FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


(Mark One)

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

                 For the quarterly period ended October 3, 1999

                                       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: 0-17919

                        SURGICAL LASER TECHNOLOGIES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                  Delaware                            31-1093148
        -------------------------------           -------------------
        (State or other jurisdiction of            (I.R.S. Employer
         incorporation or organization)           Identification No.)


                               147 Keystone Drive
                           Montgomeryville, PA 18936
                    ----------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (215) 619-3600
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


         ---------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)

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 ( )
    ---    ---

     On November 3, 1999 the registrant had outstanding 1,977,965 shares of
     Common Stock, $.0l par value.

<PAGE>

                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES


                                      INDEX

<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION:                                                                             PAGE
------------------------------                                                                             ----
     ITEM 1.      Financial Statements:

<S>                                                                                                        <C>
     a.  Condensed Consolidated Balance Sheets,
         October 3, 1999 (unaudited) and January 3, 1999                                                     3

     b.  Condensed Consolidated Statements of Operations (unaudited) for the quarters ended
         October 3, 1999 and September 27, 1998                                                              4

     c.  Condensed Consolidated Statements of Operations (unaudited) for the nine months ended
         October 3, 1999 and  September 27, 1998                                                             5

     d.  Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended
         October 3, 1999 and September 27, 1998                                                              6

     e.  Notes to Condensed Consolidated Financial Statements (unaudited)                                    7

     ITEM 2.    Management's Discussion and Analysis of
                Financial Condition and Results of Operations                                                9


PART II.  OTHER INFORMATION:

     ITEM 6.   Exhibits and Reports of Form 8-K                                                             12
     SIGNATURES                                                                                             13
     EXHIBITS:
         EXHIBIT 27 - Financial Data Schedule                                                               14

</TABLE>

                                       2
<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except par value)
<TABLE>
<CAPTION>
                                                                                    Oct. 3, 1999      Jan. 3, 1999
                                                                                    ------------      ------------
                                                                                    (Unaudited)
<S>                                                                                 <C>               <C>
ASSETS
Current Assets:
  Cash and cash equivalents (including restricted amounts of $45 and $100)             $    828          $  2,938
  Short-term investments                                                                  2,956             3,085
  Accounts receivable, net of allowance for doubtful accounts of $485 and $138            1,091             1,437
  Inventories                                                                             1,753             2,540
  Other                                                                                      86               437
                                                                                       --------          --------
   Total current assets                                                                   6,714            10,437

Property and equipment, net                                                                 670             1,191
Property held for sale, net                                                                --               4,339
Patents and licensed technology, net                                                        506               544
Other assets                                                                                 80               137
                                                                                       --------          --------
   Total Assets                                                                        $  7,970          $ 16,648
                                                                                       ========          ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt                                                    $    209          $  2,196
  Accounts payable                                                                          424               763
  Accrued liabilities                                                                       650             1,130
                                                                                       --------          --------
   Total current liabilities                                                              1,283             4,089
                                                                                       --------          --------
Long-term debt                                                                               28             3,965
                                                                                       --------          --------
Stockholders' equity:
  Common stock, $.01 par value, 30,000 shares authorized,
    1,978 shares issued and outstanding                                                      20                20
  Additional paid-in capital                                                             33,035            33,033
  Accumulated deficit                                                                   (26,383)          (24,438)
  Deferred compensation                                                                     (13)              (21)
                                                                                       --------          --------
   Total stockholders' equity                                                             6,659             8,594
                                                                                       --------          --------
   Total Liabilities and Stockholders' Equity                                          $  7,970          $ 16,648
                                                                                       ========          ========
</TABLE>

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


                                       3

<PAGE>


                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                 For the Quarter Ended
                                                                            ------------------------------
                                                                            Oct. 3, 1999    Sept. 27, 1998
                                                                            ------------    --------------
<S>                                                                            <C>              <C>
Net sales                                                                      $ 1,915          $ 2,200
Cost of sales                                                                      792            1,014
                                                                               -------          -------
Gross profit                                                                     1,123            1,186
                                                                               -------          -------

