UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                                 FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


             For the Quarterly Period Ended September 30, 1999


[ ]  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 0-13012

                          ESC MEDICAL SYSTEMS LTD.
           (Exact name of registrant as specified in its charter)


               Israel                                     N.A.
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)


    P.O. Box 240, Yokneam, Israel                        20692
    (Address of principal executive offices)           (Zip Code)

    Registrant's telephone number, including area code:  972-4-9599000

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

     The number of shares outstanding of the registrant's common stock as
of September 30, 1999 was 27,562,492 Ordinary Shares, NIS 0.10 par value
per share.


                          ESC MEDICAL SYSTEMS LTD.

                                 FORM 10-Q

                  For the Quarter Ended September 30, 1999


                                   INDEX


PART I.  FINANCIAL INFORMATION

      ITEM 1.     Financial Statements

              1)  Consolidated Balance Sheets

              2)  Consolidated Statements of Operations

              3)  Consolidated Statements of Cash Flows

              4)  Notes to Condensed Interim Consolidated Financial Statements

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

      ITEM 3.     Quantitative and Qualitative Disclosure about Market Risk

PART II. OTHER INFORMATION

      ITEM 1      Legal Proceedings

      ITEM 6      Exhibits and Reports on Form 8-K


PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS



                                # # # # # #



                          ESC MEDICAL SYSTEMS LTD.

                   CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share data)

<TABLE>
<CAPTION>

                                                            SEPTEMBER 30   DECEMBER 31
                                                                1999          1998
                                                            (UNAUDITED)    (RESTATED)
                                                               U.S.$         U.S.$
<S>                                                       <C>            <C>
CURRENT ASSETS
  Cash and cash equivalents                                   $  22,076    $  42,950
  Short-term investments                                         49,964       46,867
  Trade receivables (net of allowances of $ 26,805 in 1999
   and $ 10,480 in 1998)                                         43,779       78,392
  Prepaid expenses and other receivables                          6,516       12,824
  Inventories                                                    40,932       61,200
                                                                163,267      242,233

LONG-TERM INVESTMENTS
  Bank deposits and securities                                   16,800       41,350
  Investments in companies                                        6,168        5,469

FIXED ASSETS                                                      5,978       13,877

OTHER ASSETS                                                      5,730       24,737

     Total assets                                             $ 197,943    $ 327,666

CURRENT LIABILITIES
  Short-term debt and current maturities of long-term loans   $   1,220    $   3,533
  Accounts payable and accrued expenses                          56,716       52,319
                                                                 57,936       55,852
LONG TERM LIABILITIES
  Loans from banks                                                   45           61
  Accrued severance pay                                           1,170        1,245
  Convertible subordinated notes                                107,104      115,000
                                                                108,319      116,306

Total liabilities                                               166,255      172,158

SHAREHOLDERS' EQUITY
  Ordinary shares of NIS 0.10 par value: Authorized - 50,000,000
   Shares; Issued and outstanding - 27,562,492 shares as of
   September 30, 1999 and 27,314,605 shares as of December
   31, 1998                                                         563          553
  Paid-in capital                                               137,530      135,756
  Retained earnings (accumulated deficit)                       (94,785)      26,813
  Treasury shares, at cost (1999 - 1,644,443 shares;
   1998 -1,054,813 shares)
                                                                (11,620)      (7,614)
     Total shareholders' equity                                  31,688      155,508

     Total liabilities and shareholders' equity               $ 197,943    $ 327,666





 The accompanying notes are an integral part of these financial statements.
</TABLE>



                          ESC MEDICAL SYSTEMS LTD.

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)


                                        FOR THE THREE         FOR THE NINE
                                         MONTHS ENDED         MONTHS ENDED
                                         SEPTEMBER 30         SEPTEMBER 30
                                        1999       1998      1999       1998
                                         (UNAUDITED)          (UNAUDITED)
                                        U.S.$      U.S.$     U.S.$      U.S.$

NET SALES                             $ 30,313  $ 53,847   $102,032  $177,000

COST OF SALES                           26,000    18,264     78,562    60,620
     Gross profit                        4,313    35,583     23,470   116,380

RESEARCH AND
   DEVELOPMENT COSTS, NET                3,426     4,576     12,678    13,511

MARKETING AND SELLING EXPENSES          16,734    19,521     56,068    55,467

ADMINISTRATIVE AND
  GENERAL EXPENSES                      14,692     3,399     24,809    11,318

RESTRUCTURING COSTS                     11,988         -     23,234         -

PROXY EXPENSES                             426         -      3,274         -

OTHER EXPENSES                          11,891         -     22,641         -
     Total operating expenses           59,157    27,496    142,704    80,296
     Operating income (loss)           (54,844)    8,087   (119,234)   36,084

FINANCING INCOME, NET                    1,707       803      1,330       962
                                       (53,137)    8,890   (117,904)   37,046

NONRECURRING EXPENSES                        -         -          -    28,951
     Income (loss) before income
        taxes                          (53,137)    8,890   (117,904)    8,095

INCOME TAXES                             2,995       850      3,693     3,028
     Net income (loss)                $(56,132) $  8,040  $(121,597) $  5,067

NET INCOME (LOSS) PER SHARE
  Basic                               $  (2.16) $   0.30  $   (4.69) $   0.19
  Diluted                             $  (2.16) $   0.29  $   (4.69) $   0.18

WEIGHTED AVERAGE NUMBER
  OF SHARES
   Basic                                25,926    26,798     25,940    26,405
   Diluted                              25,926    27,719     25,940    27,647






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



                          ESC MEDICAL SYSTEMS LTD.

