UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q/A

                                 AMENDMENT NO. 1

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

                  For the Quarterly Period Ended June 30, 2002

      |_|   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

                                  LUMENIS 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: 972-4-959-9000

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 August
12, 2002 was 36,920,988 Ordinary Shares, NIS 0.10 par value per share.
<PAGE>

                                  LUMENIS LTD.

                                   FORM 10-Q/A

                       For the Quarter Ended June 30, 2002

                                      INDEX

PART I. FINANCIAL INFORMATION ...............................................  3
     ITEM 1. Financial Statements ...........................................  3
           1) Independent Accountant's Review Report ........................  3
           2) Consolidated Balance Sheets ...................................  4
           3) Consolidated Statements of Operations .........................  5
           4) Statement of Changes in Shareholders' Equity ..................  6
           5) Consolidated Statements of Cash Flows .........................  7
           6) Notes to Unaudited Condensed Consolidated Financial
                 Statements .................................................  9
     ITEM 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations ...................................... 21
     ITEM 3. Quantitative And Qualitative Disclosures About Market Risk ..... 28

     This amendment on Form 10-Q/A (Amendment No. 1) is being filed to amend
     Items 1, 2 and 3 of Part I of the Quarterly Report of Lumenis Ltd. (the
     "Company") on Form 10-Q previously filed for the quarterly period ended
     June 30, 2002. During October 2002, the Company's management determined
     that a mistake had been made in the application of accounting principles
     with respect to certain derivative foreign exchange transactions, entered
     into by the Company in December 2001 and in January 2002 (see Note 2 to
     Part I, Item 1, below). Accordingly, this Amendment corrects and restates
     certain of the information previously set forth in said Items 1, 2 and 3
     in order to correctly account for such derivative foreign exchange
     transactions. In addition: Note 8 to Part I has been revised to refer to
     new Note 11; a new Note 11 added, and Item 2 of Part I modified to reflect
     the subsequent events described in Note 11; and the Certifications, to the
     extent now required pursuant to Rule 13a-14, have been added to follow the
     signatures hereto.

     Financial statement information and related disclosures included in this
     amended filing reflect, where appropriate, changes as a result of the
     restatement and the subsequent events described in Note 11. All other
     information contained in this Quarterly Report on Form 10-Q/A (Amendment
     No. 1) is as of the date referenced for such information in the original
     filing or, if no date is referenced for information in the original
     filing, as of the date of such filing.

                                  # # # # # #


                                     - 2 -
<PAGE>

      PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     Independent Accountant's Review Report

The Board of Directors
Lumenis Ltd.
Yokneam

We have reviewed the accompanying interim consolidated balance sheet of Lumenis
Ltd. ("the Company") and its subsidiaries as of June 30, 2002, and the related
interim consolidated statements of operations for the six-month and three-month
periods ended June 30, 2002 and the related statement of changes in
shareholders' equity and statement of cash flows for the six-month period ended
June 30, 2002. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of financial information
consists principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the interim consolidated financial statements as of June
30, 2002 and for the six- month and three-month periods then ended have been
restated.

Brightman Almagor & Co.
Certified Public Accountants
A member of Deloitte Touche Tohmatsu

Tel Aviv
August 4, 2002

(October 28, 2002 for the effects of the restatement discussed in Note 2;
November 19, 2002 for the waiver of a bank covenant discussed in Note 11)


                                     - 3 -
<PAGE>

                                  LUMENIS LTD.
                       INTERIM CONSOLIDATED BALANCE SHEETS
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                     June 30,      December 31,
                                                                       2002            2001
                                                                   ----------       ---------
                                                                   (Unaudited)
                                                                   (Restated)
                                                                   ----------       ---------
<S>                                                                 <C>             <C>
CURRENT ASSETS
      Cash and cash equivalents                                     $  25,280       $  31,400
      Trade receivables, net                                          111,102         100,823
      Prepaid expenses and other receivables                           13,028          10,968
      Inventories                                                      76,880          83,614
                                                                    ---------       ---------
                                                                      226,290         226,805
                                                                    ---------       ---------
FINISHED GOODS USED IN OPERATIONS                                      10,334           9,180

LONG-TERM INVESTMENTS
      Bank deposits and securities                                         --             970
      Investments in non marketable equity securities                   3,397           3,337
      Long term trade receivables                                       3,024           3,134
FIXED ASSETS, NET                                                      18,899          16,198

Goodwill, net of accumulated amortization of $4,627 in 2001            87,850          85,752

Other purchased intangible assets, net of accumulated
   amortization of $12,983 and $9,351                                  25,245          28,877

Other assets, net                                                      12,672          13,021
                                                                    ---------       ---------

           Total assets                                             $ 387,711       $ 387,274
                                                                    =========       =========
CURRENT LIABILITIES
      Short-term bank debt                                          $  16,599       $      --
      Current maturities of long-term loan                             20,000          10,000
      Trade payables                                                   27,376          25,763
      Accounts payable and accrued expenses                            93,226          90,749
      Subordinated note                                                12,904          12,904
                                                                    ---------       ---------
                                                                      170,105         139,416
                                                                    ---------       ---------

LONG-TERM LIABILITIES
      Bank loan                                                        80,000          90,000
      Deferred income                                                     912           1,172
      Accrued severance pay, net                                        1,408           1,169
      Convertible subordinated notes                                   54,128          70,667
      Other long-term liabilities                                         649           5,484
                                                                    ---------       ---------
                                                                      137,097         168,492
                                                                    ---------       ---------
           Total liabilities                                          307,202         307,908
                                                                    ---------       ---------

SHAREHOLDERS' EQUITY
      Ordinary shares of NIS 0.1 par value: Authorized--
         100,000,000 shares; Issued and outstanding--
         36,920,685 shares and 36,667,070 shares, respectively            805             800
      Additional paid-in capital                                      325,840         321,230
      Accumulated deficit                                            (246,033)       (242,561)
      Treasury stock, at cost 14,898 shares                              (103)           (103)
                                                                    ---------       ---------
          Total shareholders' equity                                   80,509          79,366
                                                                    ---------       ---------
          Total liabilities and shareholders' equity                $ 387,711       $ 387,274
                                                                    =========       =========
</TABLE>

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


                                     - 4 -
<PAGE>

                                  LUMENIS LTD.
                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                          For the three months             For the six months
                                                             ended June 30,                  ended June 30,
                                                          2002            2001           2002             2001
                                                       ---------       ---------      ----------       ---------
                                                       (Restated)                     (Restated)
                                                              (Unaudited)                     (Unaudited)
<S>                                                     <C>            <C>             <C>             <C>
NET REVENUES                                            $ 92,965       $  80,372       $ 179,087       $ 124,240
COST OF REVENUES                                          42,221          54,109          83,251          69,671
                                                        --------       ---------       ---------       ---------
Gross profit                                              50,744          26,263          95,836          54,569
                                                        --------       ---------       ---------       ---------

OPERATING EXPENSES
    Research and development, net                          6,841           5,364          13,848           8,439
    In process research and development                       --          46,650              --          46,650
    Selling, marketing and administrative expenses        37,374          83,220          70,509         102,293
    Litigation expenses                                    5,201          27,760           5,201          29,266
    Amortization of intangible assets                      1,816           2,140           3,632           2,140
    Write-down of investment                                  --           3,435              --           3,986
                                                        --------       ---------       ---------       ---------
Total operating expenses                                  51,232         168,569          93,190         192,774
                                                        --------       ---------       ---------       ---------
Operating income (loss)                                     (488)       (142,306)          2,646        (138,205)
FINANCING EXPENSES, NET                                    3,659           3,991           7,335           5,360
OTHER INCOME                                               1,720              --           1,720              --
                                                        --------       ---------       ---------       ---------
Loss before income taxes                                   2,427         146,297           2,969         143,565
      INCOME TAX BENEFIT (EXPENSE)                          (402)            (80)           (504)          1,416
                                                        --------       ---------       ---------       ---------
Loss after income taxes                                   (2,829)             --        (146,377)             --
COMPANY'S SHARE IN LOSSES OF AN AFFILIATE                     --              --              91              --
                                                        --------       ---------       ---------       ---------
      Net loss before extraordinary item                  (2,829        (146,377)         (3,564)       (142,149)

EXTRAORDINARY GAIN ON PURCHASE
    OF COMPANY'S CONVERTIBLE NOTES                            --              --              92              --
                                                        --------       ---------       ---------       ---------
Net loss for the period                                 $ (2,829)      $(146,377)      $  (3,472)      $(142,149)
                                                        ========       =========       =========       =========

EARNINGS PER SHARE
Basic:
      Loss before extraordinary item                    $  (0.08)      $   (4.70)      $   (0.10)      $   (4.96)
      Extraordinary gain                                      --              --            0.01              --
                                                        --------       ---------       ---------       ---------
      Net loss per share                                $  (0.08)      $   (4.70)      $   (0.09)      $   (4.96)
                                                        ========       =========       =========       =========

Diluted:
      Loss before extraordinary item                    $  (0.08)      $   (4.70)      $   (0.10)      $   (4.96)
      Extraordinary gain                                      --              --            0.01              --
                                                        --------       ---------       ---------       ---------
      Net loss per share                                $  (0.08)      $   (4.70)      $   (0.09)      $   (4.96)
                                                        ========       =========       =========       =========
WEIGHTED AVERAGE NUMBER OF SHARES
Basic                                                     36,798          31,167          36,756          28,671
                                                        ========       =========       =========       =========
Diluted                                                   36,798          31,167          36,756          28,671
                                                        ========       =========       =========       =========
</TABLE>

