VISION TWENTY ONE INC, 424B4, 1997-11-21

VISION TWENTY ONE INC
424B4, 1997-11-21
MANAGEMENT SERVICES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration Statement No. 333-39031

PROSPECTUS
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2,300,000 Shares

[VISION TWENTY-ONE LOGO] [VISION TWENTY-ONE LOGO]
Common Stock

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All of the 2,300,000 shares of common stock, par value $.001 per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by Vision
Twenty-One, Inc. (the "Company").

The Common Stock is included in The Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol "EYES." On November 20, 1997, the
last reported sales price for the Common Stock on the Nasdaq National Market was
$10.125 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" ON PAGES 7 TO 18 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=======================================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share................................... $9.50 $0.55 $8.95
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Total(3).................................... $21,850,000 $1,265,000 $20,585,000
=======================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $600,000.

(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 345,000 additional shares of Common Stock on the
same terms and conditions as set forth above. If all such additional shares
are purchased by the Underwriters, the total Price to Public will be
$25,127,500, the total Underwriting Discounts and Commissions will be
$1,454,750 and the total Proceeds to Company will be $23,672,750. See
"Underwriting."

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The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and to
withdrawal, cancellation or modification of the offer without notice. Delivery
of the shares to the Underwriters is expected to be made at the office of
Prudential Securities Incorporated, One New York Plaza, New York, New York, on
or about November 26, 1997.

PRUDENTIAL SECURITIES INCORPORATED WHEAT FIRST BUTCHER SINGER

November 20, 1997
<PAGE> 2

FILED PURSUANT TO RULE 424(B)(4) REGISTRATION STATEMENT NO. 333-39031
<PAGE> 3

[The inside front cover depicts a graphic of the Company's Local Area
Delivery System. The graphic sets forth the four elements contained within the
Local Area Delivery System. The four elements are labeled primary, secondary,
tertiary and surgical facilities on four separate boxes, one on top of the
other, and each box is successively smaller, forming the shape of a pyramid.
Within each box is a description of these elements within a Local Delivery
System. In addition, the inside front cover folds out to depict a map of the
United States with the states in which the Company operates highlighted in a
different color. The Local Area Development Systems are further divided by color
to reflect those that were existing prior to the Block Acquisition and those
added as a result of the Block Acquisition.]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE
ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and information under "Risk Factors." Unless the
context otherwise requires, references in this Prospectus to the Company or
Vision Twenty-One include Vision Twenty-One, Inc., its predecessors and its
subsidiaries and references to Block Vision include Block Vision, Inc., its
parent holding company, BBG-COA, Inc., and its subsidiaries. As used herein, the
term "Managed Providers" refers to the licensed optometrists and
ophthalmologists employed by professional associations and providing eye care
services at Company clinic facilities and ambulatory surgical centers ("ASCs");
"Managed Professional Associations" refers to the professional associations
which are managed by the Company pursuant to long-term management agreements
("Management Agreements"); "Contract Providers" refers to the licensed
optometrists and ophthalmologists who are credentialed, or in the process of
being credentialed, to provide eye care services at optometry and ophthalmology
clinics and ASCs pursuant to the Company's managed care contracts; and
"Affiliated Providers" refers collectively to the Managed Providers and the
Contract Providers. Except as otherwise indicated, the information contained in
this Prospectus (i) assumes that the Underwriters' over-allotment option will
not be exercised and (ii) gives retroactive effect to a reverse stock split
resulting in an exchange of 1 share for 1.5 shares of Common Stock issued and
outstanding. The Company's acquisition of Block Vision is, upon finalization of
certain matters, effective as of October 31, 1997. Certain data and pro forma
financial information in this Prospectus reflect that the acquisition of Block
Vision and other acquisitions currently closed in escrow have been completed.
The term "1997 Acquisitions" shall be deemed to include all acquisitions made by
the Company in 1997 except for the acquisition of Block Vision.

THE COMPANY

The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS(SM)") established by the Company. LADS are
developed to provide for integrated networks of optometrists, ophthalmologists,
ASCs and retail optical centers which offer the full continuum of eye care
services in local markets. The Company began operations in 1984, providing
management services to seven optometrists practicing at eight clinic locations.
The Company currently provides its services to 39 LADS located in 26 states
through which 5,810 Affiliated Providers deliver eye care services. Of these
Affiliated Providers, 86 are Managed Providers, consisting of 50 optometrists
and 36 ophthalmologists practicing at 57 clinic locations and five ASCs, and
5,724 are Contract Providers, consisting of 4,993 optometrists and 731
ophthalmologists practicing at over 4,300 clinic locations and 35 ASCs. The
Company's Affiliated Providers, in conjunction with select national retail
optical chains operating over 300 retail optical centers, deliver eye care
services under the Company's 82 managed care contracts and 12 discount
fee-for-service plans covering approximately 4.0 million exclusively contracted
patient lives. Furthermore, the Company has established a nationwide eye care
provider network of over 6,700 additional Contract Providers thereby positioning
the Company to capture future managed care business in anticipated new local
markets.

Eye care services in the United States are delivered through a highly
fragmented system of local providers that industry sources estimate consisted of
approximately 47,000 practicing eye care professionals in 1996, including
approximately 29,500 optometrists and 17,500 ophthalmologists. According to
industry sources, expenditures for all eye care services in the United States
were approximately $31.2 billion in 1995. Industry sources estimate $19.6
billion of these expenditures was spent on primary care, including approximately
$13.8 billion for optical goods (frames, lenses and accessories) and $5.8
billion for primary eye care services (routine eye exams, contact lens fitting
and diagnosis/management of eye disease), while $11.6 billion was spent on
secondary and tertiary care, including $6.9 billion for ophthalmology services
(medical and surgical eye care) and $4.7 billion for facility services (services
provided by hospital facilities and ASCs). The Company believes several trends
are effecting the growth of the overall eye care industry as well as the
delivery of eye care services. First, as the "baby boom" generation ages, the
demand for eye care services at all levels is expected to increase to treat such
conditions as glaucoma, cataracts and other eye disorders that naturally occur
as part of the aging process. Second, technological advances and innovations in
such areas as refractive surgery utilizing the excimer laser to correct
nearsightedness are expected to contribute to increased spending on eye
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<PAGE> 5

care services. Third, the Company believes that patients are increasingly
seeking convenient and accessible primary eye care through retail centers where
primary eye care services and products are being bundled, thus making the retail
optical center an important access point for eye care delivery networks.
Finally, as more people become eligible to receive eye care benefits, the
Company believes there will be increased utilization of primary eye care
services, which will in turn lead to an increase in the demand for secondary and
tertiary eye care services.

The Company's goal is to enable each of its LADS to capture the leading
market share of fee-for-service patients and managed care members. To achieve
its goal, the Company is focused on the following strategies: (i) developing
LADS in order to provide for a complete continuum of easily accessible, high
quality and affordable eye care services, (ii) increasing patient revenue and
cost efficiencies for each LADS through practice development and managed care
initiatives and (iii) expanding into select new markets to create regional
networks of LADS.

The Company earns practice management fees by providing Managed Providers
with a wide range of management and administrative services. These management
and administrative services are designed to increase patient flow, while
effecting cost efficiencies, and to permit the Managed Provider to concentrate
on the delivery of easily accessible, high quality and affordable eye care
services. The Company also earns revenues by entering into capitated managed
care contracts with third-party insurers and payors and by administering
indemnity fee-for-service plans for its Affiliated Providers. The Company
believes it provides its Affiliated Providers with significant advantages in
negotiating, obtaining and effectively administering managed care contracts
through its experienced management team, management information systems, greater
capital resources and more efficient cost structure.

RECENT DEVELOPMENTS

Block Acquisition. Effective October 31, 1997, the Company acquired all of
the issued and outstanding stock of Block Vision (the "Block Acquisition").
Block Vision provides administration services on behalf of managed vision care
plans for a nationwide network of 5,171 Contract Providers who provide eye care
services pursuant to 58 capitated and five discount fee-for-service managed care
contracts covering over 2.1 million exclusively contracted patient lives. The
Block Acquisition has enabled the Company to establish 28 new LADS for future
development. Furthermore, Block Vision has established a network of
approximately 4,500 additional credentialed Contract Providers, and another
1,400 Contract Providers in the process of being credentialed, to capture future
managed care business in anticipated new local markets. In addition, Block
Vision operates a buying group division which provides billing and collection
services to suppliers of optical products. See "The Acquisitions -- Block
Acquisition."

October Acquisitions. In October 1997, the Company closed in escrow one
acquisition, and entered into an agreement with respect to another acquisition,
of the business assets of two ophthalmology clinics, two optical dispensaries,
and one ASC located in Brandon, Florida and Minneapolis, Minnesota. Business
assets consist of certain non-medical and non-optometric assets, including
accounts receivable, leases, contracts, equipment and other tangible and
intangible assets. Concurrently with these acquisitions, the Company entered
into long-term Management Agreements with the related professional associations
employing three optometrists and five ophthalmologists. Such acquisitions are
referred to herein as the "October Acquisitions." See "The Acquisitions -- 1997
Acquisitions."

Initial Public Offering. On August 18, 1997, the Company completed its
initial public offering of 2,100,000 shares of Common Stock at a price to the
public of $10.00 per share (the "Initial Public Offering"). The net proceeds of
the Initial Public Offering were used to repay substantially all of the
Company's
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<PAGE> 6

outstanding indebtedness and to provide funding to continue acquisitions of
optometry and ophthalmology clinics and ASCs.

THE OFFERING

Common Stock Offered by the Company....... 2,300,000 shares

Common Stock to be Outstanding after the
Offering(1)............................... 11,507,449 shares

Use of Proceeds........................... To fund a portion of the
consideration of the Block
Acquisition. See "Use of
Proceeds."

Nasdaq National Market Symbol............. EYES
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(1) Excludes (a) an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the Company's stock plans (the "Plans"), pursuant to which
options to purchase approximately 792,667 shares of Common Stock have been
granted as of November 18, 1997, (b) an aggregate of 1,026,666 shares of
Common Stock which are reserved for issuance in the event of the exercise of
warrants granted by the Company and (c) an aggregate of 438,596 shares of
Common Stock which are being held in escrow as contingent consideration in
several acquisitions. Includes an aggregate of 1,066,155 shares of Common
Stock which are being held in escrow in connection with certain
acquisitions. See "The Acquisitions," "Management -- Stock Option Plans,"
"Certain Transactions" and "Underwriting."

RISK FACTORS

Investors should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to investors from various
events which could adversely affect the Company's business. See "Risk Factors."
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<PAGE> 7

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996(1) 1996 1997 1997(1)
------- ------- ------- ----------- ------- ------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 1,192 $ 3,082 $ 9,564 $ 117,735 $ 6,026 $29,444 $ 94,707
Operating expenses............. 1,340 4,300 15,524 121,409 9,392 29,729 92,671
------- ------- ------- ----------- ------- ------- -----------
Income (loss) from
operations................... (148) (1,218) (5,960) (3,674) (3,366) (285) 2,036
Income (loss) before
extraordinary charge......... (153) (1,226) (6,120) (3,894) (3,432) (1,026) 15
Pro forma income (loss) before
extraordinary charge per
common share(2).............. $ (0.40) $ --
Pro forma weighted average
number of common shares
outstanding(2)............... 9,751,176 9,751,176
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ 1,582 $(27,068) $(7,363)
Total assets.............................................. 43,771 92,819 87,209
Long-term debt and capital lease obligations,
including current maturities............................ 580 9,347 13,147
Total stockholders' equity................................ 30,899 37,734 57,439
</TABLE>

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(1) Gives effect to the following transactions as if they were completed on
January 1, 1996: (i) the 1996 Acquisitions, (ii) the 1997 Acquisitions,
(iii) the Block Acquisition and (iv) the Initial Public Offering and the
application of the net proceeds therefrom. See "The Acquisitions" and
"Selected Pro Forma Financial Data."
(2) Reflects the pro forma income (loss) before extraordinary charge per common
share assuming an increase in the weighted average number of outstanding
shares to the extent necessary to fund the cash portion of the Block
Acquisition. See Note 9 to the Company's Unaudited Pro Forma Consolidated
Financial Information for a description of the computation of pro forma
income (loss) before extraordinary charge per common share.
(3) Gives effect to the October Acquisitions and the Block Acquisition as if
they were completed as of September 30, 1997. See "The Acquisitions."
(4) Gives effect to the Offering and the application of the net proceeds
therefrom. See "Selected Pro Forma Financial Data."
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<PAGE> 8

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.

This Prospectus contains statements which constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The words "expect,"
"believe," "goal," "plan," "intend," "estimate" and similar expressions and
variations thereof used in this Prospectus are intended to specifically identify
forward-looking statements. Those statements appear in a number of places in
this Prospectus and include statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things: (i) the financial prospects of the Company; (ii) potential
acquisitions by the Company and the successful integration of both completed and
future acquisitions; (iii) the ability of the Company to efficiently and
effectively manage its Managed Providers; (iv) the use of the proceeds of the
Offering; (v) the Company's financing plans; (vi) trends affecting the Company's
financial condition or results of operations; (vii) the Company's growth
strategy and operating strategy; (viii) trends in the health care and managed
care industries; (ix) the impact of current and future governmental regulations;
(x) the declaration and payment of dividends; (xi) the Company's current and
future managed care contracts; (xii) the Company's ability to continue to
recruit Contract Providers, to convert Contract Providers to Managed Providers,
and to maintain its relationships with Affiliated Providers; (xiii) the
Company's relationship with BSM Consulting Group and Bruce Maller; (xiv) the
Company's relationships with affiliated retail optical companies; (xv) the
Company's relationships with its buying group participants and suppliers of eye
care products and supplies; and (xvi) the Company's ability to operate
efficiently, profitably and effectively its new Block Vision subsidiary, which
includes a new business line and a significant increase in the Company's managed
care business. Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward looking statements as a result of various factors. The
accompanying information contained in this Prospectus, including without
limitation the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," identifies important factors that could cause such
differences. The Company undertakes no obligation to publicly update or revise
forward looking statements made in this Prospectus to reflect events or
circumstances after the date of this Prospectus or to reflect the occurrence of
unanticipated events.

