<PAGE>
 

                                   FORM 10-Q


                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

  [X]   Quarterly Report pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934

           For the quarterly period ended     APRIL 4, 1998
                                              -------------

                                      OR

  [_]   Transition Report pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934


                          Commission File No. 0-26646
                              __________________


                             GENERAL SCANNING INC.
            (Exact name of registrant as specified in its charter)

           MASSACHUSETTS                                   04-2445884     
      (State of incorporation)                       (I.R.S. Employer No.) 

                              500 ARSENAL STREET
                        WATERTOWN, MASSACHUSETTS 02172
                   (Address of principal executive offices)

                           TELEPHONE: (617) 924-1010


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



     As of April 13, 1998, there were 12,540,783 shares of Common Stock, $.01
par value, outstanding.


<PAGE>

                             GENERAL SCANNING INC.
 
                              Table of Contents


<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C> 
Part I - Financial Information:

    Item 1.  Financial Statements

               Consolidated Balance Sheets................................    3

               Consolidated Statements of Income..........................    4

               Consolidated Statements of Cash Flows......................    5

               Notes to Consolidated Financial Statements.................  6-7

    Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations........................ 8-10

Part II - Other Information...............................................   11

Signatures................................................................   12
</TABLE>


                                       2




<PAGE>

                    GENERAL SCANNING INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                  APRIL 4,        DEC. 31,
                                                                                                    1998            1997
                                                                                                    ----            ----
                                                                                                (unaudited)
<S>                                                                                             <C>               <C> 
ASSETS
Current assets:
  Cash and cash equivalents...................................................................  $     6,421     $    8,418
  Accounts receivable, less allowance of $1,168 in 1998 and $1,203 in 1997....................       45,947         44,425
  Inventories.................................................................................       40,520         34,051
  Deferred tax and other current assets.......................................................       10,121          9,374
                                                                                                -----------     ----------
     Total current assets.....................................................................      103,009         96,268
                                                                                                -----------     ----------

Property, plant and equipment, net of accumulated depreciation
   of $28,363 in 1998 and $27,478 in 1997.....................................................       15,066         14,611

Other assets..................................................................................          397            437

Intangible assets, net of amortization of $1,963 in 1998 and $1,863 in 1997...................        3,627          3,726
                                                                                                -----------     ----------
                                                                                                $   122,099     $  115,042
                                                                                                ===========     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable to banks and current portion of long-term debt...............................        9,058          4,169
   Current portion of deferred compensation...................................................          105            582
   Accounts payable...........................................................................       14,072         12,775
   Accrued expenses and income taxes..........................................................       14,678         16,079
                                                                                                -----------     ----------
     Total current liabilities................................................................       37,913         33,605
                                                                                                -----------     ----------

Long-term debt due after one year.............................................................        1,525          1,530
Deferred compensation, less current portion...................................................        1,958          1,678

Stockholders' equity:
   Preferred stock, $.01 par value; authorized 1,000,000
     shares; issued and outstanding - none....................................................            -              -
   Common stock, $.01 par value; authorized 30,000,000
     shares; issued 12,903,956 in 1998 and 12,791,796 in 1997.................................          130            128
   Additional paid-in capital.................................................................       49,072         48,788
   Retained earnings..........................................................................       33,095         30,794
   Cumulative translation adjustment..........................................................       (1,005)          (892)
   Treasury stock, at cost;  366,073 shares in 1998 and 1997..................................         (589)          (589)
                                                                                                -----------     ----------
     Total stockholders' equity...............................................................       80,703         78,229
                                                                                                -----------     ----------
                                                                                                $   122,099     $  115,042
                                                                                                ===========     ==========
</TABLE> 


                            See accompanying notes.

