10-K

 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                        -------------------------------

                                   FORM 10-K

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 for the fiscal year ended March 31, 1998.
                                    -------------- 
[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 for the transition period from ____________ to _____________.

                         Commission file number 0-25242

                        --------------------------------

                          PREMIER LASER SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)


             California                                   33-0472684
     (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                   Identification No.)


     3 Morgan, Irvine, California                           92618
 (Address of principal executive offices)                 (Zip Code)

     (Registrant's telephone number, including area code):   (714) 859-0656

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:
                   Class A Common Stock and Class B Warrants
                   -----------------------------------------
                                (Title of class)

     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 or
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 [_]

     Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein, and will not 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-K/A or any
amendment to this Form 10-K/A.  [_]

     The aggregate market value of the registrant's voting stock held by
nonaffiliates was approximately $61,878,491 on June 24, 1998, based upon the
closing sale price of such stock on May 22, 1998.

     Number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date:
     As of June 24, 1998:
                Class A Common Stock:    14,903,906 Shares
                Class E-1 Common Stock:  1,257,499 Shares
                Class E-2 Common Stock:  1,257,499 Shares

     Documents incorporated by reference.  List hereunder the following
documents if incorporated by reference, and the part of the Form 10-K (e.g.,
Part I, Part II, etc.) into which the document is incorporated:  (1) any annual
report to security holders; (2) any proxy or information statement; and (3) any
prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933:
Portions of the registrant's definitive proxy statement to be issued in
conjunction with the registrant's annual meeting of shareholders currently
scheduled to be held October 12, 1998, which proxy statement shall be filed no
later than 120 days after the close of registrant's fiscal year ended March 31,
1998, are incorporated by reference into Part II and Part III of this Annual
Report on Form 10-K.

 
                                     PART I

Item 1.  Business.

     This Annual Report on Form 10-K contains certain forward-looking statements
and information relating to the Company that are based on the beliefs of
management as well as assumptions made by and information currently available to
management.  Such forward-looking statements are principally contained in the
sections "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and include, without limitation, the
Company's expectation and estimates as to the Company's business operations,
including the introduction of new products, and future financial performance,
including growth in revenues and net income and cash flows.  In addition, in
those and other portions of this Annual Report, the words "anticipates,"
"believes," "estimates," "expects," "plans," "intends" and similar expressions,
as they relate to the Company or its management, are intended to identify
forward-looking statements.  Such statements reflect the current views of the
Company's management, with respect to future events and are subject to certain
risks, uncertainties and assumptions, including the risk factors described in
this Annual Report.

Overview

     Premier Laser Systems, Inc. ("Premier") develops, manufactures and markets
several lines of proprietary medical lasers, fiberoptic delivery systems and
associated products for a variety of dental, ophthalmic and surgical
applications. In addition, through its wholly owned subsidiary, EyeSys
Technologies, Inc., a Delaware corporation, ("EyeSys"), Premier develops,
manufactures and markets corneal topography (diagnostic imaging) systems.
Premier's majority-owned Data.Site joint venture ("Data.Site") assists
physicians and researchers with ophthalmic data collection and outcomes analysis
for specific procedures. Premier's majority owned subsidiary, Ophthalmic Imaging
Systems, Inc., a California corporation ("OIS") is engaged in the business of
designing, developing, manufacturing and marketing digital imaging systems and
image enhancement and analysis software for use by practitioners in the ocular
health field. When referred to in the following discussion, the "Company" shall
include Premier Eyesys, Data.Site and OIS.

     Premier commenced operations in August 1991 after acquiring substantially
all of the assets of Pfizer Laser, a division of Pfizer Hospital Products Group
("Pfizer HPG") which is a wholly-owned subsidiary of Pfizer, Inc. The Company
acquired from Proclosure, Inc. ("Proclosure") certain technology, assets and
proprietary rights relating to a laser system for tissue fusion in 1993, and
completed its initial public offering of securities in 1994. In 1997, it formed
a joint venture, named "Data.Site," with Kansas City-based Refractive Surgical
Services for the purpose of providing data collection and outcomes analysis. In
September 1997, Premier acquired EyeSys in exchange for cash and securities.
Premier acquired a majority of the outstanding common stock of OIS in several
transactions commencing in October 1997 and ending in February 1998. Premier has
also entered into a Stock Purchase Agreement, dated February 25, 1998, pursuant
to which it agreed to commence an exchange offer to acquire all of the remaining
outstanding common stock of OIS. However, the parties' obligations under that
agreement are subject to certain conditions which have not yet been fulfilled,
and the parties are discussing possible modifications to such agreement. The
agreements by which certain of the OIS securities were acquired provide that in
certain circumstances (including Premier's failure to acquire the remaining
outstanding shares of Common Stock) the acquisition of certain of the OIS shares
purchased to date may be rescinded, leaving Premier with less than a majority of
the outstanding shares in such event.

  Laser Business

     The Company's lasers and related products use the controlled application of
thermal, acoustic and optical energy to allow the physician or dentist to
perform selected minimally invasive procedures which in some cases, compared to
conventional techniques not involving the use of lasers, vaporize or sever
tissue with minimal blood loss and scarring, increase patient comfort and reduce
patient treatment time and treatment costs.

                                       2

 
The Company currently markets certain of these lasers for dentistry,
ophthalmology and surgery.

     In its laser business, the Company participates in three market segments:
dentistry, ophthalmology and surgery. The Company's innovations include: the
first laser cleared for use on hard tissue (teeth) in dentistry, the first diode
laser in dentistry, the first laser in clinical trials for cataract
emulsification, the first Erbium:YAG laser for ablation of skin and the first
laser in clinical trials for tissue melding.

     Although the Company has received more than 100 clearances from the United
States Food and Drug Administration (the "FDA") in multiple specialty areas to
market its laser products for a variety of medical applications, due to limited
financial resources the Company has initially focused its marketing efforts on
dental lasers which the Company believes have the most promise for commercial
success.  The Company initiated marketing efforts in ophthalmology in calendar
1997.  The level of future marketing efforts is partially dependent upon the
receipt of future financing.  As resources permit, the Company plans to commence
marketing efforts with respect to other medical applications which it believes
may also be commercially viable.

  Corneal Topography Business

     Eyesys designs, develops and markets a line of noninvasive corneal
topography systems for use by ophthalmologists and optometrists in surgical
planning and evaluation, diagnosis of corneal pathologies and contact lens
fitting.  Founded in 1986, Eyesys has installed more than 3,500 systems.

     The Eyesys System 2000 combines proprietary hardware used for capturing an
image and a personal computer to control the hardware and to run the software.
The output of the Eyesys System 2000 is a color-coded map of the shape and
curvature of the human cornea that vision care professionals can easily
interpret and utilize for treatments such as refractive and cataract surgery and
corneal transplants, for diagnosis of astigmatisms and corneal pathology, and
for contact lens fitting and custom lens manufacturing.

  Ocular Imaging Business

     OIS, which commenced business in 1986, is engaged in the business of
designing, developing, manufacturing, and marketing digital imaging systems and
image enhancement and analysis software for use by practitioners in the ocular
health field.

     Since its inception, OIS products have addressed primarily the needs of the
ophthalmic fluorescein angiography market, and more recently the indocyanine
green market.  The current flagship products in the OIS's angiography line are
its digital imaging systems, the WinStation 1024(TM) and WinStation 640(TM).
These WinStation products are targeted primarily at retinal specialists and
general ophthalmologists.  OIS's WinStation systems (640 and 1024 resolution)
are primarily used by ophthalmologists to perform a diagnostic test procedure
known as fluorescein angiography.  This procedure is used to diagnose and
monitor pathology and provide important information in making treatment
decisions.  Fluorescein angiography is performed by injecting a fluorescent dye
in the bloodstream.  As the dye circulates through the blood vessels of the eye,
the WinStation system connected to a fundus camera takes detailed images of the
patient's retina.  Quite often these images provide a "road map" for laser
treatment.

     OIS has experienced operating losses for each fiscal year since its initial
public offering in 1992. OIS expects to continue to incur operating losses for
the foreseeable future and while a goal of the combined ophthalmic businesses is
to achieve profitability through consolidation, there can be no assurance that
OIS will be able to achieve or sustain significant revenues or profitability in
the future.

                                       3

 
Market Overview

   Dental and Periodontal Laser Market

     The current market for laser equipment in dental procedures is comprised of
hard and soft tissue procedures, composite curing and teeth whitening.

     Hard Tissue (Cavity Preparation).  Potential dental laser applications for
hard tissue procedures (i.e., procedures on teeth) include pit and fissure
sealing, etching, caries removal and cavity preparation.  Based on user feedback
from the Company's clinical sites, the Company believes that the use of a laser
in dentistry reduces the pain associated with various traditional procedures
performed with a dental drill.  On May 7, 1997, the Company's Er:YAG laser was
cleared to market for tooth etching, caries removal and cavity preparation. This
laser was the first to be cleared by the FDA for such procedures. The Company
commenced marketing of the Er:YAG laser for these procedures shortly after
receipt of FDA clearance.

     Soft Tissue.  The dental laser can be used for certain periodontal
procedures and to treat early gum disease, postponing or in some cases
eliminating the need for conventional periodontal surgery and providing the
opportunity for overall cost savings.  While the Company has clearance to market
six lasers (including the Aurora diode laser and Centauri Er:YAG laser) for soft
tissue dental procedures, the Company focuses its marketing efforts on its
Aurora diode laser in this area.

     Composite Curing.  Composites are rapidly replacing amalgams (gold and
silver) as the material of choice for restoration of cavities, because they more
closely match the color of teeth and because amalgams have drawn increasing
worldwide concern over safety due to the toxic gases which may be released when
the amalgams are removed from teeth. Composite fillings are typically cured
using a curing light which provides a broad spectrum of wavelengths. The use of
the argon laser for this application has been shown to frequently result in a
stronger restoration than composites cured by traditional curing lights. The
Company's argon lasers can also be used to cure the resins used in placing
veneers or bond orthodontic brackets. The Company's Arago and MOD argon lasers
have received FDA clearance for use in these applications.

     Teeth Whitening.  A large number of dentists use light accelerated
bleaching materials for teeth whitening.  These materials are traditionally
applied at night over a six to eight week period to whiten a patient's teeth
while he or she sleeps.  Lasers have been shown to facilitate the use of these
light sensitive materials in the dentist's office by accelerating this process
and resulting in an approximately three shade change in less than one hour.  The
Company's MOD and Arago lasers have been cleared to market for this procedure.

     Cavity Prevention.  The Company is currently conducting research and is
initiating clinical trials to use its lasers for cavity prevention applications.
The Company's clinical trials are at an early stage and there can be no
assurances that FDA clearance will be obtained for these applications.

  Ophthalmic Laser Market

     Laser systems have been used for the treatment of eye disorders for many
years and are widely accepted in the ophthalmic community.  The original and
most widely accepted use of laser systems in ophthalmology has been for
posterior capsulotomy. The Company does not promote its lasers for this market,
which it believes is approaching saturation, but instead focuses on intraocular
refractive and aesthetic procedures including anterior capsulotomy, cataract
removal, glaucoma treatment, corneal sculpting and occuloplastic or aesthetic
procedures. The Company has developed the Centauri Er:YAG laser which is capable
of

                                       4

 
performing all of these procedures, which are typically performed by several
different types of medical lasers.  To date, however, the Centauri laser has
only been cleared for use in anterior capsulotomies and certain cosmetic
procedures.

     Cataract Removal Procedures.  The Company believes that no medical lasers
have been approved to date for cataract extraction procedures, and that medical
lasers may result in less trauma and inflammation than traditional surgical
methods, providing more comfort to the patient.  The Company's Centauri Er:YAG
laser has been cleared to market for anterior capsulotomy, a procedure which
opens the capsule of the eye prior to the removal of the cataract.  The Company
has also completed Phase II clinical trials on the Centauri laser for lens
emulsification (the removal of the cataract itself), as an alternative to
phacoemulsification (the breakup of the cataract by ultrasonic energy).  The
Company believes that this patented technology for use in lens emulsification
may provide an easier and safer method of cataract removal.

     Treatment of Glaucoma.  Glaucoma, a disease of the eye characterized by
increased intraocular pressure within the eyeball and progressive loss of
vision, has traditionally been treated with drug therapy.  When drug therapy is
ineffective, periodic invasive surgery may be required.  In these cases, lasers
may be used to open the sclera and relieve pressure in the eye.  This procedure,
which may be repeated periodically, can be performed under local anesthesia
with a self closing incision on an outpatient basis.  The Company is currently
conducting clinical trials prior to seeking clearance to market its Centauri
Er:YAG laser for this procedure.  If clearance is obtained, concerning which
there can be no assurance, the Company's Er:YAG laser could provide a viable
alternative to the traditional invasive surgical procedures.

     Corneal Sculpting.  The Company believes that the recent approval of
excimer lasers has resulted in greater acceptance and recognition of laser
refractive surgery in the ophthalmic market.  Medical lasers may be used for
corneal sculpting (photorefractive keratectomy), a procedure in which the laser
is used to sculpt the cornea of the eye to a desired curvature to correct the
myopia, hyperopia or astigmatism.  The Company plans to seek approval to market
the Centauri laser for corneal sculpting and has initiated studies in
preparation for regulatory submittal for this application. No assurance can be
given, however, that approval will be given for this application.

     Aesthetic Surgical Procedures. The Company has received clearance for the 
use of its lasers in certain aesthetic procedures such as skin resurfacing and 
eyelid surgery. It plans to begin marketing certain of these products for 
aesthetic applications during the 1999 fiscal year.

  Surgical Laser Market

     Laser systems have been approved for and are currently being used in a
variety of surgical applications including orthopedics, neurosurgery, urology,
gastroenterology, ophthalmology, cardiology, dermatology, gynecology and plastic
surgery.  Although the Company's products are cleared to market in a number of
specialty areas within the surgical market, the Company has specifically
targeted tissue melding (tissue fusion) and aesthetic applications within the
surgical market.

     Tissue Melding.  The Company believes a significant number of wound closure
procedures may be addressed with surgical lasers in conjunction with or
independent of traditional sutures or staples.  The clinically demonstrated
benefits of the use of surgical lasers for tissue melding, as compared to
sutures and staples, include fluid-static seals, immediate strength of the
closure and reduced surgical time.  The Company and its strategic partner have
conducted animal tests to support IDE submittals for the use of the Company's
Polaris Nd:YAG laser in the areas of arteries, veins, blood vessels and ducts,
and are currently conducting clinical studies for skin and hypospadias.  The
Company has also completed clinical trials for vasovasotomy (reversal of
vasectomies) which demonstrated a success rate of approximately 89%.  The
Company is also beginning Phase I clinical trials for the treatment of
hypospadias, the lengthening of the urethra to the end of the penis in infants,
in which it is anticipated that the laser's fluid-static seal may minimize post-
surgical complications such as the leakage of urine which results in secondary
surgical procedures.  The Company has clearance for Phase II clinical trials for
skin closure

                                       5

 
following mastectomies and eyelid surgery at five clinical sites.  Artery and
vein anastomosis is being tested in animals by the Company's strategic partner
in Japan in preparation for clinical studies.

     Aesthetic Surgical Procedures. The market for aesthetic surgery is growing
rapidly worldwide. The Company has a number of approvals for lasers to be used
in aesthetic applications and will devote further efforts in the future to
entering into and capitalizing on this market.

     The Company has regulatory clearance to market its products for a variety
of additional applications, including in urology, orthopedics, gynecology,
gastroenterology, podiatry, pulmonary and neurosurgery, among other areas.  In
areas where the Company's technology is not being fully utilized, the Company
may seek agreements to supply its products under private label for other
manufacturers or may enter into strategic alliances to develop and market the
Company's lasers for other applications.

  Corneal Topography Market

     Because of the importance of the cornea to visual performance, virtually
all ophthalmologists and optometrists have historically used a measuring
instrument known as a keratometer to quantify corneal curvature.  This
instrument obtains four measurement points reflected on a 3 millimeter diameter
circle on the cornea.  Because of the small number of data points and other
limitations of this instrument, it cannot accurately measure asymmetrical
curvatures.  This is clinically significant because, according to clinical
studies, more than one out of every three people suffers from asymmetric
refractive errors.  While in the past the limitations of keratometry were
accepted since only symmetrical refractive errors were correctable with glasses
or contact lenses, this is no longer the case.  Advanced contact lens designs
and refractive surgical procedures provide clinicians and patients with a
variety of optical solutions, even for asymmetrical errors, and require more
accurate information over a greater area of the cornea.

     Applications of corneal topography technology include:

     Refractive Surgery.  More than 140 million Americans suffer from refractive
errors requiring them to wear glasses or contact lenses.  Every year there are
an estimated 65-70 million patient visits to ophthalmologists and optometrists
in the U.S. which result in the purchase of over 60 million eyeglasses and
contact lenses.  It is also estimated that over 40% of the world's population
suffers from refractive errors significant enough to require some form of
correction.  Many industry analysts believe that emerging refractive surgery
techniques will be attractive to a significant number of these patients.
Corneal topography has important applications in selecting the appropriate
procedure for each patient, preoperative surgical planning, postoperative
evaluation and patient follow-up.

     Cataract Surgery. Cataract surgery is a procedure involving removal of an
opacified natural crystalline lens, primarily in elderly patients. The evacuated
lens is replaced with an implant called an intraocular lens ("IOL"). Corneal
topography can help the surgeon improve pre-surgical planning, assess and
correct surgically induced astigmatism (which is the most frequent complication
caused by IOL surgery), potentially improve the calculation of the implanted IOL
power, and support combination cataract/refractive surgical procedures.

     Corneal Transplants.  Corneal topography provides important information for
other surgical procedures, including post operative evaluation of corneal
transplants.  An increasing number of corneal transplants are performed using
corneal topography to provide for improved surgical outcomes by allowing the
practitioner to evaluate surgical technique and adjust postoperative treatment.
EyeSys estimates that approximately 50,000 corneal transplants are performed in
the U.S. each year.

