<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         SEPTEMBER 27, 1997

                                      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 October 4, 1997, there were 12,174,599 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.......................  8-11

Part II - Other Information...............................................    12

Signatures................................................................    13
</TABLE>

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  Sept. 27,           Dec. 31,
                                                                                     1997               1996
                                                                                     ----               ---- 
                                                                                  (unaudited)
<S>                                                                               <C>              <C> 
ASSETS
Current assets:
  Cash and cash equivalents...................................................... $   17,527       $   17,655
  Accounts receivable, less allowance of $924 in 1997 and $867 in 1996...........     44,015           32,213
  Inventories....................................................................     29,914           26,051
  Deferred tax and other current assets..........................................      5,823            5,603
                                                                                  ----------       ----------
     Total current assets........................................................     97,279           81,522
                                                                                  ----------       ----------

Property, plant and equipment, net of accumulated depreciation
   of $26,848 in 1997 and $24,285 in 1996........................................     13,338           12,922

Other assets.....................................................................        374              428

Intangible assets, net of amortization of $1,816 in 1997 and $1,753 in 1996......        638              701
                                                                                  ----------       ----------
                                                                                  $  111,629       $   95,573
                                                                                  ==========       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable to banks and current portion of long-term debt................... $    4,507       $    3,030
  Accounts payable...............................................................     10,004            7,025
  Accrued expenses and income taxes..............................................     16,125           13,787
                                                                                  ----------       ----------
     Total current liabilities...................................................     30,636           23,842
                                                                                  ----------       ----------

Long-term debt due after one year................................................      1,536            1,549
Deferred compensation............................................................      2,213            1,893

Stockholders' equity:
  Preferred stock, $.01 par value; authorized 1,000,000
     shares; issued and outstanding - none.......................................          -                -
  Common stock, $.01 par value; authorized 15,000,000
     shares; issued 12,527,052 in 1997 and 12,245,655 in 1996....................        125              122
  Additional paid-in capital.....................................................     44,866           43,657
  Retained earnings..............................................................     33,622           25,685
  Cumulative translation adjustment..............................................       (780)            (587)
  Treasury stock, at cost; 366,073 shares in 1997 and 365,995 in 1996............       (589)            (588)
                                                                                  ----------       ----------
     Total stockholders' equity..................................................     77,244           68,289
                                                                                  ----------       ----------
                                                                                  $  111,629       $   95,573
                                                                                  ==========       ==========
</TABLE>

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

                                       3

<PAGE>


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

<TABLE> 
<CAPTION> 
                                                      THREE MONTHS ENDED             NINE MONTHS ENDED
                                                  -------------------------      --------------------------
                                                  SEPT. 27,    SEPT. 28,         Sept. 27,    Sept. 28,
                                                    1997          1996             1997          1996
                                                  ------------ ------------      ------------ -------------
<S>                                               <C>          <C>              <C>           <C> 
Sales:
     Laser systems and components..............   $   40,515    $   32,744      $   109,128    $   98,616
     Thermal printers..........................        7,041         5,419           18,859        17,901
                                                  ------------  -----------     -------------  ------------
          Total sales..........................       47,556        38,163          127,987       116,517
                                                  ------------  -----------     -------------  ------------

Cost of sales:
     Laser systems and components..............       20,705        17,175           56,779        52,530
     Thermal printers..........................        4,010         3,083           10,476        10,202
                                                  ------------  -----------     -------------  ------------
          Total cost of sales..................       24,715        20,258           67,255        62,732
                                                  ------------  -----------     -------------  ------------

Gross profit:
     Laser systems and components..............       19,810        15,569           52,349        46,086
     Thermal printers..........................        3,031         2,336            8,383         7,699
                                                  ------------  -----------     -------------  ------------
          Total gross profit...................       22,841        17,905           60,732        53,785
                                                  ------------  -----------     -------------  ------------

Operating expenses:
     Research and product development..........        6,126         4,853           16,056        13,990
     Selling, general and administrative.......       11,357         9,313           32,781        29,592
                                                  ------------  -----------     -------------  ------------
          Total operating expenses.............       17,483        14,166           48,837        43,582
                                                  ------------  -----------     -------------  ------------

