##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|   |  | For the Fiscal Year Ended December 31, 2005,                                                
|or
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|   |  | For the Transition period
    from          to          .                                   

Commission File Number: 0-18053


Laserscope


(Exact name of Registrant as Specified in its Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|California                                                         |  | 77-0049527                              
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification No.)

3070 Orchard Drive San Jose, California 95134-2011


(Address of Principal Executive Offices)


(408) 943-0636


Registrants telephone number, including area code:


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


None


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


Common Stock, no par value


Common Share Purchase Rights


(Title of Class)


o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


þ o o


12b-2 o þ






|                                     |  |                                 
|------------------------------------ |  | --------------------------------
|Class                                |  | Outstanding at February 28, 2006
|                                     |  |                                 
|Common Stock, no par value per share |  | 22,324,393 shares               

DOCUMENTS INCORPORATED BY REFERENCE












---



##### 










LASERSCOPE


TABLE OF CONTENTS


|              |  |                                                                                                                        |    |      |    |  |  | 
|------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- |  |  | 
|              |  |                                                                                                                        |    | Page |   
|              |  |                                                                                                                        |    |      |   
|PART I       
|Item 1.       |  | Business                                                                                                               |    |      | 2  | 
|Item 1A.      |  | Risk Factors                                                                                                           |    |      | 11 | 
|Item 1B.      |  | Unresolved Staff Comments                                                                                              |    |      | 25 | 
|Item 2.       |  | Properties                                                                                                             |    |      | 25 | 
|Item 3.       |  | Legal Proceedings                                                                                                      |    |      | 25 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                                |    |      | 26 | 
|Item 4A.      |  | Executive Officers of the Registrant                                                                                   |    |      | 26 | 
|             
|PART II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Repurchases of Equity
    Securities |    |      | 28 | 
|Item 6.       |  | Selected Financial Data                                                                                                |    |      | 29 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                              |    |      | 30 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                         |    |      | 43 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                        |    |      | 44 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                               |    |      | 44 | 
|Item 9A.      |  | Controls and Procedures                                                                                                |    |      | 45 | 
|Item 9B.      |  | Other Information                                                                                                      |    |      | 46 | 
|             
|PART III     
|Item 10.      |  | Directors and Executive Officers of
    Registrant                                                                     |    |      | 46 | 
|Item 11.      |  | Executive Compensation                                                                                                 |    |      | 46 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Related Shareholder Matters                                    |    |      | 46 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                     |    |      | 46 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                                 |    |      | 46 | 
|             
|PART IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                         |    |      | 47 | 
|SIGNATURES    |  |                                                                                                                        | 50 |     
|EXHIBIT 10.1C
|EXHIBIT 10.4 
|EXHIBIT 10.5 
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 
|EXHIBIT 32.2 



i



---



##### Table of Contents



REFERENCES






| |               
| | --------------
| | Dermastat;    
| | Gemini;       
| | GreenLight PV;
| | Laserscope;   
| | MicroBeam;    
| | Opthostat;    
| | Venus; and    
| | StoneLight.   



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | The following are common law trademarks and service marks of
    Laserscope, which also may be mentioned in this report:

|            |  |                                          
|----------- |  | -----------------------------------------
|AccuStat;   |  | MicronSpot;                              
|ADD;        |  | Microstat;                               
|ADDStat,    |  | Model 630 PDT Dye Module;                
|Aura;       |  | Model 630XP PDT Dye Module;              
|Aura i;     |  | SmartScan.                               
|Aura SL;    |  | SmartConnector;                          
|Aura XP;    |  | Solis;                                   
|Dermastat;  |  | StarPulse;                               
|Endostat;   |  | Venus i;                                 
|GreenLight; |  | VersaStat;                               
|Lyra;       |  | VersaStat I; and                         
|Lyra i;     |  | 800 Series KTP/YAG Surgical Laser System.
|Lyra XP;    |  |                                          

1



---



##### Table of Contents



INTRODUCTORY STATEMENT AND REFERENCES


10-K 10-K),





PART I







|        |          
|------- | ---------
|Item 1. | Business.

General Overview of Business








| |        
| | -------
| | Mission





| |                            
| | ---------------------------
| | Basic Corporate Information



2



---



##### Table of Contents





| |             
| | ------------
| | Market Focus





| |        
| | -------
| | Urology







| |           
| | ----------
| | Aesthetics





| |              
| | -------------
| | Other Markets





| |         
| | --------
| | Products



| |                 
| | ----------------
| | Laser Platforms:



3



---



##### Table of Contents















2






| |                                            
| | -------------------------------------------
| | Laser Devices, Instruments and Disposables:











| |                    
| | -------------------
| | Sales and Marketing



4



---



##### Table of Contents









| |             
| | ------------
| | Distribution





|               |  |              |   |   |      |  |    |      |  |  |    |  
|-------------- |  | ------------ | - | - | ---- |  | -- | ---- |  |  | -- | -
|               |  | Years Ended  |  
|               |  | December 31, |  
|               |  |              |  
|               |  | 2005         |   |   | 2004 |  |    | 2003 | 
|               |  |              |   |   |      |  |    |      | 
|McKesson Corp. |  |              | 6 | % |      |  | 23 | %    |  |  | 31 | %
|Henry Schein   |  |              | 2 | % |      |  |   |      |  |  |   |  









5



---



##### Table of Contents





| |                       
| | ----------------------
| | International Business







| |                         
| | ------------------------
| | Installed Base of Lasers





| |                    
| | -------------------
| | Service and Support







| |                         
| | ------------------------
| | Research and Development







| |              
| | -------------
| | Manufacturing



6



---



##### Table of Contents







| |          
| | ---------
| | Employees





| |            
| | -----------
| | Competition







| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | market acceptance of our products;                                                           
|
| |  | product performance;                                                                         
|
| |  | price;                                                                                       
|
| |  | satisfactory reimbursement of the PVP procedure by public and
    private third party payers;
|
| |  | customer support and technical service;                                                      
|
| |  | the success and timing of new product development; and                                       
|
| |  | continued development of successful distribution channels.                                   





7



---



##### Table of Contents







| |                                      
| | -------------------------------------
| | Proprietary and Intellectual Property















| |                      
| | ---------------------
| | Government Regulation





8



---



##### Table of Contents





















9



---



##### Table of Contents







| |                         
| | ------------------------
| | Environmental Regulation







| |                                                                    
| | -------------------------------------------------------------------
| | Dependence on Single-Source Suppliers and Certain Third
    Parties





| |            
| | -----------
| | Seasonality





| |        
| | -------
| | Backlog



Available Information




10



---



##### Table of Contents






Item 1A.Risk
Factors




Demand for our products in the United States and
internationally is highly dependent on the ability of
physicians, hospitals and other health care facilities to obtain
satisfactory reimbursement rates for our products and services
performed with our products from private and governmental
third-party payers as well as direct payments from consumers. If
satisfactory reimbursement rates are not maintained, demand for
Laserscope products would decline and our business and financial
results and cash flows would suffer.


out-of








| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The current Facility Fee reimbursement for PVP in the
    United States has been reduced and could be reduced further,
    eliminated or utilized by a competitor.





11



---



##### Table of Contents









| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Physician Fee Schedule reimbursement for PVP in the United
    States remains uncertain.









12



---



##### Table of Contents





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | PVP physician reimbursement is typically lower, on a
    per-procedure basis, compared to other BPH therapies.



If we are not able to protect our intellectual property
adequately, we will lose a critical competitive advantage, which
will reduce our revenues, profits and cash flows.










If we are unable to protect the integrity, safety and proper
use of our disposable fiber optic delivery device used with the
GreenLight laser system, it could result in negative patient
outcomes and reduce our disposable delivery device recurring
revenue stream.




13



---



##### Table of Contents





We participate in competitive markets with companies that
have significantly greater financial, technical, research and
development, manufacturing and marketing resources and/or who
produce standard, entrenched medical technologies.






| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | market acceptance of our products;                                                           
|
| |  | product performance;                                                                         
|
| |  | price;                                                                                       
|
| |  | satisfactory reimbursement of the PVP procedure by public and
    private third party payers;
|
| |  | customer support;                                                                            
|
| |  | the success and timing of new product development; and                                       
|
| |  | continued development of successful distribution channels.                                   





14



---



##### Table of Contents





If we are unable to effectively manage our growth, our
business may be harmed.






Our dependence on certain single-source suppliers and certain
other third parties could adversely impact our ability to
manufacture lasers.




Problems associated with international business operations
could affect our ability to sell our products.






| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | changes in regulatory requirements;                                                      
|
| |  | delays resulting from difficulty in obtaining export licenses
    for certain technology;
|
| |  | customs, tariffs and other barriers and restrictions; and                                
|
| |  | the burdens of complying with a variety of foreign laws.                                 

15



---



##### Table of Contents







| |   |                                                       
| | - | ------------------------------------------------------
| |  | differing economic conditions;                        
|
| |  | changes in political climate;                         
|
| |  | differing tax structures; and                         
|
| |  | changes in diplomatic and trade relationships and war.





Our business has significant risks of product liability
claims, which could drain our resources and exceed our limited
insurance coverage.






Our products are subject to government regulation, and we
cannot assure that all necessary regulatory approvals, including
approvals for new products or product improvements, will be
granted on a timely basis, if at all, and that we wont be
subject to product recalls or warnings and other regulatory
actions and penalties that could materially affect our operating
results.










16



---



##### Table of Contents







| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fines, injunctions and civil penalties;                                                                                                               
|
| |  | recall or seizure of our products;                                                                                                                    
|
| |  | restrictions on our products or manufacturing processes,
    including operating restrictions, partial suspension or total
    shutdown of production;
|
| |  | denial of requests for 510(k) clearances or PMAs of product
    candidates;                                                                           
|
| |  | withdrawal of 510(k) clearances or PMAs already granted;                                                                                              
|
| |  | disgorgement of profits; and                                                                                                                          
|
| |  | criminal prosecution.                                                                                                                                 













17



---



##### Table of Contents







The regulatory approval process outside the United States
varies depending on foreign regulatory requirements and may
limit our ability to develop, manufacture and sell our products
internationally.




If our dispute with Palomar is resolved in a manner contrary
to our position, we could be required to record additional
expenses which could have a material adverse impact on our
financial results.




As we have limited working capital, we may need additional
capital that may not be available to us and, if raised, may
dilute our shareholders ownership interest in us.






18



---



##### Table of Contents









| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Our ability to manage effectively non-cash assets such as
    inventory and accounts receivable;                      
|
| |  | Our ability to anticipate and adapt to the changes in our
    industry such as new and alternative medical procedures;
|
| |  | Our level of profitability; and                                                                                       
|
| |  | Our determination to acquire or invest in products and
    businesses complementary to ours.                          





We may have difficulty sustaining profitability and may
experience additional losses in the future.




We may be unable to respond to the rapid technological
changes that often affect the markets in which we compete.








19



---



##### Table of Contents





We may become a party to a patent infringement and other
intellectual property related actions or disputes, which could
result in significant royalty or other payments or in
injunctions that can prevent the sale of our products.








Any acquisitions or divestitures we make may not provide us
the expected benefits and could disrupt our business and harm
our financial condition.




We may be unable to attract and retain key personnel who are
critical to the success of our business.




20



---



##### Table of Contents



start-up




Our quarterly operating results may fluctuate significantly
and any failure to meet financial expectations for any fiscal
quarter may cause our stock price to decline.




If we are unable to expand and maintain our relationship with
our U.S. distribution partner, Henry Schein on favorable
contractual terms, our business may be harmed.




21



---



##### Table of Contents





If we are unable to effect a swift transition and rapidly
establish a strong working relationship with our
U.S. distribution partner, Henry Schein, we may be unable
to achieve growth in sales of our aesthetic product line in a
timely manner or at all.




If our products contain defects that harm our customers
patients, it would damage our reputation, subject us to
potential legal liability and cause us to lose customers and
revenue.








| |   |                                                           
| | - | ----------------------------------------------------------
| |  | loss of customers;                                        
|
| |  | increased costs of product, returns and warranty expenses;
|
| |  | damage to our brand reputation;                           

22



---



##### Table of Contents





| |   |                                                               
| | - | --------------------------------------------------------------
| |  | failure to attract new customers or achieve market acceptance;
|
| |  | action by regulatory authorities;                             
|
| |  | diversion of development and engineering resources; and       
|
| |  | legal actions by our customers.                               



Our financial results and stock price are affected by a
number of factors which are beyond our control.






| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | product mix;                                                                                                                                                                         
|
| |  | competitive pricing pressures;                                                                                                                                                       
|
| |  | material costs;                                                                                                                                                                      
|
| |  | revenue and expenses related to new products and enhancements to
    existing products;                                                                                              
|
| |  | delays in customer purchases in anticipation of new products or
    product enhancements by Laserscope or its competitors; and                                                       
|
| |  | the risk of loss or interruption to our operations or increased
    costs due to earthquakes, the availability of power and energy
    supplies and other events beyond our control .





| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | quarterly fluctuations in our financial results;                                               
|
| |  | changes in analysts estimates of future results;                                              
|
| |  | changes in investors perceptions of our products;                                             
|
| |  | announcement of new or enhanced products by us or our
    competitors;                         
|
| |  | announcements relating to acquisitions and strategic
    transactions by us or our competitors;
|
| |  | general conditions in the medical equipment industry; and                                      
|
| |  | general conditions in the financial markets.                                                   





Our financial results and stock price are highly dependent
upon successful pricing and sales of our main product line, the
GreenLight laser system and related fiber optic delivery device,
which increases our vulnerability to a variety of factors
outside of our direct control.




