FORM 10-KSB/A-2

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
(Mark one)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     For fiscal year ended December 31, 1996
                                       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: 0-22340

                       PALOMAR MEDICAL TECHNOLOGIES, INC.
                       ----------------------------------
        (Exact name of small business issuer as specified in its charter)

<TABLE>
<C>                                                                   <C>
            Delaware                                                                 04-3128178
(State or other jurisdiction of incorporation or organization)        (I.R.S. Employer Identification No.)
</TABLE>

                     66 Cherry Hill Drive, Beverly, MA 01915
                     ---------------------------------------
                    (Address of principal executive offices)
                                 (508) 921-9300
                                 --------------
                (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:
------------------------------------------------------------   
                                                        Name of each exchange on
         Title of each class                               which registered
         -------------------                            ------------------------
         Not Applicable                                     Not Applicable  

          SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
          ------------------------------------------------------------
                          Common Stock , $.01 par value

     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 report(s), and (2) has been subject to such
filing  requirements  for the  past 90  days).  Yes     X    No  
                                                      ----

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     The  issuer's  revenues  for its fiscal year ended  December  31, 1996 were
$70,098,443.

     As of March 20, 1997, 30,945,824 shares of Common Stock, $.01 par value per
share,  and  16,000  shares of  Preferred  Stock  $.01 par value per share  were
outstanding.  The aggregate market value, held by  non-affiliates,  of shares of
the  Common  Stock,  based  upon the  average of the bid and ask prices for such
stock on that date was approximately $195,345,514.

        Transitional Small Business Disclosure Format:  Yes          No     X
                                                            ----         -------

<PAGE>
                                      -40-

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

     The following table sets forth certain information concerning each director
and  nominee  for  election  as a  director  and each  executive  officer of the
Company.
<TABLE>
         <C>                                <C>      <C>
         Name                               Age      Position

         Steven Georgiev*                    62      Chief Executive Officer and Chairman of the Board
         Michael H. Smotrich*                64      President, Secretary and Chief Operating Officer
         Buster Glosson                      54      Director
         Dr. John M. Deutch                  58      Director
         Louis P. Valente                    66      Director
         Joseph P. Caruso                    37      Treasurer, Vice President, and Chief Financial Officer .

</TABLE>

               * Each of those persons may be deemed a parent and/or promoter of
          the Company as these  terms are  defined in the Rules and  Regulations
          promulgated under the Securities Act of 1933, as amended.

     There are no family relationships among executive officers and directors of
the Company.

     STEVEN GEORGIEV.  Mr. Georgiev has served as Chief Executive Officer of the
Company since  November 12, 1993, and became a full time employee of the Company
on January 1, 1995. Mr.  Georgiev was a consultant to Dymed from June 1991 until
its September 1991 merger with the Company, at which time he became the Chairman
of the Company's  Board of Directors.  Mr.  Georgiev is a financial and business
consultant to a variety of emerging,  high growth  companies.  Mr.  Georgiev has
been a director of Excel Technology, Inc. since 1992, and of Dynagen, Inc. since
1996. Mr. Georgiev was Chairman of the Board of Directors of Dynatrend,  Inc., a
publicly-traded consulting firm that he co-founded in 1972, until February 1989.
Mr.  Georgiev has a B.S. in Engineering  Physics from Cornell  University and an
M.S.  in  Management  from the  Massachusetts  Institute  of  Technology  (Sloan
Fellow).

     MICHAEL H. SMOTRICH.  Dr.  Smotrich was a consultant to Dymed from May 1992
until its merger with the Company in September 1992, at which time he became the
Company's  Executive Vice President,  Chief Operating  Officer,  Secretary and a
director. In August 1994, Dr. Smotrich became the Company's President. From July
1988 until May 1991, Dr. Smotrich was an independent consultant  specializing in
the development and  manufacture of laser based medical  products.  Dr. Smotrich
was Vice  President of Operations at Candela Laser Corp.  from June 1987 to June
1988,  where  he was  responsible  for  medical  laser  production  and  product
development.  From  July 1984 to June  1987,  as  Corporate  Vice  President  of
Research  and  Development,  Dr.  Smotrich  was  responsible  for the design and
development of surgical laser products at Merrimack  Laboratories,  Inc.,  which
was acquired by the LaserSonics division of Cooper Laboratories,  Inc. From 1972
to 1984, Dr. Smotrich was Vice President in charge of the  Electro-Optics  Group
at Avco  Everett  Research  Laboratory,  Inc.,  working in the laser  technology
field. Dr. Smotrich received a certificate from the Advanced  Management Program
at Harvard Graduate School of Business  Administration and has a B.S. in Physics
from the Massachusetts  Institute of Technology and an M.S. and Ph.D. in Physics
from Columbia University.