HISTORY OF LOSSES. Although the Company has experienced substantial
revenue growth, the Company incurred operating and net losses in the years ended
December 31, 1994, 1995 and 1996 and in the nine months ended September 30,
1997. As of September 30, 1997, the Company had an accumulated deficit of $8.9
million. In addition, as of July 31, 1997, Block Vision had an accumulated
deficit of $584,000 due primarily to operating and net losses accumulated prior
to fiscal year ended April 30, 1996. The Company operated at a break-even level
for the third quarter of 1997 while Block Vision was marginally profitable for
the quarter ended July 31, 1997. There can be no assurance that the Company will
not incur further operating and net losses or achieve profitability in the near
future.

INTEGRATION AND OPERATION OF BLOCK ACQUISITION. The Block Acquisition is
the Company's largest acquisition to date. As a result of the Block Acquisition,
the Company has extended its business to 20 new states and the District of
Columbia, has significantly increased the managed care portion of its business
and has added a new line of business through Block Vision's buying group
division. The Company's results of operations will significantly depend on the
Company's successful integration and future operation of the businesses acquired
in the Block Acquisition. There can be no assurance that the Company will be
able to successfully integrate and operate Block Vision and a failure by the
Company to do so would have a material adverse effect on the Company's business
and profitability.

RISKS ASSOCIATED WITH EXPANSION STRATEGY. A significant portion of the
Company's expansion strategy is to grow its Managed Provider network through the
acquisition of certain assets of ophthalmology and

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optometry practices, ASCs and related businesses. The success of the Company's
expansion strategy will depend on factors which include the following:

Ability to Identify and Consummate Suitable Acquisitions. The Company
intends to devote substantial resources to identifying, negotiating and
consummating appropriate acquisitions. The Company may compete for
acquisition opportunities with entities that have greater resources than
the Company. There can be no assurance that suitable acquisition candidates
are available or can be identified or that acquisitions can be consummated
on terms favorable to the Company. Additionally, several acquisitions by
the Company have been closed in escrow and another acquisition which has
been agreed to but not completed, all of which have been included in the
pro forma calculations contained herein. Any failure by the Company
ultimately to close a material portion of such acquisitions and, where
applicable, to obtain a release from escrow could have a material adverse
effect on the Company's pro forma financial statements contained herein and
on the Company's future results of operations and financial condition. See
"The Acquisitions."

Integration of Acquisitions. The Company has made significant
acquisitions in the past year. In the past twelve months, the size of its
Contract Provider network, the number and size of its managed care
contracts and related covered lives and the number of clinics and ASCs
managed by the Company have increased significantly. The Company's revenue
has increased from $9.6 million for the year ended December 31, 1996 to
$117.7 million on a pro forma basis. The Company's financial results in
fiscal quarters immediately following a material acquisition or series of
acquisitions may be adversely impacted while the Company attempts to
integrate the acquisition or acquisitions. There can be no assurance that
there will not be substantial unanticipated costs or problems associated
with the integration effort. During the first few months after an
acquisition, the Company's expenses related to an acquisition may exceed
the revenue it realizes from the acquisition and, accordingly, any such
acquisition may have a negative effect on the Company's short-term
operating results. As the Company pursues its expansion strategy, there can
be no assurance that the Company will be able to continue to successfully
integrate acquisitions and any failure or inability to do so may have a
material adverse effect on the Company's results of operations or financial
condition. In addition, acquisitions require the Company to attract and
retain competent and experienced management personnel and require the
integration of reporting and tracking systems, management information
systems and other operating systems. At present, the Company's recent
acquisitions have not been fully integrated into its management information
systems and there can be no assurance that the Company will be able to
successfully integrate its management information systems in the near
future. There can also be no assurance that the Company will be able to
attract suitable management or other personnel or effectively expand its
operating systems. The success of the Company's expansion strategy will
depend on the Company's ability to effectively manage an increasing number
of new acquisitions while continuing to manage its existing business.

Availability of Funds for Expansion Strategy. The Company's expansion
strategy will require that substantial capital investment and adequate
financing be available to the Company. Capital is needed not only for
acquisitions, but also for the integration of operations and the addition
of equipment and technology. To date, the Company has borrowed
approximately $3.5 million under its bridge credit facility for use in
funding certain acquisitions and expects to borrow approximately an
additional $5.6 million to finance a portion of the Block Acquisition after
completion of the Offering. In addition, approximately $6.5 million under
the bridge credit facility is available, if needed, to fund additional
acquisitions by the Company. The bridge credit facility matures at the
earlier of six months from the date of any borrowing or the closing of any
future debt or equity offering of the Company. The Company is currently
seeking a long-term facility to replace the bridge credit facility,
however, there can be no assurance that the Company will be able to
refinance or replace the bridge credit facility on or before its maturity
date. An inability by the Company to refinance or replace the bridge credit
facility under commercially reasonable terms could have a material adverse
effect on the Company's financial condition. The Company currently believes
that the net proceeds from this Offering, cash flow from operations, its
bridge credit facility, anticipated future bank credit facility borrowings,
seller financing and the issuance of Common Stock in acquisitions, will be
adequate to meet the Company's anticipated capital needs for the next
twelve months. Should the Company be unable to obtain these anticipated
credit facility borrowings, the Company may be required to obtain financing
through other borrowings or the issuance of additional equity or debt
securities, which could have an adverse effect on the value of the

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<PAGE> 10

shares of Common Stock of the Company. There can be no assurance that the
Company will be able to obtain such financing or that, if available, such
financing will be on terms acceptable to the Company. An inability of the
Company to obtain the anticipated bank credit facility and suitable
additional future financings could cause the Company to substantially
change its expansion strategy, which could have a material adverse effect
on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

Managed Care Contract Expansion. The success of the Company's
expansion strategy also will be dependent on its ability to maintain and
expand its managed care contract relationships with HMOs and other third
party payors. The ability of the Company to maintain and expand its
Contract Provider network and retail affiliations will be important in
expanding these contractual relationships with both existing and new
payors. Correspondingly, expanding managed care contract relationships will
be important in maintaining and expanding its Contract Provider network and
retail affiliations. Additionally, the ability to effect acquisitions that
add to the Company's Managed Provider network will be dependent upon the
Company's ability to expand its managed care contract relationships.

Risks Associated with Merger Transactions. Several of the Company's
acquisitions have been accomplished by way of merger. As a result of such
merger transactions, there could be potential liabilities to which the
Company could be subject. The agreements entered into in connection with
the acquisitions provide for the Company to be fully indemnified against
any losses incurred by the Company as a result of certain material
liabilities. However, while the Company is not aware of any such
liabilities, there can be no assurance that the Company will not incur
losses in the event that the indemnifications are inadequate to reimburse
the Company for any such losses.

Information Systems. The Company is currently in the process of
modifying its information systems to be year 2000 compliant. The Company
expects its information systems to be year 2000 compliant within a
sufficient amount of time to meet its needs. The Block Vision managed care
information systems are currently year 2000 compliant and Block Vision is
in the process of modifying its remaining information systems to be year
2000 compliant.

RELIANCE ON AFFILIATED PROVIDERS. The Company's revenue depends on revenue
generated by the Affiliated Providers. There can be no assurance that the
practices managed by the Company will continue to maintain successful practices,
that the Management Agreements between the Company and such professional
associations will not be terminated or that the Managed Providers will continue
to be employed by the professional associations. Under the Management
Agreements, the Company has agreed with the professional associations that,
subject to certain exceptions, it will not provide management services for any
practice located within five miles of such professional associations without
first obtaining the express written consent of the professional associations.
The Company's ability to expand the managed care business will be dependent upon
the Company's ability to recruit and maintain an expanded Contract Provider
network as well as to market such network successfully to payors. The inability
to effectively expand the network and contractual relationships with payors
would have a material adverse effect on the Company's growth strategy.
Additionally, the practice management fees earned by the Company pursuant to
substantially all of its Management Agreements will fluctuate depending on
variances in revenues and expenses of the Managed Professional Association and
thus the Company's revenue and profitability in connection with its Management
Agreements will be directly and adversely affected by poor operating results of
its Managed Professional Associations.

RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS AND CAPITATED FEE
ARRANGEMENTS. As a result of the Block Acquisition, the Company's managed care
business will increase significantly, with managed care revenues increasing from
$10.8 million for 1996 to $23.1 million for 1996 on a pro forma basis.
Additionally, as an increasing percentage of the population is covered by
managed care organizations, the Company believes that its success will be, in
part, dependent upon its ability to negotiate managed care contracts with HMOs,
health insurance companies and other third party payors pursuant to which
services will be provided on a risk-sharing or capitated basis. Additionally,
substantially all of the Company's managed care business is pursuant to
approximately 14 contracts and the loss of any one of those could have an
adverse effect on the Company's results of operations. Most of the Company's
managed care contracts are for one year terms which automatically renew and the
contracts are terminable by either party on sixty days notice. Under some of
these contracts, the health care provider may accept a pre-determined amount per
month per patient in exchange for providing all necessary covered services to
the patients covered under the agreement. These contracts pass much of the risk
of providing care from the payor to the provider. The proliferation of these
contracts in markets served by the Company could result in greater
predictability of revenue, but less certainty with respect

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to profitability. There can be no assurance, however, that the Company will be
able to negotiate satisfactory arrangements on a risk-sharing or capitated
basis. In addition, to the extent that patients or enrollees covered by these
contracts require, in the aggregate, more frequent or extensive care than is
anticipated, operating margins may be reduced or the revenue derived from these
contracts may be insufficient to cover the costs of the services provided. Any
such developments could have a material adverse effect on the Company's results
of operations or financial condition. In connection with the Block Acquisition,
the Company has applied for approval by the Texas Insurance Commission regarding
the change in control of ownership of a Block Vision subsidiary in connection
with licensing requirements for Block Vision's managed care business in the
State of Texas. In the event such approval is not received, the Company's
ability to conduct future managed care business in Texas could be adversely
affected.

RISKS ASSOCIATED WITH BLOCK VISION'S BUYING GROUP. As a result of the
Block Acquisition, the Company provides billing and collection services to
suppliers of optical products benefiting suppliers and buyers of eye care
products. Block Vision had revenues of $54.8 million from its buying group
division for the year ended December 31, 1996. The Company's business
arrangements are terminable at any time by Block Vision or its customers. Any
loss of a significant number of customers in connection with this business could
have a material adverse effect on the results of operations of the Company. In
connection with its buying group services, Block Vision bears substantial credit
risk, which if not managed successfully could have a material adverse effect on
the Company, its cash flows and results of operations. In addition, the
operations of the buying group may be subject to certain federal laws, including
anti-kickback laws. A determination that the buying group operations are in
violation of such laws could have a material adverse effect on the results of
operations of the buying group division. See "Business -- Governmental
Regulations -- Health Care Regulations."

GOVERNMENT REGULATIONS. Business arrangements between business
associations that provide practice management services and ophthalmologists and
optometrists are regulated extensively at the state and federal levels,
including regulation in the following areas:

Corporate Practice of Optometry and Ophthalmology. The laws of many
states prohibit corporations that are not owned entirely by eye care
professionals from employing eye care professionals, having control over
clinical decision-making, or engaging in other activities that are deemed
to constitute the practice of optometry and ophthalmology. The Company
contracts with professional associations (which are owned by one or more
licensed optometrists or ophthalmologists), which in turn employ or
contract with licensed optometrists or ophthalmologists to provide
professional services. The Company performs only non-professional services,
is not representing to the public or its customers that it provides
professional eye care services, and is not exercising influence or control
over the practices of the eye care practitioners employed by the
professional associations. Furthermore, the Management Agreements between
the Company and the Managed Professional Associations specifically provide
that all decisions required by law to be made by professionals shall be
made by such professionals. While certain shareholders of Managed
Professional Associations that perform the practice of medicine or
optometry are also involved in Company management, they act independently
when making decisions on behalf of their professional corporations and the
Company has no right (and does not attempt to exercise any right) to
control those decisions.

Fee-Splitting and Anti-kickback Laws.

State Law. Most states have laws prohibiting paying or receiving
any remuneration, direct or indirect, that is intended to induce
referrals for health care products or services. Many states also
prohibit "fee-splitting" by eye care professionals with any party except
other eye care professionals in the same professional corporation or
practice association. In most cases, these laws apply to the paying of a
fee to another person for referring a patient or otherwise generating
business, and do not prohibit payment of reasonable compensation for
facilities and services (other than the generation of business), even if
the payment is based on a percentage of the practice's revenues.

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<PAGE> 12

the Florida Board of Medicine recently issued an order determining that
a management fee charged by a publicly held national management company
based upon a percentage of revenue constitutes illegal fee-splitting.
The case before the Board involved arrangements that are different from
the Company's arrangements in certain respects, including the fact the
management fee was based on a percentage of the increase in net revenues
of the practice after the management arrangement commenced. The ruling
is limited to the facts presented to the Board. The Board's statement of
the rationale for its opinion is unclear as to whether it would also
apply to arrangements similar to those utilized by the Company. The
Board of Medicine's order has been stayed to permit an appeal to a
Florida district court of appeals. The appellate court could reverse or
affirm the Board's opinion, or clarify that it is correct only in
limited situations. If the Board's order is allowed to stand without
clarification, there is a risk that the Company's arrangements with
physicians in the State of Florida could be determined to be in
violation of the fee-splitting statute. Since the same statute applies
to optometrists, a risk would also exist as to the Company's
arrangements with them. The Company's management arrangements provide
that if they are determined in the future to violate any law, the
parties agree to use their best efforts to modify the arrangement to
approximate as closely as possible, consistent with law, the economic
position of the parties prior to the modification and, if they are
unable to reach agreement on a new arrangement, to submit the matter to
arbitration for the purpose of reaching an equitable alternative
arrangement. In the event the form of Management Agreement utilized by
the Company in Florida is ever determined to be in violation of state
law, and the parties or the arbitrator are unable to arrive at a
satisfactory modification to the Management Agreement, there could be a
material adverse impact on the Company's current Florida Management
Agreements and therefore, the Company's results of operations. On a pro
forma basis for 1996 the revenues under the Florida Management
Agreements represented approximately 5.0% of the Company's total
revenue.

An Arizona law prohibits "dividing a professional fee" only if it
is done "for patient referrals," similar to the language of the Florida
law. Other states, such as Illinois and New York, have fee-splitting
statutes that have been interpreted to prohibit any compensation
arrangements that are based on a percentage of a physician's revenue,
and such laws shall preclude the Company from using its typical
management arrangements at such time as Managed Provider relationships
are created in those states.