Income from operations.........................        5,358         3,739           11,895        10,203
Merger (expenses)..............................            -        (1,950)               -        (1,950)
Interest income, net...........................          135            34              398           191
Foreign exchange transaction gains (losses)....         (227)          (70)            (326)         (131)
                                                  ------------  -----------     -------------  ------------
Income before income taxes.....................        5,266         1,753           11,967         8,313

Income taxes...................................        1,685           824            4,030         3,907
                                                  ------------  -----------     -------------  ------------

Net income.....................................   $    3,581    $      929      $     7,937    $    4,406
                                                  ============  ===========     =============  ============

Net income per common and
     common equivalent shares outstanding......   $     0.28    $     0.07      $      0.63    $     0.35
                                                  ============  ===========     =============  ============

Weighted average common and
     common equivalent shares outstanding......   12,738,534    12,513,511       12,558,751    12,482,970
                                                  ============  ===========      ============  ============
</TABLE> 

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

                                       4
<PAGE>


                    GENERAL SCANNING INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                (in thousands)

<TABLE> 
<CAPTION> 
                                                                           NINE MONTHS ENDED
                                                                       --------------------------
                                                                        SEPT. 27,       SEPT. 28,
                                                                         1997            1996
                                                                       ---------       ----------
<S>                                                                   <C>           <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.........................................................   $   7,937     $     4,406
Adjustments to reconcile net income to net cash provided by                          
    operating activities:                                                            
    Depreciation and amortization..................................       2,748           1,992
    Deferred compensation..........................................         320             308
Changes in current assets and liabilities:                                           
    Accounts receivable............................................     (12,413)         (6,619)
    Inventories....................................................      (3,981)         (2,920)
    Other current assets...........................................        (278)            (43)
    Accounts payable, accrued expenses, and taxes payable..........       5,214            (715)
                                                                        --------       ---------
Net cash (used in) operating activities............................        (453)         (3,591)
                                                                        --------       ---------
                                                                                     
CASH FLOWS FROM INVESTING ACTIVITIES:                                                
Purchase of property, plant, and equipment.........................      (3,143)         (5,867)
Decrease in other assets...........................................          41              17
                                                                        --------       ---------
Net cash (used in) investing activities............................      (3,102)         (5,850)
                                                                        --------       ---------
                                                                                     
CASH FLOWS FROM FINANCING ACTIVITIES:                                                
Proceeds from notes payable to banks and others....................      14,619          11,486
(Payments ) on notes payable to banks and others...................     (13,023)        (13,098)
(Payments) on long-term debt.......................................         (13)            (15)
Proceeds from exercise of stock options, including tax effects.....       1,212           1,528
                                                                        --------       ---------
Net cash provided by (used in) financing activities................       2,795             (99)
                                                                        --------       ---------
                                                                                     
Effect of exchange rate changes on cash and cash equivalents.......         632             167
                                                                        --------       ---------
                                                                                     
Increase (decrease) in cash and cash equivalents...................        (128)         (9,373)
Cash and cash equivalents, beginning of period.....................      17,655          25,695
                                                                        --------       ---------
Cash and cash equivalents, end of period...........................   $  17,527     $    16,322
                                                                        ========        ========
                                                                                     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                    
 Cash paid during the period for :                                                   
     Interest......................................................   $     317     $       754
     Income taxes..................................................   $   4,101     $     4,643
</TABLE> 

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

                                       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, 1996. 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.

     On August 27, 1996, the Company completed its acquisition of View
Engineering, Inc., a California company, by issuing 1,437,060 shares of General
Scanning Inc. common stock (after giving effect to certain adjustments at the
closing) in exchange for all of View's outstanding shares of capital stock,
accrued preferred dividends and the net value of warrants and options. View
Engineering, Inc. uses laser image processing technology to serve applications
requiring precision inspection, measurement and process control. The transaction
has been accounted for as a pooling of interests and, accordingly, the
accompanying consolidated financial statements have been retroactively restated
to include the accounts of View for all periods presented. Merger expenses
primarily include brokers fees and legal and accounting costs.