     BUSTER  GLOSSON.  Mr.  Glosson  has been a director  of the  Company  since
September  1, 1996.  From 1965 until June 1994,  he was an officer in the United
States Air Force (USAF).  Most recently,  he served as a Lieutenant  General and
Deputy Chief of Staff for plans and operations,  Headquarters USAF,  Washington,
D.C. Mr. Glosson is a veteran of combat missions in Vietnam and, during the Gulf
War, he commanded  the 14th Air Force  Division and was the director of campaign
plans for the United States Central Command Air Forces, Riyadh, Saudi Arabia. In
1994 he founded and has since  served as  

<PAGE>
                                       -41-

President  of Eagle Ltd.,  a  consulting  firm  concentrating  on  international
business opportunities in the high-technology arena. He is also Chairman and CEO
of  Alliance  Partners  Inc.,  an  investment  holding  company  with a focus on
international  business. He also serves as a director of GreenMan  Technologies,
Inc.,  The  American   Materials  and  Technologies   Corporation,   and  Skysat
Communication Network Corporation, all publicly held companies.

     JOHN M. DEUTCH.  Dr. Deutch became a director of the Company on February 1,
1997.  In May 1995 he was sworn in as  Director  of Central  Intelligence  (DCI)
following a unanimous vote in the Senate, and served as DCI until December 1996.
In  this  position  he was  head  of the  Intelligence  Community  (all  foreign
intelligence   agencies  of  the  United   States)  and   directed  the  Central
Intelligence  Agency.  From  March  1994 to May  1995 he  served  as the  Deputy
Secretary of Defense.  From March 1993 to March 1994, Dr. Deutch served as Under
Secretary of Defense for  Acquisitions  and  Technology.  Dr.  Deutch has been a
member of the faculty of the Massachusetts Institute of Technology (M.I.T.) from
1970 to the  present,  where he was an  associate  professor  and  professor  of
chemistry, Chairman of the Department of Chemistry, Dean of Science and Provost.
Currently,  Dr. Deutch is an MIT Institute  Professor and serves as director for
the following  publicly held  companies:  Ariad  Pharmaceutical,  Citicorp,  CMS
Energy and Schlinberger Ltd. Dr. Deutch has a B.A. in history and economics from
Amherst College and both a B.S. in chemical  engineering and a Ph.D. in physical
chemistry  from M.I.T.  He holds  honorary  degrees  from Amherst  College,  the
University of Lowell and Northeastern University.

     LOUIS P. VALENTE.  Mr. Valente became a director of the Company on February
1, 1997. From 1968 to 1995 Mr. Valente held numerous  positions at EG&G, Inc., a
diversified  technology  company which provides  optoelectronic,  mechanical and
electromechanical  components  and  instruments  to  manufacturers  and end-user
customers in varied markets that include aerospace, automotive,  transportation,
chemical,  petrochemical,   environmental,   industrial,  medical,  photography,
security and other global arenas.  In 1968 he began his career at EG&G,  Inc. as
an  Assistant  Controller  and  held  executive  positions  including  Assistant
Treasurer and Corporate  Treasurer  before  becoming a Senior Vice  President of
EG&G,  Inc.  In this  position  he presided  over and  negotiated  acquisitions,
mergers and investments. Since his retirement in 1995, Mr. Valente has served in
a  similar  role on a  consulting  basis.  Currently,  Mr.  Valente  serves as a
director in Micrion  Corporation,  a publicly  held  company.  Mr.  Valente is a
Certified Public Accountant and a graduate of Bentley College.