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)

                                                     FOR THE NINE MONTHS
                                                     ENDED SEPTEMBER 30
                                                      1999        1998
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                $(121,597)  $   5,067
  Adjustments to reconcile net income to net cash
   provided by operating activities -
    Expenses not affecting operating cash flows:
     Restructuring costs and inventory writedowns   42,972             -
     Deferred income taxes                           4,993        (1,945)
     Amortization of deferred compensation              96           240
     Gain on purchase of convertible notes          (2,863)            -
     Depreciation and amortization                   5,566        16,539
     Writeoff of intangibles                        15,891             -
     Other                                             220           356
    Changes in operating assets and liabilities:
     Decrease (increase) in short-term investments  (3,097)       29,300
     Decrease (increase) in trade receivables       29,853       (30,590)
     Decrease in other receivables                   1,576         1,634
     Decrease (increase) in inventories                530       (15,415)
     Decrease in accounts payable and accrued
        expenses                                    (6,626)       (2,822)
  Net cash provided by (used in) operating
        activities                                 (32,486)        2,364

CASH FLOWS FROM INVESTING ACTIVITIES
  Payment for purchase of subsidiaries, net of
        cash acquired                                    -        (2,450)
  Purchase of fixed assets                          (1,559)       (4,570)
  Sale of investment                                     -           368
  Investments in patents and know-how                    -        (5,207)
  Maturity of (additions to) long-term
        investments                                 24,550        (6,254)
      Net cash provided by (used in) investing
        activities                                  22,991       (18,113)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from exercise of options                    161         7,700
  Purchase of convertible notes                     (5,205)            -
  Repayment of long-term loans                        (122)      (11,089)
  Decrease in short-term bank debt, net             (2,207)         (237)
  Purchase of treasury shares                       (4,006)            -
  Net cash used in financing activities            (11,379)       (3,626)

DECREASE IN CASH AND CASH EQUIVALENTS              (20,874)      (19,375)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD    42,950        54,616
CASH AND CASH EQUIVALENTS AT END OF PERIOD          22,076        35,241






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



                          ESC MEDICAL SYSTEMS LTD.


          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
                        (In thousands) (Unaudited)


                                                  FOR THE NINE MONTHS
                                                   ENDED SEPTEMBER 30
                                                    1999        1998

NONCASH ACTIVITIES
  Tax benefit of options exercised by employees  $           $      610

CASH PAID DURING THE PERIOD IN RESPECT OF:
  Income taxes                                          546         427
  Interest                                            6,895       7,631

PURCHASES OF SUBSIDIARIES
  Assets and liabilities at date of purchase:
   Working capital (excluding cash)                                 556
   Fixed assets                                                     (19)
   Intangibles                                                   (3,987)
                                                                 (3,450)
  Short-term liabilities incurred in connection
   with purchase                                                  1,000

      Cash paid, net                                             (2,450)





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



                          ESC MEDICAL SYSTEMS LTD.

                     NOTES TO THE FINANCIAL STATEMENTS
                                (Unaudited)


NOTE 1 -  BASIS OF PRESENTATION

          The accompanying unaudited condensed consolidated financial
          statements have been prepared in accordance with accounting
          principles generally accepted in the United States relating to
          the provision of interim financial information. Accordingly, they
          do not include all of the information and notes required by
          generally accepted accounting principles for complete financial
          statements. In the opinion of management, all adjustments
          considered necessary for a fair presentation have been included.
          Operating results for the nine month period ended September 30,
          1999, are not necessarily indicative of the results that may be
          expected for the year ending December 31, 1999. For further
          information, refer to the financial statements and notes for the
          year ended December 31, 1998.


NOTE 2 -  INVENTORIES

          Inventories are composed of the following:

                                           SEPTEMBER 30  DECEMBER 31
                                               1999          1998
                                            (UNAUDITED)   (AUDITED)
                                                 (IN THOUSANDS)

         Raw materials                     $    17,898   $    20,309
         Work in process                         8,120        10,106
         Finished products                      14,914        30,785
                                                40,932        61,200


NOTE 3 -  RESTRUCTURING COSTS AND OTHER CHARGES

          In the first and third quarters of 1999, the Company implemented
          two restructuring programs of its business operations. In that
          connection, the Company recorded writedowns of inventories
          (included in cost of goods sold) of approximately $16.6 million
          and $8.9 million in the first quarter and third quarter,
          respectively, pertaining mostly to the Company's decision to
          eliminate a number of products.

          The restructuring charges in the first and third quarters
          amounted to $11.2 million and $12 million, respectively. These
          charges were comprised of writedowns of receivables in the first
          quarter of $4.6 million, writedowns of fixed assets of $1.6
          million and $5.7 million in the first quarter and third quarter,
          respectively, and severance charges and lease and other contract
          termination costs of $5 million and $6.2 million in the first
          quarter and third quarter, respectively. The majority of the
          restructuring charges related to the Company's divisions in the
          U.S.

