<PAGE>   1

                                  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 September 30,1998 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                                       77-0049527
(State of Incorporation)                    (I.R.S. Employer Identification No.)

              3052 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011
                    (Address of principal executive offices)

                  Registrant's telephone number: (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
November 2, 1998 was 12,480,735.



<PAGE>   2




                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>      <C>                                                                                <C>
PART I.  FINANCIAL INFORMATION.........................................................      3
  Item 1.    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...........................................     12
  Item 3.    Qualitative and Quantitative Disclosures About Market Risk................     14

PART II.  OTHER INFORMATION............................................................     15
  Item 1.    Legal Proceedings.........................................................     15
  Item 2.    Changes in Securities.....................................................     15
  Item 3.    Defaults upon Senior Securities...........................................     15
  Item 4.    Submission of Matters to a Vote of Security Holders.......................     15
  Item 5.    Other Items...............................................................     15
  Item 6.    Exhibits and Reports on Form  8-K.........................................     16

SIGNATURES   ..........................................................................     16
</TABLE>



                                       2


<PAGE>   3



PART I.      FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

                                   LASERSCOPE
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        (UNAUDITED)            (1)
                                                      SEPTEMBER 30,   DECEMBER 31,
(thousands)                                                    1998           1997
-----------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>     
ASSETS
Current assets:
    Cash and cash equivalents                              $  1,332       $  2,465
    Accounts receivable, net                                 13,454         13,960
    Inventories                                              18,511         18,656
    Other current assets                                        972          1,017
                                                           --------       --------
           Total current assets                              34,269         36,098

Property and equipment, net                                   5,317          5,183
Developed technology and other intangibles, net               4,664          5,339
Other assets                                                    620            686
                                                           --------       --------
           Total assets                                    $ 44,870       $ 47,306
                                                           ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                       $  5,818       $  6,071
    Accrued compensation                                      2,018          1,710
    Short-term bank loans                                     3,278          3,107
    Other current liabilities                                 3,702          4,897
                                                           --------       --------
        Total current liabilities                            14,816         15,785

Long-term liabilities:
    Obligations under capital leases                            814            274
    Mortgages and other long term loans                       3,181          2,970
                                                           --------       --------
        Total long-term liabilities:                          3,995          3,244

Commitments and contingencies

Minority interest                                               485            160

Shareholders' equity:
        Common stock                                         51,128         50,939
        Accumulated deficit                                 (24,775)       (21,831)
        Accumulated other comprehensive income                 (404)          (616)
        Notes receivable from shareholders                     (375)          (375)
                                                           --------       --------
           Total shareholders' equity                        25,574         28,117
                                                           --------       --------
           Total liabilities and shareholders' equity      $ 44,870       $ 47,306
                                                           ========       ========
</TABLE>


(1) Derived from the December 31, 1997 audited financial statements.

            See notes to condensed consolidated financial statements



                                       3


<PAGE>   4



                                   LASERSCOPE
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED              NINE MONTHS ENDED
                                                              SEPTEMBER 30,                 SEPTEMBER 30,
(thousands except per share amounts)                      1998           1997          1998           1997
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>            <C>     
Net revenues .......................................... $ 12,779       $ 15,704      $ 39,503       $ 46,674
Cost of sales .........................................    6,976          8,104        21,618         24,969
                                                        --------       --------      --------       --------
Gross margin ..........................................    5,803          7,600        17,885         21,705

Operating expenses:
    Research and development ..........................    1,179            893         3,862          2,258
    Selling, general and administrative ...............    4,813          5,382        15,881         16,060
                                                        --------       --------      --------       --------
 .......................................................    5,992          6,275        19,743         18,318

Operating income (loss) ...............................     (189)         1,325        (1,858)         3,387
Interest income (expense) and other, net ..............     (138)            --          (454)           (24)
                                                        --------       --------      --------       --------

Income (loss) before income
    taxes and minority interest .......................     (327)         1,325        (2,312)         3,363
Provision for income taxes ............................      178            310           311            637
                                                        --------       --------      --------       --------
Income (loss) before minority interest ................     (505)         1,015        (2,623)         2,726
Minority interest .....................................      232            114           321            188
                                                        --------       --------      --------       --------
Net income (loss) ..................................... $   (737)      $    901      $ (2,944)      $  2,538
                                                        ========       ========      ========       ========

