<PAGE>
                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

(MARK ONE)
[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 1998

                                      OR

[_]             TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
          For the transition period from __________ to _____________

                        Commission file number  0-13966
                                                -------

                          Premier Laser Systems, Inc.
                          ---------------------------
            (Exact name of registrant as specified in its charter)

             California                                  33-0476284
             ----------                                  ----------
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

                      3 Morgan, Irvine, California  92618
                      -----------------------------------
                   (Address of principal executive offices)

                                (949) 859-0656
                                --------------
             (Registrant's telephone number, including area code)


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

          Indicate by check mark whether the registrant (1) has filed all
     reports required to be filed by Section 13 or 15(d) of the Securities
     Exchange Act of 1934 during the preceding 12 months (or for such shorter
     period that the registrant was required to file such report), and (2) has
     been subject to such filing requirements for the past 90 days.
     Yes [X]   No [_]

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDING DURING THE PRECEDING FIVE YEARS:

          Indicate by check mark whether the registrant has filed all documents
     and reports required to be filed by Section 12, 13 or 15(d) of the
     Securities Exchange Act of 1934 subsequent to the distribution of
     securities under a plan confirmed by a court.
     Yes [_]   No [_]

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

        Indicate the number of shares outstanding of each of the issuer's
     classes of common stock, as of the latest practicable date (September 30,
     1998):

              Class A Common Stock:             14,693,111  Shares
                                                ----------
              Class E-1 Common Stock:            1,257,461  Shares
                                                 ---------
              Class E-2 Common Stock:            1,257,461  Shares
                                                 ---------

<PAGE>
                        PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements


                          PREMIER LASER SYSTEMS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE> 
<CAPTION> 
                                                                           September 30,    March 31,  
                                                                               1998           1998     
                                                                           -------------  ------------  
                                                                           (Unaudited)                
<S>                                                                        <C>            <C>         
                                                                                                      
                                  Assets                                                              
                                                                                                      
Current assets:                                                                                       
  Cash and cash equivalents                                                $    408,841   $  9,722,514
  Short-term investments                                                      4,405,546      9,666,918
  Restricted cash                                                                50,000      2,150,000
  Accounts receivable, net of allowance for sales returns and doubtful                                
    accounts of $1,364,715 at September 30, 1998 and $1,169,164                                       
    at March 31, 1998                                                         2,861,544      4,952,892
  Inventories                                                                 7,979,873      4,482,698
  Prepaid expenses and other current assets                                   1,668,110      2,528,996
                                                                           ------------   ------------
Total current assets                                                         17,373,914     33,504,018
Property and equipment, net                                                   2,376,889      1,778,423
Intangibles, net                                                             11,954,382     11,991,679
Other assets                                                                     42,948        434,300
                                                                           ------------   ------------
Total assets                                                               $ 31,748,133   $ 47,708,420
                                                                           ============   ============
                                                                                                      
                   Liabilities and shareholders' equity                                               
                                                                                                      
Current liabilities:                                                                                  
  Accounts payable                                                         $  3,044,191   $  5,510,692
  Line of credit                                                                222,971      2,068,163
  Accrued compensation and related costs                                        584,173        964,691
  Other current liabilities                                                   4,651,298      5,943,685
                                                                           ------------   ------------  
Total current liabilities                                                     8,502,633     14,487,231
                                                                           ------------   ------------
                                                                                                      
Commitments and contingencies                                                                         
                                                                                                      
Minority interest                                                             1,596,591      1,764,736
                                                                                                      