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


                                     - 5 -
<PAGE>

                                  LUMENIS LTD.
              INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
                                   (Restated)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                      Additional
                                          Share         paid-in       Accumulated      Treasury
                                         capital        capital         deficit          stock           Total
                                         -------      ----------      -----------      --------          -----
<S>                                        <C>         <C>             <C>               <C>           <C>
Balance as of
   December 31, 2001                       $800        $321,230        $(242,561)        $(103)        $ 79,366
Exercise of options                           2             684               --            --              686
Issuance of shares in settlement of
   litigation                                 3           3,926                                           3,929
Net loss for the period                                                   (3,472)                        (3,472)
                                           ----        --------        ---------         -----         --------
Balance as of June, 2002                   $805        $325,840        $(246,033)        $(103)        $ 80,509
                                           ====        ========        =========         =====         ========
</TABLE>

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


                                     - 6 -
<PAGE>

                                  LUMENIS LTD.
                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                               For the six months ended
                                                                                                       June 30,
                                                                                              --------------------------
                                                                                                 2002             2001
                                                                                              (Restated)
<S>                                                                                           <C>              <C>
CASH FLOWS -- OPERATING ACTIVITIES
    Net loss                                                                                  $ (3,472)        $(142,149)
    Adjustments to reconcile net loss to net cash used in operating activities -
      Income and expenses not affecting operating cash flows:
        Amortization of unearned compensation                                                       --               120
        Grant of options                                                                            --             8,963
        Non-cash compensation                                                                       --            14,839
        Decrease in long-term deferred income                                                     (260)               --
        Depreciation and amortization                                                            8,826             2,945
        In process research and development                                                         --            46,650
        Extraordinary gain on purchase of Company's convertible notes                              (92)               --
        Company's share in losses of an affiliate                                                   91                --
        Write-down of investments                                                                   --             3,986
        Amortization of other long-term assets                                                   1,483                --
        Gain on sale of an impaired investment                                                  (1,720)               --
        Other                                                                                       12                54
     Changes in operating assets and liabilities:
        Increase in trade receivables                                                          (10,169)           (1,665)
        Increase in prepaid expenses and other receivables                                      (2,060)              (30)
        Decrease in inventories (1)                                                              2,803             7,908
        Increase in accounts payable, accrued expenses and other long-term liabilities           3,300            45,390
                                                                                              --------         ---------
             Net cash-operating activities                                                      (1,258)          (12,989)
                                                                                              --------         ---------
CASH FLOWS -- INVESTING ACTIVITIES
    Purchase of fixed assets, net                                                               (5,177)             (686)
    Investment in other long-term assets                                                        (1,250)               --
    Investments, deposits and securities, net                                                      970              (506)
    Proceeds from sale of subsidiary's operations                                                  144                --
    Proceeds from sale of an impaired investment                                                 1,720                --
    Investment in an affiliate                                                                    (151)
    Payment for business acquired (Appendix A)                                                  (1,286)         (108,888)
                                                                                              --------         ---------
             Net cash-investing activities                                                      (5,030)         (110,080)
                                                                                              --------         ---------
CASH FLOWS -- FINANCING ACTIVITIES
    Purchase of convertible notes                                                              (16,770)               --
    Proceeds from exercise of options                                                              686            20,169
    Increase in long-term loans                                                                     --           100,000
    Repayment of long-term loans                                                                    --               (10)
    Repayment of liability to Coherent                                                            (347)               --
    Decrease in short-term bank debt                                                           (23,401)               --
    Increase in short-term bank debt                                                            40,000            45,000
                                                                                              --------         ---------
             Net cash-financing activities                                                         168           165,159
                                                                                              --------         ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                (6,120)           42,090
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                31,400            43,396
                                                                                              --------         ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                    $ 25,280         $  85,486
                                                                                              ========         =========
CASH PAID DURING THE PERIOD IN RESPECT OF:
      Income taxes                                                                            $    289         $     291
                                                                                              ========         =========
      Interest                                                                                $  4,989         $   2,887
                                                                                              ========         =========
</TABLE>

(1)   Including finished goods used in operations.

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


                                     - 7 -
<PAGE>

                                  LUMENIS LTD.
                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                For the six months ended
                                                                         June 30,
                                                               ---------------------------
                                                                  2002               2001
                                                               ---------         ---------
<S>                                                            <C>               <C>
Appendix A-- Payments for business acquired                             (Unaudited)
Current assets                                                       259           (71,343)
Fixed assets                                                          --            (5,223)
Current liabilities                                                   --            39,263
In process research and development                                   --           (46,650)
Goodwill and other intangibles                                    (2,098)         (133,469)
Liability in respect to acquisition                                  553             6,000
                                                               ---------         ---------
                                                                  (1,286)         (211,422)
                                                               ---------         ---------
Less - amount acquired by issuance of shares                          --            89,630
Less - amount acquired by issuance of subordinated note               --            12,904
                                                               $  (1,286)        $(108,888)
                                                               =========         =========

<CAPTION>
                                                                For the six months ended
                                                                         June 30,
                                                               ---------------------------
                                                                  2002               2001
                                                               ---------         ---------
<S>                                                            <C>               <C>
Appendix A-- Payments for business acquired                             (Unaudited)
    Appendix B -- Non cash activities
        Conversion and repurchase of notes                           323            10,290
                                                               =========         =========
    Non cash compensation                                             --             1,423
                                                               =========         =========
    Grant of options to bank                                          --             9,704
                                                               =========         =========
    Issuance of shares in settlement of a litigation               3,929                --
                                                               =========         =========
</TABLE>

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


                                     - 8 -
<PAGE>

                                  LUMENIS LTD.
                NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
            FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 30, 2002
                      (In thousands, except per share data)

Note 1 -- BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements of
      Lumenis Ltd. (the "Company") and its subsidiaries (collectively "the
      Group") as of June 30, 2002 and for the three month and six month periods
      then ended are unaudited and reflect all adjustments (consisting only of
      normal recurring adjustments) which are, in the opinion of management,
      necessary for a fair presentation of the financial position and operating
      results for the interim period. The condensed consolidated financial
      statements should be read in conjunction with the consolidated financial
      statements and notes thereto, contained in the Company's Annual Report on
      Form 10-K for the fiscal year ended December 31, 2001 (the "2001 Form
      10-K"). The results of operations for the three month and six month
      periods ended June 30, 2002 are not necessarily indicative of the results
      for the entire fiscal year ending December 31, 2002.

      Certain prior period balances have been reclassified to conform to current
      period presentation.

Note 2 -- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

      During October 2002, the Company's management determined that a mistake
      has been made in the application of accounting principles with respect to
      certain derivative foreign exchange transactions, entered into by the
      Company in December 2001 and in January 2002. The transactions, intended
      to hedge revenues, had been mistakenly determined by the Company to be
      qualified as hedges for accounting purposes. Accordingly, the Company
      deferred the results of the transactions to the time the underlying hedged
      transactions were to be realized, at which time the results would have
      been deducted from the Company's revenues. As a result, the previously
      issued unaudited financial statements as of June 30, 2002 and for the
      six-month and three-month periods then ended have been restated from the
      amounts previously reported to reflect that such transactions do not
      qualify as hedges for accounting purposes and in order to mark such
      transactions to market and to reflect the changes in the fair value of the
      transactions as part of financing expenses in the statement of operations.

      Each item of the financial statements as of June 30, 2002 and for the six
      and three months then ended as originally filed that was affected by the
      restatement has been amended to the extent affected and restated in its
      entirety.

      The principal effects of the restatement on the accompanying unaudited
      condensed consolidated financial statements are set forth below:


                                     - 9 -
<PAGE>

    Note 2 -- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Cont'd)

<TABLE>
<CAPTION>
                                                   For the three months ended          For the six months
                                                          June 30, 2002                ended June 30, 2002
                                                   --------------------------       -------------------------
Statements of Operations                                           Previously                      Previously
(Dollars in thousands, except per share amount)     Restated        Reported        Restated        Reported
                                                    --------       ----------       --------       ----------
<S>                                                 <C>             <C>             <C>             <C>
Net Revenues                                        $ 92,965        $ 92,176        $179,087        $178,298

Gross Profit                                          50,744          49,955          95,836          95,047

Operating income (loss)                                 (488)         (1,277)          2,646           1,857

Financing expense, net                                 3,659           1,341           7,335           5,017
                                                    --------        --------        --------        --------

Net loss                                              (2,829)         (1,300)         (3,472)         (1,943)
                                                    ========        ========        ========        ========

EARNINGS PER SHARE

Basic:
   Loss before extraordinary item                   $  (0.08)       $  (0.04)       $  (0.10)       $  (0.06)
   Extraordinary gain                                     --              --            0.01            0.01
                                                    --------        --------        --------        --------

   Net loss per share                               $  (0.08)       $  (0.04)       $  (0.09)       $  (0.05)
                                                    ========        ========        ========        ========

Diluted:
   Loss before extraordinary item                   $  (0.08)       $  (0.04)       $  (0.10)       $  (0.06)
   Extraordinary gain                                     --              --            0.01            0.01
                                                    --------        --------        --------        --------

   Net loss per share                               $  (0.08)       $  (0.04)       $  (0.09)       $  (0.05)
                                                    ========        ========        ========        ========
</TABLE>

                                               As of June 30, 2002
                                            ------------------------
Balance Sheet (in thousands)                              Previously
                                            Restated       Reported
                                            --------      ----------
Accounts payable and accrued expenses       $ 93,226       $ 91,697

Accumulated Deficit                          246,033        244,504


                                     - 10 -
<PAGE>

Note 3 -- NEW ACCOUNTING PRONOUNCEMENT

      Effective January 1, 2002, the Company adopted Statement of Financial
      Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible
      Assets" under which pre-existing goodwill will no longer be amortized.
      Intangible assets will continue to be amortized over their useful lives.
      The criteria for recognizing intangible assets have also been revised.
      SFAS 142 requires that goodwill be tested for impairment initially within
      one year of adoption and at least annually thereafter. If an impairment
      loss exists as a result of the transitional goodwill impairment test, the
      implementation of SFAS 142 could result in a one-time charge to earnings
      as a cumulative effect of accounting change. The goodwill impairment test
      is a two-step process that requires goodwill to be allocated to reporting
      units. In the first step, the fair value of the reporting unit is compared
      to the carrying value of the reporting unit. If the fair value of the
      reporting unit is less than the carrying value of the reporting unit,
      goodwill impairment may exist, and the second step of the test is
      performed. In the second step, the implied fair value of the goodwill is
      compared to the carrying value of the goodwill and an impairment loss will
      be recognized to the extent that the carrying value of the goodwill
      exceeds the implied fair value of the goodwill. As of June 30, 2002 the
      Company completed its review for impairment of goodwill and found no
      indication of impairment of its approximately $84 million of goodwill. The
      Company intends to re-evaluate its goodwill for impairment during the
      fourth quarter of 2002 as part of the required annual impairment
      evaluation. For the three and six months periods ended June 30, 2001
      goodwill amortization expenses amounted to $993 and $993, respectively.