23



---



##### Table of Contents





We are a party to legal proceedings arising in the ordinary
course of business.




We typically assume warranty obligations in connection with
the sales of our products, which could cause a significant drain
on our resources if our products perform poorly.




Natural catastrophic events, such as earthquakes, hurricanes
or terrorist attacks may reduce our revenues and harm our
business.






24



---



##### Table of Contents



No Dividends.




The exercise of outstanding options and warrants granted
under our stock option plans and other options and warrants may
result in dilution of our shareholders equity interests.




Other Risks.









|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








|        |            
|------- | -----------
|Item 2. | Properties.








|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.





25



---



##### Table of Contents












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








|         |                                     
|-------- | ------------------------------------
|Item 4A. | Executive Officers of the Registrant



|                         |  |     |    |  |          |                                                               
|------------------------ |  | --- | -- |  | -------- | --------------------------------------------------------------
|Name                     |  | Age |    |  | Position
|                         |  |     |    |  |         
|Robert J. Pressley, Ph.D |  |     | 73 |  |          | Chairman of the Board of Directors                            
|Eric M. Reuter           |  |     | 44 |  |          | President, Chief Executive Officer and Director               
|Robert Mann              |  |     | 48 |  |          | Group Vice President, Global Surgical Sales and Marketing     
|Robert L. Mathews        |  |     | 60 |  |          | Group Vice President, Operations and Product Development      
|Ken Arnold               |  |     | 36 |  |          | Vice President, Research and Development                      
|Van Frazier              |  |     | 53 |  |          | Vice President, Quality and Regulatory Affairs                
|Peter Hadrovic           |  |     | 39 |  |          | Vice President, Legal Affairs, General Counsel and Secretary  
|Derek Bertocci           |  |     | 52 |  |          | Vice President, Finance and Chief Financial Officer           
|Dennis LaLumandiere      |  |     | 52 |  |          | Vice President, Human Resources and Organizational Development
|Kester Nahen, Ph.D.      |  |     | 36 |  |          | Vice President, Application Research                          
|Allan Danto              |  |     | 52 |  |          | Vice President, Global Aesthetic Sales and Marketing          
|Lloyd Diamond            |  |     | 38 |  |          | Vice President, Marketing, Urology                            

Robert J. Pressley, Ph.D.


Eric M. Reuter B-Factory


26



---



##### Table of Contents



Robert Mann


Robert L. Mathews


Ken Arnold


Van Frazier


Peter Hadrovic


Derek Bertocci


Dennis LaLumandiere


27



---



##### Table of Contents



Kester Nahen


Lloyd Diamond


Allan Danto





PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Stock, Related
    Shareholder Matters and Issuer Purchases of Equity
    Securities.





|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | 2005 |      
|               |  |      |      
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 37.11 |  |     | $ | 26.55 | 
|Second Quarter |  | $    | 42.47 |  |     | $ | 28.59 | 
|Third Quarter  |  | $    | 43.67 |  |     | $ | 27.25 | 
|Fourth Quarter |  | $    | 30.47 |  |     | $ | 20.81 | 

|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | 2004 |      
|               |  |      |      
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|First Quarter  |  | $    | 27.85 |  |     | $ | 14.91 | 
|Second Quarter |  | $    | 34.18 |  |     | $ | 22.54 | 
|Third Quarter  |  | $    | 27.94 |  |     | $ | 15.27 | 
|Fourth Quarter |  | $    | 36.68 |  |     | $ | 18.83 | 





28



---



##### Table of Contents











10-K







|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.



Selected Consolidated Financial Information


|                                    |  |                                          |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        |  
|----------------------------------- |  | ---------------------------------------- | ------- |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | -
|                                    |  | Year Ended December 31,                  |        
|                                    |  |                                          |        
|                                    |  | 2005                                     |         |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                                    |  |                                          |         |  |      |   |        |      |  |   |        |  |  |      |       
|                                    |  | (In thousands, except per share amounts) |        
|Statement of Operations Data:       |  |                                          |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        |  
|Net revenues                        |  | $                                        | 127,124 |  |      | $ | 93,770 |      |  | $ | 57,427 |  |  | $    | 43,088 |  |  | $ | 35,087 |  
|Net income (loss)                   |  |                                          | 22,550  |  |      |   | 14,739 |      |  |   | 2,517  |  |  |      | 323    |  |  |   | (829   | )
|Basic net income (loss) per share   |  |                                          | 1.02    |  |      |   | 0.70   |      |  |   | 0.13   |  |  |      | 0.02   |  |  |   | (0.05  | )
|Diluted net income (loss) per share |  |                                          | 0.98    |  |      |   | 0.65   |      |  |   | 0.13   |  |  |      | 0.02   |  |  |   | (0.05  | )

29



---



##### Table of Contents



|                                           |  |                         |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------------------ |  | ----------------------- | ------- |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                           |  | Year Ended December 31, |        
|                                           |  |                         |        
|                                           |  | 2005                    |         |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                                           |  |                         |         |  |      |   |        |      |  |   |        |  |  |      |       
|                                           |  | (In thousands)          |        
|Balance Sheet Data:                        |  |                         |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Cash & cash equivalents                    |  | $                       | 30,653  |  |      | $ | 15,954 |      |  | $ | 7,158  |  |  | $    | 4,661  |  |  | $ | 3,408  | 
|Working capital                            |  |                         | 75,047  |  |      |   | 38,566 |      |  |   | 20,722 |  |  |      | 15,652 |  |  |   | 13,336 | 
|Total assets                               |  |                         | 111,770 |  |      |   | 61,589 |      |  |   | 37,028 |  |  |      | 29,163 |  |  |   | 25,482 | 
|Capital leases (excluding current portion) |  |                         | 9       |  |      |   | 31     |      |  |   |       |  |  |      | 60     |  |  |   | 60     | 
|Other long term debt                       |  |                         |        |  |      |   |       |      |  |   |       |  |  |      | 2,853  |  |  |   | 3,000  | 
|Shareholders equity                       |  |                         | 84,788  |  |      |   | 42,911 |      |  |   | 23,198 |  |  |      | 15,482 |  |  |   | 13,412 | 






|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.



Overview








30



---



##### Table of Contents







|               |  |              |    |  |      |  |     |      |  |  |     | 
|-------------- |  | ------------ | -- |  | ---- |  | --- | ---- |  |  | --- | 
|               |  | Year Ended   |   
|               |  | December 31, |   
|               |  |              |   
|               |  | 2005         |    |  | 2004 |  |     | 2003 | 
|               |  |              |    |  |      |  |     |      | 
|McKesson Corp. |  |              | 6% |  |      |  | 23% |      |  |  | 31% | 
|Henry Schein   |  |              | 2% |  |      |  |    |      |  |  |    | 















31



---



##### Table of Contents















| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Further increases in demand for the PVP procedure;                        
|
| |  | Growth in the worldwide PVP market; and                                   
|
| |  | Increased positive clinical data on the benefits of the PVP
    procedure.





32



---



##### Table of Contents







out-of out-of


Results of Operations




|                                         |                                     |      |       |      |      |  |       |      |  |  |       |      | 
|---------------------------------------- | ----------------------------------- | ---- | ----- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|                                         |                                     | 2005 |       |      | 2004 |  |       | 2003 | 
|                                         |                                     |      |       |      |      |  |       |      | 
|Net revenues                             |                                     |      | 100.0 | %    |      |  | 100.0 | %    |  |  | 100.0 | %   
|Cost of products and services            |                                     |      | 39.7  |      |      |  | 41.7  |      |  |  | 47.6  |     
|                                         |                                     |      |       |      |      |  |       |      | 
|Gross margin                             |                                     |      | 60.3  |      |      |  | 58.3  |      |  |  | 52.4  |     
|Operating expenses:                      |                                     |      |       |      |      |  |       |      |  |  |       |     
|                                         | Research and development            |      |       | 6.2  |      |  |       | 5.6  |  |  |       | 7.7  | 
|                                         | Selling, general and administrative |      |       | 35.4 |      |  |       | 36.3 |  |  |       | 39.9 | 
|                                         |                                     |      |       |      |      |  |       |      | 
|                                         |                                     |      | 41.6  |      |      |  | 41.9  |      |  |  | 47.6  |     
|Operating income                         |                                     |      | 18.7  |      |      |  | 16.4  |      |  |  | 4.7   |     
|Interest income and other, net           |                                     |      | 0.4   |      |      |  | 0.3   |      |  |  | 0.0   |     
|                                         |                                     |      |       |      |      |  |       |      | 
|Income before provision for income taxes |                                     |      | 19.1  |      |      |  | 16.7  |      |  |  | 4.7   |     
|Provision for income taxes               |                                     |      | 1.4   |      |      |  | 1.0   |      |  |  | 0.3   |     
|                                         |                                     |      |       |      |      |  |       |      | 
|Net income                               |                                     |      | 17.7  | %    |      |  | 15.7  | %    |  |  | 4.4   | %   
|                                         |                                     |      |       |      |      |  |       |      | 

33



---



##### Table of Contents



2005 results compared to 2004 (in thousands, except
percentages)


|                         |                          |                          |         |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |     | 
|------------------------ | ------------------------ | ------------------------ | ------- | ------ | ---- |  | ---- | --------- |  | - | ------ | ------ |  | -------- | ---- | --- |  |  | --- | --- | 
|                         |                          | Years Ended December 31, |        
|                         |                          |                          |        
|                         |                          | 2005                     |         |        | 2004 |  |      |          
|                         |                          |                          |         |        |      |  |      | 2004-2005 | 
|                         |                          | Amount                   |         |        | %(a) |  |      | Amount    |  |   | %(a)   |        |  | % Change |     
|                         |                          |                          |         |        |      |  |      |           |  |   |        |        |  |          |     
|Revenues from sales of:  |                          |                          |         |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |    
|                         | Lasers & Instrumentation |                          | $       | 62,047 |      |  |      | 49%       |  |   | $      | 56,958 |  |          |      | 61% |  |  |     | 9%  | 
|                         | Disposable supplies      |                          |         | 56,341 |      |  |      | 44%       |  |   |        | 29,383 |  |          |      | 31% |  |  |     | 92% | 
|                         | Service                  |                          |         | 8,736  |      |  |      | 7%        |  |   |        | 7,429  |  |          |      | 8%  |  |  |     | 18% | 
|                         |                          |                          |         |        |      |  |      |           |  |   |        |        |  |          |     
|Total net revenues       |                          | $                        | 127,124 |        |      |  | 100% |           |  | $ | 93,770 |        |  |          | 100% |     |  |  | 36% |    
|Gross margin:            |                          |                          |         |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |    
|                         | Product                  |                          | $       | 74,339 |      |  |      | 63%       |  |   | $      | 53,043 |  |          |      | 61% |  |  |     | 40% | 
|                         | Service                  |                          |         | 2,364  |      |  |      | 27%       |  |   |        | 1,612  |  |          |      | 22% |  |  |     | 47% | 
|Total gross margin       |                          |                          | 76,703  |        |      |  | 60%  |           |  |   | 54,655 |        |  |          | 58%  |     |  |  | 40% |    
|Research & development   |                          |                          | 7,858   |        |      |  | 6%   |           |  |   | 5,217  |        |  |          | 6%   |     |  |  | 51% |    
|Selling, general & admin |                          |                          | 45,014  |        |      |  | 35%  |           |  |   | 34,023 |        |  |          | 36%  |     |  |  | 32% |    
|Net income               |                          |                          | 22,550  |        |      |  | 18%  |           |  |   | 14,739 |        |  |          | 16%  |     |  |  | 53% |    






|    |  |                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | expressed as a percentage of total net revenues except for gross
    margins which are expressed as a percentage of either product or
    service revenues as designated.



| |                           
| | --------------------------
| | Lasers and Instrumentation







| |                    
| | -------------------
| | Disposable Supplies





| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Further increases in demand for the PVP procedure;                        
|
| |  | Growth in the worldwide PVP market; and                                   
|
| |  | Increased positive clinical data on the benefits of the PVP
    procedure.

