##### Table of Contents



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

___________________

FORM 10-Q

(Mark One)



|[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

or



|[   ] | Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
|----- | ----------------------------------------------------------------------------------------

For the transition period from ______ to ______

Commission file number 0-18053

LASERSCOPE

(Exact name of Registrant as Specified in Its Charter)


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

3070 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011
(Address of Principal Executive Offices)

Registrants Telephone Number, Including Area Code: (408) 943-0636

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 of Registrants common stock issued and outstanding as of
July 31, 2002 was 16,470,449.



---

TABLE OF CONTENTS



|                              |                                                                                                |                                                       |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements:                                                                 
|                              |                                                                                                | Condensed Consolidated Balance Sheets                
|                              |                                                                                                | Condensed Consolidated Statements Of Operations      
|                              |                                                                                                | Condensed Consolidated Statements of Cash Flows      
|                              |                                                                                                | Notes to Condensed Consolidated Financial Statements:
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations:
|                              |                                                                                                | Results of Operations:                               
|                              |                                                                                                | Liquidity and Capital Resources:                     
|                              |                                                                                                | Risk Factors:                                        
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk:                           
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                     
|                              | Item 2. Changes in Securities                                                                 
|                              | Item 3. Defaults upon Senior Securities                                                       
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                   
|                              | Item 5. Other Items                                                                           
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                   
|EXHIBIT INDEX                
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



---



##### Table of Contents



TABLE OF CONTENTS

|                                |  |                                                                                       |    |                                                      |    |      |    | 
|------------------------------- |  | ------------------------------------------------------------------------------------- | -- | ---------------------------------------------------- | -- | ---- | -- | 
|                                |  |                                                                                       |    |                                                      |    | Page
|                                |  |                                                                                       |    |                                                      |    |     
|PART I.   FINANCIAL INFORMATION |  |                                                                                       | 3  |                                                     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 1.                         |  | Financial Statements (unaudited)                                                      |    |                                                      | 3  |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Condensed Consolidated Balance Sheets                |    |      | 3  | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Condensed Consolidated Statements of Operations      |    |      | 4  | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows      |    |      | 5  | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements |    |      | 6  | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 2.                         |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |    |                                                      | 8  |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Results of Operations                                |    |      | 9  | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Liquidity and Capital Resources                      |    |      | 10 | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                                |  |                                                                                       |    | Risk Factors                                         |    |      | 12 | 
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 3.                         |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                                      | 16 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|PART II.   OTHER INFORMATION    |  |                                                                                       | 16 |                                                     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 1.                         |  | Legal Proceedings                                                                     |    |                                                      | 16 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 2.                         |  | Changes in Securities                                                                 |    |                                                      | 16 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 3.                         |  | Defaults upon Senior Securities                                                       |    |                                                      | 17 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 4.                         |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                      | 17 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 5.                         |  | Other Items                                                                           |    |                                                      | 18 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 6.                         |  | Exhibits and Reports on Form 8-K                                                      |    |                                                      | 18 |     
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|SIGNATURES                      |  |                                                                                       | 19 |                                                     



2



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements:




Laserscope
Condensed Consolidated Balance Sheets
(Unaudited)

|                                                            |                                                      |                             |                                            |         |          |        |              |         |        |        | 
|----------------------------------------------------------- | ---------------------------------------------------- | --------------------------- | ------------------------------------------ | ------- | -------- | ------ | ------------ | ------- | ------ | ------ | 
|                                                            |                                                      |                             |                                            |         | June 30, |        | December 31,
|(thousands)                                                 |                                                      | 2002                        |                                            | 2001   
|                                                            |                                                      |                             |                                            |        
|Assets                                                      |                                                      |                             |                                            |         |          |        |              |        
|Current assets:                                             |                                                      |                             |                                            |         |          |        |              |        
|                                                            | Cash and cash equivalents                            |                             | $                                          | 3,772   |          |        | $            | 3,408   |       
|                                                            | Accounts receivable, net                             |                             |                                            | 10,537  |          |        |              | 8,427   |       
|                                                            | Inventories                                          |                             |                                            | 9,234   |          |        |              | 9,228   |       
|                                                            | Other current assets                                 |                             |                                            | 1,194   |          |        |              | 1,283   |       
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      | Total current assets        |                                            |         | 24,737   |        |              |         | 22,346 |       
|Property and equipment, net                                 |                                                      |                             | 2,082                                      |         |          |        | 2,067        |        
|Goodwill                                                    |                                                      |                             | 655                                        |         |          |        | 655          |        
|Other assets                                                |                                                      |                             | 346                                        |         |          |        | 414          |        
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      |                             | Total assets                               |         | $        | 27,820 |              |         | $      | 25,482 | 
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|Liabilities and Shareholders Equity                        |                                                      |                             |                                            |         |          |        |              |        
|Current liabilities:                                        |                                                      |                             |                                            |         |          |        |              |        
|                                                            | Short-term bank loans                                |                             | $                                          | 1,350   |          |        | $            | 1,135   |       
|                                                            | Accounts payable                                     |                             |                                            | 3,051   |          |        |              | 2,821   |       
|                                                            | Accrued compensation                                 |                             |                                            | 1,973   |          |        |              | 1,588   |       
|                                                            | Deferred revenue                                     |                             |                                            | 1,287   |          |        |              | 1,031   |       
|                                                            | Convertible subordinated debentures, current portion |                             |                                            | 147     |          |        |              |        |       
|                                                            | Other current liabilities                            |                             |                                            | 2,897   |          |        |              | 2,435   |       
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      | Total current liabilities   |                                            |         | 10,705   |        |              |         | 9,010  |       
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|Convertible subordinated debentures, net of current portion |                                                      |                             | 2,853                                      |         |          |        | 3,000        |        
|Obligations under capital leases                            |                                                      |                             | 91                                         |         |          |        | 60           |        
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      | Total long-term liabilities |                                            |         | 2,944    |        |              |         | 3,060  |       
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|Contingencies (Note 5)                                      |                                                      |                             |                                            |         |          |        |              |        
|Shareholders equity:                                       |                                                      |                             |                                            |         |          |        |              |        
|                                                            | Common stock                                         |                             |                                            | 55,104  |          |        |              | 54,712  |       
|                                                            | Accumulated deficit                                  |                             |                                            | (39,762 | )        |        |              | (39,843 | )     
|                                                            | Accumulated other comprehensive loss                 |                             |                                            | (1,046  | )        |        |              | (1,332  | )     
|                                                            | Notes receivable from shareholders                   |                             |                                            | (125    | )        |        |              | (125    | )     
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      |                             | Total shareholders equity                 |         |          | 14,171 |              |         |        | 13,412 | 
|                                                            |                                                      |                             |                                            |         |          |        |              |        
|                                                            |                                                      |                             | Total liabilities and shareholders equity |         | $        | 27,820 |              |         | $      | 25,482 | 
|                                                            |                                                      |                             |                                            |         |          |        |              |        