Federal Law. Federal law prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return for the
referral of patients covered by federally funded health care programs
such as Medicare and Medicaid, or in return for purchasing, leasing,
ordering or arranging for the purchase, lease or order of any product or
service that is covered by a federal program. For this reason, the
Management Agreement provides that the Company will not engage in direct
marketing to potential sources of business, but will only assist the
practice's personnel in these endeavors by providing training, marketing
materials and technical assistance.

Advertising Restrictions. Many states prohibit eye care
professionals from using advertising which includes any name other than
their own, or from advertising in any manner that is likely to lead a
person to believe that a non eye care professional is engaged in the
delivery of eye care services. The Management Agreement provides that
all advertising shall conform to these requirements.

In addition, the Company's managed care arrangements with health care
service payors on the one hand, and its network of Affiliated Providers on the
other, are subject to federal and state regulations, including the following:

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<PAGE> 13

states require a license for a capitated arrangement with any party unless
the risk-bearing association is a professional corporation that employs the
eye care professionals. In the event that the Company is required to become
licensed under these laws, the licensure process can be lengthy and time
consuming and, unless the regulatory authority permits the Company to
continue to operate while the licensure process is progressing, the Company
could experience a material adverse change in its business while the
licensure process is pending. In addition, many of the licensing
requirements mandate strict financial and other requirements which the
Company may not immediately be able to meet. Once licensed, the Company
would be subject to continuing oversight by and reporting to the respective
regulatory agency.

Limited Health Service Plans and Third Party Administration
Licensing. Some states permit managed care networks that assume insurance
risk, but only as to a limited class of health services, to be licensed as
limited health service plans, and thereby avoid the need to be licensed as
an insurer or HMO even if its arrangements are with individual subscribers
or self-insured employers. Additionally, some states require licensing for
companies providing administrative services in connection with managed care
business. The Company intends to seek such licenses in those states where
it is available for eye care networks. However, the Company may not be able
to meet such requirements in all cases and should this result in the loss
of any material business (individually or in the aggregate) it could have a
material adverse effect on the Company's business and operating results.

Physician Incentive Plans. Medicare regulations impose certain
disclosure requirements on managed care networks that compensate providers
in a manner that is related to the volume of services provided to Medicare
patients (other than services personally provided by the provider). If such
incentive payments exceed 25 percent of the provider's potential payments,
the network is also required to show that the providers have certain "stop
loss" financial projections and to conduct certain Medicare enrollee
surveys.

"Any Willing Provider" Laws. Some states have adopted, and others are
considering, legislation that requires managed care networks to include any
provider who is willing to abide by the terms of the network's contracts
and/or prohibit termination of providers without cause. Such laws would
limit the ability of the Company to develop effective managed care networks
in such states.

The Company and its affiliated professional associations are subject to a
range of antitrust laws that prohibit anti-competitive conduct, including price
fixing, concerted refusals to deal and divisions of markets. Among other things,
these laws limit the ability of the Company to enter into Management Agreements
with separate practice groups that compete with one another in the same
geographic market. This does not apply to professionals within the same practice
group. In addition, these laws prevent acquisitions of business assets that
would be integrated into existing professional associations if such acquisitions
substantially lessen competition or tend to create a monopoly.

The several laws described above have civil and criminal penalties and have
been subject to limited judicial and regulatory interpretation. They are
enforced by regulatory agencies that are vested with broad discretion in
interpreting their meaning. The Company's agreements and activities have not
been examined by federal or state authorities under these laws and regulations.
For these reasons, there can be no assurance that review of the Company's
business arrangements will not result in determinations that adversely affect
the Company's operations or that certain agreements between the Company and eye
care providers or third-party payors will not be held invalid and unenforceable.
In addition, these laws and their interpretation vary from state to state. The
regulatory framework of certain jurisdictions may limit the Company's expansion
into, or ability to continue operations within, such jurisdictions if the
Company is unable to modify its operational structure to conform with such
regulatory framework. Any limitation on the Company's ability to expand could
have an adverse effect on the Company. See "Business -- Government Regulations."

COST CONTAINMENT AND REIMBURSEMENT TRENDS. A significant portion of the
revenues received by the Affiliated Providers are derived from government
sponsored health care programs and private third-party payors. The health care
industry has experienced a trend toward cost containment as government and
private third- party payors seek to impose lower reimbursement and utilization
rates and negotiate reduced payment schedules with service providers. The
Company believes that these trends may result in a reduction from

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<PAGE> 14

historical levels in per patient revenue received by the professional
associations. Recent changes in Medicare payment rates will reduce payments to
optometrists and ophthalmologists. Medicare payments to physicians and other
practitioners are based on the "relative value units" ("RVUs") assigned to the
service in question. These RVUs were adjusted effective January 1, 1997 in a
manner that generally assigns a relatively lower value to services performed by
optometrists and ophthalmologists. As a result of these changes, the projected
Medicare payments to optometrists and ophthalmologists have and will be reduced
by less than five percent. Additionally, these RVUs will be adjusted further as
to ophthalmologists' services, effective January 1, 1998, whereupon projected
Medicare payments for such services are projected to be reduced by approximately
two and one-half percent. Private insurance payments could also be affected to
the extent that the payment methodologies used by insurance companies are based
on the Medicare RVUs. Further reductions in payments to professionals or other
changes in reimbursement for health care services could have an adverse effect
on the Company's results of operations. There can be no assurance that any
potential reduced revenues and operating margins from such trends could be
offset through cost reductions, increased volume, introduction of new procedures
or otherwise. See "Business -- Governmental Regulations."

RISKS ARISING FROM HEALTH CARE REFORM. There can be no assurance that the
laws and regulations of the states in which the Company operates will not change
or be interpreted in the future either to restrict or adversely affect the
Company's relationships with its Affiliated Providers or the operation of the
professional associations with which it contracts. Federal and state governments
are currently considering various types of health care initiatives and
comprehensive revisions to the health care and health insurance systems. Some of
the proposals under consideration, or others that may be introduced, could, if
adopted, have a material adverse effect on the Company's financial condition and
results of operations. It is uncertain what legislative programs, if any, will
be adopted in the future, or what actions Congress or state legislatures may
take regarding health care reform proposals or legislation. In addition, changes
in the health care industry, such as the growth of managed care organizations
and provider networks, may result in lower payments for the services of the
Affiliated Providers, which could have a material adverse effect on the Company.
On August 5, 1997, the President signed into law a number of Medicare provisions
as part of the Balanced Budget Act of 1997. When compared to projected Medicare
spending levels under current law, the legislation would reduce Medicare
spending by $115 billion over five years. The vast majority of these savings
would come from reductions in payments for services of health care facilities,
practitioners and other providers. The legislation will eliminate disparities in
payment rates for similar services by physicians in different specialties
effective January 1, 1998. Payment rates for physician services will no longer
necessarily be updated for inflation. Beginning in 1998, inflation increases
will be adjusted based on a "sustainable growth rate" defined with reference to
the change in (i) the number of Medicare beneficiaries, (ii) the gross domestic
product per capita, and (iii) the level of expenditures for physician services.
The legislation will also revise Medicare payments for practice expense costs.
See "Business -- Government Regulations." The legislation will also, among other
things, change payments to managed care plans from the current rate of 95% of
fee-for-service rates in the area to a system based on nationwide average per
capita fee-for-service spending, with an adjustment factor for local area wage
rates. This will result in curbing future increases in high payment urban areas
while increasing payments in rural areas. The legislation will also reduce the
annual inflation adjustment for ASC fees by two percentage points. It is
impossible to determine precisely how these changes will affect payments for
services of ophthalmologists, optometrists and ASC facilities. Any reductions in
payment for these services could have an adverse effect on the Company's results
of operations and financial condition. See "Business -- Governmental
Regulations."

NON-COMPETITION COVENANTS. The Management Agreements require each
professional association to use its best efforts to enter into employment
agreements with each Managed Provider that include covenants not to compete with
the professional association for periods ranging from one to two years after
termination of employment, and which require the professional association's
shareholders to pay certain specified amounts to the Company if such shareholder
professionals violate their respective covenants not to compete. Laws affecting
the enforceability of such covenants vary significantly from state to state. In
most states, a covenant not to compete will be enforced only to the extent it is
necessary to protect a legitimate business interest of the party seeking
enforcement, does not unreasonably restrain the party against whom enforcement
is sought, and is not contrary to the public interest. This determination is
made based on all the facts and circumstances of

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<PAGE> 15

the specific case at the time enforcement is sought. For this reason, one cannot
predict with certainty whether a court will enforce such a covenant in a given
situation. In addition, it is unclear whether a management company's interest
under a management agreement will be viewed by the courts as the type of
protectable business interest that would permit the management company to
enforce such a covenant or to require the managed professional association to
enforce such a covenant against the employed professional. Furthermore,
liquidated damages provisions will not be enforced unless the court determines
that the amount is a reasonable estimate of actual damages that would be
difficult to ascertain in a precise manner. Since the intangible value of the
Management Agreement depends primarily on the ability of the professional
association to preserve its business, which could be harmed if employed
professionals went into competition with the professional association, a
determination that these provisions will not be enforced could have a material
adverse effect on the Company. See "Business -- Management Agreements."
Additionally, the Company is not permitted under certain circumstances to expand
its Affiliated or Managed Provider network within a certain geographical area
surrounding a Managed Provider without prior consent of the Managed Provider.
Such covenants could serve to limit market penetration opportunities within a
LADS and thus have an adverse effect on the Company's ability to expand within a
LADS.

RISKS ASSOCIATED WITH BSM RELATIONSHIP. The Company has exclusive
consulting agreements with leading ophthalmology practice consultants BSM
Consulting Group ("BSM") and Bruce S. Maller. The agreements are for a term of
five years and may be terminated by a party only for "cause" in the event of a
material breach which remains uncured for 30 days or the occurrence of certain
events related to bankruptcy. Mr. Maller is the chief executive officer of BSM
and a director of the Company. BSM and Mr. Maller assist the Company in
identifying and evaluating suitable ophthalmology practices for acquisition,
integrating the acquired practices and providing strategic planning designed to
enhance the growth and development of the Affiliated Providers. A large part of
the success of the Company in implementing its growth strategy will depend on
the ability of such consultants to identify and evaluate suitable ophthalmology
practices and to assist Managed Providers in growing their practices, and there
can be no assurance that the consultants will be able to provide such services
successfully. Furthermore, in the event that such consultants are no longer able
to provide such services for any reason, there can be no assurance that the
Company will be able to retain other consultants with similar expertise or
undertake these tasks internally. Therefore, the loss of the services of either
BSM or Maller could have a material adverse effect on the Company. See "Certain
Transactions."

RISKS RELATED TO AMORTIZATION OF INTANGIBLE VALUE IN MANAGEMENT
AGREEMENTS. The Company's pro forma combined total assets reflect substantial
intangible assets in the form of Management Agreements with Managed Providers.
At September 30, 1997, on a pro forma basis, intangible assets represent
approximately 71.2% of total assets and approximately 175.1% of total
stockholders' equity. The intangible asset value represents the excess of cost
over the fair value of the separate net assets acquired in connection with
rights received by the Company under its acquired Management Agreements and
goodwill. There can be no assurance that the value of such assets will ever be
realized by the Company. These intangible assets are expected to be amortized on
a straight-line method over an average life of 25 years. The Company evaluates
on a regular basis whether events and circumstances have occurred that indicate
that all or a portion of the carrying amount of the asset may no longer be
recoverable, in which case an additional charge to earnings would become
necessary. Any determination requiring the write-off of a significant portion of
unamortized intangible assets would adversely affect the Company's results of
operations. See "Selected Pro Forma Financial Data."

RELATIONSHIP WITH RETAIL OPTICAL COMPANIES. An important factor in the
Company's business and growth strategy is its strategic affiliations with retail
optical companies in the Company's markets. The Company currently has
contractual arrangements with ECCA Managed Vision Care, Inc. ("ECCA") and For
Eyes Managed Care, Inc. ("For Eyes"), subsidiaries of retail optical chains,
which are terminable by either party under certain circumstances, and there can
be no assurance that the Company will be able to maintain these arrangements.
The Company expects to gain benefits from strategic affiliations with optical
retailers through increasing patient flow into a LADS, increasing opportunities
to obtain managed care contracts and providing an opportunity to add affiliated
optometrists practicing within retail optical locations. However, under
applicable regulations these retailers may not be required to refer patients to
the Affiliated

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<PAGE> 16

Providers and there can be no assurance that the Company's arrangements with
retail optical companies will result in the intended benefits to the Company.
Additionally, in those markets where more than one affiliated optical retailer
operates and competes with others, the Company may have to choose among such
optical retailers. There can be no assurance that the Company will be able to
successfully establish strategic affiliations in any particular market or that
any such affiliations will be successful. The inability of the Company to
maintain and develop its strategic affiliations could have a material adverse
effect on the Company's business, results of operations and financial condition.

COMPETITION. The health care industry is highly competitive and subject to
continual changes in the methods by which services are provided and the manner
in which health care providers are selected and compensated. The Company
believes that private and public reforms in the health care industry emphasizing
cost containment and accountability will result in an increasing shift of eye
care from highly fragmented, individual or small practice providers to larger
group practices, affiliated practice groups or other eye care delivery systems.
The Company competes with other physician practice management companies which
seek to acquire the allowable business assets of and provide management services
to eye care professionals, some of which have substantially greater financial
resources than the Company. Companies in other health care industry segments,
such as managers of other hospital-based specialties or currently expanding
large group practices, some of which have financial and other resources greater
than those of the Company, may become competitors in providing management to
providers of eye care services. Increased competition could have a material
adverse effect on the Company's financial condition and results of operations.
The basis for competition in the practice management area is service, pricing,
strength of the delivery network, strength of operational systems, the degree of
cost efficiencies and synergies, marketing strength, management information
systems, managed care expertise, patient access and quality assessment programs.
The Company also competes with other providers of eye care services, including
HMOs, PPOs and private insurers, for managed care contracts, many of which have
larger provider networks and greater financial and other resources than the
Company. Managed care organizations compete on the basis of administrative
strength, size, quality and geographic coverage of their provider networks,
marketing abilities, informational systems, the strategy of their managed care
contracts, operating efficiencies and price. The Company also competes with
other buying group organizations for group members. Buying group organizations
compete on the basis of size and purchasing power of its member buying group,
the strength of its credit, and the strength of its supplier agreements and
relationships. See "Business -- Competition."