Operating expenses:
  Selling, general and administrative                                              970            1,402
  Product development                                                              149              329
                                                                               -------          -------
                                                                                 1,119            1,731
                                                                               -------          -------

Operating income (loss)                                                              4             (545)

Interest expense                                                                    18              147
Interest income                                                                    (61)             (78)
Other income                                                                      --                (87)
                                                                               -------          -------
Income (loss) before income taxes                                                   47             (527)
Provision for income taxes                                                        --               --
                                                                               -------          -------
Net income (loss)                                                              $    47          ($  527)
                                                                               =======          =======

Basic and diluted earnings (loss) per share                                    $  0.02          ($ 0.27)
                                                                               =======          =======

Shares used in calculating basic and diluted earnings (loss) per share           1,978            1,978
                                                                               =======          =======
</TABLE>


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

                                       4
<PAGE>



                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   For the Nine Months Ended
                                                                 ------------------------------
                                                                 Oct. 3, 1999    Sept. 27, 1998
                                                                 ------------    --------------
<S>                                                                 <C>              <C>
Net sales                                                           $ 6,147          $ 6,851
Cost of sales                                                         2,647            3,093
                                                                    -------          -------
Gross profit                                                          3,500            3,758
                                                                    -------          -------

Operating expenses:
  Selling, general and administrative                                 3,516            4,433
  Product development                                                   606              946
  Non-recurring charges                                               1,440             --
                                                                    -------          -------
                                                                      5,562            5,379
                                                                    -------          -------

Operating loss                                                       (2,062)          (1,621)

Interest expense                                                        291              450
Interest income                                                        (214)            (249)
Other income                                                           (194)            (310)
                                                                    -------          -------
Loss before income taxes                                             (1,945)          (1,512)
Provision for income taxes                                             --                  3
                                                                    -------          -------
Net loss                                                            ($1,945)         ($1,515)
                                                                    =======          =======

Basic and diluted loss per share                                    ($ 0.98)         ($ 0.77)
                                                                    =======          =======

Shares used in calculating basic and diluted loss per share           1,978            1,978
                                                                    =======          =======
</TABLE>


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

                                       5
<PAGE>


                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                     For the Nine Months Ended
                                                                                   ------------------------------
                                                                                   Oct. 3, 1999    Sept. 27, 1998
                                                                                   ------------    --------------
<S>                                                                                  <C>              <C>
Cash Flows From Operating Activities:
  Net loss                                                                           ($1,945)         ($1,515)
  Adjustments  to  reconcile  net loss to net cash  (used  in)  provided  by
    operating activities:
     Depreciation and amortization                                                       781              824
     Imputed interest                                                                    (12)             (20)
     Provision for bad debt                                                               21             --
     Non-recurring charges                                                             1,440             --
     Gain on sale of property held for sale                                              (70)            --
     (Increase) decrease in assets:
      Accounts receivable                                                                (46)             434
      Inventories                                                                        199              192
      Other current assets                                                                60               76
      Other assets                                                                        (3)              45
     Increase (decrease) in liabilities:
      Accounts payable                                                                  (339)             219
      Accrued liabilities                                                               (593)            (229)
                                                                                     -------          -------
        Net cash (used in) provided by operating activities                             (507)              26
                                                                                     -------          -------

Cash Flows From Investing Activities:
  Sale of short-term investments, net                                                    129              471
  Additions to property and equipment                                                   (104)             (77)
  Sale of property held for sale                                                         398             --
  Patent costs                                                                           (27)             (73)
  Purchase of marketing agreement                                                       --                (30)
                                                                                     -------          -------
        Net cash provided by investing activities                                        396              291
                                                                                     -------          -------

Cash Flows From Financing Activities:
  Payments on long-term debt                                                          (1,999)            (373)
                                                                                     -------          -------
        Net cash used in financing activities                                         (1,999)            (373)
                                                                                     -------          -------

Net decrease in cash and cash equivalents                                             (2,110)             (56)

Cash and Cash Equivalents, Beginning of Period                                         2,938            1,555
                                                                                     -------          -------

Cash and Cash Equivalents, End of Period                                             $   828          $ 1,499
                                                                                     =======          =======
</TABLE>


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

                                       6
<PAGE>


                        SURGICAL LASER TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    Summary Financial Information and Results of Operations:

In the opinion of Surgical Laser Technologies, Inc. and Subsidiaries (the
"Company"), the accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and with the regulations of the Securities and Exchange Commission
and contain all adjustments necessary to present fairly the financial position,
results of operations and cash flows for the interim periods presented.