See Accompanying Notes to Condensed Consolidated Financial Statements



3



---



##### Table of Contents






Laserscope
Condensed Consolidated Statements Of Operations
(Unaudited)

|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |       | 
|--------------------------------------------- | ----------------------------------- | ---- | ------------------ | ----- | ---------------- | ---- | ------ | ----- |  | - | ------ | ----- |  | - | ------ | ----- | 
|                                              |                                     |      | Three months ended |       | Six months ended
|                                              |                                     |      | June 30,           |       | June 30,        
|                                              |                                     |      |                    |       |                 
|(thousands, except per share amounts)         |                                     | 2002 |                    | 2001  |                  | 2002 |        | 2001 
|                                              |                                     |      |                    |       |                  |      |        |      
|Net revenue                                   |                                     | $    | 10,529             |       |                  | $    | 9,302  |       |  | $ | 19,949 |       |  | $ | 17,530 |      
|Cost of sales                                 |                                     |      | 4,957              |       |                  |      | 4,281  |       |  |   | 9,756  |       |  |   | 8,800  |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Gross margin                                  |                                     |      | 5,572              |       |                  |      | 5,021  |       |  |   | 10,193 |       |  |   | 8,730  |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Operating expenses:                           |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|                                              | Research and development            |      |                    | 1,033 |                  |      |        | 978   |  |   |        | 2,049 |  |   |        | 1,791 | 
|                                              | Selling, general and administrative |      |                    | 4,289 |                  |      |        | 3,774 |  |   |        | 7,836 |  |   |        | 7,084 | 
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|                                              |                                     |      | 5,322              |       |                  |      | 4,752  |       |  |   | 9,885  |       |  |   | 8,875  |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Operating income (loss)                       |                                     |      | 250                |       |                  |      | 269    |       |  |   | 308    |       |  |   | (145   | )    
|Interest income (expense) and other, net      |                                     |      | (104               | )     |                  |      | (73    | )     |  |   | (194   | )     |  |   | (131   | )    
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Income (loss) before income taxes             |                                     |      | 146                |       |                  |      | 196    |       |  |   | 114    |       |  |   | (276   | )    
|Provision for income taxes                    |                                     |      | 18                 |       |                  |      | 14     |       |  |   | 33     |       |  |   | 32     |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Net income (loss)                             |                                     | $    | 128                |       |                  | $    | 182    |       |  | $ | 81     |       |  | $ | (308   | )    
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Basic net income (loss) per share             |                                     | $    | 0.01               |       |                  | $    | 0.01   |       |  | $ | 0.00   |       |  | $ | (0.02  | )    
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Diluted net income (loss) per share           |                                     | $    | 0.01               |       |                  | $    | 0.01   |       |  | $ | 0.00   |       |  | $ | (0.02  | )    
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Shares used in basic per share calculations   |                                     |      | 16,335             |       |                  |      | 15,902 |       |  |   | 16,262 |       |  |   | 15,893 |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      
|Shares used in diluted per share calculations |                                     |      | 18,688             |       |                  |      | 19,029 |       |  |   | 18,511 |       |  |   | 15,893 |      
|                                              |                                     |      |                    |       |                  |      |        |       |  |   |        |       |  |   |        |      

See Accompanying Notes to Condensed Consolidated Financial Statements



4



---



##### Table of Contents






Laserscope
Condensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |        |     |      |  
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------- | ------ | ---------------- | ------ | ----- | ------ | --- | ---- | -
|                                                  |                                                                                          |                                                       |                           |        | Six Months Ended
|                                                  |                                                                                          |                                                       |                           |        | June 30,        
|                                                  |                                                                                          |                                                       |                           |        |                 
|(thousands)                                       |                                                                                          | 2002                                                  |                           | 2001  
|                                                  |                                                                                          |                                                       |                           |       
|Cash flows from operating activities:             |                                                                                          |                                                       |                           |        |                  |        |       |       
|                                                  | Net income (loss)                                                                        |                                                       | $                         | 81     |                  |        | $     | (308   | )  
|                                                  | Adjustments to reconcile net income (loss) to
net cash provided by operating activities: |                                                       |                           |        |                  |        |       |        |    
|                                                  |                                                                                          | Depreciation and amortization                         |                           |        | 605              |        |       |        | 559 |     
|                                                  |                                                                                          | Changes in assets and liabilities:                    |                           |        |                  |        |       |        |     |     
|                                                  |                                                                                          |                                                       | Accounts receivable, net  |        |                  | (1,956 | )     |        |     | (101 | )
|                                                  |                                                                                          |                                                       | Inventories               |        |                  | 97     |       |        |     | (285 | )
|                                                  |                                                                                          |                                                       | Other current assets      |        |                  | 122    |       |        |     | (29  | )
|                                                  |                                                                                          |                                                       | Accounts payable          |        |                  | 214    |       |        |     | 255  |  
|                                                  |                                                                                          |                                                       | Accrued compensation      |        |                  | 385    |       |        |     | 317  |  
|                                                  |                                                                                          |                                                       | Deferred revenue          |        |                  | 257    |       |        |     | 571  |  
|                                                  |                                                                                          |                                                       | Other current liabilities |        |                  | 382    |       |        |     | 249  |  
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Net cash provided by operating activities         |                                                                                          |                                                       | 187                       |        |                  |        | 1,228 |       
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Cash flows from investing activities:             |                                                                                          |                                                       |                           |        |                  |        |       |       
|                                                  | Acquisition of property and equipment                                                    |                                                       |                           | (372   | )                |        |       | (547   | )  
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Net cash used in investing activities             |                                                                                          |                                                       | (372                      | )      |                  |        | (547  | )     
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Cash flows from financing activities:             |                                                                                          |                                                       |                           |        |                  |        |       |       
|                                                  | Payments on obligations under capital leases                                             |                                                       |                           | (133   | )                |        |       | (184   | )  
|                                                  | Proceeds from the sale of common stock under stock plans                                 |                                                       |                           | 393    |                  |        |       | 18     |    
|                                                  | Proceeds from bank loans                                                                 |                                                       |                           | 5,020  |                  |        |       | 6,244  |    
|                                                  | Repayment of bank loans                                                                  |                                                       |                           | (4,805 | )                |        |       | (6,052 | )  
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Net cash provided by financing activities         |                                                                                          |                                                       | 475                       |        |                  |        | 26    |       
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Effect of exchange rate changes on cash           |                                                                                          |                                                       | 74                        |        |                  |        | (403  | )     
|Net increase in cash and cash equivalents         |                                                                                          |                                                       | 364                       |        |                  |        | 304   |       
|Cash and cash equivalents, beginning of period    |                                                                                          |                                                       | 3,408                     |        |                  |        | 2,698 |       
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Cash and cash equivalents, end of period          |                                                                                          | $                                                     | 3,772                     |        |                  | $      | 3,002 |       
|                                                  |                                                                                          |                                                       |                           |        |                  |        |       |       
|Supplemental disclosure of cash flow information: |                                                                                          |                                                       |                           |        |                  |        |       |       
|                                                  |                                                                                          | Cash paid during the period for:                      |                           |        |                  |        |       |        |     |     
|                                                  |                                                                                          |                                                       | Interest                  |        | $                | 78     |       |        | $   | 201  |  
|                                                  |                                                                                          |                                                       | Income taxes              |        | $                |       |       |        | $   | 8    |  
|                                                  |                                                                                          | Non-cash increase in obligations under capital leases |                           | $      | 172              |        |       | $      |    |     