Basic net income (loss) per share ..................... $  (0.06)      $   0.07      $  (0.24)      $   0.21
                                                        ========       ========      ========       ========

Diluted net income (loss) per share ................... $  (0.06)      $   0.07      $  (0.24)      $   0.20
                                                        ========       ========      ========       ========

Shares used in basic per share calculations ...........   12,469         12,279        12,405         12,154
                                                        ========       ========      ========       ========

Shares used in diluted per share calculations..........   12,469         12,986        12,405         13,007
                                                        ========       ========      ========       ========
</TABLE>





See notes to condensed consolidated financial statements



                                       4


<PAGE>   5



                                   LASERSCOPE
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                                                                       SEPTEMBER 30,
(thousands)                                                                          1998         1997
--------------------------------------------------------------------------------------------------------
<S>                                                                                <C>           <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                              $(2,944)      $ 2,538
    Adjustments to reconcile net income (loss) to cash used
      by operating activities:
        Depreciation and amortization                                                2,261         1,656
        Increase (decrease) from changes in:
           Accounts receivable                                                         506        (1,975)
           Inventories                                                                 145          (714)
           Other current assets                                                         45           157
           Accounts payable                                                           (253)       (3,355)
           Accrued compensation                                                        308          (626)
           Other current liabilities                                                (1,192)           30
           Minority interest                                                           325           188
                                                                                   -------       -------

           Cash used by operating activities                                          (799)       (2,101)
                                                                                   -------       -------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                              (908)       (2,240)
    Cash paid for NWL acquisition, net of cash received                                 --          (960)
    Other                                                                              146          (264)
                                                                                   -------       -------

Cash used by investing activities                                                     (762)       (3,464)
                                                                                   -------       -------

CASH USED BY FINANCING ACTIVITIES:
    Payments on obligations under capital leases                                      (143)          (70)
    Proceeds from the sale of common stock under stock plans                           189         2,057
    Proceeds from bank loans                                                         1,603         3,866
    Repayment of bank loans                                                         (1,221)       (1,300)
                                                                                   -------       -------

Cash provided by financing activities                                                  428         4,553
                                                                                   -------       -------

Decrease in cash and cash equivalents                                               (1,133)       (1,012)
Cash and cash equivalents, beginning of period                                       2,465         3,917
                                                                                   -------       -------

Cash and cash equivalents, end of period                                           $ 1,332       $ 2,905
                                                                                   =======       =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the period for:
           Interest                                                                $   308       $   223
           Income taxes                                                            $    14       $   118
    Non-cash financing activities:
           Equipment leases                                                        $   680       $    --
</TABLE>



See notes to condensed consolidated financial statements



                                       5

<PAGE>   6



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

1.      The accompanying condensed consolidated financial statements include
        Laserscope (the "Company") 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 included 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. It is suggested that these consolidated financial
        statements be read in conjunction with the consolidated financial
        statements and the notes thereto for the year ended December 31, 1997
        included in the Company's annual report on Form 10-K for the year ended
        December 31, 1997. The results of operations for the three and nine
        month periods ended September 30, 1998 are not necessarily indicative of
        the results expected for the full year.

2.      Inventory was comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                     SEPTEMBER 30, DECEMBER 31,
                                         1998          1997
---------------------------------------------------------------
<S>                                     <C>          <C>    
Sub-assemblies and purchased parts      $13,601      $13,098
Finished goods                            4,910        5,558
                                        -------      -------
                                        $18,511      $18,656
                                        =======      =======
</TABLE>


3.      Basic net income (loss) per share is calculated using the weighted
        average of common stock outstanding. Diluted net income per share is
        calculated using the weighted average of common stock outstanding plus
        dilutive common equivalent shares from stock options (707,000 shares and
        853,000 shares for the quarter and nine months ended September 30, 1997,
        respectively). Per share amounts for the three and nine month periods
        ended September 30, 1997 have been restated to conform to SFAS 128
        requirements.