34



---



##### Table of Contents





| |        
| | -------
| | Service





| |                       
| | ----------------------
| | Gross Margin  Product





| |                       
| | ----------------------
| | Gross Margin  Service





| |                         
| | ------------------------
| | Research and Development





| |                                    
| | -----------------------------------
| | Selling, General and Administrative







| |                          
| | -------------------------
| | Interest and Other Income



35



---



##### Table of Contents





| |                           
| | --------------------------
| | Provision for Income Taxes



2004 results compared to 2003 (in thousands, except
percentages):


|                         |                          |                          |        |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |     |   
|------------------------ | ------------------------ | ------------------------ | ------ | ------ | ---- |  | ---- | --------- |  | - | ------ | ------ |  | -------- | ---- | --- |  |  | --- | --- | --
|                         |                          | Years Ended December 31, |       
|                         |                          |                          |       
|                         |                          | 2004                     |        |        | 2003 |  |      |          
|                         |                          |                          |        |        |      |  |      | 2003-2004 | 
|                         |                          | Amount                   |        |        | %(a) |  |      | Amount    |  |   | %(a)   |        |  | % Change |     
|                         |                          |                          |        |        |      |  |      |           |  |   |        |        |  |          |     
|Revenues from sales of:  |                          |                          |        |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |    
|                         | Lasers & Instrumentation |                          | $      | 56,958 |      |  |      | 61%       |  |   | $      | 37,568 |  |          |      | 65% |  |  |     | 52  | % 
|                         | Disposable supplies      |                          |        | 29,383 |      |  |      | 31%       |  |   |        | 13,536 |  |          |      | 24% |  |  |     | 117 | % 
|                         | Service                  |                          |        | 7,429  |      |  |      | 8%        |  |   |        | 6,323  |  |          |      | 11% |  |  |     | 17  | % 
|                         |                          |                          |        |        |      |  |      |           |  |   |        |        |  |          |     
|Total net revenues       |                          | $                        | 93,770 |        |      |  | 100% |           |  | $ | 57,427 |        |  |          | 100% |     |  |  | 63  | %  
|Gross Margin:            |                          |                          |        |        |      |  |      |           |  |   |        |        |  |          |      |     |  |  |     |    
|                         | Product                  |                          | $      | 53,043 |      |  |      | 61%       |  |   | $      | 28,162 |  |          |      | 55% |  |  |     | 88  | % 
|                         | Service                  |                          |        | 1,612  |      |  |      | 22%       |  |   |        | 1,924  |  |          |      | 30% |  |  |     | (16 | )%
|Total gross margin       |                          |                          | 54,655 |        |      |  | 58%  |           |  |   | 30,086 |        |  |          | 52%  |     |  |  | 82  | %  
|Research & development   |                          |                          | 5,217  |        |      |  | 6%   |           |  |   | 4,443  |        |  |          | 8%   |     |  |  | 17  | %  
|Selling, general & admin |                          |                          | 34,023 |        |      |  | 36%  |           |  |   | 22,936 |        |  |          | 40%  |     |  |  | 48  | %  
|Net income               |                          |                          | 14,739 |        |      |  | 16%  |           |  |   | 2,517  |        |  |          | 4%   |     |  |  | 486 | %  






|    |  |                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | expressed as a percentage of total net revenues except for gross
    margins which are expressed as a percentage of either product or
    service revenues as designated.



| |                           
| | --------------------------
| | Lasers and Instrumentation









| |                    
| | -------------------
| | Disposable Supplies



36



---



##### Table of Contents







| |        
| | -------
| | Service





| |                       
| | ----------------------
| | Gross Margin  Product





| |                       
| | ----------------------
| | Gross Margin  Service





| |                         
| | ------------------------
| | Research and Development





| |                                     
| | ------------------------------------
| | Selling, General, and Administrative







| |                           
| | --------------------------
| | Provision for Income Taxes



37



---



##### Table of Contents



Critical Accounting Policies and Estimates






| |   |                                 
| | - | --------------------------------
| |  | revenue recognition;            
|
| |  | allowance for doubtful accounts;
|
| |  | warranty obligation;            
|
| |  | excess and obsolete inventory;  
|
| |  | legal contingencies; and        
|
| |  | income tax                      



| |                    
| | -------------------
| | Revenue Recognition



















38



---



##### Table of Contents





00-21,


01-09,










| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts

$




| |                    
| | -------------------
| | Warranty Obligation



39



---



##### Table of Contents





| |                              
| | -----------------------------
| | Excess and Obsolete Inventory





| |                    
| | -------------------
| | Legal Contingencies





| |           
| | ----------
| | Income Tax





Financial Review  Liquidity and Capital
Resources




|                          |  |              |         |  |              |   |        | 
|------------------------- |  | ------------ | ------- |  | ------------ | - | ------ | 
|                          |  | December 31, |         |  | December 31, |  
|                          |  | 2005         |         |  | 2004         |  
|                          |  |              |         |  |              |  
|Cash and cash equivalents |  | $            | 30,653  |  |              | $ | 15,954 | 
|Working capital           |  | $            | 75,047  |  |              | $ | 38,566 | 
|Total assets              |  | $            | 111,770 |  |              | $ | 61,589 | 



40



---



##### Table of Contents







| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | Positive cash flow from operating activities of
    $19.2 million;                                                                            
|
| |  | Proceeds from issuance of common stock related to employee
    participation in employee stock programs generating
    $2.5 million; and      
|
| |  | Capital expenditures of $6.6 million primarily for facility
    expansion and implementation of a new enterprise resource
    planning system.





| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generated $24.3 million of cash from net income plus
    non-cash related expenses;                                                              
|
| |  | Used cash of $7.9 million to increase inventory levels,
    primarily for the GreenLight PV laser systems and Greenlight PV
    delivery devices;
|
| |  | Increased accounts payable by $5.7 million due to increased
    sales and marketing expenses; and                                                
|
| |  | Increased sales, which resulted in increases of
    $5.7 million and $1.6 million to accounts receivable
    and deferred revenue, respectively. 











| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Our level of profitability;                                                                                                      
|
| |  | Our determination to acquire or invest in products and
    businesses complementary to ours; and                                 
|
| |  | The market price for our common stock as it affects the exercise
    of stock options and sale of common stock under stock plans.





41



---



##### Table of Contents



Contractual Obligations




|                        |  |                        |       |           |        |   |       |           |           |   |           |  |  |         |       |  |  |   |       | 
|----------------------- |  | ---------------------- | ----- | --------- | ------ | - | ----- | --------- | --------- | - | --------- |  |  | ------- | ----- |  |  | - | ----- | 
|                        |  | Payments Due by Period |      
|                        |  |                        |      
|                        |  |                        |       | Less Than |        |   |       |           | More Than |  
|Contractual Obligations |  | Total                  |       |           | 1 Year |   |       | 1-3 Years |           |   | 3-5 Years |  |  | 5 Years |      
|                        |  |                        |       |           |        |   |       |           |           |   |           |  |  |         |      
|Operating Leases        |  | $                      | 6,907 |           |        | $ | 1,248 |           |           | $ | 2,224     |  |  | $       | 1,964 |  |  | $ | 1,471 | 
|Capital Leases          |  | $                      | 28    |           |        | $ | 19    |           |           | $ | 9         |  |  |         |      |  |  |   |      | 
|                        |  |                        |       |           |        |   |       |           |           |   |           |  |  |         |      
|Total                   |  | $                      | 6,935 |           |        | $ | 1,267 |           |           | $ | 2,233     |  |  | $       | 1,964 |  |  | $ | 1,471 | 





Off-Balance Sheet Arrangements




Recent Accounting Pronouncements








42



---



##### Table of Contents







05-06


123(R)-3







|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk.



Interest Rate Risk






43



---



##### Table of Contents



Foreign Currency Risk






| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | changes in regulatory requirements;                                                      
|
| |  | delays resulting from difficulty in obtaining export licenses
    for certain technology;
|
| |  | customs, tariffs and other barriers and restrictions; and                                
|
| |  | the burdens of complying with a variety of foreign laws.                                 





| |   |                                                       
| | - | ------------------------------------------------------
| |  | differing economic conditions;                        
|
| |  | changes in political climate;                         
|
| |  | differing tax structures; and                         
|
| |  | changes in diplomatic and trade relationships and war.














|        |                                                              
|------- | -------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and Supplementary
    Data.

10-K 8-K.







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



44



---



##### Table of Contents








|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.


13a-15(b) 15d-15(b).


Managements Report on Internal Control Over Financial
Reporting. 13a-15(f). Internal Control  Integrated Framework Internal Control  Integrated Framework




Changes in Internal Control Over Financial Reporting. 13a-15(f) 15d-15(f)


Limitations on the Effectiveness of Controls.




45



---



##### Table of Contents








|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III


10-K







|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant.



Code of Ethics









|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.








|         |                                                                                     
|-------- | ------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Related Shareholder Matters.








|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



46



---



##### Table of Contents






Part IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

Consolidated Financial Statements:


|                                                                                                   |  |      |    | 
|-------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                   |  | Page |   
|                                                                                                   |  |      |   
|Report of Independent Registered Public Accounting Firm on
    Financial Statements                |  |      | 51 | 
|Consolidated Balance Sheets at December 31, 2005 and 2004                                          |  |      | 53 | 
|Consolidated Statements of Operations  Years ended
    December 31, 2005, 2004 and 2003           |  |      | 54 | 
|Consolidated Statements of Cash Flows  Years ended
    December 31, 2005, 2004 and 2003           |  |      | 55 | 
|Consolidated Statements of Shareholders Equity 
    Years ended December 31, 2005, 2004 and 2003 |  |      | 56 | 
|Notes to Consolidated Financial Statements                                                         |  |      | 57 | 



| |     |                                                                                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------
| | (2) | The following financial statement schedule for the years ended
    December 31, 2005, 2004 and 2003 is submitted herewith:

|                                                |  |      |     | 
|----------------------------------------------- |  | ---- | --- | 
|                                                |  | Page |    
|                                                |  |      |    
|Schedule II  Valuation and Qualifying Accounts |  |      | S-1 | 



S-K):


|        |    |             |  |                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1          |  | By-laws of Registrant, as amended.(1)                                                                                             
|        | 3  | .1A         |  | Amendment to By-laws adopted on August 10, 2005.(2)                                                                               
|        | 3  | .3          |  | Eighth Amended and Restated Articles of Incorporation of
    Registrant.(3)                                                       
|        | 10 | .1A         |  | 1984 Stock Option Plan, as amended, and forms of Incentive Stock
    Option Agreement and Non-statutory Stock Option Agreement.(4)
|        | 10 | .1B         |  | 1994 Stock Option Plan and forms of Incentive Stock Option
    Agreement and Non-statutory Stock Option Agreement.(5)             
|        | 10 | .1C         |  | 2004 Stock Option Plan and form of Stock Option Agreement.(6)                                                                     
|        | 10 | .2          |  | 1984 Stock Purchase Plan and form of Common Stock Purchase
    Agreement.(7)                                                      
|        | 10 | .3A         |  | 1989 Employee Stock Purchase Plan and form of Subscription
    Agreement.(8)                                                      
|        | 10 | .3B         |  | 1999 Employee Stock Purchase Plan and form of Subscription
    Agreement.(9)                                                      
|        | 10 | .4          |  | 2006 Director Compensation Plan.(10)                                                                                              
|        | 10 | .5          |  | 2006 Incentive Compensation Plan.(11)                                                                                             
|        | 10 | .6          |  | 401(k) Plan.(12)                                                                                                                  
|        | 10 | .7A         |  | Net Lease Agreement between the Registrant and Realtec
    Properties dated June 20, 2000.(13)                                    
|        | 10 | .7B         |  | Net Lease Agreement between the Registrant and Realtec
    Properties dated October 18, 2000.(14)                                 
|        | 10 | .8          |  | Form of indemnification agreement.(15)                                                                                            
|        | 10 | .9A         |  | Loan and Security Agreement between the Registrant and Silicon
    Valley Bank dated October 1, 1999.(16)                         
|        | 10 | .9B         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 25, 2000.(17)         
|        | 10 | .9C         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 26, 2001.(18)         
|        | 10 | .9D         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 26, 2002.(19)         
|        | 10 | .9E         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 25, 2003.(20)         