See Accompanying Notes to Condensed Consolidated Financial Statements



5



---



##### Table of Contents






Laserscope Notes to Condensed Consolidated Financial Statements:

1. Basis of presentation

The accompanying unaudited condensed consolidated financial statements
include Laserscope (the Company, management, we, us, our) and
its wholly and majority-owned subsidiaries. All intercompany transactions
and balances have been eliminated. While the financial information in
this report is unaudited, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position and results of operations as of and for the
periods indicated have been recorded. We suggest that these consolidated
financial statements be read in conjunction with the consolidated
financial statements and notes for the year ended December 31, 2001
included in the Companys annual report on Form 10-K for the year ended
December 31, 2001. The results of operations for the three and six month
periods ended June 30, 2002 are not necessarily indicative of the results
expected for the full year.

2. Inventories

Inventories were comprised of the following (in thousands):

|                                   |  |          |       |              |  |   |       | 
|---------------------------------- |  | -------- | ----- | ------------ |  | - | ----- | 
|                                   |  | June 30, |       | December 31,
|                                   |  | 2002     |       | 2001        
|                                   |  |          |       |             
|Sub-assemblies and purchased parts |  | $        | 4,201 |              |  | $ | 4,743 | 
|Work-in-process                    |  |          | 2,748 |              |  |   | 2,345 | 
|Finished goods                     |  |          | 2,285 |              |  |   | 2,140 | 
|                                   |  |          |       |              |  |   |       | 
|                                   |  | $        | 9,234 |              |  | $ | 9,228 | 
|                                   |  |          |       |              |  |   |       | 



6



---



##### Table of Contents



3. Net income (loss) per share

Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share is computed by giving
effect to all dilutive potential common shares, including options,
warrants, and convertible debentures. A reconciliation of the numerator
and denominator used in the calculation of historical basic and diluted
net income (loss) per share follows:

|             |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |        |  
|------------ | -------------------------------------------------------------------------------------------------------- | ---- | ------------------ | ------ | ---------------- | ---- | - | ------ |  |  | - | ------ |  |  | - | ------ | -
|             |                                                                                                          |      | Three months ended |        | Six months ended
|             |                                                                                                          |      | June 30,           |        | June 30,        
|             |                                                                                                          |      |                    |        |                 
|(thousands)  |                                                                                                          | 2002 |                    | 2001   |                  | 2002 |   | 2001  
|             |                                                                                                          |      |                    |        |                  |      |   |       
|Numerator:   |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       
|             | Net income (loss) used in computing
basic net income (loss) per share                                    |      | $                  | 128    |                  |      | $ | 182    |  |  | $ | 81     |  |  | $ | (308   | )
|             | Add: After-tax equivalent of interest
expense on 8% convertible debentures                               |      | $                  |       |                  |      | $ | 60     |  |  | $ |       |  |  | $ |       |  
|             |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       
|             | Net income (loss) used in computing
diluted net income (loss) per share                                  |      | $                  | 128    |                  |      | $ | 242    |  |  | $ | 81     |  |  | $ | (308   | )
|             |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       
|Denominator: |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       
|             | Weighted average number of common
shares outstanding used in computing
basic net income (loss) per share |      |                    | 16,335 |                  |      |   | 15,902 |  |  |   | 16,262 |  |  |   | 15,893 |  
|             | Add: dilutive potential common share used
in computing dilutive net income (loss)
per share              |      |                    | 2,353  |                  |      |   | 3,127  |  |  |   | 2,249  |  |  |   |       |  
|             |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       
|             | Total weighted-average number of shares
used in computing diluted net
income (loss) per share            |      |                    | 18,688 |                  |      |   | 19,029 |  |  |   | 18,511 |  |  |   | 15,893 |  
|             |                                                                                                          |      |                    |        |                  |      |   |        |  |  |   |        |  |  |   |       

The following outstanding options and warrants (prior to the application
of the treasury stock method) and convertible debentures (on an
as-converted basis) were excluded from the computation of diluted net
income (loss) per common share for the periods ended June 30, 2002 and
2001 because including them would have had an antidilutive effect:

|                                  |  |                    |       |                  |  |      |       |      |  |  |       |  |  |  |       | 
|--------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                                  |  | Three months ended |       | Six months ended
|                                  |  | June 30,           |       | June 30,        
|                                  |  |                    |       |                 
|(thousands)                       |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                  |  |                    |       |                  |  |      |       |     
|Options to purchase common stock  |  |                    | 1,156 |                  |  |      | 2,535 |      |  |  | 1,329 |  |  |  | 2,779 | 
|Warrants to purchase common stock |  |                    |      |                  |  |      |      |      |  |  |      |  |  |  | 459   | 
|Convertible debentures            |  |                    | 2,400 |                  |  |      |      |      |  |  | 2,400 |  |  |  | 2,400 | 
|                                  |  |                    |       |                  |  |      |       |      |  |  |       |  |  |  |       | 
|                                  |  |                    | 3,556 |                  |  |      | 2,535 |      |  |  | 3,729 |  |  |  | 5,638 | 
|                                  |  |                    |       |                  |  |      |       |      |  |  |       |  |  |  |       | 



