U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

              Annual Report Pursuant to Section 13 or 15(d) of the
              Securities Exchange Act of 1934. For the fiscal year
                             ended December 31, 1996

                         Commission File Number: 0-3207


                           Barringer Technologies Inc.
                 (Name of small business issuer in its charter)


           Delaware                                     84-0720473
  (State or Other Jurisdiction of       (I.R.S. Employer Identification No.)
  Incorporation or Organization)          

                     219 South Street, Murray Hill, NJ 07974
          (Address, Including Zip Code, of Principal Executive Offices)

                                 (908) 665-8200
                           (Issuer's Telephone Number)

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

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

                 Common Stock, par value $.01 per share
                 Common Stock Purchase Warrants

    Check  whether the issuer (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  

    Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained, to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenue for its most recent fiscal year. $10,923,000.

The  aggregate  market value of voting stock held by  nonaffiliates  computed by
reference to the price at which the stock was sold, or the average bid and asked
price of such stock, is $37,001,000 as of March 14, 1997.

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

                                           Outstanding as of March 14, 1997
      Common Stock, $.01 par value                     5,396,602

                       DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III (other than the required information  regarding
executive  officers) is hereby  incorporated  by  reference to the  registrant's
definitive  proxy statement for its 1997 Annual Meeting of  Stockholders,  which
will be filed with the  Commission  no later than 120 days  after  December  31,
1996.



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                                TABLE OF CONTENTS


                                                                         Page

                                     PART I

Item  1.   Business......................................................  3
Item  2.   Properties.................................................... 10
Item  3.   Legal Proceedings............................................. 10
Item  4.   Submission of Matters to a Vote of Security Holders........... 10

                                     PART II

Item  5.   Market for Common Equity and Related Stockholder Matters.......10
Item  6.   Management's Discussion and Analysis...........................11
Item  7.   Financial Statements and Supplemental Data.....................15
Item  8.   Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure.......................................15

                                    PART III

Item  9.   Directors, Executive Officers, Promoters and Control 
           Persons; Compliance with Section  of 16(a) of the 
           Exchange Act..................................................15
Item 10.   Executive Compensation........................................16
Item 11.   Security Ownership of Certain Beneficial Owners 
           and Management................................................16
Item 12.   Certain Relationships and Related Transactions................16
Item 13.   Exhibits and Reports on Form 8-K..............................17




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                                     PART I

Item 1.  Business

Disclosure Regarding Forward Looking Statements

     This Form 10- KSB (including,  but not limited to, the information provided
herein in response to Item 1 and Item 6 of Form 10-KSB) contains forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934, as amended..
Such statements include, but are not limited to, the anticipated development and
growth of markets for products of Barringer  Technologies  Inc. (The "Company"),
the anticipated growth in the demand for the Company's  products,  the Company's
opportunities to increase sales through,  among other things, the development of
new  applications,  markets for and extensions of its IONSCAN(R)  products,  the
development of new IONSCAN(R) products, the probability of the Company's success
in the sales of its IONSCAN(R) products, governmental regulations and directives
changing security requirements, and liquidity and capital requirements.

     Forward-looking   statements   are   inherently   subject   to  risks   and
uncertainties,  many of which can not be  predicted  with  accuracy  and some of
which might not even be anticipated. Future events and actual results, financial
and otherwise,  could differ  materially from those set forth in or contemplated
by  the  forward-looking   statements  herein.   Important  factors  that  could
contribute to such differences  include, but are not limited to, the development
and growth of markets for the Company's  products,  the Company's  dependence on
and the effect of governmental regulations on demand for the Company's products,
the impact of both foreign and domestic governmental budgeting decisions and the
timing  of  governmental  expenditures,  the  reliance  of  the  Company  on its
IONSCAN(R)  products,  and the  dependence  of the  Company  on its  ability  to
successfully  develop  and  market  new  product  applications,  the  effects of
competition,  and the effect of general economic and market conditions,  as well
as conditions  prevailing in the markets for the Company's products.  Certain of
the factors  summarized  above are  described  in more  detail in the  Company's
Registration Statement on Form SB-2 (File no. 333-13703) and reference is hereby
made thereto for additional  information with respect to the matters  referenced
above.

     Subsequent written and oral forward-looking  statements attributable to the
Company  or  persons  acting on its  behalf  are  expressly  qualified  in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Form 10-KSB.

    (a)  General

     The  Company  was  incorporated  under the laws of the State of Delaware on
September 7, 1967.

     The Company is principally engaged in the design, development,  manufacture
and sale of analytical  instruments used for the high  sensitivity  detection of
trace  amounts  of plastic  and other  explosives  and  illegal  narcotics.  The
Company's principal product, the IONSCAN(R), is a portable,  desk-top instrument
that utilizes a proprietary  implementation of ion mobility spectrometry ("IMS")
technology  to  determine  the  presence or absence of targeted  compounds  in a
sample.  The IONSCAN(R) can detect  targeted  substances in amounts smaller than
one-billionth of a gram in approximately six seconds.

     The  Company's  customers  are  primarily  governmental,  security  and law
enforcement  agencies  throughout  the world,  including  the Federal  Bureau of
Investigation  (the "FBI"), the Drug Enforcement Agency (the "DEA"), the General
Services  Administration  (the "GSA"),  the United States,  French, and Canadian
customs   services  and  various  airports   worldwide.   Because  of  its  high
sensitivity,  the  IONSCAN(R)  is used both in lieu of and in  conjunction  with
other  detection   technologies,   such  as  X-ray,  computer  aided  tomography
("CATSCAN"),  quadropole resonance and nuclear magnetic resonance imaging. As of
December 31, 1996,  the Company had sold over 350  IONSCAN(R)s,  and the Company
believes  that,  in terms of units sold, it is the world's  leading  supplier of
trace particle detection instruments.

     IONSCAN(R)s have been sold for explosives detection  applications primarily
outside the United States and for drug  interdiction  and  detection  deployment
both within the United States and elsewhere. For example, the IONSCAN(R) is used
in foreign airports, on trains and at the Eurotunnel to check for explosives and
by the United  States  Coast Guard to check ships and cargo in U.S.  territorial
waters for illegal narcotics.

     The Company believes that the security-related market for the IONSCAN(R) is
growing as a result of governmental actions,  particularly in the United States,
which reflect  heightened  public  safety  concerns in the wake of an increasing
number of terrorist acts. Recently,  Congress appropriated  $144,000,000 for the
purchase of enhanced explosives  detection equipment for use at certain airports
in the  United  States,  and  the  Company  believes  that  a  portion  of  such
appropriation will be utilized



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for the acquisition of trace particle detection equipment. Governmental agencies
in the United States,  including the GSA and the Federal Aviation Administration
"(FAA"),  have  accelerated  their  evaluation  or use of  enhanced  methods  to
increase security measures currently  employed in United States airports,  other
transportation centers and in public buildings.

     The Company also  believes  that the market for the  IONSCAN(R)  for use in
drug applications  will increase as a result of recently  reported  increases in
domestic  drug  usage,   particularly  among  teenagers.   Various  governmental
agencies, including the DEA, have purchased IONSCAN(R)s for use in their efforts
to diminish drug  trafficking.  Prisons and private  entities,  including public
utilities and drug rehabilitation  clinics,  also have purchased  IONSCAN(R)s to
detect the presence of drugs.

     The Company  believes that new markets for the  IONSCAN(R) can be developed
in other areas,  such as security  screening of individuals  and process control
and quality  assurance in certain  industrial  applications.  In addition,  when
coupled with certain other existing  technologies,  such as gas  chromatography,
the IONSCAN(R) can be adapted to other uses, including environmental, biological
and chemical testing.  Further, the Company intends to expand the potential uses
of the IONSCAN(R) technology by developing a hand held detector.

     In  addition  to  the  IONSCAN(R),   the  Company  manufactures   specialty
instruments  and engages in contract  research and  development  activities  for
industrial  companies  and various  governmental  agencies.  For the years ended
December  31,  1996,   1995  and  1994,   approximately   25%,  14%  and  11.7%,
respectively,  of the  Company's  consolidated  revenues were derived from these
other activities.

    Market Overview

  Explosives Detection

     Since the 1970s, metal detection  equipment,  imaging techniques and visual
inspection  have been  employed  throughout  the world to detect the presence of
weapons.  Passengers  boarding  airplanes  pass through  metal  detectors  while
carry-on baggage is scanned by security  personnel  utilizing X-ray equipment or
is searched by hand.  Similar security  measures are used in a variety of public
buildings, including courts, where security concerns are particularly high.

     The  persistent  occurrence  of terrorist  bombings has  demonstrated  that
currently  deployed  security  measures  are  inadequate,  particularly  for the
detection of explosives. While existing screening installations are effective to
detect metallic  weapons and other metal objects,  they are not always effective
for detecting explosives. In addition, advanced detection equipment has not been
uniformly  deployed  because of  concerns  relating  to its  efficacy,  cost and
reliability.

     In  the  aviation   security   market  the  need  for  deployment  of  more
sophisticated explosives detection systems has been recognized for some time. In
the  aftermath  of the bombing of Pan Am flight 103 over  Scotland in 1988,  the
Aviation  Security  Improvement Act of 1990 (the "Safety Act") was enacted.  The
Safety Act  directed the FAA to  establish a research  and  development  program
related to the development and implementation of explosives detection technology
and procedures to counteract terrorism against civilian aircraft. The Safety Act
directed the FAA to develop  certification  protocols for  explosives  detection
equipment and authorized the FAA  Administrator  to require the use of certified
equipment commencing thirty-six months after enactment.

     In response to the  requirements  of the Safety Act, the FAA began  funding
research and development of enhanced explosives detection technology. During the
past  five  years,  the  FAA  has  spent  approximately   $150,000,000  on  such
activities.  In addition, the FAA adopted a certification protocol regarding the
use of  imaging  detection  systems  for use on  checked  baggage.  The  imaging
protocol  focuses  on (i) the  explosive  substances  to be  detected,  (ii) the
probability  of detection,  by explosive,  (iii) the quantity of explosive  that
must be detected,  and (iv) the number of bags  processed  per hour. In addition
the protocol  specifies a maximum  acceptable false alarm rate by explosive.  To
date, only one imaging system has met the requirements of the protocol.  The FAA
has not mandated the deployment of such certified  imaging  equipment,  in part,
because of its cost  (approximately $2 million per screening  station).  Concern
also has been  raised  about its  selectivity  because  its false  alarm rate in
airport testing has been much higher than the protocol results had indicated.

     A number of recent events, including the destruction of TWA flight 800 over
Long Island and the bombing at the 1996  Olympics  in  Atlanta,  have  refocused
attention on the need to deploy  enhanced  explosives  detection  equipment.  In
response to the crash of TWA flight 800,  the FAA issued a  classified  security
directive to all airlines  subject to FAA regulation.  Although the directive is
not  publicly  available,  the  Company  believes  that the  directive  mandated
enhanced  security checks for all baggage  checked-in  through certain  airports
using one of three techniques: manual searching, deployment of certified



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imaging  equipment and use of trace particle  detection  equipment.  The Company
believes that airlines are using manual searching  techniques to comply with the
FAA  directive and have not deployed  enhanced  explosives  detection  equipment
primarily  because  of the cost of such  equipment  which,  under  existing  FAA
regulations, must be borne by the airlines.

     On international flights, the FAA has mandated that airlines subject to FAA
regulation   comply  with  the  International   Civil  Aviation   Organization's
International  Standards and Recommended  Practices  Safeguarding  International
Civil  Aviation  Against Acts of Unlawful  Interference  ("Annex 17").  Annex 17
contains generalized  recommendations  regarding bag matching,  the screening of
checked  bags and the taking of  "appropriate  actions" to determine if carry-on
baggage contains  explosives.  For all international  flights,  the FAA requires
airlines to use bag matching,  to X-ray all carry-on and checked  baggage and to
confirm that electronic devices such as cellular telephones,  tape recorders and
laptop computers are operational. For certain international flights, the FAA has
mandated more stringent  security  measures.  The Company  believes that the FAA
directive augments these procedures in certain respects.

     Annex 17 is implemented in a variety of ways outside the United States.  In
the United Kingdom,  for instance,  certain  airports have  implemented a tiered
approach to baggage screening that utilizes trace particle  detection  equipment
to resolve potential security concerns.  See "Explosives  Applications." Certain
member countries have adopted  different  security  protocols  relying on manual
searching or other  techniques and many have taken no actions to implement Annex
17.

     As a result of the crash of TWA flight 800, the Gore  Commission was formed
to examine the security  measures  currently in place in United States  airports
and to make  recommendations  to the President  with respect  thereto.  The Gore
Commission's initial report made a number of general  recommendations  regarding
the enhancement of airport security. These recommendations included, among other
things,  that  the  government  bear  the  initial  cost  of  enhanced  security
equipment,  through  ticket  surcharges  or other  methods,  that  approximately
$160,000,000 be appropriated  initially for the purchase of enhanced  explosives
detection equipment at major airports,  that approximately  $50,000,000 be spent
in fiscal 1997 on research and development  activities and that  cooperation and
sharing of information among agencies be increased.

     Partially  in  response  to  the  Gore  Commission's  initial  report,  the
administration asked Congress to appropriate $1.1 billion to fund anti-terrorism
activities.  In October 1996, Congress appropriated all the funds recommended by
the administration for fiscal 1997,  including  $144,000,000 for the purchase of
enhanced explosives detection  equipment.  A published report indicates that the
administration  plans to use a portion of that  appropriation  to  purchase  489
trace  detection  instruments  in fiscal 1997.  The Company  believes that these
instruments will be used to augment screening of carry-on baggage and to resolve
false alarms reported by imaging equipment. Published reports estimate the total
cost of implementing  enhanced explosives  detection equipment at the 75 busiest
domestic  airports  will be  upwards  of $6  billion  and will take ten years to
complete.