                                       3





<PAGE>

                    GENERAL SCANNING INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE> 
<CAPTION> 
                                                            THREE MONTHS ENDED
                                                           --------------------
                                                            APR. 4,   MAR. 29,
                                                             1998       1997   
                                                           --------- ----------
<S>                                                      <C>         <C> 
Net sales:                                              
     Laser systems and components.................       $  44,504   $   31,109 
     Thermal printers.............................           6,068        6,608 
                                                         ---------   ---------- 
          Total sales.............................          50,572       37,717 
                                                         ---------   ---------- 
Cost of sales:                                                                 
     Laser systems and components.................          22,747       16,097 
     Thermal printers.............................           3,323        3,547 
                                                         ---------   ---------- 
          Total cost of sales.....................          26,070       19,644 
                                                         ---------   ---------- 
Gross profit:                                                                  
     Laser systems and components.................          21,757       15,012 
     Thermal printers.............................           2,745        3,061 
                                                         ---------   ---------- 
          Total gross profit......................          24,502       18,073 
                                                         ---------   ---------- 
                                                                               
Operating expenses:                                                            
     Research and product development.............           7,461        4,952 
     Selling, general and administrative..........          13,385       10,321 
                                                         ---------   ---------- 
          Total operating expenses................          20,846       15,273 
                                                         ---------   ---------- 
Income from operations............................           3,656        2,800 
Interest income (expense), net....................             (34)          98 
Foreign exchange transaction (losses).............             (82)        (110)
                                                         ---------   ---------- 
Income before income taxes........................           3,540        2,788 
Income taxes......................................           1,239          978 
                                                         ---------   ---------- 
Net income........................................           2,301        1,810 

                                                                               
Foreign currency translation adjustments, net.....             (73)        (105)
                                                         ---------   ---------- 
Comprehensive income..............................       $   2,228   $    1,705 
                                                         =========   ========== 

Net income per common share:                                                   
     Basic........................................       $    0.18   $     0.15 
     Diluted......................................       $    0.18   $     0.15 
                                                         =========   ==========
                                                                               
Weighted average common shares outstanding                                     
     and dilutive potential common shares.........      12,869,771   12,465,103
                                                        ==========   ========== 
</TABLE> 

                            See accompanying notes.

                                       4


<PAGE>

                    GENERAL SCANNING INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED   
                                                                                     ----------------------- 
                                                                                       APR. 4,     MAR. 29,  
                                                                                        1998         1997    
                                                                                     ----------   ---------- 
<S>                                                                                  <C>          <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.....................................................................      $    2,301   $    1,810
Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
    Depreciation and amortization..............................................           1,019          857   
    Deferred compensation and income taxes.....................................             283          230  
Changes in current assets and liabilities:
    Accounts receivable........................................................          (1,857)        (210)  
    Inventories................................................................          (6,533)        (397)   
    Other current assets.......................................................            (779)        (103)    
    Accounts payable, accrued expenses, and taxes payable......................              13          613    
    Deferred compensation......................................................            (480)           - 
                                                                                     ----------   ----------
Net cash provided by (used in) operating activities............................          (6,033)       2,800
                                                                                     ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment....................................          (1,383)        (578)
Decrease in other assets.......................................................              18           37
                                                                                     ----------   ----------
Net cash (used in) investing activities........................................          (1,365)        (541)
                                                                                     ----------   ---------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to banks and others................................           9,201        3,324  
(Payments) on notes payable to banks and others................................          (4,201)      (3,116)  
(Payments) on long-term debt...................................................              (5)          (5)  
Stock option and warrant exercises, including tax effects......................             285          146 
                                                                                     ----------   ---------- 
Net cash provided by financing activities......................................           5,280          349
                                                                                     ----------   ---------- 

Effect of exchange rate changes on cash and cash equivalents...................             121          285
                                                                                     ----------   ----------

Increase (decrease) in cash and cash equivalents...............................          (1,997)       2,893
Cash and cash equivalents, beginning of period.................................           8,418       17,655
                                                                                     ----------   ---------- 
Cash and cash equivalents, end of period.......................................      $    6,421   $   20,548
                                                                                     ==========   ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid during the period for:
     Interest..................................................................      $      130   $      104 
     Income taxes..............................................................      $      674   $    1,142
</TABLE> 

                            See accompanying notes.