Shareholders' equity:                                                                                 
  Preferred stock, no par value:                                                                      
    Authorized shares--8,850,000                                                                     
    Issued and outstanding shares--none                                               -              -
  Common stock, Class A, no par value:                                                                
    Authorized shares--35,600,000                                                                    
    Issued and outstanding shares--14,693,111 at September 30, 1998                                  
      and 14,649,421 at March 31, 1998                                       83,993,338     83,546,913
  Common stock, Class E-1, no par value:                                                              
    Authorized shares--2,200,000                                                                     
    Issued and outstanding shares--1,257,461 at September 30, 1998                                   
      and March 31, 1998                                                      4,769,878      4,769,878
  Common stock, Class E-2, no par value:                                                              
    Authorized shares--2,200,000                                                                     
    Issued and outstanding shares--1,257,461 at September 30, 1998                                   
      and March 31, 1998                                                      4,769,878      4,769,878
  Warrants and options                                                        1,723,842      1,723,842
  Accumulated deficit                                                       (73,608,027)   (63,354,058)
                                                                           ------------   ------------
Total shareholders' equity                                                   21,648,909     31,456,453
                                                                           ------------   ------------
Total liabilities and shareholders' equity                                 $ 31,748,133   $ 47,708,420
                                                                           ============   ============ 
</TABLE> 


See notes to condensed consolidated financial statements

                                      -2-

<PAGE>

                          PREMIER LASER SYSTEMS, INC.

     CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                                  (UNAUDITED)
<TABLE> 
<CAPTION> 
                                                Three Months Ended           Six Months Ended
                                                   September 30,               September 30,
                                             -------------------------  -------------------------- 
                                                1998          1997          1998          1997
                                             -----------  ------------  ------------  ------------
<S>                                          <C>          <C>           <C>           <C> 
                                                                        
Net sales                                    $ 3,325,335  $  3,051,767  $  6,806,671  $  5,157,214
Cost of sales                                  3,513,878     1,789,463     6,971,302     3,085,443
                                             -----------  ------------  ------------  ------------
                                                                        
Gross profit (loss)                             (188,543)    1,262,304      (164,631)    2,071,771
                                                                        
Selling and marketing expenses                 1,870,587       894,309     4,070,162     1,709,332
Research and development expenses              1,458,871       669,573     2,647,912     1,183,072
General and administrative expenses            1,964,662       640,256     3,596,113     1,004,242
In-process research and development acquired                            
  in the EyeSys Technologies acquisition                     9,200,000                   9,200,000
Merger related and integration costs                         2,146,912                   2,146,912
                                             -----------  ------------  ------------  ------------
Loss from operations                          (5,482,663)  (12,288,746)  (10,478,818)  (13,171,787)
Minority interest in (income) loss of                                   
  consolidated subsidiary                        (36,421)            -       168,145
Interest income (expense), net                    10,135       331,736        56,704       501,522
                                             -----------  ------------  ------------  ------------
                                                                        
Net loss                                      (5,508,949)  (11,957,010)  (10,253,969)  (12,670,265)

Other comprehensive income
                                             -----------  ------------  ------------  ------------

Comprehensive loss                           $(5,508,949) $(11,957,010) $(10,253,969) $(12,670,265)
                                             ===========  ============  ============  ============
 
Net loss per share                           $     (0.38) $      (1.11) $      (0.70) $      (1.30)
                                             ===========  ============  ============  ============
                                                                        
Shares used in the computation of net                                   
  loss per share                             14,686,844    10,755,941    14,675,426     9,758,207
                                             ===========  ============  ============  ============
</TABLE> 

See notes to condensed consolidated financial statements

                                      -3-

<PAGE>
                          PREMIER LASER SYSTEMS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE> 
<CAPTION> 
                                                                            Six Months Ended
                                                                              September 30,
                                                                       ----------------------------
                                                                           1998            1997
                                                                       ------------    ------------
<S>                                                                    <C>             <C> 
Operating Activities
Net loss                                                               $(10,253,969)   $(12,670,265)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization                                             866,676         487,913
  Purchased research and development                                                      9,200,000
  Stock options issued to advisors and others                               230,000       1,010,200
  Minority interest in loss of consolidated subsidiary                     (168,145)
  Changes in operating assets and liabilities:
      Accounts receivable                                                 2,091,348      (2,304,193)
      Inventories                                                        (3,497,175)     (1,894,509)
      Prepaid expenses and other current assets                             860,886      (1,992,773)
      Accounts payable                                                   (2,466,501)        905,973
      Accrued liabilities                                                (1,672,905)      1,267,218
                                                                       ------------    ------------
Net cash used in operating activities                                   (14,009,785)     (5,990,436)