     Diagnosis of Astigmatism and Corneal Pathology.  Corneal topography is a
valuable technology for the analysis and diagnosis of astigmatism and various
corneal pathologies, including keratoconus, pellucid marginal degeneration and
contact lens-induced corneal warpage.  Because of the limitations of

                                       6

 
keratometers, many of these patients have pathology that cannot be accurately
measured by keratometry, the most widely used method of measuring corneal
curvature.

     Contact Lens Fitting and Custom Lens Manufacturing.  Corneal topography has
several applications in contact lens fitting and manufacturing, including (i)
identification of irregular and hard-to-fit corneas, (ii) detection of contact
lens induced corneal warpage, (iii) computerized selection of lenses and
evaluation of fit, (iv) custom designed contact lenses, and (v) verification of
lens parameters. The Company believes that the combination of an affordable
corneal topography system and applications software targeted at improving
contact lens fitting is particularly attractive to optometrists and general
ophthalmologists who currently fit contact lenses. The Company has developed a
software application, Pro-Fit, which utilizes the available corneal topography
data to recommend lenses which can be selected from a comprehensive worldwide
database of rigid gas permeable (RGP or "hard") and soft lenses. Clinical
testing of Pro-Fit shows that the use of this application software can yield
dispensable RGP prescriptions over 90% of the time providing for dramatic
improvements in the quality of contact lens fits and can result in a significant
saving of clinicians' time. Traditional RGP lens fitting, based on keratometer
readings, is often a trial and error process, consuming clinician or staff time
and can be uncomfortable for patients.

  Ocular Imaging Systems Market

     There are approximately 18,000 ophthalmologists in the United States and
28,000 ophthalmologists practicing medicine in countries outside the United
States.  This group has been traditionally divided into two major groups: those
who specialize on the anterior segment (front of the eye), and those who
specialize on the posterior segment (back of the eye).  Within these groups
there are several sub-specialties including medical retina, retina and vitreous,
glaucoma, neuro, plastics, pediatric, cataract, cornea and refractive surgery.
OIS's WinStation products are targeted primarily at the retina specialist and
general ophthalmologist.

     The WinStation market consists of current fundus camera owners and
anticipated purchasers of fundus cameras suitable for interfacing with the OIS's
digital imaging system products.  A fundus camera is a camera that produces
photographs of the retina of the eye.  Presently there are over 8,500 mydriatic
fundus cameras in clinical use in the United States with an equal number in the
international market.  New fundus camera sales fluctuate between 500 and 1,000
units per year.  Of the total number of fundus cameras worldwide, approximately
12,000 are suitable to be interfaced with OIS digital imaging systems.

     Currently there are six manufacturers of fundus cameras producing a total
of 17 models.  OIS has successfully designed optical and electronic interfaces
to each of these cameras.

     The primary target market for digital angiography systems is retinal
specialists who number approximately 3,000 in the U.S.  For the past two years
OIS digital imaging system sales have been driven in this segment to a large
extent by indocyanine green ("ICG") angiography.  ICG angiography is a new
diagnostic test procedure which is yielding new clinically significant
information that is helpful in the treatment of patients with macular
degeneration (a leading cause of blindness afflicting over 13 million people in
the U.S.).  ICG angiography is a dye procedure that can only be performed using
a digital imaging system.  While only used for 10-20% of patient angiography, it
has been the catalyst to digital imaging system purchases.  Competition is
intense in the retinal community and those practices without ICG capability are
losing referral business from general ophthalmologists.  The Company expects the
demand for digital angiography to continue as it is becoming a standard of care.

  Surgical Outcomes Market

    Data.Site surgical outcomes software is targeted to approximately 18,000
ophthalmologists in the United States who desire to monitor and improve their
surgical outcomes. Accessible through the internet, Data.Site is expanding into
the international marketplace and other clinical specialties. The Data.Site
software is currently being expanded to perform in conjunction with other
electronic medical records systems.



                                       7

 
Products

  Laser Products

     The use of laser technology in dentistry, ophthalmology and surgery
involves the controlled application of laser light to hard or soft tissue
causing an optical, thermal, acoustic or plasma interaction with the tissue.
When applied to tissue, the laser light is partially absorbed.  This process of
absorption converts the light to heat, which in turn alters the state of the
tissue.  The degree of tissue absorption varies with the choice of wavelength
and is an important variable in the application of laser technology in treating
various tissues.  The laser energy can also form a gas bubble in a water medium
which provides an acoustic cutting effect as it bursts.  The Company often uses
its proprietary delivery systems to control the relative proportions of
acoustic, thermal and optical energy applied to tissue resulting in enhanced
cutting effects. These delivery systems include flexible fiberoptics,
waveguides, articulated arms and micromanipulators or scanners which are used on
a disposable or limited reuse basis, and which the Company expects will provide
a recurring revenue stream for the Company. The Company's strategy is to target
specific applications in the dental, ophthalmic and surgical markets, where
management believes that the Company's technology and products have competitive
strengths.

     The Company's line of portable lasers are specifically designed for use in
outpatient surgical centers and medical offices.  The Company believes that its
lasers are also well suited for the international market, particularly in
facilities with many surgical suites where easy transportation of equipment is
necessary.  By employing techniques developed in the computer industry, the
Company has designed a laser system that (i) is modularly designed and uses
similar components for multiple laser systems thereby reducing their overall
cost, (ii) allows for efficient and inexpensive repair by replacing a board or
assembly in the field or through the mail, reducing the need for a field service
force, and (iii) can be easily moved from the office to surgical centers because
of its compact size and limited voltage requirements.  The Company's Er:YAG
lasers are currently priced from $39,000 to $126,000 and its Nd:YAG lasers are
currently priced from $25,000 to $80,000.  The Company's diode lasers are
currently priced from $22,000 to $35,000 and its argon lasers are priced from
$5,500 to $22,000.  The prices of lasers within these ranges depend upon each
model's power capability and the features offered.

     The following table presents in summary form, the Company's principal
lasers and delivery systems, the principal applications for which the Company
intends to use them, and the FDA status of such products.


Product                              Medical Application                    FDA Regulatory Status
- --------------------   ------------------------------------------------   --------------------------
                                                                     
Centauri (Er:YAG)      Dental--Soft Tissue.............................   Cleared to market
                       Dental--Hard Tissue.............................   Cleared to market
                       Ophthalmology (e.g. Anterior Capsulotomy)          Cleared to market
                       Ab-externo and Ab-interno Sclerostomy, Laser
                       Lens Emulsification.............................   
 
                       Corneal Sculpting...............................   Preclinical animal studies
                       General Surgery, Neurosurgery, Orthopedics,
                       Gastrointestinal and Genitourinary Procedures,
                       Urology, Gynecology and Oral Surgery............   Cleared to market
 
 
Pegasus (Nd:YAG        Dental--Soft Tissue.............................   Cleared to Market
20W)
Polaris (1.32(units)   Tissue Melding..................................   Clinical trials
Nd:YAG)
 

                                       8

 


Product                              Medical Application                    FDA Regulatory Status
- --------------------   ------------------------------------------------   --------------------------
                                                                    
                       General Surgery, Ophthalmology, Arthroscopic
                       Surgery, Gastrointestinal and Genitourinary
                       Procedures, Urology, Gynecology and Oral           Cleared to market
                       Surgery.........................................
 
Aurora (diode)         Dental--Soft Tissue.............................   Cleared to market

                       Dental and General Surgery, Ophthalmology,
                       Arthroscopic Surgery, Gastrointestinal and
                       Genitourinary Procedures, Urology, Dermatology,
                       Plastic Surgery, Podiatry, Neurosurgery,
                       Gynecology, Pulmonary Surgery and Oral Surgery..   Cleared to market
 
MOD and Arago          Dental--Composite Curing........................   Cleared to market
 (argon)
                       Dental--Teeth Whitening.........................   Cleared to market


     Centauri ER:YAG Laser.  The Company's Centauri Er:YAG laser is a portable
Er:YAG pulsed solid state laser which generates high frequencies (up to 30Hz) at
relatively low peak power.  These high frequencies allow faster cutting at lower
energies.  The 2.9 micron wavelength of the Er:YAG is highly absorbed by water,
producing a cut similar to the scalpel.  The Er:YAG wavelength is delivered
through a fiber optic delivery system which enables the beams to be focused and
angled. These fiberoptic catheters are difficult to produce and the Company has
invested heavily in the technology to develop fibers which can handle adequate
power. The Company had experienced difficulties in securing a consistent and
reliable source for these fibers in the past. It has procured two sources for
these fibers. See "--Manufacturing and Materials" and "Legal Proceedings."

     The Company's Centauri Er:YAG laser has many potential applications in
different medical specialties, including cutting hard tissue such as bone and
teeth, which could replace or minimize the use of noisy, high speed dental hand
drills, and removing ocular structures or performing microsurgery with minimal
thermal damage.  Although until recently marketed only for soft tissue dental
procedures and anterior capsulotomy, the Centauri laser also has received FDA
clearance to market for hard tissue dental procedures. No assurance can be
given, however, that the use of the Er:YAG laser for hard and soft tissue
procedures will become a widely accepted practice in dentistry. This laser also
has received FDA clearances to market for hemostasis, excision and vaporization
of tissues in ophthalmology, general surgery, neurosurgery, orthopedics,
gastroenterology, urology, gynecology and oral surgery. See "--Government
Regulation." The Centauri laser is effective in cataract ophthalmic procedures
because its wavelength is at the peak of the water absorption spectrum and water
comprises greater than sixty percent of ophthalmic tissues. Therefore, the
Centauri laser can emulsify cataracts, surgically excise tissue in the treatment
of glaucoma and can precisely remove layers of cornea similarly to an excimer
laser. This system, which currently is cleared for anterior capsulotomy and
other procedures in ophthalmology, is estimated to be available for
approximately one-third the price of refractive excimer lasers currently on the
market and requires substantially lower maintenance costs than excimer lasers
(an estimated $10,000 per year as compared to approximately $70,000). In
addition, the multipurpose Centauri Er:YAG laser is completely portable and does
not emit any toxic gases or cause any potential mutagenic effect which may
result from the use of the excimer laser.

     The Company has recently introduced what it believes to be the industry's
first fully-integrated Er:YAG laser system for ophthalmic procedures.  The new
system incorporates the Centauri Er:YAG laser and provides the option of either
a bi-manual or coaxial, uni-manual handpiece to accommodate an individual
physician's technique.  The Company has also demonstrated this system with an 
optional scanner for skin resurfacing.

                                       9

 

     While animal studies have been encouraging, there can be no assurance that
the FDA will approve the use of the Company's Centauri laser for corneal
sculpting, or that the laser will work effectively in clinical trials.  Clinical
trials are estimated to continue for two to five years before approval can be
sought in the United States.  There are several patents pending on this
technology and application, although no assurances can be given that these
patents will be approved or approved with the current claims.

     Polaris and Pegasus ND:YAG LASERS.  The energy of Nd:YAG lasers is absorbed
by blood in tissue and as a result these systems are the preferred lasers to
limit bleeding during surgery and for procedures requiring fiberoptic delivery,
such as laparoscopic surgery.  The Nd:YAG fiberoptic delivery system allows the
surgeon to perform surgery through small incisions, providing minimally invasive
surgery to patients and usually reducing treatment costs and the length of
hospital stays.

     The Company manufactures a variety of continuous wave solid state Nd:YAG
lasers which are designed for use in dentistry and a number of medical
specialties.  The Company received its first FDA clearance to market a
continuous wave Nd:YAG laser system for dental (soft tissue) applications and
introduced its 20 watt dental Pegasus Nd:YAG laser in February 1992 (which has
in large part been superseded by the Company's newer diode laser system).  The
Company also manufactures 40, 60 and 100 watt Pegasus Nd:YAG lasers which have
FDA clearance to market for various applications and procedures in general
surgery, urology, gastrointestinal procedures, pulmonary procedures,
gastroenterology, gynecology and ophthalmology.

     These lasers also utilize the Company's disposable unique TouchTIPS,
AngleTIPS and sculptured fibers.  By using the Pegasus laser with TouchTIPS, the
surgeon is allowed direct contact with tissue and the tactile feeling of the
scalpel or other surgical instruments.  The Company believes that the
availability of these technologies permits the use of lower power laser systems
(20W in dental, 40-60W in surgery).

     The Company holds the proprietary rights, including several patents, to
manufacture and sell the Polaris laser, a 1.32 micron Nd:YAG laser (except in
Japan, China and Taiwan), together with specialized software and delivery
systems, for tissue melding.  The Company is developing the Polaris laser for
use in cosmetic skin closures, vascular surgeries and minimally invasive
surgical procedures normally performed with sutures and staples.  Although the
use of the Polaris laser for tissue melding is still in the development stage,
and no clearance for this application has been received, the Company believes
that tissue melding offers clinical advantages over traditional sutures and
staples including fluid-static seals, immediate strength of the closure and
reduced surgical time.

     Aurora Diode Laser.  The Aurora diode laser is the Company's first
semiconductor laser and is the first truly portable diode laser designed for
dentistry. The Aurora diode laser replaces the 20 watt Pegasus laser for
periodontal procedures, and is approximately one-fourth the size and one-half of
the cost of that system. The diode wavelength is absorbed by blood and
pigmentation and has been cleared for use in multiple specialties such as
general surgery, ophthalmology, urology and plastic surgery. The Aurora laser,
which was introduced for soft tissue dental applications in February 1996, is
designed to utilize the Nd:YAG delivery systems, including TouchTIPS, AngleTIPS
and sculptured fibers, for soft tissue surgery with minimal bleeding or
anesthesia. The dental laser can also be used to treat early stage gum disease,
postponing or in some cases eliminating the need for periodontal surgery and
providing the opportunity for overall cost savings. The Company believes the
Aurora laser compares favorably with competitive products including pulsed
Nd:YAG lasers, which cannot produce the required laser settings for use with
TouchTIPs, or in the new technique for the treatment of periodontal disease, as
well as with CO(2) lasers (which cannot be delivered through a fiber), and argon
lasers (which tend to be slower in cutting and may produce charring).

                                       10

 
     Arago and MOD Argon Lasers.  The Arago and the MOD (Multi Operatory
Dentalaser) are gas lasers which have been cleared to market in dentistry to
accelerate the composite curing process.  Composites are rapidly replacing
amalgams (gold and silver) as the material of choice for the restoration of
cavities. The argon wavelength penetrates through the composite and has been
shown to frequently result in a stronger restoration than composites cured by
traditional curing lights. The Company's argon lasers can also be used to cure
the resins used in placing veneers or bonding orthodontic brackets.

     The argon laser can also be used to enhance teeth whitening procedures
using light activated bleaching materials which have traditionally been applied
at night over a six to eight week period. Lasers have been shown to facilitate
the use of these light activated products in a dentist's office by accelerating
this process and resulting in an approximately three shade change in less than
one hour. The argon laser has been cleared to market for this procedure. No
assurance may be given that the use of the argon laser for teeth whitening will
become a widely accepted practice in the dental industry. The Company plans to
bundle its lasers with light activated whitening materials and co-market these
products with the manufacturers of these materials. The Company is currently
manufacturing the MOD lasers in-house. The Arago laser is currently being
supplied by a third party manufacturer on behalf of the Company.

     Other Lasers.  The Company has developed other solid state pulsed lasers
including the Sirius .532 Nd:YAG laser, Orion Ho:YAG laser and the Arcturus
alexandrite:YAG laser, and other applications for its existing lasers, but is
not actively marketing these lasers at the present time.  The following table
sets forth in summary form certain additional lasers owned by the Company which
are not currently marketed by the Company, and the principal applications for
which the Company has clearance to market such lasers.



Product                                         Medical Application                FDA Regulatory Status
- ---------------------------------   --------------------------------------------   ---------------------
                                                                             
Altair (CO\\2\\) and a CO\\2\\      Orthopedics General and Plastic Surgery,
 laser acquired from Pfizer HPG     Dermatology, Podiatry Ear, Nose and Throat,
                                    Gynecology Pulmonary Procedures;
                                    Neurosurgery and Ophthalmology..............   Cleared to market
 
Pegasus (Nd YAG)                    General Surgery, Urology, Gastrointestinal
 40W/60W                            Procedures, Pulmonary Procedures,
                                    Gastroenterology, Gynecology and               Cleared to market
                                    Ophthalmology...............................
 
Pegasus (Nd:YAG)                    Oral, Arthroscopic and General Surgery,
 100W                               Gastroenterology, Gastrointestinal and
                                    Genitourinary Procedures, Pulmonary
                                    Procedures, Gynecology, Neurosurgery and       Cleared to market
                                    Ophthalmology...............................
 
Sirius (.532(units) Nd:YAG)         Dermatology, General and Plastic Surgery,
                                    Podiatry and Orthopedic Applications........   Cleared to market
 
Orion (Ho:YAG)                      General Surgery, Orthopedics, Ear, Nose and
                                    Throat, Ophthalmology, Gastroenterology,
                                    Pulmonary Procedures and Urology............   Cleared to market
 
Er:YAG/Nd:YAG                       Various specialties.........................   Cleared to market
 (Combination)

                                       11

 
  Laser Delivery Systems and Disposable Products

     An integral part of any laser system is the means of delivering laser light
to the target tissue.  Delivery systems commonly employed in laser surgery
include flexible fiberoptics, waveguides, articulated arms and
micromanipulators.  The Company's proprietary delivery systems control the
relative proportions of acoustic, thermal and optical energy applied to tissue
resulting in enhanced cutting efforts.  Flexible fibers are a preferred method
of delivery for most clinical procedures, but until recently were only available
for Nd:YAG and argon lasers. With the diode laser, coupling efficiency between
the laser and fiber optic limits high powers being focused into small diameter
fibers. Fibers for Erbium lasers are less reliable and durable than standard
quartz fibers, which limits the number of procedures they may be used for. They 
are also significantly more expensive than quartz fibers. The end of a fiber may
be shaped or used with a detachable tip to control the mechanism of laser/tissue
interaction, to give a tactile feel, to provide certain mechanical effects and
to angle or focus the laser beam. The Company has also been granted a perpetual
paid-up license to manufacture, use and sell flexible waveguides to deliver
CO(2) energy pursuant to the Assignment and Modification Agreement dated July
26, 1991 among the Company, Pfizer HPG and Medical Laser Technologies Limited.