                                       5


<PAGE>
 
                    GENERAL SCANNING INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF PRESENTATION
     ---------------------
     The unaudited interim financial statements presented herein have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Regulation S-X
pertaining to interim financial statements. Accordingly, these interim financial
statements do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. The financial
statements reflect all adjustments and accruals which management considers
necessary for a fair presentation of financial position and results of
operations for the periods presented. The financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended December 31, 1997. The
results for the interim periods are not necessarily indicative of results to be
expected for the year or any future periods.

     The consolidated financial statements include the accounts of General
Scanning Inc. and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

2.   NET INCOME PER SHARE OF COMMON STOCK
     ------------------------------------
     In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, Earnings per Share, effective December 15, 1997. The amount reported
herein for 1997 as diluted net income per common share is the same as that
reported prior as net income per common and common equivalent share outstanding.
Basic net income per common share was computed by dividing net income by the
weighted average number of common shares outstanding during the year. For
diluted net income per common share, the denominator also includes dilutive
outstanding stock options and warrants determined using the treasury stock
method.

Common and diluted common shares calculations are:

<TABLE>
<CAPTION>
          (in thousands)                              Three months ended     
                                                  ---------------------------
                                                     Apr. 4,      Mar. 29,   
                                                      1998         1997      
                                                  ---------------------------
          <S>                                     <C>             <C>        
          Weighted average common shares                12,471        11,902 
          outstanding                                                        
          Dilutive potential common shares                 399           563 
                                                  ---------------------------
          Diluted common shares                         12,870        12,465 
                                                  ===========================
                                                                             
          Options and warrants excluded from                                 
          diluted income per common share                                    
          as their effect would be antidilutive             67           167 
                                                  =========================== 
</TABLE>

3.   CASH EQUIVALENTS
     ----------------
     Cash equivalents, which consist of investments in money market funds, are
highly liquid investments with original maturity dates of less than three
months.

4.   INVENTORIES
     -----------
     Inventories, which include materials, labor, and manufacturing overhead,
are stated at the lower of cost (first-in, first-out) or market. The components
of inventory are:

<TABLE>
<CAPTION>
                             Apr. 4,         Dec. 31,      
                              1998             1997        
                             -------         --------      
          <S>                <C>             <C>           
          Materials          $18,527          $14,992      
          Work-in-process     10,225            8,127      
          Finished goods      11,768           10,932      
                             -------          -------      
                             $40,520          $34,051      
                             =======          =======       
</TABLE>

                                       6
<PAGE>
 
5.   COMPREHENSIVE INCOME
     --------------------
     Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, establishes standards for reporting and displaying
comprehensive income and its components in a full set of general- purpose
financial statements. The statement is effective for fiscal years beginning
after December 15, 1997 and the Company has adopted the statement in its fiscal
quarter ending April 4, 1998.

                                       7
<PAGE>
 
                             GENERAL SCANNING INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
                                        
OVERVIEW

General Scanning Inc. ("General Scanning" or the "Company") is a leading
manufacturer of laser systems and components, and thermal printers.  In the
three months ended April 4, 1998 and in the fiscal year 1997, 88% and 85%,
respectively, of the Company's revenues were derived from sales of laser systems
and components, and the balance was derived from sales of thermal printers.
Sales of laser systems and components in the three months ended April 4, 1998
and in the fiscal year 1997 grew 43% and 17%, respectively, over sales for this
segment in the comparable period in 1997 and in the fiscal year 1996,
respectively.  Thermal printer sales in the three months ended April 4, 1998 and
in the fiscal year 1997 decreased 8% and increased 9%, respectively, over the
comparable period in 1997 and in the fiscal year 1996, respectively.

The Company sells its laser systems primarily to manufacturers of products
containing advanced electronic components and circuitry.  In addition, the
Company produces a line of laser subsystems and components that are used in the
Company's own systems, as well as sold to other manufacturers of laser systems.
The Company's laser system sales have been, and are expected to continue to be,
dependent upon its customer capital expenditures which are, in turn, affected by
business cycles in the markets served by those customers.  The Company's
strategy is to expand applications for its products into different and varied
markets in order to limit its dependency on any one market, but it may not
always be successful in doing so.