     The Company  believes that the aviation  security market for the IONSCAN(R)
will expand  significantly  as a result of the actions of Congress  and the Gore
Commission.  While a substantial amount of the initial $144,000,000 appropriated
for the purchase of enhanced explosives  detection equipment in fiscal 1997 will
be used to purchase  equipment  utilizing other  technologies,  such as CATSCAN,
enhanced X-ray,  quadropole resonance and other imaging techniques,  the Company
believes  that,  as indicated  above,  a  significant  number of trace  particle
detection instruments,  including IONSCAN(R)s,  will be purchased.  In addition,
the  appropriation  approved by Congress  covers only a limited number of United
States  airports.  The Company believes that additional  appropriations  will be
required to deploy enhanced explosives detection equipment at all major airports
in the United  States.  However,  there can be no assurance that funding for the
purchase of such equipment will be continued in subsequent fiscal years or as to
the level thereof. In addition,  there can be no assurance as to the amount that
will ultimately be spent on the purchase of trace particle  detection  equipment
or as to the number of  IONSCAN(R)s  that will actually be purchased or that the
IONSCAN(R) will meet any certification or other requirements that may be adopted
in connection therewith.

     Other explosives  detection  markets for the IONSCAN(R) have been similarly
affected by increased terrorist activity. For instance, as a result of the World
Trade Center  bombing in 1990 and the 1995 bombing in Oklahoma City, the Company
has sold IONSCAN(R)s to customers, including the World Trade Center and the GSA,
for facilities protection applications.

  Drug Interdiction

     The Company  believes  that  concerns  regarding  the  increasing  usage of
narcotics will result in substantial  growth in the market for IONSCAN(R)s  used
in drug detection and interdiction efforts.  According to the Office of National
Drug Control Policy,  use of certain illegal narcotics  significantly  increased
during the past five years. Recent surveys have also indicated

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that the use of illegal narcotics by teenagers has reached a record level. X-ray
scanning, random searches and the use of canines have not resulted in sufficient
progress in programs to suppress illegal drug trafficking.  Accordingly, customs
and  law  enforcement   agencies,   particularly  in  the  United  States,  have
increasingly  turned to more sophisticated  detection  equipment,  including the
IONSCAN(R),  to assist in their interdiction and detection  efforts.  The United
States  Coast Guard and customs  services  throughout  the world have  purchased
IONSCAN(R)s for use in their drug interdiction  efforts.  Prisons throughout the
United  States and around the world also are  increasingly  using  sophisticated
equipment,  such as the IONSCAN(R),  to reduce drug use.  Various prisons in the
United States,  as well as in Canada and Mexico,  have purchased  IONSCAN(R)s to
test visitors,  packages,  cell blocks and vehicles for illegal  narcotics.  The
Company  believes  that the  successful  integration  of the  IONSCAN(R) in drug
interdiction and detection  activities by the United States Coast Guard, as well
as by the various customs services and correctional  facilities described above,
will result in  additional  purchases of the  IONSCAN(R)  for drug  interdiction
purposes.

     As a result of  increased  drug  usage and a  heightened  public  awareness
regarding  criminal  activity  generally,  governmental  agencies have increased
their spending on drug interdiction efforts. In addition, in connection with the
implementation  of United States  foreign  policy,  grants have been provided to
foreign countries,  particularly in Latin America,  for use in drug interdiction
efforts.  The Company  believes that as a result of the  increased  governmental
focus  on drug  prevention  and the  increased  budgetary  allocations  for drug
intervention  programs,  the  drug  detection  market  for the  IONSCAN(R)  will
continue to grow.

    Strategy

     The  Company's  objective  is to  strengthen  its  position  as the leading
supplier  of trace  particle  detection  equipment  by (i)  further  penetrating
existing  markets for the IONSCAN(R)  through  aggressive  pursuit of additional
sales  from  new  and  existing  customers,  (ii)  expanding  the  uses  of  the
IONSCAN(R),  particularly for security  screening of individuals and for process
control and quality  assurance  in certain  industrial  applications,  and (iii)
extending  the  capabilities  and  the  potential  uses  of the  IONSCAN(R)  for
environmental, biological and chemical testing by, among other things, combining
the IMS technology used by the IONSCAN(R) with other existing technologies, such
as gas  chromatography,  and by  developing a hand-held  detector  utilizing the
IONSCAN(R) technology.

Explosives Applications

  Aviation Security

     IONSCAN(R)s are currently used in explosives detection  applications in the
aviation security market primarily outside the United States. In most cases, the
IONSCAN(R) is used to resolve  concerns  regarding  checked or carry-on  baggage
that may  contain  explosives.  For  instance,  certain  foreign  airports  have
implemented a three-tiered  security procedure for checked baggage.  All checked
bags are  screened by an X-ray  machine to identify  those bags that may contain
explosive materials.  Bags identified through that process are then subjected to
a second level of testing, generally using a more sensitive imaging system, such
as enhanced X-ray or CATSCAN. Bags that are not cleared at this second level are
either manually  searched or tested using trace particle  detection  instruments
such as the  IONSCAN(R).  A number of  IONSCAN(R)s  have been purchased for this
purpose.

     IONSCAN(R)s  also are used to augment  screening of carry-on  baggage.  The
carry-on bags of individuals  meeting  certain  passenger  profiles are searched
manually (including using bomb sniffing canines),  screened by imaging equipment
or scanned using trace particle  detection  equipment,  such as the  IONSCAN(R).
Although the IONSCAN(R) was approved in 1992 by the FAA for screening electronic
items, there has been only limited use of it for such purpose.

     Although  most  airports  use manual  searching to resolve  concerns  about
checked baggage and to provide enhanced  security of certain  carry-on  baggage,
the  Company  believes  that as a result  of  recent  governmental  initiatives,
governmental regulators will require deployment of more sophisticated equipment,
such  as  the  IONSCAN(R).  Currently,  IONSCAN(R)s  are  used  in  15  airports
throughout the world in explosives detection applications.

  Other Transportation Security

     IONSCAN(R)s also are employed in explosives detection applications in other
segments of the transportation  industry.  In Europe,  IONSCAN(R)s are in use at
the Eurotunnel,  which connects England and France, to scan vehicles and freight
for explosive materials.  In addition,  IONSCAN(R)s are used by British Rail and
train systems operating in the Eurotunnel to test


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for explosive  materials.  The Company believes that this market will experience
substantial  growth as  governmental  authorities  increasingly  recognize  that
terrorist  acts,  such as the poison gas incidents in Tokyo in 1995, may involve
other forms of public transportation, such as railroads and subways.

  Building Security and Forensics

     IONSCAN(R)s are deployed at numerous  facilities  around the world, such as
large  electric  utilities  and  landmark  buildings,   that  are  perceived  as
potentially  likely  targets for terrorist  attacks.  For instance,  IONSCAN(R)s
currently  are in use at the World  Trade  Center in New York as a result of the
bombing  there  in  1993.  In  addition,   the  Company  recently  sold  several
IONSCAN(R)s to the GSA, which is responsible for the maintenance and security of
U.S.  government  buildings.  In the wake of incidents such as the 1995 Oklahoma
City  bombing and the bombing in Atlanta  during the 1996 Summer  Olympics,  the
Company believes that this market will experience significant growth as the need
for  physical  security  measures at public  facilities  increases.  The Company
believes that the IONSCAN(R) is  particularly  well suited for this  application
because of its fast scanning time, its high throughput and its low cost compared
to other available detection technologies.

     Customers,  such as the FBI, the New York City Police Department,  military
forces and other  investigative  agencies  in Europe and the Middle East use the
IONSCAN(R)  for forensic  purposes to test debris for traces of  explosives  and
other chemicals following the occurrence of a bombing or explosion. For example,
IONSCAN(R)s were used to test debris from the crash of TWA flight 800 and at the
site of the 1995 Oklahoma City bombing.

Drug Applications

  Drug Interdiction

     As a result of the increased usage of illegal drugs,  governmental agencies
in the United States and around the world are refining  their drug  interdiction
techniques.  Metal detectors,  X-ray equipment,  random manual searching and the
use of canines have not resulted in sufficient  progress in programs to suppress
illegal drug  trafficking,  and  governmental  agencies  have been  increasingly
utilizing more sophisticated detection equipment,  including the IONSCAN(R),  to
supplement their drug interdiction efforts.  Currently, law enforcement agencies
around the world,  including the FBI, the DEA,  customs  officials in the United
States and eight other  countries,  the U.S. and Japanese  Coast Guards,  police
departments in 10 states and five foreign  countries and a number of federal and
foreign prisons use the IONSCAN(R) for this purpose. IONSCAN(R)s also are in use
in drug interdiction efforts in 16 airports throughout the world.

     The Company  expects that this market will  continue to grow as a result of
continuing drug trafficking,  increased  governmental attention in this area and
increased budgets for anti-drug activities. The Company believes that it will be
well-positioned  to take advantage of the expected growth in this market because
of its  large  installed  base,  the  breadth  of its  customers  and the  field
performance of the IONSCAN(R) to date.

  Drug Detection

     The  increased  usage  of  illegal  narcotics  also  is  driving  sales  of
IONSCAN(R)s  to other entities for drug  detection  applications.  For instance,
several  large  public  utilities  have  purchased  IONSCAN(R)s  to  test  their
facilities,  vehicles and  employees for the presence of illegal  narcotics.  In
addition, various prisons in the United States, as well as in Canada and Mexico,
have purchased  IONSCAN(R)s to test visitors and packages entering prisons, cell
blocks and vehicles for illegal narcotics. Drug rehabilitation centers also have
purchased  IONSCAN(R)s to supplement their testing procedures for patients.  The
Company believes that this market segment will experience  additional  growth as
other  large  utilities,   prisons  and  drug  rehabilitation  centers  seek  to
supplement their current drug detection efforts.

Sales and Marketing

     The Company sells its products  through a direct sales and support force of
16 persons  located  at its  headquarters  in New  Jersey and at its  offices in
Toronto,  London  and Paris.  The  Company  intends to open a sales and  service
facility  in Asia  during  1997.  In  addition,  the  Company  has a network  of
independent sales  representatives  located  throughout Europe, the Middle East,
Africa,  Asia,  South America and  Australia.  The Company also has entered into
sales   representative   agreements   with  Mitsubishi   Heavy   Industries  for
distribution  of the  IONSCAN(R)  in Japan.  The  Company's  sales and marketing
efforts typically involve extensive  customer visits,  demonstrations  and field
testing.   Sales  prospects  generally  are  targeted  by  the  Company  or  its
independent  sales  representatives,  although  the  Company  also  responds  to
requests for proposals.


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     Typically,  the Company sells its IONSCAN(R) instruments for prices between
$50,000 and $95,000 per unit, depending  principally on the configuration of the
unit and the  purchaser's  location.  Once a sale is  consummated,  the  Company
provides  training at a customer's  location to teach  operators  how to use the
IONSCAN(R).  The Company generally  provides a one-year parts and labor warranty
on its  IONSCAN(R)  instruments,  although  from time to time,  the  Company has
entered into service contracts which include extended  warranties.  To date, the
Company's warranty claims experience has not been material.

     The Company does not actively market its other specialty instruments or its
contract  research and  development  services.  However,  from time to time, the
Company  responds to  appropriate  requests  for  proposals  for  non-IONSCAN(R)
instruments  and such  services.  Although  sales of such  instruments  and such
services have been material to the Company's historic results from time to time,
as a result of the  expected  increase in sales of the  IONSCAN(R),  the Company
does not expect that such sales will materially affect its results of operations
in future periods.

     During  1996,   the  European   Passenger   Services  Ltd   accounted   for
approximately  11% of  consolidated  revenues of the Company.  During  1995,  no
customer  accounted  for  more  than  10% of the  consolidated  revenues  of the
Company.   During  1994,  one  customer   accounted  for  approximately  22%  of
consolidated revenues.

Backlog

     Although the Company's  sales cycle is relatively  long due to governmental
budgetary and procurement  policies,  once orders are placed customers typically
seek immediate  delivery.  Accordingly,  for competitive  purposes,  the Company
follows the practice of  manufacturing  to a sales  forecast.  As a result,  the
Company  does not have a material  backlog of orders  for its  instruments.  The
Company anticipates that all of its instrument backlog at December 31, 1996 will
be shipped prior to December 31, 1997.

     Because the  Company's  funded  research  and  development  activities  are
undertaken  pursuant to  contracts  which  typically  run for one or more fiscal
periods,  from time to time, the Company has a backlog  relating to research and
development  activities to be performed in future periods.  Such backlog was not
material at December 31, 1996. See "Management's Discussion and Analysis."

Manufacturing and Assembly

     The  Company  manufactures  and  assembles  IONSCAN(R)s  primarily  at  its
facility in Toronto,  Canada,  and has expanded its  capabilities to manufacture
and assemble IONSCAN(R)s at its facility in Murray Hill, New Jersey.

     Although  many  of  the  basic  components  of  the  IONSCAN(R),   such  as
chipboards,  resistors,  capacitors,  liquid crystal  displays and other similar
components,  are  readily  available  from a  number  of  sources,  the  Company
typically  purchases such components from single suppliers.  A limited number of
components and sub-assemblies are manufactured for the Company,  pursuant to the
Company's  proprietary  specifications,  but the Company  does not believe it is
dependent  on any single  source for these items.  To date,  the Company has not
experienced any difficulty in obtaining any components or sub-assemblies.

Competition

     The  Company  competes  with  other  entities,   a  number  of  which  have
significantly greater financial, marketing and other resources than the Company.
Principal  competitive factors include selectivity (the ability of an instrument
to identify the presence of a particular substance), sensitivity (the ability of
an instrument to detect small  amounts of a particular  substance),  false alarm
rate, price, marketing,  ease of use and speed of analysis. The Company believes
that it competes effectively with respect to each of these factors.