RISKS ASSOCIATED WITH EYE CARE SERVICES. The Company's business entails an
inherent risk of claims of liability. The optometrists, ophthalmologists and
ASCs which the Company contracts with are involved in the delivery of health
care services to the public and, therefore, are exposed to the risk of
professional liability claims. As a result of the Company providing management
services pursuant to its Management Agreements, the Company may also be named as
a co-defendant in professional liability lawsuits against its Affiliated
Providers from time to time. The Company does not control the practice of
optometry or ophthalmology by the Affiliated Providers or the compliance with
regulatory and other requirements directly applicable to the Affiliated
Providers and their practices. Claims of this nature, if successful, could
result in substantial damage awards to the claimants that may exceed the limits
of any applicable insurance coverage. Insurance against losses related to claims
of this type can be expensive and varies widely from state to state. The Company
is indemnified under the Management Agreements for claims against the
professional associations with which it contracts and maintains liability
insurance for itself. Successful malpractice claims asserted against the
professional associations, however, could have an adverse effect on the
Company's profitability. The Company maintains an umbrella insurance policy
which includes professional liability and general liability insurance on a
claims made basis in the amounts of $5.0 million per incident, and $5.0 million
in the aggregate per year. While the Company believes it maintains reasonable
levels of liability insurance coverage, there can be no assurance that a pending
or future claim or claims will not be successful or, if successful, will not
exceed the limits of available insurance coverage or that such coverage will
continue to be available at acceptable costs and on favorable terms. See
"Business -- Management Agreements."

DEPENDENCE ON KEY INDIVIDUALS. The success of the Company is dependent
upon the continued services of the Company's senior management. The loss of the
services of one or more of these individuals, including

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<PAGE> 17

the Company's Chairman, President and Chief Executive Officer, Theodore N.
Gillette, O.D. could have a material adverse effect on the Company. The Company
and Dr. Gillette are parties to an employment agreement which expires on
September 30, 2001 and is renewable for subsequent one year terms. See
"Management -- Employment Agreements." There can be no assurance that Dr.
Gillette will remain employed by the Company during such period or that his
employment agreement will be renewed. The Company believes that its future
success will also depend in part upon its ability to attract and retain
qualified management personnel. Competition for such personnel is intense and
the Company competes for qualified personnel with numerous other employers, some
of whom have greater financial and other resources than the Company. There can
be no assurance that the Company will be successful in attracting and retaining
such personnel. See "Management."

CONTROL BY CURRENT STOCKHOLDERS AND MANAGEMENT. Upon completion of the
Offering, the Company's current officers and directors will own approximately
33.3% of the outstanding shares of Common Stock. Accordingly, these individuals,
as a group, will have the ability to significantly influence and may be able to
control all matters requiring stockholder approval, including the election of
the Company's directors and any amendments to the Company's Articles of
Incorporation and Bylaws, and to control the business of the Company. Such
control could preclude any acquisition of the Company and could adversely affect
the market price of the Common Stock. See "Principal and Selling Stockholders"
and "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 11,507,449 shares of Common Stock outstanding of which the
2,300,000 shares sold in the Offering (2,645,000 shares if the Underwriters'
over-allotment option is exercised in full) and the 2,100,000 shares sold in the
Initial Public Offering will be freely tradeable without restriction or the
requirement of future registration under the Securities Act of 1933 (the
"Securities Act"). All of the remaining 7,107,449 shares are Restricted
Securities ("Restricted Securities") as that term is defined by Rule 144
promulgated under the Securities Act and are subject to certain restrictions
described below. Holders of 2,834,683 of the Restricted Shares will be eligible
to sell a portion of such shares pursuant to Rule 144 under the Securities Act
subject to manner of sale, volume, notice and information requirements of Rule
144 but are subject to certain lock-up agreements described below. Holders of
the 4,272,766 remaining Restricted Shares will be eligible to sell a portion of
such shares pursuant to Rule 144 at differing dates in and after December 1997.
These shares are subject to certain lock-up agreements described below and also
subject to registration rights agreements requiring the Company to register such
shares under certain circumstances. See "Description of Capital
Stock -- Registration Rights" and "Shares Eligible for Future Sale." The Company
has reserved 1,600,000 shares of Common Stock under the Plans for issuance
pursuant to stock options granted by the Company, of which options to purchase
792,667 shares have been granted. See "Management -- Stock Option Plans." In
addition, 1,026,666 shares of Common Stock are reserved for issuance in the
event of the exercise of warrants granted by the Company. See "Description of
Capital Stock -- Warrants." The warrant shares are subject to registration
rights agreements requiring the Company to register such shares under certain
circumstances and otherwise will be eligible for resale subject to all of the
limitations on resale imposed by Rule 144. See "Description of Capital Stock --
Registration Rights."

The Company and certain of its executive officers and directors have
executed agreements pursuant to which each has agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital stock
of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock or other capital stock of the
Company, for a period of 180 days after the date of this Prospectus, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, except for bona fide gifts or transfers affected by such
stockholders other than on any securities exchange or in the over-the-counter
market to donees or transferees that agree to be bound by similar agreements
(the "Lock-up Agreements"). In addition, certain non-affiliates of the Company
had entered into contractual 180 day Lock-up Agreements from the date of the
Initial Public Offering similar to the above Lock-up Agreements which prohibit
the direct or indirect disposition of shares until the expiration of such
Lock-up Agreements without the prior written consent of Prudential Securities
Incorporated. Such non-

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<PAGE> 18

affiliates have also contractually agreed that they will be subject to the same
restrictions as affiliates of the Company under Rule 144. Prudential Securities
Incorporated may, in its sole discretion, at any time and without notice,
release all or any portion of the shares of Common Stock subject to such
agreements.

The Company has filed a Form S-8 registration statement under the
Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Incentive
Plan. Shares covered by this registration statement are eligible for sale in the
public markets, subject to the Lock-up Agreements relating to shares held by
executive officers. See "Management" and "Shares Eligible for Future Sale."

The Company is unable to predict the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock in the public market, or the availability of such shares
for future sale, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise additional capital through an
offering of its equity securities. See "Shares Eligible for Future Sale" and
"Underwriting."

Following the Offering, the Company may issue its Common Stock from time to
time in connection with the acquisition of stock or assets of other companies.
Such securities may be issued in transactions exempt from registration under the
Securities Act. The Company currently expects for the foreseeable future to
continue to require contractual lock-up agreements and to provide registration
rights consistent with previous transactions for sellers receiving stock in
acquisitions.

CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions in the Company's
Articles of Incorporation and Bylaws and Florida law may make a change in
control of the Company more difficult to effect, even if a change in control
were in the stockholders' interest. Such provisions include certain
supermajority voting requirements contained in the Company's Articles of
Incorporation. The Company's Articles of Incorporation also provide that the
Board of Directors is divided into three classes of directors, elected for
staggered three-year terms. In addition, the Company's Articles of Incorporation
allow the Board of Directors to determine the terms of preferred stock which may
be issued by the Company without approval of the holders of the Common Stock,
and thereby enable the Board of Directors to inhibit the ability of the holders
of the Common Stock to effect a change in control of the Company. See
"Description of Capital Stock -- Certain Provisions of Florida Law." The Company
has entered into employment agreements with executive officers Theodore
Gillette, Richard Sanchez, Richard Welch and Michael Block, as well as certain
other employees of the Company, that require the Company to pay certain amounts
to such employees upon their termination following certain events including a
change in control of the Company. Such agreements may inhibit a change in
control of the Company. See "Management -- Employment Agreements."

RESTRICTIONS ON PAYMENT OF DIVIDENDS. The Company's bridge credit facility
places certain restrictions on the future payment of dividends and the
anticipated bank credit facility is expected to have similar restrictions.
Furthermore, the Company currently intends to retain all future earnings for the
operation and expansion of its business and, accordingly, the Company does not
anticipate that any dividends will be declared or paid for the foreseeable
future. See "Dividend Policy" and "Management Discussion and Analysis of
Financial Conditions and Results of Operations -- Liquidity and Capital
Resources."

POTENTIAL CONFLICTS OF INTEREST FROM RELATED PARTY TRANSACTIONS. There are
currently Management Agreements existing between the Company and professional
associations owned and controlled by several of the Company's officers,
directors and key employees which could create the potential for possible
conflicts of interests for such individuals. Any future transactions and
agreements or modifications of current agreements between the Company and such
individuals, other affiliates and their professional associations will be
approved by a majority of the Company's independent directors and will be on
terms no less favorable to the Company than those that could be obtained from
unaffiliated parties. See "Certain Transactions."

POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to variations in
financial results or announcements of material events by the Company or its
competitors. Quarterly operating results of the Company, changes in general
conditions in the

17
<PAGE> 19

economy or the health care industry, or other developments affecting the Company
or its competitors, could cause the market price of the Common Stock to
fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market prices
for many companies' securities and that have often been unrelated to the
operating performance of these companies. Concern about the potential effects of
health care reform measures has contributed to the volatility of stock prices of
companies in health care and related industries and may similarly affect the
price of the Common Stock following the Offering. Any such fluctuations that
occur following completion of the Offering may adversely affect the market price
of the Common Stock.

18
<PAGE> 20

THE COMPANY

Vision 21 Physician Practice Management Company, Inc., a current subsidiary
of the Company ("Vision 21 PPMC"), was founded in 1984 to provide management
services to optometry practices owned primarily by the Company's Chief Executive
Officer, Theodore N. Gillette, O.D. At such time, Vision 21 PPMC contracted with
VisionWorks and Eckerd Optical (subsidiaries of Eckerd Corporation) to manage
optometry practices located within VisionWorks and Eckerd retail optical
centers. As Vision 21 PPMC expanded its network of optometry practices under
management, its management services were also expanded to include management
information systems, electronic claims processing, practice administration,
continuing education and credentialing of associated optometrists. By 1987,
management services were provided to over 20 optometry clinics located in the
state of Florida in close proximity to, or within, VisionWorks and Eckerd
Optical retail optical centers. Additionally, during that period, Vision 21 PPMC
began to form strategic relationships with independent ophthalmologists to
provide its optometric patients with access to secondary and tertiary eye care
services.

In 1986, Vision 21 Managed Eye Care of Tampa Bay, Inc., a current
subsidiary of the Company ("Vision 21 MCO"), began to provide management and
administrative services to networks of eye care providers that offered primary,
secondary and tertiary eye care services. Vision 21 MCO was awarded its first
managed care contract in 1988 covering in excess of 18,000 patient lives, with
retail optical and optometric services provided by its network of eye care
providers.

The Company was incorporated in Florida on May 9, 1996. The principal
operating subsidiaries of the Company are Vision 21 Managed Eye Care of Tampa
Bay, Inc. and Vision 21 Physician Practice Management Company, Inc., both of
which merged with the Company in November 1996. In the merger, all of the
outstanding shares of stock of Vision 21 PPMC and Vision 21 MCO were exchanged
for an aggregate of 2,685,318 shares of Common Stock of the Company. The
previous shareholders of these two entities consisted of certain executive
officers and directors of the Company. See "Certain Transactions."

The Company's 5,810 Affiliated Providers provide eye care services to 39
LADS located in 26 states. Of these Affiliated Providers, 86 are Managed
Providers, consisting of 50 optometrists and 36 ophthalmologists practicing at
57 clinic locations and five ASCs, and 5,724 are Contract Providers, consisting
of 4,993 optometrists and 731 ophthalmologists practicing at over 4,300 clinic
locations and 35 ASCs. The Company's Affiliated Providers, in conjunction with
select national retail optical chains operating over 300 retail optical centers,
deliver eye care services under the Company's 82 managed care contracts and 12
discount fee-for-service plans covering approximately 4.0 million exclusively
contracted patient lives. Furthermore, the Company has established a nationwide
eye care provider network, of over 6,700 additional Contract Providers thereby
positioning the Company to capture incremental managed care market share in new
local markets.

The principal executive office of the Company is located at 7209 Bryan
Dairy Road, Largo, Florida 33777, and its telephone number is (813) 545-4300.

THE ACQUISITIONS

BLOCK ACQUISITION

Block Acquisition. Effective October 31, 1997, the Company acquired all of
the issued and outstanding stock of Block Vision. Block Vision provides
administration services on behalf of managed vision care plans for a nationwide
network of 5,171 Contract Providers who provide eye care services pursuant to 58
capitated and five discount fee-for-service managed care contracts covering over
2.1 million exclusively contracted patient lives. The Block Acquisition has
enabled the Company to establish 28 new LADS for future development.
Furthermore, Block Vision has established a network of approximately 4,500
additional credentialed Contract Providers, and another 1,400 Contract Providers
in the process of being credentialed, to provide eye care services to capture
future managed care business in anticipated new local markets. In addition,
Block Vision operates a buying group division which provides billing and
collection services to suppliers of optical products. The Block Acquisition was
accounted for under the purchase method of accounting. The aggregate

19
<PAGE> 21

consideration paid by the Company was approximately $35.0 million, consisting of
$25.6 million in cash, 458,365 shares of Common Stock, subject to certain
post-closing adjustments, and 219,633 shares of Common Stock to be held in
escrow as contingent consideration, of which 109,816 shares of Common Stock are
to be delivered by the Company to the sellers if earnings before interest,
taxes, depreciation and amortization ("EBITDA") of Block Vision reaches $4.5
million for the year ended December 31, 1998. The remaining 109,817 shares will
be deliverable on a pro rata escalating basis if Block Vision reaches $4.5
million of EBITDA for 1998 with the full contingent consideration deliverable
upon Block Vision attaining $4.9 million of EBITDA for 1998.

1997 ACQUISITIONS

October Acquisitions. In October 1997, the Company closed in escrow one
acquisition, and entered into an agreement with respect to another acquisition,
of the business assets of two ophthalmology clinics, two optical dispensaries
and one ASC located in Brandon, Florida and Minneapolis, Minnesota.
Concurrently, the Company entered into Management Agreements with the related
professional associations employing three optometrists and five
ophthalmologists. These acquisitions were accounted for by recording assets and
liabilities at fair value and allocating the remaining costs to the related
Management Agreements. In connection with the October Acquisitions, the Company
is providing aggregate consideration of approximately $3.2 million, consisting
of approximately 101,494 shares of Common Stock and approximately $1.8 million
in cash.