          As of September 30, 1999, the unutilized accrual amounted to $8.5
          million. It is expected that the restructuring programs will be
          substantially completed by the end of March 2000.

NOTE 4 -  GEOGRAPHICAL SEGMENTS

          The company's activities fall within two reporting geographical
          segments: the U.S.A. and the rest of the world (ROW). The
          following table sets forth segment information for three month
          and nine month periods ended September 30, 1999 and 1998 (in
          thousands):

                            FOR THE THREE            FOR THE NINE
                             MONTHS ENDED             MONTHS ENDED
                             SEPTEMBER 30             SEPTEMBER 30
                          1999         1998        1999        1998
Revenues
  U.S.A.                 $  9,046    $ 30,676     $ 37,369    $ 99,376
  ROW                    $ 21,267    $ 23,171     $ 64,663    $ 77,624
    Consolidated           30,313      53,847      102,032     177,000

Operating income (loss)
  U.S.A.                 $(33,332)   $ (3,940)    $(91,943)   $(11,879)
  ROW                      (9,195)     12,027       (1,376)     47,963
    Consolidated (1)      (54,844)      8,087     (119,234)     36,084

Financing income, net       1,707         803        1,330         962
Nonrecurring expenses           -           -            -      28,951
Income (loss) before
  income taxes         $  (53,137) $    8,890   $ (117,904) $    8,095

                                                     SEPTEMBER 30
                                                   1999        1998

Identifiable Assets
  U.S.A.                                        $   58,763  $  112,555
  ROW                                              128,928     210,770
    Consolidated (2)                            $  197,943  $  337,347


          (1)  Includes unallocated corporate expenses of $12,317 and
               $25,915 for three month and nine month periods ended
               September 30, 1999. These include $426 of proxy expenses and
               $11,891 of other expenses for the three month period and
               $3,274 of Proxy expenses and $22,641 of other expenses for
               the nine month period.

          (2)  Includes investments in companies and other assets not
               allocable to a particular segment of $10,252 as of September
               30, 1999 and $14,022 as of September 30, 1998.

NOTE 5 -  CONTINGENT LIABILITIES

          (1)  In September 1995, Laser and SLI (Laser's subsidiary in the
               U.S.A.) instituted a patent infringement suit against a
               California company, which counterclaimed for declaratory
               judgment of patent invalidity, unenforceability and
               non-infringement. Subsequently, such company also filed a
               complaint against Laser and SLI for claims under the Federal
               anti-trust laws, federal unfair competition law (Lanham Act)
               and California state laws, requesting a judgment for damages
               of not less than $20 million.

               The District Court entered summary judgement in favor of the
               California company on Laser's claim of infringement and
               further held that Laser's lawsuit was objectively baseless.
               The Court has scheduled a trial on the parties' remaining
               claims in the litigation for April 24, 2000. Laser has
               appealed the summary judgement award and if Laser's appeal
               is successful, Laser intends to ask the court to vacate its
               determination that Laser's patent suit was objectively
               baseless, and will renew its motion to dismiss the antitrust
               and Lanham Act allegations remaining in the California
               company counter-suit against Laser.

               Company management is unable to predict the final outcome of
               these claims. However, management intends to defend this
               action vigorously, including its appeal from the Court's
               award of Summary Judgement. Oral arguments for Laser
               Industries' appeal of the District Court's ruling of patent
               invalidity, has been set for December 8, 1999 before the
               United States Court of Appeals for the Federal Circuit.

          (2)  In late 1998 the Company and one of its officers were named
               in a series of securities class action lawsuits. These
               lawsuits have now been consolidated before the United States
               District Court for the Southern District of New York. In
               addition to the Company and certain of the Company's
               officers and directors who have been named as defendants,
               the consolidated complaint names certain former officers and
               directors of the Company's Laser Industries Ltd. subsidiary
               as defendants. The actions seek damages and attorneys fees
               under the United States securities laws for alleged
               "tipping" of non-public information to an investment banker
               in September 1998 and for alleged irregularities in the way
               in which the Company reported its financial results and
               disclosed certain facts throughout 1997 and 1998. Management
               of the Company believes that the Company's directors and
               officers' liability insurance applies to the claims made in
               this consolidated action and has informed the Company's
               insurance carrier of the claims. (The insurance carrier has
               agreed to assume the defense of action while reserving all
               of its rights under the applicable insurance policy).The
               Company has until the end of November 1999 to answer, move
               or otherwise respond to the consolidated amended complaint.

          (3)  On November 9, 1998, Light Age, Inc. ("Light Age")
               instituted a statement of claim and an application for
               preliminary injunction in the Tel-Aviv District Court (the
               "Tel-Aviv Court") against the Company and others, seeking
               injunctions against the development, production and sale of
               the Company's Alexandrite laser for dermatological or hair
               removal treatments. On January 25, 1999, the Company, along
               with three affiliated entities, brought an action in the
               Superior Court of New Jersey, Somerset County, against Light
               Age, Inc. entitled Laser Industries Ltd., ESC Medical
               Systems Inc., Sharplan Lasers Inc., and ESC Medical Systems
               Ltd. v. Light Age, Inc., Docket No. SOM-L-14199. The
               litigation relates to disputes arising out of an agreement
               between Light Age and Laser Industries pursuant to which
               Light Age supplied certain medical laser devices to Laser
               Industries. On July 1, 1999, the U.S. Court granted
               defendant Light Age's motion to compel the Company and the
               three affiliated entities to arbitrate. On August 13, 1999,
               Light Age filed a demand for arbitration on its counterclaim
               with the American Arbitration Association. To date, the
               arbitration has not progressed beyond the demand stage.
               Pending the outcome of the U.S. arbitration, Light Age and
               the Company agreed to file a motion to stay the proceedings
               in Tel-Aviv. On October 14, 1999, the Tel-Aviv Court
               confirmed the motion as requested and stayed the
               proceedings.