7



---



##### Table of Contents



4. Comprehensive income (loss)

Total comprehensive income (loss) during the periods ended June 30, 2002
and 2001 consisted of (in thousands):

|                            |  |                    |     |                  |  |      |     |      |  |   |     |  |  |   |      |  
|--------------------------- |  | ------------------ | --- | ---------------- |  | ---- | --- | ---- |  | - | --- |  |  | - | ---- | -
|                            |  | Three months ended |     | Six months ended
|                            |  | June 30,           |     | June 30,        
|                            |  |                    |     |                 
|                            |  | 2002               |     | 2001             |  | 2002 |     | 2001
|                            |  |                    |     |                  |  |      |     |     
|Net income (loss)           |  | $                  | 128 |                  |  | $    | 182 |      |  | $ | 81  |  |  | $ | (308 | )
|Translation adjustments     |  |                    | 376 |                  |  |      | (82 | )    |  |   | 286 |  |  |   | (403 | )
|                            |  |                    |     |                  |  |      |     |      |  |   |     |  |  |   |      |  
|Comprehensive income (loss) |  | $                  | 504 |                  |  | $    | 100 |      |  | $ | 367 |  |  | $ | (711 | )
|                            |  |                    |     |                  |  |      |     |      |  |   |     |  |  |   |      |  

5. Contingencies

The Company is at times a party to legal proceedings arising in the
ordinary course of its business. While it is not feasible to predict or
determine the outcome of the actions brought against the Company,
management believes that the ultimate resolution of these claims will not
ultimately have a material adverse effect on the Companys financial
position, results of operations, or future cash flows.

6. Recent accounting pronouncements

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which is effective for fiscal years beginning after December 15,
2001. SFAS No. 142 requires, among other things, the discontinuance of
goodwill amortization. The standard also requires a change in the method
of testing for the impairment of long-lived assets, including goodwill,
from the method previously used by the Company as of December 31, 2001.
Adoption of SFAS No. 142 has not had a significant impact on our financial
statements.




Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations:

INTRODUCTORY STATEMENT

Some of the statements in this Quarterly Report on Form 10-Q, including but not
limited to Managements Discussion and Analysis of Financial Condition and
Results of Operations, and elsewhere in this document are forward-looking
statements within the meaning of the Private Securities Litigation Act of 1995.
These statements relate to future events or our future financial performance
and involve known and unknown risks, uncertainties and other factors that may
cause our actual results, performance or achievements to be materially
different from those expressed or implied by any forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
may, will, could, would, should, expect, plan, anticipate,
intend, believe, estimate, predict, potential or continue or the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. We refer you
to the factors described under the heading Risk Factors in this Quarterly
Report on Form 10-Q as well as to our Annual Report on Form 10-K for the year
ended December 31, 2001 under the heading Risk
Factors. Readers are cautioned not to place undue reliance on
forward-looking statements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of those statements. We are
under no duty to update any of the forward-looking statements after the date of
this document to reflect the occurrence of unanticipated events.



8



---



##### Table of Contents






Results of Operations:

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes included in Part I  Item 1 of
this Quarterly Report and the audited financial statements and notes contained
in the Companys Annual Report on Form 10-K for the year ended December 31,
2001 and the accompanying Managements Discussion and Analysis of Financial
Condition and Results of Operations.

The following table contains selected income statement information, which
serves as the basis of the discussion of the Companys results of operations
for the quarter and six months ended June 30, 2002 (in thousands, except for
percentages):

|                         |                                   |   |                    |       |               |  |        |    |                  |   |               |       |        |  |      |    |        |  |      |    |        |   |        |       |  |  |     |    |   |   |        |       |  |  |     |    |   |  |    |    |   
|------------------------ | --------------------------------- | - | ------------------ | ----- | ------------- |  | ------ | -- | ---------------- | - | ------------- | ----- | ------ |  | ---- | -- | ------ |  | ---- | -- | ------ | - | ------ | ----- |  |  | --- | -- | - | - | ------ | ----- |  |  | --- | -- | - |  | -- | -- | --
|                         |                                   |   | Three months ended |       |               |  |        |    | Six months ended |   |               |       |       
|                         |                                   |   |                    |       |               |  |        |    |                  |   |               |       |       
|                         |                                   |   | June 30, 2002      |       | June 30, 2001 |  |        |    | June 30, 2002    |   | June 30, 2001 |       |       
|                         |                                   |   |                    |       |               |  | %      |    |                  |   |               |       | %     
|                         |                                   |   | Amount             |       | %(a)          |  | Amount |    | %(a)             |   | Change        |       | Amount |  | %(a) |    | Amount |  | %(a) |    | Change
|                         |                                   |   |                    |       |               |  |        |    |                  |   |               |       |        |  |      |    |        |  |      |    |       
|Revenues from sales of:  |                                   |   |                    |       |               |  |        |    |                  |   |               |       |        |  |      |    |        |  |      |    |        |   |        |       |  |  |     |    |   |   |        |       |  |  |     |    |   |  |    |   
|                         | Lasers                            |   | $                  | 4,700 |               |  |        | 45 | %                |   | $             | 4,193 |        |  |      | 45 | %      |  |      | 12 | %      |   | $      | 8,778 |  |  |     | 44 | % |   | $      | 8,246 |  |  |     | 47 | % |  |    | 6  | % 
|                         | Instruments &
disposable supplies |   |                    | 4,412 |               |  |        | 42 | %                |   |               | 3,669 |        |  |      | 39 | %      |  |      | 20 | %      |   |        | 8,309 |  |  |     | 42 | % |   |        | 6,365 |  |  |     | 36 | % |  |    | 31 | % 
|                         | Service                           |   |                    | 1,417 |               |  |        | 13 | %                |   |               | 1,440 |        |  |      | 16 | %      |  |      | (2 | )%     |   |        | 2,862 |  |  |     | 14 | % |   |        | 2,919 |  |  |     | 17 | % |  |    | (2 | )%
|                         |                                   |   |                    |       |               |  |        |    |                  |   |               |       |        |  |      |    |        |  |      |    |        |   |        |       |  |  |     |    |   |   |        |       |  |  |     |    |   |  |    |   
|Total net revenues       |                                   | $ | 10,529             |       |               |  | 100    | %  |                  | $ | 9,302         |       |        |  | 100  | %  |        |  | 13   | %  |        | $ | 19,949 |       |  |  | 100 | %  |   | $ | 17,530 |       |  |  | 100 | %  |   |  | 14 | % 
|Gross margin             |                                   | $ | 5,572              |       |               |  | 53     | %  |                  | $ | 5,021         |       |        |  | 54   | %  |        |  | 11   | %  |        | $ | 10,193 |       |  |  | 51  | %  |   | $ | 8,730  |       |  |  | 50  | %  |   |  | 17 | % 
|Research & development   |                                   | $ | 1,033              |       |               |  | 10     | %  |                  | $ | 978           |       |        |  | 11   | %  |        |  | 6    | %  |        | $ | 2,049  |       |  |  | 10  | %  |   | $ | 1,791  |       |  |  | 10  | %  |   |  | 14 | % 
|Selling, general & admin |                                   | $ | 4,289              |       |               |  | 41     | %  |                  | $ | 3,774         |       |        |  | 41   | %  |        |  | 14   | %  |        | $ | 7,836  |       |  |  | 39  | %  |   | $ | 7,084  |       |  |  | 40  | %  |   |  | 11 | % 