      In June 2001, the FASB issued SFAS No. 143 ("SFAS 143"), "Accounting for
      Asset Retirement Obligations". SFAS 143 addresses financial accounting and
      reporting for obligations associated with the retirement of tangible
      long-lived assets and the associated asset retirement costs. SFAS 143 is
      effective for fiscal years beginning after June 15, 2002. While the
      Company is currently evaluating the impact the adoption of SFAS 143 will
      have on its financial position and results of operations, it does not
      expect such impact to be material.

      Effective January 1, 2002, the Company adopted Statement of Financial
      Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment
      or Disposal of Long-Lived Assets." This statement addresses financial
      accounting and reporting for the impairment of long-lived assets. The
      statement also broadens the definition of what constitutes a discontinued
      operation and how the results of a discontinued operation are to be
      measured and presented. The adoption of this statement did not have a
      material impact on the Company's results of operations or financial
      position.

      In April 2002, the FASB issued SFAS No. 145, which rescinds SFAS No. 4,
      "Reporting Gains and Losses from Extinguishments of Debt" ("SFAS 4"), SFAS
      No. 44, "Accounting for Intangible Assets of Motor Carriers" ("SFAS 44")
      and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
      Requirements" ("SFAS 64") and amends SFAS No. 13, "Accounting for Leases"
      ("SFAS 13") This statement updates, clarifies and simplifies existing
      accounting pronouncements. As a result of rescinding SFAS 4 and SFAS 64,
      the criteria in APB 30 will be used to classify gains and losses from
      extinguishments of debt. SFAS 44 was no longer necessary because the
      transitions under the Motor Carrier Act of 1980 were completed. SFAS 13
      was amended to require that certain lease modifications that have economic
      effects similar to sale-leaseback transactions be accounted for in the
      same manner as sale-leaseback transactions and makes technical corrections
      to existing pronouncements. The Company does not expect the adoption of
      this pronouncement to have a material impact on its results of operations
      or financial positions.

      In June 2002, the FASB issued SFAS No. 146 ("SFAS 146"), "Accounting for
      Costs Associated with Exit or Disposal Activities", which addresses
      accounting for restructuring and similar costs. SFAS 146 supersedes
      previous accounting guidance, principally Emerging Issues Task Force Issue
      No. 94-3. The Company will adopt the provisions of SFAS 146 for
      restructuring activities initiated after December 31, 2002. SFAS 146
      requires that the liability for costs associated with an exit or disposal
      activity be recognized when the liability is incurred. Under Issue 94-3, a
      liability for an exit cost was recognized at the date of the Company's
      commitment to an exit plan. SFAS 146 also establishes that the liability
      should initially be measured and recorded at fair value. Accordingly, SFAS
      146 may affect the timing of recognizing future restructuring costs as
      well as the amounts recognized.


                                     - 11 -
<PAGE>

Note 4 -- MERGERS AND ACQUISITIONS

      On April 30, 2001 (the "Closing"), the Group acquired from Coherent, Inc.
      ("Coherent") all of the assets and assumed certain liabilities of the
      Coherent Medical Group ("CMG"), Coherent's medical group division. The
      assets acquired included among other things, plant, equipment, certain
      technology, goodwill and other physical property. CMG focuses on
      solid-state lasers and diode lasers that are developed for aesthetic,
      surgical and ophthalmic applications. The core CMG technologies are in the
      area of lasers, optics, embedded software, electronic controllers, power
      supplies, and mechanical design.

      Pro Forma Financial Results:

      The following selected unaudited pro forma results of operations for six
      months ended June 31, 2001 of the Group and CMG, have been prepared
      assuming the CMG acquisition occurred at the beginning of 2001.

                                                            For the six months
                                                                   ended
                                                               June 30, 2001
                                                            ------------------
                                                                (Unaudited)
                                                            ------------------
      Net Revenues                                              $ 185,183
      Net loss                                                  $ (99,061)
      Basic net loss per share                                  $   (3.07)
      Diluted net loss per share                                $   (3.07)
      Weighted average number of shares used in
          calculation of basic net loss per share                  32,293
      Weighted average number of shares used in
          calculation of diluted net loss per share                32,293

      The pro forma results of operations give effect to certain adjustments,
      including amortization of purchased intangibles, goodwill and options
      granted in connection with financing and write down of inventories and
      receivables. Such unaudited information does not purport to be indicative
      of the combined results of operations of future periods or indicative of
      the results that actually would have been realized had the entities been a
      single entity during the period presented.

      The $46,650 charge for purchased in-process research and development has
      been excluded from the pro forma results, as it is a material
      non-recurring charge.

Note 5 -- TRADE RECEIVABLES

      The trade receivables as of June 30, 2002 and December 31, 2001 are
      presented net of allowance for doubtful accounts of $17,629 and $19,744,
      respectively and provision for returns of $2,318 and $2,849, respectively.

Note 6 -- INVENTORIES

      Inventories are composed of the following:

                                                 June 30,        December 31,
                                                   2002              2001
                                               -----------       ------------
                                               (Unaudited)
      Raw materials                              $19,013           $29,718
      Work in process                             13,593            14,835
      Finished products                           44,274            39,061
                                                 -------           -------

                                                 $76,880           $83,614
                                                 =======           =======


                                     - 12 -
<PAGE>

Note 7 -- SEGMENT INFORMATION

      A.    REPORTABLE SEGMENTS

            Commencing January 1, 2002, the Company began to evaluate its
            business on the basis of four separate business units, as follows:
            Aesthetics, Ophthalmic, Surgical, and Other. Those business units
            were identified as operating segments in accordance with SFAS No.
            131, "Disclosure about Segments of an Enterprise and Related
            Information". The information evaluated by the Company's decision
            makers in deciding how to allocate resources to these segments are
            net revenues and gross profit.

<TABLE>
<CAPTION>
                          For the three months ended June 30, 2002 (Unaudited, Restated)
                   ----------------------------------------------------------------------------
                   Aesthetics      Ophthalmic       Surgical          Other        Consolidated
                   ----------      ----------       --------         -------       ------------
<S>                  <C>             <C>             <C>             <C>             <C>
Net Revenues         $41,213         $21,406         $13,371         $16,975         $ 92,965
Gross Profit         $28,825         $10,036         $ 7,610         $ 4,273         $ 50,744

<CAPTION>
                           For the six months ended June 30, 2002 (Unaudited, Restated)
                   ----------------------------------------------------------------------------
                   Aesthetics      Ophthalmic       Surgical          Other        Consolidated
                   ----------      ----------       --------         -------       ------------
<S>                  <C>             <C>             <C>             <C>             <C>
Net Revenues         $78,375         $39,309         $27,997         $33,406         $179,087
Gross Profit         $54,546         $18,291         $15,528         $ 7,471         $ 95,836
</TABLE>

                                                         For the periods
                                                       Ended June 30, 2001
                                                   ----------------------------
                                                   Three months      Six months
                                                   ------------      ----------
                                                            (Unaudited)
      Net Revenues
          Surgical, aesthetics and ophthalmic       $   4,620        $ 112,588
          Dental                                        2,423            5,177
          Industrial                                    3,329            6,475
                                                    ---------        ---------

                 Consolidated                       $  80,372        $ 124,240
                                                    =========        =========
      Operating income (loss)
          Surgical, aesthetics and ophthalmic       $(141,656)       $(137,746)
          Dental                                         (963)          (1,162)
          Industrial                                      313              703
                 Consolidated                        (142,306)        (138,205)
      Financing expenses, net                           3,991            5,360
                                                    ---------        ---------
      Loss before income taxes                      $(146,297)       $(143,565)
                                                    =========        =========


                                     - 13 -
<PAGE>

      B.    GEOGRAPHIC INFORMATION:

            The following presents net revenues based on the location of the
            customer:

<TABLE>
<CAPTION>
                                       For the six months          For the three months
                                         ended June 30,               ended June 30,
                                   ------------------------     ------------------------
                                      2002           2001          2002           2001
                                   ----------      --------     ----------      --------
                                   (Restated)                   (Restated)
                                          (Unaudited)                  (Unaudited)
<S>                                 <C>            <C>            <C>           <C>
Net Revenues
      North and Latin America       $ 91,118       $ 55,079       $46,814       $ 38,618
      Europe                          30,281         25,864        14,420         14,973
      Asia                            50,173         35,746        27,423         23,013
      Israel                           1,954          1,155         1,207            517
      Other                            5,561          6,396         3,101          3,251
                                    --------       --------       -------       --------
      Consolidated                  $179,087       $124,240       $92,965       $ 80,372
                                    ========       ========       =======       ========

<CAPTION>
                                                   June 30,                   December 31,
                                                     2002                         2001
                                                 -----------                  ------------
                                                 (Unaudited)
<S>                                                <C>                          <C>
Assets
North and Latin America                            $232,446                     $193,866
Europe                                               80,771                       88,446
Asia                                                 18,778                       34,023
Israel                                               55,716                       70,939
                                                   --------                     --------
Consolidated                                       $387,711                     $387,274
                                                   ========                     ========
</TABLE>

Note 8 -- FINANCING ACTIVITIES

      On March 26, 2002, the Company entered into new agreements with Bank
      Hapoalim for a new four year loan in the amount of $70,667, the proceeds
      of which will be used to repay the Company's existing convertible
      subordinated notes due September 1, 2002 in the amount of $54,128 and to
      repay borrowings of $16,489 under its revolving credit agreement. The
      $70,667 loan matures four years from date of drawdown and bears interest
      at LIBOR plus 6.55% increasing to 7.80% over the life of the loan. The
      Company expects to draw down the loan in August 2002. The Company also
      increased its revolving credit facility to $35,000 from $20,000. In
      connection with these loan and credit facilities, the Company is obligated
      to pay Bank Hapoalim a $4,000 fee. (See also Note 11, Subsequent Events,
      below).