September Acquisitions. In September 1997, the Company closed in escrow
the acquisition of the business assets of four ophthalmology clinics and two
optical dispensaries located in Tampa, Florida, Tucson, Arizona and Setauket,
New York. Concurrently, the Company entered into Management Agreements with the
related professional associations employing eight ophthalmologists. These
acquisitions were accounted for by recording assets and liabilities at fair
value and allocating the remaining costs to the related Management Agreements.
Additionally, the Company closed in escrow the acquisition of substantially all
the business assets of a managed care company servicing two capitated managed
care contracts covering over 134,000 patient lives. In connection with the
September Acquisitions, the Company is providing aggregate consideration of $7.6
million, consisting of 397,212 shares of Common Stock, $3.6 million in cash and
promissory notes in the amount of $100,000, subject to closing adjustments.
Additionally, the Company is required to provide additional contingent
consideration consisting of up to 76,622 shares of Common Stock and $800,000 in
cash, to be paid to the sellers in the event that certain post-acquisition
performance targets are met.

Material September Acquisitions include: (i) the business assets of a
professional corporation providing ophthalmology services at two clinics located
in Tucson, Arizona for a total consideration of $4.1 million, consisting of
219,057 shares of Common Stock, $1.8 million in cash and contingent
consideration of up to $405,000, consisting of 55% in Common Stock and 45% in
cash, to be paid to the sellers if certain post-acquisition performance targets
are met; (ii) the business assets of a professional partnership providing
ophthalmology services at two clinics located in Tampa and Zephyrhills, Florida
for a total consideration of $2.9 million, consisting of 155,702 shares of
Common Stock, $1.3 million in cash and certain contingent consideration to be
paid to the sellers if certain post-acquisition performance targets are met; and
(iii) the business assets of a managed care company located in Tampa, Florida
for a total consideration of $1.6 million, consisting of $435,000 in cash and
contingent consideration of 76,622 shares of Common Stock and $395,000 in cash
to be paid to the sellers if certain post-acquisition performance targets are
met.

Pre Initial Public Offering Acquisitions. Between March 1, 1997 and the
Initial Public Offering, which was completed on August 18, 1997, the Company
completed the acquisitions of the business assets of one optometry clinic, 11
ophthalmology clinics, six optical dispensaries and four ASCs located in
Pinellas Park and Ft. Lauderdale, Florida and Sierra Vista, Mesa, Tucson and
Phoenix, Arizona. Concurrently, the Company entered into Management Agreements
with the related professional associations employing six optometrists and 13
ophthalmologists (collectively the "Pre IPO Acquisitions"). These acquisitions
were accounted for by recording assets and liabilities at fair value and
allocating the remaining cost to the related Management Agreements. In
connection with the Pre IPO Acquisitions, the Company provided aggregate
consideration of

20
<PAGE> 22

$7.3 million, consisting of 876,524 shares of Common Stock, a promissory note in
the amount of $264,000 and $29,000 in cash, subject to closing adjustments.

1996 ACQUISITIONS

In December 1996, the Company completed a series of transactions resulting
in the acquisition of the business assets of 22 optometry clinics, nine
ophthalmology clinics, 15 optical dispensaries and one ASC. Concurrently, the
Company entered into Management Agreements with the related professional
associations employing 34 optometrists and 13 ophthalmologists. These
acquisitions were accounted for by recording the assets and liabilities at fair
value and allocating the remaining costs to the related Management Agreements.
Additionally, the Company acquired substantially all the business assets of a
managed care company servicing four capitated managed care contracts covering
over 100,000 patient lives, which was accounted for under the purchase method of
accounting (collectively, the "1996 Acquisitions"). In connection with the 1996
Acquisitions, the Company provided aggregate consideration of $11.2 million,
consisting of 2.1 million shares of Common Stock, promissory notes in the
aggregate principal amount of $1.9 million and $800,000 in assumed debt.
Additionally, the Company is required to provide additional consideration of up
to $316,000, consisting of up to 79,805 shares of Common Stock, in connection
with several of the 1996 Acquisitions, which will be transferred out of escrow
to certain sellers in the event that certain post-acquisition performance
targets are met. See "Certain Transactions."

Material 1996 Acquisitions include: (i) the business assets of a
professional association providing optometry services at 11 clinics located in
Tampa, Port Richey, Clearwater, St. Petersburg, Palm Harbor and Seminole,
Florida for a total consideration of $1.9 million, consisting of 373,971 shares
of Common Stock and a promissory note in the amount of $416,000; (ii) the
business assets of a professional corporation providing ophthalmology services
at three clinics located in Tucson, Arizona for a total consideration of $1.6
million, consisting of 396,612 shares of Common Stock; (iii) the business assets
of a professional association providing ophthalmology services at one clinic
located in Minneapolis, Minnesota for a total consideration of $1.4 million,
consisting of 247,108 shares of Common Stock and a promissory note in the amount
of $460,000; and (iv) the business assets of a professional limited liability
company providing ophthalmology services at two clinics located in Tucson and
Oro Valley, Arizona for a total consideration of $1.7 million, consisting of
327,717 shares of Common Stock and a promissory note in the amount of $396,000.

21
<PAGE> 23

RELATIONSHIPS WITH AFFILIATED PROVIDERS AND RETAIL OPTICAL COMPANIES

The Company provides practice management services pursuant to long-term
Management Agreements with professional associations employing Managed Providers
or with entities operating ASCs. This arrangement allows the Managed Providers
to focus on providing professional eye care services to patients. The related
professional associations receive payments from third-party payors or patients
for services provided. The Company receives management fees from the
professional associations for providing management services and employs all
administrative and non-professional staff for the clinic or ASC. The Company
owns all the business assets of the clinics and ASCs to the extent allowable by
law. Furthermore, the Company does not engage in the practice of optometry or
ophthalmology and does not control the practice of optometry or ophthalmology by
the Managed Providers or the compliance with regulatory and other requirements
directly applicable to the Managed Providers and their practices or the
operation of ASCs. The professional associations maintain full control over the
professional eye care services provided by the Managed Providers and set the
fees for all such services. See "Business -- Management Agreements."

The Company has also entered into managed care agreements with HMOs, health
insurance companies and other third-party payors pursuant to which the Company's
Managed Providers and Contract Providers provide eye care services to patients
who are covered by the payors' health benefit plans. The Company does not
provide practice management services to the Contract Providers. Furthermore, the
Company does not control the practice of optometry or ophthalmology by the
Contract Providers or the compliance with regulatory and other requirements
directly applicable to the Contract Providers and their practices or the
operation of ASCs.

The Company has contractual affiliations with ECCA and For Eyes,
subsidiaries of retail optical chains that operate a combined total of over 300
optical retail locations in 48 cities in the United States. As part of its
strategic relationship with ECCA, the Company's LADS provide certain eye care
services to customers of ECCA at retail optical centers located within the
Company's local area markets. In addition, the Company and ECCA jointly seek to
benefit from increasing managed care business by marketing to managed care plans
an integrated network of eye care providers that are able to offer primary,
secondary and tertiary care as well as retail optical products and services. In
its contractual agreement with For Eyes, the Company is a joint venture partner
in a general partnership called "Vision 21 Plus" in which the Company and For
Eyes each have a 50% interest. The objective of the joint venture is to maximize
opportunities for the Company in managed care by securing contracts and
providing comprehensive, fully integrated eye care products and services to
health care organizations and self-funded employer groups.

22
<PAGE> 24

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered by the Company (after deducting underwriting discounts and
commissions and estimated offering expenses) are estimated to be approximately
$20.0 million ($23.1 million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use the net proceeds from the
Offering to pay approximately $20.0 million of the cash portion of the Block
Acquisition. See "Certain Transactions" and "Underwriting."

PRICE RANGE OF COMMON STOCK

The Common Stock has been included for quotation in the Nasdaq National
Market under the symbol "EYES" since August 18, 1997. The following table sets
forth, for the periods indicated, the range of high and low sales prices per
share of Common Stock, as reported by the Nasdaq National Market:

<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- ------ ------
<S> <C> <C>
Third Quarter (beginning August 18, 1997)................... $15.00 $ 9.00
Fourth Quarter (through November 20, 1997).................. 14.75 10.13
</TABLE>

On November 20, 1997, the last reported sales price of the Common Stock on
the Nasdaq National Market was $10.125 per share and the number of holders of
record of the Common Stock was approximately 132.

DIVIDEND POLICY

The Company has not paid or declared any dividends since its inception. The
Company currently intends to retain all future earnings for the operation and
expansion of its business and, accordingly, the Company does not anticipate that
any dividends will be declared or paid on the Common Stock for the foreseeable
future. Any future determination to pay cash dividends will be at the discretion
of the Board of Directors and will be dependent upon the Company's financial
condition, results of operations, capital requirements and other factors the
Board of Directors deems relevant. In addition, the Company's bridge credit
facility places certain restrictions on the payment of dividends and the
Company's anticipated bank credit facility is expected to have a similar
restriction. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

23
<PAGE> 25

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997, (i) on an actual basis, (ii) on a pro forma basis to give
effect to the Block Acquisition and the October Acquisitions and (iii) as
adjusted to give effect to the sale of the 2,300,000 shares of Common Stock
offered by the Company hereby, which are estimated to be approximately $20.0
million (after deducting underwriting discounts and commissions and estimated
offering expenses). This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Unaudited Pro Forma Consolidated
Financial Information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations............................................... $ 403 $ 6,045 $ 9,845
Long-term debt and capital lease obligations................ 177 3,302 3,302
Stockholders' equity(1):
Common Stock: $.001 par value; 50,000,000 shares
authorized, 8,591,234 shares outstanding, 9,207,449
shares outstanding, pro forma, 11,507,449 shares
outstanding, pro forma as adjusted..................... 9 9 12
Additional paid-in capital................................ 40,269 47,951 67,976
Deferred compensation..................................... (436) (436) (436)
Retained earnings (deficit)............................... (8,943) (9,790) (10,113)
------- ------- -------
Total stockholders' equity........................ 30,899 37,734 57,439
------- ------- -------
Total capitalization......................... $31,479 $47,081 $70,586
======= ======= =======
</TABLE>

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

(1) Excludes (a) an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the Plans, pursuant to which options to purchase 792,667
shares of Common Stock have been granted as of November 18, 1997, (b) an
aggregate of 1,026,666 shares of Common Stock which are reserved for
issuance in the event of the exercise of warrants granted by the Company and
(c) an aggregate of 438,596 shares of Common Stock which are being held in
escrow as contingent consideration in several acquisitions. Includes an
aggregate of 1,066,155 shares of Common Stock which are being held in escrow
in connection with certain acquisitions. See "The Acquisitions,"
"Management -- Stock Option Plans," "Shares Eligible for Future Sale" and
"Underwriting."

24
<PAGE> 26

SELECTED PRO FORMA FINANCIAL DATA

The pro forma financial data are derived from the Unaudited Pro Forma
Consolidated Financial Information of the Company appearing elsewhere in this
Prospectus. The Pro Forma Statement of Operations Data for the year ended
December 31, 1996 give effect to the following transactions as if they had
occurred on January 1, 1996: (i) the 1996 Acquisitions, (ii) the 1997
Acquisitions, (iii) the Block Acquisition and (iv) the Initial Public Offering
and the application of the net proceeds therefrom. The Pro Forma Statement of
Operations Data for the nine months ended September 30, 1997 give effect to the
following transactions as if they had occurred on January 1, 1996: (i) the 1997
Acquisitions, (ii) the Block Acquisition and (iii) the Initial Public Offering
and the application of the net proceeds therefrom. The Pro Forma Balance Sheet
Data as of September 30, 1997 give effect to the (i) the October Acquisitions,
(ii) the Block Acquisition and (iii) the Offering and the application of the net
proceeds therefrom, as if they had occurred as of September 30, 1997.

The pro forma financial data should be read in conjunction with the
Unaudited Pro Forma Consolidated Financial Information of the Company and the
related notes thereto included elsewhere in this Prospectus. Management believes
the assumptions used in the Unaudited Pro Forma Consolidated Financial
Information provide a reasonable basis on which to present the pro forma
financial data. The pro forma financial data are provided for informational
purposes only and should not be construed to be indicative of the Company's
financial position or results of operations had the transactions and events
described in the notes thereto been consummated on the dates assumed and are not
intended to project the Company's financial condition or results of operations
on any future date or for any future period.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenues:
Practice management fees................................ $ 39,481 $ 31,073
Managed care............................................ 23,087 22,646
Buying group sales...................................... 54,832 40,389
Other revenue........................................... 335 599
-------- --------
Total revenues..................................... 117,735 94,707
-------- --------
Operating expenses:
Practice management expenses............................ 31,748 25,168
Medical claims.......................................... 20,789 17,342
Cost of buying group sales.............................. 52,085 38,360
Salaries, wages and benefits............................ 6,806 5,565
Business development.................................... 1,927 --
General and administrative.............................. 4,035 3,213
Depreciation and amortization........................... 4,019 3,023
-------- --------
Total operating expenses........................... 121,409 92,671
-------- --------
Income (loss) from operations........................... (3,674) 2,036
Interest expense........................................ 1,743 1,392
-------- --------
Income (loss) before income taxes....................... (5,417) 644
Income tax expense (benefit)............................ (1,523) 629
-------- --------
Net income (loss) before extraordinary charge........... $ (3,894) $ 15
======== ========
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
(IN THOUSANDS)
<S> <C> <C>
PRO FORMA BALANCE SHEET DATA:
Working capital.............................................................. $ (7,363)
Total assets................................................................. 87,209
Long-term debt and capital lease obligations,
including current maturities............................................... 13,147
Total stockholders' equity................................................... 57,439
</TABLE>

See Notes to the Unaudited Pro Forma Consolidated Financial Information.