          (4)  On December 31, 1998, the Company and Luxar were named as
               defendants in an action filed in the United States District
               Court for the Southern District of Florida (the "Florida
               Court"), entitled LPG USA, Inc. v. ESC Medical Systems, Ltd.
               and Luxar Corporation, Civ, No. 98-7509 (S.D. Fla.).
               Discovery closes on December 1, 1999, and a trial is
               currently scheduled to begin the week of January 14, 2000.
               The action alleges violations of the Lanham Act (including
               false advertising and trade dress infringement) and related
               state laws (including trade secret and unfair competition
               laws). The plaintiffs in the action are seeking an
               injunction and monetary damages of an unspecified amount.
               The Company and Luxar filed an answer which also asserted
               counterclaims for intentional interference with business
               relationships and prospective business relationships, trade
               libel and product disparagement, Lanham Act violations,
               unfair competition and related counterclams.

          (5)  The Company and its subsidiaries are involved in further
               legal proceedings, claims and litigation arising in the
               ordinary course of business. In the opinion of management,
               the outcome of such current legal proceedings, claims and
               litigation could have a material effect on quarterly or
               annual operating results or cash flows when resolved in a
               future period. However, in the opinion of management, each
               of these matters individually is not likely to materially
               affect the Company's consolidated financial position.

          An accrual in the amount of $4.5 million has been recorded in
          other expenses to cover estimated probable losses arising from
          the abovementioned legal proceedings. The Company is not
          presently able to estimate any additional loss that may be
          reasonably possible, in addition to the amount accrued. The
          Company reassesses these matters as new facts are brought to its
          attention.


NOTE 6 -  WRITEOFF OF OTHER ASSETS

          In connection with the evaluation of certain intangibles, the
          Company recorded a writeoff of goodwill and other intangibles in
          the amount of $6.3 million in the second quarter of 1999 and $9.6
          million in the third quarter of 1999. These writeoffs are
          included in other expenses in the statement of operations.


NOTE 7 -  PROXY EXPENSES

          In connection with the director election contest held during the
          second quarter, the Company has incurred expenses of $1.8
          million. In addition, in accordance with the resolution of the
          Board of Directors of the Company in a meeting held on September
          23, 1999, all cost and expenses of Messrs. Genger and Gottstein
          and their affiliates in connection with the director election
          contest shall be reimbursed by the Company promptly on submission
          of invoices therefor. The reimbursement is subject to refund
          should such reimbursement not be approved by the shareholders.
          Messrs. Genger and Gottstein have submitted to the Company
          invoices in the amount of $1.5 million which have been included
          in proxy expenses.


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

ESC Medical Systems Ltd. ("ESC" or the "Company") is a world leader in the
design, manufacture, marketing and servicing of a broad range of medical
devices that incorporate proprietary intense pulsed light technology,
state-of-the-art lasers and accessories as well as other technologies. The
Company's systems incorporate these technologies for applications in
aesthetic dermatology, plastic and re-constructive surgery, ear, nose and
throat procedures and oral and dental surgery, among others. The Company's
systems are designed for use in a variety of medical environments, ranging
from physicians' offices to acute care hospitals.

In this Report, unless the context otherwise requires, all references to
the "Company" are to ESC Medical Systems Limited, an Israeli corporation
and its direct and indirect wholly owned subsidiaries.

On September 14, 1999 the Board of Directors approved a comprehensive
restructuring program designed to align the Company's cost structure with
its revenue capabilities, while capitalizing on the market potential of its
innovative light technology products, including products in various
development and regulatory stages.

The restructuring plan was developed by the Company's senior management
team, together with the consulting firm of McKinsey & Company. The vast
majority of the plan should be implemented by the close of the quarter
ended March 31, 2000. Under the plan, ESC Medical Systems will:

     .    Continue to reduce or eliminate certain fixed and variable costs
          from the organizational structure. If those cost savings would
          have been implemented prior to January 1, 1999, management
          estimates that expenses would have been over $40 million lower as
          compared to annualized revenue and expense levels in the first
          half of the year. The cost reductions include over $25 million in
          selling, general and administrative expenses not considered
          essential to the continued growth of sales.

     .    Reduce headcount in certain departments, adjust certain employee
          compensation plans and reduce non-core R&D expenditures.

     .    Bring the selling and marketing team closer to the customers and
          markets being served.

     .    Reorganize the internal reporting structure of the Company in a
          manner intended to provide all management levels with greater
          visibility.


A number of personnel changes took place during the quarter, some of which
were related to the restructuring. Changes included the replacement of the
Company's CFO and the formation of three geographic business units for
aesthetic and surgical sales. Other vice president level positions were
eliminated. The Company expects to be fully organized by geographic
business unit by January 2000.