Note 9 --- CONTINGENT LIABILITIES

      The Company is a party to various legal proceedings incident to its
      business. Except as noted below or set forth in the "Legal Proceedings"
      section of the 2001 Form 10-K, 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.

      In February 2002, the Company received a request from the United States
      Securities and Exchange Commission ("SEC") to voluntarily provide certain
      documents and information for a period commencing January 1, 1998. The
      request primarily relates to the Company's relationships with
      distributors, and also asks for amplification of the Company's explanation
      of certain previously disclosed charges and write-downs which were taken
      in 1999 (inventory and other charges of approximately $30,050; bad debt
      charges of $13,430; and litigation expenses of $4,400) and 2001
      (write-down of accounts receivable of $14,043 and write-downs of inventory
      and other charges (amounts not given)). On May 15, 2002, the Company
      learned that the SEC had issued a formal order of investigation on these
      matters, including as to whether, in connection therewith, the Company, in
      prior periods, may have overstated revenues and related income and failed
      to maintain proper


                                     - 14 -
<PAGE>

      books and records and a proper system of internal controls. The Company is
      continuing to collect and submit documents and information responsive to
      the SEC request. As of the date hereof, the Company has produced to the
      SEC approximately 30,000 pages of documents, consisting primarily of
      distribution agreements, invoices and general ledger entries for
      distributor sales, as well as correspondence with auditors. Additionally,
      in connection with the SEC investigation, the Company is currently
      conducting additional reviews with respect to the above-referenced
      matters. The Company is continuing to cooperate with the SEC, but is
      unable to predict the duration or outcome of this process.

      During March, April and May 2002, eight purported class action lawsuits
      were filed in the United States District Court for the Southern District
      of New York on behalf of purchasers of Lumenis securities between January
      2 and February 28, 2002 (the "Class Period"). The named defendants
      include, in addition to the Company, certain present and former officers
      and directors of the Company, including Jacob Frenkel, Yacha Sutton, Sagi
      Genger and Asif Adil. The complaints generally allege that the defendants
      violated U.S. Federal securities laws by issuing materially false and
      misleading statements throughout the Class Period that had the effect of
      artificially inflating the market price of the Company's securities. The
      complaints allege that throughout the Class Period, defendants discounted
      and disputed marketplace rumors about the Company's operations even as the
      Company knew it was being investigated by the United States Securities and
      Exchange Commission ("SEC") and that its distributors had been contacted
      by the SEC. The Company has been served with a summons and complaint in
      some but not all of these actions. There is currently pending before the
      Court a motion by plaintiffs to appoint a lead plaintiff and for approval
      of selection of lead counsel. Upon the disposition of this motion, it is
      anticipated that a consolidated complaint will be filed. The Company's
      time to respond to the complaints has been extended, and it is anticipated
      that, following the appointment of a lead plaintiff and approval of lead
      class counsel, and subject to review and evaluation of any consolidated
      complaint that is filed, the Company will file a motion to dismiss for
      failure to state a claim and failure to plead fraud with particularity as
      required by the Private Securities Litigation Reform Act of 1995 and Rule
      9(b) of the Federal Rules of Civil Procedure.

      In May 2002, another purported class action complaint was filed in the
      United States District Court for the Southern District of New York on
      behalf of purchasers of the Company's securities between August 2, 2001
      and May 7, 2002 (the "Extended Class Period"). In addition to the Company,
      the named defendants include certain present and former officers and
      directors of the Company, including Jacob Frenkel, Yacha Sutton, Sagi
      Genger and Asif Adil. The complaint alleges that the defendants violated
      U.S. Federal securities laws by making a series of material
      misrepresentations to the market during the Extended Class Period
      regarding the Company's financial performance, successful execution of its
      business plan and strong demand for the Company's products, thereby
      artificially inflating the price of Lumenis securities. The Company has
      not been served with a summons and complaint in this action.

      The Company believes that all the allegations and claims in all of the
      above purported class action lawsuits are baseless, and the Company
      intends to vigorously defend against them.

      On January 25, 1999, the Company, along with three affiliated entities,
      brought an action seeking declaratory and injunctive relief in the
      Superior Court of New Jersey, Somerset County; Law Division, 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
      March 5, 1999, defendant Light Age answered the complaint and
      counterclaimed against the plaintiffs, seeking unspecified damages under
      thirteen counts alleging a variety of causes of action such as breach of
      contract, tortious interference with contract, unjust enrichment, and
      misappropriation. On July 1, 1999 the court granted 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. On November 22,
      1999, the Company and the three affiliated entities filed a response to
      Light Age's demand. Light Age claimed that it incurred damages of up to
      $41,447, including interest. A hearing on the merits was held in December
      2001 and closing arguments were held on January 30, 2002. On or about June
      12, 2002 the Company was advised that the arbitrators issued an interim
      award to Light Age in the amount of approximately $6,880 plus interest. On
      or about July 25, 2002, the Company was advised that the arbitrators
      issued a final award in the amount of approximately $9,143, which includes
      pre-judgment interest, an award of certain out of pocket costs incurred by
      Light Age, and an increase of approximately $375


                                     - 15 -
<PAGE>

      due to a computational error made by the arbitrators. The final award
      substantially exceeded the Company's accrual for this matter, requiring
      the Company to take a charge of $5,201 for the three month period ended
      June 30, 2002 in addition to its remaining reserve of $4,600. The request
      by Light Age for approximately $2,780 in attorneys' fees and disbursements
      was denied in its entirety. Approximately $180 of Light Age's request for
      reimbursement for out-of-pocket-costs and $36 of Light's request for
      prejudgment interest was also denied. On or about July 26, 2002, Light-Age
      filed an application in the Superior Court of the State of New Jersey,
      Somerset County, to confirm the final arbitration award. The Company's
      response to the application to confirm must be filed with the court on or
      before August 15, 2002, and the hearing is scheduled to take place on
      August 22, 2002. The parties are discussing a possible settlement of this
      matter.

      On September 20, 1999, Dr. Richard Urso filed what purports to be a class
      action lawsuit against the Company and against a leasing company in Harris
      County, Texas, alleging a variety of causes of action. In December 2000,
      plaintiff amended his complaint to eliminate the class action claim. On
      April 13, 2001 the lawsuit was dismissed and on May 3, 2001, Dr. Urso and
      approximately forty-eight physicians and medical clinics re-filed what
      purports to be a class action lawsuit in Harris County, Texas. Plaintiffs
      filed a motion to remove the case to Federal Court. The lawsuit was
      removed to the U.S. District Court for the Southern District of Texas. The
      current allegations on behalf of plaintiffs are breach of contract, breach
      of express and implied warranties, fraud, misrepresentation, conversion,
      product liability, violation of the Texas Deceptive Trade Practices Act
      and Texas Securities Act as well as lender liability and unconscionable
      conduct. In March 2002, the Plaintiffs filed a motion to amend their
      complaint to dismiss the class action and securities allegations and to
      add several new plaintiffs and in June 2002, the motion was granted. The
      plaintiffs have filed a motion to remand the cases to State Court. The
      Company denies the allegations and will continue to defend this case
      vigorously. No assessment of likelihood of outcome or likely damages, if
      any, can be made at this time.

      On October 12, 2001, Lumenis Inc., a subsidiary of the Company, commenced
      an action for patent infringement in the United States District Court for
      the Southern District of New York against Altus Medical Inc. ("Altus")
      seeking, among other things, an injunction and damages. The complaint
      alleges that Altus infringed two U.S. patents owned by Lumenis Inc. Altus
      answered the complaint denying that it was infringing the asserted patents
      and filed counterclaims seeking a declaratory judgment that the asserted
      patents are invalid and were not infringed. Lumenis filed a reply denying
      the material allegations of the counterclaims. Altus filed a motion
      seeking to transfer the action to the United States District Court for the
      Northern District of California ("NDCA") for the convenience of the
      parties and witnesses. Lumenis Inc. consented to the motion to transfer.
      On December 12, 2001 the action was transferred to the NDCA. The parties
      entered into a settlement agreement and license agreement, both effective
      as of June 11, 2002, pursuant to which Altus became a non-exclusive
      licensee under the patents at issue in this lawsuit.