The Company also sells thermal printers, primarily to manufacturers of medical
equipment for patient care monitoring.  This segment of the Company's business
has not experienced significant cyclicality in the past.

Product prices have remained relatively stable during the periods covered by
this discussion, and price fluctuations did not have a material effect on
reported gross profit.  A significant portion of sales is made in foreign
currencies.  Fluctuations in currency exchange rates, particularly in the
Japanese yen and European currencies as compared to the U.S. dollar, can impact
the Company's sales and expenses, which are reported in U.S. dollars.

RESULTS OF OPERATIONS

THREE MONTHS ENDED APRIL 4, 1998 AND MARCH 29, 1997

Sales. Total sales were $50.6 million for the three months ended April 4, 1998,
an increase of 34% over $37.7 million in total sales in the three month period
ended March 29, 1997. Laser systems and component sales for the three months
ended April 4, 1998 increased 43% to $44.5 million from $31.1 million in the
comparable period of 1997 primarily due to continued strength in trim and test
applications for the automotive and electronics market, laser marking in
electronics and laser imaging for medical applications, particularly in the
United States and Europe, offset to some extent by slower activity in the
Company's semiconductor product lines, particularly in Asia. Thermal printer
sales for the three months ended April 4, 1998 decreased 8% to $6.1 million from
$6.6 million in the comparable period of 1997 primarily due to scheduling
patterns from the Company's OEM customer base, not from basic changes in demand
for product. Laser systems and components sales, as a percentage of total sales,
increased to 88% in the three months ended April 4, 1998 from 82% of total sales
in the comparable period of 1997. International sales, many of which are
denominated in foreign currencies, were approximately 42% and 38% of total sales
in the quarters ended April 4, 1998 and March 29, 1997, respectively.

Gross profit. Total gross profit was $24.5 million, or 48% of sales, for the
three months ended April 4, 1998, compared to $18.1 million, or 48% of sales,
for the three month period ended March 29, 1997. Laser systems and components
gross profit increased to 49% of sales in the three months ended April 4,

                                       8
<PAGE>
 
1998 from 48% of sales for the comparable three month period of 1997. Thermal
printers gross profit decreased to 45% of sales in the three months ended April
4, 1998 from 46% for the comparable three-month period of 1997.

Research and product development. Research and product development expenses
increased to $7.5 million, or 15% of total sales, for the three months ended
April 4, 1998, from $5.0 million, or 13% of total sales, for the three month
period ended March 29, 1997. This increase was primarily due to the addition of
full-time and consulting personnel and related costs to support the development
of new laser systems and components.

Selling, general and administrative. Selling, general and administrative
expenses increased to $13.4 million in the three months ended April 4, 1998 from
$10.3 million in the comparable period of 1997. This increase was primarily due
to the addition of sales and marketing support personnel and related costs
incurred in supporting increased sales and to an increase in legal costs as a
result of defending various legal proceeding, as discussed in Item 3. to the
1997 Form 10-K. These expenses decreased to 26% of total sales for the three-
month period ended April 4, 1998 from 27% in the year earlier period.

Interest. Net interest expense was $34,000 for the three-month period ended
April 4, 1998 compared to net interest income of $98,000 for the comparable
period of 1997. A lower cash balance during the three months ended April 4,
1998, which resulted in less interest income from the year-earlier period, was
primarily due to an increase in working capital requirements and to a $12.4
million cash outlay used for the acquisition of the assets of Reel-Tech, Inc. in
November 1997.

Foreign exchange. Foreign exchange transactions resulted in a loss of $82,000 in
the three months ended April 4, 1998 compared to a loss of $110,000 in the
comparable period of 1997. Gains and losses are incurred when the Company's net
receivables denominated in certain currencies, including yen, deutsche marks and
other major European currencies, are not fully hedged. The Company continues to
utilize foreign exchange forward contracts, primarily to reduce the impact of
foreign currency fluctuations arising from intercompany balances.