---

|(a) |  | expressed as a percentage of total net revenues.
|--- |  | ------------------------------------------------

Net revenues increased for the three month and six month periods ended June 30,
2002 relative to the corresponding periods of 2001.

Revenues from the sales of laser systems increased during the three-month and
six-month periods ended June 30, 2002 relative to the same periods in 2001.
While unit sales increased 29% and 26%, respectively, for the three and
six-month periods ended June 30, 2002 relative to the same periods in 2001,
average selling prices decreased. This price decrease is due to a change in
the mix of laser types sold, as well as our distribution agreement with
McKesson/HBOC. The distribution arrangement with McKesson Corp. was
implemented during the first quarter of 2001, and unit volumes through that
channel were lower in the start-up period than in the first or second quarters
of 2002. The Company expects that sales of aesthetic lasers will continue to
be a major source of revenue. In addition, as the year progresses, we
anticipate increasing the sales of Niagara PVTM lasers. The Niagara PV is a
surgical laser used for the treatment of benign prostatic hyperplasia (BPH).
Our first revenue shipments of the Niagara PV laser were in the three month
period ended March 31, 2002 during which we sold six units. In the three month
period ended June 30, 2002, we sold nine of these units.

Revenues from the sales of instrumentation and disposable supplies increased
during the three and six months ended June 30, 2002 compared to the
corresponding periods in 2001. The increases are driven by the higher laser
unit volumes and the associated increase in volume of accessories that are sold
with lasers. The Company expects revenues from the



9



---



##### Table of Contents



sales of instrumentation and disposable supplies to incrementally increase as
we ship more Niagara PV lasers and experience the corresponding recurring
revenue from sales of the Niagara PVs single-use fiber optic energy delivery
device.

Laserscopes service revenues decreased during the three and six-month periods
ended June 30, 2002 compared to the same periods in 2001. Decreased service
revenues were primarily experienced in the domestic region as a result of a
reduction in the number of billable service calls performed. The Company
believes that future service revenues primarily depend on increases to the
installed base of lasers as well as the acceptance of its service contracts by
its customers.

Gross margin as a percentage of revenues during the quarter and six months
ended June 30, 2002 decreased one percentage point and increased one percentage
point, respectively, relative to the corresponding periods of 2001. Laserscope
expects that gross margin as a percentage of revenues for the remainder of 2002
may vary from quarter to quarter as product and distribution mix varies.

Research and development expenses are the result of activities related to the
development of new laser, instrumentation and disposable products and the
enhancement of Laserscopes existing products. These expenses increased during
the three month and six month periods ended June 30, 2002 compared to the same
periods in 2001. The increase was driven by product development activity in
the United States on the new Niagara PV laser as well as the Aura, Lyra, and
Venus I-series lasers. While development of these lasers is nearly complete,
the Company expects that sustaining engineering, clinical development, and
development of new aesthetic and surgical products will cause amounts spent in
research and development to decline only marginally in absolute terms in the
remainder of the year relative to the prior quarters level.

Selling, general and administrative expenses increased during the quarter and
six month periods ended June 30, 2002, compared to the corresponding periods in
2001. This was driven by expenses relating to the promotion of the Niagara PV
laser and to a lesser extent, increased expenses in support of our aesthetic
lasers. Laserscope expects amounts spent in selling, general and
administrative expenses to increase during the remainder of 2002 as variable
selling and marketing expenses increase.




Liquidity and Capital Resources:

The following table contains selected balance sheet information that serves as
the basis of the discussion of the Companys liquidity and capital resources at
June 30, 2002 and for the six months then ended (in thousands):

|                          |  |          |        |              |  |   |        | 
|------------------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                          |  | June 30, |        | December 31,
|                          |  | 2002     |        | 2001        
|                          |  |          |        |             
|Cash and cash equivalents |  | $        | 3,772  |              |  | $ | 3,408  | 
|Total assets              |  | $        | 27,820 |              |  | $ | 25,842 | 
|Total liabilities         |  | $        | 13,649 |              |  | $ | 12,070 | 
|Net working capital       |  | $        | 14,032 |              |  | $ | 13,336 | 



10



---



##### Table of Contents



The increase in cash and cash equivalents was due primarily to cash provided by
operating and financing activities, partially offset by cash used by investing
activities.

Cash provided in operating activities totaled $0.2 million. This was the
combined result of the following sources: depreciation and amortization   $0.6
million; increase in accrued compensation  $0.4 million; increase in other
current liabilities  $0.4 million; increase in deferred revenue  $0.3
million; increase in accounts payable  $0.2 million;
decrease in other current
assets  $0.1 million; decrease in inventory  $0.1 million; and net income 
$0.1. These sources were partially offset by an increase in accounts
receivable  $2.0 million.

Cash used in investing activities consisted of capital expenditures of $0.4
million.

Cash provided by financing activities consisted of sale of common stock under
stock plans  $0.4 million; and an increase in short-term borrowing  $0.2
million; which was partially offset by payments on obligations under capital
leases  $0.1 million.