      On January 18, 2002, Lumenis Inc. commenced an action for patent
      infringement against Trimedyne, Inc. ("Trimedyne") in the United States
      District Court for the Central District of California. The complaint
      alleges that Trimedyne has willfully infringed and is willfully infringing
      two Lumenis Inc. U.S. patents. Lumenis Inc. seeks (i) an injunction
      enjoining Trimedyne's infringement; (ii) an award of damages sustained by
      Lumenis as a result of such infringement; (iii) a trebling of such damage
      award; and (iv) an award of its costs and attorneys' fees incurred in the
      action. On or about February 26, 2002, Trimedyne filed an answer and
      counterclaims in this action denying Lumenis' material allegations of
      infringement and asserting counterclaims alleging that: (i) Trimedyne is
      entitled to a declaratory judgment that Trimedyne is not infringing the
      patents; (ii) Lumenis Inc. has violated certain U.S. and California
      antitrust and trade practices laws; (iii) Lumenis Inc. has disseminated
      false and misleading statements in violation of the California Business
      and Professions Code and/or California's trade libel laws; (iv) certain
      Lumenis Inc. products infringe Trimedyne's patents; (v) Lumenis has
      tortiously interfered with Trimedyne's prospective economic relationships;
      and (vi) Trimedyne is entitled to a declaratory judgment that it is
      entitled to a refund of an alleged overpayment of royalties by Trimedyne
      of approximately $130 under a 1994 patent license. Trimedyne seeks: (i) an
      injunction enjoining Lumenis Inc. from the allegedly wrongful acts; (ii)
      unspecified damages arising from Lumenis Inc.'s allegedly wrongful acts
      and a trebling of such damages; (iii) Lumenis Inc.'s profits derived from
      Lumenis Inc.'s allegedly wrongful acts; (iv) unspecified punitive damages
      for Lumenis' allegedly wrongful acts; (v) a refund of the alleged royalty
      overpayment, plus interest thereon; and (vi) Trimedyne's costs and
      attorneys fees incurred in connection with this action. The Company
      believes the counterclaims are baseless, will vigorously defend against
      them and will continue to vigorously prosecute its claims against
      Trimedyne. On April 29, 2002, the Company moved to: (i) dismiss the
      federal and state antitrust counterclaims, the counterclaims for


                                     - 16 -
<PAGE>

      trade libel and the counterclaim for tortious interference with
      prospective economic relationships on the grounds that Trimedyne has
      failed to state a claim upon which relief can be granted; (ii) dismiss or
      stay the claims related to the 1994 patent license as those claims are
      subject to a compulsory arbitration clause; and (iii) strike certain of
      the affirmative defenses asserted by Trimedyne. On June 3, 2002, Trimedyne
      served an amended answer and counterclaims re-asserting all of the claims
      from its original complaint other than the claims relating to the 1994
      patent license. The response to the amended answer and counterclaims is
      not yet due. The parties have commenced negotiations to attempt to settle
      this action.

      In addition to the actions described above or set forth in the 2001 Form
      10-K, the Company is a party in certain actions in various countries,
      including the U.S., in which the Company sells its products in which it is
      alleged that the Company's products did not perform as promised and/or
      that the Company made certain misrepresentations in connection with the
      sale of products to the plaintiffs. Management believes that none of these
      actions (other than those set forth above or in the 2001 Form 10-K) that
      are presently pending individually would have a material adverse impact on
      the consolidated financial position of the Company, although such actions
      in the aggregate could have a material effect on quarterly or annual
      operating results or cash flows when resolved in a future period.

      Finally, the Company also is a defendant in various product liability
      lawsuits in which the Company's products are alleged to have caused
      personal injury to certain individuals who underwent treatments using the
      Company's products. The Company maintains insurance against these types of
      claims and believes that these claims individually or in the aggregate are
      not likely to have a material adverse impact on the business, financial
      condition or operating results of the Company.

      The balance sheet as of June 30, 2002 includes an accrual of approximately
      $18,900 (including the provision of $ 8,873 due to the pending
      class-action lawsuits, as disclosed in the 2001 Form 10-K) reflecting
      management's estimate of the Company's potential exposure with respect to
      certain, but not all, legal proceedings, claims and litigation. With
      respect to the pending legal proceedings and claims for which no accrual
      has been recorded in the financial statements, Company management is
      unable to predict the outcome of such matters, the likelihood of an
      unfavorable outcome or the amount or range of potential loss, if any.

Note 10 -- EARNINGS PER SHARE (UNAUDITED)

<TABLE>
<CAPTION>
                                          Three month ended                      Three month ended
                                            June 30, 2002                          June 30, 2001
                                              (Restated)
                                   -------------------------------     ----------------------------------
                                                             Per                                    Per
                                                             Share                                  Share
                                   Income       Shares      Amount      Income         Shares      Amount
                                   ------       ------      ------     --------        ------      ------
<S>                                <C>          <C>         <C>        <C>             <C>         <C>
Net income (loss)                  (2,829)          --         --      (146,377)
                                   ======                              ========
Basic earnings per share
Income (loss) before
    extraordinary items            (2,829)      36,798      (0.08)     (146,377)       31,167      (4.70)
Extraordinary gain                     --       36,798         --            --        31,167         --
                                  =======      =======      =====      ========      ========      =====
Income available to
    ordinary shareholders          (2,829)      36,798      (0.08)     (146,377)       31,167      (4.70)
                                  =======      =======      =====      ========      ========      =====
Effect of diluting securities
    Options                                         --                                     --
    Warrants                                        --                                     --
                                               -------                               --------
Diluted earnings per share
Income (loss) before
    extraordinary items            (2,829)      36,798      (0.08)     (146,377)       31,167      (4.70)
Extraordinary gain                     --       36,798         --            --        31,167         --
                                  =======      =======      =====      ========      ========      =====
Income (loss) available
to ordinary shareholders           (2,829)      36,798      (0.08)     (146,377        31,167      (4.70)
                                  =======      =======      =====      ========      ========      =====
</TABLE>


                                     - 17 -
<PAGE>

<TABLE>
<CAPTION>
                                           Six month ended                        Six month ended
                                            June 30, 2002                          June 30, 2001
                                              (Restated)
                                   -------------------------------     ----------------------------------
                                                             Per                                    Per
                                                             Share                                  Share
                                   Income       Shares      Amount      Income         Shares      Amount
                                   ------       ------      ------     --------        ------      ------
<S>                                <C>          <C>         <C>        <C>             <C>         <C>
Net income (loss)                  (3,473)          --         --      (142,149)          --
                                  =======                              ========
Basic earnings per share
Income (loss) before
   extraordinary items             (3,564)      36,756      (0.10)     (142,149)       28,671      (4.96)
Extraordinary gain                     92       36,756       0.01            --        28,671         --
                                  =======                   =====      ========                    =====
Income available to
   ordinary shareholders           (3,472)      36,756      (0.09)     (142,149)       28,671      (4.96)
                                  =======                   =====      ========                    =====
Effect of diluting securities
   Options                                          --                                     --
   Warrants                                         --                                     --
                                               -------                               --------
Diluted earnings per share
Income (loss) before
    extraordinary items            (3,564)      36,756      (0.10)     (142,149)       28,671      (4.96)
Extraordinary gain                     92       36,756       0.01            --        28,671         --
                                  =======                   =====      ========                    =====
Income (loss) available to
   ordinary shareholders           (3,473)      36,756      (0.09)     (142,149)       28,671      (4.96)
                                  =======                   =====      ========                    =====
</TABLE>

Note 11 -- SUBSEQUENT EVENTS

In its three financing arrangements with Bank Hapoalim, the Company is required
to maintain a ratio of its debt, as defined, to EBITDA, as defined, of less than
three times. At September 30, 2002, the Company had outstanding $175,572 under
the three agreements. At September 30, 2002, the Company was not in compliance
with this covenant and does not expect to be in compliance as of December 31,
2002. On November 19, 2002, the Company received a waiver of this requirement
for September 30, 2002 and an amendment of the ratio to a maximum of 3.7 times
for the quarter ending December 31, 2002. Additionally, among other things, the
interest rate on borrowings under the revolving credit facility will be
increased by 1.25% to LIBOR plus 2.25% effective November 19, 2002. Based on its
current business plans, the Company expects to be in compliance with the ratio.
See "Cautionary Statements"; Item 2 below, with respect to this forward looking
statement.

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

OVERVIEW

For purposes of this Form 10-QA, and in accordance with Rule 12b-15 under the
Securities Exchange Act of 1934, as amended, each item of the Form 10-Q for the
six and three months ended on June 30, 2002 as originally filed that was
affected by the restatement has been amended to the extent affected and restated
in its entirety. No attempt has been made in this form 10-Q/A to modify or
update other disclosures as presented in the original form 10-Q except as
required to reflect the effects of the restatement and to disclose the waiver of
the bank covenant as discussed in Note 11 to the unaudited consolidated
financial statements.

Lumenis Ltd. ("Lumenis" or "the Company") is a world leader in the design,
manufacture, marketing and servicing of laser and light based systems for
aesthetic, ophthalmic, surgical and dental applications. Lumenis offers a broad
range of laser and intense pulsed light ("IPL") systems which are used in skin
treatments, hair removal, non-invasive treatment of vascular lesions and
pigmented lesions, acne, psoriasis, ear, nose and throat ("ENT"), gynecology,
urinary lithotripsy, benign prostatic hyperplasia, open angle glaucoma,
secondary cataracts, age-related macular degeneration, refractive eye
correction, neurosurgery, dentistry and veterinary medicine.

The Company's systems are designed for use in a variety of medical environments.
The principal target markets for the Company's aesthetic products are physicians
with private practices or clinics, as well as leading beauty/hair removal
centers. Many of these are customers who wish to access the vanity market and
are looking to increase


                                     - 18 -
<PAGE>

their revenues and reduce dependence on insurance reimbursements. The target
markets for the Company's surgical products are hospitals and outpatient clinics
that use lasers for certain procedures. Ophthalmologists are the primary target
market for the ophthalmic products; and dentists are the primary target market
for the dental products.