Investing activities
(Purchase) sale of short-term investments                                 5,261,372      (5,806,947)
Restricted cash used to (secure) retire credit line                       2,100,000      (1,100,000)
Purchase of property and equipment                                         (803,452)       (126,197)
Other                                                                      (233,041)        (79,411)
                                                                       ------------    ------------
Net cash provided (used) by investing activities                          6,324,879      (7,112,555)

Financing activities
Net borrowings (repayments) under line of credit                         (1,845,192)       (800,000)
Proceeds from exercise of stock options and warrants                        216,425      24,422,856
Other                                                                                         9,874
                                                                       ------------    ------------
Net cash provided (used) by financing activities                         (1,628,767)     23,632,730

Net increase (decrease) in cash and cash equivalents                     (9,313,673)     10,529,739
Cash and cash equivalents at beginning of period                          9,722,514         173,610
                                                                       ------------    ------------

Cash and cash equivalents at end of period                             $    408,841    $ 10,703,349
                                                                       ============    ============

Supplemental disclosure of non cash activities (business acquisition):
  Fair value of tangible assets                                                          $9,154,500
  Purchased research and development                                                      9,200,000
  Liabilities assumed                                                                    (5,869,500)
  Stock issued                                                                          (12,015,000)
                                                                       ------------    ------------
  Cash paid                                                            $          0    $    470,000
                                                                       ============    ============
</TABLE> 
See notes to condensed unaudited financial statements

                                      -4-
<PAGE>
 
                          PREMIER LASER SYSTEMS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   UNAUDITED

NOTE 1:   General

     In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements include all adjustments (which
include only normal recurring adjustments) necessary for a fair presentation of
the financial position of the Company at September 30, 1998 and the results of
operations and cash flows for the three and six month periods ended September
30, 1998 and 1997.  Although the Company believes the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission.  Results of operations for interim
periods are not necessarily indicative of results of operations to be expected
for the full year.

     The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly and majority owned
subsidiaries.  All significant intercompany transactions and balances have been
eliminated.

     The financial information in this quarterly report should be read in
conjunction with the March 31, 1998 consolidated financial statements and notes
thereto included in the Company's Annual Report filed on Form 10-K (as amended)
for the fiscal year ended March 31, 1998.

     The Company has suffered recurring losses from operations and may continue
to incur losses for the foreseeable future due to the significant costs
anticipated to be incurred in connection with manufacturing, marketing and
distributing its products.  In addition, the Company intends to conduct
continuing research and development activities, including regulatory submittals
and clinical trials to develop additional applications for its technology.  The
Company operates in a highly competitive environment and is subject to all of
the risks inherent in new business enterprises. The Company's ability to meet
its working capital needs will be dependent on its ability to achieve sales
targets, profitability, and a positive cash flow from operations.

     The Company believes that its present liquid assets and cash to be
generated by sales of its inventories (including substantial amounts of reserved
inventory) will be sufficient to meet its working capital requirements through
at least March 31, 1999. Any significant uninsured settlement or judgment
associated with the class action litigation (see Note 2) would seriously affect
the Company's ability to satisfy its working capital requirements.

NOTE 2:   Litigation

     The Company entered into an agreement with Infrared Fiber Systems, Inc.
(IFS), as a supplier of certain fiber optics, that expires in the fiscal year
ending March 31, 2002.  The agreement requires the supplier to sell exclusively
to the Company fiber optics for medical and dental applications as long as the
Company purchases defined minimum amounts.