2.   NET INCOME PER SHARE OF COMMON STOCK
     ------------------------------------

     Net income per common and common equivalent share is computed using the
weighted average number of common shares and dilutive common equivalent shares
outstanding during each period.  Dilutive common equivalent shares, consisting
of outstanding stock options and warrants, are determined using the treasury
stock method.  Fully diluted net income per common and common equivalent share
has not been presented as it is not materially different from primary net income
per common and common equivalent share or is anti-dilutive.

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.

                                       6
<PAGE>
 
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>
                                       Sept. 27,      Dec. 31, 
                                         1997           1996   
                                       ---------      -------- 
<S>                                    <C>            <C>      
               Materials                 $13,320       $12,572 
               Work-in-process             7,160         5,341 
               Finished goods              9,434         8,138 
                                         -------       ------- 
                                         $29,914       $26,051 
                                         =======       =======  
</TABLE>


5.   NEW ACCOUNTING STANDARD
     -----------------------
 
     In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock. This statement is effective for fiscal years ending after December 15,
1997 and early adoption is not permitted. When adopted, the statement will
require restatement of prior years' earnings per share. The Company will adopt
this statement for its fiscal year ending December 31, 1997 and does not believe
that the effect of the adoption of this standard would be materially different
from the amounts presented in the accompanying statements of income.

                                       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 nine
months ended September 27, 1997 and in the fiscal year 1996, 85% 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 nine months ended September 27, 1997 and in the fiscal
year 1996 grew 11% and 28%, respectively, over sales for this segment in the
comparable period in 1996 and in the fiscal year 1995, respectively.  Thermal
printer sales in the nine months ended September 27, 1997 and in the fiscal year
1996 increased 5% and 8%, respectively, over the comparable period in 1996 and
in the fiscal year 1995, 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 which are used in the
Company's own systems, as well as sold to other manufacturers of laser systems.
Over two-thirds of the Company's net sales of laser systems and components have
been, and are expected to continue to be, dependent upon 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 be successful in doing so.

The Company also sells thermal printers 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.

In August 1996, the Company completed its acquisition of View Engineering, Inc.
("View") by issuing 1,437,060 shares of General Scanning common stock.  The
transaction was accounted for as a pooling of interests and, accordingly, the
accompanying consolidated financial statements have been retroactively restated
to include the accounts of View for all periods presented.  View employs laser
image processing technology to serve applications requiring precision
inspection, measurement and process control in several industries.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996

Sales.   Total sales were $47.6 million for the three months ended September 27,
1997, an increase of 25% over $38.2 million in total sales in the three month
period ended September 28, 1996.  Laser systems and component sales for the
three months ended September 27, 1997 increased 24% to $40.5 million from $32.7
million in the comparable period of 1996 primarily due to systems sales to the
semiconductor, consumer electronics and automotive sensor markets.  Thermal
printer sales for the three months ended September 27, 1997 increased 30% to
$7.0 million from $5.4 million in the comparable period of 1996 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, decreased to 85% in the three months ended September 27, 1997 from
86% of total sales in the comparable period of 1996.  International sales, many
of which are denominated in foreign currencies, were approximately 49% and 43%
of total sales in the quarters ended September 27, 1997 and September 28, 1996,
respectively.

                                       8
<PAGE>
 
Gross profit.   Total gross profit was $22.8 million, or 48% of sales, for the
three months ended September 27, 1997, compared to $17.9 million, or 47% of
sales, for the three month period ended September 28, 1996. Laser systems and
components gross profit increased to 49% of sales in the three months ended
September 27, 1997 from 48% of sales for the comparable three month period of
1996. Thermal printers gross profit was 43% of sales in both the three months
ended September 27, 1997 and the comparable three month period of 1996.

Research and product development.   Research and product development expenses
increased to $6.1 million, or 13% of total sales, for the three months ended
September 27, 1997, from $4.9 million, or 13% of total sales, for the three
month period ended September 28, 1996.  This increase was primarily due to the
addition of 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 $11.4 million in the three months ended September 27, 1997
from $9.3 million in the comparable period of 1996.  This increase was primarily
due to the addition of sales and marketing support personnel and related costs
incurred in supporting increased sales, particularly in overseas locations, and
to an increase in legal costs associated with various legal proceedings, as
discussed in the Company's 1996 Form 10-K.  These expenses were 24% of total
sales in both periods.