On April 30, 2001, the Company completed the purchase of Coherent Medical Group
("CMG"), the medical division of Coherent, Inc. ("Coherent"). This acquisition
approximately doubled the Company's sales, expanded its leading position in
sales of pulsed light and laser based systems for the aesthetic and surgical
markets, made it a significant competitor in the ophthalmic portion of the
medical laser market, expanded its proprietary technology and increased its
critical mass by country and customer type for the marketing and cross-selling
of its products. After completion of this acquisition, the Company changed its
name from ESC Medical Systems Ltd. ("ESC") to Lumenis Ltd.

On November 30, 2001, the Company completed the acquisition of the stock of
FISMA Corporation, Instruments for Medicine & Diagnostics, Inc. and Instruments
for Surgery (collectively "HGM") from the Estate of William H. McMahan
("McMahan"). HGM is a Salt Lake City developer and manufacturer of medical laser
devices. The purchase price for HGM was $9.9 million in cash. This transaction
expands the Company's ophthalmic product offerings, provides specialized
technologies to help reduce the cost of manufacturing certain parts and
accessories and enables the Company to transfer certain manufacturing operations
from higher cost locations. The purchase included HGM's manufacturing
facilities. In January 2002, the Company exercised its right of first refusal to
purchase from McMahan the adjacent premises for the purchase price of $900,000.

In this Report, unless the context otherwise requires, all references to the
"Company", "Lumenis", "We" or "Our" are to Lumenis Ltd. and its direct and
indirect wholly owned subsidiaries.

RESULTS OF OPERATIONS

THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2002 COMPARED WITH THREE AND
SIX-MONTH PERIODS ENDED JUNE 30, 2001 (In thousands of U.S. Dollars, except per
share data)

The Company reported net revenues of $92,965 and $179,087 for the three and
six-months ended June 30, 2002, respectively, compared to net revenues of
$80,372 and $124,240 for the three and six-months ended June 30, 2001,
respectively. The net loss for the three and six-months ended June 30, 2002 was
$2,829 and $3,472, respectively, or a diluted net loss per share of $0.08 and
$0.09, respectively, compared to a net loss of $146,377 and $142,149 for the
three and six-months ended June 30, 2001, respectively, or a diluted net loss
per share of $4.70 and $4.96, respectively. Commencing January 1, 2002, we began
to evaluate our business based on four separate business units, as follows:
Aesthetics, Ophthalmic, Surgical, and Other. These business units are identified
as operating segments in accordance with SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information". The information evaluated by
the Company's senior management in deciding how to allocate resources to these
segments is net revenues and gross profit.

Revenues. The Company's net revenues increased by 16% to $92,965 for the three
months ended June 30, 2002 compared to $80,372 for the three months ended June
30, 2001. The Company's net revenues increased by 44% to $179,087 for the six
months ended June 30, 2002 compared to $124,240 for the six months ended June
30, 2001. The increase in sales reflects mainly the contribution from the CMG
acquisition.

By business unit, revenues for the three and six months ended June 30, 2002
compared to actual reported revenues for the three and six months ended June 30,
2001 and compared to pro-forma revenues for the same periods adjusted as if the
acquisition of CMG had occurred as of January 1, 2001 are shown below.


                                     - 19 -
<PAGE>

--------------------------------------------------------------------------------
                                                Three months       Three months
                                                   ended               ended
                       Three months ended      June 30, 2001,      June 30, 2001
Segment                   June 30, 2002      pro-forma for CMG      as reported
--------------------------------------------------------------------------------
Aesthetic                   $ 41,213              $ 37,594           $ 35,284
--------------------------------------------------------------------------------
Ophthalmic                    21,406                16,842             15,226
--------------------------------------------------------------------------------
Surgical                      13,371                14,838             13,703
--------------------------------------------------------------------------------
    Other                     16,159                18,380             16,159
--------------------------------------------------------------------------------
    Total                   $ 92,965              $ 87,654           $ 80,372
--------------------------------------------------------------------------------

      Six months ended June 30, 2002, Six months ended June 30, 2001 pro-forma
for CMG, and Six months ended June 30, 2001, as reported

--------------------------------------------------------------------------------
                                                 Six months         Six months
                                                   ended               ended
                        Six months ended      June 30, 2001,      June 30, 2001
Segment                   June 30, 2002      pro-forma for CMG      as reported
--------------------------------------------------------------------------------
Aesthetic                   $ 78,375              $ 85,155           $ 60,957
--------------------------------------------------------------------------------
Ophthalmic                    39,309                34,403             15,226
--------------------------------------------------------------------------------
Surgical                      27,997                29,288             20,371
--------------------------------------------------------------------------------
    Other                     33,406                36,337             27,686
--------------------------------------------------------------------------------
    Total                   $179,087              $185,183           $124,240
--------------------------------------------------------------------------------

The increase in revenues for the three months ended June 30, 2002 compared to
the three months ended June 30, 2001, on a pro-forma basis for the CMG
acquisition, is mainly due to the higher sales of our IPL photorejuvenation
products in the Aesthetic unit and higher sales of our refractive products and
our recently introduced Selecta II system for the treatment of glaucoma in the
Ophthalmic unit.

The decrease in revenues for the six months ended June 30, 2002 compared to the
six months ended June 30, 2001, on a pro-forma basis for the CMG acquisition, is
mainly due to higher than usual sales of CMG hair removal products prior to the
acquisition, offset in part by the increase in sales mainly due to the
introduction of the new Selecta and refractive products in the Ophthalmic unit.

Gross Profit. Gross profit increased by 93% to $50,744 for the three months
ended June 30, 2002 from $26,263 for the three months ended June 30, 2001.
Excluding write downs of inventory and other charges, mainly in connection with
the acquisition of CMG, in the total amount of $17,569 for the three months
ended June 30, 2001, gross profit increased by 16%. As a percentage of sales,
the gross profit was 55% in the three months ended June 30, 2002, same as,
excluding write-down of inventory and other-charges in the same period in 2001.
Gross profit increased by 76% to $95,836 for the six months ended June 30, 2002
from $54,569 for the six-month period ended June 30, 2001. Excluding write down
of inventory and other charges, gross profit increased by 32% for the six months
ended June 30, 2002. As a percentage of sales, the gross profit was 54% in the
six months ended June 30, 2002 compared to 58% excluding write-downs of
inventory and other charges, in the same period in 2001.

The increase in gross profit, excluding write downs of inventory and other
charges, in the three and six months ended June 30, 2002 was due principally to
the CMG acquisition and from the higher sales of IPL and Ophthalmic products in
the three-month period ended June 30, 2002.

The decrease in gross profit, excluding write down and other charges, as a
percentage of sales in the three and six months ended June 30, 2002 stems from
the inherently lower margins of the CMG product lines and was also


                                     - 20 -
<PAGE>

affected by sales of lower margin products, principally in the Surgical and
Ophthalmic units, in 2002 compared to last year.

Research and Development, net. Net research and development costs increased by
28% to $6,841 for the three months ended June 30, 2002 from $5,364 in the same
period in 2001. As a percentage of sales, research and development costs were 7%
in the three-month period ended June 30, 2002 and 2001. Net research and
development costs increased by 64% to $13,848 for the six months ended June 30,
2002 from $8,439 in the same period in 2001. As a percentage of sales, research
and development costs were 8% and 7% in the six-month period ended June 30, 2002
and 2001, respectively.

The increase in research and development costs in the three and six months ended
June 30, 2002 is due mainly to the contribution from CMG activities.

In process research and development. In process research and development
expenses in the three and six months ended June 30, 2001 in the amount of
$46,650, represents the fair value allocated to in process research and
development of the CMG acquisition, based upon an independent valuation.

Selling, Marketing and Administrative expenses. Selling, Marketing and
Administrative expenses decreased by 55% to $37,374 for the three months ended
June 30, 2002 compared to $83,220 for the same period in 2001. As a percentage
of sales, Selling, Marketing and Administrative expenses in the three months
ended June 30, 2002 were 40% compared to 104% in the same period in 2001. As a
percentage of sales, excluding one time charges in the amount of approximately
$53,955 mainly in connection with the CMG acquisition, Selling, Marketing and
Administrative expenses in the three months ended June 30, 2001 were 36%.

Selling, Marketing and Administrative expenses decreased by 31% to $70,509 for
the six months ended June 30, 2002 compared to $102,293 for the same period in
2001. As a percentage of sales, Selling, Marketing and Administrative expenses
in the six-month period ended June 30, 2002 were 39% compared to 82% in the same
period in 2001. As a percentage of sales, Selling, Marketing and Administrative
expenses in the six months ended June 30, 2002 and 2001, excluding one time
charges in the amount of $56,292 during the six months ended June 30, 2001, were
39% and 37%, respectively.

Selling, Marketing and Administrative expenses for the three months ended June
30, 2001 include unusual charges, mainly in connection with the CMG acquisition
as follows:

o     Write-down of accounts receivable mainly in connection with terminated
      distributors of $12,673 in the three months ended June 30, 2001 and
      $14,043 in the six months ended June 30, 2001.

o     Severance for terminated employees of $2,188.

o     Retention bonuses of $6,824.

o     Costs incurred for outside consultants, travel costs during the
      integration and other integration costs of $3,048.

o     Approximately $5,537 relating to accrued future lease costs of closed or
      unused facilities and relocation costs.

Other unusual charges in the three and six months ended June 30, 2001 also
included as follows:

o     Non-cash compensation related to special option grants and accelerated
      vesting of previously granted options in the amount of $23,685 in the
      three months ended June 30, 2001 and $24,651 in the six months ended June
      30, 2001.