4.      The Company considers cash equivalents to be short-term financial
        instruments that are readily convertible to cash, subject to no more
        than insignificant interest rate risk and that have original maturities
        of three months or less. 

        At September 30, 1998 and December 31, 1997 the Company's cash
        equivalents were in the form of institutional money market accounts and
        totaled $0.6 million and $1.3 million, respectively.

        At September 30, 1998 and December 31, 1997 the Company had no
        investments in debt or equity securities.

5.      As of January 1, 1998, the Company adopted Statement of Financial
        Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
        130). SFAS 130 establishes new rules for the reporting and display of
        comprehensive income and its components; however, the adoption of the
        Statement had no impact the Company's net income or shareholders'
        equity. SFAS 130 requires foreign currency translation adjustments,
        which prior to adoption were reported separately in shareholders'
        equity, 



                                       6

<PAGE>   7


        to be included in other comprehensive income. Prior year financial
        statements have been reclassified to conform to the requirements of SFAS
        130.

        Total comprehensive income (loss) for the quarters ended September 30,
        1998 and 1997 was $(501,000) and $715,000, respectively. Total
        comprehensive income (loss) for the nine month periods ended September
        30, 1998 and 1997 was $(2,732,000) and $2,094,000, respectively.
 .
 6.     As of January 1, 1998, the Company adopted Statement of Financial
        Accounting Standards No.131 "Disclosures about Segments of an Enterprise
        and Related Information" (SFAS 131). SFAS 131 will change the way
        companies report selected segment information in annual financial
        statements and requires those companies to report selected segment
        information in interim financial reports to shareholders. The Company
        has not reached a conclusion as to the appropriate segments, if any, it
        will be required to report to comply with SFAS 131.

7.      In June 1997 the Company completed the acquisition of a majority
        interest in NWL Laser-Technologie GmbH ("NWL"). The Company accounted
        for the acquisition as a purchase. Accordingly, the operating results of
        NWL are included in the Company's consolidated results of operations for
        the quarter and nine month periods ended September 30, 1998. The
        minority interest reported in the financial statements represents
        minority shareholders' proportional interest in the net assets and
        operating results of the NWL subsidiary.

8.      On November 9, 1998 the Company sold its AMS business unit to Heraeus
        Medical, Inc. ("HMI), a newly established division of Heraeus Holding,
        GmbH. The Company acquired the AMS business as part of its acquisition
        in 1996 of Heraeus Surgical Inc. from Heraeus Med GmbH, a subsidiary of
        Heraeus Holding.

        In connection with the divestiture, the Company will receive
        approximately $1.0 million in cash, subject to the release of $0.2
        million from a related escrow account in connection with potential
        post-closing price adjustments and the Company's indemnification
        obligations to Heraeus and HMI. In addition, HMI has assumed
        approximately $2.1 million in associated Laserscope liabilities. The
        Company currently anticipates taking a non-operating charge in the range
        of up to $1.0 million in the fourth quarter of 1998 directly related to
        the divestiture. During the quarter ended September 30, 1998, AMS
        accounted for revenues of approximately $1.3 million and an operating
        loss of approximately $0.3 million.



                                       7



<PAGE>   8



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

Except for the historical information contained in this Quarterly Report on Form
10-Q, the matters discussed herein are forward-looking statements made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements are subject to
certain risks and uncertainties that could cause the actual results to differ
materially from those projected. Factors that could cause actual results to
differ materially include, but are not limited to, the risks associated with the
acquisitions of Heraeus Surgical, Inc. ("HSI") and NWL Laser-Technologie, GmbH
("NWL"), including the integration of the operations and assets acquired and the
assumption of the liabilities assumed by Laserscope, the timing of orders and
shipments, the Company's ability to balance its inventory and production
schedules, the timely development, clearance by the F.D.A. and other regulatory
agencies and market acceptance of new products and surgical/therapeutic
procedures, the impact of competitive products and pricing, the Company's
ability to raise capital on terms acceptable to the Company, or at all, the
Company's ability to expand further into international markets, and public
policy relating to health care reform in the United States and other countries.