     The  Company   competes  for  governmental   expenditures   with  equipment
manufacturers  utilizing  other  types  of  detection  technologies,   including
CATSCANs, enhanced X-ray and quadropole resonance, as well as with manufacturers
of other IMS equipment and  manufacturers  using other trace particle  detection
technologies,  such as gas chromatography and  chemoluminescence.  Because trace
particle  detection  equipment is used in certain  instances to verify detection
results obtained by other enhanced detection  systems,  the IONSCAN(R) and other
trace  particle  detection  equipment  are  used  in  conjunction  with  systems
utilizing imaging technologies.  As a result of recent governmental initiatives,
the Company  anticipates that additional  technologies,  including  improved IMS
technologies,  will be  developed  and  that  new  competitors  will  enter  the
Company's markets.



<PAGE>



     The Company also competes  with the present use by various law  enforcement
agencies of canines to locate the  presence  of  explosives  or drugs.  Although
canines have a highly  developed  sense of smell and are able to follow a trail,
the Company believes that its IONSCAN(R) instruments are more effective and cost
efficient  than  canines,  because they can operate 24 hours a day, have greater
selectivity  than  canines and can  identify the  composition  of the  substance
detected.

Government Regulation

     Although the Company's  business is not subject to  significant  government
regulation,  government  regulation plays a large role in determining the demand
for the  IONSCAN(R).  In the  United  States  and most  foreign  countries,  the
aviation  industry is highly regulated and  authorities,  such as the FAA in the
United  States,  have the  ability  to  recommend  or  mandate  use of  enhanced
explosives detection equipment.

     The FAA has adopted a certification  protocol  regarding the use of imaging
detection systems for use on checked baggage.  The FAA is currently developing a
certification protocol for trace particle detection equipment, which the Company
believes will be finalized in the second  quarter of 1997.  Once the protocol is
adopted,   the  Company   believes  that  only   instruments   meeting  the  FAA
certification  requirements  will be approved for use by airlines subject to FAA
regulation.  Although the final  protocol has yet to be adopted,  based on early
versions of the testing criteria, as well as discussions with representatives of
the  FAA,  the  Company  believes  that  the  IONSCAN(R)  will  meet  the  FAA's
certification  requirements,  although no  assurance  can be given.  The FAA has
approved the  IONSCAN(R)  for screening of electronic  carry-on  items,  such as
cellular telephones,  tape recorders and laptop computers.  In addition, the FAA
recently  issued a  classified  security  directive  that the  Company  believes
authorizes the use of certain trace particle detection equipment,  including the
IONSCAN(R), on carry-on baggage.

Product Development

     The Company's product development expenses totaled $230,000,  $354,000, and
$531,000,  for the years ended December 31, 1996,  1995 and 1994,  respectively.
These  amounts  primarily  relate  to the  development  and  enhancement  of the
Company's  IONSCAN(R)  instruments.  All of these  amounts  were  funded  by the
Company.

     In addition to further  performance  enhancements,  the Company  intends to
combine  the  IONSCAN(R)   with  other  existing   technologies,   such  as  gas
chromatography,  to enable the IONSCAN(R) to detect compounds  contained in more
difficult  sampling media,  such as soil. The Company believes that the modified
IONSCAN(R) would be able to break down a complex matrix of chemicals to separate
out the  background  material and permit  testing for the targeted  substance on
site instead of shipment of a sample to an offsite laboratory for analysis. As a
result, the modified IONSCAN(R) could be utilized to field test for the presence
of microscopic organisms and other environmentally sensitive materials.

Patents, Trademarks and Proprietary Rights

     The Company holds,  through BRL, an aggregate of 10 patents  throughout the
world related to equipment,  systems and  techniques.  While such patents may be
regarded as having  substantial  value,  the Company's  current  business is not
deemed to be materially  dependent  upon either the aggregate of such patents or
any one of  them  individually.  The  Company  relies  primarily  on  unpatented
proprietary  know-how in building the IONSCAN(R)  which it protects  through the
use of nondisclosure agreements and other methods. However, the basic technology
used  in the  IONSCAN(R)  is  not  proprietary  to  the  Company  and  the  same
functionality  contained in the IONSCAN(R)  could be duplicated by the Company's
competitors without violating the Company's patents.

     The Company's  initial  development of the IONSCAN(R) was funded in part by
Transport Canada and Revenue Canada.  Pursuant to an agreement with the Canadian
government,  the Company has received a worldwide,  perpetual license to certain
unpatented technology developed from such work and pays Revenue Canada a royalty
equal to 1% of sales of all IONSCAN(R) units. This licensing arrangement remains
exclusive  until March 31, 1999.  The Company has entered into an agreement with
Revenue  Canada,  pursuant  to which the  Company  has the  right to renew  such
exclusive  arrangement on a year by year basis for up to ten additional years at
which time  Revenue  Canada  would have the right to license the  technology  to
third  parties.  Revenue Canada has retained the right to use the technology and
to produce products  incorporating  such technology  although,  to date, Revenue
Canada has not attempted to do so.

     The Company  believes that the IONSCAN(R)  registered  trademark has gained
recognition  in the  markets  for  the  Company's  products  and  is a  valuable
trademark.



<PAGE>



Employees

     As of December  31,  1996,  the Company  had 70  full-time  and 9 part-time
employees of whom 35 were engaged in manufacturing,  18 were engaged in research
and  development  activities  (16 of whom have  advanced  degrees,  including  6
doctorates)  and 26 were engaged in sales,  service and general  administration.
None of the Company's  employees are  represented by any union,  and the Company
considers its relationships with its employees to be satisfactory.

     (b) Financial  Information about Foreign and Domestic Operations and Export
Sales.

     For  information  with respect to financial  information  about foreign and
domestic  operations and export sales,  reference is made to the information set
forth  in  Note  12 to the  Consolidated  Financial  Statements  of the  Company
included herein, and see Item 6.  "Management's  Discussion and Analysis or Plan
of Operation."

Item 2. Properties.

     The  Company  does not own any real  property  and  currently  conducts  it
operations at the following leased premises.

<TABLE>

<S>                                   <C>                <C>               <C>                  <C>    
                                      Square             Annual            Lease
                                      Footage            Lease             Expiration           Type

219 South Street,                      4,910             $78,000           March 1998           Corporate headquarters,
Murray Hill,  NJ  07974                                                                         sales, service and assembly

1730 Aimco Boulevard                  28,380             $76,000*          September 2005       Research, manufacturing
Mississauga, Ontario,                                                                           and assembly, sales,
Canada L4W 1V1                                                                                  service and
                                                                                                administration
Aeroport De Paris, Roissytech         1,060              $21,000           February 1998        Sales and service
BP10614-1 Rue Du Cercle
95724, Roissy C.D.G., France

Manor Royal                           1,560              $16,000           February 1998        Sales and service
Crawley, West Sussex
England  RH10 2QU

-------------------------------------
* Increases to $115,000 on September 1, 2000

</TABLE>


Item 3.  Legal Proceedings

    The Company is not a party to any material legal proceedings.

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

     No matters  were  submitted  to a vote of the  Company's  security  holders
during the fourth quarter of the year ended December 31, 1996.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The following table sets forth certain  information  regarding the price of
the Common  Stock for each quarter in the  two-year  period  ended  December 31,
1996.  Since  November 12, 1996,  the Common Stock has been quoted on the NASDAQ
Stock Market  National Market System under the symbol BARR.  Prior thereto,  the
Common Stock was traded on the NASDAQ  interdealer  quotation  system  (SmallCap
listing).  The following table sets forth the high and low sales price per share
of Common Stock for the periods  subsequent  to November 12, 1996 as reported by
NASDAQ and, prior  thereto,  the high and low bid quotations per share of Common
Stock as reported by NASDAQ,  adjusted to reflect the one-for-four reverse stock
split  effected  September 25, 1995.  The bid and asked prices  included  herein
reflect inter-dealer prices, without retail markup, markdown or commission,  and
may not necessarily represent actual transactions.



<PAGE>

<TABLE>

<S>      <C>                                                              <C>              <C> 
                                                                               Common Stock
                                                                           High            Low
                     1995
         First Quarter...................                                  $6.88           1.25
         Second Quarter..................                                   5.00           2.00
         Third Quarter...................                                   4.25           2.25
         Fourth Quarter..................                                   3.25            .50

                    1996
         First Quarter...................                                  $0.56          $0.31
         Second Quarter..................                                   4.19           0.44
         Third Quarter...................                                  13.88           2.88
         Fourth Quarter..................                                  10.63           6.63

</TABLE>


     On March 14,  1997,  the last  reported  sale price of the Common Stock was
$9.75 per share.  On March 14,  1997,  there were  approximately  890 holders of
record of the Common Stock

                                 DIVIDEND POLICY

     Since  inception,  the  Company has not paid cash  dividends  on its Common
Stock.  The Company  currently  intends to retain future earnings to support its
growth  strategy and does not  anticipate  paying  dividends in the  foreseeable
future.  Payment of future  dividends,  if any, will be at the discretion of the
Company's  Board  of  Directors  after  taking  into  account  various  factors,
including the Company's financial condition, results of operations,  current and
anticipated  cash needs and plans for expansion.  The Company is prohibited from
paying cash dividends on the Common Stock unless full cumulative  dividends have
been  paid or set  aside  for  payment  on the  Company's  Class  A  Convertible
Preferred  Stock and Class B  Convertible  Preferred  Stock at an annual rate of
$.16 per share,  which dividends,  at the option of the Company,  are payable in
cash or shares of Common Stock.  The  Company's  ability to pay dividends on its
Common Stock may be further  limited in the future by other legal or contractual
restrictions  placed on the Company and on the  ability of its  subsidiaries  to
provide cash to the Company.

                     RECENT SALES OF UNREGISTERED SECURITIES

    In July  1996,  the  Company  completed  the  sale of  $1,000,000  of its 6%
Convertible  Subordinated  Debentures  due  1997,  ("Debentures"),  in a private
transaction to institutional and private investors and members of management for
an aggregate  purchase  price of  $1,000,000.  This  transaction  was  completed
without registration under the Securities Act of the Debentures or the shares of
Common  Stock  into which such  Debentures  are  convertible  in  reliance  upon
exemptions  provided  by  Section  4(2) of the  Securities  Act.  There  were no
underwriters for this issuance. The Common Stock issuable upon conversion of the
Debentures was subsequently  registered  pursuant to the Company's  Registration
Statement on Form S-3 (File No. 333-11629).

The Debentures were converted into shares of Common Stock by December 31, 1996.

Item 6. Management's Discussion and Analysis

     The following  discussion and analysis should be read in conjunction  with,
and is  qualified  in its  entirety  by, the  Company's  Consolidated  Financial
Statements,  including  the  Notes  thereto,  appearing  elsewhere  in this Form
10-KSB. Historical results are not necessarily indicative of trends in operating
results for any future period.  Through  December 31, 1995 the Company  reported
two segments for financial  statement  purposes:  (i) specialty  instruments and
(ii) funded  research and  development.  Because of the rapid growth in sales of
IONSCAN(R)s  through 1996,  the funded  research and  development  segment is no
longer  significant to the Company's  consolidated  revenues.  Accordingly,  the
Company has ceased reporting segment information.

Overview

     Since  1990,  the  Company  has  principally  been  engaged in the  design,
development,   manufacture  and  sale  of  the  IONSCAN(R).  The  Company  sells
IONSCAN(R)s in two primary markets,  explosives detection and drug interdiction.
The Company sold its first  IONSCAN(R) in 1990 and had sold over 350 units as of
December  31, 1996.  Historically,  the Company sold a majority of its units for
drug interdiction  applications.  However, during 1996, the Company's sales have
been divided almost evenly between the explosives  detection market and the drug
interdiction  market.  Management  expects that the explosives  detection market
will account for an  increasingly  significant  portion of the Company's  future
growth.


<PAGE>



     The Company  sells  IONSCAN(R)s  for between  $50,000 and $95,000 per unit,
depending  principally  on the  configuration  of the unit  and the  purchaser's
location.  While  substantially all of the Company's revenues are denominated in
U.S.  dollars,  the Company  operates in several  foreign  countries,  including
Canada,  the United Kingdom and France,  and in certain  instances,  the Company
sells the  IONSCAN(R) in other  denominations,  particularly  British pounds and
French francs. In addition,  the Company conducts operations in Canada and, as a
result,  certain of the  Company's  costs are incurred in Canadian  dollars.  To
date, the Company has not experienced  significant losses as a result of foreign
currency  fluctuations.  The  Company  currently  does not  regularly  hedge its
foreign currency exposure but will enter into hedging  arrangements from time to
time when management deems appropriate.

     The Company  manufactures to a rolling quarterly sales forecast in order to
have inventory  available to meet anticipated demand promptly and,  accordingly,
does not have a significant  backlog.  Management's sales forecast is determined
by an analysis of a number of factors,  including, among other things, the needs
of its customers,  the  availability of budgeted funds,  the status of equipment
demonstrations,  the status of any  required  approvals  and the  complexity  of
specific customer's procurement processes. The Company also considers the effect
of competition in obtaining an order. There can be no assurance that the Company
will receive  orders for all of the units to be produced and, if such orders are
not  received,  the  Company's  liquidity  and  results of  operations  could be
materially  and  adversely  affected.  The Company  believes  that its  existing
manufacturing  facilities,  which the Company intends to supplement  through the
use of a portion of the proceeds from its recently  completed  public  offering,
will be sufficient  for the  anticipated  growth in orders for the IONSCAN(R) in
the foreseeable future.

     Approximately  68.6%,  72.1% and 62.6 % of the  Company's  revenues for the
years ended December 31, 1996,  1995 and 1994,  respectively,  were derived from
non-United States sources. Approximately 25%, 30% and 11.8% of revenues in 1996,
1995 and 1994, were derived from customers in Canada.

     The Company recognizes revenues from the sale of IONSCAN(R)s upon shipment.
Accordingly,  changes in delivery dates for relatively few IONSCAN(R)s  from one
quarter to another  may have a  significant  impact on the  Company's  quarterly
results.