     While each laser system marketed by the Company consists of a laser and an
integral fiber, these fibers and other products, such as tubing sets, are used
by surgeons on a disposable or limited reuse basis for each clinical procedure.
The Company believes that expansion into this market could provide it with a
recurring revenue stream.  The Company manufactures a variety of fiberoptic
delivery systems, sculpted fiberoptic probes, optical tips (AngleTIPS and
TouchTIPS), waveguides and catheters which are designed for single-patient use.
The patented connectors and need for product sterility encourage the users of
the Company's lasers to purchase only products which are compatible with this
system.  The Company believes it can sell these products on a custom basis to
hospital administrators for other surgical laser systems at a significant
discount to competitors' published prices, while maintaining gross margins
through vertical integration and the extensive use of molds and tooling.  The
Company also assembles and/or distributes a full line of laser accessories,
including glasses, goggles, laser signs and smoke evacuators.

  Corneal Topography Products

     EyeSys 2000 Corneal Analysis System.  The EyeSys System 2000 corneal
topography instrument and Microsoft Windows based software is targeted at
refractive surgeons, general ophthalmologists and optometrists for diagnostic,
surgical and contact lens fitting applications.  The primary function of the
instrument is to position a patient for corneal image capture, acquire the image
of reflected rings and send the image to an Intel based personal computer for
further processing.  The System 2000 is modular and is marketed as a proprietary
computer peripheral and software.  The System 2000 hardware interfaces to the
computer via a parallel port connection, allowing EyeSys to unbundle the
computer, monitor, printer, tables and other third party items.  This can
significantly lower the price to the customer by allowing physicians to utilize
hardware they already own.  Customers that need to purchase nonproprietary
hardware are given the option of ordering through EyeSys or obtaining suitable
hardware on their own.

     The EyeSys System 2000 software modules are Microsoft Windows applications
and include the following basic modules:

     Patient Examination Software.  This core application is the fundamental
software marketed by EyeSys and is required to perform corneal topography
examinations.  It provides the control functions for EyeSys' System 2000
instrumentation as well as image processing and basic topographical mapping
capability.

     Patient History Software.  This application provides a database for patient
topographic and demographic data as well as the results of other tests performed
as part of an eye examination.  This software includes the ability to compare
multiple corneal topography examinations for a patient allowing

                                       12

 
the clinician to monitor surgical and other corneal changes over time.  Features
include the ability to digitally subtract multiple examinations, providing high
resolution analysis of corneal changes.

     Advanced Diagnostic Software.  This application provides software tools to
allow for diagnosing corneal pathologies and analyzing visual function.  More
specifically, this package presents unique information on the cornea's
refractive power, aspherecity and optical surface distortion.

     Pro-Fit Contact Lens Fitting Software.  Pro-Fit utilizes the available
corneal topography data to recommend specific lenses which can be selected from
a comprehensive worldwide database of rigid gas permeable (RGP or "hard") and
soft lenses.  This application also has been designed for the needs of foreign
markets, particularly for the European market where contact lens fitting methods
and practices differ from those in the United States.

     At the American Academy of Ophthalmology the Company introduced what it 
believes to be the smallest hand held topography system currently available. The
Vista(TM) incorporates much of the same reliable and accurate software as the
System 2000, but its portability facilitates its use in the operating room or by
the optometrist.
     
  Ocular Imaging Products

     OIS currently offers two products to the ophthalmic market: WinStation 640
and the WinStation 1024.  Over the past 35 years fluorescein angiography has
been performed using photographic film which requires special processing and
printing.  The WinStation systems allow for immediate diagnosis and treatment of
the patient.  Images are automatically data based and are permanently stored on
optical laser disk or CD-ROM.  OIS offers a variety of networking and printer
options to best fit the practice needs.

     OIS's WinStation systems are also used by ophthalmologists to perform
indocyanine green ("ICG") angiography.  ICG angiography is a new diagnostic test
procedure which is yielding new clinically significant information that is
helpful in the treatment of patients with macular degeneration (a leading cause
of blindness afflicting over 13 million people in the U.S.).  ICG angiography,
used for approximately 10-20% of patient angiography, is a dye procedure that
can only be performed using a digital imaging system.

                                       13

 
  Other Products

     OIS also developed the Glaucoma-Scope(R)(TM), designed for use by ocular
health providers that manage patients with glaucoma by providing a means for
comparing optic nerve head topography over a number of patient visits.  While
OIS has sold Glaucoma-Scope(R)(TM) units in the past, it no longer actively
markets this product for sale.

Marketing, Sales and Service

  Marketing and Sales 

     The Company markets its products to the dental market in the United States
directly to dentists and periodontists through its direct sales force consisting
of seven area sales managers and its distributor and manufacturer's
representative network consisting of approximately ten manufacturer's
representatives and numerous international distributors. The Company markets its
products primarily through conventions, educational courses, direct mail,
telemarketing and other dental training programs. The dental market includes
approximately 129,000 practicing dentists in the United States. The Company
believes that in order to reach this market it must expand its U.S. distribution
capabilities. Accordingly, Premier signed a letter of intent in December 1997
with Henry Schein, Inc. However, a dispute has arisen between the companies
which makes the viability of this relationship uncertain. 

     Through an active program of educational courses and preceptorships, the
Company has trained dentists in many countries during the past year using
industry recognized dentists and periodontists.

     The Company markets its products in the ophthalmic market through a sales
manager and eight territory managers who focus their efforts on key
ophthalmologists worldwide. The Company has entered into distribution agreements
with distributors in many countries for sales of its diagnostic products and in
preparation for market introduction of the Centauri laser. The Company grants
exclusive distribution rights in select territories to its distributors who
usually must maintain certain distribution minimums in order to retain their
exclusive rights. The Company plans to expand its ophthalmic sales force both by
enlarging its domestic sales force, either internally or through acquisition, by
acquiring or engaging additional international manufacturing representatives,
and by having existing international distributors carry other of the companies
product lines. The Company's acquisition of EyeSys in September 1997 has aided,
and is expected to continue aid, in the establishment of increased international
distribution, as EyeSys utilizes 55 distributors in 60 countries. Sales,
marketing and telemarketing efforts for ophthalmic products are managed out of
Sacramento, California.

     On June 2, 1997, EyeSys entered into an agreement with Marco Ophthalmic
Inc. ("Marco") pursuant to which that company was appointed as a nonexclusive
distributor in the United States of the System 2000 and the exclusive
distributor of the Vista portable corneal topography system for a three-year
period following commercialization of that system.

     In the surgical market, the Company intends to form strategic alliances in
any specialty area where the partner has an established presence in the market
selling to either the physician or the hospital. The Company has entered into
such a strategic alliance with Nippon Shoji Kaisha, Ltd. ("NSK"), which is one
of the leading suppliers of sutures in the Pacific Rim pursuant to an Exclusive
Marketing Agreement.  Under this agreement, Proclosure granted to NSK, in
exchange for a license fee, the exclusive rights to market and distribute the
Polaris Nd:YAG laser in Japan, China and Taiwan.  In addition, under this
agreement the Company granted to NSK an option to manufacture the Polaris, which
if exercised would require NSK to pay the Company a $1.5 million fee and
royalties. NSK has not yet indicated whether it intends to manufacture these
products.  There can be no assurance that the Company will receive any payments
under this agreement.

     No customer accounted for more than 10% of net sales by the Company (on a
consolidated basis) in fiscal 1998 or fiscal 1997.  During calendar 1997, three 
customers each accounted for more than 10% of the sales of EyeSys:  Marco 
Technologies accounted for 13% of sales, Newtech accounted for 14% of sales and 
Vistatek accounted for 15% of sales.

                                       14

 
Customer Service and Support

     The Company is seeking to create a group of loyal customers by focusing on
customer service, quality and reliability.  In addition to its educational
courses, the Company performs a complete

                                       15

 
installation of its products and trains the customers' staff in its proper use.
Educational videos and papers are available upon request.  The Company conducts
service training courses for the representatives of its distributors.  Prior to
shipping, every product is subjected to an extensive battery of quality control
tests. The Company generally provides a one year warranty with all products and
extended warranties are available at an additional cost. If service is required,
a product owner is either sent a loaner product by overnight carrier, returns
his product for service or a service representative visits the owner to repair
the unit. International service is provided either by the foreign distributor or
by return of the product to the Company. The Company has experienced and may
continue to experience difficulties in providing prompt and cost-effective
service of its products in foreign countries. The Company is working to improve
the service training of its international distributors. 

Competition

  Laser Business

     The Company is and will continue to be subject to competition in its
targeted markets, principally from businesses providing other traditional
surgical and nonsurgical treatments, including existing and developing
technologies or therapies, some of which include medical lasers manufactured by
competitors.  In the dental market, the Company competes primarily with dental
drills, traditional curing lights and other existing technologies, and to a
lesser extent competitors' CO(2), argon, Er:YAG and Nd:YAG lasers.  In the
ophthalmic market, the Company is subject to competition principally from (i)
traditional surgical treatments using a tearing needle in anterior capsulotomy,
(ii) phacoemulsification, an ultrasound device used to break up cataracts in
cataract removal procedures, (iii) corrective eyewear (such as eyeglasses and
contact lenses) and surgical treatments for refractive disorders such as
photorefractive keratectomy which is typically performed with an excimer laser
and radial keratotomy which is performed with a scalpel, and (iv) drug therapy
or surgical treatment of glaucoma.  In the surgical market, wound closure
procedures are usually performed using sutures and staples, and traditional
cosmetic surgical procedures may be performed with a scalpel or other lasers.
The Company believes that for many applications its patented or patent pending
methods and fiberoptic delivery systems provide clinical benefits over other
currently known technologies and competitors' laser products.

     The medical laser industry in particular is also subject to intense
competition and rapid technological change.  The Company believes that there are
approximately 30 competitors in different sectors of the medical laser industry.
The Company believes that the principal competitive factors for medical laser
products are the products' technological capabilities, proven clinical ability,
patent protection, price and scope of regulatory approval, as well as industry
expert endorsements.  Many conventional laser systems target one particular
application, while the Company's Er:YAG system is designed to perform in
multiple therapeutic applications.  The Company's self-contained units are
significantly smaller than competitive surgical models, have internal cooling
devices and are powered primarily by dedicated readily available 110 volt lines
instead of the 220 volt lines used by most surgical solid state lasers.  The
specialized menu-driven system software utilized in the Company's lasers also
enhances safety and ease of use of the lasers.

     The Company believes that its ability to compete successfully against
traditional treatments, competitive laser systems and treatments that may be
developed in the future will depend on its ability to create and maintain
advanced technology, develop proprietary products, obtain required regulatory
approvals and clearances for its products, attract and retain scientific
personnel, obtain patent or other proprietary protection for its products and
technologies, and manufacture and successfully market products either alone or
through other parties.  Certain of the Company's competitors have substantially
greater financial, technical and marketing resources than the Company.  There
can be no assurance that such competition will not adversely affect the
Company's results of operations or its ability to maintain or increase market
share.

                                       16

 
  Topography Business

     EyeSys' primary competitors in the corneal topography market are Tomey
Technology ("Tomey"), Alcon Surgical, Inc., a subsidiary of Nestle ("Alcon"),
and Humphrey Instruments, a subsidiary of Carl Zeiss ("Humphrey").

     Tomey, a Japanese ophthalmic diagnostic instrument manufacturer, has
historically been EyeSys' principal established competitor.  Tomey initially
obtained worldwide marketing rights for the TMS-1 topography system from
Computed Anatomy, the product's developer, and subsequently purchased Computed
Anatomy.  Computed Anatomy first introduced a placido disk based topography unit
at the 1987 American Academy of Ophthalmology ("AAO") meeting.  The Tomey
instrument distinguishes itself with a small placido and a very short working
distance.

     Alcon, by its 1993 acquisition of Visioptic Inc., became a competitor of
EyeSys, with considerable financial and marketing strength.  Visioptic first
introduced its placido disc based topography system at the AAO in 1989.  The
founder of Visioptic, Sami El Hage, OD, is a pioneer in three-dimensional
measurement of the cornea and holds several patents on both the EH-270 placido
ring based system and algorithms used in the device.

     Humphrey, with its acquisition of the corneal topography business of
Optical Radiation Corporation (ORC), entered the corneal topography market at
the American Academy of Ophthalmology meeting in San Francisco in October 1994.
Humphrey has a strong international reputation in diagnostic instrumentation.

     Other placido based instruments and other technologies such as those
produced by PAR and Orbtek are marketed or are under development by other
companies, although to date none of such companies has achieved appreciable
market share. EyeSys anticipates that it will encounter established competitors
as it enters new markets for ophthalmic instrumentation. Some of these
competitors may have greater financial, technical and marketing resources.

  Ocular Imaging Business

     The healthcare industry is characterized by extensive research and
development efforts and rapid technological change.  Competition for products
that can diagnose and evaluate eye disease is intense and is expected to
increase.  The Company is aware of two primary OIS competitors in the U.S. which
produce and are delivering digital fundus imaging systems, Topcon and Tomey.
Four other companies are known to have systems in the international market, each
with lesser market penetration.

     Topcon is OIS's main competitor in the angiography market.  Topcon
angiography products predominantly interface with Topcon fundus cameras while
OIS's systems interface with 17 different models or fundus cameras from a wide
variety of manufacturers.

     Although OIS will continue to work to develop new and improved products,
many companies are engaged in research and development of new devices and
alternative methods to diagnose and evaluate eye disease.  Introduction of such
devices and alternative methods could hinder OIS's ability to compete
effectively and could have a material adverse effect on its business, financial
condition and results of operations.  Many of OIS's competitors and potential
competitors have substantially greater financial, manufacturing, marketing,
distribution and technical resources than OIS.

Seasonality

     To date, the Company's revenues have typically been significantly higher in
the second and fourth calendar quarters.  This seasonality reflects the timing
of major medical and dental industry trade shows

                                       17

 
in these quarters, significantly reduced sales during the summer and the effect
of year end tax planning influencing the purchasing of capital equipment for
depreciation during the fourth calendar quarter.  Although revenues during the
summer of 1996 did not follow this historical pattern, the Company expects that
this seasonality will continue indefinitely.

Research and Development

  Laser Business

     In the past three fiscal years, the Company (excluding EyeSys, Data.Site
and OIS) has invested in excess of $5.8 million in research and development
programs. This amount includes approximately $700,000 received under a Small
Business Innovative Research Grant in fiscal 1996 and 1997, however; it excludes
a $9.2 million non cash charge for in-process research and development related
to the EyeSys acquisition in fiscal 1998. The Company's research and development
programs have capitalized on the research and development activities conducted
by Pfizer Laser wherein that company identified key military and aerospace
technologies and adapted these technologies to portable, efficient, solid-state
laser products that were modular in nature. This investment in research and
development has resulted in the development of 20 models of lasers, reusable
accessories such as smoke evacuators and irrigation aspiration systems, more
than 1,000 types of custom delivery systems and approximately 20 types of
surgical tips and accessories.

     In order to maintain its technological advantage, the Company must continue
to invest in new product development.  The Company seeks to augment its funding
of research and development through government grants.  The Company has
previously been awarded a Phase II SBIR grant of $750,000, substantially all of
which has been drawn to fund additional research and clinical trials regarding
laser emulsification of cataracts.  The Company has also applied for new Phase I
research grants related to dentistry, orthopedics, tissue melding, and
ophthalmology.  No assurance can be given that the Company will be awarded any
of these potential government grants.

     The Company's current research is focused on expanding the clinical
applications of its existing products, reducing the size and cost of current
laser systems, developing custom delivery systems and developing new innovative
products.  The Company's in-house research and development efforts have focused
on the development of a systems approach to medical laser products with
proprietary delivery systems designed to allow the laser to interact with tissue
by a number of different mechanisms (e.g., acoustic, ablative and thermal) for
unique laser/tissue effects.  These disposable fiberoptic delivery systems,
developed specifically for niche surgical applications, demonstrate the
principal focus of the Company's research efforts.  Examples of patented or
patent pending products resulting from these research efforts include:
TouchTIPS, AngleTIPS, Er:YAG fiberoptics and CO(2) waveguides.  Clinical
research has also yielded several new surgical procedures.

  Corneal Topography Business

     EyeSys' research and development efforts are focused on further development
of corneal topography systems, advanced applications software development, 
internationalization of software, minimization, simplification and optimization 
of the instrument and development of the next generation ophthalmic 
instrumentation. 

  Ocular Imaging Business

     OIS intends to devote significant resources to the development of
telemedicine/managed care applications, the improvement of optics, new fundus
camera interfaces for ICG, software development (including the continued
enhancement of WinStation), hardware optimization, and the patient/doctor
interface.  OIS's research and development expenditures in the periods ended
August 31, 1997 and 1996, were $1,070,192 and $846,034, respectively.

Patents and Patent Applications

     Patent protection is an important part of the Company's business strategy,
and the Company's success depends, in part, on its ability to maintain patents
and trade secret protection and on its ability

                                       18

 
to operate without infringing on the rights of third parties.  The Company has
sought to protect its unique technologies and clinical advances through the use
of the patent process.  Patent applications filed in the United States are
frequently also filed in selected foreign countries.  The Company focuses its
efforts on filing only for those patents which the Company believes will provide
it with key defensible features instead of filing for all potential minor device
features.  In the United States, the Company holds 33 patents which expire at
various times throughout approximately the next 6-17 years, and has an
additional 24 pending patent applications, including divisional applications.
In addition, the Company holds 23 foreign patents including two utility model
patents and has at least 44 foreign patent applications.  The Company also has a
nonexclusive license to a number of basic laser technologies which are commonly
licensed on such basis in the laser industry.  OIS holds one patent covering its
current products.

     The Company's success will depend in part on its ability to obtain patent
protection for its products and processes, to preserve trade secrets and to
operate without infringing the rights of others.  There can be no assurance that
the Company's patents or trademarks, if granted, would be upheld if challenged,
or that competitors might not develop similar or superior processes or products
outside the protection of any patents issued to the Company.  In addition, there
can be no assurance that the Company will have the financial or other resources
necessary to enforce or defend a patent or trademark infringement or proprietary
rights violation action. Moreover, if its products infringe patents, trademarks
or proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which also could have a material adverse effect on
the Company.