     JOSEPH P. CARUSO. Mr. Caruso joined the Company in March 1992 as Controller
in a  part-time  capacity  and became a  full-time  employee  on June 15,  1992.
Effective  January 1, 1993, Mr. Caruso became Vice President and Chief Financial
Officer.  From October  1989 to June 1992,  Mr.  Caruso was the Chief  Financial
Officer of Massachusetts  Electrical  Manufacturing  Co., Inc., a privately held
manufacturer  of power  distribution  equipment.  From September 1987 to October
1989,  Mr.  Caruso was a manager with Robert Half, an  international  consulting
firm.  From  December  1982 to  September  1987,  Mr.  Caruso was a manager with
Pannell Kerr Forster, an international public accounting firm. Mr. Caruso became
a  Certified  Public  Accountant  in 1984  and  has a B.S.  in  accounting  from
Merrimack College.

     Section  16(a) of the  Securities  and  Exchange  Act of 1934  requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange  Commission  (the "SEC") initial  reports of ownership of the Company's
Common  Stock and other  equity  securities  on Form 3 and reports of changes in
such  ownership on Form 4 and Form 5. Officers,  directors and 10%  Stockholders
are  required  by SEC  regulations  to furnish  the  Company  with copies of all
Section 16(a) forms they file.

     To the  Company's  knowledge,  based solely on review of the copies of such
reports  furnished to the Company  during,  and with respect to, its most recent
fiscal  year,  or  written  representations  that Form 5 was not  required,  the
Company  believes that all Section 16(a) filing  requirements  applicable to its
officers, directors and 10% Stockholders were fulfilled in a timely manner.

ITEM 10. EXECUTIVE COMPENSATION.

     The  following  table  sets  forth  certain   information   concerning  the
compensation  for  services  rendered in all  capacities  to the Company for the
fiscal years ended December 31, 1995 and 1996 of (i) the Chief Executive Officer
of the Company during 1996 and (ii) the other executive  officers of the Company
serving on December 31, 1996 whose salary and bonuses for 1996 exceeded $100,000
(the "Named Executive Officers"):

                              SUMMARY COMPENSATION TABLE

<TABLE>
<C>                            <C>                <C>            <C>                  <C>                 <C>
                                                                                          Long-Term
                                                                                        Compensation
                                                                                           Awards
                                                                                       ----------------

                                                                                         Securities                 All
                                                                                         Underlying                Other
Name and                            Fiscal           Salary            Bonus             Options(1)            Compensation
Principal Position                  Year              ($)               ($)                 (#)                    ($)
                                --------------    ------------    ----------------    ----------------    -----------------------

Steven Georgiev                    12/31/96       $275,000        $ 305,000                 800,000                $    --
     Chief Executive Officer       12/31/95       $161,800        $  50,000                 450,000                $    --
                                   12/31/94       $    --         $    --                       --                 $  80,000(2)

Michael H. Smotrich                12/31/96       $214,000        $  50,000                 300,000                $    --
     President, Chief              12/31/95       $149,400        $  50,000                 250,000                $    --
     Operating Officer,            12/31/94       $ 92,000        $  20,000                 170,000                $    --
     Secretary

Joseph P. Caruso                   12/31/96       $180,000        $  64,000                 450,000                $    --
     Vice President and  Chief     12/31/95       $109,600        $  75,000                 250,000                $    --
     Financial Officer             12/31/94       $ 70,400        $  20,000                 170,000                $    --

</TABLE>

     (1) During  fiscal  1996 and fiscal  1995,  the  Company  did not grant any
restricted  stock  awards or stock  appreciation  rights  or make any  long-term
incentive plan payouts to any of the Named Executive Officers.

<PAGE>
                                       -43-

     (2) Represents  monies paid by the Company to Mr.  Georgiev during the year
ended December 31, 1994 pursuant to a consulting arrangement between the Company
and Mr. Georgiev.