47



---



##### Table of Contents



|        |    |             |  |                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .9F         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 24, 2004.(21)                    
|        | 10 | .10         |  | 1990 Directors Stock Option Plan and form of Option
    Agreement.(22)                                                                      
|        | 10 | .11A        |  | Form of Laserscope Management Continuity Agreement, as
    amended.(23)                                                                      
|        | 10 | .11B        |  | Form of Laserscope Management Continuity Agreement, as
    amended.(24)                                                                      
|        | 10 | .12C        |  | Form of Laserscope Management Continuity Agreement.(25)                                                                                      
|        | 10 | .12D        |  | Form of Laserscope Management Continuity Agreement. (26)                                                                                     
|        | 10 | .13A        |  | 1995 Directors Stock Option Plan and form of Option
    agreement.(27)                                                                      
|        | 10 | .13B        |  | 1999 Directors Stock Option Plan.(28)                                                                                                       
|        | 10 | .14A        |  | Common Stock Placement Agreement.(29)                                                                                                        
|        | 10 | .14B        |  | Form of Common Stock Purchase Agreement.(30)                                                                                                 
|        | 10 | .15A        |  | Convertible Loan Agreement.(31)                                                                                                              
|        | 10 | .15B        |  | Amendment to Convertible Loan Agreement.(32)                                                                                                 
|        | 10 | .15C        |  | Amendment to the Convertible Debentures Agreement between the
    Registrant and Renaissance Capital Growth and Income Fund III,
    Inc.(33)
|        | 10 | .16         |  | Form of Distribution Agreement between Laserscope and Henry
    Schein, Inc. dated July 29, 2005.(34)                                        
|        | 21 | .1          |  | Subsidiaries of Registrant.(35)                                                                                                              
|        | 23 | .1          |  | Consent of Independent Registered Public Accounting Firm.(36)                                                                                
|        | 31 | .1          |  | Certification of the Registrants Chief Executive Officer,
    as required by Section 302 of the Sarbanes-Oxley Act of 2002.(37)             
|        | 31 | .2          |  | Certification of Registrants Chief Financial Officer, as
    required by Section 302 of the Sarbanes-Oxley Act of 2002.(38)                 
|        | 32 | .1          |  | Certification of Registrants Chief Executive Officer, as
    required by Section 906 of the Sarbanes-Oxley Act of 2002.(39)                 
|        | 32 | .2          |  | Certification of Registrants Chief Financial Officer, as
    required by Section 906 of the Sarbanes-Oxley Act of 2002.(40)                 




| |      |  |  |                                                                                                                                                                                                                                                                                
| | ---- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)  |  |  | Incorporated by reference to Exhibit 3.4 filed in response to
    Item 14(a)(3),Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                           
| | (2)  |  |  | Incorporated by reference to Exhibit 3.1 filed in response to
    Item 9.01(c), Financial Statements and Exhibits, of
    Registrants Current Report on Form 8-K filed on August 11,
    2005.                                                                              
| | (3)  |  |  | Incorporated by reference to Exhibit 3.3 filed in response to
    Item 15(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2002.                                                                                          
| | (4)  |  |  | Incorporated by reference to Exhibit 10.1A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                        
| | (5)  |  |  | Incorporated by reference to Exhibit 10.1B filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1994.                                                                                        
| | (6)  |  |  | Filed herewith.                                                                                                                                                                                                                                                                
| | (7)  |  |  | Incorporated by reference to Exhibit 10.2 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989.
| | (8)  |  |  | Incorporated by reference to Exhibit 10.3 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                         
| | (9)  |  |  | Incorporated by reference to Exhibit 10.3A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                        
| | (10) |  |  | Filed herewith.                                                                                                                                                                                                                                                                
| | (11) |  |  | Filed herewith.                                                                                                                                                                                                                                                                
| | (12) |  |  | Incorporated by reference to Exhibit 10.4 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989.

48



---



##### Table of Contents



| |      |  |  |                                                                                                                                                                                                                                                                                 
| | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (13) |  |  | Incorporated by reference Exhibit 10.6 filed in response to Item
    14(a)(3), Exhibits, of the Registrants Annual
    Report on Form 10-K for the year ended December 31, 2000.                                                                                             
| | (14) |  |  | Incorporated by reference Exhibit 10.6A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2000.                                                                                            
| | (15) |  |  | Incorporated by reference to Exhibit 10.10 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989.
| | (16) |  |  | Incorporated by reference to Exhibit 10.11G filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                        
| | (17) |  |  | Incorporated by reference to Exhibit 10.11H filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2000.                                                                        
| | (18) |  |  | Incorporated by reference to Exhibit 10.11I filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2001.                                                                        
| | (19) |  |  | Incorporated by reference to Exhibit 10.11J filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2002.                                                                        
| | (20) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2003.                                                                          
| | (21) |  |  | Incorporated by reference to Exhibit 10.11L filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2004.                                                                        
| | (22) |  |  | Incorporated by reference to Exhibit 10.13 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                         
| | (23) |  |  | Incorporated by reference to Exhibit 10.14 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2000.                                                                             
| | (24) |  |  | Incorporated by reference to Exhibit 10.14 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2002.                                                                             
| | (25) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2004.                                                                              
| | (26) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 9.01(c),Financial Statements and Exhibits, of
    the Registrants Current Report on Form 8-K filed on
    December 28, 2005.                                                                         
| | (27) |  |  | Incorporated by reference to Exhibit 10.18 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K/ A for the year ended December 31,
    1995.                                                                                  
| | (28) |  |  | Incorporated by reference to Exhibit 10.18A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                        
| | (29) |  |  | Incorporated by reference to Exhibit 10.19 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                         
| | (30) |  |  | Incorporated by reference to Exhibit 10.19A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                        
| | (31) |  |  | Incorporated by reference to Exhibit 10.20 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                         
| | (32) |  |  | Incorporated by reference to Exhibit 10.20A filed in response to
    Item 15(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2002.                                                                                        
| | (33) |  |  | Incorporated by reference to Exhibit 10.2 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2003.                                                                          
| | (34) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2005.                                                                          
| | (35) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (36) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (37) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (38) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (39) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (40) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 

49



---



##### Table of Contents






SIGNATURES






| |           
| | ----------
| | LASERSCOPE



| |     |                   
| | --- | ------------------
| | By: | /s/ ERIC M. REUTER

| |                                      
| | -------------------------------------
| |                                      
| | Eric M. Reuter                       
| | President and Chief Executive Officer



POWER OF ATTORNEY


attorneys-in 10-K, attorneys-in




|                                                  |  |                                                                                                      |  |                |  | 
|------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                         |  | Title                                                                                                |  | Date          
|                                                  |  |                                                                                                      |  |               
|                                                 
|/s/ Robert J. Pressley(Robert J. Pressley, Ph.D.) |  | Chairman of the Board of Directors                                                                   |  | March 15, 2006
|                                                 
|/s/ Eric M. Reuter(Eric M. Reuter)                |  | President, Chief Executive Officer and Director (Principal
    Executive Officer)                    |  | March 15, 2006
|                                                 
|/s/ Derek Bertocci(Derek Bertocci)                |  | Vice President, Finance and Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | March 15, 2006
|                                                 
|/s/ James Baumgardt(James Baumgardt)              |  | Director                                                                                             |  | March 15, 2006
|                                                 
|/s/ Robert C. Pearson(Robert C. Pearson)          |  | Director                                                                                             |  | March 15, 2006
|                                                 
|/s/ Rodney Perkins(Rodney Perkins, M.D.)          |  | Director                                                                                             |  | March 15, 2006
|                                                 
|/s/ Elisha Finney(Elisha Finney)                  |  | Director                                                                                             |  | March 15, 2006

50



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


ON FINANCIAL STATEMENTS






Consolidated financial statements and financial statement
schedules




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




51



---



##### Table of Contents









| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP





52



---



##### Table of Contents



LASERSCOPE


CONSOLIDATED BALANCE SHEETS


|                                       |                                                                                                           |                             |                                            |        |         |         |       |         |        |        | 
|-------------------------------------- | --------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------------------------ | ------ | ------- | ------- | ----- | ------- | ------ | ------ | 
|                                       |                                                                                                           | December 31,                |                                           
|                                       |                                                                                                           |                             |                                           
|                                       |                                                                                                           | 2005                        |                                            |        | 2004    |        
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           | (Thousands except           |                                           
|                                       |                                                                                                           | share amounts)              |                                           
|ASSETS                                
|Current assets                         |                                                                                                           |                             |                                            |        |         |         |       |        
|                                       | Cash and cash equivalents                                                                                 |                             | $                                          | 30,653 |         |         | $     | 15,954  |       
|                                       | Accounts receivable, net of allowance for doubtful accounts of
    $416 and $104, respectively            |                             |                                            | 25,138 |         |         |       | 20,342  |       
|                                       | Inventories                                                                                               |                             |                                            | 27,058 |         |         |       | 19,446  |       
|                                       | Deferred tax assets                                                                                       |                             |                                            | 16,285 |         |         |       |        |       
|                                       | Other current assets                                                                                      |                             |                                            | 2,886  |         |         |       | 1,471   |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           | Total current assets        |                                            |        | 102,020 |         |       |         | 57,213 |       
|Property and equipment, net            |                                                                                                           |                             | 8,663                                      |        |         |         | 3,457 |        
|Goodwill                               |                                                                                                           |                             | 655                                        |        |         |         | 655   |        
|Other assets                           |                                                                                                           |                             | 432                                        |        |         |         | 264   |        
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           |                             | Total assets                               |        | $       | 111,770 |       |         | $      | 61,589 | 
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                      
|LIABILITIES AND SHAREHOLDERS EQUITY  
|Current liabilities                    |                                                                                                           |                             |                                            |        |         |         |       |        
|                                       | Accounts payable                                                                                          |                             | $                                          | 7,961  |         |         | $     | 2,389   |       
|                                       | Accrued compensation                                                                                      |                             |                                            | 4,273  |         |         |       | 4,365   |       
|                                       | Warranty                                                                                                  |                             |                                            | 2,947  |         |         |       | 2,536   |       
|                                       | Other accrued liabilities                                                                                 |                             |                                            | 6,691  |         |         |       | 5,761   |       
|                                       | Deferred revenue                                                                                          |                             |                                            | 5,082  |         |         |       | 3,575   |       
|                                       | Current obligations under capital leases                                                                  |                             |                                            | 19     |         |         |       | 21      |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           | Total current liabilities   |                                            |        | 26,973  |         |       |         | 18,647 |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|Long-term liabilities:                 |                                                                                                           |                             |                                            |        |         |         |       |        
|                                       | Obligations under capital leases                                                                          |                             |                                            | 9      |         |         |       | 31      |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           | Total long-term liabilities |                                            |        | 9       |         |       |         | 31     |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|Commitments and contingencies (Note 8) |                                                                                                           |                             |                                            |        |         |         |       |        
|Shareholders equity                   |                                                                                                           |                             |                                            |        |         |         |       |        
|                                       | Common stock, no par value:                                                                               |                             |                                            |        |         |         |       |         |       
|                                       | Authorized shares  30,000,000 at December 31,
    2005 and 2004                                          |                             |                                            |        |         |         |       |         |       
|                                       | Issued and outstanding shares  22,296,689 and
    21,966,117 at December 31, 2005 and 2004, respectively |                             |                                            | 84,957 |         |         |       | 65,009  |       
|                                       | Retained earnings (accumulated deficit)                                                                   |                             |                                            | 287    |         |         |       | (22,263 | )     
|                                       | Accumulated other comprehensive income/(loss)                                                             |                             |                                            | (456   | )       |         |       | 165     |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           | Total shareholders equity  |                                            |        | 84,788  |         |       |         | 42,911 |       
|                                       |                                                                                                           |                             |                                            |        |         |        
|                                       |                                                                                                           |                             | Total liabilities and shareholders equity |        | $       | 111,770 |       |         | $      | 61,589 | 
|                                       |                                                                                                           |                             |                                            |        |         |        



53



---



##### Table of Contents



LASERSCOPE


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                       |                                     |                          |                                     |         |        |         |        |        |        |        |        |        |        |        | 
|-------------------------------------- | ----------------------------------- | ------------------------ | ----------------------------------- | ------- | ------ | ------- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | 
|                                       |                                     | Years Ended December 31, |                                    
|                                       |                                     |                          |                                    
|                                       |                                     | 2005                     |                                     |         | 2004   |         |        | 2003   |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     | (Thousands, except       |                                    
|                                       |                                     | per share amounts)       |                                    
|Net revenues:                          |                                     |                          |                                     |         |        |         |        |        |        |        |        |       
|                                       | Products                            |                          | $                                   | 118,388 |        |         | $      | 86,341 |        |        | $      | 51,104 |       
|                                       | Services                            |                          |                                     | 8,736   |        |         |        | 7,429  |        |        |        | 6,323  |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     |                          | Total net revenues                  |         |        | 127,124 |        |        |        | 93,770 |        |        |        | 57,427 | 
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Cost of products and services:         |                                     |                          |                                     |         |        |         |        |        |        |        |        |       
|                                       | Products                            |                          |                                     | 44,049  |        |         |        | 33,298 |        |        |        | 22,942 |       
|                                       | Services                            |                          |                                     | 6,372   |        |         |        | 5,817  |        |        |        | 4,399  |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     |                          | Total cost of products and services |         |        | 50,421  |        |        |        | 39,115 |        |        |        | 27,341 | 
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Gross margin                           |                                     |                          | 76,703                              |         |        |         | 54,655 |        |        |        | 30,086 |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Operating expenses:                    |                                     |                          |                                     |         |        |         |        |        |        |        |        |       
|                                       | Research and development            |                          |                                     | 7,858   |        |         |        | 5,217  |        |        |        | 4,443  |       
|                                       | Selling, general and administrative |                          |                                     | 45,014  |        |         |        | 34,023 |        |        |        | 22,936 |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     |                          | Total operating expenses            |         |        | 52,872  |        |        |        | 39,240 |        |        |        | 27,379 | 
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Operating income                       |                                     |                          | 23,831                              |         |        |         | 15,415 |        |        |        | 2,707  |       
|Interest income                        |                                     |                          | 224                                 |         |        |         | 39     |        |        |        | 52     |       
|Interest expense and other income, net |                                     |                          | 321                                 |         |        |         | 225    |        |        |        | (40    | )     
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Income before income taxes             |                                     |                          | 24,376                              |         |        |         | 15,679 |        |        |        | 2,719  |       
|Provision for income taxes             |                                     |                          | 1,826                               |         |        |         | 940    |        |        |        | 202    |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Net income                             |                                     | $                        | 22,550                              |         |        | $       | 14,739 |        |        | $      | 2,517  |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Net income per share                   |                                     |                          |                                     |         |        |         |        |        |        |        |        |       
|                                       |                                     | Basic                    |                                     | $       | 1.02   |         |        | $      | 0.70   |        |        | $      | 0.13   |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     | Diluted                  |                                     | $       | 0.98   |         |        | $      | 0.65   |        |        | $      | 0.13   |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|Shares used for net income per share   |                                     |                          |                                     |         |        |         |        |        |        |        |        |       
|                                       |                                     | Basic                    |                                     |         | 22,142 |         |        |        | 21,075 |        |        |        | 17,452 |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       
|                                       |                                     | Diluted                  |                                     |         | 22,917 |         |        |        | 22,808 |        |        |        | 21,838 |       
|                                       |                                     |                          |                                     |         |        |         |        |        |       