Selling, Marketing and Administrative expenses for the three and six months
ended June 30, 2002, excluding one time expenses increased due to contribution
from the CMG acquisition and due to higher legal and integration costs during
the second quarter of 2002

Litigation expenses. Litigation expenses amounted to $5,201 for the three-month
and six-month periods ended June 30, 2002, which resulted from the arbitration
award in the Light Age matter (see Part II Item 1- "Legal


                                     - 21 -
<PAGE>

Proceedings", below) compared to $27,760 and $29,266 for the three and six-month
periods ended June 30, 2001, respectively, which represented management's
estimate of the Company's potential exposure relating to certain legal
proceedings, claims and litigation, including but not limited to the class
action settlement, Light Age and other matters.

Amortization of intangible assets. Amortization of intangible assets of $1,816
and $3,632 for the three and six months ended June 30, 2002, respectively,
compared to $2,140 for the three and six-month periods ended June 30, 2001,
include amortization of intangible assets arising from the CMG acquisition.
Amortization in the three and six months ended June 30, 2001 include two months
of amortization of the identified intangible assets and goodwill arising from
the CMG acquisition compared to the three and six months ended June 30, 2002
which included only amortization of identified intangibles.

Write down of investments. Write downs of investments for the three months and
six months ended June 30, 2001 of $3,435 and $3,986 respectively, represent
mainly impairment of value of investments in affiliated companies, principally
the Company's investment in Galil Medical Ltd.

Other income. Other income for the three months and six months ended June 30,
2002 of $1,720 represents the capital gain arising from the sale of the
investment in Galil Medical Ltd., an investment for which the Company took an
impairment reserve in 2001. Based on the terms of the sale the Company has the
right to receive additional consideration in the event of a sale or public
offering by Galil for a period of two years.

Financing expenses, net. For the three months ended June 30, 2002, financing
expenses were $3,659 compared to financing expenses of $3,991 in the same period
in 2001. For the six months ended June 30, 2002, financing expenses were $7,335
compared to financing expenses of $5,360 in the same period in 2001.

The decrease in financing expenses for the three months ended June 30, 2002 is
mainly due to a foreign exchange gain of $1,816 compared to a foreign exchange
loss of $867 in the three months ended June 30, 2001, offset by a loss from
certain foreign exchange derivative contracts, originally entered into in
December 2001 and January 2002, in the amount of $2,318, intended as hedges ut
which do not qualify as hedges for accounting purposes. The foreign exchange
gain resulted principally from the Company's net asset position in Euros, which
appreciated approximately 12% against the U.S. dollar in the second quarter of
2002.

The increase in financing expenses in the six months ended June 30, 2002 is
mainly due to the loss from the foreign exchange derivative contracts and an
increase in interest expenses relating to the CMG acquisition and lower cash
balances, offset by a foreign exchange gain.

Income Tax Benefit (expense). Income tax expense in the three months ended June
30, 2002 was $402 compared to $80 in the same period last year. Tax expense for
the six months ended June 30, 2002 was $504 compared with a tax benefit of
$1,416 in the period ended June 30, 2001. In April 2001, the Company reached a
final agreement with the Israeli tax authorities with regard to tax returns
filed by the Company for the years up to and including 1998. As a result, the
Company recorded a gain of $1,600 from reversal of the accrual recorded in
previous years. The (Israel) Law for Amendment of the Income Tax Ordinance (the
"New Law") was enacted on July 24, 2002. The New Law will have a significant
impact on international investments of Israeli companies. The New Law may also
affect the local taxation of individuals and companies such as Lumenis. The
Company is assessing the potential impact of the New Law on the Company.

Company's share on losses of affiliates. For the six months ended June 30, 2002,
the Company's share in Aculight (UK) Limited's losses amounted to $91. In the
three months ended June 30, 2002 the effect of the Company's share in the losses
of Aculight (UK) Limited were offset by realizing a portion of deferred income
that resulted from the sale of products to Aculight in 2001.

Extraordinary gain on repurchase of Company's convertible notes. For the six
months ended June 30, 2002, extraordinary gain on the repurchase of the
Company's convertible notes was $92.

Net Income (loss). As a result of the foregoing factors, the Company's net loss
was $2,829 for the three months ended June 30, 2002 compared to net loss of
$146,377 in the same period in 2001. The Company's net loss was $1,943 for the
six months ended June 30, 2002 compared to net loss of $142,149 in the same
period in 2001.


                                     - 22 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
(In thousands of dollars)

As of June 30, 2002, the Company had cash and cash equivalents of $25,280
compared to $31,400 on December 31, 2001. The decrease of $6,120 is mainly
attributable to:

Operating activities

For the six months ended June 30, 2002, cash used for operating activities was
$1,258, attributable mainly to a $7,655 increase in operating assets and
liabilities that resulted from an increase in trade receivables of $10,169 and
prepaid expenses and other receivables of $2,060 partially offset by an increase
in accounts payable, accrued expenses and other long-term liabilities of $3,300
and a decrease in inventory of $2,803. The increase in trade receivables was due
to the effect of foreign currency translation of approximately $4,221 and to
processing difficulties associated with the integration of the accounting
systems of ESC and CMG. The decrease in inventory resulted from ongoing efforts
to decrease inventory levels. An increase of $5,201 in accrued expenses is
attributable to the increase in the Light Age arbitration award provision.
$10,022 of the decrease in accounts payable and accrued expenses was for
payments of previously accrued one-time charges in respect of the CMG
acquisition, of which $4,902 was paid for severance and retention bonuses,
$2,573 was paid in respect of integration costs and $2,547 was paid mainly for
termination of agreements with distributors and lease agreements of abandoned
facilities for which no sub-lease has been arranged. The remaining balance of
the accrued one-time integration expenses in the amount of $6,859 is expected to
be paid before the end of this year

Investing Activities

For the six months ended June 30, 2002, cash used for investing activities was
approximately $5,030. Investment in fixed assets was $5,177, which includes an
investment of approximately $900 for an additional manufacturing facility in
Salt Lake City. Payments of $1,286 were made in respect of liabilities related
to the acquisition of CMG and HGM that were paid during this period and $1,250
was used for other long-term investments. The sale of the investment in Galil
Medical Ltd. resulted in proceeds of $1,720.

Financing Activities

For the six months ended June 30, 2002, cash provided by financing activities
was $168. A net total of $16,489 was provided by borrowings under the revolving
credit agreement with Bank Hapoalim offset by payments of $16,770 to repurchase
a portion of the Company's convertible subordinated notes due September 1, 2002.

On March 26, 2002, the Company entered into new agreements with Bank Hapoalim
for a new four year loan in the amount of $70,667, the proceeds of which will be
used to repay the Company's existing convertible subordinated notes due
September 1, 2002 in the amount of $54,128 and to repay $16,489 outstanding
under the revolving credit agreement. The $70,667 loan matures four years from
draw down and bears interest at LIBOR plus 6.55% increasing to 7.80% over the
life of the loan. The Company also increased its revolving credit facility to
$35,000 from $20,000. In connection with these loan and credit facilities, the
Company is obligated to pay Bank Hapoalim a $4,000 fee.

In its three financing arrangements with Bank Hapoalim, the Company is required
to maintain a ratio of its debt, as defined, to EBITDA, as defined, of less than
three times. At September 30, 2002, the Company had outstanding $175,572 under
the three agreements. At September 30, 2002, the Company was not in compliance
with this covenant and does not expect to be in compliance as of December 31,
2002. On November 19, 2002, the Company received a waiver of this requirement
for September 30, 2002 and an amendment of the ratio to a maximum of 3.7 times
for the quarter ending December 31, 2002. Additionally, among other things, the
interest rate on borrowings under the revolving credit facility will be
increased by 1.25% to LIBOR plus 2.25% effective November 19, 2002. Based on its
current business plans, the Company expects to be in compliance with the ratio.
See "Cautionary Statements" below.

The Company believes that internally generated funds, together with available
cash and funds available under the revolving credit agreement will be sufficient
to meet the Company's presently anticipated day-to-day operating expenses,
commitments, working capital, capital expenditure and debt payment requirements.


                                     - 23 -
<PAGE>

CAUTIONARY STATEMENTS

Certain statements made in this Report or made in press releases or in oral
presentations made by the Company's employees or agents 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.

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:

      o     The Company is the subject of an investigation by the U.S.
            Securities and Exchange Commission with respect to its relationship
            with distributors, and certain charges and write-offs taken. The
            Company and several officers and directors have been named as
            defendants in several purported class action lawsuits (see Note 9 -
            "Contingent Liabilities" above) alleging violations of U.S. Federal
            securities laws.

      o     The Company is highly leveraged, with indebtedness that is
            substantial in relation to its shareholders' equity. This requires
            the Company to dedicate a substantial portion of its cash flow to
            debt service, could impair its ability to obtain additional
            financing for capital expenditures or other purposes, hinder its
            ability to adjust rapidly to changing market conditions, and could
            make the Company more vulnerable in the event of a downturn in its
            business or further deterioration of general economic conditions.
            Since much of the Company's debt is at floating rates, an increase
            in interest rates could adversely affect the Company.

      o     The Company's future success depends on its ability to develop and
            successfully introduce new and enhanced products that meet the needs
            of its customers.

      o     The Company's market is unpredictable and characterized by rapid
            technological changes and evolving standards, and, if the Company
            fails to keep up with such changes, its business and operating
            results will be harmed.

      o     The market for laser and light based systems for aesthetic and
            medical applications is relatively new and the Company's business
            will suffer if we fail to educate customers or if the market does
            not develop as we expect.

      o     The Company must spend heavily on research and development.

      o     The Company's products are subject to U.S., E.U. and international
            medical regulations and controls, which impose substantial financial
            costs on it and which can prevent or delay the introduction of new
            products.

      o     The Company depends on its facilities in Israel and on its
            international sales. Many of its customers' operations are also
            located outside the U.S.

      o     The Company faces challenges as it integrates new and diverse
            operations.

      o     Any acquisitions the Company makes could harm or disrupt its
            business without bringing the anticipated synergies.

      o     The Company depends on skilled personnel to operate its business
            effectively in a rapidly changing market, and if the Company is
            unable to retain existing or hire additional personnel, its ability
            to develop and sell its products could be harmed.

      o     The Company anticipates a decline in selling prices of its products
            as competition increases, which could adversely affect its operating
            results.