                                       5
<PAGE>
 
     In March 1994, the Company initiated litigation against IFS.  The Company's
complaint alleges that IFS and two of its officers misrepresented IFS' ability
to supply optical fibers, and that IFS breached its supply agreement and certain
warranties.  In April 1994, IFS filed a cross-complaint alleging breach of
contract and intentional interference with prospective economic advantage,
seeking declaratory relief that the contract has been terminated and that IFS is
free to market its fiber optics to others.  In July 1994, Coherent, Inc. a major
shareholder of IFS and a manufacturer of medical lasers which employ IFS optical
fibers, joined the lawsuit for the express purpose of defending their rights to
the IFS optical fibers.  In May 1995, the Company instituted litigation
concerning this dispute in Orange County, California Superior Court against
Coherent, Westinghouse Electric Corporation ("Westinghouse") and an individual
employee of Westinghouse who was an officer of IFS from 1986 to 1993, when the
events involved in the federal action against IFS took place and while
Westinghouse owned a substantial minority interest in IFS.  The complaint
charges that Coherent conspired with IFS in the wrongful conduct which is the
subject of the federal lawsuit and interfered with the Company's contracts and
relations with IFS and with prospective contracts and advantageous economic
relations with third parties.  The complaint asserts that Westinghouse is liable
for its employee's wrongful acts as an IFS executive while acting within the
scope of his employment at Westinghouse.  The lawsuit seeks injunctive relief
and compensatory damages.  In October 1995, the federal action was stayed by
order of the court in favor of the California state court action, in which the
pleadings have been amended to include all claims asserted by the Company in the
federal action.

     In July 1996, the court in the California state court action granted
demurrers by Westinghouse and the employee of Westinghouse to all causes of
action against them, as well as all but one of the Company's claims against
Coherent.  As a result, the claims that were the subject of the granted
demurrers have been dismissed, subject to the Company's right to appeal.  The
Company has filed an appeal of these decisions as they relate to Westinghouse
and the Westinghouse employee, and briefs have been submitted.  No date has been
set for a hearing of this appeal.  No trial date has been set as to the
remaining outstanding causes of action.

     The Company and certain of its officers and directors have been named in a
number of securities class action lawsuits which allege violations of the
Securities Exchange Act or the California Corporations Code.  The plaintiffs
seek damages on behalf of classes of investors who purchased the Company's stock
between May 7, 1997 and April 15, 1998.  The complaints allege that the Company
misled investors by failing to disclose material information and making material
misrepresentations regarding the Company's business operations and projections.
The Company has also been named in a shareholder derivative action purportedly
filed on its behalf against certain officers and directors arising out of the
same alleged acts.  Although the Company intends to vigorously defend itself in
the actions, the ultimate outcome is uncertain and no provision for any
settlement has been reflected in the accompanying financial statements.  Any
significant adverse resolution of the actions would seriously impact the
Company's financial condition.  The Company maintains insurance coverage for
these types of actions and has filed claims with the carrier.  The policy has a
limit of $5 million and a $250,000 deductible amount.

     The Company is involved in various other disputes and lawsuits arising from
its normal operations.  The litigation process in inherently uncertain and it is
possible that the resolution of these disputes and other lawsuits may adversely
affect the Company, however, it is the opinion of management, that the outcome
of such matters will not have a material adverse impact on the 

                                       6
<PAGE>
 
Company's financial position, results of operations or cash flows.


Item 2.   Management's Discussion and Analysis of Financial Condition and
          ---------------------------------------------------------------
          Results of Operations.
          --------------------- 

Results of Operations

     The Company's net sales for the quarter and six months ended September 30,
1998 (the "1998 Periods") increased by 9% to $3,325,000 for the quarter and by
32% to $6,807,000 for the six month period as compared to the quarter and six
month periods ended September 30, 1997 (the "1997 Periods").  The increases were
attributable to the sales generated by Ophthalmic Imaging Systems (OIS), and
EyeSys Technologies, Inc. (EyeSys), which were acquired between September 30,
1997 and February 28, 1998, offset by declining sales of dental products
following the Company's disagreement with a national distributor of dental
products (on whom the Company had previously relied to distribute certain of its
products).