      Interim Financial Information:

While the Company believes that the disclosures presented are adequate to
prevent misleading information, it is suggested that the unaudited condensed
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes included in the Company's Form 10-K
report for the fiscal year ended January 3, 1999, as filed with the Securities
and Exchange Commission. Interim results for the quarter and nine months ended
October 3, 1999 are not necessarily indicative of the results to be expected for
the full year.

2.    Sale of Property:

On June 30, 1999, the Company sold its property in Oaks, Pennsylvania. At the
time of the sale, the property had a cost basis of $6,527,000 and accumulated
depreciation of $2,241,000. In connection with the sale, the mortgages, having a
balance on June 30, 1999 of $3,922,000, were assumed by the buyer. The cash
payment received by the Company at the time of sale was $398,000.

3.    Basic and Diluted Loss Per Share:

Basic and diluted loss per share have been computed under the guidelines of
Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
No. 128"). The Company had common stock options and common stock warrants
outstanding of 397,000 and 463,000 at October 3, 1999 and September 27, 1998,
respectively. Due to the Company's net loss for the nine months ended October 3,
1999 and September 27, 1998, the inclusion of these common share equivalents
would have had an anti-dilutive effect when calculating diluted earnings per
share under SFAS No. 128 and, as a result, diluted earnings per share was
equivalent to basic earnings per share for those periods.

4.    Supplemental Cash Flow Information:

There were no material income taxes paid for the nine months ended October 3,
1999 and September 27, 1998. Interest paid for the nine months ended October 3,
1999 and September 27, 1998 was $291,000 and $450,000, respectively.

The following non-cash investing and financing activities took place for the
nine months ended October 3, 1999:

In connection with the sale of the Company's property in Oaks, Pennsylvania (see
Note 2 of Notes to Condensed Consolidated Financial Statements), the mortgages,
having a balance of $3,922,000 at the time of sale, were assumed by the buyer.

                                       7
<PAGE>


5.    Non-recurring Charges:

In the second quarter of 1999, the Company recorded a non-recurring charge of
$1,440,000. This non-recurring charge consisted of $719,000 in charges related
to the discontinuance of certain new product ventures, a $539,000 charge to
reserve for excess inventories and a $182,000 charge for severance and related
costs associated with headcount reductions made in response to the
discontinuance of the new product ventures.

6.    Bank Borrowings:

The Company's $2,535,000 line of credit agreement with a bank expired on August
31, 1999. The Company is currently seeking a new banking relationship, at which
time the Company will expect to secure a new line of credit. The Company's
management does not foresee any event or condition which would prohibit the
attainment of a new line of credit.

7.    Income Taxes:

No income tax provision was made for the nine months ended October 3, 1999 due
to net losses incurred. The tax provision for the nine months ended September
27, 1998, was for state income taxes.

8.    Business Segment and Geographic Data:

Effective January 3, 1999, SLT adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS No. 131 requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. SFAS No. 131 defines operating segments as "components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance".

The Company is engaged primarily in one business segment: the design,
development, manufacture and marketing of laser products and other instruments
for medical applications. SLT's customers are primarily hospitals and medical
centers. For the nine months ended October 3, 1999 and September 27, 1998, SLT
did not have material net sales to any one individual customer.