The Company desires to continue expansion of its operations outside of the
United States and to enter additional international markets, requiring
significant management attention and financial resources and further subjecting
the Company to the risks of operating internationally. These risks include
unexpected changes in regulatory requirements, delays resulting from difficulty
in obtaining export licenses for certain technology, customs, tariffs and other
barriers and restrictions, and the burdens of complying with a variety of
foreign laws. While only eight percent of the Company's revenues were
attributable to sales in Asia during the nine months ended September 30, 1998
compared to ten percent during the year ended December 31, 1997, the recent
economic instability in certain Asian countries could adversely affect the
Company's business, financial condition and operating results. The Company is
also subject to general geopolitical risks in connection with its international
operations, such as political and economic instability and changes in diplomatic
and trade relationships. The Company cannot predict whether quotas, duties,
taxes or other charges or restrictions will be imposed by the United States,
Japan, countries in the European Union or other countries upon the import or
export of the Company's products in the future, or what effect any such actions
would have on its business, financial condition or results of operations. In
addition, fluctuations in currency exchange rates may negatively impact the
Company's ability to compete in terms of price against products denominated in
local currencies. In addition, there can be no assurance that regulatory,
geopolitical and other factors will not adversely impact the Company's
operations in the future or require the Company to modify its current business
practices.

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date field. Beginning in the year 2000,
these date fields need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, in a little more than a year,
computer systems and/or software used by many companies may need to be upgraded
to comply with such "Year 2000" requirements. Significant uncertainty exists
concerning the potential effects associated with such compliance. Any Year 2000
compliance problem to either the Company, its suppliers, its service providers
or its customers could result in a material adverse effect on the Company's
business, financial condition and operating results. 



                                       8

<PAGE>   9


Other risks are detailed from time to time in the Company's press releases and
other public disclosure filings with the U.S. Securities and Exchange Commission
(SEC), copies of which are available upon request from the Company. The
forward-looking statements included herein speak only as of the date hereof. The
Company assumes no obligation to update any forward-looking statements included
herein.

RESULTS OF OPERATIONS:

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in Part I -- Item 1
of this Quarterly Report and the audited financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1997 contained in the Company's
Annual Report on Form 10-K.

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 nine months ended September 30, 1998 (in thousands except for
percentages):

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED                                 NINE MONTHS ENDED
                                SEPT. 30, 1998      SEPT. 30, 1997       %         SEPT. 30,1998       SEPT 30, 1997          %
                                  AMOUNT %(a)         AMOUNT%(a)       CHANGE       AMOUNT %(a)          AMOUNT %(a)       CHANGE
<S>                            <C>          <C>    <C>          <C>     <C>      <C>          <C>    <C>            <C>      <C> 
Revenues from sales of:
  Lasers                       $  6,955     55%    $  7,983     51%     (13)%    $ 20,891     53%    $ 21,806       47%      (4)%
  Ascent medical systems          1,329     10%       2,225     14%     (40)%       4,382     11%       7,763       17%     (44)%
  Instruments & supplies          2,916     23%       3,427     22%     (15)%       9,106     23%      11,120       24%     (18)%
  Service                         1,579     12%       2,069     13%     (24)%       5,124     13%       5,985       12%     (14)%
                               --------  -----     --------  -----   ------      --------  -----     --------   ------   ------

  Total net revenues           $ 12,779    100%    $ 15,704    100%     (19)%    $ 39,503    100%    $ 46,674      100%     (15)%

Gross margin                   $  5,803     45%      $7,600     48%     (24)%    $ 17,885     45%    $ 21,705       47%     (18)%

Research & development           $1,179      9%    $    893      6%      32%     $  3,862     10%    $  2,258        5%      71%

Selling, general & admin.        $4,813     38%    $  5,382     34%     (11)%    $ 15,881     40%    $ 16,060       34%      (1)%
</TABLE>


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


Net revenues decreased during the three and nine months ended September 30, 1998
relative to the corresponding periods of 1997 as a combined result of lower
revenues from shipments of lasers, lower shipments of Ascent medical system
("AMS") products, lower shipments of instrumentation and supplies and lower
sales of services.