     The Company is aware of certain patents which, along with other patents
that may exist or be granted in the future, could restrict the Company's right
to market certain of its technologies without a license, including, without
limitation, patents relating to the Company's lens emulsification product and
ophthalmic probes for its Er:YAG laser.  In the past, the Company has received
allegations that certain of the Company's laser products infringe other patents.
There has been significant patent litigation in the medical industry in general,
and in the medical laser industry in particular.  Adverse determinations in
litigation or other patent proceedings in which the Company may become a party
could subject the Company to significant legal judgments or liabilities to third
parties, and could require the Company to seek licenses from third parties that
may or may not be economically viable.  Patent and other intellectual property
rights disputes often are settled through licensing arrangements.  No assurance
can be given that any licenses required under these or any other patents or
proprietary rights would be available on terms acceptable to the Company, if at
all.  If the Company does not obtain such licenses, it could encounter delays in
product introductions while it attempts to design around such patents, or it
could find that the development, manufacture or sale of products requiring such
licenses could be enjoined.  If the Company is found, in a legal proceeding, to
have infringed the patents or other proprietary rights of others, it could be
liable for significant damages. These damages may be mitigated in some cases by 
patent infringement insurance held by the Company.

     The Company also relies on unpatented proprietary technology, trade secrets
and know-how.  Certain components of the Company's products are largely
proprietary and constitute trade secrets, but others are purchased from third
parties.  There is no assurance that other parties will not independently
develop substantially equivalent proprietary information or techniques, or
otherwise gain access to the Company's trade secrets or disclose such
technology, or that the Company can meaningfully protect its rights to its
unpatented trade secrets.

     The Company seeks to protect its unpatented proprietary technology, in
part, through proprietary confidentiality and nondisclosure agreements with
employees, consultants and other parties.  The Company's confidentiality
agreements with its employees and consultants generally contain industry
standard provisions requiring such individuals to assign to the Company without
additional consideration any inventions conceived or reduced to practice by them
while employed or retained by the Company, subject to customary exceptions.
There can be no assurance that proprietary information agreements with
employees, consultants and others will not be breached, that the Company would
have adequate remedies

                                       19

 
for any breach or that the Company's trade secrets will not otherwise become
known to or independently developed by competitors.

Government Regulation

  FDA Regulation

     The products that are manufactured by the Company are regulated as medical
devices by the FDA under the Food, Drug and Cosmetics Act (the "FDC Act").
Satisfaction of applicable regulatory requirements may take several years and
requirements vary substantially based upon the type, complexity and novelty of
such devices as well as the clinical procedure. Pursuant to the FDC Act and the
regulations promulgated thereunder, the FDA regulates the preclinical and
clinical testing, manufacture, labeling, distribution, and promotion of medical
devices. Noncompliance with applicable requirements can result in fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, denial or withdrawal of premarket clearance or
approval for devices, recommendations by the FDA that the Company not be allowed
to enter into government contracts, and criminal prosecution. The FDA also has
the authority to request recall, repair, replacement or refund of the cost of
any device manufactured or distributed by the Company.

     The FDA classifies medical devices in commercial distribution into one of
three classes:  Class I, II or Ill.  This classification is based on the
controls the FDA deems necessary to reasonably ensure the safety and
effectiveness of medical devices.  Class I devices are subject to general
control (e.g., labeling, premarket notification and adherence to applicable
requirements for Good Manufacturing Practices, or "GMP's") and Class II devices
are subject to general and special controls (e.g., performance standards,
postmarket surveillance, patient registries, and FDA guidelines).  Generally,
Class III devices are those which must receive premarket approval by the FDA to
ensure their safety and effectiveness (e.g., life-sustaining, life-supporting
and implantable devices, or new devices which have been found not to be
substantially equivalent to legally marketed devices). The Company's laser and
diagnostic products typically are classified as Class II devices, but the FDA
may classify certain indications or technologies into Class III and require a
premarket approval application ("PMA"). OIS's products are classified as Class
II devices (special controls) which require, among other things, annual
registration, listing of devices, good manufacturing practices and labeling, and
prohibition against misbranding and adulteration.

     If a manufacturer or distributor of a medical device can establish that a
proposed device is "substantially equivalent" to a legally marketed Class I or
Class II medical device or to a pre-1976 Class III medical device for which the
FDA has not called for a PMA, the manufacturer or distributor may seek FDA
clearance for the device by filing a Section 510(k) premarket notification.  If
a manufacturer or distributor of a medical device cannot establish that a
proposed device is substantially equivalent to another legally marketed device,
the manufacturer or distributor will have to seek premarket approval for the
proposed device.  A 510(k) notification and the claim of substantial equivalence
will likely have to be supported by various types of data and materials,
possibly including test results or the results of clinical studies in humans.  A
PMA would have to be submitted and be supported by extensive data, including
preclinical and clinical study data, to prove the safety and effectiveness of
the device.  There can be no assurance that some of the Company's products will
not require the more rigorous and time consuming PMA approval, including laser
uses for vasovasotomy or other tissue melding procedures, cavity preparation,
cosmetic surgery, sclerostomy and lens emulsification, among others.

     If human clinical studies of a proposed device are required, whether for a
510(k) or a PMA, and the device presents a "significant risk," the manufacturer
or the distributor of the devices will have to file an IDE application with the
FDA prior to commencing human clinical trials.  The IDE application must be
supported by data, typically including the results of animal and mechanical
laboratory testing. If the IDE application is approved by the FDA and one or
more appropriate Institutional Review Boards ("IRBs"), human clinical trials may
begin at a specific number of investigational sites with a specific

                                       20

 
number of patients, as approved by the FDA.  Submission of an IDE does not give
assurance that FDA will approve the IDE and, if it is approved, there can be no
assurance that the FDA will determine that the data derived from these studies
support the safety and efficacy of the device or warrant the continuation of
clinical studies.  Sponsors of clinical studies are permitted to charge for
those devices distributed in the course of the study provided such compensation
does not exceed recovery of the costs of manufacture, research, development and
handling.  Clinical studies of nonsignificant risk devices may be performed
without prior FDA approval, but various regulatory requirements still apply,
including the requirement for approval by an IRB, conduct of the study according
to applicable portions of the IDE regulations, and prohibitions against
commercialization of an investigational device.

     The manufacturer or distributor may not place the device into interstate
commerce until an order is issued by the FDA granting premarket clearance for
the device.  The FDA has no specific time limit by which it must respond to a
510(k) premarket notification.  The FDA has recently been requiring more
rigorous demonstration of substantial equivalence in connection with 510(k)
notifications and the review time can take four to 12 months or longer for a
510(k).  If a PMA submission is filed, the FDA has by statute 180 days to review
it; however, the review time is often extended significantly by the FDA asking
for more information or clarification of information already provided in the
submission.  During the review period, an advisory committee may also evaluate
the application and provide recommendations to the FDA as to whether the device
should be approved.  In addition, the FDA will inspect the manufacturing
facility to ensure compliance with the FDA's good manufacturing practice
requirements prior to approval of a PMA.

     Devices are cleared by 510(k) or approved by PMA only for the specific
intended uses claimed in the submission and agreed to by the FDA.  Labeling and
promotional activities are also subject to scrutiny by the FDA and, in certain
instances, by the Federal Trade Commission.  Marketing or promotion of products
for medical applications other than those that are cleared or approved could
lead to enforcement action by the FDA.

     There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances for its products on a timely basis or at all,
and delays in receipt of or failure to receive such approvals or clearances, the
loss of previously received approvals or clearances, limitations on intended use
imposed as a condition of such approvals or clearances, or failure to comply
with existing or future requirements would have a material adverse effect on the
Company's business, financial condition and results of operations. FDA or other
governmental approvals of products developed by the Company in the future may
require substantial filing fees which could limit the number of applications
sought by the Company and may entail limitations on the indicated uses for which
such products may be marketed.  In addition, approved or cleared products may be
subject to additional testing and surveillance programs required by the FDA and
other regulatory agencies, and product approvals and clearances could be
withdrawn for failure to comply with regulatory standards or by the occurrence
of unforeseen problems following initial marketing.

  Regulatory Status of Products

     The Company has received 510(k) clearance to market the following lasers in
an aggregate of more than 100 specialty areas: CO(2) (four models: 10W, 20W,
35W, 65W); Nd:YAG (four models: 20W, 40W, 60W, 100W); Ho:YAG (one model); Er:YAG
(two models); 1.32 micron Nd:YAG (two models: 15W, 25W); .532 micron Nd:YAG (one
model); Argon (three models); diode (two models); Nd:YAG/Er:YAG combination
laser (one model). Each of these lasers has clearances in multiple specialty
areas. The Company also has received 510(k) clearance to market a scanner,
sculptured fiber contact tip fibers, bare fibers, TouchTIPS, AngleTIPS and
focusing tips for all cleared wavelengths of the Company's lasers as well as
argon lasers. If a device for which the Company has already received 510(k)
premarket clearance is changed or modified in design, components, method of
manufacture or intended use, such that the safety or effectiveness of the device
could be significantly affected, a new 510(k) premarket notification is

                                       21

 
required before the modified device can be marketed in the United States.  The
Company has made modifications to certain of its products which the Company
believes do not require the submission of new 510(k) notifications.  However,
there can be no assurance that the FDA will agree with the Company's
determinations and not require the Company to discontinue marketing one or more
of the modified devices until they have been cleared by the FDA.  There also can
be no assurance that any such clearance of modifications would be granted should
clearance be necessary.

     OIS has received 510(k) clearance for its Glaucoma-Scope(R)(TM) and its
digital angiography product, and EyeSys has received 510(k) clearance for its
System 2000 and Vista corneal topography systems.

     The Company currently is conducting preclinical animal studies and clinical
trials, both under approved IDEs and as nonsignificant risk studies.  There can
be no assurance that the results of any of these clinical studies will be
successful or that the FDA will not require the Company to discontinue any of
these studies in the interest of the public health or due to any violations of
the FDA's IDE regulations.  There can be no assurance that the Company will
receive approval from the FDA to conduct any of the significant risk studies for
which the Company seeks IDE approval, or that the FDA will not disagree with the
Company's determination that any of its studies are "nonsignificant risk"
studies and require the Company to obtain approval of an IDE before the study
can continue.

  Additional Regulatory Requirements

     Any products manufactured or distributed by the Company pursuant to a
510(k) premarket clearance notification or PMA are or will be subject to
pervasive and continuing regulation by the FDA.  The FDC Act also requires the
Company to manufacture its products in registered establishments and in
accordance with current GMP regulations, which include testing, control and
documentation requirements.  The Company must also comply with Medical Device
Reporting ("MDR") requirements that a firm report to the FDA any incident in
which its product may have caused or contributed to a death or serious injury,
or in which its product malfunctioned and, if the malfunction were to recur,
would be likely to cause or contribute to a death or serious injury.  The
Company's facilities in the United States are subject to periodic inspections by
the FDA.  The FDA may require postmarketing surveillance with respect to the
Company's products.  The export of medical devices is also subject to regulation
in certain instances.

     All lasers manufactured by the Company are subject to the Radiation Control
for Health and Safety Act administered by the Center for Devices and
Radiological Health of the FDA.  The law requires laser manufacturers to file
new product and annual reports and to maintain quality control, product testing
and sales records, to incorporate certain design and operating features in
lasers sold to end users pursuant to a performance standard, and to comply with
labeling and certification requirements.  Various warning labels must be affixed
to the laser, depending on the class of the product under the performance
standard.

     In addition, the use of the Company's products may be regulated by various
state agencies.  For instance, the Company is required to register as a medical
device manufacturer with certain state agencies.  In addition to being subject
to inspection by the FDA, the Company also will be routinely inspected by the
State of California for compliance with GMP regulations and other requirements.

     Although Premier believes that it currently complies in all material 
respects and will continue to comply with the applicable regulations regarding
the manufacture and sale of medical devices, such regulations are always subject
to change and depend heavily on administrative interpretations. Premier plans to
integrate OIS's manufacturing operations under Premier's GMP practices and at
its facilities over the next several months. There can be no assurance that
future changes in law, regulations, review guidelines or administrative
interpretations by the FDA or other regulatory bodies, with possible retroactive
effect, will not adversely affect the Company's business, financial condition
and results of operations. In addition to the foregoing, the Company is subject
to numerous federal, state and local laws relating to such matters as safe
working conditions, manufacturing practices, environmental protection, fire
hazard control and disposal of hazardous or potentially hazardous

                                       22

 
substances.  There can be no assurance that the Company will not be required to
incur significant costs to comply with such laws and regulations in the future,
or that such laws or regulations will not have a material adverse effect upon
the Company's ability to conduct business.

     Furthermore, the introduction of the Company's products in foreign
countries often require obtaining foreign regulatory clearances, and additional
safety and effectiveness standards are required in certain other countries.  The
Company believes that only a limited number of foreign countries currently have
extensive regulatory requirements.  These countries include the European Union
countries, France, Germany, Canada, Mexico and Japan.  Domestic manufacturing
locations of American companies doing business in certain foreign countries,
including European Union countries, may be subject to inspection.  The time
required for regulatory approval in foreign countries varies and can take a
number of years.  During the period in which the Company will be attempting to
obtain the necessary regulatory approvals, the Company expects to market its
products on a limited basis in certain other countries that do not require
regulatory approval.  There can be no assurance that the Company's products will
be cleared or approved by the FDA or other governmental agencies for additional
applications in the United States or in other countries or that countries that
do not now require regulatory approval will not require such approval in the
future.

Manufacturing and Materials

     Manufacturing consists of component assembly and systems integration of
electronic, mechanical and optical components and modules.  The Company's
product costs are principally related to the purchase of raw materials while
labor and overhead have been reduced due to the use of customized tooling and
automated test systems.  The Company believes that its customized tooling and
automated systems improve quality and manufacturing reliability resulting in
lower overall manufacturing costs.  The Company believes that these systems will
allow the Company to expand production rapidly.

     The Company purchases certain raw materials, components and subassemblies
included in the Company's products from a limited group of qualified suppliers
and does not maintain long-term supply contracts with any of its key suppliers.
While multiple sources of supply exist for most critical components used in the
laser, corneal topography and fiberoptic delivery systems, the disruption or
termination of these sources could have a material adverse effect on the
Company's business and results of operations. Vendor delays or quality problems
could also result in production delays of up to six months as several components
have long production lead times.  These long lead times, as well as the need for
demonstration units, require a significant portion of working capital to fund
inventory growth.  The Company has in the past experienced and may continue to
experience shortages in raw materials and certain supplies.

     The Company owns the molds used to produce certain proprietary parts of the
devices.  The Company also designs and develops the software necessary for the
operation of its laser systems.  The Company designs and assembles its own
fiberoptic delivery systems and laser accessory equipment such as laser carts
and associated disposable supplies.  The Company believes that its manufacturing
practices are in accordance with GMP regulations.

  OIS Manufacturing and Production

     OIS is primarily a systems integrator with proprietary software, optical
interfaces, and electronic fundus camera interfaces.  Certain components are
subcontracted to outside vendors and assembled at OIS.  OIS inventories and
assembles components in a facility located in Sacramento, California. For
production of certain components of its products, OIS's manufacturing strategy
is to use subcontractors to minimize time and reduce capital requirements.

                                       23

 
     OIS's product line is manufactured by assembling components purchased from
established outside quality vendors as well as certain components manufactured
by OIS.  Proprietary components manufactured by OIS include interface circuit
boards for 17 fundus camera models, video optical interfaces including ICG and
live viewing options.  The Glaucoma- Scope(R)(TM) optical head is also
manufactured by OIS.

     As a systems integrator, a significant number of the major hardware
components in OIS's products are procured from sole source vendors.  Whenever
possible, however, OIS seeks multiple vendor sources from which to procure its
components.  As with any manufacturing concern dependent on subcontractors and
component suppliers, significant delays in receiving products or unexpected
vendor price increases could adversely affect OIS.

Product Liability and Insurance

     Since the Company's products are intended for use in the treatment of human
medical conditions, the Company is subject to an inherent risk of product
liability and other liability claims which may involve significant claims and
defense costs.  The Company currently has product liability insurance with
coverage limits of $5.0 million per occurrence and $5.0 million in the aggregate
per year.  Product liability insurance is expensive and subject to various
coverage exclusions, and in the future may not be available in acceptable
amounts, on acceptable terms, or at all.  Although the Company does not have any
outstanding product liability claims, in the event the Company were to be held
liable for damages exceeding the limits of its insurance coverage or outside of
the scope of its coverage, the business and results of operations of the Company
could be materially adversely affected.  The Company's reputation and business
could also be adversely affected by product liability claims, regardless of
their merit or eventual outcome.

Employees

     As of June 25, 1998, the Company (including EyeSys, but excluding Data.Site
and OIS) employed 102 people, 2 of whom are employed on a part-time basis.  None
of these employees are represented by a union.   Twenty-seven employees perform
sales, marketing and customer support activities. The remaining employees
perform manufacturing, financial, administration, regulatory, research and
development and quality control activities.  The Company also engages the
services of many

                                       24

 
independent contractors and temporary personnel.  The Company believes that its
relationship with its employees is good.

  OIS and Data.Site Employees

     As of June 23, 1998, OIS had 29 employees, and Data.Site had 13 employees,
all of which were full time employees. OIS also engages the services of
consultants from time to time to assist OIS on specific projects in the area of
research and development, software development, regulatory affairs, and product
services. These consultants periodically engage contract engineers as
independent consultants for specific projects. OIS has no collective bargaining
agreements covering any of its employees, has never experienced any material
labor disruption, and is unaware of any current efforts or plans to organize its
employees. OIS considers its relationship with its employees to be good.

                                  RISK FACTORS

     The Company's securities are highly speculative in nature and an investment
in such securities involves a high degree of risk.  Prospective investors should
carefully consider, along with the other information contained in this Annual
Report, the following considerations and risks in evaluating an investment in
the Company.