The headcount of the Company as of October 31,1999 was 754 down from 854 on
June 30, 1999. As of November 10, 1999, 84 employees were on notice that
they will be laid off.

RESULTS OF OPERATIONS

THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE
AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 (In thousands of U.S.
Dollars)

NET SALES. The Company's net sales decreased by 44% to $30,313 for the
three months ended September 30, 1999 compared to $53,847 for the three
months ended September 30, 1998. For the nine months ended September 30,
1999, net sales decreased by 42% to $102,032 compared to $177,000 for the
comparable period in 1998.

Most of the decrease in sales is attributable to decreased unit sales and
lower selling prices in the U.S. aesthetic markets. Net sales in the U.S.
decreased by 70% for the three months ended September 30, 1999 from the
comparable period in 1998, compared with a decrease of 8% for the same
period in the rest of the world. The Company increased its reserves for
sales returns by $2,450.

GROSS PROFIT. Gross profit decreased by 88% to $4,313 for the three months
ended September 30, 1999 from $35,583 for the three months period ended
September 30, 1998. Gross profit for the nine months ended September 30,
1999 decreased by 80% to $ 23,470 from $116,380 for the nine months ended
September 30, 1998. Excluding write off of inventory and other reserves
gross profit for the three and nine months ended September 30, 1999 was
$13,955 and $53,520 respectively.

RESEARCH AND DEVELOPMENT COSTS, NET. Net research and development costs
decreased by 25% to $3,426 for the three months ended September 30, 1999
from $4,576 in the three month ended September 30, 1998. For the nine
months ended September 30, 1999, net research and development costs
decreased by 6% to $12,678 from $13,511 for the comparable period in 1998.
The decrease in research and development costs, net is due to reduction in
staff and lower material consumption.

MARKETING AND SELLING EXPENSES. Marketing and selling expenses decreased by
14% to $16,734 for the three months ended September 30, 1999 compared to
$19,521 for the same period in 1998. For the nine months ended September
30, 1999, marketing and selling expenses increased 1% to $56,068 from
$55,467 for the comparable period in 1998. The decrease in the third
quarter expense was due to a lower sales level and reduction in staff.

ADMINISTRATIVE AND GENERAL EXPENSES. Administrative and general expenses
increased by 332% to $14,692 for the three months ended September 30, 1999
from $3,399 for the three months ended September 30, 1998. For the nine
months ended September 30, 1999, administrative and general expenses
increased 119% to $24,809 from $11,318 for the comparable period in 1998.

Administrative and general expenses for the three month period ending
September 30, 1999 include bad debt charges of $10,780 and litigation
expenses of $2,800.

RESTRUCTURING COSTS. In the quarter ended March 31, 1999, the Company
developed and started the implementation of a restructuring plan. In
connection with that restructuring plan, the Company recorded in the first
quarter charges of $11,246 related to its sales and marketing operations
and $16,608 related to inventory write-off (included in the cost of goods
sold).

In the third quarter of 1999, the Company commenced another restructuring
program. In that connection, the Company recorded writedowns of inventories
(included in cost of goods sold) of approximately $3,100. The restructuring
charge amounted to $12 million is comprised of writedowns of fixed assets
of $5.7 million and severance charges and lease contract termination of
$6.2 million. The majority of the restructuring charge related to the
company's divisions in the USA. The restructuring program provides for a
reduction of approximately 58 employees. In addition the Company recorded
$8,337 of expenses associated with the same plan which was charged to
operating and income tax expense. The Company expects about another $5,000
charges related to the restructuring plan through the year 2000.

PROXY EXPENSES. The $3,274 of expenses incurred during 1999 in connection
with the director election include an expected reimbursement of certain
shareholder expenses, in accordance with the resolution of the Board of
Directors of the Company in a meeting held on September 23, 1999 which
resolved that "all cost and expenses of Messrs. Arie Genger and Barnard J.
Gottstein and their affiliates in connection with the directors election
contest shall be reimbursed by the Company promptly on submission of
invoices therefore subject to refund when such reimbursement is submitted
to shareholders and not approved by such shareholders at a meeting noticed
for such purpose". Messrs. Genger and Gottstein have submitted to the
Company invoices for a sum of approximately $1,510. The officers and
directors of the Company at the time incurred expenses of $1,764, those
expenses were charged to the Company.

OTHER EXPENSES. For the three months ended September 30, 1999, other
expenses were $11,891 comprised mainly of the following: (i) $9,642
intangible assets write off related to goodwill from acquisitions and (ii)
a provision of $1,250 related to the fee of McKinsey & Co.

OPERATING INCOME (LOSS). For the three months ended September 30, 1999,
operating loss was $54,844 compared to operating income of $8,087 for the
same period in 1998. For the nine months ended September 30, 1999,
operating loss was $119,234 compared to operating income of $36,084 for the
same period in 1998.

FINANCING INCOME (EXPENSES), NET. For the three months ended September 30,
1999, financing income was $1,707 compared to financing income of $803 for
the three months ended September 30, 1998. For the nine months ended
September 30, 1999, financing income was $1,330 compared to financing
income of approximately $962 for the comparable period in 1998. The primary
reasons for the change in net financing income were a decrease in interest
income, foreign currency exchange gain and gain on repurchases of 7,896 of
the companys 6% subordinated convertible notes.