25
<PAGE> 27

SELECTED FINANCIAL DATA

The following selected financial data with respect to the Company's
statements of operations for the years ended December 31, 1994, 1995 and 1996,
and the balance sheet data as of December 31, 1995 and 1996 are derived from the
Consolidated Financial Statements of the Company which have been audited by
Ernst & Young LLP, independent certified public accountants. The selected
financial data presented below for the years ended December 31, 1992, 1993 and
for the nine months ended September 30, 1996 and 1997 are unaudited and were
prepared by management of the Company on the same basis as the audited
Consolidated Financial Statements included elsewhere herein and, in the opinion
of management of the Company, include all adjustments necessary to present
fairly the information set forth therein. The results for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the full year ending December 31, 1997 or future periods. The following data
should be read in conjunction with the Consolidated Financial Statements of the
Company and the related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Practice management fees................. $ 645 $ 653 $ 392 $ 424 $ 1,943 $ 555 $19,685
Managed care(1).......................... -- -- 669 2,446 7,315 5,307 9,307
Other revenue............................ 8 6 131 212 306 163 452
----- ----- ------- ------- ------- ------- -------
Total revenues...................... 653 659 1,192 3,082 9,564 6,025 29,444
----- ----- ------- ------- ------- ------- -------
Operating expenses:
Practice management expenses............. -- -- -- -- 1,244 -- 15,978
Medical claims........................... -- -- 551 2,934 9,129 7,319 8,053
Salaries, wages and benefits............. 494 501 538 904 1,889 1,375 3,405
Business development..................... -- -- -- -- 1,927 -- --
General and administrative............... 167 168 238 443 1,209 662 1,339
Depreciation and amortization............ 11 8 13 18 126 35 954
----- ----- ------- ------- ------- ------- -------
Total operating expenses............ 672 677 1,340 4,299 15,524 9,391 29,729
----- ----- ------- ------- ------- ------- -------
Loss from operations....................... (19) (18) (148) (1,217) (5,960) (3,366) (285)
Interest expense........................... 1 5 5 9 160 66 741
----- ----- ------- ------- ------- ------- -------
Loss before income taxes................... (20) (23) (153) (1,226) (6,120) (3,432) (1,026)
Income taxes............................... -- -- -- -- -- -- --
----- ----- ------- ------- ------- ------- -------
Loss before extraordinary charge........... (20) (23) (153) (1,226) (6,120) (3,432) (1,026)
Extraordinary charge -- early
extinguishment of debt................... -- -- -- -- -- -- 323
----- ----- ------- ------- ------- ------- -------
Net loss................................... $ (20) $ (23) $ (153) $(1,226) $(6,120) $(3,432) $(1,349)
===== ===== ======= ======= ======= ======= =======
Loss before extraordinary charge per common
share(2)................................. $ (1.02) $ (0.15)
======= =======
Net loss per common share(2)............... $ (1.02) $ (0.20)
======= =======
Weighted average number of common shares
outstanding(2)........................... 5,980 6,671
======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
----- ----- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................. $ 19 $ (5) $ (193) $(1,499) $(2,857) $ 1,582
Total assets............................... 53 67 49 165 15,712 43,771
Long-term debt and capital lease
obligations, including current
maturities............................... 56 89 85 363 7,735 580
Total stockholders' equity (deficit)....... (16) (38) (191) (1,439) 2,536 30,899
</TABLE>

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

(1) Revenues related to managed care for 1992 and 1993 are included under other
revenue as managed care revenues were not separately accounted for during
such periods.

(2) See Note 3 to Notes to Consolidated Financial Statements for a description
of the computation of net loss per common share.

26
<PAGE> 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS") established by the Company. LADS are
developed to provide for integrated networks of optometrists, ophthalmologists,
ASCs and retail optical centers which offer the full continuum of eye care
services in local markets. The Company began operations in 1984, providing
management services to seven optometrists practicing at eight clinic locations.
The Company currently provides its services to 39 LADS located in 26 states
through which 5,810 Affiliated Providers deliver eye care services. Of these
Affiliated Providers, 86 are Managed Providers, consisting of 50 optometrists
and 36 ophthalmologists practicing at 57 clinic locations and five ASCs, and
5,724 are Contract Providers, consisting of 4,993 optometrists and 731
ophthalmologists practicing at over 4,300 clinic locations and 35 ASCs. The
Company's Affiliated Providers, in conjunction with select national retail
optical chains operating over 300 retail optical centers, deliver eye care
services under the Company's 82 managed care contracts and 12 discount
fee-for-service plans covering approximately 4.0 million exclusively contracted
patient lives. Furthermore, the Company has established a nationwide eye care
provider network of over 6,700 additional Contract Providers thereby positioning
the Company to capture future managed care business in anticipated new local
markets.

RECENT DEVELOPMENTS

Effective October 31, 1997, the Company acquired all of the issued and
outstanding stock of Block Vision. Block Vision provides administration services
on behalf of managed vision care plans for a nationwide network of 5,171
Contract Providers who provide eye care services pursuant to 58 capitated and
five discount fee-for-service managed care contracts covering over 2.1 million
exclusively contracted patient lives. The Block Acquisition has enabled the
Company to establish 28 new LADS for future development. Furthermore, Block
Vision has established a network of approximately 4,500 additional credentialed
Contract Providers, and another 1,400 Contract Providers in the process of being
credentialed, to provide eye care services to capture future managed care
business in anticipated new local markets. For Block Vision's fiscal year ended
April 30, 1997, managed vision care revenue was approximately $14.4 million with
a medical loss ratio of 71.0%. In addition, Block Vision operates a buying group
division which provides billing and collection services to suppliers of optical
products. The buying group division is not directly involved in the ordering
process or the physical distribution of eye care products. For Block Vision's
fiscal year ended April 30, 1997, buying group revenue was approximately $54.6
million. See the Consolidated Financial Statements of BBG-COA Inc., included
elsewhere in this Prospectus.

The Block Acquisition was accounted for under the purchase method of
accounting. The aggregate consideration paid by the Company was approximately
$35.0 million, consisting of $25.6 million in cash, 458,365 shares of Common
Stock, subject to certain post-closing adjustments, and 219,633 shares of Common
Stock to be held in escrow as contingent consideration, of which 109,816 shares
are to be delivered by the Company to the sellers if EBITDA of Block Vision
reaches $4.5 million for the year ended December 31, 1998. The remaining 109,817
shares will be deliverable on a pro rata escalating basis if Block Vision
reaches $4.5 million of EBITDA for 1998 with the full contingent consideration
deliverable upon Block Vision attaining $4.9 million of EBITDA for 1998. On a
pro forma basis, had the Block Acquisition occurred at the beginning of 1996,
the Company would have recorded $54.8 million in buying group revenue and $23.1
million in managed care revenue for 1996 and $40.4 million in buying group
revenue and $22.6 million in managed care revenue for the nine months ended
September 30, 1997. See "The Acquisitions."

In October 1997, the Company closed in escrow one acquisition and entered
into an agreement with respect to another acquisition (the October Acquisitions)
of the business assets of two ophthalmology clinics, two optical dispensaries,
and one ASC. Concurrently with the October Acquisitions, the Company entered
into long-term Management Agreements with the related professional associations
employing three optometrists and five ophthalmologists. The October Acquisitions
were accounted for by recording the assets and liabilities at fair value and
allocating the remaining costs to the related Management Agreements. In

27
<PAGE> 29

connection with the October Acquisitions, the Company is providing aggregate
consideration of approximately $3.2 million, consisting of approximately 101,494
shares of Common Stock and approximately $1.8 million in cash. On a pro forma
basis, had the October Acquisition occurred at the beginning of 1996, the
Company would have recorded $3.0 million and $2.3 million in practice management
fee revenue for 1996 and the nine months ended September 30, 1997, respectively.
See "The Acquisitions."

In September 1997, the Company closed in escrow the September Acquisitions
consisting of the business assets of four ophthalmology clinics and two optical
dispensaries. Concurrently with the September Acquisitions, the Company entered
into long-term Management Agreements with the related professional associations
employing eight ophthalmologists. These acquisitions were accounted for by
recording assets and liabilities at fair value and allocating the remaining
costs to the related Management Agreements. Additionally, the Company closed in
escrow the acquisition of substantially all the business assets of a managed
care company servicing two capitated managed care contracts covering over
134,000 patient lives. In connection with the September Acquisitions, the
Company is providing aggregate consideration of $7.6 million, consisting of
397,212 shares of Common Stock, $3.6 million in cash and promissory notes in the
amount of $100,000. Additionally, the Company is required to provide additional
contingent consideration, consisting of 76,622 shares of Common Stock and
$800,000 cash, to be paid to the sellers if certain post-acquisition performance
targets are met. On a pro forma basis, had the September Acquisitions occurred
at the beginning of 1996, the Company would have recorded $6.8 million and $4.6
million in practice management fee and managed care revenue for 1996 and the
nine months ended September 30, 1997, respectively. See "The Acquisitions."

HISTORICAL OVERVIEW

The Company enters into Management Agreements with the Managed Professional
Associations pursuant to which the Company is the sole provider of comprehensive
management, business and administrative services for the non-professional
aspects of the professional practices which obligate the Company to provide
certain facilities and equipment, accounting services, purchasing, assistance in
managed care, contract negotiations, management and clinical personnel,
information systems, training, and billing and collection services. Each Managed
Provider maintains full authority, control and responsibility over the provision
of professional care and services to its patients. The Company does not provide
professional care to patients nor does the Company employ any of the
ophthalmologists or optometrists, or any other professional health care provider
personnel, of the Managed Professional Association. The Managed Professional
Association is responsible for, among other things, hiring, supervising, and
directing certain of the Managed Professional Association's professional
employees, adopting a peer review/quality assurance program and maintaining
appropriate worker's compensation, professional and comprehensive general
liability insurance. The Managed Professional Associations derive their revenues
from fees received for professional services provided by optometrists and
ophthalmologists, charges for the use of ASCs and sales of optical goods. The
Managed Professional Associations currently receive revenues from a combination
of sources, including fees paid by private-pay patients, indemnity insurance
reimbursements, capitation payments from managed care companies and government
funded reimbursements (Medicare and Medicaid). See "Business -- Management
Agreements."

The initial term of the Management Agreement is typically 40 years. Under
substantially all of the Company's Management Agreements, the management fee
ranges from 24% to 37% of the Managed Professional Association's gross revenues
after deducting from such revenues all expenses of the clinic other than those
related to shareholders of the Managed Professional Associations. The practice
management fees earned by the Company pursuant to these Management Agreements
fluctuate depending on variances in revenues and expenses of the Managed
Professional Association. Therefore, in connection with the Management
Agreements, the amount of such fees will be significantly affected by the degree
of success of operations of the Managed Professional Association and the
Company's ability to successfully manage the practice. See "Risk
Factors -- Reliance on Affiliated Providers" and "Business -- Management
Agreements."

The Company recognizes as managed care revenue certain fixed payments
received pursuant to its managed care contracts on a capitated or risk-sharing
basis. The Company also recognizes fees received for the provision of certain
financial and administrative services related to its indemnity fee-for-service
plans. The

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<PAGE> 30

Company manages risk of capitated managed care contracts by monitoring
utilization of each Affiliated Provider and comparing their utilization to
national averages, expected utilization at the time the contract was bid,
utilization of other providers and historical utilization of the Affiliated
Provider. Abnormal utilization of an Affiliated Provider results in a medical
chart review by the Company and further counseling on appropriate clinical
protocols. To further manage the risk of capitated managed care contracts, the
Company, in certain instances, enters into agreements to pay Affiliated
Providers a fixed per member per month fee for eye care services rendered or a
pro rata share of managed care capitated payments received (as determined by the
number of eye care procedures performed relative to other Affiliated Providers).
The Company targets these payments at a range of 80% to 90% of total payments
received pursuant to the Company's capitated managed care contracts. Pursuant to
its capitated managed care contracts, the Company receives a fixed payment per
member per month for a predetermined benefit level of eye care services, as
negotiated between the Company and the payor. Profitability of the Company's
capitated managed care contracts is directly related to the specific terms
negotiated, utilization of eye care services by member patients and the
effectiveness of administering the contracts. The Company receives a percentage
of collected medical billings for administering indemnity fee-for-service plans
for its Affiliated Providers. Although the terms and conditions of the Company's
managed care contracts vary considerably, they are typically for a one-year
term. See "Risk Factors -- Risks Associated with Managed Care Contracts and
Capitated Fee Arrangements."

Between March 1, 1997 and the Initial Public Offering, which was completed
on August 18, 1997, the Company completed the Pre IPO Acquisitions resulting in
the acquisition of the business assets of one optometry clinic, 11 ophthalmology
clinics, six optical dispensaries and four ASCs. Concurrently, the Company
entered into Management Agreements with the related professional associations
employing six optometrists and 13 ophthalmologists. These acquisitions were
accounted for by recording the assets and liabilities at fair value and
allocating the remaining cost to the related Management Agreements. In
connection with the Pre IPO Acquisitions, the Company provided aggregate
consideration of $7.3 million, consisting of 876,524 shares of Common Stock,
promissory notes in the aggregate principal amount of $264,000 and $29,000 in
cash, subject to closing adjustments. On a pro forma basis, had the Pre IPO
Acquisitions occurred at the beginning of 1996, the Company would have recorded
$13.6 million and $6.2 million in practice management fee revenue for 1996 and
the nine months ended September 30, 1997, respectively.

In December 1996, the Company completed the 1996 Acquisitions resulting in
the acquisition of the business assets of 22 optometry clinics, nine
ophthalmology clinics, 15 optical dispensaries and one ASC. Concurrently, the
Company entered into Management Agreements with the related professional
associations employing 34 optometrists and 13 ophthalmologists. These
acquisitions were accounted for by recording the assets and liabilities at fair
value and allocating the remaining costs to the related Management Agreements.
Additionally, the Company acquired substantially all the business assets of a
managed care company servicing four capitated managed care contracts covering
over 100,000 patient lives, which was accounted for under the purchase method of
accounting. In connection with the 1996 Acquisitions, the Company provided
aggregate consideration of $11.2 million, consisting of 2.1 million shares of
Common Stock, promissory notes in the aggregate principal amount of $1.9 million
and $800,000 in assumed debt. Additionally, the Company is required to provide
additional consideration of up to $316,000, consisting of up to 79,805 shares of
Common Stock, in connection with several of the 1996 Acquisitions, which will be
transferred out of escrow to certain sellers in the event that certain
post-acquisition performance targets are met. If the 1996 Acquisitions had
occurred at the beginning of 1996, the Company would have recorded $16.8 million
in additional practice management fee revenue for 1996. The Company recorded a
one-time charge of $1.4 million in the fourth quarter of 1996 for expenses
associated with the planned acquisition of the business assets of certain
Contract Providers at the time of the 1996 Acquisitions which the Company chose
not to continue to pursue.

Effective October 1996, the Company renegotiated its agreements to pay
certain ophthalmology Contract Providers a per member per month fee for surgical
eye care services provided under the Company's largest capitated managed care
contract. Previously, the Company had paid these Contract Providers pursuant to
a fee schedule for eye care services provided under the same capitated managed
care contract. In exchange for entering into the renegotiated agreement,
selected ophthalmology Contract Providers obtained dedicated

29
<PAGE> 31

groups of managed care members and the right to manage the utilization by these
members. The renegotiated capitation agreements improved the Company's medical
claims ratio (medical claims expense divided by managed care revenue) from
136.0% for the third quarter of 1996 to 90.1% for the fourth quarter of 1996 and
86.5% for the nine months ended September 30, 1997. On a pro forma basis for
1996, assuming the renegotiated capitation agreement had been in place for the
entire period, medical claims expense would have been reduced by $2.6 million.