Limited Operating History; Continuing Operating Losses

     The Company was formed in July 1991 and has not generated significant
revenues to date.  As of March 31, 1998, the Company had a substantial
accumulated deficit.  The Company also had substantial operating losses for each
of the four fiscal years ended March 31, 1998, resulting principally from costs
incurred in research and development and other costs of operations.  The Company
expects that operating losses will continue until such time as product sales
generate sufficient revenues to fund its continuing operations, as to which
there can be no assurance.  The Company may incur losses for the foreseeable
future due to the significant costs associated with manufacturing, marketing and
distributing its laser products and due to continual research and development
activities which will be necessary to develop additional applications for the
Company's technology.

Uncertainties Concerning Future Profitability

     The Company's ability to achieve profitability will depend, in part, on its
ability to continue to successfully develop clinical applications, obtain
regulatory approvals for its products and develop the capacity to manufacture
and market such products on a wide scale.  There is no assurance that the
Company will be able to successfully make the transition from research and
development to manufacturing and selling commercial medical laser products on a
broad basis.  While attempting to make this transition, the Company will be
subject to all risks inherent in a growing venture, including the need to
produce reliable products, develop marketing expertise and enlarge its sales
force.

Uncertain Market Acceptance

     The Company's future sales are dependent, in part, on the Company's ability
to demonstrate to dentists, ophthalmologists and other physicians the potential
cost and performance advantages of its laser systems and other products over
traditional methods of treatment and over competitive products. To date,
commercial sales of the Company's lasers have been limited, and no assurance can
be given that these laser products can be successfully commercialized on a broad
basis.  Lasers have not been widely used in dentistry and their use requires
training and expertise.  The acceptance of dental lasers may be adversely
affected by their high cost, concerns by patients and dentists relating to their
safety and efficacy, and the substantial market acceptance and penetration of
alternative dental tools such as the dental drill.  Current economic pressure
may make doctors and dentists reluctant to purchase substantial

                                       25

 
capital equipment or invest in new technology.  The failure of medical lasers to
achieve broad market acceptance would have a material adverse effect on the
Company's business, financial condition and results of operations.  No assurance
can be given that any of the Company's products will be accepted by the medical
or dental community or by patients, or that a significant market for the
Company's systems will be developed and sustained.  The Company currently has a
limited sales force and will need to hire additional sales and marketing
personnel to increase the general acceptance of its products.

Pending Litigation and Regulatory Investigations

     The Company is a defendant in a number of related securities class action
matters, generally relating to allegations of misrepresentations by the Company 
during the period May 7, 1997 to April 15, 1998 (the "Class Action Litigation").
In addition, the SEC and Nasdaq Stock Market have commenced investigations of
the Company's practices and procedures relating to revenue recognition issues
and related matters. The Company's defense of the litigation matters, and
responses to the regulatory investigations, will be expensive and time
consuming to the Company's management, and are expected to materially and
adversely affect the Company's results of operations for the foreseeable future.
If an adverse judgement is entered in the Class Action Litigation, or the
Company settles such litigation, such judgement or settlement could also
materially and adversely affect the Company's business and results of
operations. In addition, the SEC and Nasdaq Stock Market are empowered to assess
substantial penalties against the Company, in connection with their findings in
the pending investigation. The Nasdaq Stock Market is also empowered to take
various actions relating to the listing of the Company's securities on the
Nasdaq Stock Market. The imposition of any of such penalties could materially
and adversely affect the Company's business, financial condition and results of
operations.

Possible Restatement of Financial Results

     The Company, in conjunction with its independent accountants, is conducting
an analysis of its historical revenue recognition practices, including but not
limited to those employed in connection with its transactions with Henry Schein,
Inc. The period under review includes fiscal 1997 and fiscal 1998 including
interim periods. Upon completion of that analysis, the Company may determine
that it is appropriate to restate the financial statements in one or more of its
past SEC filings. If made, such restatements may involve a reduction in the
amount of revenue reported for such periods, increased reserves for accounts
receivable and slow moving and absolete inventory, together with corresponding
adjustments to net income or net loss and other items of the financial
statements. Such reductions may be material.

Suspension of Trading of Securities.

     On May 26, 1998, following the withdrawal by the Company's former 
accountant of its report on the Company's fiscal 1997 financial statements, the
Nasdaq Stock Market suspended trading of the Company's Class A Common Stock and 
Class B Warrants, pending an investigation of certain of the Company's 
accounting practices. Although the Company is cooperating with this 
investigation, and has engaged new auditors for the purpose of certifying the 
Company's 1997 and 1998 financial statements, no assurance can be given that the
Company will be able to meet any conditions that may be imposed by the Nasdaq 
Stock Market in order for the suspension of trading to be terminated. Unless and
until the suspension is terminated or other arrangements are made for creating a
market for the Company's securities, such securities will continue to be highly 
liquid. The absence of a public trading market for the Company's securities 
will materially and adversely affect the market value of such securities.  In 
addition, OIS's Common Stock is trading on the OTC "bulletin board," which 
provides less liquidity than a listing on the Nasdaq Stock Market or an 
exchange. To the Company's knowledge, OIS has no plans to apply for the listing 
of its Common Stock on the Nasdaq Stock Market or an exchange.

Integration of Acquired Businesses

     The Company acquired EyeSys in September 1997.  The Company is still in the
process of integrating and coordinating the EyeSys business with the Company's
existing businesses.  Although the Company believes that there are certain
synergies in the two lines of business, it may continue to incur expenses in
connection with its efforts to integrate the two businesses.  In addition,
members of the Company's management will also have to continue to expend time
and effort on new activities relating to the EyeSys operations, which will
detract from their time available to attend to the Company's other activities.
No assurance can be given that the expenses or dislocations the may suffer or
incur as a result of the post-Merger coordination of these businesses will not
be material. Considerations similar to the above apply equally to the Company's
acquisition of a controlling interest in OIS.

     The Company currently markets EyeSys' corneal topography and OIS digital 
imaging products in a highly competitive market. Historically, EyeSys and OIS
have incurred substantial losses. The ability of these subsidiaries to achieve a
break even level of performance is dependent on the demand for its products as
well as maintaining sufficient research, development and sales and marketing
expenditures to meet the requirements of the market. There can be no assurance
that the revenues from these product lines will be sufficient to cover all of
the expenses related to such operations. If these subsidiaries are unable to
achieve a break-even cash flow performance, additional levels of capital will be
required.

Going Concern Report With Respect to EyeSys

     EyeSys' independent auditors have included an explanatory paragraph in
their report covering EyeSys' financial statements for the year ended December
31, 1996, which paragraph emphasizes substantial doubt as to EyeSys' ability to
continue as a going concern.  EyeSys' independent auditors cited the following
reasons for such explanatory paragraph: (i) EyeSys has reported net losses of
$4,164,998, $3,424,996 and $3,708,657 for the years ended December 31, 1996,
1995 and 1994, respectively, (ii) EyeSys was in default of several loan
covenants relating to its revolving lines of credit, and (iii) Eyesys has not
repaid such loan obligations within their respective terms.

                                       26

 
Dependence on Suppliers

     The Company purchases certain raw materials, components and subassemblies
included in the Company's products from a limited group of qualified suppliers
and does not maintain long-term supply contracts with any of its key suppliers.
The disruption or termination of these sources could have a material adverse
effect on the Company's business and results of operations.  For example, during
fiscal 1994, the Company's sole supplier of the specialized optic fiber required
for use in the Company's Er:YAG lasers ceased to provide this fiber to the
Company.  While the Company has since qualified the new suppliers of this fiber,
the Company's inability to obtain sufficient quantities of this specialized
optical fiber had a material adverse effect on the volume of Er:YAG lasers the
Company was able to sell during fiscal 1994 and 1995.  While the Company
believes that alternative suppliers could be found, there can be no assurance
that any supplier could be replaced in a timely manner.  Any interruption in the
supply of other key components could have a material adverse effect on the
Company's ability to manufacture its products and on its business, financial
condition and results of operations.

     Certain computer components used by EyeSys and OIS are manufactured by a
sole vendor. These components are subject to rapid innovation and obsolescence.
The discontinuance of the manufacturing of this chip may require the Company to
redesign certain hardware and software to accommodate a replacement component.
While in the past the Company has been successful in these redesign efforts,
there can be no assurance that such an event would not prove costly or cause a
disruption in sales of corneal topography and digital imaging systems.

Risks Applicable to Foreign Sales

     Sales of the Company's products to foreign markets account for a
substantial portion of the Company's sales.  Foreign sales expose the Company to
certain risks, including the difficulty and expense of maintaining foreign sales
distribution channels, barriers to trade, potential fluctuations in foreign
currency exchange rates, political and economic instability, availability of
suitable export financing, accounts receivable collections, tariff regulations,
quotas, shipping delays, foreign taxes, export licensing requirements and other
United States and foreign regulations that may apply to the export of medical
lasers.  The regulation of medical devices worldwide also continues to develop,
and there can be no assurance that new laws or regulations will not have an
adverse effect on the Company.  In addition, the Company may experience
additional difficulties in providing prompt and cost effective service of its
medical lasers in foreign countries.  The Company does not carry insurance
against such risks.  The occurrence of any one or more of these events may
individually or in the aggregate have a material adverse effect upon the
Company's business, financial condition and results of operations.

Risk of Technological Obsolescence

     The markets in which the Company's medical products compete are subject to
rapid technological change as well as the potential development of alternative
surgical techniques or new pharmaceutical products.  Such changes could render
the Company's products uncompetitive or obsolete.  The Company will be required
to invest in research and development to attempt to maintain and enhance its
existing products and develop new products.  No assurances can be given that
such research and development efforts will result in the introduction of new
products or product improvements.

Dependence on Patents and Proprietary Technology

     The Company's success will depend in part on its ability to obtain patent
protection for products and processes, to preserve its trade secrets and to
operate without infringing the proprietary rights of third parties.  While the
Company holds a number of U.S. foreign patents and has other patent applications
pending in the United States and foreign countries, no assurance can be given
that any additional patents will be issued, that the scope of any patent
protection will exclude competitors or that any of the

                                       27

 
Company's patents will be held valid if subsequently challenged.  Further, there
can be no assurance that others will not independently develop similar products,
duplicate the Company's products or design products that circumvent any patents
used by the Company.  The Company is aware of certain patents which, along with
other patents that may exist or be granted in the future, could restrict the
Company's right to market certain of its technologies without a license,
including, without limitation, patents relating to the Company's lens
emulsification product and ophthalmic probes for the Er:YAG laser.  In the past,
the Company has received allegations that certain of the Company's laser
products infringe other patents.  American Dental Technologies ("ADT") recently
has asserted that an aspect of the delivery system of the Company's Er:YAG laser
infringes a patent held by ADT.  There has been significant patent litigation in
the medical industry in general, and in the medical laser industry in
particular.  Adverse determinations in litigation or other patent proceedings to
which the Company may become a party could subject the Company to significant
legal judgments or other liabilities to third parties and could require the
Company to seek licenses from third parties that may or may not be economically
viable.  Patent and other intellectual property rights disputes often are
settled through licensing arrangements.  No assurance can be given that any
licenses required under these or any other patents or proprietary rights would
be available on terms acceptable to the Company, if at all.  If the Company does
not obtain such licenses, it could encounter delays in product introductions
while it attempts to design around such patents, or it could find that the
development, manufacture or sale of products requiring such licenses could be
enjoined.  If the Company is found, in a legal proceeding, to have infringed the
patents or other proprietary rights of others, it could be liable for
significant damages.  The Company also relies upon unpatented trade secrets, and
no assurance can be given that others will not independently develop or
otherwise acquire substantially equivalent trade secrets.  In addition, at each
balance sheet date, the Company is required to review the value of its
intangible assets based on various factors, such as changes in technology.  Any
adjustment downward in such value may result in a write-off of the intangible
asset and a substantial charge to earnings, thereby adversely affecting the
operating results of the Company in the future.

Need for FDA and Foreign Governmental Approvals; Government Regulation

     The Company's products are regulated as medical devices by the FDA under
the the FDC Act. As such, these devices require either Section 510(k) premarket
clearance ("510(k)") or approval of a premarket approval application ("PMA") by
the FDA prior to commercialization. Satisfaction of applicable regulatory
requirements may take several years and varies substantially based upon the
type, complexity and novelty of such devices, as well as the clinical procedure.
Filings and governmental approvals may be required in foreign countries before
the devices can be marketed in these countries. There is no assurance that
further clinical trials of the Company's medical products or of any future
products will be successfully completed or, if they are completed, that any
requisite FDA or foreign governmental approvals will be obtained. FDA or other
governmental approvals of products developed by the Company in the future may
require substantial filing fees which could limit the number of applications
sought by the Company and may entail limitations on the indicated uses for which
such products may be marketed. In addition, approved or cleared products may be
subject to additional testing and surveillance programs required by the FDA and
other regulatory agencies, and product approvals and clearances could be
withdrawn for failure to comply with regulatory standards or by the occurrence
of unforeseen problems following initial marketing. Also, the Company has made
modifications to certain of its existing products which it does not believe
require the submission of a new 510(k) notification to the FDA. However, there
can be no assurance that the FDA would agree with the Company's determination
and not require the Company to discontinue marketing one or more of the modified
devices until they have been cleared by the FDA. The Company is also required to
adhere to applicable requirements for current Good Manufacturing Practices and
radiological health requirements, to engage in extensive record keeping and
reporting and to comply with the FDA's product labeling, promotional and
advertising requirements. Noncompliance with state, local, federal or foreign
requirements can result in fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, delay, denial or
withdrawal of premarket clearance or approval of devices,

                                       28

 
recommendations by the FDA that the Company not be allowed to enter into
government contracts, and criminal prosecution, all of which would have a
material adverse effect on the Company's business, financial condition and
results of operations.  The Company's manufacturing facilities are subject to
periodic inspections by state and federal agencies, including the FDA, the
California Department of Health Services, and comparable agencies in other
countries.

Dependence on Key Personnel

     The Company depends to a considerable degree on a limited number of key
personnel, including Colette Cozean, Ph.D., its Chairman of the Board,
President, Chief Executive Officer and Director of Research.  Dr. Cozean is also
an inventor of a number of the Company's patented technologies. During the
Company's limited operating history, many key responsibilities within the
Company have been assigned to a relatively small number of individuals.  The
loss of Dr. Cozean's services or those of certain other members of management
could adversely affect the Company.  The Company carries key person life
insurance in excess of $3 million on Dr. Cozean. The Company has no employment
agreements with its key personnel. The success of the Company will also depend,
among other factors, on the successful recruitment and retention of qualified
technical and other personnel.

Highly Competitive Industry

     The medical equipment industry is subject to intense competition and is
characterized by rapid technological change.  The Company is and will continue
to be subject to competition in its targeted markets, principally from
businesses providing other traditional surgical and nonsurgical treatments,
including existing and developing technologies, and competitive products.  Many
of the Company's competitors have substantially greater financial, marketing and
manufacturing resources and experience than the Company.  Furthermore, the
Company expects other companies will enter the laser market, particularly as
medical lasers gain increasing market acceptance.  Significant competitive
factors which will affect future sales in the marketplace include regulatory
approvals, performance, pricing and general market acceptance.

     The opthalmic diagnostic market is highly competitive.  There are many
companies, both public and private, some with significantly greater resources
than the Company engaged in this market. These companies include Topcon, Alcon
Laboratories (a subsidiary of Nestle), Humphrey Instruments (a subsidiary of
Carl Zeiss), and Tomey Technology. There can be no assurances that the Company's
competitors will not succeed in developing technologies, procedures or products
that are more effective or economical than those marketed or being developed by
the Company or that would render the Company's products obsolete or
noncompetitive.

     To continue to remain competitive, the Company must develop new software
and hardware meeting the needs of ophthalmologists and optometrists. The
Company's future revenues will depend, in part, on its ability to develop and
commercialize these new products as well as on the success of development and
commercialization efforts of its competitors.

Potential Fluctuations in Quarterly Operating Results

     Due to the relatively high sales price of the Company's products and the
low sales unit volume, minor timing differences in receipt of customer orders
have produced and could continue to produce significant fluctuations in
quarterly results.  In addition, if anticipated sales and shipments in any
quarter do not occur when expected, expenditures and inventory levels could be
disproportionately high, and the Company's operating results for that quarter,
and potentially for future quarters, would be adversely

                                       29

 
affected.  Quarterly results may also fluctuate based on a variety of other
factors, such as seasonality, production delays, product mix, cancellation or
rescheduling of orders, new product announcements by competitors, receipt of FDA
clearances or approvals by the Company or its competitors, notices of product
suspension or recall, the Company's ability to manage product transitions, sales
prices and market conditions.  In addition, if the Company expands or augments
its manufacturing capabilities in connection with the introduction of new
products, quarterly revenues and operating results are expected to fluctuate to
an even greater degree.

Uncertain Ability to Meet Capital Needs

     The Company will require substantial additional funds for its research and
development programs, preclinical and clinical testing, development of its sales
and distribution force, operating expenses, regulatory processes and
manufacturing and marketing programs.  The Company's capital requirements will
depend on numerous factors, including the progress of its research and
development programs, results of preclinical and clinical testing, the time and
cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, developments
and changes in the Company's existing research, licensing and other
relationships and the terms of any new collaborative, licensing and other
arrangements that the Company may establish.  The Company believes its available
short-term assets and investment income will be sufficient to meet its operating
expenses and capital expenditures through the next 12 months.  However, the
Company's cash requirements may vary materially from those now planned due to
potential future acquisitions, class action and patent litigation, the progress
of research and development programs, results of clinical testing, relationships
with strategic partners, if any, competitive and technological advances, the FDA
and foreign regulatory processes and other factors. There can be no assurance,
however, that additional financing will be available when needed, or if
available, will be available on acceptable terms. Insufficient funds may prevent
the Company from implementing its business strategy or may require the Company
to delay, scale back or eliminate certain of its research and product
development programs or to license to third parties rights to commercialize
products or technologies that the Company would otherwise seek to develop
itself.