Option Grants in Last Fiscal Year

     The following table sets forth certain information  regarding stock options
and warrants granted during 1996 by the Company to the Named Executive Officers:

                                              OPTION GRANTS
<TABLE>
<C>                                <C>                 <C>               <C>                <C>
-----------------------------------------------------------------------------------------------------------
                                      Percent of
                                   Number of Shares     Total Options
                                      Underlying           Granted
Name and                               Options           to Employee      Exercise Price     Expiration
Principal Position                     Granted          in Fiscal Year      Per Share           Date
                                         (#)                                 ($/Sh)
-----------------------------------------------------------------------------------------------------------

Steven Georgiev
     Chief Executive Officer             300,000(1)          5.87%              6.75           2/5/01
     Chairman of the Board               200,000(1)          3.91%              6.00          12/18/01
                                         300,000(1)          5.87%              8.00           8/26/01

Michael H. Smotrich
     President, Chief                    250,000(2)          4.89%              6.75           2/5/01
     Operating Officer,                   50,000(2)           .98%              6.00          12/18/01
     Secretary

Joseph P. Caruso
     Vice President and Chief            200,000(3)          3.91%              8.00         8/26/01
      Financial Officer                  150,000(3)          2.94%              6.75          2/5/01
                                         100,000(3)          1.96%              6.00         12/18/01
</TABLE>



     (1) On February 5, 1996, the Company granted Mr. Georgiev 300,000 shares of
     Common Stock,  issuable upon exercise of a five year warrant at an exercise
     price of $6.75 per share, all of which vests  immediately.  On December 19,
     1996,  the Company  granted Mr.  Georgiev  200,000  shares of Common Stock,
     issuable upon exercise of a five year warrant at an exercise price of $6.00
     per share,  of which 66,666 shares vest  immediately,  66,667 shares vest a
     year  from  issuance  and the  final  66,667  shares  vest two  years  from
     issuance.  On August 27, 1996,  the Company  granted Mr.  Georgiev  300,000
     shares of Common Stock  issuable  upon exercise of a five year stock option
     at an  exercise  price of $8.00 per share,  of which  100,000  shares  vest
     immediately,  100,000  shares  vest one year  from  issuance  and the final
     100,000 shares vest two years from issuance.

     (2) On February 5, 1996, the Company granted Dr. Smotrich 250,000 shares of
     Common Stock,  issuable upon exercise of a five year warrant at an exercise
     price of $6.75 per share, all of which vests  immediately.  On December 19,
     1996,  the Company  granted Dr.  Smotrich  50,000  shares of Common  Stock,
     issuable upon exercise of a five year warrant at an exercise price of $6.00
     per share,  of which 16,666 shares vest  immediately,  16,667 shares vest a
     year  from  issuance  and the  final  16,667  shares  vest two  years  from
     issuance.

     (3) On February 5, 1996,  the Company  granted Mr. Caruso 150,000 shares of
     Common Stock,  issuable upon exercise of a five year warrant at an exercise
     price of $6.75 per share, all of which vests  immediately.  On December 19,
     1996,  the  Company  granted Mr.  Caruso  100,000  shares of Common  Stock,
     issuable upon exercise of a five year warrant at an exercise price of $6.00
     per share,  of which 33,333 shares vest  immediately,  33,333 shares vest a
     year  from  issuance  and the  final  33,334  shares  vest two  years  from
     issuance. On August 27, 1996, the Company granted Mr. Caruso 200,000 shares
     of Common Stock  issuable  upon  exercise of a five year stock option at an
     exercise price of $8.00 per share, of which 66,666 shares vest immediately,
     66,667  shares vest one year from issuance and the final 66,667 shares vest
     two years from issuance.

<PAGE>
                                       -44-

Aggregated Option Exercises in Last Year and Fiscal Year-End; Option/SAR Values

     The following table sets forth information on an aggregated basis regarding
the exercise of stock options during the last  completed  fiscal year by each of
the Named  Executive  Officers and the value of unexercised  options at December
31, 1996:

<TABLE>

<C>                               <C>                <C>              <C>                      <C>
                                                                          Number of
                                                                          Securities                 Value of
                                                                          Underlying               Unexercised
                                                                         Unexercised               in-the-Money
                                      Shares                             Options/SARs              Options/SARs
                                     Acquired            Value          at FY-End (#)            at FY-End ($)(1)
Name and                            on Exercise        Realized          Exercisable/              Exercisable/
Principal Position                      (#)               ($)           Unexercisable             Unexercisable
-------------------------------------------------------------------------------------------------------------------------
Steven Georgiev
     Chief Executive Officer          260,000           426,200        703,666/333,334(2)              1,115,750/100,000