     Cost of sales increased 96% to $3,514,000 during the three months ended
September 30, 1998 and 126% to $6,971,000 during the six months ended September
30, 1998 from $1,789,000 and $3,085,000 during  the corresponding 1997 Periods.
These increases were attributable to the higher sales levels and under-
absorption of manufacturing personnel and overhead costs at the Company's Irvine
facility, as well as higher costs for product warranties and associated customer
support.  Spending controls, which began to take effect during the three months
ended September 30, 1998, were more than offset by a $580,000 reserve for
additional excess inventory quantities recorded during that period, resulting in
a higher cost of sales percentage than reported for the first quarter of the
year.

     Selling and marketing expenses increased 109% to $1,871,000 during the
three months ended September 30, 1998 and 138% to $4,070,000 during the six
months ended September 30, 1998 from $894,000 and $1,709,000 reported for the
corresponding 1997 Periods.   Selling and marketing expenses of OIS (which were
not included in the 1997 Periods), accounted for approximately one-half of the
increases.  Other factors which contributed to the increases during the 1998
Periods included the resumption of direct sales activities for dental products
and  a $180,000 bad debt provision during the second quarter for two specific
accounts.  Dental products' selling and marketing expenses for the three months
ended September 30, 1998 were lower than those reported for the first quarter
due to the lower level of trade show activity that typically occurs during the
summer months.

     Research and development expenses increased 117% to $1,459,000 during the
three months ended September 30, 1998 and 124% to $2,648,000 during the six
month ended September 30, 1998 as compared to those same periods of the prior
year.  Research and development expenses of OIS accounted for approximately one-
fourth of the increases.  The balance of the increases arose from personnel
additions, outside services, and component costs associated with new product
development (both dental and ophthalmic products) at the Company's Irvine
facility.

     General and administrative expenses increased 207% to $1,965,000 during the
three months ended September 30, 1998 and 258% to $3,596,000 during the six
months ended September 30, 1998 from $640,000 and $1,004,000 reported for the
corresponding 1997 Periods.  Approximately one-

                                       7
<PAGE>
 
third of the increases resulted from the OIS acquisition. Legal and accounting
fees totaled almost $800,000 and $1,000,000 during the 1998 Periods as compared
to less than $100,000 and $150,000 during the corresponding 1997 Periods. These
increases ensued from the resignation of the Company's former auditors and the
resulting need to have audits performed for two fiscal years, as well as class
action litigation and SEC/Nasdaq inquiries that arose during the quarter ended
June 30, 1998. Increases in accounting, human resources, and other
administrative personnel at the Company's Irvine facility also contributed to
the increases during the 1998 Periods.

     During the three months ended September 30, 1997, the Company acquired
EyeSys Technologies and wrote-off $9,200,000 of in-process research and
development and $2,147,000 of merger related and integration costs.  No business
acquisitions have occurred during the 1998 Periods.

     Net interest income decreased to $10,000 and $57,000 during the 1998
Periods from $332,000 and $502,000 recognized during the prior year periods.
These declines reflecting the decreased cash available for the Company to
invest, following the declines in sales levels for laser products, the higher
operating expenses discussed above, business acquisitions, and inventory
increases.


Liquidity and Capital Resources

     The Company's operations have been financed through the proceeds from the
sale of the Company's equity securities, including an initial public offering in
December 1994, a secondary public offering in October 1996, the exercise of
publicly traded warrants and stock options, revenues from operations, and
proceeds from a Small Business Innovative Research Grant.  The Company's
principal capital requirements include the financing of inventory, accounts
receivable, research and development activities, the development of an
ophthalmic and a surgical sales force, the development of marketing programs and
the acquisition and/or licensing of patents.