Possible Volatility of Stock Price

     The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies.  These broad market fluctuations may adversely affect the
market price of the Common Stock.  In addition, the market price of the Common
Stock has been and is likely to be highly volatile.  Factors such as
fluctuations in the Company's operating results, the commencement or major
developments in litigation, announcements of technological innovations or new
products by the Company or its competitors, FDA and international regulatory
actions, developments with respect to patents or proprietary rights, public
concern as to the safety of products developed by the Company or its
competitors, changes in health care policy in the United States and
internationally, changes in analysts' recommendations regarding the Company,
other medical companies or the medical laser industry generally and general
market conditions may have a significant effect on the market price of the
Company's Common Stock.

Product Liability Exposure

     The sale of the Company's medical products involves the inherent risk of
product liability claims against the Company.  The Company currently maintains
product liability insurance coverage in the amount of $5 million per occurrence
and $5 million in the aggregate, but such insurance is expensive, subject to
various coverage exclusions and may not be obtainable by the Company in the
future on terms acceptable to the Company.  There can be no assurance that
claims against the Company arising with respect to its products will be
successfully defended or that the insurance carried by the Company will

                                       30

 
be sufficient to cover liabilities arising from such claims.  A successful claim
against the Company in excess of the Company's insurance coverage could have a
material adverse effect on the Company.

Limitations on Third Party Reimbursement

     The Company's laser systems and other products are generally purchased by
physicians, dentists and surgical centers which then bill various third party
payors, such as government programs and private insurance plans, for the
procedures conducted with these products. Third-party payors carefully review
and are increasingly challenging the prices charged for medical products and
services. Reimbursement rates from private companies vary depending on the
procedure performed, the third-party payor, the insurance plan and other
factors. Medicare reimburses hospitals a prospectively-determined fixed amount
for the costs associated with an in-patient hospitalization based on the
patient's discharge diagnosis, and reimburses physicians a prospectively-
determined fixed amount based on the procedure performed, regardless of the
actual costs incurred by the hospital or physician in furnishing the care and
unrelated to the specific devices used in that procedure. Third-party payors are
increasingly scrutinizing whether to cover new products and the level of
reimbursement for covered products. While the Company believes that the laser
procedures using its products have generally been reimbursed, payors may deny
coverage and reimbursement for the Company's products if they determine that the
device was not reasonable and necessary for the purpose for which used, was
investigational or not cost-effective. As a result, there can be no assurance
that reimbursement from third party payors for these procedures will be
available or if available, that reimbursement will not be limited, thereby
adversely affecting the Company's ability to sell its products on a profitable
basis. Moreover, the Company is unable to predict what legislation or
regulation, if any, relating to the health care industry or third-party coverage
and reimbursement may be enacted in the future, or what effect such legislature
or regulation may have on the Company.

Uncertainties Regarding Health Care Reform

     Several states and the United States government are investigating a variety
of alternatives to reform the health care delivery system and further reduce and
control health care spending.  These reform efforts include proposals to limit
spending on health care items and services, limit coverage for new technology
and limit or control the price health care providers and drug and device
manufacturers may charge for their services and products.  If adopted and
implemented, such reforms could have a material adverse effect on the Company's
business, financial condition and results of operations.

Shares Eligible for Future Sale; Effect of Outstanding Options and Warrants

     Sales of a substantial number of shares of Common Stock in the public
market could adversely affect the market price for the Common Stock.
Substantially all of the Company's shares of Common Stock outstanding as of the
date hereof are freely tradeable, subject to compliance with Rule 144
promulgated under the Securities Act.  As of the date hereof, in excess of
7,000,000 shares of Common Stock are issuable upon the full exercise of the
Company's outstanding Class B Warrants, and in excess of five million shares of
Common Stock are issuable upon exercise of other outstanding warrants and
options. The existence of the Company's outstanding warrants and options could
adversely affect the Company's ability to obtain future financing. The price
which the Company may receive for the Common Stock issued upon exercise of such
options and warrants will likely be less than the market price of the Common
Stock at the time such options and warrants are exercised. Moreover, the holders
of the options and warrants might be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain needed capital by a new
offering of its securities on terms more favorable than those provided for by
the options and warrants.

                                       31

 
Potential Anti-Takeover Effects of Preferred Stock

     The Company's Articles of Incorporation authorize the issuance of 8,850,000
shares of "blank check" preferred stock, which will have such designations,
rights and preferences as may be determined from time to time by the Board of
Directors.  Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the Common Stock.  In the event of such
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company.

     In March 1998 the Company adopted a Shareholder Rights Plan, pursuant to 
which certain shareholders of the Company are entitled to purchase Series A 
Junior Participating Preferred Stock of the Company at the price stated in the 
plan. These rights are not exerciseable until certain events involving the 
acquisition by a person or affiliated group of 15% or more of the Company's 
outstanding shares of common stock, or the commencement or announcement of a 
tender offer or exchange offer which would result in the acquisition of 15% or 
more of the Company's outstanding shares. A copy of the Shareholder Rights Plan 
is available from the Company. The Shareholder Rights Plan may have the effect 
of discouraging, delaying or preventing a change of control of the Company.


Item 2.  Properties.

  Executive Offices and Manufacturing Facilities

     The Company leases approximately 28,000 square feet in one facility in
Irvine, California pursuant to a lease which expires in December 2000.  This
facility contains the Company's executive offices, service center and
manufacturing space. The Company is required to lease an additional 13,000
square feet in the same facility commencing in January 1999, or on such earlier
date that the adjoining tenant's lease terminates. The Company also leases an
additional 4,700 square foot facility in Irvine, under a lease that expires
October 31, 1998. While the Company believes that its manufacturing and
administrative facilities are adequate to satisfy the Company's needs through at
least 2000, it may need to lease additional clean room facilities in the future.

  OIS Facilities

     OIS leases, under a triple net lease, approximately 13,875 square feet of
office, manufacturing, and warehouse space in Sacramento, California under a
lease which terminates June 30, 1998. After that date, OIS expects to continue
to occupy these premises under a month-to-month arrangement. Management believes
that its existing facilities are suitable and adequate to meet its current
needs.


Item 3.  Legal Proceedings.

  Fiber Litigation

     In March 1994, the Company instituted litigation (the "Fiber Litigation")
in the U.S. District Court, Central District of California, against Infrared
Fiber Systems, Inc., a Delaware corporation ("IFS") which contracted to supply
optical fiber to the Company for the Company's Er:YAG laser.  Two of IFS's
senior officers are also named as defendants.  The Company's complaint in this
matter alleges that IFS and two of its officers made misrepresentations to the
Company and that IFS breached its agreement to supply fibers and certain
warranties concerning the quality of the fiber to be provided.  The Company is
seeking damages and an injunction requiring IFS to subcontract the production of
optical fiber to a third party, as provided in the supply agreement.  In April
1994, IFS filed a general denial and a cross-complaint against the Company
alleging breach of contract and intentional interference with prospective
economic advantage, seeking compensatory damages "in excess of $500,000,"
punitive damages and a judicial declaration that the contract has been
terminated and that IFS is free to market

                                       32

 
its fibers to others.  In September 1996, IFS filed a new cross-complaint
alleging the same causes of action and seeking substantially the same relief in
the Orange County California Superior Court.  The Company has filed an answer to
the complaint, denying the allegations and asserting several affirmative
defenses.

     IFS has agreed to license certain fiber technologies, to which the Company
claims exclusive license rights, to Coherent, Inc. ("Coherent"), a competitor of
the Company.  Coherent joined the above federal litigation on behalf of IFS,
seeking a declaration that IFS had the legal right to enter into this license
and supply the fiber covered by that agreement, and then subsequently filed a
new complaint in the Orange County California Superior Court for declaratory
relief, seeking an order that the Company's original agreement with IFS applies
only to a specific type of optical fiber.  The Company has answered this
complaint.  Premier and IFS have reached an agreement in principle to settle the
litigation between them and are in the process of preparing a written settlement
agreement. Although Premier is hopeful that the formal settlement agreement will
be successfully negotiated, no assurance can be given that the agreement will 
actually be completed. The settlement agreement under discussion does not 
terminate the litigation as between Premier and Coherent.

     In May 1995, the Company instituted litigation concerning this dispute in
the Orange County, California Superior Court against Coherent, Westinghouse
Electric Corporation ("Westinghouse") and an individual employee of Westinghouse
who was an officer of IFS from 1986 to 1993, when the events involved in the
federal action against IFS took place and while Westinghouse owned a substantial
minority interest in IFS.  The complaint charges that Coherent conspired with
IFS in the wrongful conduct which is the subject of the federal lawsuit
described above and interfered with the Company's contracts and relations with
IFS and with prospective contracts and advantageous economic relations with
third parties.  The complaint asserts that Westinghouse is liable for its
employee's wrongful acts as an IFS executive while acting within the scope of
his employment at Westinghouse.  The lawsuit seeks injunctive relief and
compensatory damages.  In October 1995, the federal action was stayed by order
of the court in favor of the California state court action, in which the
pleadings have been amended to include all claims asserted by the Company in the
federal action.

     In July 1996, the court in the California state court action granted
demurrers by Westinghouse and the employee of Westinghouse to all causes of
action against them, as well as all but one of the Company's claims against
Coherent. As a result, the claims that were the subject of the granted demurrers
have been dismissed, subject to the Company's right to appeal. The Company has
filed an appeal of these decisions as they relate to Westinghouse and the
Westinghouse employee, and briefs have been submitted. No date has been set for
a hearing of this appeal. No trial date has been set as to the remaining
outstanding causes of action.

  Securities Class Action

     On May 1, 1998, a class action suit (the "Valenti Litigation") was
commenced in the United States District of Court for the Central District of
California pursuant to federal securities laws on behalf of purchasers of the
Company's securities during the period from February 12, 1998 through April 15,
1998.  The complaint alleges that the Company and certain of its officers and
directors violated the federal securities laws by issuing false and misleading
statements and omitting material facts regarding the Company's financial results
and operations during such period.  Among other things, the complaint alleges
that the defendants materially misstated the Company's financial results for the
fiscal quarter ended December 31, 1998 and that as a result of such
misstatements, the plaintiff suffered damages as a result of a decrease in the
market price of the Company's publicly traded securities.

     After the filing of such complaint, a number of similar complaints have
also been filed in the United States District Court for the Central District of
California, seeking certification as class actions, and covering class periods
commencing as early as May 7, 1997. Such complaints alleged facts similar to
those described above with respect to the Valenti Litigation, as well as
allegations that the Company artificially inflated the price of its outstanding
publicly traded securities as a result of misrepresentations relating to the
market and prospects for sale of its Centauri Er:YAG laser. All of the above
described complaints seek monetary damages in unspecified amounts, together with
attorneys fees, interest, costs and related remedies.

                                       33

 
     The Company presently intends to seek to have all of such securities class
action lawsuits consolidated into a single action.

  Investigations and Other Matters

     The Company has been notified that the Securities and Exchange Commission
("SEC") and the Nasdaq Stock Market have instituted investigations concerning
matters pertaining to the Company's revenue reporting practices, and related
management issues.  These investigations, the Company believes, generally relate
to whether the Company, in SEC filings and press releases issued prior to the
end of the 1998 fiscal year, properly recognized revenues for transactions
occurring during fiscal 1997, and at interim periods in fiscal 1998.  To date,
neither the SEC nor the Nasdaq Stock Market has indicated that it is seeking to
impose any penalties on the Company or that it is made any specific findings
with respect to the Company's accounting practices.  The Company is cooperating
with both the SEC and the Nasdaq Stock Market in connection with these
investigations.

     The Company is also involved in various disputes and other lawsuits from
time to time arising from its normal operations.  The litigation process is
inherently uncertain and it is possible that the resolution of the IFS
litigation, securities class actions, disputes and other lawsuits may adversely
affect the Company.

  OIS Litigation

     On September 6, 1996, an action was filed in Superior Court in the County
of Sacramento, California against OIS by a former employee alleging that such
employee was wrongfully terminated by OIS in retaliation for filing a grievance
against a co-employee for harassment and creation of a hostile work environment.
The suit, which is still pending, seeks, among other things, lost wages,
$150,000 in compensatory damages, and punitive damages.  OIS believes that this
action is without merit and intends to defend this action vigorously.

     On or about August 17, 1997, the Company was advised that JB Oxford &
Company ("JBO"), one of several market makers in OIS's common shares which trade
over the counter on the Nasdaq Small-Cap Market, was being investigated by the
SEC.  In connection with this investigation, OIS, and Mr. Verdooner, in his
capacity as Chief Executive Officer of OIS, were served by the SEC with a
subpoena on or about August 18, 1997.  These subpoenas require the submission to
the SEC of various documents, predominantly relating to JBO.  OIS is cooperating
with the SEC investigation of JBO.  OIS does not believe that it is a subject of
such SEC inquiries.


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

     There were no matters that were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this report.

                                       34

 
                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

     The Company's Class A Common Stock and Class B Warrants are listed on the
Nasdaq National Market under the symbols "PLSIA" and "PLSIZ," respectively.
Prior to January 6, 1998, Class A Warrants outstanding which were listed on the
Nasdaq National Market and the symbol "PLSIW," and "Units," each consisting of
one share of Class A Common Stock, one Class A Warrant and one Class B Warrant,
were listed on the Nasdaq SmallCap Market. The Class A Warrants were redeemed by
the Company pursuant to the terms of the Warrant Agreement on January 6, 1998,
and as a result there have no outstanding Class A Warrants or Units since that
date.

     Trading of the Company's Class A Common Stock and Class B Warrants was
suspended by the Nasdaq Stock Market on May 26, 1998, when the Company's former
auditors withdrew their audit opinion on the 1997 fiscal year. The Company is
presently discussing with the Nasdaq Stock Market the conditions, if any, under
which such suspension may be terminated so that trading may resume.

     The following table sets forth, for the quarters indicated, the high and
low closing sale prices per share of the Common Stock and Class B Warrants as
reported on the Nasdaq National Market.



                                             Class A             Class B
                                           Common Stock          Warrants
                                        ------------------   ----------------
                                          High       Low      High      Low
                                        --------   -------   -------   ------
                                                           
Fiscal Year Ended March, 31, 1997:
 First Quarter........................    10 3/4         8     3 5/8    2 1/8
 Second Quarter.......................         9     6 1/8     2 3/4    1 3/8
 Third Quarter........................     7 7/8         5    2 1/16    13/16
 Fourth Quarter.......................     8 1/8    5 3/16   1 11/16    27/32

Fiscal Year Ended March 31, 1998:
 First Quarter........................        14     5 1/4     5 3/4      3/4
 Second Quarter.......................  11 17/32     8 1/2   3 27/32   2 5/16
 Third Quarter........................    10 3/8    7 3/16         3   1 3/16
 Fourth Quarter.......................  11 11/16   7 11/16     3 7/8    1 5/8


     On May 22, 1998, the last day prior to suspension of trading, the last
reported sale price for the Company's Common Stock and Class B Warrants on the
Nasdaq National Market was $4 3/16 and $13/16, respectively. As of June 25,
1998, the approximate number of holders of record of the Common Stock, Class B
Warrants, Class E-1 Common Stock and Class E-2 Common Stock were 825, 32, 326
and 326, respectively. There is no public market for the Company's Class E-1 and
Class E-2 Common Stock.

     The Company has not paid dividends and does not anticipate declaring
dividends on its Common Stock in the foreseeable future.


Item 6.  Selected Financial Data.

                            Selected Financial Data
                                  (Historical)

     The following table contains certain selected consolidated financial data
of the Company and is qualified by the more detailed financial statements and
notes thereto of the Company included herein. The

                                       35

 
balance sheet and statement of operations data for the periods ended March 31,
1994, 1995 and 1996, have been derived from the Company's financial statements,
audited by Price Waterhouse LLP, independent accountants.  The report of Price
Waterhouse LLP with respect to such financial statements contains an explanatory
paragraph that describes uncertainty as to the ability of the Company to
continue as a going concern.  The selected financial data for the years ended
March 31, 1997 and 1998 will be filed by amendment.  The following information
should be read in conjunction with the Company's financial statements and
related notes thereto either included herein or incorporated by reference from
the Company's definitive proxy statement referred to above and to the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in this Annual Report on Form 10-K (to be filed by 
amendment).