Effective June 1997, the Company renegotiated its agreement to pay the
existing operator of multiple surgical eye care facilities a per member per
month fee for facility services provided at its facilities pursuant to the
Company's largest capitated managed care contract. Previously, the Company had
paid these Contract Providers pursuant to a fee schedule for eye care services
provided under the same capitated managed care contract. In exchange for
entering into the renegotiated agreement, the facility operator obtained
dedicated groups of managed care members. On a pro forma basis for the nine
months ended September 30, 1997, assuming the renegotiated capitation agreement
had been in place for the entire period, medical claims expense would have been
reduced by $267,000. The effect of the renegotiated agreements of October 1996
and June 1997 was to shift the risk of any increased utilization for services by
members from the Company to the Contract Providers.

The Company leveraged its strategic alliance with a leading optical
retailer by adding five internally developed optometry clinics located in
Oklahoma, Louisiana and Florida and entering into Management Agreements with the
related professional association employing five optometrists. In June 1997, the
Company reached a tentative agreement with the same optical retailer to add at
least 20 internally developed optometry clinics through the first quarter of
1998. The Company will continue to leverage its strategic alliances by adding
select internally developed optometry clinics in affiliated optical retail
locations.

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<PAGE> 32

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of total revenues, certain
items in the Company's statement of operations for the periods indicated. As a
result of the 1996 Acquisitions, 1997 Acquisitions, and the Company's entering
into capitated arrangements with its Contract Providers, the Company does not
believe that the historical percentage relationships for 1994, 1995, 1996 and
the nine months ended September 30, 1996 and 1997 reflect the Company's expected
future operations.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ---------------
1994 1995 1996 1996 1997
------ ------ ------ ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Practice management fees........................ 32.9% 13.8% 20.3% 9.2% 66.9%
Managed care.................................... 56.1 79.4 76.5 88.1 31.6
Other revenue................................... 11.0 6.8 3.2 2.7 1.5
----- ----- ----- ----- ------
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ------
Operating expenses:
Practice management expenses.................... -- -- 13.0 -- 54.3
Medical claims.................................. 46.3 95.2 95.5 121.5 27.3
Salaries, wages and benefits.................... 45.1 29.3 19.8 22.8 11.6
Business development............................ -- -- 20.1 -- --
General and administrative...................... 19.9 14.4 12.6 11.0 4.5
Depreciation and amortization................... 1.1 0.6 1.3 0.6 3.2
----- ----- ----- ----- ------
Total operating expenses................ 112.4 139.5 162.3 155.9 100.9
----- ----- ----- ----- ------
Loss from operations.............................. (12.4) (39.5) (62.3) (55.9) (0.9)
Interest expense.................................. 0.3 0.3 1.7 1.1 2.6
----- ----- ----- ----- ------
Loss before income taxes.......................... (12.7) (39.8) (64.0) (57.0) (3.5)
Income taxes...................................... -- -- -- -- --
----- ----- ----- ----- ------
Loss before extraordinary charge.................. (12.7) (39.8) (64.0) (57.0) (3.5)
Extraordinary charge -- early extinguishment of
debt............................................ -- -- -- -- (1.1)
----- ----- ----- ----- ------
Net loss.......................................... (12.7)% (39.8)% (64.0)% (57.0)% (4.6)%
===== ===== ===== ===== ======
Medical claims ratio.............................. 82.5% 120.0% 124.8% 137.9% 86.5%
===== ===== ===== ===== ======
</TABLE>

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996

Revenues. Revenues increased 388.6% from $6.0 million for the nine months
ended September 30, 1996 to $29.4 million for the nine months ended September
30, 1997. This increase was caused primarily by an increase in practice
management fees attributable to the 1996 Acquisitions and the 1997 Acquisitions,
which accounted for $19.1 million of the increase, and a 75.4% increase in
managed care revenues attributable to the addition of one capitated contract and
the expansion of an existing contract, which accounted for $4.0 million of the
increase.

Practice Management Expenses. Practice management expenses were $16.0
million for the nine months ended September 30, 1997 as a result of the 1996
Acquisitions and the 1997 Acquisitions. Prior to the 1996 Acquisitions, the
Company recognized no practice management expenses related to its management
services because the Company was not liable for such expenses. Practice
management expenses consist of salaries, wages and benefits of certain clinic
staff, professional fees, medical supplies, advertising, building and occupancy
costs, and other general and administrative costs related to the operation of
clinics and ASCs.

Medical Claims. Medical claims expense increased 10.0% from $7.3 million
for the nine months ended September 30, 1996 to $8.1 million for the nine months
ended September 30, 1997. The Company's medical claims ratio decreased from
137.9% for the nine months ended September 30, 1996 to 86.5% for the nine months
ended September 30, 1997. This decrease was caused primarily by the Company's
renegotiated agreement to pay its ophthalmology and ASC Contract Providers a per
member per month fee for surgical eye care services provided under the Company's
largest capitated managed care contract. Medical claims expense consists of
payments by the Company to its Affiliated Providers for primary eye care
services, medical and

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<PAGE> 33

surgical eye care services and facility services. These payments are based on
fixed payments per member per month, a pro rata share of managed care capitated
payments received (as determined by the number of eye care procedures performed
relative to other Affiliated Providers) or negotiated fee-for-service schedules.
Capitated payments and pro rata payments collectively represented 62.0% and
fee-for-service claims represented 38.0% of total medical claims expense for the
nine months ended September 30, 1997. Medical claims for the nine months ended
September 30, 1996 were based entirely on negotiated fee-for-service schedules.

Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 147.7% from $1.4 million for the nine months ended September 30, 1996
to $3.4 million for the nine months ended September 30, 1997. This increase was
caused primarily by an increase in corporate staff necessary to support the
Company's expanded practice management and managed care business. Salaries,
wages and benefits expense consists of expenses related to management and
administrative staff located at the Company's corporate headquarters and
regional offices. As a percentage of revenues, salaries, wages and benefits
expense decreased from 22.8% for the nine months ended September 30, 1996 to
11.6% for the nine months ended September 30, 1997. This decrease was caused
primarily by increased economies of scale resulting from the Company's expanding
business.

General and Administrative. General and administrative expenses increased
102.3% from $662,000 for the nine months ended September 30, 1996 to $1.3
million for the nine months ended September 30, 1997. This increase was caused
primarily by increases in travel expenses, professional fees and occupancy
costs. As a percentage of revenues, general and administrative expenses
decreased from 11.0% for the nine months ended September 30, 1996 to 4.5% for
the nine months ended September 30, 1997. This decrease was caused primarily by
increased economies of scale resulting from the Company's expanding business.

Depreciation and Amortization. Depreciation and amortization expense
increased from $35,000 for the nine months ended September 30, 1996 to $954,000
for the nine months ended September 30, 1997. As a percentage of revenues,
depreciation and amortization expense increased from 0.6% for the nine months
ended September 30, 1996 to 3.2% for the nine months ended September 30, 1997.
These increases were caused primarily by the amortization of intangibles
attributable to the 1996 Acquisitions and the 1997 Acquisitions.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues. Revenues increased 210.3% from $3.1 million for 1995 to $9.6
million for 1996. This increase was caused primarily by a 358.3% increase in
practice management fees attributable to the 1996 Acquisitions, which accounted
for $1.5 million of the increase, and a 199.1% increase in managed care revenues
attributable to the addition of one new capitated contract and the expansion of
the Company's largest managed care contract, which accounted for $4.9 million of
the increase.

Practice Management Expenses. Practice management expenses were $1.2
million for 1996, all of which resulted from the 1996 Acquisitions. Prior to the
1996 Acquisitions, the Company recognized no practice management expenses
related to its management services, because the Company was not liable for
expenses of the practices.

Medical Claims. Medical claims expense increased 211.1% from $2.9 million
in 1995 to $9.1 million in 1996. The Company's medical claims ratio increased to
124.8% for 1996 from 120.0% for 1995. These increases were caused primarily by
excess utilization of surgical eye care services and facility services related
to the Company's largest managed care contract, which accounted for $4.8 million
of the increase, and an increase in members covered by the Company's capitated
managed care contracts, which accounted for $1.8 million of the increase.
Capitated payments and pro rata payments represented 11.3% and fee-for-service
payments represented 88.7% of total medical claim expense for 1996. Medical
claims for 1995 were based entirely on negotiated fee-for-service schedules.

Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 109.0% from $904,000 in 1995 to $1.9 million in 1996. This increase
was caused primarily by an increase in corporate staff necessary to support the
Company's expanded practice management and managed care business. As a
percentage of

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<PAGE> 34

revenues, salaries, wages and benefits expense decreased from 29.3% in 1995 to
19.8% in 1996. This decrease was caused primarily by increased economies of
scale resulting from the Company's expanding business.

Business Development. Business development expenses were $1.9 million in
1996. Business development expenses consisted of a one-time charge of $1.4
million related to potential acquisitions that were not completed and $500,000
related to the amortization of deferred compensation charges attributable to
consulting services.

General and Administrative. General and administrative expenses increased
172.6% from $443,000 in 1995 to $1.2 million in 1996. This increase was caused
primarily by increases in travel expenses, professional fees, occupancy costs,
temporary labor and recruitment costs related to the Company's expanding
business. As a percentage of revenues, general and administrative expenses
decreased from 14.4% in 1995 to 12.6% in 1996. This decrease was caused
primarily by increased economies of scale resulting from the Company's expanding
business.

Depreciation and Amortization. Depreciation and amortization expense
increased from $18,000 in 1995 to $126,000 in 1996. As a percentage of revenues,
depreciation and amortization expense increased from 0.6% in 1995 to 1.3% in
1996. This increase was caused primarily by the amortization of intangibles
attributable to the 1996 Acquisitions.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues. Revenues increased 158.6% from $1.2 million for 1994 to $3.1
million for 1995. This increase was primarily caused by an increase in managed
care revenues as a result of the Company obtaining its first complete eye care
capitated contract from a leading HMO, which accounted for $1.8 million of the
increase.

Practice Management Expenses. The Company incurred no practice management
expenses during 1994 or 1995. Prior to the 1996 Acquisitions, the Company
recognized no practice management expenses related to its management services
because the Company was not liable for the expenses of the practices.

Medical Claims. Medical claims expense increased 432.1% from $551,000 for
1994 to $2.9 million for 1995. The Company's medical claims ratio increased to
120.0% for 1995 from 82.5% for 1994. These increases were caused primarily by
excess utilization of surgical eye care services and facility services related
to the Company's largest managed care contract. All medical claims for 1995 and
1994 were based on negotiated fee-for-service schedules.

Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 68.1% from $538,000 in 1994 to $904,000 in 1995. This increase was
caused primarily by an increase in corporate staff necessary to support the
Company's expanded practice management and managed care business. As a
percentage of revenues, salaries, wages and benefits expense decreased from
45.1% in 1994 to 29.3% in 1995. This decrease was caused primarily by increased
economies of scale resulting from the Company's expanding business.

Business Development. The Company incurred no business development
expenses during 1994 or 1995.

General and Administrative. General and administrative expenses increased
86.5% from $238,000 in 1994 to $443,000 in 1995. This increase was caused
primarily by increases in travel expenses, professional fees, occupancy costs
and temporary labor and recruitment costs. As a percentage of revenues, general
and administrative expenses decreased from 19.9% in 1994 to 14.4% in 1995. This
decrease was caused primarily by increased economies of scale resulting from the
Company's expanding business.

Depreciation and Amortization. Depreciation and amortization expense
increased 37.9% from $13,000 in 1994 to $18,000 in 1995. This increase was
caused primarily by the amortization of intangibles. As a percentage of
revenues, depreciation and amortization expense decreased from 1.1% in 1994 to
0.6% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its working capital and capital
expenditure requirements primarily through institutional borrowings and private
debt and equity financings. Net cash provided by operating

33
<PAGE> 35

activities for 1994 was $30,000 and net cash used in operating activities for
1995 and 1996 and the nine months ended September 30, 1997 was $138,000, $4.2
million and $2.9 million, respectively. Net cash provided by operating
activities for 1994 was caused primarily by an increase in liabilities more than
offsetting a net loss. Net cash used in operating activities for 1995 and 1996
and the nine months ended September 30, 1997 was caused primarily by net losses
offset in part by increases in medical claims payable, deferred compensation and
accrued acquisition expenses.

Net cash used in investing activities for 1994, 1995 and 1996 and the nine
months ended September 30, 1997 was $14,000, $88,000, $1.6 million and $4.9
million, respectively, and was caused primarily by the purchase of furniture and
equipment and payments for capitalized acquisition and offering costs.

Net cash used in financing activities for 1994 was $4,000. Net cash
provided by financing activities for 1995 and 1996 and the nine months ended
September 30, 1997 was $256,000, $5.8 million and $10.4 million, respectively.
The amounts for 1996 and for the nine months ended September 30, 1997 were
attributable to private debt and equity financings and higher levels of
institutional borrowings to support the Company's internal expansion and
acquisition activities.

In June 1996, the Company borrowed $3.0 million from Peter Fontaine, a
director of the Company, for working capital purposes pursuant to an unsecured
promissory note bearing interest at 8.0% per annum (the "Fontaine Note"). The
Fontaine Note was repaid by the Company from the net proceeds of the Initial
Public Offering. In addition, the Company borrowed $200,000 and $500,000 from
Mr. Fontaine in November and December 1996, respectively, for working capital
purposes pursuant to unsecured promissory notes bearing interest at 8.5% per
annum. The unsecured promissory notes were repaid from the net proceeds of the
Initial Public Offering. See "Certain Transactions."

In December 1996, the Company completed the 1996 Acquisitions for an
aggregate consideration of $11.2 million, consisting of 2.1 million shares of
Common Stock, unsecured promissory notes in the aggregate principal amount of
$1.9 million bearing interest at 8.0% per annum and $800,000 in assumed debt.
Additionally, the Company has agreed to aggregate contingent consideration of
$316,000, consisting of 79,805 shares of Common Stock, in connection with
several of the 1996 Acquisitions which will be transferred out of escrow to
certain sellers in the event they meet certain post-acquisition performance
targets. The promissory notes were repaid by the Company from the net proceeds
of the Initial Public Offering.