Revenues from the sales of laser systems decreased during the quarter and nine
month periods ended September 30, 1998 relative to the same periods in 1997.
During the quarter ended September 30, 1998, relative to the same period in
1997, this was due to a combination of lower unit shipments at lower average
unit prices. During the nine month period ended September 30, 1998, relative to
the same period in 1997, this was due to a combination of lower unit shipments
and higher average unit prices. The lower unit shipments are the net result of
decreased shipments of the Company's KTP Surgical Laser Systems and CO2 laser
systems in the United States and Asia, partially offset by shipments of laser
products acquired in the NWL acquisition. The lower average unit prices in the
quarterly comparison are primarily the result of the introduction of the
Company's Venus erbium laser which sold at average unit prices lower than the
Company's other laser products while the higher average unit prices in the year
to date comparisons are principally due to higher average unit prices for the
Company's Aura office laser systems. The Company believes that the lower demand
for its office laser products and CO2 laser systems in the United States and the
economic



                                       9

<PAGE>   10


downturn in Asia may continue to impact negatively its revenues in these regions
for the next several quarters.


Revenues from the sales of the Company's Ascent Medical System ("AMS") products
declined during the quarter and nine month periods ended September 30, 1998
relative to the same periods in 1997. The Company believes that the decrease is
partially attributable to its withdrawal from the operating room table business
in late 1997. Shipments of operating room tables contributed approximately $0.9
million to revenues during the nine months ended September 30, 1997.
Additionally, the Company believes that lower orders of AMS products and delays
in construction projects in which the AMS products have been ordered negatively
impacted shipments of these products during the nine months ended September 30,
1998 relative to the corresponding periods in 1997. (See subsequent event
discussion later in this report.) 

Revenues from the sales of instrumentation, disposable supplies and services
during the quarter and nine months ended September 30, 1998 decreased compared
to the corresponding periods in 1997. The decreases are due to the combination
of decreased shipments of scanning devices sold as accessories to the Aura
office laser system, lower shipments of disposable supplies and lower sales of
services. The Company expects that revenues from sales of disposable supplies,
instrumentation and service will depend principally upon the Company's ability
to increase its installed base of systems and to promote and develop surgical
procedures which use its laser systems, instrumentation and disposable supplies.

The Company believes that acceptance of lasers in aesthetic surgery,
dermatology, urology, and ear, nose and throat surgery will continue to be
important to its business. In addition, the adoption of photodynamic therapy by
medical practitioners will be important. The Company continues to invest in
developing new instrumentation for emerging surgical applications and in
educating surgeons in the United States and internationally to encourage the
adoption of such new applications. Penetration of the international market,
although generally increasing, has been limited and the Company continues to
view expansion of international sales as important to the Company's success.
During the nine months ended September 30, 1998, international revenues
accounted for 38% of total net revenues compared to 29% of total net revenues
during the corresponding period in 1997.

Gross margin as a percentage of revenues during the quarter and nine months
ended September 30, 1998 declined relative to the corresponding periods of 1997.
This is due principally to decreased production levels without corresponding
reductions in fixed manufacturing costs. The declines in production levels are
the combined result of lower shipment levels in the 1998 periods compared to
1997 periods as well as the Company's efforts to reduce inventory levels. The
Company expects that gross margin as a percentage of revenues for the remainder
of 1998 will vary from quarter to quarter as it continues to balance production
volumes and inventory levels with product demand and 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 the Company's existing products. The increases in research and
development spending during the quarter and nine month period ended September
30, 1998 relative to the corresponding periods in 1997 are due to a combination
of increased spending in product development and incremental



                                       10

<PAGE>   11


research and development spending by NWL. The Company expects that amounts spent
in research and development to remain at similar levels during the remainder of
1998. 

The decreases in selling, general and administrative expenses during the quarter
and nine months ended September 30, 1998 relative to the same periods in 1997
primarily result from lower direct selling and marketing expenses resulting from
lower revenues. The Company expects these amounts to remain at similar levels
during the remainder of 1997 as the Company continues to invest in international
expansion, marketing programs and educational support. 