                                     - 24 -
<PAGE>

      o     The Company may not be able to protect its proprietary technology,
            which could adversely affect its competitive advantage.

      o     The Company could become subject to litigation regarding
            intellectual property rights, which could seriously harm its
            business.

      o     The sales cycles for the Company's products may cause it to incur
            significant expenses without offsetting revenues.

      o     The markets in which the Company sells its products are intensely
            competitive and increased competition could cause reduced sales
            levels, reduced gross margins or the loss of market share.

      o     If the Company fails to accurately forecast component and material
            requirements for its products, it could incur additional costs and
            significant delays in shipments, which could result in loss of
            customers.

      o     The Company's dependence on sole source suppliers for certain
            components exposes it to possible supply interruptions that could
            delay or prevent the manufacture of its systems.

      o     Some of the Company's medical customers' willingness to purchase its
            products depends on their ability to obtain reimbursement for
            medical procedures using its products and its revenues could suffer
            from changes in third-party coverage and reimbursement policies.

      o     Some of the Company's laser and intense pulsed light (IPL) systems
            are complex in design and may contain defects that are not detected
            until deployed by its customers and could lead to product liability
            claims.

      o     The Company may be required to implement a costly product recall.

      o     The Company uses laboratory and manufacturing materials that could
            be considered hazardous; and it could be liable for any damage or
            liability resulting from accidental environmental contamination or
            injury.

      o     If the Company's facilities located in Israel or near major
            earthquake faults in California were to experience catastrophic
            loss, its operations would be seriously harmed.

      o     Conditions in Israel affect the Company's operations and may limit
            its ability to produce and sell its products.

      o     The Company's operations could be disrupted as a result of the
            obligation of key personnel in Israel to perform military service.

      o     The Company receives tax benefits from the Israeli government that
            may be reduced or eliminated in the future.

      o     It may be difficult to enforce a U.S. judgment against the Company,
            its officers and directors based on U.S. securities laws claims in
            Israel or to serve process on the Company's officers and directors.

      o     The new Israeli Companies Law may cause uncertainties regarding
            corporate governance.

      o     Under current Israeli law, the Company may not be able to enforce
            covenants not to compete and therefore may be unable to prevent
            competitors from benefiting from the expertise of some of its former
            employees.

      o     Risks of downturns in economic conditions generally, and in the
            healthcare industry specifically.

Readers are cautioned not to place undue reliance on forward-looking statements
made in this Report, or made in press releases or in oral presentations. Such
forward-looking statements reflect management's analysis only as of


                                     - 25 -
<PAGE>

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 set forth above and described elsewhere in this document, in the 2001
Form 10-K and in other documents the Company files from time to time with the
Securities and Exchange Commission.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Such estimates include, but are not limited to,
allocation of corporate expenses, allowances for uncollectible accounts
receivable and sales returns reserves, inventory reserves, warranty costs,
depreciation and amortization, income taxes and contingencies. Actual results
could differ from those estimates.

CONDITIONS IN ISRAEL

General

      The Company is incorporated under the laws of the State of Israel, and
much of its research and development, manufacturing and significant executive
facilities are located in Israel. Accordingly, the Company is directly affected
by political, economic and military conditions in Israel. The Company's
operations would be materially adversely affected if major hostilities involving
Israel should occur or if trade between Israel and its present trading partners
should be curtailed.

Political Conditions

      Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its neighbors. A state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. Additionally, Israel is currently
experiencing intense violence and terrorism and from time to time in the past,
Israel has experienced civil unrest, primarily in the West Bank and in the Gaza
Strip administered by Israel since 1967. However, a peace agreement between
Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan
was signed in 1994 and, since 1993, several agreements between Israel and
Palestinian representatives have been signed pursuant to which certain
territories in the West Bank and Gaza Strip were handed over to the Palestinian
administration. The implementation of these agreements with the Palestinians
representatives has been subject to difficulties and delays and a resolution of
all of the differences between the parties remains uncertain. Recently the
political conflict with the Palestinians has worsened. Since October 2000, there
has been a significant increase in violence primarily in the West Bank and Gaza
Strip, as well as in Israel itself, which intensified during 2001 and 2002.
Negotiations between the parties have almost entirely ceased. As of the date
hereof, Israel has not entered into any peace agreement with Syria or Lebanon.
The Company cannot predict whether any other agreements will be entered into
between Israel and its neighboring countries, whether a final resolution of the
area's problem will be achieved, the nature of any resolution of this kind, or
whether the current violence will continue and to what extent this violence will
have an adverse impact on Israel's economic development, on the Company's
operations in the future or what other effects it may have upon the Company.

      Certain countries, companies and organizations continue to participate in
a boycott of Israeli firms and others doing business with Israel or with Israeli
companies. Although the Company is restricted from marketing the Company's
product in these countries, the Company does not believe that the boycott has
had a material adverse effect on the Company. However, a prolonged continuation
of the increased hostilities in the region could lead to increased boycotts and
further restrictive laws, policies or practices directed towards Israel or
Israeli businesses, and these could have a material adverse impact on the
Company's business.

      Generally, all male adult citizens and permanent residents of Israel under
the age of 45 are obligated, unless exempt, to perform up to 45 days, or longer
under certain circumstances, of military reserve duty annually. Additionally,
all such residents are subject to being called to active duty at any time under
emergency circumstances and many have been so called over the past few months.
Currently, some of the Company's senior officers and key employees are obligated
to perform annual reserve duty. While the Company has operated effectively under
these requirements since it began operations, no assessment can be made as to
the full impact of such requirements on its


                                     - 26 -
<PAGE>

workforce or business if hostilities continue, and no prediction can be made as
to the effect on the Company of any expansion or reduction of such obligations,
particularly if emergency circumstances occur.

      The September 11, 2001 terror attacks on the U.S. and the military
response by the U.S. and its international allies in Afghanistan, have created
additional uncertainty. The U.S. threatened war against Iraq, and increased
interest in fighting terrorist groups activities in the Middle East, could more
directly affect the Company's business.

Economic Conditions

      Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. The Israeli government has, for these and other reasons,
intervened in various sectors of the economy, employing, among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
controls of wages, prices and foreign currency exchange rates. Until May 1998,
Israel imposed restrictions on transactions in foreign currency. These
restrictions affected the Company's operations in various ways, and also
affected the right of non-residents of Israel to convert into foreign currency
amounts they received in Israeli currency, such as the proceeds of a judgment
enforced in Israel. Despite these restrictions, foreign investors who purchased
shares with foreign currency are able to repatriate in foreign currency both
dividends (after deduction of withholding tax) and the proceeds from any sale of
shares. In 1998, the Israeli currency control regulations were liberalized
significantly, as a result of which Israeli residents generally may freely deal
in foreign currency and non-residents of Israel generally may freely purchase
and sell Israeli currency and assets. There are currently no Israeli currency
control restrictions on remittances of dividends on Ordinary Shares or proceeds
from the sale of Ordinary Shares; however, legislation remains in effect,
pursuant to which currency controls can be imposed by administrative action at
any time. In addition, Israeli residents are required to file reports pertaining
to certain types of actions or transactions.

      The Israeli Government's monetary policy contributed to relative price and
exchange rate stability in recent years, despite fluctuating rates of economic
growth and a high rate of unemployment. There can be no assurance that the
Israeli Government will be successful in its attempts to keep prices and
exchange rates stable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The Company has fixed rate debt of approximately $67,032,000. The Company
believes that a material decrease in interest rates would not have a material
impact on the fair value of this debt.

      The Company has foreign subsidiaries, which sell and manufacture its
products in various markets. As a result, the Company's earnings and cash flows
are exposed to fluctuations in foreign currency exchange rates. The Company
attempts to limit this exposure by selling and linking its products mostly to
the United States dollar.

      The Company also enters into foreign currency hedging transactions to
protect the dollar value of its non-dollar denominated trade receivables and to
protect revenues, mainly in Yen and EURO. The gains and losses on these
transactions are included in the statement of operations or as part of the other
comprehensive loss, as appropriate, in the period in which the changes in the
exchange rate 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.


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<PAGE>

                                   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.

                                        Lumenis Ltd.


                                        /s/ Kevin Morano
                                        ----------------------------------------
Date: November 19, 2002                 By: Kevin Morano
                                        Chief Financial Officer, and Duly
                                        Authorized Officer


                                     - 28 -
<PAGE>

                                 CERTIFICATIONS

I, Yacha Sutton, certify that:

      1)    I have reviewed this quarterly report on Form 10-Q of Lumenis
            Ltd.;

      2)    Based on my knowledge, this quarterly report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this quarterly report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this quarterly report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the registrant as of, and for, the periods presented
            in this quarterly report.


      Date: November 19, 2002           By: /s/ Yacha Sutton
                                            ------------------------------
                                            Yacha Sutton
                                            Chief Executive Officer

I, Kevin Morano, certify that:

      1)    I have reviewed this quarterly report on Form 10-Q/A of Lumenis
            Ltd.;

      2)    Based on my knowledge, this quarterly report does not contain
            any untrue statement of a material fact or omit to state a material
            fact necessary to make the statements made, in light of the
            circumstances under which such statements were made, not misleading
            with respect to the period covered by this quarterly report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this quarterly report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the registrant as of, and for, the periods presented
            in this quarterly report.


      Date: November 19, 2002           By: /s/ Kevin Morano
                                            ------------------------------
                                            Kevin Morano
                                            Chief Financial Officer




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