54



---



##### Table of Contents



LASERSCOPE


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                      |                                                                                   |                                       |        |        |         |   |       |        |        |   |       |        |        |  
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | ------ | ------ | ------- | - | ----- | ------ | ------ | - | ----- | ------ | ------ | -
|                                      |                                                                                   | Years Ended December 31,              |       
|                                      |                                                                                   |                                       |       
|                                      |                                                                                   | 2005                                  |        |        | 2004    |   |       | 2003   |       
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|                                      |                                                                                   | (In thousands)                        |       
|Cash flows from operating activities: |                                                                                   |                                       |        |        |         |   |       |        |        |   |       |       
|                                      | Net income                                                                        |                                       | $      | 22,550 |         |   | $     | 14,739 |        |   | $     | 2,517  |       
|                                      | Adjustments to reconcile net income to cash provided by
    operating activities: |                                       |        |        |         |   |       |        |        |   |       |        |       
|                                      |                                                                                   | Depreciation and amortization         |        |        | 1,420   |   |       |        | 1,055  |   |       |        | 1,222  |  
|                                      |                                                                                   | Tax benefit of stock option exercises |        |        | 17,455  |   |       |        | 383    |   |       |        |       |  
|                                      |                                                                                   | Amortization of debt issuance costs   |        |        |        |   |       |        |       |   |       |        | 135    |  
|                                      |                                                                                   | Provision for doubtful accounts       |        |        | 606     |   |       |        | 229    |   |       |        | 93     |  
|                                      | Changes in assets and liabilities:                                                |                                       |        |        |         |   |       |        |        |   |       |        |       
|                                      |                                                                                   | Accounts receivable                   |        |        | (5,965  | ) |       |        | (7,627 | ) |       |        | (2,204 | )
|                                      |                                                                                   | Inventories                           |        |        | (7,905  | ) |       |        | (5,940 | ) |       |        | (2,679 | )
|                                      |                                                                                   | Deferred tax assets                   |        |        | (16,285 | ) |       |        |       |   |       |        |       |  
|                                      |                                                                                   | Prepayments and other current assets  |        |        | (1,581  | ) |       |        | (68    | ) |       |        | (326   | )
|                                      |                                                                                   | Accounts payable                      |        |        | 5,709   |   |       |        | (1,271 | ) |       |        | 829    |  
|                                      |                                                                                   | Accrued compensation                  |        |        | (53     | ) |       |        | 1,998  |   |       |        | 327    |  
|                                      |                                                                                   | Warranty                              |        |        | 411     |   |       |        | 589    |   |       |        | 820    |  
|                                      |                                                                                   | Deferred revenue                      |        |        | 1,561   |   |       |        | 1,539  |   |       |        | 614    |  
|                                      |                                                                                   | Other accrued liabilities             |        |        | 1,256   |   |       |        | 1,758  |   |       |        | 371    |  
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|Cash provided by operating activities |                                                                                   |                                       | 19,179 |        |         |   | 7,384 |        |        |   | 1,719 |       
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|Cash flows from investing activities: |                                                                                   |                                       |        |        |         |   |       |        |        |   |       |       
|                                      | Capital expenditures                                                              |                                       |        | (6,553 | )       |   |       | (2,812 | )      |   |       | (873   | )     
|                                      | Acquisition of licenses and other intangibles                                     |                                       |        | (267   | )       |   |       | (127   | )      |   |       | (200   | )     
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|                                      | Cash used in investing activities                                                 |                                       |        | (6,820 | )       |   |       | (2,939 | )      |   |       | (1,073 | )     
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|Cash flows from financing activities: |                                                                                   |                                       |        |        |         |   |       |        |        |   |       |       
|                                      | Payment on obligations under capital leases                                       |                                       |        | (20    | )       |   |       | (10    | )      |   |       | (117   | )     
|                                      | Proceeds from the sale of common stock under stock plans                          |                                       |        | 2,478  |         |   |       | 3,691  |        |   |       | 1,565  |       
|                                      | Proceeds from the exercise of warrants                                            |                                       |        | 15     |         |   |       | 508    |        |   |       | 97     |       
|                                      | Repayment of shareholder notes                                                    |                                       |        |       |         |   |       |       |        |   |       | 125    |       
|                                      | Proceeds from line of credit                                                      |                                       |        |       |         |   |       |       |        |   |       | 200    |       
|                                      | Repayment of line of credit                                                       |                                       |        |       |         |   |       |       |        |   |       | (200   | )     
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|                                      | Cash provided by financing activities                                             |                                       |        | 2,473  |         |   |       | 4,189  |        |   |       | 1,670  |       
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|                                      | Effect of exchange rate changes on cash                                           |                                       |        | (133   | )       |   |       | 162    |        |   |       | 181    |       
|                                      | Increase in cash and cash equivalents                                             |                                       |        | 14,699 |         |   |       | 8,796  |        |   |       | 2,497  |       
|                                      | Cash and cash equivalents, beginning of year                                      |                                       |        | 15,954 |         |   |       | 7,158  |        |   |       | 4,661  |       
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|                                      | Cash and cash equivalents, end of year                                            |                                       | $      | 30,653 |         |   | $     | 15,954 |        |   | $     | 7,158  |       
|                                      |                                                                                   |                                       |        |        |         |   |       |        |       
|Supplemental cash flow information:   |                                                                                   |                                       |        |        |         |   |       |        |        |   |       |       
|                                      | Cash paid for income taxes, net of refunds                                        |                                       | $      | 1,023  |         |   | $     | 224    |        |   | $     | 67     |       
|                                      | Cash paid for interest                                                            |                                       | $      | 34     |         |   | $     | 37     |        |   | $     | 234    |       
|                                      | Non-cash financing, equipment lease                                               |                                       | $      |       |         |   | $     | 81     |        |   | $     |       |       
|                                      | Debenture conversion                                                              |                                       | $      |       |         |   | $     |       |        |   | $     | 2,850  |       



55



---



##### Table of Contents



LASERSCOPE


CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |        |        | 
|----------------------------------------------------------------------------- | ----------------------- | -------------------------- | ------ |  | ------ | -------- | -------- | ------------ | ----------- | ----- | ------------- | ------ | ---------- | ------------ | ---- | ----- | ------------- | - | ---- | - |  | - | ------ | ------ | ------ | 
|                                                                              |                         |                            |        |  |        | Retained |          |              | Accumulated |       |               | Notes  |            |              |     
|                                                                              |                         | Common                     |        |  |        |          | Earnings |              |             | Other |               |        | Receivable |              |      | Total |              
|                                                                              |                         | Shares                     |        |  | Common |          |          | (Accumulated |             |       | Comprehensive |        |            | from         |      |       | Shareholders |  
|                                                                              |                         | Issued                     |        |  | Stock  |          |          | Deficit)     |             |       | Income/(Loss) |        |            | Shareholders |      |       | Equity        |  
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|                                                                              |                         | (In thousands)             |       
|Balance at December 31, 2002                                                  |                         |                            | 16,828 |  |        | $        | 55,915   |              |             | $     | (39,519       | )      |            | $            | (789 | )     |               | $ | (125 | ) |  | $ | 15,482 |       
|Components of comprehensive income:                                           |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |       
|                                                                              | Net income              |                            |        |  |        |          |          |              |             |       |               | 2,517  |            |              |      |       |               |   |      |   |  |   |        | 2,517  |       
|                                                                              | Translation adjustments |                            |        |  |        |          |          |              |             |       |               |        |            |              |      | 562   |               |   |      |   |  |   |        | 562    |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|                                                                              |                         | Total comprehensive income |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |        | 3,079  | 
|Common stock issued under stock plans                                         |                         |                            | 828    |  |        |          | 1,565    |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 1,565  |       
|Common stock issued upon warrant exercises                                    |                         |                            | 76     |  |        |          | 97       |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 97     |       
|Debenture conversion into common stock, net of unamortized
    issuance costs |                         |                            | 2,400  |  |        |          | 2,850    |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 2,850  |       
|Repayment of shareholder notes                                                |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   | 125  |   |  |   | 125    |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|Balance at December 31, 2003                                                  |                         |                            | 20,132 |  |        |          | 60,427   |              |             |       | (37,002       | )      |            |              | (227 | )     |               |   |     |   |  |   | 23,198 |       
|Components of comprehensive income:                                           |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |       
|                                                                              | Net income              |                            |        |  |        |          |          |              |             |       |               | 14,739 |            |              |      |       |               |   |      |   |  |   |        | 14,739 |       
|                                                                              | Translation adjustments |                            |        |  |        |          |          |              |             |       |               |        |            |              |      | 392   |               |   |      |   |  |   |        | 392    |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|                                                                              |                         | Total comprehensive income |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |        | 15,131 | 
|Common stock issued under stock plans                                         |                         |                            | 1,471  |  |        |          | 3,691    |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 3,691  |       
|Common stock issued upon warrant exercises                                    |                         |                            | 363    |  |        |          | 508      |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 508    |       
|Tax benefit of stock option exercise                                          |                         |                            |        |  |        |          | 383      |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 383    |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|Balance at December 31, 2004                                                  |                         |                            | 21,966 |  |        |          | 65,009   |              |             |       | (22,263       | )      |            |              | 165  |       |               |   |     |   |  |   | 42,911 |       
|Components of comprehensive income:                                           |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |       
|                                                                              | Net income              |                            |        |  |        |          |          |              |             |       |               | 22,550 |            |              |      |       |               |   |      |   |  |   |        | 22,550 |       
|                                                                              | Translation adjustments |                            |        |  |        |          |          |              |             |       |               |        |            |              |      | (621  | )             |   |      |   |  |   |        | (621   | )     
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|                                                                              |                         | Total comprehensive income |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   |        |        | 21,929 | 
|Common stock issued under stock plans                                         |                         |                            | 321    |  |        |          | 2,478    |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 2,478  |       
|Common stock issued upon warrant exercises                                    |                         |                            | 10     |  |        |          | 15       |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 15     |       
|Tax benefit of stock option exercise                                          |                         |                            |        |  |        |          | 17,455   |              |             |       |               |        |            |              |      |       |               |   |      |   |  |   | 17,455 |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  
|Balance at December 31, 2005                                                  |                         |                            | 22,297 |  |        | $        | 84,957   |              |             | $     | 287           |        |            | $            | (456 | )     |               | $ |     |   |  | $ | 84,788 |       
|                                                                              |                         |                            |        |  |        |          |          |              |             |       |               |        |            |              |      |       |               |  



56



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies



| |         
| | --------
| | Business





| |                      
| | ---------------------
| | Basis of presentation





| |                 
| | ----------------
| | Use of estimates





| |                                    
| | -----------------------------------
| | Fair value of financial instruments





| |                          
| | -------------------------
| | Cash and cash equivalents





| |                    
| | -------------------
| | Revenue recognition















57



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








00-21,


01-09,








58



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |                    
| | -------------------
| | Warranty Obligation





| |                              
| | -----------------------------
| | Excess and Obsolete Inventory





| |           
| | ----------
| | Litigation





| |                    
| | -------------------
| | Functional Currency



59



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |           
| | ----------
| | Income Tax







| |                                      
| | -------------------------------------
| | Research and development expenditures





| |                       
| | ----------------------
| | Property and equipment





| |                      
| | ---------------------
| | Internal use software





| |            
| | -----------
| | Inventories

first-in,


60



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                     
| | --------------------
| | Net income per share





|                                                                                           |                                                                                             |                    |        |        |      |   |        |        |  |   |        |        |  
|------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | ------------------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | -
|                                                                                           |                                                                                             | 2005               |        |        | 2004 |   |        | 2003   | 
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|                                                                                           |                                                                                             | (Thousands, except |       
|                                                                                           |                                                                                             | per share data)    |       
|Basic earnings per share                                                                   |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|Numerator:                                                                                 |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|                                                                                           | Net income used in computing basic and diluted net income per
    share                     |                    | $      | 22,550 |      |   | $      | 14,739 |  |   | $      | 2,517  |  
|                                                                                           | Amount allocated to holders of convertible debentures                                       |                    |        |       |      |   |        |       |  |   |        | (267   | )
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|                                                                                           | Income available to common stockholders-basic                                               |                    | $      | 22,550 |      |   | $      | 14,739 |  |   | $      | 2,250  |  
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Denominator:                                                                               |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|                                                                                           | Weighted average common shares outstanding used in computing
    basic net income per share |                    |        | 22,142 |      |   |        | 21,075 |  |   |        | 17,452 |  
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Basic earnings per share                                                                   |                                                                                             | $                  | 1.02   |        |      | $ | 0.70   |        |  | $ | 0.13   |       
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Diluted earnings per share                                                                 |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|Numerator:                                                                                 |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|                                                                                           | Net income used in computing basic and diluted net income per
    share                     |                    | $      | 22,550 |      |   | $      | 14,739 |  |   | $      | 2,517  |  
|                                                                                           | Addback interest on debentures                                                              |                    |        |       |      |   |        |       |  |   |        | 219    |  
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|                                                                                           | Income available to common stockholders-diluted                                             |                    | $      | 22,550 |      |   | $      | 14,739 |  |   | $      | 2,736  |  
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Denominator:                                                                               |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|                                                                                           | Weighted average common shares outstanding used in computing
    basic net income per share |                    |        | 22,142 |      |   |        | 21,075 |  |   |        | 17,452 |  
|Add dilutive potential shares used in computing dilutive net
    income per share:         |                                                                                             |                    |        |        |      |   |        |        |  |   |        |       
|                                                                                           | Assumed exercise of stock options                                                           |                    |        | 775    |      |   |        | 1,463  |  |   |        | 1,881  |  
|                                                                                           | Assumed exercise of warrants                                                                |                    |        |       |      |   |        | 270    |  |   |        | 437    |  
|                                                                                           | Assumed conversion of debentures                                                            |                    |        |       |      |   |        |       |  |   |        | 2,068  |  
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Total weighted average number of shares used in computing
    diluted net income per share |                                                                                             |                    | 22,917 |        |      |   | 22,808 |        |  |   | 21,838 |       
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 
|Diluted earnings per share                                                                 |                                                                                             | $                  | 0.98   |        |      | $ | 0.65   |        |  | $ | 0.13   |       
|                                                                                           |                                                                                             |                    |        |        |      |   |        |        | 