INCOME TAXES. Income taxes was $2,995 for the three months ended September
30, 1999 compared to $850 for the three months ended September 30,1998. For
the nine months ended September 30, 1999, income taxes was $3,693 compared
to $3,028 for the same period in 1998. For 1999 income taxes included write
offs of deferred tax assets for the net amount of $2,383.

NET INCOME(LOSS). As a result of the foregoing factors, the Company's net
loss was $56,132 for the three months ended September 30, 1999 compared to
net income $8,040 for the three months ended September 30,1998. For the nine
months ended September 30,1999, net loss was $121,597 compared to net
income of $5,067 for the same period in 1998.

LIQUIDITY AND CAPITAL RESOURCES
(in thousands of dollars)

As of September 30, 1999, the Company had cash and cash equivalents of
approximately $22,076 compared to approximately $42,950 on December 31,
1998. The decrease of $20,874 is mainly attributable to (i) the repurchase
of the Company's 6% Convertible Notes for $5,205; (ii) the repurchase of
shares of the Company's common stock for $4,006; (iii) the decrease of
short-term bank debt by $2,207; (iv) the use of cash for operational
activities in the amount of $32,486; and (vii) capital expenditures
totaling $1,559, all offset partially by the maturing of long term
investments in an amount of $24,550.

Despite the expected negative cash-flow over the next nine months, the
management of the Company believes that available cash and borrowing power
will be sufficient over at least the next 12 months to meet its presently
anticipated day-to-day operating expenses, material commitments, working
capital and capital expenditures including those in connection with the
restructuring plan currently being developed, announced share repurchase
program and possible continued purchase of the 6% subordinated convertible
notes.

INVESTING ACTIVITIES
(in thousands of dollars)

For the nine months ended September 30, 1999 cash provided by investing
activities was approximately $22,991. The primary changes in the Company's
investing activities were the maturity of $24,550 in long-term investments
which was used in operations activities and use of cash of approximately
$1,559 to purchase fixed assets.

FINANCING ACTIVITIES
(in thousands of dollars)

For the nine months ended September 30,1999 cash used in financing
activities was $11,379. The primary financing activities of the Company
included (i) the repurchase of shares of the Company's Common Stock for
$4,006, (ii) the repurchase the Company's 6% Convertible Notes for $5,205
and (iii) the payment of short-term and long term bank loans totaling
$2,329.

YEAR 2000

The Company is committed to assuring "Year 2000 compliance" for its
facilities and products. Year 2000 compliance means that when the new
century begins on January 1, 2000 systems and products using date
information in various ways (display, calculations, etc.) will continue to
perform normally.

The Company initiated a program in 1998 to assess the risks of Year 2000
noncompliance, remediate all noncompliant systems and assess the readiness
of key third parties. In January 1999, a Year 2000 Task Force was created
headed by a vice president, with direct reporting to the executive
management of the company. The Task Force includes 8 internal personnel
including managers from each of the Company's principal operational areas
including finance, IT, manufacturing and distribution. The Task Force is
also assisted by third party consultants.

The inventory and assessment phases are complete for critical internal
information technology (IT) systems and the Company has completed over 90%
of the remediation phase of these systems as of September 30, 1999.The
Company anticipate to complete 100% of the remeditaion phase for IT systems
by the end of December, 1999. The inventory and assessment and remediation
phases for non-IT systems (including production facilities worldwide) is
substantially complete.

The remediation process includes both the upgrading of existing systems and
the replacement of various critical systems. All critical aspects of the
Company's Year 2000 compliance program are believed to be in place. The
Company has also included a complete list of its products, and the status
of their Year 2000 readiness, on the Company's official web site
(www.escmed.com).

While some of the risks relating to third party readiness are outside of
the Company's control, the Company has instituted programs, including
internal records review and external questionnaires and supplier audits, to
identify key third parties and assess their level of Year 2000 readiness.
Suppliers and vendors of the Company as well as providers of goods and
services to the Company have been contacted to evaluate the state of their
Year 2000 readiness. At this point the Company has no reason to believe
that any of its significant suppliers, vendors and providers of goods and
services will be unable to meet their business obligations to the Company
beyond the end of the year 1999 and into the year 2000. However, the
Company's business might be adversely affected if its significant vendors
and suppliers cannot meet their business obligations as a result of
difficulties with the Year 2000 compliance.

Contingency plans (including the substitution of systems, use of manual
methods and other means to prevent the failure of critical systems from
having a material effect on the Company) are in place, particularly for
high-risk areas such as those involving supplier and product management.
Third party-based contingency plans, including securing alternate suppliers
and alternate lines of communication with customers and suppliers, as well
as advance ordering and staging of materials, have been developed to
address the risks of noncompliance.

As of September 30, 1999 the Company has spent $70,000 on its Year 2000
compliance program. The total costs of the Year 2000 compliance program are
not expected to exceed $100,000. All expenditures are funded by working
capital expensed as incurred and they are not expected to have a
significant impact on the Company's ongoing results of operations.

The Company believes that its Year 2000 program will identify and correct
all material non-compliant systems and operations before the end of 1999.
The Company also expects to have contingency plans that will avoid failures
having a material effect on the Company's business operations or financial
condition in place before the end of 1999. However, there can be no
assurance that the Company's Year 2000 program will identify and correct
all non-compliant systems of the Company and its third party service
providers or that any such failure will not have a material effect on the
Company's business operations or financial condition.