Michael H. Smotrich
     President, Chief                   --                --            686,666/33,334(3)               1,881,249/25,000
     Operating Officer,
     Secretary

Joseph P. Caruso
     Vice President and Chief           --                --           699,999/200,001(4)               2,041,250/50,000
     Financial Officer

</TABLE>

     (1) Value is based on the  December  31, 1996  closing  price on the Nasdaq
     Small Cap Market of $6.75 per share. Actual gains, if any, on exercise will
     depend  on the  value  of the  Common  Stock on the date of the sale of the
     shares.

     (2)  Includes  warrants to purchase  Common  Stock and stock  options  with
     exercise prices ranging from $2.00-$8.00,  all of which expire on or before
     December 18, 2001.

     (3)  Includes  warrants to purchase  Common  Stock and stock  options  with
     exercise prices ranging from $2.125-$6.75, all of which expire on or before
     December 18, 2001.

     (4)  Includes  warrants to purchase  Common  Stock and stock  options  with
     exercise prices ranging from $2.00-$8.00,  all of which expire on or before
     December 18, 2001.

     (5) Consists of a warrant to purchase  Common Stock at an exercise price of
     $6.00 per share expiring on December 19, 2001.

     Mr. Glosson, Mr. Valente and Dr. Deutch are paid $60,000 per year for their
services as Director.  For his services as a Director,  Mr.  Glosson  received a
warrant to purchase 100,000 shares of Common Stock at an exercise price of $8.00
per share. This warrant vests over a period of three years and expires on August
26, 2001.  For his  services as a Director,  Mr.  Valente  received a warrant to
purchase  50,000 shares of Common Stock at an exercise price of $7.00 per share.
This  warrant  vests  immediately  and expires on  December  26,  2001.  For his
services as a Director,  Dr. Deutch received a warrant to purchase 50,000 shares
of Common  Stock at an exercise  price of $6.75 per share.  This  warrant  vests
immediately and expires on December 27, 2001. In accordance with Company policy,
Directors  who  are  employees  of  the  Company  serve  as  Directors   without
compensation.   Directors  are  also  reimbursed  for  reasonable  out-of-pocket
expenses incurred in attending Board of Directors meetings.

Employment Agreements

     Effective  January  1,  1997,  the  Company  entered  into  three-year  key
employment agreements with Mr. Georgiev,  Dr. Smotrich and Mr. Caruso.  Pursuant
to these  agreements,  Mr.  Georgiev  serves  as Chief  Executive  Officer,  Dr.
Smotrich serves as President and Chief  Operating  Officer and Mr. Caruso serves
as Chief Financial  Officer,  at annual base salaries of $350,000,  $250,000 and
$200,000,  respectively. The agreements provide for bonuses as determined by the
Board of Directors  or Executive  Committee,  and employee  benefits,  including
vacation, sick pay and insurance, in accordance with the Company's policies.

<PAGE>
                                       -45-

     The agreements provide that, in the event of termination (i) by the Company
without  cause,  as defined,  or by the executive  for good reason,  as defined,
other than  within one year of a change in control,  the  Company  shall pay the
executive  four times the  executive's  annual base  salary then in effect,  and
continue  the  executive's  employee  benefits  for  the  remaining  term of the
agreement; (ii) within one year following a change in control, the Company shall
pay the executive eight times the executive's annual  compensation,  as defined,
and continue the  executive's  employee  benefits for the remaining  term of the
agreement;  and (iii) by the executive for good reason within one year following
an approved change in control,  as defined,  the Company shall pay the executive
eight  times the  executive's  annual  base  salary then in effect and any bonus
compensation  to which the executive would have been entitled if he had remained
as an employee  under the agreement to the end of the fiscal year,  and continue
the executive's employee benefits for the remaining term of the agreement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following  table sets forth,  as of April 4, 1997, the number of shares
of the Company's Common Stock owned by each director, by the Company's Principal
Executive  Officer  and  each of the  other  Named  Executive  Officers,  by all
directors and executive  officers as a group, and by any persons  (including any
"group" as used in Section  13(d)(3) of the  Securities  Exchange  Act of 1934),
known by the Company to own  beneficially 5% or more of the  outstanding  Common
Stock. Except as otherwise indicated, the stockholders listed in the table below
have sole voting and investment power with respect to the shares indicated.