                                                                    Fiscal Year Ended March 31,
                                                --------------------------------------------------------------------
                                                    1994           1995           1996       1997/(1)/    1998/(1)/
                                                ------------   ------------   ------------   ----------   ----------
                                                                                           
Selected Statement of Operations Data:
Net sales....................................    $ 2,079,335    $ 1,249,403    $ 1,704,390    $            $
Cost of sales................................      1,753,352      1,298,420      3,324,757
                                                 -----------    -----------    -----------   ----------   ---------- 
Gross profit (loss)..........................        325,983        (49,017)    (1,620,367)
Selling and marketing expenses...............      1,087,461      1,035,863      1,308,767
Research and development expenses............        678,279      1,035,705      1,213,471
General and administrative expenses..........      1,322,888      1,747,090      1,709,327
                                                 -----------    -----------    -----------   ----------   ---------- 
Write-off of investment in Mattan............             --             --             --
Termination of strategic alliance with IBC...             --             --             --
In process research and development                                                       
  acquired in the Data.Site acquisition......             --             --             --
                                                 -----------    -----------    -----------   ----------   ---------- 
Loss from operations.........................     (2,762,645)    (3,867,675)    (5,851,932)
Interest (expense) income....................       (434,851)      (322,540)        99,037
                                                 -----------    -----------    -----------   ----------   ---------- 
Net loss before extraordinary items..........     (3,197,496)    (4,190,215)    (5,752,895)
Extraordinary gain from extinguishment                                                    
  of indebtedness............................             --        381,730             --
                                                 -----------    -----------    -----------   ----------   ---------- 
Net loss.....................................    $(3,197,496)   $(3,808,485)   $(5,752,895)  $            $
                                                 ===========    ===========    ===========   ==========   ==========
Selected Per Share Data:                                                                  
Loss per share before extraordinary                                                       
  item/(2)/..................................    $     (2.45)   $     (1.59)   $     (1.26)  $
Extraordinary gain from extinguishment                                                    
  of indebtedness............................             --            .15               
                                                 -----------    -----------    -----------   ----------   ---------- 
Net loss per share...........................    $     (2.45)   $     (1.44)   $     (1.26)  $            $
                                                 ===========    ===========    ===========   ==========   ==========
Weighted average shares outstanding/(2)(3)/..      1,288,751      2,584,722      4,556,959 


                                                                          At March 31,                          
                                                -----------------------------------------------------------------
                                                   1994          1995          1996       1997/(1)/    1998/(1)/
                                                -----------   -----------   -----------   ----------   ----------
                                                                                              
Selected Balance Sheet Data:                                                                                    
 Cash and cash equivalents.....                  $   308,764   $ 5,888,237   $    35,463   $            $        
 Working capital...............                    1,287,587     6,756,149     5,818,492                        
 Total assets..................                   12,325,029    16,883,975    15,674,568                        
 Long-term debt/(4)/...........                    4,303,890            --            --                        
 Shareholders' equity..........                    6,022,174    15,002,260    13,797,046                         

- ----------------------------------------
(1) Selected Financial Data for the 1997 and 1998 fiscal years will be filed by
    amendment.
(2) The effect on net loss per common share of the conversion of the Company's
    debentures was to reduce historical net loss by $37,500 and $67,995 and to
    increase weighted average shares outstanding by 76,875 shares and 321,099
    shares for the fiscal years ended March 31, 1994 and 1995, respectively.
    Net loss per common share was computed based on the weighted average number
    of the Company's common shares outstanding during the fiscal years ended
    March 31, 1995 and 1994 after giving retroactive adjustment for
    recapitalization and conversion of debentures into Units upon completion of
    the Company's initial public offering.
(3) Does not include shares of Class E-1 or Class E-2 Common Stock, which are
    subject to cancellation in certain circumstances.
(4) Amounts for long-term debt at March 31, 1994 include $285,000 in mandatorily
    redeemable warrants.

                                       36

 
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operation.

 To be filed by amendment.


Item 8.  Financial Statements and Supplementary Data.

 To be filed by amendment.


Item 9.  Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.

  On June 1, 1998, the Company filed a Current Report on Form 8-K, reporting a
change in its certifying accountant. This Current Report was amended on June 15,
1998. In connection with the resignation of the Company's former accountants,
there was a disagreement between the Company and the former accountants
concerning certain accounting matters. Reference is hereby made to such Current
Reports for further discussion of this matter.

  On June 22, 1998, the Company engaged the firm of Haskell & White LLP as its
certifying accountant.  The engagement of Haskell & White LLP was reported in a
Current Report on Form 8-K filed June 26, 1998.

                                       37

 
                                    PART III

Item 10.  Directors and Officers of the Registrant.

  The information required by this item is incorporated herein by this reference
to the section entitled "Election of Directors" in the Company's definitive
Proxy Statement prepared pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, for the Company's 1998 Annual Meeting of
Shareholders involving, among other things, the election of directors.  Such
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the close of the Company's fiscal year ended March 31,
1998.


Item 11.  Executive Compensation.

  The information required by this item is incorporated herein by this reference
to the section entitled "Executive Compensation" in the Company's definitive
Proxy Statement prepared pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, for the Company's 1998 Annual Meeting of
Shareholders involving, among other things, the election of directors.  Such
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the close of the Company's fiscal year ended March 31,
1998.


Item 12.  Security Ownership of Certain Beneficial Owners and Management.

  The information required by this item is incorporated herein by this reference
to the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's definitive Proxy Statement prepared pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, for the
Company's 1998 Annual Meeting of Shareholders involving, among other things, the
election of directors.  Such Proxy Statement will be filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended March 31, 1998.


Item 13.  Certain Relationships and Related Transactions.

  The information required by this item is incorporated herein by this reference
to the section entitled Executive Compensation--Certain Transactions" in the
Company's definitive Proxy Statement prepared pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, for the Company's 1998 Annual
Meeting of Shareholders involving, among other things, the election of
directors.  Such Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company's fiscal year
ended March 31, 1998.

                                       38

 
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.
                                                                         Page in
                                                                   Annual Report
                                                                    on Form 10-K
                                                                    ------------

     (a)  The following documents are filed as part of this Annual 
          Report on Form 10-K (financial statements, auditor's 
          reports and schedules will be filed by amendment).

          (1)  Report of Haskell & White LLP, Independent Auditors.............

               Report of Price Waterhouse LLP, Independent Accountants.........

               Consolidated Balance Sheets at March 31, 1998 and 1997..........

               Consolidated Statements of Operations for the Years Ended 
               March 31, 1998, 1997 and 1996...................................

               Consolidated Statements of Shareholders' Equity for the years
               ended March 31, 1998, 1887 and 1996............................. 

               Consolidated Statements of Cash Flows for the Years Ended 
               March 31, 1998, 1997 and 1996...................................

               Notes to Consolidated Financial Statements......................

          (2)  Financial Statements Schedules

               Schedule II-Valuation and Qualifying Accounts for the Years 
               Ended March 1998, 1997 and 1996.................................

               Schedules not listed above have been omitted because the
               information required to be set forth therein is not applicable 
               or is shown in the financial statements or notes thereto.

          (3)  Exhibits (numbered in accordance with Item 601 of 
               Regulation S-K)................................................. 

Exhibits
- --------

  2.1   Agreement and Plan of Merger dated as of April 24, 1997 among Premier
        Laser Systems, Inc., EyeSys Technologies, Inc. and Premier Acquisition
        of Delaware, Inc. (incorporated herein by this reference to Exhibit 2.1
        to the Registrant's Registration Statement on Form S-4, Registration No.
        333-29573).

  2.2   First Amendment to Agreement and Plan of Merger dated as of August 6, 
        1997, among Premier Laser Systems, Inc., EyeSys Technologies, Inc. and
        Premier Acquisition of Delaware, Inc. (incorporated herein by this
        reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K
        filed October 15, 1997).

  2.3   Second Amendment to Agreement and Plan of Merger dated as of September
        16, 1997 among Premier Laser Systems, Inc., EyeSys Technologies, Inc. 
        and Premier Acquisition of Delaware, Inc. (incorporated herein by this
        reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K
        filed October 15, 1997).

  2.4   Stock Purchase Agreement dated February 25, 1998 between Premier Laser
        Systems, Inc. and Ophthalmic Imaging Systems (incorporated herein by
        this reference to Exhibit 99.1 to the Registrant's Current Report on
        Form 8-K filed March 9, 1998).

  2.5   Purchase Agreement dated February 25, 1998 between Registrant and Mark
        S. Blumenkranz, M.D. and Recia Blumenkranz, M.D. (incorporated herein by
        this reference to Exhibit 99.4 to the Registrant's Current Report on
        Form 8-K filed March 9, 1998).

  2.6   Purchase Agreement dated February 25, 1998 between Registrant and 
        Stanley Chang, M.D. (incorporated herein by this reference to Exhibit 
        99.8 to the Registrant's Current Report on Form 8-K filed March 9,
        1998).

  2.7   Purchase Agreement dated February 25, 1998 between Registrant and J.B.
        Oxford & Company (incorporated herein by this reference to Exhibit 99.12
        to the Registrant's Current Report on Form 8-K filed March 9, 1998).
  
  2.8   Asset Purchase Agreement dated as of January 9, 1998 by and between
        Premier Laser Systems, Inc. and Corneal Contouring Development, LLC (to
        be filed by amendment)

  2.9   Agreement in Principal dated ______ , 1998 by and between Premier Laser
        Systems, Inc. and Wound Healing of Oklahoma (to be filed by amendment)

  3.1   Amended and Restated Articles of Incorporation filed with the California
        Secretary of State on November 23, 1994. (incorporated herein by this
        reference to Exhibit 4.8 to the Registrant's Quarterly Report on Form 
        10-QSB for the Quarter ended December 31, 1994)

  3.2   Bylaws (incorporated herein by this reference to Exhibit 3.3 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

  4.1   Rights Agreement dated as of March 31, 1998 between Premier Laser
        Systems, Inc. and American Stock Transfer and Trust Company acting as
        rights agent (incorporated herein by this reference to Exhibit 4.1 to
        the Registrant's Current Report on Form 8-K filed April 2, 1998).

 10.1   Letter Agreement and Patent License Agreement dated August 29, 1991
        among the Company, Patlex Corporation and Gordon Gould (incorporated
        herein by this reference to Exhibit 10.1 to the Registrant's
        Registration Statement on Form SB-2, Registration No. 33-83984).

                                       39

 
 10.2   Assignment Agreement dated July 27, 1992 between the Company and Michael
        Colvard, M.D. (incorporated herein by this reference to Exhibit 10.2 to
        the Registrant's Registration Statement on Form SB-2, Registration No.
        33-83984).

 10.3   Gold Catalyst Licensing Agreement dated April 16, 1992 between the
        Company and Optical Engineering, Inc. (incorporated herein by this
        reference to Exhibit 10.3 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

+10.4   Lead Generation/Distribution Agreement dated March 17, 1994 between the
        Company and Burkhart Dental Supply Company (incorporated herein by this
        reference to Exhibit 10.10 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

 10.5   Form of International Distribution Agreement (incorporated herein by
        this reference to Exhibit 10.12 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.6   Letter of Intent between the Company and Richard Leaderman, D.D.S.,
        together with related Patent Assignments as filed in the U.S. Patent and
        Trademark Office on February 22, 1994 (incorporated herein by this
        reference to Exhibit 10.13 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

+10.7   Exclusive Marketing Agreement dated July 26, 1994 between the Company,
        Proclosure, Inc. and Nippon Shoji Kaisha, Ltd. (incorporated herein by
        this reference to Exhibit 10.14 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.8   Form of Indemnification Agreement (incorporated herein by this reference
        to Exhibit 10.23 to the Registrant's Registration Statement on Form SB-
        2, Registration No. 33-83984).

 10.9   Purchase/Supply Agreement dated January 13, 1987 between Infrared Fiber
        Systems, Inc. and Pfizer Hospital Products Group, Inc., as amended
        (incorporated herein by this reference to Exhibit 10.26 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

 10.10  Form of Warrant Agreement (including forms of Class A and Class B
        Warrant Certificates) (incorporated herein by this reference to Exhibit
        4.1 to the Registrant's Registration Statement on Form SB-2,
        Registration No. 33-83984).

 10.11  Form of Underwriter's Unit Purchase Option (incorporated herein by this
        reference to Exhibit 4.2 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

 10.13  1992 Stock Option Plan, together with form of Nonstatutory Stock Option
        Agreement and form of Incentive Stock Option Agreement (incorporated
        herein by this reference to Exhibit 4.5 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.14  Employee Bonus Stock Plan, together with form of Bonus Stock Agreement
        (incorporated herein by this reference to Exhibit 4.6 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

 10.15  Assignment and Modification Agreement dated July 26, 1991, among the
        Registrant, Pfizer Hospital Products Group and Medical Laser
        Technologies Limited (incorporated herein by this reference to Exhibit
        10.4 of the Registrant's Registration Statement on Form SB-2,
        Registration Number 33-83984).

                                       40

 
 10.16  Letter agreement dated October 13, 1987 between Pfizer Laser Systems,
        Inc. and Duke University, together with patent assignment as filed in
        the U.S. Patent and Trademark Office on October 23, 1993 (incorporated
        herein by this reference to Exhibit 10.8 to the Registrant's
        Registration Statement on Form SB-2, Registration Number 33-83984).

 10.17  Industrial Lease dated December 6, 1995 between the Registrant and
        Irvine Company (incorporated herein by this reference to Exhibit 10.22
        to the Registrant's Annual Report on Form 10-KSB for the fiscal year
        ended March 31, 1996).

 10.18  Use and Cost Sharing Agreement dated December 1, 1995 between the
        Registrant and Biopsys Medical, Inc. (incorporated herein by this
        reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-
        KSB for the fiscal year ended March 31, 1996).

 10.22  Exclusive Licensing Agreement dated June 1, 1992 between the Registrant
        and Quentin M. Murphy, D.D.S. (incorporated herein by this reference to
        Exhibit 10.27 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.23  Broker Agreement dated March 13, 1996 among the Registrant, First
        National Marketing Services, Inc. and William F. Sullivan (incorporated
        herein by this reference to Exhibit 10.29 to the Registrant's Annual
        Report on Form 10-KSB for the fiscal year ended March 31, 1996).

 10.24  Form of Consulting Agreement (incorporated herein by this reference to
        Exhibit 10.30 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.25  Radiation Services Agreement dated January 10, 1994 between the
        Registrant and SteriGenics International (incorporated herein by this
        reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10-
        KSB for the fiscal year ended March 31, 1996).

 10.26  Form of Nonstatutory Stock Option Agreement between the Registrant and
        Colette Cozean (granting option to purchase 358,650 shares of
        Registrant's Common Stock) (incorporated herein by this reference to
        Exhibit 10.32 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.27  Form of Termination Agreement between the Registrant and certain of the
        Registrant's Executive Officers (incorporated herein by this reference
        to Exhibit 10.33 to the Registrant's Annual Report on Form 10-KSB for
        the fiscal year ended March 31, 1996).

 10.28  1995 Employee Stock Option Plan, together with form of Nonqualified
        Stock Option Agreement and form of Incentive Stock Option Agreement
        (incorporated herein by this reference to Exhibit 10.34 to the
        Registrant's Annual Report on Form 10-K for the fiscal year ended March
        31, 1996).

 10.29  February 1996 Stock Option Plan (incorporated herein by this reference
        to Exhibit 10.35 to the Registrant's Annual Report on Form 10-KSB for
        the fiscal year ended March 31, 1996).

 10.30  1996 Stock Option Plan (incorporated herein by this reference to Exhibit
        10.36 to the Registrant's Annual Report on Form 10-KSB for the fiscal
        year ended March 31, 1996).

 10.31  Loan Agreement dated June 3, 1996 between the Registrant and Silicon
        Valley Bank, together with Schedule to Loan Agreement dated June 3, 1996
        (incorporated herein by this reference to Exhibit 10.36 to the
        Registrant's Registration Statement on Form SB-2 Registration No. 333-
        04219).

                                       41

 
 10.32  Pledge Agreement dated June 3, 1996 between the Registrant and Silicon
        Valley Bank (incorporated herein by this reference to Exhibit 10.37 to
        the Registrant's Registration Statement on Form SB-2 Registration No.
        333-04219).

 10.33  Warrant to Purchase Stock dated June 3, 1996 issued to Silicon Valley
        Bank (incorporated herein by this reference to Exhibit 10.38 to the
        Registrant's Registration Statement on Form SB-2 Registration No. 333-
        04219).

 10.34  Registration Rights Agreement dated June 3, 1996 between the Registrant
        and Silicon Valley Bank (incorporated herein by this reference to
        Exhibit 10.39 to the Registrant's Registration Statement on Form SB-2
        Registration No. 333-04219).

 10.35  Antidilution Agreement dated June 3, 1996 between the Registrant and
        Silicon Valley Bank (incorporated herein by this reference to Exhibit
        10.40 to the Registrant's Registration Statement on Form SB-2
        Registration No. 333-04219).

 10.37  Amendment to Loan Agreement together with Schedule, dated February 13,
        1997, between the Registrant and Silicon Valley Bank (incorporated
        herein by this reference to Exhibit 10.37 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended March 31, 1997).

 10.38  Pledge Agreement dated February 13, 1997 between the Registrant and
        Silicon Valley Bank (incorporated herein by this reference to Exhibit
        10.38 to the Registrant's Annual Report on Form 10-K for the fiscal year
        ended March 31, 1997).

 10.39  Joint Venture Agreement dated January 31, 1997 between the Registrant,
        RSS, LLC and Data.Site (incorporated herein by this reference to Exhibit
        10.39 to the Registrant's Annual Report on Form 10-K for the fiscal year
        ended March 31, 1997).

 10.40  Operating Agreement of Data.Site dated January 31, 1997 (incorporated
        herein by this reference to Exhibit 10.40 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended March 31, 1997).

 10.42  Loan Agreement dated September 24, 1997 between Silicon Valley Bank and
        EyeSys Technologies, Inc. (incorporated herein by this reference to
        Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed
        November 14, 1997, as amended by Amendment filed November 26, 1997).

 10.43  Third Party Security Agreement dated September 24, 1997, between Silicon
        Valley Bank and Premier Laser Systems, Inc. (incorporated herein by this
        reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form
        10-Q filed November 14, 1997, as amended by Amendment filed November 26,
        1997).

 16     Letter dated June 11, 1998, from Ernest & Young, LLP (incorporated
        herein by this reference to Exhibit 16 to the Registrant's Current
        Report on Form 8-K filed June 1, 1998, as amended June 15, 1998).

 21     Subsidiaries*

 23.1   Consent of Haskell & White LLP.

 23.2   Consent of Price Waterhouse LLP.

 27     Financial Data Schedule.

 99.1   Form of Class C Warrant (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K
        filed March 9, 1998).

 99.2   Form of Class D Warrant (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.3 to the Registrant's Current Report on Form
        8-K filed March 9, 1998).

 99.3   Class C Warrant dated February 25, 1998 issued by Registrant to Mark S.
        Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.5 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.4   Class D Warrant dated February 25, 1998 issued by Premier to Mark S.
        Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.6 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.5   Registrant Rights Agreement dated February 25, 1998 between Premier and
        Mark S. Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.7 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.6   Class C Warrant dated February 25, 1998 issued by Registrant to Stanley
        Chang, M.D. (OIS transaction) (incorporated herein by this reference to
        Exhibit 99.9 to the Registrant's Current Report on Form 8-K filed March
        9, 1998).

 99.7   Class D Warrant dated February 25, 1998 issued by Registrant to Stanley
        Chang, M.D. (OIS transaction) (incorporated herein by this reference to
        Exhibit 99.10 to the Registrant's Current Report on Form 8-K filed March
        9, 1998).