Net interest expense and other non-operating expenses increased $0.4 million
during the nine month period ended September 30, 1998 compared to the
corresponding period in 1997. This was due to the combination of increased
interest expense from NWL and domestic bank lines and the recording of the
settlement of a dispute relating to the termination of a Heraeus domestic
distributor. 

During the nine months ended September 30, 1998, the Company recorded income tax
provisions of $0.3 million due to profits reported by NWL in Germany. During the
same period in 1997 the Company recorded an income tax provision representing an
effective tax rate of 19% which is below the combined federal and state
statutory rates due to the utilization of available net operating loss
carryforwards.



                                       11


<PAGE>   12



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
September 30, 1998 and for the nine months then ended (in thousands):

<TABLE>
<CAPTION>
                           SEPTEMBER 30,  DECEMBER 31,
                               1998            1997
                           ---------------------------
<S>                          <C>             <C>    
Cash and cash equivalents    $ 1,332         $ 2,465
Total assets                 $44,870         $47,306
Net working capital          $19,453         $20,313
</TABLE>


The net decrease in cash and cash equivalents was due the combined result of
cash used by operating activities of $0.8 million, cash used by investing
activities of $0.8 and cash provided by financing activities of $0.4 million.

Cash used by operating activities was the combined result of a net loss of $2.9
million and decreases in accounts payable and other current liabilities of $0.3
million and $1.2 million, respectively. Partially offsetting these uses were
depreciation and amortization of $2.3 million, reductions in accounts receivable
and inventory of $0.5 million and $0.1 million, respectively, and $0.3 million
increases to each of minority interest and accrued compensation.

Cash used by investing activities primarily consisted of capital expenditures of
$0.9 million.

Cash provided by financing activities primarily consisted of net increases in
bank loans of $.4 million.

The Company has in place a $5.0 million revolving bank line of credit that
expires in November 1998. At September 30, 1998, the collateral provisions
allowed for approximately $3.6 million in borrowings and $2.5 million in
borrowings were outstanding. In addition, NWL has in place various bank lines
totaling approximately $3.0 million that expire in 1999 and under which $2.6
million in borrowings were outstanding at September 30, 1998. The Company
expects to renew its primary line of credit with terms similar to those
currently existing before its expiration in November 1998 and to renew NWL's
revolving bank lines prior to their respective expirations. 

The Company anticipates that future changes in cash and working capital will be
dependent on a number of factors including management's ability to manage
effectively non-cash assets such as inventory and accounts receivable. At
September 30, 1998, the Company's inventories consisted of $18.5 million
comprised of $13.6 million of sub-assemblies and purchased parts and $4.9
million of finished goods. This represents a 1% decrease from inventories at
December 31, 1997 which consisted of $18.7 million, comprised of $13.1 million
of sub-assemblies and purchased parts and $5.6 million of finished goods. The
Company competes in a competitive industry where technological changes and
acceptance of new and alternative procedures by its customers is rapid.
Management's ability to anticipate and adapt to these changes will significantly
affect the Company's investment in inventory and the potential for inventory
valuation adjustments. In addition, the level of profitability of the Company
will have a significant impact on cash resources. 



                                       12

<PAGE>   13


Under the terms of the NWL purchase agreement, the Company has an obligation to
purchase an additional 26.9% ownership interest in NWL in January 1999 for
$1,278,500. From time to time, the Company may also consider the acquisition of,
or evaluate investments in, other products and businesses complementary to the
Company's business. Any such acquisition or investment may require additional
capital resources. The Company has historically financed acquisitions using its
existing cash resources. While the Company believes its remaining cash resources
will be sufficient to fund its operating needs for the next twelve months,
additional financing either through its bank lines of credit or otherwise will
be required for the Company's currently envisioned long term needs. There can be
no assurance that such additional financing will be available on terms
acceptable to the Company, or at all.

YEAR 2000 

The Company has developed a plan to modify its information technology to
recognize the Year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by early 1999 and to cost approximately $200,000. This estimate includes
internal costs, but excludes the costs to upgrade and replace systems in the
normal course of business. The Company continues to implement systems with
strategic value to improve operating efficiencies and believes that such
implementation efforts will also address the Company's Year 2000 compliance
issues. 