<TABLE>
<C>                                                        <C>                                <C>
                                                                                              Percentage
                                                             Number of Shares                  of Class
Name and Address of Beneficial Owner                        Beneficially Owned                   (1)
------------------------------------                        ------------------                -----------
Steven Georgiev(5)                                                1,072,871                       3.25%
66 Cherry Hill Drive
Beverly, MA  01915

Joseph P. Caruso(6)                                                 768,257                       2.33%
66 Cherry Hill Drive
Beverly, MA  01915

Michael H. Smotrich(7)                                            1,224,256                       3.71%
66 Cherry Hill Drive
Beverly, MA  01915

Buster C. Glosson(8)                                                 53,333                         *
66 Cherry Hill Drive
Beverly, MA  01915

Louis P. Valente(9)                                                  54,000                         *
66 Cherry Hill Drive
Beverly, MA  01915

John M. Deutch(9)                                                    50,000                         *
66 Cherry Hill Drive
Beverly, MA  01915

All Directors and Executive Officers as a Group                   3,222,717                       9.34%
(6 persons)(10)
</TABLE>

*    Less than one percent.

(1)  Pursuant to the rules of the Securities and Exchange Commission,  shares of
     Common Stock which an individual or group has a right to acquire  within 60
     days  pursuant to the  exercise of options  and  warrants  are deemed to be

<PAGE>
                                       -46-

     outstanding  for the purpose of computing the percentage  ownership of such
     individual or group,  but are not deemed to be outstanding  for the purpose
     of  computing  the  percentage  ownership  of any other person shown in the
     table.  Percentage  ownership is based on 32,267,890 shares of Common Stock
     outstanding.

(5)  Includes 703,666 shares of Common Stock which Mr. Georgiev has the right to
     acquire  within 60 days  pursuant to the exercise of options and  warrants,
     40,000 shares of Common Stock held by family  members and 2,051 shares held
     in the Company 401(k) Plan.

(6)  Includes  699,999  shares of Common Stock which Mr. Caruso has the right to
     acquire  within 60 days  pursuant to the exercise of options and  warrants,
     and 1,432 shares held in the Company 401(k) Plan.

(7)  Includes 686,666 shares of Common Stock which Dr. Smotrich has the right to
     acquire  within 60 days  pursuant to the exercise of options and  warrants,
     and 8,000 shares of Common Stock owned by family members.

(8)  Includes  53,333 shares of Common Stock which Mr.  Glosson has the right to
     acquire within 60 days pursuant to the exercise of options and warrants.

(9)  Includes  50,000  shares of Common Stock which Mr.  Valente and Mr.  Deutch
     have the  right to  acquire  within 60 days  pursuant  to the  exercise  of
     warrants.

(10) For  purposes of this  calculation,  total  issued and  outstanding  shares
     includes an aggregate of 2,243,664 shares issuable  pursuant to options and
     warrants exercisable within 60 days.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     From January 1995 to April 1997 the Company has advanced varying amounts to
Steven  Georgiev,  the  Company's  Chief  Executive  Officer and Chairman of the
Board;  the total  outstanding  indebtedness  at April 18, 1997 was  $1,185,993.
These advances are evidenced by demand  promissory  notes which bear interest at
7% and are  collateralized  by  stock in the  Company  and  Common  Stock of The
American  Materials & Technologies  Corporation  ("AM&T") at a 75% loan to value
ratio.

     From January 1995 to April 1997 the Company has advanced varying amounts
to Michael H. Smotrich, the Company's President and Chief Operating Officer; the
total  outstanding  indebtedness at March 31, 1997 was $518,156.  These advances
are  evidenced  by demand  promissory  notes  which bear  interest at 7% and are
collateralized by stock in the Company at a 75% loan to value ratio.