CAUTIONARY STATEMENTS

Certain statements made in this Form 10-Q reflect the Company's estimates
and beliefs and are intended to be, and are hereby identified as, `forward
looking statements' for the purposes of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by the use of words such
as "expects," "plans," "will," "estimates," "forecasts," "projects" and
other words of similar meaning. One can also identify them by the fact that
they do not relate strictly to historical or current facts. These
statements are likely to address the Company's growth strategy, financial
results, product approvals and development programs.

The Company cautions readers that such forward looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those expected by the Company or expressed in the Company's
forward looking statements. These factors include, but are not limited to,
the following: (1) risks associated with the Company's dependence on a
limited number of products; (2) uncertainty of market acceptance of the
Company's products; (3) limited number of customers for the Company's
products; (4) risks of downturns in economic conditions generally, and in
the health care industry specifically; (5) risks associated with
competition and competitive pricing pressures; (6) risks associated with
uncertainty of the Companies ability to timely consume the restructuring
plans, including the reduction in head-count, and (7) other risks described
in the Company's filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on forward-looking
statements made in this Form 10-Q. Such forward-looking statements reflect
management's analysis only as of the date such statements are made and the
Company undertakes no obligation to revise publicly these forward-looking
statements to reflect events or circumstances that arise subsequently.
Readers should carefully review the risk factors described in documents the
Company files from time to time with the Securities and Exchange
Commission.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN EXCHANGE

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

The cost of the Company's operations in Israel is influenced by the extent
to which any increase in the rate of inflation in Israel compared to the
currencies of its markets (the "Revenue Currencies", mainly the U.S. Dollar
and Euro) is not offset (or is offset on a lagging basis) by the
devaluation of the New Israeli Shekel (NIS) in relation to those
currencies. Inflation in Israel will likely have a negative impact on the
profitability of the Company of contracts under which the Company is to
receive payment in revenue currencies, unless such inflation is offset by a
devaluation of the NIS. Inflation in Israel and currency fluctuations will
also have a negative effect on the profitability to the Company of fixed
price contracts under which the Company is to receive payments in NIS.

A devaluation of the NIS in relation to the U.S. Dollar (the "Dollar") will
have the effect of decreasing the dollar value of any assets of the Company
which consist of NIS (unless such assets are linked to another currency).
Such a devaluation would also have the effect of reducing the Dollar amount
of any liabilities of the Company which are payable in NIS (unless such
payables are linked to another currency). Any increase in the value of the
NIS in relation to the Dollar will have the effect of increasing the Dollar
value of any unlinked NIS assets of the Company and the Dollar amount of
any unlinked NIS liabilities of the Company.

To reduce foreign exchange exposure, a significant portion of the Company's
expenditures, including in Israel, are in Dollars or are Dollar linked.

The Company also enters into foreign currency hedging transactions to
protect the dollar value of its NIS deposits and certain non-dollar
denominated trade receivables. The gains and losses on these transactions
are included in the statement of operations in the period in which the
changes in the exchange rates occur. There can be no assurance that such
activities or others will eliminate the negative financial impact of
currency fluctuations. Indeed, such activities may have an adverse impact
on earnings.

FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

The Company deposits a portion of its funds in interest-bearing NIS
accounts. In order to minimize exposure to currency fluctuation, the
Company enters into hedging positions that will secure its Dollar principal
from losses due to devaluation of the NIS.

Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of cash, short-term and
long-term financial investments and trade receivables. Short-term cash
investments are placed with high credit-quality financial institutions as
specified in the Company's investment policy guidelines. Other investments
are in securities of various banks, in U.S. Government securities and in
commercial paper of industrial companies.

The table below provides information about the Company's investment
portfolio. For investment Securities, the table presents principal cash
flows and related weighted average interest rates by expected maturity
dates.

------------------------------------------------------
                       FY 1999    FY 2000   Total
------------------------------------------------------
Cash and Cash          22,076        --     22,076
Equivalents  ($)
------------------------------------------------------
Average Interest Rate  4.85%         --
------------------------------------------------------
Investments ($)        22,140     44,624    66,764
------------------------------------------------------
Average Interest Rate  6.10%      6.20%
------------------------------------------------------
TOTAL PORTFOLIO  ($)   42,216     44,624    88,840
------------------------------------------------------

The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains allowances for
estimated credit losses.

The carrying amounts of cash, investments, receivables and accounts payable
approximate fair value.


PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS


The Company is a party to various legal proceedings incident to its
business. Except as noted below and as noted in the Company's quarterly
report for the period ended June 30, 1999, there are no legal proceedings
pending or threatened against the Company that management believes are
likely to have a material adverse effect on the Company's consolidated
financial position.

The Company has been named in a number of purported class action securities
lawsuits filed in the fall of 1998 that have now been consolidated in the
United States District Court for the Southern District of New York. The
consolidated action is known as In Re ESC Medical Systems Ltd. Securities
Litigation, Case No. 98 Civ. 7530 (MBM). The Company is required to answer,
move or otherwise respond to the Consolidated Amended Complaint by November
23, 1999. No discovery has been conducted.