     Pursuant to the terms of a Stock Purchase Agreement, dated December 8, 1995
("Agreement"),  by and between the Company and Labco,  on December  13, 1995 the
Company sold to Labco  647,238  shares of Labco's  common stock for an aggregate
purchase price of $809,000,  resulting in a gain of $93,000.  The purchase price
consisted of $300,000 in cash,  cancellation  of all amounts owed by the Company
to Labco pursuant to certain intercompany  agreements (aggregating $452,000) and
cancellation of $57,000 in accounts receivable due to Labco. After giving effect
to the sale of the Labco shares,  the Company continued to own 432,475 shares of
Labco stock representing a 26% ownership interest.

     In October 1996, the Company and Labco entered into a Termination Agreement
(the "Termination Agreement") pursuant to which, among other things, the Company
agreed  that,  for a period  of three  months  from the date of the  Termination
Agreement,  it would sell its  remaining  shares in Labco at a price of at least
$1.6875 per share (the "Target Price"). During 1996, the Company sold all of its
remaining  shares and  warrants in Labco and  recognized a gain on such sales of
$123,000.  In  addition  to the gain on the sale of its  Labco  investment,  the
Company  recorded  $117,000 of income  representing its  proportionate  share of
Labco's net income for 1996.

     As of December  13,  1996,  the Company had sold all of its shares of Labco
common  stock  and  warrants  and,  pursuant  to the  terms  of the  Termination
Agreement,  Messrs.  Binder and Harte have resigned their  respective  positions
with Labco. The Company no longer has any interest in Labco.

     On November 15, 1996, the Company sold, through an underwriting  syndicate,
1,250,000  shares of its common  stock at an initial  public  offering  price of
$8.563 and 1,250,000  warrants at an initial  public  offering price of $.05 per
warrant.  Each warrant is exercisable for one-quarter of a share of common stock
at an  exercise  price of $9.847 per share  (subject  to  adjustment  in certain
circumstances)  for three  years  (subject  to  earlier  redemption  in  certain
circumstances).  On December 12, 1996, the underwriting  syndicate had exercised
its option to purchase an  additional  187,500  shares of the  Company's  common
stock at an initial public  offering  price of $8.563 and an additional  187,500
warrants at an initial public offering price of $.05 per warrant.  The aggregate
net proceeds of the offering were  approximately  $10,401,000.  The net proceeds
will be used to fund product  development,  to repay  certain  indebtedness,  to
expand the Company's  manufacturing and assembling  capabilities and for working
capital and general corporate purposes.




<PAGE>



     The following table presents  certain income statement items expressed as a
percentage of total  revenue for the years ended  December 31, 1994,  1995,  and
1996. Percentage of Total Revenue


<TABLE>

                                                                  Year Ended December 31,
                                                              1996            1995          1994
<S>                                                           <C>             <C>           <C>   
    Statement of operations data:(1)
      Revenues from operations....................            100.0           100.0          100.0
      Cost of revenues............................             49.1            56.5           74.4
      Gross profit................................             50.9            43.5           25.6
      Selling, general and administrative expenses             34.2            51.9           60.8
      Product development...........................            2.1             5.6            9.6
      Operating income (loss).......................           14.6          (13.9)         (44.8)
      Other income (expense), net.................              0.6           (4.6)          (1.6)
      Income tax (provision) benefit .............              3.6               -          (1.4)
      Income (loss) from continuing operations......           18.9          (18.5)         (47.8)
      Income from operation held for sale...........              -             5.5            1.2
      Net income (loss).............................           18.9          (13.0)         (46.5)
      Preferred stock dividends...................            (0.4)           (1.3)          (2.0)
      Net income (loss) attributable                           18.5          (14.3)         (48.5)
         to common stockholders...................
         (1) Columns may not foot due to rounding.

</TABLE>

  1996 Compared to 1995

     Revenues  from  operations  increased by  $4,549,000,  or 71.4% in 1996, as
compared to 1995. Net sales of the IONSCAN(R) and related products  increased by
approximately  $4,911,000, or 93.5%, due to an increase of 134% in the number of
units sold. The increase in IONSCAN(R)  sales was due to increased  sales of the
Model 400 which was  introduced in the first quarter of 1995. Net sales of other
instruments  increased by approximately  $223,000, or 41.6%, in 1996 as compared
to 1995,  principally due to work performed on a heavy water analyzer  contract,
which was awarded to the Company in mid-1995 and  completed in the first half of
1996.  In  addition,  net  sales  benefitted  from  the  sale of  several  other
instruments.  The markets for heavy water  analyzers and other  instruments  are
limited,  and  therefore  management  cannot  predict  whether the Company  will
receive any future orders. Revenues derived from funded research and development
decreased by approximately  $349,000, or 33.2%, in 1996 as compared to 1995. The
reduced  revenues  were   attributable  to  the  Company's   contract  with  the
Emergencies Science Division, Environment Canada to design and build an airborne
laser-fluorosensor system, a substantial portion of which was completed in 1995.

    Gross profit as a percentage  of sales for the year ended  December 31, 1996
increased  to  50.9%  from  43.5%  in  1995.  The   improvement   was  primarily
attributable to higher margins on international sales, coupled with larger, more
efficient  production runs of the IONSCAN(R) and related  products.  The sale at
higher  than  expected  prices of several  Model 350 units  during the first six
months of 1996,  the  carrying  value of which had been  reduced  in 1995,  also
attributed to the improvement.

    Selling,  general and  administrative  expenses  increased by  approximately
$429,000,  or 13%, in 1996, as compared to 1995. In the 1995 period, the Company
recognized  an  expense  decrease  of  $337,000  attributable  to  a  negotiated
reduction in  professional  fees and $147,000 of  additional  expense  reduction
recognized  on the  termination  of the  Company's  Canadian  Pension Plan as of
December 31, 1993.  Excluding these items,  selling,  general and administrative
expenses in the 1996 period  decreased by $55,000 or 1.7%.  As a  percentage  of
revenues,  selling,  general and  administrative  expenses decreased to 34.2% in
1996 from 51.9% in 1995.  The decrease as a percentage of revenues was primarily
attributable  to  spreading  costs over  increased  revenues.  Selling  expenses
increased  by  $108,000,  or 4.6%,  in 1996 as compared to 1995  primarily  as a
result of increased  sales  commissions  on units sold in the fourth  quarter of
1996.

    Product development expenses decreased by approximately $124,000, or 35%, in
1996 as compared  to 1995.  The level of product  development  engaged in by the
Company at any time is primarily a function of the resources, both financial and
personnel,   that  are  available  at  the  time.   Management  expects  product
development expenses to increase significantly in


<PAGE>



1997

     Equity in  earnings  of Labco  represents  the  Company's  share of Labco's
operating  results,  in which the Company had a  non-controlling  26%  ownership
during most of 1996.  Prior to December 31, 1995,  the Company had a controlling
interest  in Labco,  but  since  the first  quarter  of 1995,  the  Company  has
presented  Labco as an operation held for sale.  The Company's  share of Labco's
net income for 1996 was $117,000, as compared to $258,000 for the same period in
1995 (where it is shown as Income from operations  under the caption  "Operation
held for sale").

     In 1996, the Company earned investment income of $72,000.

     Other expense, net of income was $12,000 in 1996, as compared to $52,000 in
1995. In 1996,  the Company  recognized  $44,000 of gains  recognized on trading
securities  held for Canadian  pension  funding  purposes,  partially  offset by
miscellaneous expenses, primarily $43,000 of foreign exchange losses realized in
1996. In 1995, the Company had realized foreign exchange losses of $79,000.

     For the year ended  December 31, 1996, the Company had a net tax benefit of
$391,000 primarily due to a reduction in the deferred tax valuation allowance as
a result of changes in management's  estimates of the utilization of both US and
Canadian tax loss  carryforwards  caused primarily by improved operating results
in Canada and the United States.  Management  anticipates  that further deferred
tax benefits will be recognized in 1997.

  1995 Compared to 1994

     Sales of all instruments increased by $34,000, or 0.1%, in 1995 as compared
to 1994.  Sales of  IONSCAN(R)  instruments  and related  products  decreased by
approximately  $80,000,  or 1.6%.  The decrease  was due, in part,  to the lower
selling price of the new Model 400 IONSCAN(R), which was introduced in the first
quarter  of  1995.   This  reduction  in  selling  price,   coupled  with  other
improvements of the new model,  resulted in approximately 36.6% more unit sales.
Sales  of  instruments  other  than  IONSCAN(R)  products  increased  in 1995 by
approximately  $114,000,  or 33%,  principally  due to the  award in 1995 of the
contract to build four heavy water  analyzers  for use at a nuclear  facility in
Asia,  which  was  completed  in  mid-1996.  The  introduction  of the Model 400
resulted in reduced sales of the Model 350. As a result, the Company reduced the
carrying value of the Model 350s remaining in inventory.

     Revenues  of  the   research   and   development   business   increased  by
approximately  $754,000,  or 253.0%,  in 1995 as compared to 1994.  The improved
sales are  attributable  to work performed in 1995 under the Company's  contract
with the Emergencies Science Division, Environment Canada to design and build an
airborne laser-fluorosensor system.

     The Company introduced and made a limited  distribution of DrugAlert(TM) in
1995. Sales of such product were not significant.

     Gross profit as a percentage of sales for the year ended  December 31, 1995
increased to 43.5% from 25.6% in 1994. The gross profit as a percentage of sales
for the research and development  business  decreased to 5.1% in 1995 from 12.1%
in 1994. The decrease was due to lower margins on the 1995 contracts.  The gross
profit as a percentage of sales for the instruments  business increased to 53.1%
in 1995 from 26.4% in 1994. The 1995 gross profit was impacted by the write down
of the carrying value of the Model 350 inventory which aggregated  approximately
$442,000,  approximately  $155,000  of  which  related  to  excess  spare  parts
inventory  and the  balance to  finished  goods.  In 1994,  the  Company  took a
$792,000 charge against its Model 350 inventory.  The consumer products business
had  negative  gross profit in 1995 due  primarily to the  expensing of tooling,
software and other development costs.

     Selling,   general  and  administrative   expenses  in  1995  decreased  by
approximately $47,000, or 1.4%, over 1994. As a percentage of revenues, selling,
general and  administrative  expenses  decreased to 51.9% for 1995 from 60.8% in
1994.  The decrease as a percentage  of revenues was primarily  attributable  to
such costs being spread over a higher revenue base.  Selling expenses  increased
by $759,000,  or 48.3%, in 1995. The increase was primarily  attributable to the
expenses associated with the Company's Paris, France and London, England offices
being  open  for  a  full  year  and  marketing  expenses  associated  with  the
DrugAlert(TM)  product.   General  and  administrative   expenses  decreased  by
approximately  $806,000  in 1995,  or  45.3%,  over  1994.  This  reduction  was
attributable  primarily  to the  recovery  of  $147,000  relating  to  the  1993
conversion of the Canadian  pension plan from a defined  benefit plan to a money
purchase  plan,  a  reduction  in  accounts  payable of  $226,000  relating to a
settlement of professional  fees and the effect of staff and expense  reductions
implemented in late 1994.



<PAGE>



     Product development in 1995 decreased by approximately  $177,000, or 33.3%,
over 1994. The 1994 level was  attributable to the completion of the development
of the Company's new Model 400.

     Interest expense increased by approximately $38,000 in 1995, or 18.8%, over
1994 levels. The increase is the result of higher levels of borrowing, at higher
interest rates.

     Other  expense,  net of  income,  in 1995,  was  approximately  $52,000  as
compared to other income, net of expense, in 1994 of approximately $113,000. The
difference  of $165,000  was  attributable  primarily to the changes in exchange
rates which  generated a gain of $135,000 in 1994  compared to a loss of $79,000
in 1995.

    Capital Resources and Liquidity

     The Company  sustained net losses of $2,565,000  and $827,000 for the years
ended December 31, 1994 and 1995,  respectively,  and had an accumulated deficit
of $14,522,000 at December 31, 1996.  Although the Company  generated net income
of $2,059,000 for the year ended December 31, 1996, the Company used  $1,447,000
of cash in  operations  during  such  period as a result of the need for working
capital to support  higher  levels of accounts  receivable  and  inventory.  The
Company's history of losses and its failure to generate positive  operating cash
flow had resulted in significant cash shortages from time to time. The Company's
cash  constraints   were   exacerbated   during  1995  in  connection  with  the
introduction of the Company's  Model 400 IONSCAN(R),  as customers chose to wait
for Model 400s to become  available  rather than purchase  existing  Model 350s.
However,  as a result of the net proceeds of approximately  $10,400,000 from the
Company's   November   1996  public   offering   and  the   Company's   improved
profitability, management believes that the Company will have sufficient cash to
fund its working  capital  requirements  and to execute its growth plans through
1998.

     During 1996,  the Company sold the remaining  portion of its  investment in
Labco and realized net proceeds of $574,000.  The proceeds were added to working
capital.

     The Company's capital  expenditures  relating to its continuing  operations
were $491,000, $359,000 and $124,000 for the years ended December 31, 1994, 1995
and 1996,  respectively.  Such expenditures  related primarily to the support of
the production of the  IONSCAN(R).  During 1995, a portion of such  expenditures
related to the opening of the  Company's  foreign sales  offices.  Approximately
$75,000 of the 1995 expenditures were for development of the DrugAlert  product,
further  development of which has been suspended.  The Company  anticipates that
total capital  expenditures  will be  approximately  $500,000 for the year ended
December 31, 1997.

     The Company has  substantial  tax loss and  research  and  development  tax
credit carryforwards to offset future tax liabilities in the United States.

Inflation

     Inflation  was not a material  factor in either the sales or the  operating
expenses of the Company during the periods presented herein.

Item 7.  Financial Statements and Supplementary Data.

     Financial statements and supplementary  financial information are contained
on pages 20 through 42.

Item 8.  Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosures.

     Not applicable.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act .

     The Company hereby  incorporates  by reference the  applicable  information
from its definitive proxy statement for its 1997 Annual Meeting of Stockholders,
except for certain  information  relating to the  Company's  executive  officers
which is provided below.



<PAGE>



     The following  table sets forth certain  information as of February 1, 1997
concerning each of the Company's executive officers.