The Company reported net sales in the following categories (in thousands of
dollars):

<TABLE>
<CAPTION>
                                                                       For the Nine Months Ended
                                                                -----------------------------------------
                                                                October 3, 1999        September 27, 1998
                                                                ---------------        ------------------
<S>                                                                 <C>                       <C>
     Disposables and accessories                                    $4,501                    $4,707
     Laser system sales, service and rental                          1,646                     2,144
                                                                    ------                    ------
     Total net sales                                                $6,147                    $6,851
                                                                    ======                    ======
</TABLE>


For the nine months ended October 3, 1999 and September 27, 1998, there were no
material net sales attributed to an individual foreign country. Net sales by
geographic area were as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                       For the Nine Months Ended
                                                                -----------------------------------------
                                                                October 3, 1999        September 27, 1998
                                                                ---------------        ------------------
<S>                                                                 <C>                       <C>
     Domestic                                                       $5,460                    $5,931
     Foreign                                                           687                       920
                                                                    ------                    ------
                                                                    $6,147                    $6,851
                                                                    ======                    ======
</TABLE>

                                       8
<PAGE>


9.    Inventories:

Inventories at October 3, 1999 and January 3, 1999 were as follows (in thousands
of dollars):

<TABLE>
<CAPTION>
                                                                October 3, 1999        January 3, 1999
                                                                ---------------        ---------------
<S>                                                                 <C>                       <C>
     Raw material and work-in-process                               $1,050                  $1,691
     Finished goods                                                    703                     849
                                                                    ------                  ------
                                                                    $1,753                  $2,540
                                                                    ======                  ======
</TABLE>


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

Balance Sheet Changes

In the second quarter of 1999, CorMedica Corporation, a company that had been
developing a new product for performing percutaneous transluminal endocardial
revascularization ("PTER(TM)"), for which SLT supplied holmium lasers and fiber
delivery systems, advised SLT that CorMedica had not timely achieved a key
development milestone necessary to receive further funding. As a result, SLT
does not anticipate further sales to CorMedica in connection with this
development project. The Company had net sales to CorMedica of $524,000 in the
second half of 1998, of which $159,000 were in the three months ended September
27, 1998.

Also, during the second quarter of 1999, in response to the discontinuance of
the CorMedica venture and certain other new product ventures, the Company
reassessed its manpower and inventory requirements. As a result of that
reassessment, certain adjustments were made (see the change in inventories and
non-recurring charge paragraphs below) intending to better align the Company's
cost structure and inventory value with current revenue expectations.

On June 30, 1999, the Company sold its property in Oaks, Pennsylvania (see Note
2 of Notes to Condensed Consolidated Financial Statements). The sale of the
property accounted for the decline in property held for sale, net, on the
balance sheet and also the decline in both current and long term debt, as the
related mortgage obligations were assumed by the buyer with the sale.

Inventories of $1,753,000 at October 3, 1999, declined by $787,000 or 31% from
inventories of $2,540,000 at January 3, 1999. This decline in inventory was
mainly attributable to a non-recurring charge of $539,000 recorded during the
second quarter of 1999 to reserve for excess inventories.

On July 30, 1999, the Company's 8% subordinated notes matured and, as a result,
the Company paid $1,621,000 to the noteholders to satisfy the remaining
principal balance outstanding. The $1,621,000 payment primarily accounted for
the third quarter 1999 decline in cash and current portion of long term debt on
the balance sheet.

Accrued liabilities of $650,000 at October 3, 1999, declined $480,000 or 43%
from accrued liabilities of $1,130,000 at January 3, 1999. This decline in
accrued liabilities was primarily attributable to reductions in legal fees and
deferred laser system service contract revenue, as well as the timing of
miscellaneous liability payments.

Results of Operations

Historically the Company has generated its net sales from positioning its
technology and products across a wide range of surgical specialties. In an
effort to attain more significant growth in sales, the Company redefined its
strategy for growth to include a specific focus in the surgical specialties of
Otolaryngology, Head and Neck surgery and Neurosurgery ("ENT and Neurosurgery").
The Company has entered and will continue to seek to enter into relationships
with other companies to expand the sales of the Company's laser and non-laser
products. The Company will continue to seek to utilize its strengths in
supplying other companies with products that draw on the

                                       9
<PAGE>

Company's expertise and competencies. While refocusing its strategy in ENT and
Neurosurgery, the Company will take these other actions in an effort to enhance
sales and to promote continued utilization of its products and services.