Income tax. The effective income tax rate for the Company was 35% in both the
three months ended April 4, 1998 and in the three months ended March 29, 1997.

Net income. Net income for the three months ended April 4, 1998 increased to
$2.3 million, or $0.18 per diluted share based upon 12.9 million common and
dilutive potential common shares, compared to $1.8 million in net income, or
$0.15 per diluted share based upon 12.5 million common and dilutive potential
common shares in the first quarter of 1997.

Backlog. Backlog at April 4, 1998 was approximately $54 million compared to $44
million at December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $6.4 million on April 4, 1998 compared to $8.4
million on December 31, 1997.  During the first three months of 1998, $6.0
million was used in operating activities, $5.3 million was provided by financing
activities and $1.4 million was used in investing activities.

Net income of $2.3 million in the first three months of 1998, supplemented by
non-cash charges for depreciation and amortization and deferred compensation
totaling $1.3 million, was more than offset by a net increase in working capital
of $9.6 million, resulting in $6.0 million used in operating activities.

Cash flow from investing activities was primarily due to capital expenditures of
$1.4 million for property, plant and equipment.

The Company's revolving credit agreement with its lending bank provides for a
maximum $20 million revolving credit facility and $6 million in international
credit lines.  Borrowings under the $20 million 

                                       9
<PAGE>
 
revolving credit facility, of which $5.0 million was outstanding at April 4,
1998, bear interest at the London InterBank Offered Rate (LIBOR) plus one and
one-half percent, or prime, determined at the time of borrowing. Borrowings
under the international credit lines, of which $4.1 million denominated in yen
was outstanding at April 4, 1998, accrue interest at a negotiated interest rate
approximating the prime rate in the applicable country. The agreement requires
compliance with certain financial ratios and expires December 31, 1999.

The Company believes that its existing cash, together with cash generated from
future operations and its existing bank line of credit, will be sufficient to
satisfy anticipated cash needs to fund working capital and investments in
manufacturing facilities and equipment for its existing businesses over the next
two years.  The Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products or
technologies.  The Company may require additional equity or debt financings to
fund such activities, which could result in additional dilution to the Company's
shareholders.

To the extent this analysis discusses financial projections, information or
expectations about General Scanning's products or markets, or otherwise makes
statements about the future, such statements are forward looking and are subject
to a number of risks and uncertainties that could cause actual results to differ
materially from the statements made.  These factors include the fact that the
Company's sales have been, and are expected to continue to be, dependent upon
customer capital equipment expenditures which are, in turn, affected by business
cycles in the markets served by those customers.  Other factors include
continued volatility in the semiconductor industry, the risk of order delays and
cancellations, the risk of delays by our OEM customers in introducing their new
products and market acceptance of those products incorporating subsystems
supplied by the Company, similar risks to the Company in delays in new product
introductions and market acceptance of its new products, and other risks
detailed in the Company's Form 10-K that has been filed in connection with its
1997 fiscal year.

                                       10
<PAGE>
 
                             GENERAL SCANNING INC.
                           PART II. OTHER INFORMATION


Item 1.   Change in legal proceedings
          ---------------------------

          None

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

          None

Item 3.   Defaults upon Senior Securities
          -------------------------------

          None

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

          None

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

          None

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

          a) Exhibits
          -----------

          Exhibit 27 - Financial Data Schedule
 
          b) Reports on Form 8-K
          ----------------------

          None

                                       11
<PAGE>
 
                             GENERAL SCANNING INC.
                                   SIGNATURES
                                        


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



General Scanning Inc.



/s/ Charles D. Winston             Date: April 29, 1998
----------------------                                 
Charles D. Winston
President and
Chief Executive Officer



/s/ Victor H. Woolley              Date: April 29, 1998
---------------------                                          
Victor H. Woolley
Vice President Finance and
Chief Financial Officer

                                       12