<TABLE>


<S>                        <C>    <C> 

   Executive Officer       Age                    Position with the Company and Affiliates

Stanley S. Binder           55    Chairman of the Board, President and Chief Executive Officer of the Company
John H. Davies              61    Director and Executive Vice President of the Company; President and Chief Executive
                                  Officer of Barringer Research Limited ("BRL")
Richard S. Rosenfeld        50    Vice President - Finance, Chief Financial Officer, Treasurer and Assistant Secretary of
                                  the Company
Kenneth S. Wood             44    Vice President and Secretary of the Company; President of Barringer Instruments Inc.
Ludo Daubner                53    Vice President of BRL
David Martinak              36    Vice President - Sales of BRL

</TABLE>


     Mr. Stanley S. Binder has been the President and Chief Executive Officer of
the Company  since 1991.  In July 1989,  Mr.  Binder  joined the Company and has
since held the following  offices with the Company:  President  from 1989 to the
present date,  Chief Operating  Officer from 1989 to June 1990,  Chief Financial
Officer from 1989 until July 1993, and Chief Executive Officer from July 1990 to
the  present  date.  Mr.  Binder is  chairman  of the New Jersey  Counsel of the
American  Electronics  Association and a member of the Board of Directors of the
American Electronics Association.

     Mr.  John H. Davies has been an  Executive  Vice  President  of the Company
since 1992 and the  President  and Chief  Executive  Officer of BRL since August
1989.

     Mr. Richard S.  Rosenfeld,  a certified  public  accountant,  has been Vice
President-Finance and Chief Financial Officer of the Company since July 1993. He
has been the  Treasurer  and  Assistant  Secretary of the Company  since January
1992, and was a consultant to the Company from July 1991 to December 1991.

     Mr.  Kenneth  S.  Wood has been a Vice  President  of the  Company  and the
President of  Barringer  Instruments  Inc.  ("BII")  since  January 1992 and the
Secretary of the Company since March 1993.  He was Vice  President of Operations
for BII from April 1990 to January 1992.

     Mr.  Ludo  Daubner  joined  BRL in  1974  and has  been  Vice  President  -
Operations of BRL since January 1989 and was General Manager of BRL since 1981.

     Mr.  David  Martinak  joined BRL in 1979 and has been a Vice  President  of
Sales for BRL since April 1996.  Prior  thereto,  Mr.  Martinak held a number of
positions  with BRL,  including  Sales and Marketing  Manager from December 1988
until 1996.


    Item 10.  Executive Compensation.

    The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.

    Item 11.  Security Ownership of Certain Beneficial Owners and Management.

    The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.

    Item 12.  Certain Relationships and Related Transactions.

    The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.



<PAGE>



    Item 13.  Exhibits and Reports on Form  8-K

       (a) Exhibits

3.1        The Company's  Certificate of Incorporation,  as amended  (previously
           filed as Exhibit 3.1A to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1995 (File No.
           0-3207) and incorporated herein by reference).

3.2        By-laws  of the  Company  (previously  filed as  Exhibit  3.2A to the
           Company's  Annual  report on Form  10-K/A-2 for the fiscal year ended
           December  31,  1994  (File No.  0-3207)  and  incorporated  herein by
           reference).

10.1       Employment Agreement,  dated as of July 10, 1989, between the Company
           and  Stanley S.  Binder  (previously  filed as  Exhibit  10.15 to the
           Company's Registration Statement on Form S-1 (File No.
           33-3162) and incorporated herein by reference).

10.2       Employment Agreement, dated November 1, 1996, between the Company and
           Richard  S.  Rosenfeld  (previously  filed  as  Exhibit  10.2  to the
           Company's  Registration  Statement on Form SB-2 (File No.  333-13703)
           and incorporated herein by reference).

10.3       Employment Agreement, dated November 1, 1996, between the Company and
           Kenneth S. Wood  (previously  filed as Exhibit 10.3 to the  Company's
           Registration Statement on Form SB-2 (File No.
           333-13703) and incorporated herein by reference).

10.4       Consulting  Agreement,  dated as of  January  1,  1991,  between  the
           Company and John J. Harte  (previously  filed as Exhibit  10.4 to the
           Company's Registration Statement on Form SB-2 (File No.
           333-13703) and incorporated herein by reference).

10.5       Form of 1995  nonqualified  stock  option  agreement  (previously  
           filed as Exhibit 10.6 to the Company's Registration Statement on Form
           SB-2 (File No. 333-13703) and incorporated herein by reference).

10.6       Form of 1996 nonqualified stock option agreement (previously filed as
           Exhibit 10.7 to the Company's Registration Statement on Form SB-2 
           (File No. 333-13703) and incorporated herein by reference).

10.7       Description of 1991 Warrant Plan (previously filed as Exhibit 10.8 to
           the  Company's  Registration  Statement  on  Form  SB-2  (File No. 
           333-13703) and incorporated herein by reference).

10.8       Description of Exercise Plan (previously filed as Exhibit 10.9 to the
           Company's Registration Statement on Form SB-2 (File No. 333-13703) 
           and incorporated herein by reference).

10.9       License Agreement, dated February 27, 1989, between Canadian Patents 
           and  Development  Limited --  Societe  Canadienne  Des  Brevets  Et 
           D'Exploitation Limite and Barringer Instruments Limited (the "License
           Agreement"),  Supplement  #1,  dated  March  4, 1991,  Assignment of 
           License Agreement, dated January 2, 1992, to Her Majesty the Queen in
           Right of Canada, as Represented By the Minister of National  Revenue 
           and Supplemental Letter Agreement, dated October 7, 1996 (previously 
           filed as Exhibit 10.10 to  the Company's  Registration  Statement on 
           Form SB-2 (File No. 333-13703) and incorporated herein by reference).

10.10      Termination  Agreement  dated  October 7, 1996,  between  the Company
           and Barringer  Laboratories Inc. (previously filed as Exhibit 10.11 
           to the Company's Registration Statement on Form SB-2 (File No. 333-
           13703) and incorporated herein by reference).

10.11      Lease,  dated as of February 17, 1993, between the Company and Murray
           Hill Associates  (previously  filed as Exhibit 10.17 to the Company's
           Registration   Statement  on  Form  SB-2  (File  No.  333-13703)  and
           incorporated herein by reference).

10.12      Lease,  dated as of July 27, 1995, between Barringer Research Limited
           and Lehndorff  Management Limited  (previously filed as Exhibit 10.18
           to the  Company's  Registration  Statement  on Form  SB-2  (File  No.
           333-13703) and incorporated herein by reference).




<PAGE>




11.1       Computation of Earnings Per Share

21.1       List of the Company's Subsidiaries (previously filed as Exhibit 21 to
           the Company's Registration Statement on Form SB-2 (File No. 
           333-13703) and incorporated herein by reference).

23.1       Consent of Independent Certified Public Accountants

27.1       Financial Data Schedule

           (b) Reports on Form 8-K.

           Item 5.  Other Events:-

       October 7, 1996 -     Termination agreement between the Company and 
                             Barringer Laboratories  Inc.  

       October  23,  1996 -  Announcement of the Company's results of operations
                             for the three-month and six-month periods ended 
                             September 30, 1996.

       November 12, 1996 -   Announcement  by the Company that it had agreed to
                             sell shares of its common  stock and common  stock 
                             purchase warrants in an underwritten public 
                             offering.
 
      December  13, 1996 -  Announcement of the exercise of the  over-allotment
                            option in connection with the Company's underwritten
                            public offering.

                                      -18-

<PAGE>



SIGNATURES

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

                                            BARRINGER TECHNOLOGIES INC.

                                            By: /s/ Stanley S. Binder
                                                ____________________________
                                                Stanley S. Binder, President
                                                and Chief Executive Officer

Dated: March 26, 1997

          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
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>


        Signature                                Title                          Date

<S>                                          <C>                                <C> 
/s/ Stanley S. Binder                        President, Chief                   March 26, 1997
_____________________________
Stanley S. Binder                            Executive Officer
                                             and Director

 /s/ John D. Abernathy                       Director                           March 26, 1997
_____________________________
John D. Abernathy

 /s/ Richard D. Condon                       Director                           March 26, 1997
_____________________________
Richard D. Condon

 /s/ John H. Davies                          Director                           March 26, 1997
_____________________________
John H. Davies

 /s/ John J. Harte                           Director                           March 26, 1997
_____________________________
John J. Harte

 /s/ James C. McGrath                        Director                           March 26, 1997
_____________________________
James C. McGrath

/s/ Richard S. Rosenfeld                     Vice President-Finance, Chief      March 26, 1997
_____________________________
Richard S. Rosenfeld                         Financial Officer and Treasurer
                                             (Principal Financial Officer
                                             and Principal Accounting Officer)

</TABLE>


<PAGE>



                          INDEX TO FINANCIAL STATEMENTS





                                                                       Page

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants .................... 21

Consolidated Statements of Operations for the Years Ended
  December 31, 1996, 1995 and 1994..................................... 22

Consolidated Balance Sheets - December 31, 1996 and 1995............... 24

Consolidated Statements of Stockholders' Equity for the Years
  Ended December 31, 1996, 1995 and 1994............................... 26

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1995 and 1994..................................... 27

Notes to Consolidated Financial Statements............................. 28


Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts....................... 42



<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





Board of Directors and Stockholders
Barringer Technologies Inc.
New Providence, New Jersey


We have  audited  the  accompanying  consolidated  balance  sheets of  Barringer
Technologies Inc. as of December 31, 1996 and 1995 and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period  ended  December  31,  1996.  We have also audited the
schedule  listed in the  accompanying  index.  These  financial  statements  and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about whether the financial  statements  and schedule are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial  statements and
schedule.  An audit also includes  assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
presentation  of the  financial  statements  and  schedule.  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  Barringer
Technologies  Inc.  at  December  31,  1996 and  1995,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996 in conformity with generally accepted accounting principles.

Also, in our opinion,  the schedule presents fairly,  in all material  respects,
the information set forth therein.


                                                         /S/ BDO SEIDMAN, LLP
                                                         _______________________
                                                         BDO Seidman, LLP

Woodbridge, New Jersey
February 12, 1997


<PAGE>



                           BARRINGER TECHNOLOGIES INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                               YEAR ENDED DECEMBER 31,

<S>                                                                       <C>                  <C>                  <C> 
                                                                          1996                 1995                 1994
                                                                  -------------------- -------------------- --------------------
Revenues from operations                                          $    10,923,000      $    6,374,000       $    5,514,000
Cost of revenues                                                        5,363,000           3,601,000            4,100,000
                                                                  -------------------- -------------------- --------------------
     Gross profit                                                       5,560,000           2,773,000            1,414,000

Operating expenses:
  Selling, general and administrative                                   3,734,000           3,305,000            3,352,000
  Product development                                                     230,000             354,000              531,000
                                                                  -------------------- -------------------- --------------------
                                                                        3,964,000           3,659,000            3,883,000
                                                                  -------------------- -------------------- --------------------
     Operating income (loss)                                            1,596,000            (886,000)          (2,469,000)

Other income, (expense):
  Interest expense                                                       (228,000)           (240,000)            (202,000)
  Equity in earnings of Labco (note 2)                                    117,000                  -                    -
  Gain on sale of investment in Labco (note 2)                            123,000                  -                    -
  Investment income                                                        72,000                  -                    -
  Other, net                                                              (12,000)            (52,000)              113,000
                                                                  -------------------- -------------------- --------------------
                                                                           72,000            (292,000)             (89,000)
                                                                  -------------------- -------------------- --------------------
     Income (loss) before income tax provision (benefit)                1,668,000          (1,178,000)          (2,558,000)
Income tax provision (benefit) (note 8)                                  (391,000)                 -                75,000
                                                                  -------------------- -------------------- --------------------
     Income (loss) from continuing operations                           2,059,000          (1,178,000)          (2,633,000)
Operation held for sale (note 2):
  Income from operations                                                        -             258,000               68,000
  Gain on sale of a portion of investment                                       -              93,000                    -
                                                                  -------------------- -------------------- --------------------
                                                                                0             351,000               68,000
                                                                  -------------------- -------------------- --------------------
     Net income (loss)                                                  2,059,000            (827,000)          (2,565,000)
Preferred stock dividends                                                 (39,000)            (82,000)            (108,000)
                                                                  -------------------- -------------------- --------------------
     Net income (loss) attributable to common stockholders        $     2,020,000 $          (909,000) $        (2,673,000)
                                                                  ==================== ==================== ====================

                             Continued on next page


See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                           BARRINGER TECHNOLOGIES INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Continued)



                                                                                YEAR ENDED DECEMBER 31,

<S>                                                                   <C>                 <C>                <C>    
                                                                              1996               1995               1994
                                                                       ------------------ ------------------ ------------------
Primary Earnings (Loss) Per Share Data (Note 1):
  Continuing operations                                                $        0.48      $      (0.39)      $      (0.97)
  Operation held for sale:
    Income from operations                                                         -              0.08               0.02
    Gain on sale of a portion of investment in Labco                               -              0.03                  -
                                                                       ------------------ ------------------ ------------------
Net income (loss) per share                                            $        0.48      $      (0.28)      $      (0.95)
                                                                       ================== ================== ==================

Fully Diluted Earnings (Loss) Per Share Data (Note 1):
  Continuing operations                                                $        0.44      $      (0.39) $           (0.97)
  Operation held for sale:
    Income from operations                                                         -              0.08               0.02
    Gain on sale of a portion of investment in Labco                               -              0.03                  -
                                                                       ------------------ ------------------ ------------------
Net income (loss) per share                                            $        0.44      $      (0.28)      $      (0.95)
                                                                       ================== ================== ==================

Weighted average common and common equivalent shares
outstanding
Primary                                                                    4,221,000         3,283,000          2,827,000
Fully diluted                                                              4,607,000         3,283,000          2,827,000




See notes to consolidated financial statements.