Additionally, the Company has explored and is continuing to explore
opportunities to expand the utilization of its proprietary technologies by
entering into private label relationships with other companies to market
products encompassing the Company's technologies under their product labeling.

Net sales for the quarter ended October 3, 1999 of $1,915,000 decreased $285,000
or 13% compared to the third quarter 1998 net sales of $2,200,000. For the nine
months ended October 3, 1999, net sales were $6,147,000 compared to $6,851,000
in the first nine months of 1998, a decrease of $704,000 or 10%.

Net sales of disposables and related accessories declined $206,000 or 4% in the
first nine months of 1999 from the first nine months of 1998 due to a lower
level of Contact Laser(TM) Delivery System and Accessory sales primarily within
the urology market, which were offset, in part, by increases in sales within the
ENT and Neurosurgery markets and by sales of new products introduced in late
1998 and 1999.

Net sales of laser systems, service and rentals of $1,646,000 in the first nine
months of 1999 declined $498,000 or 23% from the comparable period in 1998. The
discontinuance of the CorMedica product development venture and decreases in
service, rental and international laser system unit sales accounted for the
decline. Partially offsetting this reduction was an increase in domestic laser
unit sales, resulting primarily from the Company's focus in the ENT and
Neurosurgery market.

Gross profits of $1,123,000 for the quarter ended October 3, 1999 decreased
$63,000 or 5% from the third quarter of 1998, while gross profits for the nine
months ended October 3, 1999 of $3,500,000 decreased $258,000 or 7% from the
first nine months of 1998. As a percentage of net sales, gross profit of 57% and
55% was relatively consistent for the nine months ended October 3, 1999 and
September 27, 1998, respectively.

Operating expenses for the third quarter of 1999 were $1,119,000, a decrease of
$612,000 or 35% from the third quarter of 1998. For the first nine months of
1999, operating expenses, excluding the non-recurring charge, were $4,122,000, a
decrease of $1,257,000 or 23% from the first nine months of 1998. This decrease
was due primarily to personnel and other expense reductions made for the purpose
of bringing expenses more in line with the sales revenue being generated.

Selling, general and administrative expenses were $970,000 in the third quarter
of 1999, a decrease of $432,000 or 31% from the comparable prior year period. In
the first nine months of 1999, selling, general and administrative expenses were
$3,516,000 compared to $4,433,000 in the first nine months of 1998, a decrease
of $917,000 or 21%. Reductions in personnel and associated expenses accounted
for a majority of the reduced spending level.

Product development expenses of $149,000 in the third quarter of 1999 decreased
by $180,000 or 55% from the comparable period in 1998. Product development
expenses of $606,000 in the first nine months of 1999 decreased by $340,000 or
36% from the comparable period in 1998. This lower level of spending was
principally due to a decrease in laser system development consulting charges
associated with a discontinued new product venture (see non-recurring charge
below).

In the second quarter of 1999, the Company recorded a non-recurring charge of
$1,440,000. This non-recurring charge consisted of $719,000 in charges related
to the discontinuance of certain new product ventures, a $539,000 charge to
reserve for excess inventories and a $182,000 charge for severance and for
related costs associated with headcount reductions made in response to the
discontinuance of the new product ventures.

                                       10
<PAGE>

Other income, which primarily consisted of facility-related income and expense
items, was $194,000 in the first nine months of 1999, a decrease of $116,000 or
37% from the comparable period in 1998. This decrease was attributable to the
sale of the Company's property in Oaks, Pennsylvania on June 30, 1999.

Net interest expense of $77,000 in the first nine months of 1999 decreased by
$124,000 or 62% from the comparable period in 1998. This decrease was primarily
attributable to the elimination of mortgage interest payments as a result of the
sale of the Company's property in Oaks, Pennsylvania on June 30, 1999.

Liquidity and Capital Resources

The Company had cash, cash equivalents and short-term investments of $3,784,000
at October 3, 1999. The Company's $2,535,000 line of credit agreement with a
bank expired on August 31, 1999. The Company is currently seeking a new banking
relationship, at which time the Company will expect to secure a new line of
credit. The Company's management does not foresee any event or condition which
would prohibit the attainment of a new line of credit.