Laserscope has in place an asset-based line of credit that provides for
borrowing up to $5.0 million and expires in September 2002. Credit is extended
based on eligible accounts receivable and inventory. At June 30, 2002, we had
approximately $4.1 million in borrowing capacity available against borrowings
of $1.4 million outstanding and $1.1 million in letter of credit reserve
requirements. This resulted in $1.6 million of unused borrowing capacity. As
of June 30, 2002 we were in compliance with all covenants associated with the
line of credit and our convertible debentures. We anticipate that future
changes in cash and working capital will be dependent on a number of factors
including:



| |  | our ability to effectively manage inventory and accounts receivable;                                              
|- |  | ------------------------------------------------------------------------------------------------------------------
| 
| |  | our ability to anticipate and adapt to the changes in our industry such as new and alternative medical procedures;
| 
| |  | our level of profitability;                                                                                       
| 
| |  | our determination to acquire or invest in products and businesses complementary to ours; and                      
| 
| |  | the market price for our common stock as it affects the exercise of stock options.                                

We have historically financed acquisitions using our existing cash resources.
While we believe our existing cash resources, including our bank line of
credit, will be sufficient to fund our operating needs for the next twelve
months, additional financing may be required for our currently envisioned
long-term needs.

There can be no assurance that any additional financing will be available on
terms acceptable to us, or at all. In addition, future equity financings could
result in dilution to our shareholders, and future debt financings could result
in certain financial and operational restrictions.



11



---



##### Table of Contents






Risk Factors:

Our business, financial condition and results of operations have been, and in
the future may be, affected by a variety of factors, including those set forth
below and elsewhere in this report.

Limited Working Capital; Potential Need to Raise Additional Capital.

Current and anticipated demand for our products as well as procurement and
production affect our need for capital. Changes in these or other factors could
have a material impact on capital requirements and may require us to raise
additional capital.

History of Losses; Uncertain Future Profitability.

There can be no assurance that we can achieve or maintain profitability on a
quarterly basis or at all.

Government Regulation; Uncertainty of Obtaining Regulatory Approval.

Government regulation in the United States and other countries is a significant
factor in the development, manufacturing and marketing of many of our products.
There can be no assurance that the appropriate regulatory agencies will grant
us the clearance to market our future products on a timely basis, or at all.

Insurance Reimbursement.

Demand for certain of our products depends on government and private insurance
reimbursement of hospitals and physicians for health care costs, including, but
not limited to, reimbursement of capital equipment costs. Reductions or delays
in such insurance coverage or reimbursement may negatively impact hospitals
and physicians decisions to purchase our products, adversely affecting our
future sales.

Uncertainty of Technological Change; Uncertainty of New Product Development and
Acceptance.

We operate in an industry that is subject to rapid technological change. Our
ability to remain competitive and future operating results will depend upon,
among other things,
our ability to anticipate and respond rapidly to such change by developing,
manufacturing and marketing technologically innovative products in sufficient
quantities at acceptable costs to meet such demand. Without new products and
enhancements, our existing products will likely become technologically
obsolete, which could result in the write-off of inventory as well as
diminished revenues. Therefore, we intend to continue to invest significant
amounts in research and development.

Dependence on Single-Source Suppliers and Certain Third Parties.

Certain of the components used in our laser products, including certain optical
components, are purchased from single sources. While we believe that most of
these components are available from alternate sources, an interruption of these
or other supplies could adversely affect our ability to manufacture lasers.

Competition.

We compete in the non-ophthalmic surgical segment of the worldwide medical
laser market. In this market, lasers are used in hospital operating rooms,
outpatient surgery centers and individual physician offices for a wide variety
of procedures. This market is highly competitive. Our competitors are numerous
and include some of the worlds largest organizations as well



12



---



##### Table of Contents



as smaller, highly-specialized firms. We cannot assure that we can compete
successfully against these organizations.

Reliance on Patents and Licenses.

We cannot assure that any patents or licenses that we hold or that may be
issued as a result of our patent applications will provide any competitive
advantages for our products. Nor can we assure that any of the patents that we
now hold or may hold in the future will not be successfully challenged,
invalidated or circumvented in the future. In addition, we cannot assure that
competitors, many of which have substantial resources and have made substantial
investments in competing technologies, will not seek to apply for and obtain
patents that will prevent, limit or interfere with our ability to make, issue,
use and sell our products.

Failure to Attract or Retain Key Personnel Can Adversely Affect Results.

We depend upon the efforts and abilities of a number of current key personnel.
If we are unable to attract and retain key employees it would have a material
adverse effect on our business, financial condition and results of operations.

Reliance on Key Customers.

In December 2000, Laserscope and McKesson Corporation (McKesson) entered into
a five year agreement whereby McKesson would obtain exclusive distribution
rights for the Companys aesthetic product lines to doctors offices in the
United States. If we are unable to maintain a favorable relationship with
McKesson or if McKesson encounters financial difficulties, it would have a
material adverse effect on our business, financial condition, results of
operations, and future cashflows.

Fluctuations in Quarterly Operating Results.

A number of factors affect our quarterly financial results including the timing
of shipments and orders. Our laser products are relatively expensive pieces of
medical capital equipment and the precise shipment date of specific units can
have a marked effect on our results of operations on a quarterly basis. Any
delay in product shipments near the end of a quarter could cause our quarterly
results to fall short of anticipated levels. Furthermore, to the extent we
receive orders near the end of a quarter, we may not be able to fulfill the
order during the balance of that same quarter. Moreover, we typically receive
a disproportionate percentage of orders toward the end of each quarter. To the
extent that we do not receive anticipated orders or orders are delayed beyond
the end of the applicable quarter, our results may be adversely affected and
may be unpredictable from quarter to quarter. In addition, because a
significant portion of our revenues in each quarter result from orders received
in that quarter, we base our production, inventory and operating expenditure
levels on anticipated revenue levels. Thus, if sales do not occur when
expected, expenditure levels could be disproportionately high and operating
results for that quarter and potentially future quarters, would be adversely
affected. We cannot assure that Laserscope will accomplish revenue growth or
profitability on a quarterly or annual basis. Nor can we assure that revenue
growth or profitability will not fluctuate significantly from quarter to
quarter.

Product Liability Risk; Limited Insurance Coverage.

Our business has significant risks of product liability claims. We have
experienced product liability claims from time to time, which we believe are
ordinary for our business. While we



13



---



##### Table of Contents



cannot predict or determine the outcome of the actions brought against us, we
believe that these actions will not ultimately have a material adverse impact
on Lasercopes financial position, results of operations or future cash flows.