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                           BARRINGER TECHNOLOGIES INC.
                           CONSOLIDATED BALANCE SHEETS



ASSETS                                                                                         DECEMBER 31,
                                                                                ---------------------------------------------

                                                                                         1996                    1995
                                                                                         ----                    ----

Current Assets:
<S>                                                                             <C>                        <C>          
   Cash and cash equivalents (note 5)                                            $      5,276,000          $      43,000
   Marketable securities                                                                4,328,000                  -
   Receivables, less allowances of $63,000 and $41,000 (note 5)                         3,521,000              1,533,000
   Inventories (Note 3)                                                                 2,270,000              1,621,000
   Prepaid expenses and other                                                             498,000                250,000
   Deferred tax assets (note 8)                                                           731,000                225,000
                                                                                -----------------------  ---------------------
          Total current assets                                                         16,624,000              3,672,000
Machinery and equipment, net (note 4)                                                     595,000                586,000

Investment in unconsolidated subsidiary (note 2)                                             -                   334,000

Other                                                                                     104,000                143,000
                                                                                -----------------------  ---------------------
                                                                                $      17,323,000          $   4,735,000
                                                                                =======================  =====================


</TABLE>


See notes to consolidated financial statements.



<PAGE>

<TABLE>

<CAPTION>

                           BARRINGER TECHNOLOGIES INC.
                           CONSOLIDATED BALANCE SHEETS



LIABILITIES AND STOCKHOLDERS' EQUITY                                                             DECEMBER 31,
                                                                                 --------------------------------------------

                                                                                           1996                   1995
                                                                                           ----                   ----
Current Liabilities:
<S>                                                                                <C>                  <C>              
   Bank indebtedness and other notes (note 5)                                      $     174,000        $         744,000
   Accounts payable                                                                    1,009,000                1,278,000
   Accrued liabilities                                                                   648,000                  723,000
   Accrued payroll and related taxes                                                     522,000                  257,000
   Current portion of long-term debt (note 6a)                                              -                     300,000
                                                                                   --------------------  -----------------
          Total current liabilities                                                    2,353,000                3,302,000

Other non-current liabilities (note 6b)                                                  117,000                  108,000
Commitments (notes 9 and 10)

Stockholders' equity (note 7):
     Preferred Stock,  $2.00 par value,  4,000,000  shares  authorized:  270,000
      shares designated class A convertible  preferred stock,  60,165 and 82,497
      shares outstanding, less discount of $64,000 and
      $47,000, respectively                                                               74,000                  101,000
      730,000 shares designated class B convertible preferred stock,
      122,500 and 258,000 shares outstanding, respectively                               245,000                  515,000
     Common stock, $0.01 par value, 7,000,000 shares authorized,
      5,357,000 and 3,479,000 shares outstanding, respectively                            54,000                   35,000
   Additional paid-in capital                                                         29,430,000               17,685,000
   Accumulated deficit                                                               (14,522,000)             (16,542,000)
   Cumulative foreign currency translation adjustment                                   (415,000)                (456,000)
                                                                                   --------------------     --------------------
                                                                                      14,866,000                1,338,000
   Less: common stock in treasury, at cost, 31,000 shares                                (13,000)                 (13,000)
                                                                                   --------------------     --------------------
          Total stockholders' equity                                                  14,853,000                1,325,000
                                                                                   --------------------     --------------------
                                                                                   $  17,323,000            $   4,735,000
                                                                                   ====================     ====================

</TABLE>


See notes to consolidated financial statements.


<PAGE>


<TABLE>
<CAPTION>

                           BARRINGER TECHNOLOGIES INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)
                                                            Preferred    Class A    Class B
                                               Common stock   stock      pfd stk    pfd stk
                                               ------------ ----------- ---------  ----------

                                      Total                                                    Paid in    Accum     Foreign  Treas
                                      equity    shrs   am't  shrs  am't shrs am't  shrs  am't  capital   deficit    Transl   stock
                                     --------- ------  ----  ----  ---- ---- ----  ----  ---- ---------  -------    -------  ------

<S>                                  <C>       <C>     <C>   <C>  <C>    <C> <C>   <C>   <C>  <C>        <C>        <C>      <C>   
Balance - January 1, 1994            $ 3,646   2,762   $ 28  445  $ 555  83  $101  318   $635 $ 15,683   $(12,960)  $ (391)  $  (5)
   Exercise of stock options/warrants    168      72      1                                        167
   Issuance of common stock pursuant
     to settlement of  1993 litigation    70      12                                                78                          (8)
   1994 dividend on preferred stock        0      26                                               108       (108)
   Net loss                           (2,565)                                                              (2,565)
   Translation adjustment               (133)                                                                         (133)
                                    --------- -------  ----- ------ ---- --- ----- ----  -----  ------   ---------   -----    -----
Balance -  December 31, 1994           1,186   2,872     29   445   555  83   101  318    635   16,036    (15,633)    (524)    (13)
   Sale of units in private 
     placement, net                      888     383      4                                        884
   Conversion of preferred stock           0     159      2  (445) (555)           (60)  (120)     673
   Change in warrant exercise 
     price in payment of debt             10                                                        10
   1995 dividend on preferred stock        0      65                                                82        (82)
   Net loss                             (827)                                                                (827)
   Translation adjustment                 68                                                                            68
                                   ---------- -------- ----- -----  --- ---  ----- ----  -----   ------   --------  -------- -------
Balance -  December 31, 1995           1,325   3,479     35     0    0  83    101   258   515   17,685    (16,542)    (456)    (13)
   Sale of securities, net of 
     expense ($741)                   10,401   1,437     14                                     10,387
   Conversion of preferred stock           0      55      1            (23)   (27) (135) (270)     296
   Exercise of stock options and warrants 42      15                                                42
   Conversion of debentures            1,000     364      4                                        996
   Preferred stock dividends             (15)      7                                                24        (39)
   Net income                          2,059                                                                2,059
   Translation adjustment                 41                                                                            41
                                   ---------  ------- ------- ----- --- --- -----  ----  -----  -------  -----------  ------ -------
Balance - December 31, 1996        $  14,853   5,357  $  54     0   $0  60   $ 74   123 $ 245   $29,430* $(14,522)   $ 415)    (13)
                                   =========  ======  ======= ===== === === =====  ====  =====  =======  ===========  ====== ======
* At December 31, 1996 and 1995,  net of notes  receivable of $274 from the sale
of stock.

</TABLE>



See notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>


                                                        BARRINGER TECHNOLOGIES INC.
                                                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                         Year Ended December 31,
                                                                          ---------------------------------------------------------

                                                                            1996                  1995                  1994
                                                                            ----                  ----                  ----
<S>                                                                    <C>               <C>              <C>                  
Net Income (loss)                                                      $  2,059,000      $      (827,000) $         (2,565,000)
Items not affecting cash:
     Depreceiation and amortization                                         115,000              362,000               711,000
     Inventory write-down and receivable reserves                            22,000              656,000             1,210,000
     Minority interest                                                          -                   -                  (76,000)
     Income from and gain on sale of investment in Labco                   (240,000)            (351,000)                  -
      Pension recovery                                                          -               (147,000)                  -
      Deferred tax (benefit) expense                                       (506,000)                -                   75,000
      Prepaid pension cost                                                      -                (78,000)              132,000
      Other                                                                  50,000               71,000               235,000
 (Increase) decrease in non-cash working capital balances                (2,947,000)            (397,000)              206,000
                                                                       --------------        ----------------      ----------------
          Cash (used in) operating activities                            (1,447,000)            (711,000)              (72,000)
                                                                       --------------        ----------------      ----------------
Investing Activities:
      Purchase of machinery and equipment                                  (124,000)            (358,000)             (847,000)
      Escrowed cash on sale of Canadian subsidiary                              -                    -                 225,000
      Investment in marketable securities                                (4,328,000)                 -                     -
      Proceeds on sale of  investment in Labco                              574,000              300,000                   -
                                                                        -------------        ----------------     -----------------
          Cash used in  investing activities                             (3,878,000)             (58,000)             (622,000)
Financing Activities
      Proceeds on issuance of Convertible Subordinated Debentures         1,000,000                  -                     -
      Reduction in long-term debt                                          (300,000)                 -                (184,000)
      Increase (decrease) in bank debt and other                           (570,000)            (412,000)              488,000
      Proceeds on issuance of equity securities                          10,443,000              888,000               171,000
      Rent inducement                                                           -                108,000                   -
      Payment of dividends on preferred stock                               (15,000)                 -                     -
                                                                        -------------        ---------------       ----------------
          Cash provided by financing activities                          10,558,000              584,000               475,000
                                                                        -------------        ---------------       ----------------
Increase (decrease) in cash                                               5,233,000             (185,000)             (219,000)
Cash - beginning of year                                                     43,000              267,000               486,000
Less cash held for sale                                                         -                (39,000)                  -
                                                                       --------------       ---------------       -----------------
Cash and cash equivalents - end of year                                $  5,276,000         $     43,000          $     267,000
                                                                       ==============       ===============        ================
Changes in components of non-cash working capital 
   balances related to operations:
      Receivables                                                     $  (2,010,000)        $     38,000          $   1,249,000
      Inventories                                                          (649,000)            (281,000)              (987,000)
      Other current assets                                                 (248,000)              60,000                (58,000)
      Other assets                                                           39,000              (12,000)                   -
      Accounts payable and accrued liabilities                              (79,000)            (202,000)                 2,000
                                                                        -------------       ---------------        ----------------
Decrease (increase) in operating assets net of operating
   liabilities arising from cash transactions                         $  (2,947,000)       $    (397,000)         $     206,000
                                                                      ===============      ==============          ================
See notes to consolidated financial statements.

</TABLE>

<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying  consolidated financial statements comprise the accounts of the
Company and its continuing subsidiary companies.  All intercompany  transactions
have been eliminated.

Principles of Translation

Assets and liabilities of the Company's  foreign  subsidiaries are translated by
using year-end exchange rates and statement of operation items are translated at
average exchange rates for the year. Translation  adjustments are accumulated in
a separate component of stockholders' equity.

Inventories

Materials  and supplies are carried at the lower of average cost or  replacement
cost.  Finished  goods and  work-in  process are carried at the lower of average
cost or net realizable value.

Property and Equipment

Property and equipment are carried at cost.  Depreciation  of owned equipment is
computed on a straight-line basis over the estimated useful lives of the related
assets,  generally from three to ten years. Leasehold improvements are amortized
over the term of the  related  lease,  generally  from five to ten years,  which
approximates  the useful lives of these  improvements.  Equipment  under capital
leases  is  amortized  on a  straight-line  basis  over the  term of the  lease,
generally four to ten years,  which  approximates  the estimated useful lives of
the leased equipment.

Per Share Data

Net income  (loss) per share is  computed by dividing  net income  (loss),  less
preferred stock  dividends,  by the weighted average number of common and common
equivalent  shares  outstanding  during the  period.  Common  equivalent  shares
consist of the dilutive  effect,  if any, of unissued  shares under  options and
warrants,  computed  using the treasury  stock method  (using the average  stock
prices for primary  basis and the higher of average or  period-end  stock prices
for fully  diluted  basis).  Fully  diluted  income (loss) per share is computed
assuming  the  conversion  of  convertible   preferred  stock  and  subordinated
debentures at the beginning of the period or the date of issuance,  whichever is
later.

Statement of Cash Flows

For purposes of the  Statement of Cash Flows,  the Company  considers all highly
liquid  investments with an original maturity of three months or less to be cash
equivalents.

Revenue Recognition

The Company  recognizes  revenue on the percentage of completion  method for its
research and development  contracts with progress measured based on the ratio of
costs  incurred to the total  estimated  cost,  and  generally,  when product is
shipped for all other sales. Where the Company receives contracts for the design
and construction of specialty instruments that require long manufacturing times,
the Company will also recognize  revenue on the percentage of completion  method
similar to its recognition method in the research and development business.

For the years ended December 31, 1996, 1995 and 1994, the Company had recognized
revenues of $49,000,  $264,000 and $17,000 respectively,  on jobs in process and
had incurred  related costs of $25,000,  $183,000 and $10,000  respectively,  of
which $0, $210,000 and $5,000 respectively, were billed to customers.


<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Financial Instruments and Credit Risk Concentration

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  primarily of trade accounts  receivable.  Concentrations of
credit  risk  with  respect  to  such   receivables  are  limited  to  primarily
governmental  agencies.  Marketable  securities  consist  of  investments  in US
government and agency obligations.

Long-Lived Assets

Long-lived assets, such as property and equipment,  are evaluated for impairment
when events or changes in circumstances indicate that the carrying amount of the
assets may not be  recoverable  through the estimated  undiscounted  future cash
flows from the use of these assets. If and when any such impairment  exists, the
related assets will be written down to fair value.  This policy is in accordance
with Statement of Financial  Accounting  Standards No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and Long-Lived Assets to be Disposed of", which
the Company has adopted  effective  for the year ended  December  31,  1996.  No
write-downs  have been  necessary  through  December 31, 1996 as a result of the
adoption of FAS 121.

Stock-Based Compensation

The Company has adopted the disclosure only provisions of SFAS 123,  "Accounting
for Stock-Based  Compensation"  ("SFAS 123"), but applies  Accounting  Principle
Board Opinion No. 25 in accounting and measuring compensation expense related to
stock option plans. There was no compensation expense related to the issuance of
stock options for the years ended  December 31, 1996,  1995 and 1994 (see note 7
for pro-forma disclosure required by SFAS 123).

Fair Value of Financial Instruments

The carrying amounts  reported in the  consolidated  balance sheets for cash and
cash equivalents,  marketable securities, accounts receivable, accounts payable,
accrued  liabilities  and notes  payable  approximate  fair value because of the
immediate or short-term maturity of these financial instruments. The Company has
the ability and intent to hold all marketable securities through maturity dates.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual  results  could  differ  from  these  estimates.  Many  of the  Company's
estimates  and  assumptions  used  in the  financial  statements  relate  to the
Company's  products,  which are subject to technology and market changes.  It is
reasonably  possible  that  changes may occur in the near term that would affect
management's estimates with respect to inventories and equipment.