Net cash used in operating activities was $507,000 in the first nine months of
1999 compared to cash provided by operating activities of $26,000 in the
comparable period in 1998. Excluding non-recurring charges, the comparative
decrease in the net loss was more than offset by a comparatively higher change
in the level of accounts receivable due to the timing of sales and to a
comparative increase in liability payments.

Net cash provided by investing activities was $396,000 in the first nine months
of 1999 compared to net cash provided by investing activities of $291,000 in the
first nine months of 1998. The comparable increase in cash provided by investing
activities was caused by the cash receipt of $398,000 from the sale of the
property in Oaks, Pennsylvania, offset, in part by a decrease in the sales of
short-term investments.

Net cash used in financing activities was $1,999,000 and $373,000 in the first
nine months of 1999 and 1998, respectively. This increase in cash used in
financing activities was the result of the Company's cash payment of $1,621,000
to the noteholders of the Company's 8% subordinated notes which matured on July
30, 1999.

Management believes the Company's current cash position will be sufficient to
fund operations and meet commitments for long-term debt, other commitments and
contingencies and capital expenditures.

Management believes that inflation has not had a material effect on operations
for the periods presented.

The Company has analyzed its information technology systems for the "Year 2000"
compliance issues. Management believes that the "Year 2000" issue related to the
Company's hardware and software programs are not likely to result in any
material adverse disruptions in the Company's computer systems or its internal
business operations. The Company has purchased and implemented the latest
version of its operating software package to provide remediation for the "Year
2000" issue. The cost of this new software was $8,000.

The Company has analyzed and determined that the "Year 2000" issue related to
its non-information technology, such as its telephone and security systems, are
not likely to result in any material disruption of its business operations.

The Company is currently in the process of evaluating its relationships with
third parties, such as banks, service providers and suppliers, with which the
Company has a direct and material relationship to determine whether they are
"Year 2000" compliant. The responses received to date from such third parties to
inquiries made by the Company indicate that these third parties either are or
expect to be compliant by the Year 2000.

Even assuming that all material third parties confirm that they are or expect to
be "Year 2000" compliant by December 31, 1999, it is not possible to state with
certainty that such parties will be so compliant, or that the operations of such
third parties will not be materially impacted by other parties with whom they
themselves have a

                                       11
<PAGE>

material relationship, and who fail to timely become "Year 2000" compliant.
Consequently, it is not possible to predict whether or to what extent the "Year
2000" issues may have an adverse material impact on the Company as a result of
the impact of this issue on the operations of the third parties with whom the
Company has a material relationship. For example, the failure to be "Year 2000"
compliant by a bank with whom the Company has a material banking relationship
could cause significant disruption in the Company's ability to make payments,
deposit funds and make investments, which could have a material adverse effect
on the Company's financial condition.

The Company has not established a contingency plan in case of failure of its
information technology systems since it has implemented its new software system.
The Company will continually monitor its relationships with banks, service
providers and suppliers to ensure they expect to be "Year 2000" compliant. If
the Company learns that one of these third parties will not be "Year 2000"
compliant, the Company's contingency plan would include replacing such third
party.

Risk Factors

For information regarding certain risk factors that could cause actual results
to differ materially from those suggested in forward-looking statements
contained herein or otherwise made from time to time by the Company, reference
is made to the Company's Form 10-K, Item 7, "Risk Factors," for the fiscal year
ended January 3, 1999, which is incorporated herein by reference. The risk
factors described in such report continue to be applicable at October 3, 1999.


PART II.   OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

a. Exhibits 27 - Financial Data Schedule, October 3, 1999

b. Reports on Form 8-K: none

                                       12
<PAGE>

                                   SIGNATURES

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

                                       SURGICAL LASER TECHNOLOGIES, INC.


Date: November 10, 1999                By: /s/ Davis Woodward
                                           ------------------

                                           Davis Woodward
                                           Chief Financial Officer

                                           Signing on behalf of the Registrant
                                           and as principal financial officer.

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