Interest.   Net interest income was $135,000 for the three month period ended
September 27, 1997 compared to net interest income of $34,000 for the comparable
period of 1996.  This increase in net interest income was primarily due to a
decrease in bank borrowings and other debt in the 1997 period, resulting in
lower interest expense.

Foreign exchange.   Foreign exchange transactions resulted in a loss of $227,000
in the three months ended September 27, 1997 compared to a loss of $70,000 in
the comparable period of 1996.  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 32% in the three
months ended September 27, 1997 compared to 47% in the three months ended
September 28, 1996.  The income tax rate used in the three month period ended
September 27, 1997 has been adjusted from the 35% rate used in the first six
months of 1997 primarily to reflect the benefit to be derived from the
reinstatement of the Federal research and development tax credit.  The higher
effective tax rate in 1996 was primarily due to certain non-deductible merger
expenses incurred for the acquisition of View and View's 1996 preacquisition
losses which could not be used to offset General Scanning's profit for tax
purposes.  In accordance with tax law and regulations, the ability of the
Company to utilize preacquisition losses of View is subject to certain
restrictions.

Net income.   Net income for the three months ended September 27, 1997 increased
to $3.6 million, or $0.28 per share based upon 12.7 million common and common
equivalent shares outstanding, compared to $0.9 million in net income, or $0.07
per share based upon 12.5 million common and common equivalent shares
outstanding, in the third quarter of 1996.  The 1996 period included $1.95
million of merger related expenses.

Backlog.   Backlog at September 27, 1997 was approximately $46 million compared
to $51 million at June 28, 1997 and $36 million at December 31, 1996.

NINE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996

Sales.   Total sales were $128.0 million for the nine months ended September 27,
1997, an increase of 10% over $116.5 million in total sales in the nine month
period ended September 28, 1996.  Laser systems and 

                                       9
<PAGE>
 
component sales increased 11% to $109.1 million from $98.6 million in the
comparable period of 1996 primarily due to systems sales to the semiconductor,
consumer electronics and automotive sensor markets. Thermal printer sales for
the nine months ended September 27, 1997 increased 5% to $18.9 million from
$17.9 million in the comparable period of 1996 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,
were 85% in both the nine months ended September 27, 1997 and the comparable
period of 1996. International sales, many of which are denominated in foreign
currencies, were approximately 45% and 41% of total sales in the nine months
ended September 27, 1997 and September 28, 1996, respectively.

Gross profit.   Total gross profit was $60.7 million, or 47% of total sales, for
the nine months ended September 27, 1997, compared to $53.8 million, or 46% of
total sales, for the nine month period ended September 28, 1996.  Laser systems
and components gross profit increased to 48% of sales in the nine months ended
September 27, 1997 from 47% of sales for the comparable nine month period of
1996.  Thermal printers gross profit increased to 44% of sales in the nine
months ended September 27, 1997 from 43% of sales for the comparable nine month
period of 1996.

Research and product development.   Research and product development expenses
increased to $16.1 million, or 13% of total sales, for the nine months ended
September 27, 1997 from $14.0 million, or 12% of total sales, for the nine month
period ended September 28, 1996.  This increase was primarily due to the
addition of personnel and related costs to support the development of new laser
systems and components.  Because the development of new products is vital to its
continued success, the Company expects to maintain similar levels of research
and product development expenses as a percentage of sales over the long term.

Selling, general and administrative.   Selling, general and administrative
expenses increased to $32.8 million for the nine months ended September 27, 1997
from $29.6 million in the comparable period of 1996.  This increase was
primarily due to the addition of sales and marketing support personnel and
related costs incurred in supporting increased sales, particularly in overseas
locations, and to an increase in legal costs associated with various legal
proceedings, as discussed in the Company's 1996 Form 10-K.  These expenses were
26% of total sales in the nine months ended September 27, 1997 compared to 25%
of total sales in the comparable period of 1996.