     At September 30, 1998, the Company had unrestricted cash and short-term
investments of $4,814,000 and its working capital was $8,871,000.  The decrease
in cash and short-term investments since March 31, 1998 was primarily the result
of the losses for the 1998 Periods, increased by working capital changes during
the period, including the continued receipt of inventory purchases commitments
that had been made during the prior fiscal year.  Cash flow during the 1997
Periods was positive as the net result of capital stock transactions, reduced by
operating requirements and investing activities.

     The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development activities, the
scope and results of preclinical studies and clinical trials, the costs and
timing of regulatory approvals, the rate of technology advances by the Company,
competitive conditions within the medical laser industry, the maintenance of
manufacturing capacity, the outcome of the class action lawsuits and the
establishment of collaborative marketing and other relationships which may
either involve cash infusions to the Company, or require additional cash from
the Company.  The Company's ability to meet its working 

                                       8
<PAGE>
 
capital needs will be dependent on its ability to achieve sales targets,
profitability and a positive cash flow from operations. No assurance can be
given that the Company will be able to achieve sales targets, profitable
operations or a positive cash flow from operations.

     The Company believes that its present liquid assets and cash to be
generated by sales of its inventories (including substantial amounts of reserved
inventory) will be sufficient to meet its working capital requirements through
at least March 31, 1999. Any significant uninsured settlement or judgment
associated with the class action litigation would seriously affect the Company's
ability to satisfy its working capital requirements. If additional capital is
required, the Company would explore several financing alternatives including
stock issuances, licensing of technology and marketing rights, and/or bank
financing. There can be no assurances that the Company would be successful in
obtaining additional financing.


Year 2000 Issues

     During the quarter ended September 30, 1998, the Company upgraded its
computerized accounting system to a release that is compliant with Year 2000
dating sensitivities.  The costs of this upgrade were minimal.  The Company has
not prepared a formal assessment of the internal and external Year 2000 issues
that would have a significant impact on its products.  The Company's laser
products are not date sensitive.  Diagnostic products, on the other hand,
contain date sensitive data bases.  The Company's internal software engineers
are developing a plan to have a test version of the new software available by
mid-1999.  The costs of software modification are not expected to be material.
Any diagnostic products currently in the market that are covered by a warranty
will be upgraded at no charge to the customer.  The Company plans to charge
upgrade fees for previously sold products that are outside of the warranty
period.  The Company expects that its existing warranty reserves will be
adequate to absorb the upgrade costs.


Seasonality

     To date, the Company's revenues have typically been significantly higher in
the second and fourth calendar quarters. This seasonality reflects the timing of
major medical and dental industry trade shows in these quarters, significantly
reduced sales during the summer and the effect of year end tax planning
influencing the purchasing of capital equipment for depreciation during the
fourth calendar quarter.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk.
          -----------------------------------------------------------

No disclosure required.


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings.
          ------------------

                                       9
<PAGE>
 
Securities Class Action

     On May 1, 1998, a class action suit (the "Valenti Litigation") was
commenced in the United States District Court for the Central District of
California pursuant to federal securities laws on behalf of purchasers of the
Company's securities during the period from February 12, 1998 through April 15,
1998.  The complaint alleges that the Company and certain of its officers and
directors violated the federal securities laws by issuing false and misleading
statements and omitting material facts regarding the Company's financial results
and operations during such period.  Among other things, the complaint alleges
that the defendants materially misstated the Company's financial results for the
fiscal quarter ended December 31, 1997 and that as a result of such
misstatements, the plaintiff suffered damages as a result of a decrease in the
market price of the Company's publicly traded securities.