03-06 Earnings Per
Share


61



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |         
| | --------
| | Goodwill





| |                            
| | ---------------------------
| | Intangible and other assets





| |                    
| | -------------------
| | Advertising expense





| |                         
| | ------------------------
| | Stock-based compensation



62



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                       |                                                                                                                                            |                     |        |         |      |   |        |        |      |   |       |        |      | 
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------------------- | ------ | ------- | ---- | - | ------ | ------ | ---- | - | ----- | ------ | ---- | 
|                       |                                                                                                                                            | 2005                |        |         | 2004 |   |        | 2003   |     
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|Net income as reported |                                                                                                                                            | $                   | 22,550 |         |      | $ | 14,739 |        |      | $ | 2,517 |       
|                       | Deduct: Total stock-based compensation expense determined under
    fair value based method for all awards, net of related tax
    effects |                     |        | (10,742 | )    |   |        | (2,244 | )    |   |       | (1,352 | )   
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       | Pro forma net income                                                                                                                       |                     | $      | 11,808  |      |   | $      | 12,495 |      |   | $     | 1,165  |     
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       | Amount allocated to holders of convertible debentures                                                                                      |                     |        |        |      |   |        |       |      |   |       | (267   | )   
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       | Pro forma net income available to common stockholders-basic                                                                                |                     | $      | 11,808  |      |   | $      | 12,495 |      |   | $     | 898    |     
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|Net income per share:  |                                                                                                                                            |                     |        |         |      |   |        |        |      |   |       |       
|                       |                                                                                                                                            | Basic-as reported   |        | $       | 1.02 |   |        | $      | 0.70 |   |       | $      | 0.13 | 
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       |                                                                                                                                            | Basic-pro forma     |        | $       | 0.53 |   |        | $      | 0.59 |   |       | $      | 0.05 | 
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       |                                                                                                                                            | Diluted-as reported |        | $       | 0.98 |   |        | $      | 0.65 |   |       | $      | 0.13 | 
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     
|                       |                                                                                                                                            | Diluted-pro forma   |        | $       | 0.52 |   |        | $      | 0.55 |   |       | $      | 0.05 | 
|                       |                                                                                                                                            |                     |        |         |      |   |        |        |     



|                                         |  |      |      |   |      |  |      |      |  |  |      |  
|---------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                         |  | 2005 |      |   | 2004 |  |      | 2003 | 
|                                         |  |      |      |   |      |  |      |      | 
|Risk free interest rate for options      |  |      | 4.05 | % |      |  | 3.26 | %    |  |  | 2.60 | %
|Risk free interest rate for ESPP rights  |  |      | 3.85 | % |      |  | 1.15 | %    |  |  | 1.12 | %
|Dividend yield                           |  |      |     |   |      |  |     |      |  |  |     |  
|Volatility for options                   |  |      | 73   | % |      |  | 84   | %    |  |  | 85   | %
|Volatility for ESPP rights               |  |      | 55   | % |      |  | 66   | %    |  |  | 63   | %
|Expected life (in years)                 |  |      | 4.19 |   |      |  | 4.45 |      |  |  | 4.13 |  
|Expected life for ESPP rights (in years) |  |      | 0.70 |   |      |  | 0.50 |      |  |  | 0.50 |  



out-of


out-of


63



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                  
| | -----------------
| | Reclassifications





| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements









64



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


05-06


123(R)-3




|   |                    
|-- | -------------------
|2. | Segment information





|                                 |       |                |         |         |      |   |        |        |  |   |        |        | 
|-------------------------------- | ----- | -------------- | ------- | ------- | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                 |       | 2005           |         |         | 2004 |   |        | 2003   | 
|                                 |       |                |         |         |      |   |        |        | 
|                                 |       | (In thousands) |        
|By similar products and services |       |                |         |         |      |   |        |        |  |   |        |       
|Lasers & instrumentation         |       | $              | 62,047  |         |      | $ | 56,958 |        |  | $ | 37,568 |       
|Disposables                      |       |                | 56,341  |         |      |   | 29,383 |        |  |   | 13,536 |       
|Service                          |       |                | 8,736   |         |      |   | 7,429  |        |  |   | 6,323  |       
|                                 |       |                |         |         |      |   |        |        | 
|                                 | Total |                | $       | 127,124 |      |   | $      | 93,770 |  |   | $      | 57,427 | 
|                                 |       |                |         |         |      |   |        |        | 
|By major geographic area(1)      |       |                |         |         |      |   |        |        |  |   |        |       
|United States                    |       | $              | 87,657  |         |      | $ | 68,390 |        |  | $ | 42,398 |       
|Europe(2)                        |       |                | 30,384  |         |      |   | 19,893 |        |  |   | 11,221 |       
|Asia Pacific(2)                  |       |                | 8,030   |         |      |   | 4,862  |        |  |   | 3,214  |       
|Rest of world(2)                 |       |                | 1,053   |         |      |   | 625    |        |  |   | 594    |       
|                                 |       |                |         |         |      |   |        |        | 
|Total                            |       | $              | 127,124 |         |      | $ | 93,770 |        |  | $ | 57,427 |       
|                                 |       |                |         |         |      |   |        |        | 






|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | Based on the location of the external customer.                                                            
|   
|(2) | Individual countries within each of these geographic regions
    represent less than 10% of total revenues.

65



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|               |  |                |       |  |      |   |       |      |  |   |       | 
|-------------- |  | -------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|               |  | 2005           |       |  | 2004 |   |       | 2003 | 
|               |  |                |       |  |      |   |       |      | 
|               |  | (In thousands) |      
|United States  |  | $              | 8,622 |  |      | $ | 3,328 |      |  | $ | 1,508 | 
|France         |  |                | 90    |  |      |   | 166   |      |  |   | 204   | 
|United Kingdom |  |                | 52    |  |      |   | 95    |      |  |   | 65    | 
|               |  |                |       |  |      |   |       |      | 
|               |  | $              | 8,764 |  |      | $ | 3,589 |      |  | $ | 1,777 | 
|               |  |                |       |  |      |   |       |      | 



|   |            
|-- | -----------
|3. | Inventories



|                |                   |                |        |        |      |   |       |        | 
|--------------- | ----------------- | -------------- | ------ | ------ | ---- | - | ----- | ------ | 
|                |                   | 2005           |        |        | 2004 |  
|                |                   |                |        |        |      |  
|                |                   | (In thousands) |       
|Raw materials   |                   | $              | 12,785 |        |      | $ | 9,120 |       
|Work-in-process |                   |                | 7,963  |        |      |   | 6,330 |       
|Finished goods  |                   |                | 6,310  |        |      |   | 3,996 |       
|                |                   |                |        |        |      |  
|                | Total inventories |                | $      | 27,058 |      |   | $     | 19,446 | 
|                |                   |                |        |        |      |  



|   |                       
|-- | ----------------------
|4. | Property and Equipment



|                                               |                              |                |         |       |      |   |         |       | 
|---------------------------------------------- | ---------------------------- | -------------- | ------- | ----- | ---- | - | ------- | ----- | 
|                                               |                              | 2005           |         |       | 2004 |  
|                                               |                              |                |         |       |      |  
|                                               |                              | (In thousands) |        
|Machinery and equipment                        |                              | $              | 6,456   |       |      | $ | 5,436   |      
|Office equipment and furniture                 |                              |                | 11,850  |       |      |   | 9,189   |      
|Leasehold improvements                         |                              |                | 1,601   |       |      |   | 1,273   |      
|Software                                       |                              |                | 6,037   |       |      |   | 3,551   |      
|                                               |                              |                |         |       |      |  
|                                               |                              |                | 25,944  |       |      |   | 19,449  |      
|Less accumulated depreciation and amortization |                              |                | (17,281 | )     |      |   | (15,992 | )    
|                                               |                              |                |         |       |      |  
|                                               | Total property and equipment |                | $       | 8,663 |      |   | $       | 3,457 | 
|                                               |                              |                |         |       |      |  





|   |                               
|-- | ------------------------------
|5. | Warranty and Service Contracts



| |         
| | --------
| | Warranty



66



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                            |                                             |                |        |    | 
|------------------------------------------- | ------------------------------------------- | -------------- | ------ | -- | 
|                                            |                                             | (In thousands) |       
|Warranty Reserve                            |                                             |                |        |   
|Balance, December 31, 2003                  |                                             | $              | 1,947  |   
|Add: Accruals for warranties issued in 2004 |                                             |                | 3,275  |   
|                                            | Accruals related to pre-existing warranties |                |        |   | 
|Less: Settlements made during the period    |                                             |                | (2,686 | ) 
|                                            |                                             |                |       
|Balance, December 31, 2004                  |                                             | $              | 2,536  |   
|Add: Accruals for warranties issued in 2005 |                                             |                | 3,451  |   
|                                            | Accruals related to pre-existing warranties |                |        | 92 | 
|Less: Settlements made during the period    |                                             |                | (3,132 | ) 
|                                            |                                             |                |       
|Balance, December 31, 2005                  |                                             | $              | 2,947  |   
|                                            |                                             |                |       



|   |               
|-- | --------------
|6. | Line of Credit





|   |                             
|-- | ----------------------------
|7. | Intangibles and Other Assets





67



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                      |  |                   |     |  |                   |   |     |     |  |                |        |  |             |              |     |  |     |   |     |  |  |   |     | 
|--------------------- |  | ----------------- | --- |  | ----------------- | - | --- | --- |  | -------------- | ------ |  | ----------- | ------------ | --- |  | --- | - | --- |  |  | - | --- | 
|                      |  | December 31, 2005 |     |  | December 31, 2004 |  
|                      |  |                   |     |  |                   |  
|                      |  | Gross Carrying    |     |  | Accumulated       |   |     |     |  | Gross Carrying |        |  | Accumulated |              |     | 
|                      |  | Amount            |     |  | Amortization      |   |     | Net |  |                | Amount |  |             | Amortization |     |  | Net |  
|                      |  |                   |     |  |                   |   |     |     |  |                |        |  |             |              |     |  |     |  
|Technology License    |  | $                 | 350 |  |                   | $ | 234 |     |  | $              | 116    |  |             | $            | 327 |  |     | $ | 195 |  |  | $ | 132 | 
|Intellectual Property |  |                   | 345 |  |                   |   | 30  |     |  |                | 315    |  |             |              |    |  |     |   |    |  |  |   |    | 
|                      |  |                   |     |  |                   |   |     |     |  |                |        |  |             |              |     |  |     |  
|                      |  | $                 | 695 |  |                   | $ | 264 |     |  | $              | 431    |  |             | $            | 327 |  |     | $ | 195 |  |  | $ | 132 | 
|                      |  |                   |     |  |                   |   |     |     |  |                |        |  |             |              |     |  |     |  





|   |                              
|-- | -----------------------------
|8. | Commitments and Contingencies



| |                  
| | -----------------
| | Lease Obligations



|                                                           |  |                |        |   |      |   |        |  
|---------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                           |  | 2005           |        |   | 2004 |  
|                                                           |  |                |        |   |      |  
|                                                           |  | (In thousands) |       
|Leased equipment (Primarily office equipment and software) |  | $              | 1,714  |   |      | $ | 1,738  |  
|Accumulated amortization                                   |  |                | (1,687 | ) |      |   | (1,601 | )
|                                                           |  |                |        |   |      |  
|                                                           |  | $              | 27     |   |      | $ | 137    |  
|                                                           |  |                |        |   |      |  