The Company's Laser Industries Ltd ("Laser Industries") and Sharplan Laser,
Inc. subsidiaries are parties to an action entitled Laser Industries Ltd. and
Sharplan Lasers, Inc. v. Reliant Technologies, Inc. currently pending before
the United States District Court for Northern District of California. Oral
arguments for Laser Industries' appeal of the District Court's ruling of
patent invalidity, has been set for December 8, 1999 before the  United
States Court of Appeals for the Federal Circuit.

On November 9, 1998, Light Age, Inc. ("Light Age") instituted a statement
of claim and an application for preliminary injunction in the Tel-Aviv
District Court (the "Tel-Aviv Court") against the Company and others,
seeking injunctions against the development, production and sale of the
Company's Alexandrite laser for dermatological or hair removal treatments.
On January 25, 1999, the Company, along with three affiliated entities,
brought an action in the Superior Court of New Jersey, Somerset County,
against Light Age, Inc., entitled Laser Industries Ltd., ESC Medical
Systems Inc., Sharplan Lasers Inc., and ESC Medical Systems Ltd. v. Light
Age, Inc., Docket No. SOM-L-14199. The litigation relates to disputes
arising out of an agreement between Light Age and Laser Industries pursuant
to which Light Age supplied certain medical laser devices to Laser
Industries. On July 1, 1999, the U.S. Court granted defendant Light Age's
motion to compel the Company and the three affiliated entities to
arbitrate. On August 13, 1999, Light Age filed a demand for arbitration on
its counterclaim with the American Arbitration Association. To date, the
arbitration has not progressed beyond the demand stage. Pending the outcome
of the U.S. arbitration, Light Age and the Company agreed to file a motion
to stay the proceedings in Tel Aviv. On October 14, 1999, the Tel Aviv
Court confirmed the motion as requested and stayed the proceedings.

On December 31,  1998,  the Company and Luxar were named as  defendants  in an
action filed in the United States District Court for the Southern  District of
Florida (the "Florida Court"), entitled LPG USA, Inc. v. ESC Medical Systems,
Ltd. and Luxar  Corporation,  Civ. No. 98-7509 (S.D.  Fla.).  Discovery closes
on December 1, 1999,  and a trial is currently  scheduled to begin the week of
January 14, 2000.

On July 1, 1998 an action was filed by Richard Fitzpatrick, M.D. and
Mitchell Goldman, M.D. against the Company in the Superior Court in San
Diego County, California. On September 2, 1999, the parties reached a
complete settlement of this action in a settlement conference held before
Magistrate Judge James Stiven. That settlement has now been concluded with
a formal settlement agreement executed by all parties. The settlement
agreement requires that the terms of the settlement be kept confidential by
the parties and, therefore, the terms are not set forth herein. The
settlement did not have a material effect on the Company's results for the
third quarter of 1999. A dismissal of Plaintiffs' claims and ESC's
counterclaims was filed on October 20, 1999. Thus, this matter is
concluded.

On September 20, 1999, Dr. Richard Urso filed what purports to be a class
action lawsuit against the Company in the State District Court in Harris
County, Texas. Dr. Urso alleges a number of causes of action including,
breach of contract, breach of warranty, product liability,
misrepresentation and violations of the Texas Deceptive Trade Practices
Act. The complaint purports to be filed on behalf of a national class. The
Company has taken steps to remove the case to Federal court and intends to
vigorously deny all allegations and challenge Plaintiff's class
certification motion when it is filed.



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(1) Exhibits

NUMBER     DESCRIPTION

3.1        Memorandum of Association of the  Incorporated by reference to
           Registrant (English translation)  Amendment No. 1 to the
                                             Registrant's Registration
                                             Statement on Form F-1, File No.
                                             33-80199, filed on December 20,
                                             1996.

3.2        Articles of Association of the    Incorporated by reference to
           Registrant                        Amendment No. 1 to the
                                             Registrant's Registration
                                             Statement on Form F-1, File No.
                                             33-80199, filed on December 20,
                                             1996.

10.1       Agreement, dated as of June 29,   Filed with this document
           1999, between the Company and
           Yacha Sutton

27         Financial data schedules          Filed with this document


(2) Reports on Form 8-K

During the three-month period ended September 30, 1999, the Company filed
one Current Report on Form 8-K under Item 7 - Financial Statements, Pro
Forma Financial Information and Exhibits. The report was filed on August 4,
1999 and incorporated a letter to shareholders dated August 4, 1999.


                                SIGNATURES

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


                                          ESC Medical Systems Ltd.

                                          /s/  Sagi A. Genger
                                          -----------------------------
      Date: November 14, 1999             By: Sagi A. Genger
                                          (Chief Financial Officer,
                                          and Duly Authorized Officer)


                               EXHIBIT INDEX


3.1        Memorandum of Association of the  Incorporated by reference to
           Registrant (English translation)  Amendment No. 1 to the
                                             Registrant's Registration
                                             Statement on Form F-1, File No.
                                             33-80199, filed on December 20,
                                             1996.

3.2        Articles of Association of the    Incorporated by reference to
           Registrant                        Amendment No. 1 to the
                                             Registrant's Registration
                                             Statement on Form F-1, File No.
                                             33-80199, filed on December 20,
                                             1996.

10.1       Agreement, dated as of June 29,   Filed with this document
           1999, between the Company and
           Yacha Sutton

27         Financial data schedules          Filed with this document