Based on the Company's assessment to date, the products sold by the Company are
not affected by the Year 2000 date. 

The Company is in the process of obtaining assurances from its suppliers of
products and services that their systems are Year 2000 compliant. Additionally,
the Company is in the process of evaluating the need for contingency plans with
respect to Year 2000 requirements. The necessity of any contingency plan must be
evaluated on a case-by-case basis and will vary considerably in nature depending
on the Year 2000 issue it may need to address. The Company expects that its
review of Year 2000 compliance issues and its development of contingency plans
will be completed by September 1999. 

Significant uncertainty exists concerning the potential effects associated with
Year 2000 compliance. Any Year 2000 compliance problem to either the Company,
its suppliers, its service providers or its customers could result in a material
adverse effect on the Company's financial condition and operating results. There
can be assurances that the modifications to its data processing systems will be
completed within the Company's timetable or within the cost estimate. In
addition, there can be no assurance that further assessment of the Company's
products will not determine the need for modifications for the products to be
Year 2000 compliant, that its suppliers will be Year 2000 compliant or that its
contingency plans will address all issues of Year 2000 compliance. 

SUBSEQUENT EVENT 

On November 9, 1998 the Company sold its AMS business unit to Heraeus Medical,
Inc. ("HMI), a newly established division of Heraeus Holding, GmbH. The Company
acquired the AMS business as part of its acquisition in 1996 of Heraeus Surgical
Inc. from Heraeus Med GmbH, a subsidiary of Heraeus Holding. 

In connection with the divestiture, the Company will receive approximately $1.0
million in cash, subject to the release of $0.2 million from a related escrow
account in connection with potential post-closing price adjustments and the
Company's indemnification obligations to Heraeus and HMI. In addition, HMI has
assumed approximately $2.1 million in associated 



                                       13

<PAGE>   14


Laserscope liabilities. The Company currently anticipates taking a non-operating
charge in the range of up to $1.0 million in the fourth quarter of 1998 directly
related to the divestiture. During the quarter ended September 30, 1998, AMS
accounted for revenues of approximately $1.3 million and an operating loss of
approximately $0.3 million.


ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

        Not Applicable



                                       14



<PAGE>   15



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, the Company
        believes that the ultimate resolution of these claims will not
        ultimately have a material adverse effect on its financial position or
        results of operations.

ITEM 2. CHANGES IN SECURITIES

        Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

ITEM 5. OTHER INFORMATION

        Pursuant to recent amendments to the rules relating to proxy statements
        under the Securities Exchange Act of 1934, as amended (the "Exchange
        Act"), shareholders of the Company are hereby notified that any
        shareholder proposal not included in the Company's proxy materials for
        its 1999 Annual Meeting of Shareholders (the "Annual Meeting") in
        accordance with Rule 14a-8 under the Exchange Act will be considered
        untimely for the purposes of Rules 14a-4 and 14a-5 under the Exchange
        Act if notice thereof is received by the Company after April 6, 1999.
        Management proxies will be authorized to exercise discretionary voting
        authority with respect to any shareholder proposal not included in the
        Company's proxy materials for the Annual Meeting unless (a) the Company
        receives notice of such proposal by April 6, 1999, and (b) the
        conditions set forth in Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act
        are met.



                                       15


<PAGE>   16



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

<TABLE>
<CAPTION>
EXHIBIT 
 NUMBER                           DESCRIPTION
-------                           -----------
<S>            <C>

10.11C      Loan Modification Agreement between the Registrant and Silicon
            Valley Bank dated September 3, 1998.

27.1        Financial Data Schedule
</TABLE>

        (b) Reports on Form 8-K:  None

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 of Finance
                                            and Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)

Date:  November 12, 1998



                                       16


<PAGE>   17


                                EXHIBIT INDEX



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                           -----------
<S>         <C>

10.11C      Loan Modification Agreement between the Registrant and Silicon
            Valley Bank dated September 3, 1998.

27.1        Financial Data Schedule                                           
                                           
</TABLE>