2. Operation Held For Sale

During the first  quarter  of 1995,  the  Company  started  to  actively  seek a
purchaser for its then 47% interest in Barringer  Laboratories,  Inc  ("Labco").
Accordingly, the financial statements had been reclassified,  where appropriate,
to reflect Labco as an operation held for sale.

Pursuant  to the terms of a Stock  Purchase  Agreement,  dated  December 8, 1995
("Agreement"),  by and between the Company and Labco,  on December  13, 1995 the
Company sold to Labco  647,238  shares of Labco's  common stock for an aggregate
purchase price of $809,000,  resulting in a gain of $93,000.  The purchase price
consisted of $300,000 in cash,  cancellation  of all amounts owed by the Company
to Labco pursuant to certain intercompany  agreements (aggregating $452,000) and
cancellation of $57,000 in accounts receivable due to Labco. After giving effect
to the sale of the Labco shares,  the Company continued to own 432,475 shares of
Labco stock representing a 26% ownership interest.


<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

In October 1996, the Company and Labco entered into a Termination Agreement (the
"Termination  Agreement")  pursuant to which,  among other  things,  the Company
agreed  that,  for a period  of three  months  from the date of the  Termination
Agreement,  it would sell its  remaining  shares in Labco at a price of at least
$1.6875 per share (the "Target Price"). During 1996, the Company sold all of its
remaining  shares and  warrants in Labco and  recognized a gain on such sales of
$123,000.  In  addition  to the gain on the sale of its  Labco  investment,  the
Company  recorded  $117,000 of income  representing its  proportionate  share of
Labco's net income for 1996.


3. Inventories

At December 31, 1996 and 1995, the Company had parts,  subassemblies and work in
process of  $1,483,000  and  $1,010,000,  and  finished  goods of  $787,000  and
$611,000, respectively.


4. Machinery and Equipment

The major categories of machinery and equipment are as follows:

                                                         December 31,
                                             --------------------------------

                                              1996                    1995
                                              ----                    ----
Owned:
   Office equipment                       $   395,000              $ 350,000
   Machinery and equipment                  1,857,000              1,687,000
   Leasehold improvement                       64,000                 64,000
                                          -----------            --------------
                                            2,316,000              2,101,000
   Accumulated depreciation                (1,721,000)            (1,515,000)
                                          ------------          ---------------
Totals                                    $   595,000              $ 586,000
                                          ===========           ===============


5. Bank Indebtedness and Other Notes Payable

The  Company's  Canadian  subsidiary,  Barringer  Research Ltd.  ("BRL"),  has a
financing  arrangement with the Ontario  Development  Corporation  ("ODC") for a
$730,000 export line of credit. BRL may borrow up to $730,000 on a formula basis
of 90% of export  accounts  receivable  plus 70% of the value of export purchase
orders  (subject  to  $220,000  sub-limit).  The rate of  interest  is  adjusted
quarterly and was 10% at December 31, 1996 and  outstanding  borrowings  totaled
$150,000.  The ODC has informed the Company that this facility will no longer be
available  due to the  phasing  out of the ODC by the  Canadian  government.  In
January 1997,  the Company paid all amounts owed to the ODC and the facility was
terminated.

BRL's line of credit  arrangement  with the  Toronto-Dominion  Bank ("Bank") was
terminated  by BRL in  December  1996 upon the payment of all amounts due to the
Bank.  During  December 1996, the Company placed in an interest  bearing account
$280,000 in order to secure a performance bond that was previously issued by the
Bank. At December 31, 1996, this deposit was  restricted.  On February 12, 1997,
the bond was canceled and the deposit released.


6. Current Portion of Long-term Debt and Other Non-current Liabilities

(a) Current portion of long-term debt at December 31, 1995, consisted of amounts
due on the 12 1/2% Convertible Subordinated Debentures which were repaid on July
15, 1996 with a portion of the net proceeds  from the sale of  $1,000,000  of 6%
Convertible Subordinated Debentures due 1997. See note 7.

(b) Other non-current liabilities represent rents payable on the Company's 
Canadian facility.


<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

7. Stockholders' Equity

Public Offering

On  November  12,  1996,  the Company  completed  the sale of  1,250,000  shares
("Shares")  of  common  stock  and  1,250,000  Common  Stock  Purchase  Warrants
("Warrants") in a public  underwriting.  On December 12, 1996, the  underwriters
exercised their over-allotment  option and acquired an additional 187,500 Shares
and 187,500  Warrants.  The  aggregate  net proceeds to the  Company,  after all
expenses of the offering, was approximately $10,401,000.

Private Offerings

On May 9, 1995, the Company completed the private placement of its securities to
two institutional investors. The private placement consisted of 125 units priced
at $6,000 each for an  aggregate  sales price of  $750,000.  Each unit  ("Unit")
consisted of 2,500 shares of the Company's  common stock and a five year warrant
to purchase  2,500 shares of the Company's  common stock at $1.96 per share.  In
addition,  in order to induce  the  institutional  investors  to enter into this
transaction,  an additional  three year warrant to acquire  37,500 shares of the
Company's common stock at $1.96 per share was issued.

On June 30, 1995, the Company completed an additional private placement in which
it sold an  additional  28 Units,  including  22 Units to 17  members  of senior
management  and the  Company's  Board of  Directors,  for  proceeds  aggregating
$168,000.
This private placement did not include the additional three year warrant.

On July  10,  1996,  the  Company  completed  the sale of  $1,000,000  of its 6%
Convertible  Subordinated  Debentures,  ("Debentures")  due  1997,  in a private
transaction  to  private  investors  including  members  of  management.   These
debentures are convertible into shares of the Company's Common Stock at the rate
of $2.75 per share and mature on the earlier of (i) 30 days after the completion
of an underwritten  public offering or a private placement by the Company of its
equity  securities  pursuant to which the Company  receives  net  proceeds in an
aggregate  amount in excess of  $5,000,000,  or (ii) July 9, 1997.  Interest  is
payable  semi-annually.  A  portion  of the net  proceeds  of the  sale of these
debentures were used to repay the 12 1/2%  Subordinated  Convertible  Debentures
due 1996.  All of the  Debentures  were  converted into 363,628 shares of common
stock in December 1996, as a result of the public offering.


Due from Officers/Shareholders

In  connection  with the  exercise of options to acquire  190,000  shares of the
Company's  Common  Stock,  two  officers  of the Company  signed  full  recourse
interest bearing (no interest the first year,  prime rate thereafter)  unsecured
promissory  demand notes  aggregating  $274,000 that was available to them under
the Company's stock option purchase program.  Under that program the Company has
arranged for a  market-maker  in the Company's  Common Stock,  to coordinate the
orderly  sale in the open market of a portion of the Common Stock to be received
by the employees  upon the exercise of their options in an amount  sufficient to
repay the loan and related  interest.  As of December 31,  1996,  the notes were
still outstanding.








<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Common Stock Outstanding or Reserved for Issuance

The following table sets forth the number of shares of Common Stock  outstanding
as of  December  31,  1996 as well as the number of shares of Common  Stock that
would be  outstanding  in the event that all of the  options  and  warrants  are
exercised  and all Series of  Convertible  Preferred  Stock and  Debentures  are
converted into Common Stock.

<TABLE>

<CAPTION>

                                             Exercise,                      Common stock
                                           conversion or                   outstanding or
                                            option price                   reserved for issuance

<S>                                      <C>                               <C>
Common stock                                                                  5,357,852
Class A convertible preferred stock            0.361745                          21,764
Class B convertible preferred stock            0.355839                          43,590
Stock options (i)                       $1.00 to $14.00                         461,000
Private placement warrants (ii)                   $1.96                         412,499
Public warrants (iii)                            $9.847                         359,375
Underwriter's warrants (iii)                    $10.276                         125,000
Underlying warrants (iii)                        $9.847                          31,250
Other warrants (iv)                     $4.82 to $12.46                          55,000
                                         --------------                      -----------
Total                                                                         6,867,330
                                                                             ===========

</TABLE>

All outstanding warrants expire between January 23, 1997 and April 25, 2001.

(i)  Stock Compensation Plans

From time to time,  the  Company has  granted  non-qualified  options to various
employees and Directors.  The Company  applies APB Opinion 25,  "Accounting  for
Stock Issued to Employees",  and related  Interpretations  in accounting for the
plans.  Under APB Opinion 25, because the exercise price of the Company's  stock
options  issued to  employees  and  directors  equals  the  market  price of the
underlying stock on the date of grant, no compensation is recognized.

FASB Statement 123,  "Accounting  for  Stock-Based  Compensation",  requires the
Company  to  provide  pro-forma  information  regarding  net  income  (loss) and
earnings (loss) per share as if compensation cost for the Company's stock option
plans  had been  determined  in  accordance  with the fair  value  based  method
prescribed in FASB Statement  123. The Company  estimates the fair value of each
stock  option at the grant date by using the  Black-Scholes  option-price  model
with the  following  weighted  average  assumptions  used for grants in 1995 and
1996,  respectively:  no dividend yield;  expected  volatility of 30%; risk-free
interest rates of 7.11% and expected lives of 5 years for the options.

Under the accounting  provisions of FASB Statement 123, the Company's net income
(loss),  primary earnings (loss) per share and fully diluted earnings (loss) per
share would have been reduced (increased) to pro-forma amounts indicated below.

<TABLE>
<CAPTION>

                                                              1996                          1995
                                                      ---------------------         ---------------------
Net income (loss):
<S>                                                   <C>                           <C>

     As reported                                      $      2,059,000              $       (827,000)
     Pro-forma                                        $      1,986,000              $       (884,000)

</TABLE>

<PAGE>

<TABLE>

                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)
<CAPTION>

<S>                                                   <C>                           <C> 
                                                              1996                          1995
                                                      ---------------------         ---------------------


Primary earnings (loss) per share from continuing operations:
     As reported                                      $       0.48                  $      (0.39)
     Pro-forma                                        $       0.47                  $      (0.40)

Fully diluted earnings (loss) per share from continuing operations:
     As reported                                      $       0.44                 $       (0.39)
     Pro-forma                                        $       0.43                 $       (0.40)

</TABLE>


A summary of the status of the Company's outstanding options as of December 31,
1995 and 1996 and changes  during the years  ending on those dates is  presented
below:



<TABLE>
<CAPTION>

                                   December 31, 1995                   December 31, 1996
                              ---------------------------         ---------------------------

<S>                                   <C>              <C>                <C>               <C>     
                                                       Weighted                             Weighted
                                                       Average                               Average
                                                       Exercise                             Exercise
                                         Shares         Price                  Shares         Price
                                      ------------  --------------         -------------- -------------
Outstanding - beginning of year
                                            58,750  $     12.38                240,125      $   4.54
   Granted                                 181,375         2.00                253,000          1.00
   Exercised                                     0                              (1,250)         2.00
   Forfeited                                     0                             (30,875)        10.66
------------
                                      ------------                         ------------
Outstanding - end of year                  240,125         4.54                461,000          2.19
                                      ============                         ============

Options exercisable - year-end             126,800         6.38                164,200          3.49

Fair value of options granted
during the  year                      $       0.70                        $       0.40
                                      ============                         ============

</TABLE>


The options  issued in 1996 expire on April 25, 2001 and are  exercisable  as to
25% of the optioned shares immediately,  50% after the first year, 75% after the
second year and 100% after the third year.  The options issued in 1995 expire on
March 10, 2000 and are  exercisable  as to 40% of the optioned  shares after the
first year,  60% after the second year,  80% after the third year and 100% after
the fourth year.



<PAGE>
<TABLE>
<CAPTION>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

The following table summarizes  information  about stock options  outstanding at
December 31, 1996.

                  OPTIONS OUTSTANDING                                       OPTIONS EXERCISABLE
----------------------------------------------------------------      ----------------------------------------
<S>            <C>                  <C>                         <C>               <C>                        <C>    

               Number Outstanding         Weighted-Average         Exercise             Number Exercisable         Exercise
Exercise        at December 31,              Remaining              Price              at December 31, 1996         Price
 Prices               1996                Contractual Life
----------- ----------------------  ------------------------    ----------------  -------------------------   --------------
$   1.00                  253,000              4.3 years $           1.00                      63,250         $     1.00
    2.00                  175,500              3.2 years $           2.00                      70,200               2.00
   12.00                   23,750              0.1 years $          12.00                      23,750              12.00
   14.00                    8,750              1.2 years $          14.00                       7,000              14.00
         ------------------------                                                 -------------------------
$ 1.00 to
$ 14.00                   461,000                 3.6 years $           2.19                  164,200         $     3.49
         ========================                                                 =========================
</TABLE>



(ii) Private  Placement  Warrants - In  connection  with the  Company's  private
placement  (see  above)  warrants to purchase  420,000  shares of the  Company's
common  stock at $1.96 per share were sold to a group of private  investors  and
senior management. The warrants expire between May 9, 1998 and June 29, 2000.

(iii) Public  Warrants - The public  warrants  (see above) are  exercisable  for
three years and entitle the registered holder to purchase one-quarter of a share
of Common Stock at an exercise price of $9.847 per share.  The Warrant  exercise
price and the  number of shares  issuable  upon  exercise  of the  Warrants  are
subject to  adjustment  under  certain  circumstances.  The  Company  may redeem
outstanding  Warrants  commencing  six months from November 12, 1996 on not less
than 30 days notice at a price of $0.25 per Warrant (subject to adjustment under
certain  circumstances) if the closing bid price of the Common Stock averages in
excess of 200% of the exercise  price for a period of 30 days' ending  within 15
days of the redemption notice date.

In connection with the underwritten public offering,  the underwriter received a
warrant ("Underwriter's Warrant") to purchase from the Company 125,000 shares of
Common Stock at an exercise  price of $10.276 per share  ("Exercise  Price") and
125,000  Warrants  ("Underlying  Warrant")  at an  exercise  price of $0.06  per
Warrant.  Each Underlying Warrant entitles the holder to purchase one-quarter of
a share  of  Common  Stock  at an  exercise  price  of  $9.847  per  share.  The
Underwriter's  Warrants are  exercisable  with respect to the Common Stock for a
period of four years  commencing  from November 12, 1997 and with respect to the
Underlying Warrants for a period of two years commencing from November 12, 1997.
These warrants contain certain registration rights.