Interest.   Net interest income was $398,000 in the first nine months of 1997
compared to net interest income of $191,000 in the comparable period of 1996.

Foreign exchange.   Foreign exchange transactions resulted in a loss of $326,000
in the nine months ended September 27, 1997 compared to a loss of $131,000 in
the comparable period of 1996.  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 34% in the nine
months ended September 27, 1997 compared to 47% in the nine months ended
September 28, 1996.  The income tax rate used in the first nine months of 1997
has been adjusted from the 35% rate used in the first six months of 1997
primarily to reflect the benefit to be derived from the reinstatement of the
Federal research and development tax credit.  The higher effective tax rate in
1996 was primarily due to certain non-deductible merger expenses incurred for
the acquisition of View and View's 1996 preacquisition losses which could not be
used to offset General Scanning's profit for tax purposes.  In accordance with
tax law and regulations, the ability of the Company to utilize preacquisition
losses of View is subject to certain restrictions.

                                       10
<PAGE>
 
Net income.   Net income for the nine months ended September 27, 1997 increased
80% to $7.9 million, or $0.63 per share based upon 12.6 million common and
common equivalent shares outstanding, compared to $4.4 million in net income, or
$0.35 per share based upon 12.5 million common and common equivalent shares
outstanding in the comparable nine month period of 1996.  The 1996 period
included $1.95 million of merger related expenses.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $17.5 million on September 27, 1997 compared
to $17.7 million on December 31, 1996.  During the first nine months of 1997,
$0.5 million was used in operating activities, $2.8 million was provided by
financing activities and $3.1 million was used in investing activities.

Net income of $7.9 million in the first nine months of 1997, supplemented by
non-cash charges for depreciation and amortization and deferred compensation
totaling $3.1 million, was more than offset by a net increase in working capital
of $11.5 million, resulting in $0.5 million used in operating activities.

Capital expenditures were $3.1 million for the nine months ended September 27,
1997, representing leasehold improvements to a facility to be occupied later in
1997 and additions to machinery and equipment.

The Company's bank credit agreement, which expires on December 31, 1998,
provides for borrowings up to $10 million.  Borrowings bear interest at the
London InterBank Offered Rate (LIBOR) plus one and one-half percent, or prime,
determined at the time of borrowing.  Bank lines of credit are provided to the
Company's foreign operations with a maximum availability of $6 million at a
negotiated interest rate approximating the appropriate country's prime rate.  At
September 27, 1997, $4.5 million, denominated in yen, was outstanding under the
lines of credit.  The bank credit agreement requires compliance with certain
financial ratios.

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
1996 fiscal year.

                                       11
<PAGE>
 
                             GENERAL SCANNING INC.
                           PART II. OTHER INFORMATION


Item 1.   Legal proceedings
          -----------------

          Robotic Vision Systems, Inc. v. General Scanning Inc., USDC Case No.
          96-3884 On September 8, 1997, the United States District Court for the
          Eastern District of New York issued a decision on General Scanning's
          motion for summary judgment in an action filed against the Company by
          Robotic Vision Systems, Inc. ("RVSI"). RVSI filed suit against the
          Company in August 1996 alleging that the Company had improperly
          obtained information from RVSI during the Company's acquisition of
          View Engineering, Inc. The Court dismissed RVSI's claims for: (1)
          tortious interference with business relations, (ii) breach of
          contract, (iii) breach of the implied covenant of good faith and fair
          dealing and (iv) violations under the Massachusetts Unfair and
          Deceptive Business Practices Statute. Claims were not dismissed for
          fraud of confidential business information and for unfair competition
          in contravention of New York common law. RVSI has moved for
          reconsideration with respect to the dismissal of its tortious
          interference claim. The claims not dismissed are expected to result in
          a jury trial during 1998.

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

                                       12
<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: October 17, 1997
----------------------                                   
Charles D. Winston
President and
Chief Executive Officer



/s/ Victor H. Woolley              Date: October 17, 1997
---------------------                                            
Victor H. Woolley
Vice President Finance and
Chief Financial Officer

                                       13