At present, we maintain product liability insurance on a claims made basis
with coverage of $10.0 million in the aggregate with a deductible of $0.1
million per occurrence and an annual maximum aggregate deductible of $0.5
million. We cannot assure that such insurance coverage will be available to us
in the future at a reasonable cost, if at all. Nor can we assure that other
claims will not be brought against us in excess of our insurance coverage.

Factors Affecting Financial Results and Stock Price.

A number of factors affect our financial results and stock price including, but not limited to:



| |  | product mix;                                                                                                                                                                                                  
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | competitive pricing pressures;                                                                                                                                                                                
| 
| |  | material costs;                                                                                                                                                                                               
| 
| |  | revenue and expenses related to new products and enhancements to existing
products; and delays in customer purchases in anticipation of new products or
product enhancements by Laserscope or its competitors.

The market price of our common stock may be subject to significant
fluctuations. These fluctuations may be due to factors specific to Laserscope,
such as:



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

The stock market has from time to time experienced extreme price and volume
fluctuations, particularly among stocks of high technology companies, which, on
occasion, have been unrelated to the operating performance of particular
companies. Factors not directly related to Laserscopes performance, such as
negative industry reports or disappointing earnings announcements by publicly
traded competitors, may have an adverse impact on the market price of our
common stock.

As of July 31, 2002, we had 16,470,449 shares of outstanding common stock. The
sale of a substantial number of shares of common stock or the perception that
such sales could occur, could adversely affect prevailing market prices for our
common stock.

International Business.

We intend to continue our operations outside of the United States and
potentially to enter additional international markets. These activities
require significant management attention and financial resources and further
subject us to the risks of operating internationally.

Legal Proceedings.

Laserscope is a party to a number of legal proceedings arising in the ordinary
course of business. While it is not feasible to predict or determine the
outcome of the actions brought against us, we believe that the ultimate
resolution of these claims will not have a material adverse effect on
Laserscopes financial position, results of operations, or future cash flows.



14



---



##### Table of Contents



Interest Rate Risk.

(See Item 3.  Quantitative and Qualitative Disclosures About Market Risk in this
Quarterly Report on Form 10-Q.)

Warranty Obligations.

We have a direct field service organization that provides service for our
products. We generally provide a twelve month warranty on our laser systems.
After the warranty period, maintenance and support is provided on a variety of
service contract bases or on an individual call basis. We also have a 99.0%
Uptime Guarantee on our laser systems. Under provisions of this guarantee, we
extend the term of the related warranty or service contract if specified system
uptime levels are not maintained. Although most systems covered by this
guarantee have achieved a 99.0% uptime rate to date, we cannot assure that we
can maintain such uptime rates in the future.

No Dividends.

We have never paid cash dividends on our common stock and do not anticipate
paying cash dividends on the common stock in the foreseeable future. The
payment of dividends on the common stock will depend on our earnings, financial
condition and other business and economic factors affecting us at such time as
the Board of Directors may consider relevant.

Penny Stock Rules.

Our common stock is traded on the National Association of Securities Dealers
Automated Quotation (NASDAQ) National Market System, which requires that a
company have, among other things, a minimum bid price of $1.00 in order to
qualify for continued listing. If we fail to maintain our listing for our
common stock on the NASDAQ National Market System, and no other exclusion from
the definition of penny stock under the Exchange Act is available, any
brokers engaging in transactions in our securities would be required to provide
their customers with a risk disclosure document, the compensation of the
broker/dealer in the transaction and monthly account statements showing the
market values of our securities held in the customers accounts. The bid and
offer quotations and compensation information must be provided prior to
effecting the transaction and must be contained on the customers confirmation.
If brokers become subject to the penny stock rules when engaging in
transactions in our securities, they would become less willing to engage in
such transactions, thereby making it more difficult for shareholders to dispose
of their shares of Laserscope common stock.

Dilution.

Shareholders may experience dilution in the net tangible book value of their
investment upon the exercise of outstanding options and warrants granted under
Laserscopes stock option plans and other options, warrants and outstanding
convertible securities.

Other.

Other risks are detailed from time to time in our press releases and other
public disclosure filings with the United States Securities and Exchange
Commission (SEC), copies of which are available upon request from the
Company.



15



---



##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures About Market Risk:

Laserscope is exposed to a variety of risks, including changes in interest
rates affecting the return on its investments, outstanding debt balances and
foreign currency fluctuations. In the normal course of business, the Company
employs established policies and procedures to manage its exposure to
fluctuations in interest rates and foreign currency values.

Interest Rate Risk

Laserscopes exposure to market rate risk for changes in interest rates relates
primarily to our outstanding debt. In 2002 and 2001 we did not use derivative
financial instruments. We invest our excess cash in money market funds. Our
debt financings consist of convertible debentures and bank loans requiring
either fixed or variable rate interest payments. Investments in and borrowings
under both fixed-rate and floating-rate interest-earning instruments carry a
degree of interest rate risk. On the investment side, fixed-rate securities
may have their fair market value adversely affected due to a rise in interest
rates, while floating-rate securities may produce less income than expected if
interest rates fall. In addition, our future investment income may fall short
of expectations due to changes in interest rates or we may suffer losses in
principal if forced to sell securities that have declined in market value due
to changes in interest rates. On the debt side, borrowings that require
fixed-rate interest payments require greater than current market rate interest
payments if interest rates fall, while floating rate borrowings may require
greater interest payments if interest rates rise. Additionally, Laserscopes
future interest expense may be greater than expected due to changes in interest
rates.

Foreign Currency Risk

International revenues were 28% and 26% of total revenues in the three and six
month periods ended June 30, 2002, compared to 29% and 34% during the
comparable periods in 2001. International sales are made through international
distributors and wholly-owned subsidiaries with payments to the Company
typically denominated in the local currencies of the United Kingdom and France,
and in U.S. dollars in the rest of the world. Our international business is
subject to risks typical of an international business, including, but not
limited to, differing economic conditions, changes in political climate,
differing tax structures, other regulations and restrictions, and foreign
exchange rate volatility. Accordingly, our future results could be materially
adversely affected by changes in these or other factors. We do not engage in
hedging transactions for speculative or trading purposes.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings

The Company is a party to a number of legal proceedings arising in the ordinary
course of business. While it is not feasible to predict or determine the
outcome of the actions brought against it, we believe that the ultimate
resolution of these claims will not have a material adverse effect on our
financial position, results of operations, or future cash flows.




Item 2. Changes in Securities

Not applicable.