     At December 31, 1995, the Company had notes  receivable for $3,150,000 from
AM&T evidenced by a $3,000,000  promissory note and a $150,000  promissory note,
both with interest at the rate of 10% per annum.  Steve  Georgiev is chairman of
AM&T and owns 13% of AM&T's  outstanding  common stock.  On March 29, 1996,  the
Company assigned a portion of its notes receivable at a face value of $1,500,000
to  a  non-affiliated  individual  for  $1,500,000.  The  remaining  outstanding
portions of the notes was paid off in 1996.  The Company owns a total of 463,664
shares of AM&T's common stock at March 31, 1997.  These shares were purchased at
a cost of $375,000 and have a market value at March 31, 1997 of $2,781,984.

     In 1996 the  Company  had  loans  outstanding  at  various  points  in time
totaling $5,800,000 to Alliance Partners, Inc. Buster Glosson, a director of the
Company,  is Chairman and Chief  Executive  Officer of Alliance  Partners,  Inc.
These loans accrued interest at a rate of 10% per annum and were all paid off by
December 31, 1996.

     In 1996 the Company made  consulting  payments  totaling  $109,000 to Eagle
Limited. Buster Glosson is President of Eagle Limited.

     On December 18, 1996,  Steven  Georgiev  pledged  77,000 shares of his AM&T
common  stock in favor of the Company to secure a loan of  $500,000  made by the
Company to Trani,  Inc.; on April 16, 1997, Mr. Georgiev increased the number of
pledged AM&T shares to 100,000.

<PAGE>
                                       -47-

     On March 31,  1997,  Steven  Georgiev  pledged  112,000  shares of his AM&T
common  stock in favor of the Company to secure a loan of  $500,000  made by the
Company to JCV Capital  Corp.;  on April 16, 1997,  Mr.  Goergiev  decreased the
number of AM&T shares pledged to 100,000.

     (See also "Employment Agreements.")

     The  Company  believes  the  foregoing  transactions  were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
The Company's policy, as adopted by its Board of Directors on December 16, 1996,
is that, in order to reduce the risks of self-dealing or a breach of the duty of
loyalty to the  Company,  all  transactions  between  the Company and any of its
officers,  directors or principal  stockholders  must be for bona fide purposes,
will be subject to approval by a majority  of the  disinterested  members of the
Board of Directors of the Company, and must be on terms no less favorable to the
Company than could be obtained from unaffiliated parties.

<PAGE>
 
                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1934, the Registrant
certifies  that it has  caused  this  Report to be  signed on its  behalf by the
undersigned,   thereunto  duly  authorized,  in  the  Town  of  Beverly  in  the
Commonwealth of Massachusetts on April 30, 1997.


                                          PALOMAR MEDICAL TECHNOLOGIES, INC.





                                          By:     /s/ Stevem Georgiev
                                              ------------------------------
                                              Steven Georgiev
                                              Chairman of the Board of Directors
                                              Chief Executive Officer

     Pursuant to the requirements of the Securities Act of 1934, this Report has
been  signed  by the  following  persons  on  behalf  of the  Registrant  in the
capacities and on the dates indicated.

<TABLE>
            <C>                                  <C>                                             <C>           
                          Name                                   Capacity                             Date

            /s/ Steven Georgiev                  President, Chief Executive                      April 30, 1997
            ---------------------------------
            Steven Georgiev                      Officer and Chairman of the Board

            /s/ Dr. Michael H. Smotrich          President, Chief Operating Officer,             April 30, 1997
            ---------------------------------
            Dr. Michael H. Smotrich              Secretary and Director

            /s/ Joseph P. Caruso                 Chief Financial Officer and Treasurer           April 30, 1997
            ---------------------------------
            Joseph P. Caruso                     ( Principal Financial Officer and
                                                 Principal Accounting Officer)

            /s/ Buster C. Glosson                Director                                        April 30, 1997
            ---------------------------------
            Buster C. Glosson

            /s/ Louis P. Valente                 Director                                        April 30, 1997
            ---------------------------------
            Louis P. Valente

            /s/ John M. Deutch                   Director                                        April 30, 1997
            ---------------------------------
            John M. Deutch

</TABLE>