68



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                |                                                |                |    |    |           |   |       |  | 
|--------------- | ---------------------------------------------- | -------------- | -- | -- | --------- | - | ----- |  | 
|                |                                                | Capital        |    |    | Operating |  
|                |                                                | Leases         |    |    | Leases    |  
|                |                                                |                |    |    |           |  
|                |                                                | (In thousands) |   
|2006            |                                                | $              | 19 |    |           | $ | 1,248 | 
|2007            |                                                |                | 9  |    |           |   | 1,191 | 
|2008            |                                                |                |   |    |           |   | 1,033 | 
|2009            |                                                |                |   |    |           |   | 972   | 
|2010            |                                                |                |   |    |           |   | 992   | 
|2010 and beyond |                                                |                |   |    |           |   | 1,471 | 
|                |                                                |                |    |    |           |  
|                |                                                | $              | 28 |    |           | $ | 6,907 | 
|                |                                                |                |    |    |           |  
|                | Less amount representing interest              |                |    | (1 | )         |   |       |  | 
|                |                                                |                |    |    |           |  
|                | Present value of future minimum lease payments |                |    | 27 |           |   |       |  | 
|                |                                                |                |    |    |           |  
|                | Less current portion                           |                |    | 19 |           |   |       |  | 
|                |                                                |                |    |    |           |  
|                |                                                | $              | 8  |    |           |   |       | 
|                |                                                |                |    |    |           |  



| |                 
| | ----------------
| | Indemnifications







| |              
| | -------------
| | Contingencies



69



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|   |                                    
|-- | -----------------------------------
|9. | Convertible Subordinated Debentures



paid-in




|    |                     
|--- | --------------------
|10. | Shareholders Equity





| |         
| | --------
| | Warrants





| |                       
| | ----------------------
| | 1994 Stock Option Plan



70



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | 1999 Retention Stock Option Plan







| |                       
| | ----------------------
| | 2004 Stock Option Plan







| |                              
| | -----------------------------
| | Directors Stock Option Plans



71



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |             |            |   |                  |   |       | 
|-------------------------- |  | ----------- | ---------- | - | ---------------- | - | ----- | 
|                           |  | Options     |            |   | Weighted Average |  
|                           |  | Outstanding |            |   | Exercise Price   |  
|                           |  |             |            |   |                  |  
|Balance, January 1, 2003   |  |             | 2,855,316  |   |                  | $ | 2.12  | 
|Granted                    |  |             | 556,583    |   |                  | $ | 8.50  | 
|Exercised                  |  |             | (740,841   | ) |                  | $ | 1.49  | 
|Canceled                   |  |             | (77,701    | ) |                  | $ | 3.53  | 
|                           |  |             |            |   |                  |  
|Balance, December 31, 2003 |  |             | 2,593,357  |   |                  | $ | 3.63  | 
|Granted                    |  |             | 337,250    |   |                  | $ | 24.49 | 
|Exercised                  |  |             | (1,407,038 | ) |                  | $ | 2.09  | 
|Canceled                   |  |             | (66,076    | ) |                  | $ | 14.78 | 
|                           |  |             |            |   |                  |  
|Balance, December 31, 2004 |  |             | 1,457,493  |   |                  | $ | 9.44  | 
|Granted                    |  |             | 579,400    |   |                  | $ | 29.12 | 
|Exercised                  |  |             | (277,773   | ) |                  | $ | 5.68  | 
|Canceled                   |  |             | (83,467    | ) |                  | $ | 17.17 | 
|                           |  |             |            |   |                  |  
|Balance, December 31, 2005 |  |             | 1,675,653  |   |                  | $ | 16.48 | 
|                           |  |             |            |   |                  |  



|                         |  |                     |           |           |              |  |                     |          |  |   |             |          |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | --------- | ------------ |  | ------------------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |           |              |  |                    
|                         |  |                     |           |           |              |  | Options Exercisable |         
|                         |  |                     |           | Weighted  |              |  |                     |          |  |  
|                         |  |                     |           | Average   |              |  | Weighted            |          |  |   |             | Weighted | 
|                         |  |                     |           | Remaining |              |  | Average             |          |  |   |             | Average  | 
|                         |  | Number              |           |           | Contractual  |  |                     | Exercise |  |   | Number      |          |  | Exercise |          
|Range of Exercise Prices |  | Outstanding         |           |           | Life (Years) |  |                     | Price    |  |   | Exercisable |          |  | Price    |          
|                         |  |                     |           |           |              |  |                     |          |  |   |             |          |  |          |          
|$1.03-$1.63              |  |                     | 200,341   |           |              |  | 2.27                |          |  | $ | 1.58        |          |  |          | 200,341   |  |  | $ | 1.58  | 
|$1.65-$4.19              |  |                     | 172,364   |           |              |  | 3.22                |          |  | $ | 3.72        |          |  |          | 148,922   |  |  | $ | 3.73  | 
|$4.52-$5.25              |  |                     | 253,582   |           |              |  | 1.86                |          |  | $ | 4.97        |          |  |          | 167,730   |  |  | $ | 5.00  | 
|$7.53-$7.53              |  |                     | 1,913     |           |              |  | 2.49                |          |  | $ | 7.53        |          |  |          | 1,124     |  |  | $ | 7.53  | 
|$9.91-$9.91              |  |                     | 183,218   |           |              |  | 2.64                |          |  | $ | 9.91        |          |  |          | 95,817    |  |  | $ | 9.91  | 
|$14.33-$21.33            |  |                     | 181,250   |           |              |  | 8.17                |          |  | $ | 20.72       |          |  |          | 56,719    |  |  | $ | 20.49 | 
|$23.10-$24.42            |  |                     | 206,564   |           |              |  | 8.62                |          |  | $ | 23.37       |          |  |          | 41,964    |  |  | $ | 24.42 | 
|$29.50-$30.01            |  |                     | 231,084   |           |              |  | 9.44                |          |  | $ | 29.75       |          |  |          | 231,084   |  |  | $ | 29.75 | 
|$30.85-$31.25            |  |                     | 101,837   |           |              |  | 8.94                |          |  | $ | 31.15       |          |  |          | 101,837   |  |  | $ | 31.15 | 
|$34.40-$34.40            |  |                     | 143,500   |           |              |  | 9.44                |          |  | $ | 34.40       |          |  |          | 143,500   |  |  | $ | 34.40 | 
|                         |  |                     |           |           |              |  |                     |          |  |   |             |          |  |          |          
|$1.03-$34.40             |  |                     | 1,675,653 |           |              |  | 5.77                |          |  | $ | 16.48       |          |  |          | 1,189,038 |  |  | $ | 16.69 | 
|                         |  |                     |           |           |              |  |                     |          |  |   |             |          |  |          |          



| |                                  
| | ---------------------------------
| | 1999 Employee Stock Purchase Plan



72



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                                     
|--- | ------------------------------------
|11. | Employee Savings and Investment Plan





|    |             
|--- | ------------
|12. | Income Taxes



|                                  |  |      |        |  |      |   |        |      |  |   |       |  
|--------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | -
|                                  |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                  |  |      |        |  |      |   |        |      | 
|United States income before taxes |  | $    | 23,657 |  |      | $ | 14,894 |      |  | $ | 3,077 |  
|Foreign income before taxes       |  |      | 719    |  |      |   | 785    |      |  |   | (358  | )
|                                  |  |      |        |  |      |   |        |      | 
|Income before taxes               |  | $    | 24,376 |  |      | $ | 15,679 |      |  | $ | 2,719 |  
|                                  |  |      |        |  |      |   |        |      | 



|                                 |               |                |       |         |         |   |     |      |     |   |     |    |     | 
|-------------------------------- | ------------- | -------------- | ----- | ------- | ------- | - | --- | ---- | --- | - | --- | -- | --- | 
|                                 |               | 2005           |       |         | 2004    |   |     | 2003 |    
|                                 |               |                |       |         |         |   |     |      |    
|Current:                         |               |                |       |         |         |   |     |      |     |   |     |   
|                                 | Federal taxes |                | $     | 18,708  |         |   | $   | 613  |     |   | $   | 91 |    
|                                 | State taxes   |                |       | (845    | )       |   |     | 144  |     |   |     | 35 |    
|                                 | Foreign taxes |                |       | 247     |         |   |     | 183  |     |   |     | 76 |    
|                                 |               |                |       |         |         |   |     |      |    
|                                 |               | Total current  |       |         | 18,110  |   |     |      | 940 |   |     |    | 202 | 
|                                 |               |                |       |         |         |   |     |      |    
|Deferred:                        |               |                |       |         |         |   |     |      |     |   |     |   
|                                 | Federal taxes |                |       | (16,294 | )       |   |     |     |     |   |     |   |    
|                                 | State taxes   |                |       | 3       |         |   |     |     |     |   |     |   |    
|                                 | Foreign taxes |                |       | 7       |         |   |     |     |     |   |     |   |    
|                                 |               |                |       |         |         |   |     |      |    
|                                 |               | Total deferred |       |         | (16,284 | ) |     |      |    |   |     |    |    | 
|                                 |               |                |       |         |         |   |     |      |    
|Total provision for income taxes |               | $              | 1,826 |         |         | $ | 940 |      |     | $ | 202 |   
|                                 |               |                |       |         |         |   |     |      |    



|                                                                 |  |                         |       |   |      |  |       |      |  |  |       |  
|---------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                 |  | Year Ended December 31, |      
|                                                                 |  |                         |      
|                                                                 |  | 2005                    |       |   | 2004 |  |       | 2003 | 
|                                                                 |  |                         |       |   |      |  |       |      | 
|Statutory Federal income tax rate                                |  |                         | 35.0  | % |      |  | 35.0  | %    |  |  | 35.0  | %
|State income taxes, net of Federal benefit                       |  |                         | 4.9   |   |      |  | 0.6   |      |  |  | 1.3   |  
|Release of valuation reserve for deferred and prepaid tax assets |  |                         | (32.4 | ) |      |  |      |      |  |  |      |  
|Operating loss with no carry back benefit                        |  |                         |      |   |      |  |      |      |  |  | 9.3   |  
|Benefit of net operating loss carryforward                       |  |                         |      |   |      |  | (32.5 | )    |  |  | (38.8 | )
|R&D credits                                                      |  |                         | (1.3  | ) |      |  |      |      |  |  |      |  
|Other                                                            |  |                         | 1.3   |   |      |  | (2.9  | )    |  |  | 0.7   |  
|                                                                 |  |                         |       |   |      |  |       |      | 
|Effective income tax rate                                        |  |                         | 7.5   | % |      |  | 6.0   | %    |  |  | 7.4   | %
|                                                                 |  |                         |       |   |      |  |       |      | 

73



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                          |                                                                           |      |        |       |      |   |         |        | 
|------------------------- | ------------------------------------------------------------------------- | ---- | ------ | ----- | ---- | - | ------- | ------ | 
|                          |                                                                           | 2005 |        |       | 2004 |  
|                          |                                                                           |      |        |       |      |  
|Deferred tax assets:      |                                                                           |      |        |       |      |   |         |       
|                          | Net operating loss carryforwards                                          |      | $      | 9,356 |      |   | $       | 17,645 | 
|                          | General business credit carryforwards                                     |      |        | 2,560 |      |   |         | 1,732  | 
|                          | Inventory reserves and adjustments                                        |      |        | 1,229 |      |   |         | 1,072  | 
|                          | Other accruals and reserves not currently deductible for tax
    purposes |      |        | 2,703 |      |   |         | 1,708  | 
|                          | Capitalized research and development                                      |      |        | 149   |      |   |         | 321    | 
|                          | Depreciation & amortization                                               |      |        | 505   |      |   |         | 386    | 
|                          | AMT carryforward                                                          |      |        | 437   |      |   |         |       | 
|                          |                                                                           |      |        |       |      |  
|Total deferred tax assets |                                                                           |      | 16,939 |       |      |   | 22,864  |       
|Less valuation allowance  |                                                                           |      | (655   | )     |      |   | (22,864 | )     
|                          |                                                                           |      |        |       |      |  
|Net deferred tax asset    |                                                                           | $    | 16,284 |       |      | $ |        |       
|                          |                                                                           |      |        |       |      |  