16



---



##### Table of Contents






Item 3. Defaults upon Senior Securities

Not applicable.




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



| | (a) |  | The annual meeting of shareholders was held on June 21, 2002.                                                         
| | --- |  | ----------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The first matter voted upon at the meeting was the election of
directors and the results of that vote were as follows:

|                          |  |     |            |          |  |           |         |            |  |  |   |  |  |             |   | 
|------------------------- |  | --- | ---------- | -------- |  | --------- | ------- | ---------- |  |  | - |  |  | ----------- | - | 
|                          |  |     |            |          |  |           |         |            |  |  |   |  |  | Present but
|                          |  | For |            | Withheld |  | Abstained |         | Not Voting
|                          |  |     |            |          |  |           |         |           
|James R. Baumgardt        |  |     | 15,083,346 |          |  |           | 183,582 |            |  |  | 0 |  |  |             | 0 | 
|Robert C. Pearson         |  |     | 15,083,346 |          |  |           | 183,582 |            |  |  | 0 |  |  |             | 0 | 
|Rodney Perkins, M.D.      |  |     | 15,082,946 |          |  |           | 183,982 |            |  |  | 0 |  |  |             | 0 | 
|Robert J. Pressley, Ph.D. |  |     | 15,082,946 |          |  |           | 183,982 |            |  |  | 0 |  |  |             | 0 | 
|Eric M. Reuter            |  |     | 15,083,346 |          |  |           | 183,582 |            |  |  | 0 |  |  |             | 0 | 



| | (c) |  | The second matter voted upon at the meeting and the results of that
vote were as follows:
| | --- |  | -----------------------------------------------------------------------------------------

|                                                                                                                                                                                                        |  |     |            |         |  |           |         |            |  |  |        |  |  |             |   | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | ------- |  | --------- | ------- | ---------- |  |  | ------ |  |  | ----------- | - | 
|                                                                                                                                                                                                        |  |     |            |         |  |           |         |            |  |  |        |  |  | Present but
|                                                                                                                                                                                                        |  | For |            | Opposed |  | Abstained |         | Not Voting
|                                                                                                                                                                                                        |  |     |            |         |  |           |         |           
|To authorize an
amendment to the
Companys Articles of
Incorporation to increase
the number of shares of
Common Stock authorized
for issuance by 5,000,000 shares to
an aggregate of 30,000,000 shares. |  |     | 14,460,925 |         |  |           | 715,615 |            |  |  | 90,388 |  |  |             | 0 | 



| | (d) |  | The third matter voted upon at the meeting and the results of that
vote were as follows:
| | --- |  | ----------------------------------------------------------------------------------------

|                                                                                                                                                                                  |  |     |            |         |  |           |         |            |  |  |        |  |  |             |   | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | ------- |  | --------- | ------- | ---------- |  |  | ------ |  |  | ----------- | - | 
|                                                                                                                                                                                  |  |     |            |         |  |           |         |            |  |  |        |  |  | Present but
|                                                                                                                                                                                  |  | For |            | Opposed |  | Abstained |         | Not Voting
|                                                                                                                                                                                  |  |     |            |         |  |           |         |           
|To authorize an
amendment to the
Companys 1994 Stock
Option Plan to increase the
number of shares for issuance
thereunder by 200,000 shares to
an aggregate of 3,450,000 shares. |  |     | 14,194,197 |         |  |           | 985,745 |            |  |  | 86,986 |  |  |             | 0 | 



| | (e) |  | The fourth matter voted upon at the meeting and the results of that
vote were as follows:
| | --- |  | -----------------------------------------------------------------------------------------

|                                                                                                                                                                                    |  |     |            |         |  |           |           |            |  |  |        |  |  |             |   | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | ------- |  | --------- | --------- | ---------- |  |  | ------ |  |  | ----------- | - | 
|                                                                                                                                                                                    |  |     |            |         |  |           |           |            |  |  |        |  |  | Present but
|                                                                                                                                                                                    |  | For |            | Opposed |  | Abstained |           | Not Voting
|                                                                                                                                                                                    |  |     |            |         |  |           |           |           
|To authorize an
amendment to the
Companys 1999 Employee
Stock Purchase Plan to increase
the number of shares for issuance
thereunder by 150,000 shares to an
aggregate of 650,000. |  |     | 14,121,426 |         |  |           | 1,047,654 |            |  |  | 97,848 |  |  |             | 0 | 



17



---



##### Table of Contents





| | (f) |  | The fifth matter voted upon at the meeting and the results of that
vote were as follows:
| | --- |  | ----------------------------------------------------------------------------------------

|                                                                                                                                                  |  |     |            |         |  |           |        |            |  |  |        |  |  |             |   | 
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | ------- |  | --------- | ------ | ---------- |  |  | ------ |  |  | ----------- | - | 
|                                                                                                                                                  |  |     |            |         |  |           |        |            |  |  |        |  |  | Present but
|                                                                                                                                                  |  | For |            | Opposed |  | Abstained |        | Not Voting
|                                                                                                                                                  |  |     |            |         |  |           |        |           
|To ratify the appointment
of PricewaterhouseCoopers
LLP as the independent
auditors for the Company for the
fiscal year ending
December 31, 2002. |  |     | 15,169,563 |         |  |           | 32,850 |            |  |  | 64,515 |  |  |             | 0 | 




Item 5. Other Items

Not applicable.




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits filed herewith (numbered in accordance with Item 601 of
Regulation S-K):
| | --- |  | ---------------------------------------------------------------------------------

|        |  |                                                                                
|------- |  | -------------------------------------------------------------------------------
|Exhibit |  |                                                                                
|Number  |  | Description                                                                    
|        |  |                                                                                
|99.1    |  | Certification of Principal Executive Officer pursuant to 18 U.S.C.
section 1350
|99.2    |  | Certification of Principal Financial Officer pursuant to 18 U.S.C.
section 1350



18



---



##### Table of Contents






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.



| | LASERSCOPE
Registrant
| | ---------------------



| | /s/   Dennis LaLumandiere
        
Dennis LaLumandiere
Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

Date: August 13, 2002



19



---



##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                
|------- |  | -------------------------------------------------------------------------------
|Exhibit |  |                                                                                
|Number  |  | Description                                                                    
|        |  |                                                                                
|99.1    |  | Certification of Principal Executive Officer pursuant to 18 U.S.C.
section 1350
|99.2    |  | Certification of Principal Financial Officer pursuant to 18 U.S.C.
section 1350