     After the filing of such complaint, a number of similar complaints have
also been filed in the United States District Court for the Central District of
California, and the California Superior Court for the County of Orange, seeking
certification as class actions, and covering class periods commencing as early
as May 7, 1997.  Such complaints alleged facts similar to those described above
with respect to the Valenti Litigation, as well as allegations that the Company
artificially inflated the price of its outstanding publicly traded securities as
a result of misrepresentations relating to the market and prospects for sale of
its Centauri Er:YAG laser.  All of the above described complaints seek monetary
damages in unspecified amounts, together with attorneys' fees, interest, costs
and related remedies.  The Company has been successful in having all of such
securities class actions lawsuits consolidated into a single action in the
federal court and a single action in the state court.

     The Company has also been named as a nominal defendant in a shareholder
derivative lawsuit filed in the Orange County, California Superior Court, in a
case captioned Eskeland vs. Cozean, et al.  The complaint was filed by a
shareholder of the Company, on behalf of the Company, against certain of the
Company's officers and directors, including Colette Cozean, Michael Hiebert,
Richard Roemer, Ronald Higgins, Patrick Day, Grace Chin-Hsin Lin, G. Lynn
Powell, and E. Donald Shapiro. The complaint alleges, among other things, that
such persons violated their fiduciary duty to the Company by exposing the
Company to liability under the securities laws, failing to ensure that the
Company maintained adequate accounting controls, and related alleged actions and
omissions. Although the Company is a named defendant, the lawsuit seeks to
recover damages from the individual defendants on behalf of the Company.
Accordingly, it is not clear whether the Company will have any liability or
incur any material loss as a result of being named as a defendant in this
matter.


Investigations and Other Matters

     The Company has been the subject of recent Securities and Exchange
Commission ("SEC") and Nasdaq Stock Market investigations concerning matters
pertaining to the Company's revenue reporting practices, and related management
issues.  The Company has cooperated with both the SEC and the Nasdaq in
connection with both of these investigations.  These investigations, the Company
believes, generally relate to whether the Company, in SEC filings and press
releases issued prior to 

                                       10
<PAGE>
 
the end of the 1998 fiscal year, properly recognized revenues for transactions
occurring during fiscal 1997, and during interim periods of fiscal 1998. To
date, the SEC has not indicated that it is seeking to impose any penalties on
the Company or that it has made any specific finding with respect to the
Company's accounting practices. In July 1998, the Nasdaq Stock Market notified
the Company of a proposed delisting of the Company's securities from the Nasdaq
Stock Market. The Company filed an appeal of this proposed action and attended a
hearing on September 17, 1998. On October 21, 1998 the Company received
notification that the Nasdaq Listing Qualifications Panel had determined that
the trading of the Company's stock and warrants would resume, effective October
22, 1998. That notification indicated that the decision of the panel was subject
to later review by the Nasdaq Listing and Hearing Review Council.

     The Company is also involved in various disputes and other lawsuits from
time to time arising from its normal operations.  The litigation process is
inherently uncertain and it is possible that the resolution of any of such
litigation, as well as the matters described above, may adversely affect the
Company.

Item 2.   Changes in Securities.
          ----------------------

     Not applicable.

Item 3.   Defaults Upon Senior Securities.
          --------------------------------

     Not Applicable.

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

     Not Applicable.

Item 5.   Other Information.
          ------------------

     None.

Item 6.   Exhibits and Reports on Form 8-K.
          ---------------------------------

     (a)  Exhibits:

          27  Financial Data Schedule (filed herewith)

     (b)  Reports on Form 8-K:

     None.

                                       11
<PAGE>
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                   PREMIER LASER SYSTEMS, INC.
Dated: November 16, 1998           By: /s/ COLETTE COZEAN
                                       -----------------------------------------
                                       Colette Cozean, Chief Executive Officer
                                       (duly authorized officer)


Dated: November 16, 1998           By: /s/ CHARLES J. OLSON
                                       -----------------------------------------
                                       Charles J. Olson, Chief Financial Officer
                                       (Principal Financial Officer and
                                       Principal Accounting Officer)

                                       12