74



---



##### Table of Contents



LASERSCOPE


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|13. | Financial Instruments With Market Risks, Concentrations of
    Customer and Credit Risk,

and Other Risks












|    |                                                                     
|--- | --------------------------------------------------------------------
|14. | Consolidated Quarterly Statement of Operations Data
    (Unaudited):

|                             |  |                                       |        |  |          |   |        |          |  |   |          |  |  |   |        | 
|---------------------------- |  | ------------------------------------- | ------ |  | -------- | - | ------ | -------- |  | - | -------- |  |  | - | ------ | 
|                             |  | Three Months Ended                    |       
|                             |  |                                       |       
|                             |  | Mar. 31,                              |        |  | Jun. 30, |   |        | Sep. 30, |  |   | Dec. 31, | 
|                             |  |                                       |        |  |          |   |        |          |  |   |          | 
|                             |  | (In thousands, except per share data) |       
|2005                         |  |                                       |        |  |          |   |        |          |  |   |          |  |  |   |        | 
|Net revenues                 |  | $                                     | 28,177 |  |          | $ | 33,518 |          |  | $ | 30,428   |  |  | $ | 35,001 | 
|Gross margin                 |  |                                       | 17,600 |  |          |   | 20,366 |          |  |   | 18,025   |  |  |   | 20,711 | 
|Net income                   |  |                                       | 4,963  |  |          |   | 5,357  |          |  |   | 6,323    |  |  |   | 5,907  | 
|Basic net income per share   |  |                                       | 0.23   |  |          |   | 0.24   |          |  |   | 0.28     |  |  |   | 0.27   | 
|Diluted net income per share |  |                                       | 0.22   |  |          |   | 0.23   |          |  |   | 0.28     |  |  |   | 0.26   | 
|2004                         |  |                                       |        |  |          |   |        |          |  |   |          |  |  |   |        | 
|Net revenues                 |  | $                                     | 18,750 |  |          | $ | 21,434 |          |  | $ | 24,156   |  |  | $ | 29,430 | 
|Gross margin                 |  |                                       | 10,669 |  |          |   | 12,329 |          |  |   | 14,407   |  |  |   | 17,250 | 
|Net income                   |  |                                       | 2,214  |  |          |   | 2,988  |          |  |   | 4,353    |  |  |   | 5,184  | 
|Basic net income per share   |  |                                       | 0.11   |  |          |   | 0.14   |          |  |   | 0.20     |  |  |   | 0.24   | 
|Diluted net income per share |  |                                       | 0.10   |  |          |   | 0.13   |          |  |   | 0.19     |  |  |   | 0.23   | 

75



---



##### Table of Contents



SCHEDULE II


LASERSCOPE


VALUATION AND QUALIFYING ACCOUNTS


|                                             |                              |            |   |                |           |  |   |            |            |  |        |        |  |  |   |        | 
|-------------------------------------------- | ---------------------------- | ---------- | - | -------------- | --------- |  | - | ---------- | ---------- |  | ------ | ------ |  |  | - | ------ | 
|                                             |                              | Balance at |   |                |           |  |   |            | Balance at | 
|                                             |                              | Beginning  |   |                |           |  |   |            | End of     | 
|Descriptions                                 |                              | of Period  |   |                | Additions |  |   | Deductions |            |  | Period |       
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             |                              |            |   | (In thousands) |           |  |  
|Allowance for doubtful accounts receivable:  |                              |            |   |                |           |  |   |            |            |  |        |        |  |  |   |       
|                                             | Year ended December 31, 2003 |            | $ | 303            |           |  | $ | 93         |            |  | $      | 127    |  |  | $ | 268    | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2004 |            | $ | 268            |           |  | $ | 229        |            |  | $      | 394    |  |  | $ | 104    | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2005 |            | $ | 104            |           |  | $ | 606        |            |  | $      | 294    |  |  | $ | 416    | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|Reserve for excess and obsolete inventory:   |                              |            |   |                |           |  |   |            |            |  |        |        |  |  |   |       
|                                             | Year ended December 31, 2003 |            | $ | 2,291          |           |  | $ | 288        |            |  | $      | 713    |  |  | $ | 1,866  | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2004 |            | $ | 1,866          |           |  | $ | 151        |            |  | $      | 224    |  |  | $ | 1,793  | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2005 |            | $ | 1,793          |           |  | $ | 190        |            |  | $      | 374    |  |  | $ | 1,609  | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|Valuation allowance for deferred tax assets: |                              |            |   |                |           |  |   |            |            |  |        |        |  |  |   |       
|                                             | Year ended December 31, 2003 |            | $ | 15,770         |           |  | $ |           |            |  | $      | 61     |  |  | $ | 15,709 | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2004 |            | $ | 15,709         |           |  | $ | 7,155      |            |  | $      |       |  |  | $ | 22,864 | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       
|                                             | Year ended December 31, 2005 |            | $ | 22,864         |           |  | $ |           |            |  | $      | 22,209 |  |  | $ | 655    | 
|                                             |                              |            |   |                |           |  |   |            |            |  |        |       

S-1



---



##### Table of Contents



EXHIBIT INDEX


|        |    |             |  |                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1          |  | By-laws of Registrant, as amended.(1)                                                                                                        
|        | 3  | .1A         |  | Amendment to By-laws adopted on August 10, 2005.(2)                                                                                          
|        | 3  | .3          |  | Eighth Amended and Restated Articles of Incorporation of
    Registrant.(3)                                                                  
|        | 10 | .1A         |  | 1984 Stock Option Plan, as amended, and forms of Incentive Stock
    Option Agreement and Non-statutory Stock Option Agreement.(4)           
|        | 10 | .1B         |  | 1994 Stock Option Plan and forms of Incentive Stock Option
    Agreement and Non-statutory Stock Option Agreement.(5)                        
|        | 10 | .1C         |  | 2004 Stock Option Plan and form of Stock Option Agreement.(6)                                                                                
|        | 10 | .2          |  | 1984 Stock Purchase Plan and form of Common Stock Purchase
    Agreement.(7)                                                                 
|        | 10 | .3A         |  | 1989 Employee Stock Purchase Plan and form of Subscription
    Agreement.(8)                                                                 
|        | 10 | .3B         |  | 1999 Employee Stock Purchase Plan and form of Subscription
    Agreement.(9)                                                                 
|        | 10 | .4          |  | 2006 Director Compensation Plan.(10)                                                                                                         
|        | 10 | .5          |  | 2006 Incentive Compensation Plan.(11)                                                                                                        
|        | 10 | .6          |  | 401(k) Plan.(12)                                                                                                                             
|        | 10 | .7A         |  | Net Lease Agreement between the Registrant and Realtec
    Properties dated June 20, 2000.(13)                                               
|        | 10 | .7B         |  | Net Lease Agreement between the Registrant and Realtec
    Properties dated October 18, 2000.(14)                                            
|        | 10 | .8          |  | Form of indemnification agreement.(15)                                                                                                       
|        | 10 | .9A         |  | Loan and Security Agreement between the Registrant and Silicon
    Valley Bank dated October 1, 1999.(16)                                    
|        | 10 | .9B         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 25, 2000.(17)                    
|        | 10 | .9C         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 26, 2001.(18)                    
|        | 10 | .9D         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 26, 2002.(19)                    
|        | 10 | .9E         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 25, 2003.(20)                    
|        | 10 | .9F         |  | Amendment to Loan and Security Agreement between the Registrant
    and Silicon Valley Bank dated September 24, 2004.(21)                    
|        | 10 | .10         |  | 1990 Directors Stock Option Plan and form of Option
    Agreement.(22)                                                                      
|        | 10 | .11A        |  | Form of Laserscope Management Continuity Agreement, as
    amended.(23)                                                                      
|        | 10 | .11B        |  | Form of Laserscope Management Continuity Agreement, as
    amended.(24)                                                                      
|        | 10 | .12C        |  | Form of Laserscope Management Continuity Agreement.(25)                                                                                      
|        | 10 | .12D        |  | Form of Laserscope Management Continuity Agreement. (26)                                                                                     
|        | 10 | .13A        |  | 1995 Directors Stock Option Plan and form of Option
    agreement.(27)                                                                      
|        | 10 | .13B        |  | 1999 Directors Stock Option Plan.(28)                                                                                                       
|        | 10 | .14A        |  | Common Stock Placement Agreement.(29)                                                                                                        
|        | 10 | .14B        |  | Form of Common Stock Purchase Agreement.(30)                                                                                                 
|        | 10 | .15A        |  | Convertible Loan Agreement.(31)                                                                                                              
|        | 10 | .15B        |  | Amendment to Convertible Loan Agreement.(32)                                                                                                 
|        | 10 | .15C        |  | Amendment to the Convertible Debentures Agreement between the
    Registrant and Renaissance Capital Growth and Income Fund III,
    Inc.(33)
|        | 10 | .16         |  | Form of Distribution Agreement between Laserscope and Henry
    Schein, Inc. dated July 29, 2005.(34)                                        
|        | 21 | .1          |  | Subsidiaries of Registrant.(35)                                                                                                              
|        | 23 | .1          |  | Consent of Independent Registered Public Accounting Firm.(36)                                                                                



---



##### Table of Contents



|        |    |             |  |                                                                                                                                 
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 31 | .1          |  | Certification of the Registrants Chief Executive Officer,
    as required by Section 302 of the Sarbanes-Oxley Act of 2002.(37)
|        | 31 | .2          |  | Certification of Registrants Chief Financial Officer, as
    required by Section 302 of the Sarbanes-Oxley Act of 2002.(38)    
|        | 32 | .1          |  | Certification of Registrants Chief Executive Officer, as
    required by Section 906 of the Sarbanes-Oxley Act of 2002.(39)    
|        | 32 | .2          |  | Certification of Registrants Chief Financial Officer, as
    required by Section 906 of the Sarbanes-Oxley Act of 2002.(40)    




| |      |  |  |                                                                                                                                                                                                                                                                                 
| | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)  |  |  | Incorporated by reference to Exhibit 3.4 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                           
| | (2)  |  |  | Incorporated by reference to Exhibit 3.1 filed in response to
    Item 9.01(c), Financial Statements and Exhibits, of
    Registrants Current Report on Form 8-K filed on August 11,
    2005.                                                                               
| | (3)  |  |  | Incorporated by reference to Exhibit 3.3 filed in response to
    Item 15(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2002.                                                                                           
| | (4)  |  |  | Incorporated by reference to Exhibit 10.1A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                         
| | (5)  |  |  | Incorporated by reference to Exhibit 10.1B filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1994.                                                                                         
| | (6)  |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (7)  |  |  | Incorporated by reference to Exhibit 10.2 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989. 
| | (8)  |  |  | Incorporated by reference to Exhibit 10.3 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                          
| | (9)  |  |  | Incorporated by reference to Exhibit 10.3A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                         
| | (10) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (11) |  |  | Filed herewith.                                                                                                                                                                                                                                                                 
| | (12) |  |  | Incorporated by reference to Exhibit 10.4 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989. 
| | (13) |  |  | Incorporated by reference Exhibit 10.6 filed in response to Item
    14(a)(3), Exhibits, of the Registrants Annual
    Report on Form 10-K for the year ended December 31, 2000.                                                                                             
| | (14) |  |  | Incorporated by reference Exhibit 10.6A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2000.                                                                                            
| | (15) |  |  | Incorporated by reference to Exhibit 10.10 filed in response to
    Item 16(a), Exhibits, of the Registrants
    Registration Statement on Form S-1 and Amendment No. 1 and
    Amendment No. 2 thereto (File No. 33-31689), which became
    effective on November 29, 1989.
| | (16) |  |  | Incorporated by reference to Exhibit 10.11G filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                                                                                        
| | (17) |  |  | Incorporated by reference to Exhibit 10.11H filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2000.                                                                        
| | (18) |  |  | Incorporated by reference to Exhibit 10.11I filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2001.                                                                        
| | (19) |  |  | Incorporated by reference to Exhibit 10.11J filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2002.                                                                        
| | (20) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2003.                                                                          
| | (21) |  |  | Incorporated by reference to Exhibit 10.11L filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2004.                                                                        
| | (22) |  |  | Incorporated by reference to Exhibit 10.13 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                         



---



##### Table of Contents



| |      |  |  |                                                                                                                                                                                                         
| | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (23) |  |  | Incorporated by reference to Exhibit 10.14 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2000.     
| | (24) |  |  | Incorporated by reference to Exhibit 10.14 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2002.     
| | (25) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    March 31, 2004.      
| | (26) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 9.01(c), Financial Statements and Exhibits, of
    the Registrants Current Report on Form 8-K filed on
    December 28, 2005.
| | (27) |  |  | Incorporated by reference to Exhibit 10.18 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K/ A for the year ended December 31,
    1995.          
| | (28) |  |  | Incorporated by reference to Exhibit 10.18A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                
| | (29) |  |  | Incorporated by reference to Exhibit 10.19 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                 
| | (30) |  |  | Incorporated by reference to Exhibit 10.19A filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                
| | (31) |  |  | Incorporated by reference to Exhibit 10.20 filed in response to
    Item 14(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 1999.                 
| | (32) |  |  | Incorporated by reference to Exhibit 10.20A filed in response to
    Item 15(a)(3), Exhibits, of the Registrants
    Annual Report on Form 10-K for the year ended December 31, 2002.                
| | (33) |  |  | Incorporated by reference to Exhibit 10.2 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2003.  
| | (34) |  |  | Incorporated by reference to Exhibit 10.1 filed in response to
    Item 6(a), Exhibits, of the Registrants
    Quarterly Report on Form 10-Q for the quarterly period ended
    September 30, 2005.  
| | (35) |  |  | Filed herewith.                                                                                                                                                                                         
| | (36) |  |  | Filed herewith.                                                                                                                                                                                         
| | (37) |  |  | Filed herewith.                                                                                                                                                                                         
| | (38) |  |  | Filed herewith.                                                                                                                                                                                         
| | (39) |  |  | Filed herewith.                                                                                                                                                                                         
| | (40) |  |  | Filed herewith.