(iv) Other warrants - In September 1994, the Company issued warrants to purchase
6,250  shares of the  Company's  common  stock at $5.25 per share to the Ontario
Development  Corporation  in  connection  with  their  increase  in  the  export
financing facility available to the Company's Canadian subsidiary, from $365,000
to $730,000) See Note 5 for additional information.

On December 31, 1991, the Board of Directors  adopted the 1991 Directors Warrant
Plan ("Plan").  Pursuant to the Plan, each non-employee  director will be sold a
five-year  warrant to purchase 3,750 shares of Common Stock at an exercise price
to be  determined  by the Board at the time of such sale,  but shall not be less
than the  current  market  price for such  shares at the time of issuance of the
warrant.  During 1996,  3,750  warrants  expired.  During 1995, no warrants were
issued  under the Plan.  During  1994,  warrants to purchase  3,750  shares were
issued to a Director at $9.64 per share, subject to adjustment.

On April 7, 1995,  the Company  issued  warrants to purchase 6,250 shares of the
Company's  common  stock  at  $4.00  per  share  to  Barringer  Laboratories  in
connection  with  their  extending  an   intercompany   obligation,   which  has
subsequently been paid.
The warrant was exercised in 1996.

The other warrants expire between March 1, 1997 and January 12, 1999.

Increase in Authorized Shares



<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

At  the  reconvened   1995  Annual  Meeting  of   Stockholders,   the  Company's
stockholders approved an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of capital stock of the Company from
7,000,000  to  12,000,000,  comprised  of  7,000,000  shares  of  Common  Stock,
1,000,000  shares of Convertible  Preferred Stock, par value $1.25 per share and
4,000,000 shares of Preferred Stock, par value $2.00 per share. The stockholders
also approved a one for four reverse stock split of the Company's common stock.


8. Income Taxes

The provision (benefit) for income taxes related to continuing operations are as
follows:

                                        1996              1995              1994
                                        ----              ----              ----
Current Tax Expense:
     U.S.                                                   -                 - 
     Foreign (primarily Canadian)     $  115,000            -                 -
                                      -----------      --------       ----------
          Total Current                  115,000            0                 0
                                      -----------      --------       ----------
Deferred Tax Expense:
     U.S.                                574,000            -                 -
     Foreign (primarily Canadian)         90,000            -                 -
                                     -----------       --------       ----------
          Total Deferred                 664,000            0                 -
                                     -----------       --------       ----------
Change in valuation allowance:
     U.S.                               (726,000)           -                 -
     Foreign (primarily Canadian)       (444,000)           -            75,000
                                     ------------      --------       ----------
          Total Change                (1,170,000)           0            75,000
                                      -----------      --------       ----------
Total income tax provision
(benefit)                             $ (391,000)     $     0      $     75,000
                                      ===========     =========     ===========



Deferred tax assets are comprised of the  following  temporary  differences  and
carryforwards at December 31:



<PAGE>

<TABLE>

                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


<CAPTION>
                                                              1996              1995
                                                              ----              ----
<S>                                                     <C>               <C>        
Nondeductible allowances against trade receivables      $    24,000      $     15,000
Nondeductible inventory reserves                            106,000            90,000
Nondeductible expense accruals                               72,000            50,000
Machinery and equipment                                     787,000           706,000
Tax benefit of Canadian operating loss and
investment credit carry forwards                            217,000           401,000
Tax benefit of U.S. operating loss carry forwards         4,019,000         4,621,000
Other                                                        35,000            41,000
                                                        -----------      ------------
     Gross deferred tax assets                            5,260,000         5,924,000
Deferred tax assets valuation allowance                  (4,529,000)       (5,699,000)
                                                        -----------      ------------
          Net deferred tax assets                       $   731,000      $    225,000
                                                        ===========      ============

</TABLE>


As a result of the Company's  historical trend of losses, a valuation  allowance
has been  provided for a substantial  portion of the U.S. and Canadian  deferred
tax assets.  At December  31, 1995,  the net  deferred tax asset  related to the
Company's  Canadian  subsidiary,  which  had  available  tax  credits  and  loss
carryforwards.  The Canadian subsidiary has a history of profitability,  despite
the consolidated  losses of the Company.  At December 31, 1996, the net deferred
tax asset of $731,000, including approximately $525,000 and $206,000, related to
the Company's Canadian and U.S.  operations,  respectively.  Based on historical
results and  estimated  1997  earnings,  which  includes  earnings  from certain
contracts,  as well as available tax planning  strategies,  management considers
realization  of  the  unreserved  deferred  tax  asset  more  likely  than  not.
Additional  reductions to the valuation  allowance will be recorded when, in the
opinion of  management,  the  Company's  ability to generate  taxable  income is
considered more likely than not.

The Company's income tax provision  (benefit) differed from the amount of income
tax determined by applying the applicable statutory U.S. federal income tax rate
to pretax income from continuing operations as a result of the following:

<TABLE>
                                                 1996              1995               1994
                                                 ----              ----               ----
<S>                                        <C>             <C>                  <C>    
Income taxes (benefit) computed
  at the U.S. statutory rate               $    567,000    $     (280,000)      $   (821,000)
Income not subject to U.S. tax, net            (112,000)         (126,000)          (154,000)
U.S. losses and expenses for
  which no tax benefit has been
  recognized                                     25,000           398,000            943,000
Utilization of U.S. net operating
  losses                                       (340,000)              -                  -
Change in net deferred tax assets              (506,000)              -               75,000
Other                                           (25,000)            8,000             32,000
                                           ------------     -------------      -------------
Provision (benefit) for income
  taxes                                    $   (391,000)    $           0       $     75,000
                                           =============    ==============      ============
</TABLE>

At December  31,  1996,  the Company has net  operating  loss carry  forwards of
approximately $10,500,000 and $5,000,000


<PAGE>


                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

for federal and state income tax purposes, respectively, which expire in varying
amounts through 2011.  Canadian research and development  investment tax credits
of approximately $217,000 will expire in varying amounts through 2006.


9. Commitments

The Company rents facilities,  automobiles and equipment under various operating
leases.  Rental expenses under such leases amounted to $325,000,  $280,000,  and
$191,000 for 1996, 1995 and 1994, respectively.

At  December  31,  1996,  the  aggregate  minimum  commitments  pursuant to
operating  leases are as follows:  


                Year ending  December 31, 
                         1997                       $ 298,000
                         1998                         203,000 
                         1999                         149,000 
                         2000                          98,000 
                         2001 and thereafter          543,000


10. Pension Plan

The Company's Canadian  subsidiary's defined benefit pension plan, which covered
its Canadian  employees,  was terminated at December 31, 1993. At the same time,
it established a money purchase plan that is structured  after the 401(k) salary
deferral plan  available to all U.S.  employees and as such,  does not establish
any corporate obligation other than a discretionary matching formula to employee
contributions.  As a result of the termination, the Company recognized a gain of
$206,000,  representing  the excess of the Plan's projected  benefit  obligation
over the accumulated  benefit  obligation,  in 1993 and recognized an additional
gain in 1995 of $172,000,  representing the excess of the Plan's assets over the
cost of  providing  the  annuities  to the  participants  for the value of their
termination benefits.  This excess was placed into a money purchase contract and
used by the  Company to provide  for its  matching  contributions  under the new
arrangement. This amount is being carried as a deferred pension expense asset on
the consolidated balance sheet.

The Company  maintains a 401(k)  salary  deferral plan  instituted  for all U.S.
employees with more than one year of service.  As a money purchase plan, it does
not establish any Company  liability  other than a matching  formula to employee
contributions.  The  aggregate  cost of the plan for  1996,  1995,  and 1994 was
$20,000, $15,700, and $16,000.


11. Supplemental Disclosures of Cash Flow Information

The Company made cash payments for interest of $246,000,  $189,000, and $239,000
for  the  years  ended   December  31,  1996,   1995  and  1994,   respectively.
Additionally,  income taxes of $3,500,  $0, and $190,000 were paid for the years
ended December 31, 1996, 1995 and 1994, respectively.

In the three years ended December 31, 1996, the Company issued  Preferred  Stock
dividends in the amount  $108,000,  $82,000,  and $24,000 in the form of 25,291,
65,417, and 7,949 shares of common stock, respectively.

In  December  1996,  the  entire  $1,000,000  of the  Company's  6%  Convertible
Subordinated  Debentures  were  converted  into 363,628  shares of the Company's
common stock.


12.  Information Concerning the Company's Principal Activities

A summary of the Company's  continuing  operations  by  geographic  area for the
years ended December 31, is as follows:


<PAGE>

<TABLE>
<CAPTION>

                           BARRINGER TECHNOLOGIES INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Revenues from operations:
<S>                                          <C>               <C>                <C> 
                                             1996              1995               1994
                                             ----              ----               ----
 United States                       $     4,122,000    $    1,867,000     $    1,862,000
 Canada                                    7,887,000         5,110,000          5,593,000
 Europe                                    2,577,000         1,599,000              -
 Eliminations                             (3,663,000)       (2,202,000)        (1,941,000)
                                      ---------------    --------------    ---------------
      Totals                         $    10,923,000    $    6,374,000     $    5,514,000
                                      ===============   ===============    ===============

Income (loss) from continuing operations:
     United States                   $      1,152,000   $   (1,548,000)    $   (2,653,000)
     Canada                                   869,000          270,000             20,000
     Europe                                    38,000          100,000              -
                                     ----------------    --------------     --------------
                                     $      2,059,000   $   (1,178,000)    $   (2,633,000)
                                     ================    ==============    ===============

Identifiable assets:
     United States                   $     16,650,000   $    4,253,000     $    6,400,000
     Canada                                 7,750,000        6,248,000          4,422,000
     Europe                                 1,256,000          696,000             -
     Eliminations                          (8,333,000)      (6,462,000)        (4,030,000)
                                      ----------------   --------------      -------------
          Totals                     $     17,323,000   $    4,735,000     $    6,792,000
                                      ===============    ==============    ==============
</TABLE>

Export sales, including sales from Canada to other countries, comprised 53.0% of
total revenues and were made primarily to Western  Europe,  Asia and Central and
South America.

A summary of the Company's  continuing  operations by principal activity for the
years ended  December 31, 1995 and 1994 is as shown below (in $000's):  Starting
in 1996 no segment,  other than the  Instruments  segment,  was  material to the
Company's  consolidated  operations  and  accordingly,  segment  reporting is no
longer required.

<TABLE>

                                                Total        Elimination      Res & Dev      Instruments      Corp & other
1995:
<S>                                          <C>             <C>           <C>              <C>    

Revenues from operations                     $      6,374                  $     1,052      $     5,250       $         72
                                             ============                  ===========      ===========       ============

Operating income (loss)                      $      (886)                  $      (311)     $       268       $       (843)
                                                                           ============     ===========       ============
Interest expense and other                          (292)
                                             ------------
Loss before income taxes                     $    (1,178)
                                             ============

Depreciation and amortization                $        362                  $        45      $       314       $          3
                                             ============                  ===========      ===========       ============

Capital expenditures                         $        359                  $        10      $       349                  -
                                             ============                  ===========      ===========       ============

Identifiable assets                          $      4,735  $       (6,462) $       275      $     7,589       $      3,333
                                             ============  =============== ===========      ===========       ============

</TABLE>


<TABLE>
<CAPTION>
                                                Total        Elimination      Res & Dev      Instruments      Corp & other

1994:
<S>                                          <C>              <C>          <C>             <C>      <C>

Revenues from operations                     $      5,514                  $       298     $      5,216                  -
                                             ============                  =============== ===============  ===============

Operating income (loss)                      $    (2,469)                  $      (208)    $     (1,075)    $       (1,186)
                                                                           =============== ===============  ===============
Interest expense and other                           (89)
                                             ------------
Loss before income taxes                     $    (2,558)
                                             ============

Depreciation and amortization                $        320                  $         8     $        280     $           32
                                             ============                  ===========     ============     ==============

Capital expenditures                         $      (491)                          -       $       (491)              -
                                             ============                  ===========     =============    ==============

Identifiable assets                          $      5,003  $       (4,030) $      302      $      5,486     $        3,245
                                                           =============== ===========     ============     ==============
Identifiable assets - held for sale                 1,789
                                             ------------
Identifiable assets - per balance sheet      $      6,792
                                             ============
</TABLE>


13. Sales to Major Customers

During 1996, the European Passenger Services Ltd accounted for approximately 11%
of consolidated revenues of the Company.  During 1995, no customer accounted for
more than 10% of the  consolidated  revenues of the Company.  During  1994,  one
customer accounted for approximately 22% of consolidated revenues.


14. Fourth Quarter Adjustments

During the fourth quarter of 1996,  the Company  recorded a deferred tax benefit
related  to a  decrease  in the  deferred  tax  asset  valuation  allowances  of
$266,000.  During the fourth quarter of 1995, the Company  recorded  adjustments
for estimated  losses on inventories and receivables of  approximately  $450,000
and  $200,000,  respectively.  During the fourth  quarter of 1994,  the  Company
recorded  adjustments  for estimated  losses on inventories  and  receivables of
approximately $800,000 and $515,000, respectively.



<PAGE>

<TABLE>
<CAPTION>


                           BARRINGER TECHNOLOGIES INC
                        VALUATION AND QUALIFYING ACCOUNTS
                            YEARS ENDED DECEMBER 31,
                                   SCHEDULE II


                                             Balance -                                                              Balance -
                                           beginning of                                                              end of
                                              period            Addition        Deduction         Recovery           period
                                        ------------------- ----------------- -------------     -------------    --------------
Allowance for doubtful accounts 
and sales allowances:
<S>                                          <C>              <C>              <C>                <C>           <C>

   1996                                       41,000            52,000           30,000                          63,000
   1995                                      539,000           221,000          719,000                          41,000
   1994                                       25,000           526,000           17,000            5,000        539,000



</TABLE>


<PAGE>