 99.8   Registration Rights Agreement dated February 25, 1998 between Registrant
        and Stanley Chang, M.D. (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.11 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.9   Class C Warrant dated February 25, 1998 issued by Registrant to J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.13 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.10  Class D Warrant dated February 25, 1998 issued by Registrant to J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.14 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.11  Series C Warrant Certificate dated November 21, 1995 issued by
        Ophthalmic to J.B. Oxford & Company (OIS transaction) (incorporated
        herein by this reference to Exhibit 99.15 to the Registrant's Current
        Report on Form 8-K filed March 9, 1998).

 99.12  Consent to Transfer of Warrant dated February 25, 1998 between
        Ophthalmic and Premier (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.16 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.13  Warrant Agreement dated November 21, 1995 between Ophthalmic and J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.17 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.14  Registration Rights Agreement dated February 25, 1998 between Premier
        and J.B. Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.18 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

________________________
*    Filed herewith.
+    Confidential treatment has been granted with respect to portions of this
     Exhibit.

(b)  Reports on Form 8-K.

                                       42

 
  During the fourth quarter of the period covered by this report, the Company
filed one Current Report on Form 8-K (filed March 9, 1998).  Such filing
reported the Company's acquisition of common stock and warrants of Ophthalmic
Imaging Systems ("OIS").

  Such Report included:  Audited Balance Sheets of OIS as of August 31, 1997 and
1996, Audited Statements of Operations for the years ended August 31, 1997, 1996
and 1995, Audited Statements of Stockholders' Equity for the years ended August
31, 1997, 1996 and 1995, and Statements of Cash Flows for the year ended August
31, 1996, 1996 and 1995.

  In addition, such report included Unaudited Financial Statements of OIS
consisting of a Condensed Balance Sheet as of November 30, 1997, Condensed
Statement of Operations for the three months ended November 30, 1997 and 1996,
and Condensed Statements of Cash Flows for the three months ended November 30,
1997 and 1996. Such financial statements also included Pro Forma Combined
Financial Statements for the combined companies required to be filed pursuant to
Form 8-K.

                                       43

 
                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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.

                               PREMIER LASER SYSTEMS, INC.


                               By:  /s/  Colette Cozean
                                  ----------------------------------------------
                                  Colette Cozean, Ph.D.,
                                  Chief Executive Officer and President

                                       44

 
                               POWER OF ATTORNEY

  Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
 
          Name                             Title                      Date
- -------------------------    ----------------------------------   -------------
 
 
/s/ Colette Cozean           Chairman of the Board, President     June 29, 1998
- -------------------------    and Chief Executive Officer
Colette Cozean, Ph.D.        (Principal Executive Officer)
 
 
/s/ Michael Hiebert          Vice President of Finance and        June 29, 1998
- -------------------------    Chief Financial Officer (Principal
Michael Hiebert              Financial Officer and Principal
                             Accounting Officer)
 
 
/s/ Patrick J. Day           Director                             June 29, 1998
- -------------------------
Patrick J. Day

 
/s/ Grace Ching-Hsin Lin     Director                             June 29, 1998
- -------------------------
Grace Ching-Hsin Lin
 
 
/s/ G. Lynn Powell           Director                             June 29, 1998
- -------------------------
G. Lynn Powell, D.D.S.
 
 
/s/ E. Donald Shapiro        Director                             June 29, 1998
- -------------------------
E. Donald Shapiro

                                       45

 
                                 EXHIBIT INDEX
                                 -------------

Exhibit
- -------
  2.1   Agreement and Plan of Merger dated as of April 24, 1997 among Premier
        Laser Systems, Inc., EyeSys Technologies, Inc. and Premier Acquisition
        of Delaware, Inc. (incorporated herein by this reference to Exhibit 2.1
        to the Registrant's Registration Statement on Form S-4, Registration No.
        333-29573).

  2.2   First Amendment to Agreement and Plan of Merger dated as of August 6, 
        1997, among Premier Laser Systems, Inc., EyeSys Technologies, Inc. and
        Premier Acquisition of Delaware, Inc. (incorporated herein by this
        reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K
        filed October 15, 1997).

  2.3   Second Amendment to Agreement and Plan of Merger dated as of September
        16, 1997 among Premier Laser Systems, Inc., EyeSys Technologies, Inc. 
        and Premier Acquisition of Delaware, Inc. (incorporated herein by this
        reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K
        filed October 15, 1997).

  2.4   Stock Purchase Agreement dated February 25, 1998 between Premier Laser
        Systems, Inc. and Ophthalmic Imaging Systems (incorporated herein by
        this reference to Exhibit 99.1 to the Registrant's Current Report on
        Form 8-K filed March 9, 1998).

  2.5   Purchase Agreement dated February 25, 1998 between Registrant and Mark
        S. Blumenkranz, M.D. and Recia Blumenkranz, M.D. (incorporated herein by
        this reference to Exhibit 99.4 to the Registrant's Current Report on
        Form 8-K filed March 9, 1998).

  2.6   Purchase Agreement dated February 25, 1998 between Registrant and 
        Stanley Chang, M.D. (incorporated herein by this reference to Exhibit 
        99.8 to the Registrant's Current Report on Form 8-K filed March 9,
        1998).

  2.7   Purchase Agreement dated February 25, 1998 between Registrant and J.B.
        Oxford & Company (incorporated herein by this reference to Exhibit 99.12
        to the Registrant's Current Report on Form 8-K filed March 9, 1998).

  
  2.8   Asset Purchase Agreement dated as of January 9, 1998 by and between
        Premier Laser Systems, Inc. and Corneal Contouring Development, LLC (to
        be filed by amendment)

  2.9   Agreement in Principal dated ______ , 1998 by and between Premier Laser
        Systems, Inc.and Wound Healing of Oklahoma (to be filed by amendment)

  3.1   Amended and Restated Articles of Incorporation filed with the California
        Secretary of State on November 23, 1994. (incorporated herein by this
        reference to Exhibit 4.8 to the Registrant's Quarterly Report on Form 
        10-QSB for the Quarter ended December 31, 1994)

  3.2   Bylaws (incorporated herein by this reference to Exhibit 3.3 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

  4.1   Rights Agreement dated as of March 31, 1998 between Premier Laser
        Systems, Inc. and American Stock Transfer and Trust Company acting as
        rights agent (incorporated herein by this reference to Exhibit 4.1 to
        the Registrant's Current Report on Form 8-K filed April 2, 1998).

 10.1   Letter Agreement and Patent License Agreement dated August 29, 1991
        among the Company, Patlex Corporation and Gordon Gould (incorporated
        herein by this reference to Exhibit 10.1 to the Registrant's
        Registration Statement on Form SB-2, Registration No. 33-83984).

 10.2   Assignment Agreement dated July 27, 1992 between the Company and Michael
        Colvard, M.D. (incorporated herein by this reference to Exhibit 10.2 to
        the Registrant's Registration Statement on Form SB-2, Registration No.
        33-83984).

 10.3   Gold Catalyst Licensing Agreement dated April 16, 1992 between the
        Company and Optical Engineering, Inc. (incorporated herein by this
        reference to Exhibit 10.3 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

+10.4   Lead Generation/Distribution Agreement dated March 17, 1994 between the
        Company and Burkhart Dental Supply Company (incorporated herein by this
        reference to Exhibit 10.10 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

 10.5   Form of International Distribution Agreement (incorporated herein by
        this reference to Exhibit 10.12 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.6   Letter of Intent between the Company and Richard Leaderman, D.D.S.,
        together with related Patent Assignments as filed in the U.S. Patent and
        Trademark Office on February 22, 1994 (incorporated herein by this
        reference to Exhibit 10.13 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

+10.7   Exclusive Marketing Agreement dated July 26, 1994 between the Company,
        Proclosure, Inc. and Nippon Shoji Kaisha, Ltd. (incorporated herein by
        this reference to Exhibit 10.14 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.8   Form of Indemnification Agreement (incorporated herein by this reference
        to Exhibit 10.23 to the Registrant's Registration Statement on Form SB-
        2, Registration No. 33-83984).

 10.9   Purchase/Supply Agreement dated January 13, 1987 between Infrared Fiber
        Systems, Inc. and Pfizer Hospital Products Group, Inc., as amended
        (incorporated herein by this reference to Exhibit 10.26 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

 10.10  Form of Warrant Agreement (including forms of Class A and Class B
        Warrant Certificates) (incorporated herein by this reference to Exhibit
        4.1 to the Registrant's Registration Statement on Form SB-2,
        Registration No. 33-83984).

 10.11  Form of Underwriter's Unit Purchase Option (incorporated herein by this
        reference to Exhibit 4.2 to the Registrant's Registration Statement on
        Form SB-2, Registration No. 33-83984).

                                       46

 
 10.13  1992 Stock Option Plan, together with form of Nonstatutory Stock Option
        Agreement and form of Incentive Stock Option Agreement (incorporated
        herein by this reference to Exhibit 4.5 to the Registrant's Registration
        Statement on Form SB-2, Registration No. 33-83984).

 10.14  Employee Bonus Stock Plan, together with form of Bonus Stock Agreement
        (incorporated herein by this reference to Exhibit 4.6 to the
        Registrant's Registration Statement on Form SB-2, Registration No. 33-
        83984).

 10.15  Assignment and Modification Agreement dated July 26, 1991, among the
        Registrant, Pfizer Hospital Products Group and Medical Laser
        Technologies Limited (incorporated herein by this reference to Exhibit
        10.4 of the Registrant's Registration Statement on Form SB-2,
        Registration Number 33-83984).

 10.16  Letter agreement dated October 13, 1987 between Pfizer Laser Systems,
        Inc. and Duke University, together with patent assignment as filed in
        the U.S. Patent and Trademark Office on October 23, 1993 (incorporated
        herein by this reference to Exhibit 10.8 to the Registrant's
        Registration Statement on Form SB-2, Registration Number 33-83984).

 10.17  Industrial Lease dated December 6, 1995 between the Registrant and
        Irvine Company (incorporated herein by this reference to Exhibit 10.22
        to the Registrant's Annual Report on Form 10-KSB for the fiscal year
        ended March 31, 1996).

 10.18  Use and Cost Sharing Agreement dated December 1, 1995 between the
        Registrant and Biopsys Medical, Inc. (incorporated herein by this
        reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-
        KSB for the fiscal year ended March 31, 1996).

 10.22  Exclusive Licensing Agreement dated June 1, 1992 between the Registrant
        and Quentin M. Murphy, D.D.S. (incorporated herein by this reference to
        Exhibit 10.27 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.23  Broker Agreement dated March 13, 1996 among the Registrant, First
        National Marketing Services, Inc. and William F. Sullivan (incorporated
        herein by this reference to Exhibit 10.29 to the Registrant's Annual
        Report on Form 10-KSB for the fiscal year ended March 31, 1996).

 10.24  Form of Consulting Agreement (incorporated herein by this reference to
        Exhibit 10.30 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.25  Radiation Services Agreement dated January 10, 1994 between the
        Registrant and SteriGenics International (incorporated herein by this
        reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10-
        KSB for the fiscal year ended March 31, 1996).

 10.26  Form of Nonstatutory Stock Option Agreement between the Registrant and
        Colette Cozean (granting option to purchase 358,650 shares of
        Registrant's Common Stock) (incorporated herein by this reference to
        Exhibit 10.32 to the Registrant's Annual Report on Form 10-KSB for the
        fiscal year ended March 31, 1996).

 10.27  Form of Termination Agreement between the Registrant and certain of the
        Registrant's Executive Officers (incorporated herein by this reference
        to Exhibit 10.33 to the Registrant's Annual Report on Form 10-KSB for
        the fiscal year ended March 31, 1996).

 10.28  1995 Employee Stock Option Plan, together with form of Nonqualified
        Stock Option Agreement and form of Incentive Stock Option Agreement
        (incorporated herein by this reference to Exhibit

                                       47


        10.34 to the Registrant's Annual Report on Form 10-K for the fiscal year
        ended March 31, 1996).

 10.29  February 1996 Stock Option Plan (incorporated herein by this reference
        to Exhibit 10.35 to the Registrant's Annual Report on Form 10-KSB for
        the fiscal year ended March 31, 1996).

 10.30  1996 Stock Option Plan (incorporated herein by this reference to Exhibit
        10.36 to the Registrant's Annual Report on Form 10-KSB for the fiscal
        year ended March 31, 1996).

 10.31  Loan Agreement dated June 3, 1996 between the Registrant and Silicon
        Valley Bank, together with Schedule to Loan Agreement dated June 3, 1996
        (incorporated herein by this reference to Exhibit 10.36 to the
        Registrant's Registration Statement on Form SB-2 Registration No. 333-
        04219).

 10.32  Pledge Agreement dated June 3, 1996 between the Registrant and Silicon
        Valley Bank (incorporated herein by this reference to Exhibit 10.37 to
        the Registrant's Registration Statement on Form SB-2 Registration No.
        333-04219).

 10.33  Warrant to Purchase Stock dated June 3, 1996 issued to Silicon Valley
        Bank (incorporated herein by this reference to Exhibit 10.38 to the
        Registrant's Registration Statement on Form SB-2 Registration No. 333-
        04219).

 10.34  Registration Rights Agreement dated June 3, 1996 between the Registrant
        and Silicon Valley Bank (incorporated herein by this reference to
        Exhibit 10.39 to the Registrant's Registration Statement on Form SB-2
        Registration No. 333-04219).

 10.35  Antidilution Agreement dated June 3, 1996 between the Registrant and
        Silicon Valley Bank (incorporated herein by this reference to Exhibit
        10.40 to the Registrant's Registration Statement on Form SB-2
        Registration No. 333-04219).

 10.37  Amendment to Loan Agreement together with Schedule, dated February 13,
        1997, between the Registrant and Silicon Valley Bank (incorporated
        herein by this reference to Exhibit 10.37 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended March 31, 1997).

 10.38  Pledge Agreement dated February 13, 1997 between the Registrant and
        Silicon Valley Bank (incorporated herein by this reference to Exhibit
        10.38 to the Registrant's Annual Report on Form 10-K for the fiscal year
        ended March 31, 1997).

 10.39  Joint Venture Agreement dated January 31, 1997 between the Registrant,
        RSS, LLC and Data.Site (incorporated herein by this reference to Exhibit
        10.39 to the Registrant's Annual Report on Form 10-K for the fiscal year
        ended March 31, 1997).

 10.40  Operating Agreement of Data.Site dated January 31, 1997 (incorporated
        herein by this reference to Exhibit 10.40 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended March 31, 1997).

 10.42  Loan Agreement dated September 24, 1997 between Silicon Valley Bank and
        EyeSys Technologies, Inc. (incorporated herein by this reference to
        Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed
        November 14, 1997, as amended by Amendment filed November 26, 1997).

 10.43  Third Party Security Agreement dated September 24, 1997, between Silicon
        Valley Bank and Premier Laser Systems, Inc. (incorporated herein by this
        reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form
        10-Q filed November 14, 1997, as amended by Amendment filed November 26,
        1997).

 16     Letter dated June 11, 1998, from Ernest & Young, LLP (incorporated
        herein by this reference to Exhibit 16 to the Registrant's Current
        Report on Form 8-K filed June 1, 1998, as amended June 15, 1998).


                                      48

 
 21     Subsidiaries*

 23.1   Consent of Haskell & White LLP.

 23.2   Consent of Price Waterhouse LLP.

 27     Financial Data Schedule

 99.1   Form of Class C Warrant (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K
        filed March 9, 1998).

 99.2   Form of Class D Warrant (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.3 to the Registrant's Current Report on Form
        8-K filed March 9, 1998).

 99.3   Class C Warrant dated February 25, 1998 issued by Registrant to Mark S.
        Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.5 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.4   Class D Warrant dated February 25, 1998 issued by Premier to Mark S.
        Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.6 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.5   Registrant Rights Agreement dated February 25, 1998 between Premier and
        Mark S. Blumenkranz, M.D. and Recia Blumenkranz, M.D. (OIS transaction)
        (incorporated herein by this reference to Exhibit 99.7 to the
        Registrant's Current Report on Form 8-K filed March 9, 1998).

 99.6   Class C Warrant dated February 25, 1998 issued by Registrant to Stanley
        Chang, M.D. (OIS transaction) (incorporated herein by this reference to
        Exhibit 99.9 to the Registrant's Current Report on Form 8-K filed March
        9, 1998).

 99.7   Class D Warrant dated February 25, 1998 issued by Registrant to Stanley
        Chang, M.D. (OIS transaction) (incorporated herein by this reference to
        Exhibit 99.10 to the Registrant's Current Report on Form 8-K filed March
        9, 1998).

 99.8   Registration Rights Agreement dated February 25, 1998 between Registrant
        and Stanley Chang, M.D. (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.11 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.9   Class C Warrant dated February 25, 1998 issued by Registrant to J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.13 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.10  Class D Warrant dated February 25, 1998 issued by Registrant to J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.14 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.11  Series C Warrant Certificate dated November 21, 1995 issued by
        Ophthalmic to J.B. Oxford & Company (OIS transaction) (incorporated
        herein by this reference to Exhibit 99.15 to the Registrant's Current
        Report on Form 8-K filed March 9, 1998).

 99.12  Consent to Transfer of Warrant dated February 25, 1998 between
        Ophthalmic and Premier (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.16 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.13  Warrant Agreement dated November 21, 1995 between Ophthalmic and J.B.
        Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.17 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).

 99.14  Registration Rights Agreement dated February 25, 1998 between Premier
        and J.B. Oxford & Company (OIS transaction) (incorporated herein by this
        reference to Exhibit 99.18 to the Registrant's Current Report on Form 8-
        K filed March 9, 1998).
________________________
+  Confidential treatment has been granted with respect to portions of this
   Exhibit.
#  Incorporated by reference herein.
*  Filed herewith.

                                       49

EX-21

 
                                  EXHIBIT 21

                          Subsidiaries of Registrant
                          --------------------------

                                               Jurisdiction of
    Name                                        Organization
    ----                                       ---------------
EyeSys Technologies, Inc.                         Delaware
(dba "EyeSys/Premier")      

Data.Site, LLC*                                   California

Ophthalmic Imaging Systems, Inc.*                 California

CRS Clinical Research, Inc.                       California

________________

* The Registrant holds a majority equity interest in these entities.