In December 1996, the Company borrowed an aggregate of $1.3 million from
certain individuals for working capital purposes pursuant to the issuance of
senior subordinated notes bearing interest at 10% per annum (the "1996
Subordinated Notes"). The 1996 Subordinated Notes included detachable warrants
to purchase an aggregate of 208,333 shares of Common Stock at an exercise price
of $6.00 per share. The 1996 Subordinated Notes were repaid by the Company from
the net proceeds of the Initial Public Offering.

In February 1997, the Company borrowed an aggregate of $2.0 million from
Piper Jaffray Healthcare Fund II Limited Partnership ("Piper Jaffray") for
working capital purposes pursuant to the issuance of senior subordinated notes
bearing interest at 10% per annum (the "1997 Subordinated Notes"). The 1997
Subordinated Notes included a detachable warrant to purchase an aggregate of
333,333 shares of Common Stock which have an exercise price of $6.00 per share.
The 1997 Subordinated Notes were repaid by the Company from the net proceeds of
the Initial Public Offering.

Between March 1, 1997 and August 18, 1997, the Company completed the Pre
Initial Public Offering Acquisitions, and provided aggregate consideration of
$7.3 million, consisting of 876,524 shares of Common Stock, promissory notes in
the aggregate principal amount of $264,000 and $29,000 in cash, subject to
closing adjustments.

In April 1997, the Company entered into a credit facility in the aggregate
amount of $4.9 million with Prudential Securities Group Inc. ("Prudential")
pursuant to a Note and Warrant Purchase Agreement (as amended and restated, the
"Note and Warrant Purchase Agreement"). The proceeds from the borrowing were
used to repay the Company's credit facility with Barnett Bank N.A. in the
principal amount of $2.0 million and for general working capital purposes. Under
the Note and Warrant Purchase Agreement, the Company issued a senior note
secured by all the Company's assets (the "Prudential Note"). The Prudential

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<PAGE> 36

Note accrued interest at 10% per annum with a maturity of the earlier of January
1, 1998 or upon completion of the Initial Public Offering. In addition, the Note
and Warrant Purchase Agreement include a detachable warrant to purchase 210,000
shares of Common Stock at an exercise price per share equal to $10.00 per share,
the price of the Common Stock in the Initial Public Offering. The Prudential
Note was repaid by the Company from the net proceeds of the Initial Public
Offering.

In September 1997, the Company closed in escrow the September Acquisitions
and is providing aggregate consideration of $7.6 million consisting of 397,212
shares of Common Stock, $3.6 million in cash, which must be paid by the Company
in the near future, and promissory notes in the amount of $100,000, subject to
closing adjustments. Additionally, the Company is required to provide additional
contingent consideration consisting of 76,622 shares of Common Stock and
$800,000 in cash, to be paid to the sellers in the event that certain
post-acquisition performance targets are met.

In October 1997, the Company closed in escrow one acquisition and entered
into an agreement with respect to another acquisition (the October Acquisitions)
and is providing aggregate consideration of approximately $3.2 million,
consisting of approximately 101,494 shares of Common Stock, and approximately
$1.8 million in cash which must be paid by the Company in the near future.

Effective October 31, 1997, the Company completed the Block Acquisition in
exchange for aggregate consideration paid to the sellers of approximately $35.0
million, consisting of $25.6 million in cash, 458,365 shares of Common Stock,
subject to certain post-closing adjustments and 219,633 shares of Common Stock
to be held in escrow as contingent consideration, of which 109,816 shares are to
be delivered by the Company to the sellers if EBITDA of Block Vision reaches
$4.5 million for the year ended December 31, 1998. The remaining 109,817 shares
will be deliverable on a pro rata escalating basis if Block Vision reaches $4.5
million of EBITDA for 1998 with the full contingent consideration deliverable
upon Block Vision attaining $4.9 million of EBITDA for 1998. Approximately $2.4
million in net indebtedness of Block Vision will be assumed in connection with
the Block Acquisition. See "The Acquisitions."

In October 1997, the Company received a commitment from Prudential
Securities Credit Corporation ("Prudential Credit") for a credit facility in the
aggregate amount of $37.0 million pursuant to a Note Purchase Agreement (the
"Bridge Credit Facility"). Approximately $27.0 million of the Bridge Credit
Facility is available, if needed, to fund the cash portion of the Block
Acquisition to the extent the net proceeds from this Offering are insufficient
for such purpose. The remaining balance of approximately $10.0 million of the
Bridge Credit Facility is available for optometry and ophthalmology practice
acquisitions. To date, the Company has borrowed approximately $3.5 million for
use in the funding of certain acquisitions. Approximately $5.6 million of the
Bridge Credit Facility is expected to be used to finance a portion of the Block
Acquisition after completion of the Offering. Amounts borrowed pursuant to the
Bridge Credit Facility are secured by a first security interest in all of the
Company's assets. The Bridge Credit Facility must be repaid at the earlier of
six months from the date of any borrowing from the Bridge Credit Facility or
upon the closing of any future debt or equity offering by the Company. The
Bridge Credit Facility contains negative and affirmative covenants and
agreements which include covenants requiring the maintenance of certain
financial ratios. The Company expects to repay in full any borrowing from the
Bridge Credit Facility upon the completion of its anticipated future bank credit
facility. See "Use of Proceeds" and "Underwriting."

The Company has retained Prudential Securities Incorporated as its
investment advisor for the purpose of obtaining on behalf of the Company a
future bank credit facility of up to approximately $50.0 million. The Company
expects to obtain such bank credit facility by the end of 1997. See
"Underwriting."

The Company has treated as deferred compensation the issuance of shares of
restricted stock in September and October 1996, for future services related to
various business development initiatives and management incentives. In September
1996, the Company entered into a five-year services agreement with its Chief
Medical Officer and current director of the Company and issued 108,133 shares of
restricted Common Stock. These shares were valued at $2.77 per share or
$300,000. Of these shares, 40% vested immediately and the Company recorded a
business development charge of $120,000. The remaining 60% of the shares were
recorded as an offset in stockholders' equity as deferred compensation for
$180,000. In October 1996, the Company entered into a five-year advisory
agreement with an industry consultant and issued 125,627 shares of

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<PAGE> 37

restricted Common Stock which vest over the life of the advisory agreement.
These shares were valued at $2.77 per share or $349,000. The Company recorded
the issuance of these shares as an offset in stockholder's equity as deferred
compensation. This deferred compensation is being amortized as the shares vest
on a pro rata basis. See "Certain Transactions."

Intangible assets consist of the Management Agreements with the Managed
Professional Associations. The Management Agreements have 40-year terms and are
being amortized over an average life of 25 years. Intangible assets represented
64.1% of the Company's total assets as of September 30, 1997. In determining the
useful life of a Management Agreement, the Company considers the operating
history and other characteristics of each practice. A principal consideration is
the degree to which the practice has demonstrated its ability to extend its
existence indefinitely. The Company will review the carrying value of its
intangible assets at least quarterly on an entity-by-entity basis to determine
if facts and circumstances exist which would suggest that the intangible assets
may be impaired or that amortization periods need to be modified. Among the
factors the Company considers in making the valuation are changes in the Managed
Professional Associations market position, reputation, profitability, and
geographic penetration. See "Risk Factors -- Risks Related to Amortization of
Intangible Value in Management Agreements" and Note 3 to Notes to Consolidated
Financial Statements.

In addition to the business assets purchased, the Company assumes certain
payables and accrued expenses in connection with its acquisitions. Generally,
the acquired tangible assets exceed the assumed liabilities. The Company has
assumed liabilities of $3.2 million, including $791,000 of long-term debt, in
connection with acquisitions (including the Block Acquisition) completed through
October 31, 1997.

Based upon the Company's anticipated capital needs for operation of its
business, general corporate purposes, the acquisition of clinics and ASCs and
repayment of certain indebtedness, management believes that the combination of
the funds expected to be provided from the Company's operations, anticipated
future bank credit facilities, seller financing and the net proceeds received
from the Offering will be sufficient to meet the Company's funding requirements
to conduct its operations and for further implementation of its growth strategy
for a period of approximately twelve months. See "Risk Factors -- Availability
of Funds for Expansion Strategy." The Company will continue to offer Common
Stock, notes or combinations thereof as consideration for certain future mergers
and acquisitions related to the growth of its LADS and currently expects for the
foreseeable future to continue to require contractual lock-up agreements and to
provide registration rights consistent with previous transactions for sellers
receiving stock in acquisitions. After the twelve-month period, or in the event
the Company's capital expenditures are greater than currently expected and to
the extent additional capital resources are needed, the Company expects to
utilize supplemental borrowings to the extent available and/or the net proceeds
from the offering of debt or equity securities.

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<PAGE> 38

BUSINESS

OVERVIEW

The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS") established by the Company. LADS are
developed to provide for integrated networks of optometrists, ophthalmologists,
ASCs and retail optical centers which offer the full continuum of eye care
services in local markets. The Company began operations in 1984, providing
management services to seven optometrists practicing at eight clinic locations.
The Company currently provides its services to 39 LADS located in 26 states
through which 5,810 Affiliated Providers deliver eye care services. Of these
Affiliated Providers, 86 are Managed Providers, consisting of 50 optometrists
and 36 ophthalmologists practicing at 57 clinic locations and five ASCs, and
5,724 are Contract Providers, consisting of 4,993 optometrists and 731
ophthalmologists practicing at over 4,300 clinic locations and 35 ASCs. The
Company signed its first managed care contract in 1988 for 18,000 patient lives
serviced through the Company's network of optometrists practicing within retail
optical locations. The Company's Affiliated Providers, in conjunction with
select national retail optical chains operating over 300 retail optical centers,
deliver eye care services under the Company's 82 managed care contracts and 12
discount fee-for-service plans covering approximately 4.0 million exclusively
contracted patient lives. Furthermore, the Company has established a nationwide
eye care provider network of over 6,700 additional Contract Providers thereby
positioning the Company to capture future managed care business in anticipated
new local markets.

THE EYE CARE INDUSTRY

The Eye Care Market. According to industry sources, expenditures for all
eye care services in the United States were approximately $31.2 billion in 1995.
Industry sources estimate $19.6 billion of these expenditures was spent on
primary care, including approximately $13.8 billion for optical goods (frames,
lenses and accessories) and $5.8 billion for primary eye care services (routine
eye exams, contact lens fitting and diagnosis/management of eye disease), while
$11.6 billion was spent on secondary and tertiary care, including $6.9 billion
for ophthalmology services (medical and surgical eye care) and $4.7 billion for
facility services (services provided by hospital facilities and ASCs).

The aging of the "baby boom" generation in the United States is expected to
result in increased spending on all eye care services. As individuals age, their
need for eye services at all levels of care -- primary, secondary and
tertiary -- increases with the onset of cataracts, glaucoma and other eye
diseases and disorders. According to the American Academy of Ophthalmology, U.S.
surgeons performed 1.4 million cataract surgeries in 1995, up from 1.2 million
procedures in 1994. Additionally, according to The Journal of the American
Medical Association, cataract surgery is the largest single Medicare
expenditure.

Technological advances and innovations are also expected to contribute to
increased spending on eye care services. Innovative procedures in the area of
refractive surgery, such as Photo Refractive Keratectomy (PRK) procedures,
utilize the excimer laser to surgically correct nearsightedness. Additionally,
enhancements in current technology and micro surgical protocols have allowed for
less invasive and disruptive outpatient ocular procedures utilizing local rather
than general anesthesia. For example, according to industry sources, PRK
procedures alone are expected to increase from 108,000 in 1996 to 945,000 in the
year 2000.

Today's Delivery of Eye Care. Eye care services in the United States are
delivered through a highly fragmented system of local providers which industry
sources estimate consisted of approximately 47,000 practicing eye care
professionals in 1996, including approximately 29,500 optometrists and 17,500
ophthalmologists. A patient's first encounter with an eye care provider
frequently occurs with an optometrist or optical retailer for some form of
primary care. According to the American Optometric Association, approximately 86
million eye exams are performed each year in the U.S., 70% of which are
performed by optometrists. During the eye exam, the optometrist typically issues
prescriptions for corrective eye wear and evaluates the need for secondary
and/or tertiary procedures. As such, the optometrist is in a natural position as
the "gate keeper" for additional eye care services, influencing in excess of
$17.0 billion in domestic eye care expenditures annually.

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<PAGE> 39

The Company believes that patients are increasingly seeking convenient and
accessible primary eye care through retail optical centers that typically
feature extended hours of operation, convenient locations, walk-in service, wide
selections of familiar name brand eyeglass frames and contact lenses, prompt
service, lower pricing, extensive advertising and the availability of an
optometrist on the premises. While optometrists have traditionally marketed eye
wear in their offices, the proliferation of large retail optical centers has
placed pressure on an optometrist's ability to compete for patients and has
caused optometrists to increasingly affiliate with retailers by locating within,
or in close proximity to, retail optical centers. Through such affiliations,
optometrists attempt to improve their access to patients. As a result, the
Company believes primary eye care services and products are increasingly being
bundled together at the retail level making the retail optical center an
important access point for eye care delivery networks.

While some ophthalmologists provide certain primary eye care services, such
as eye exams, their main focus is on the delivery of secondary care, such as
cataract surgery, and tertiary care, such as retina/vitreous procedures,
predominantly at office-based clinics and ASCs. Because optometrists are an
important source of patients, many ophthalmologists develop informal and
non-binding referral networks in conjunction with optometrists. However, despite
these initiatives, industry sources estimate that only 4.8% of all optometrists
actually provide eye care services within the same practice as an
ophthalmologist.

Eye Care Payors. The number of people covered by managed care and
indemnity eye care insurance plans has increased significantly in recent years
and is expected to continue to increase as health insurers seek to gain a
competitive advantage by offering insurance packages that include primary eye
care coverage. Many of these insurers are HMOs presently focused on the need to
increase revenue and market share by offering a full range of health insurance
options, including coverage for primary eye care, to both commercial and
Medicare patients. According to industry sources, HMO enrollment overall has
increased from 41.0 million members in 1992 to 58.0 million members in 1995,
while HMO Medicare membership increased to approximately 3.6 million in 1995 and
is expected to reach 7.2 million by 1999. It is estimated that in 1995, 65.0% of
commercial HMO plans and 86.0% of Medicare plans offered primary eye care
benefits.

While both private and government funded insurance programs vary widely in
their coverage and benefits, these programs are expected to significantly impact
the structure of the eye care industry. As more people become eligible to
receive eye care benefits, the Company believes there will be increased
utilization of primary eye care services, which will in turn lead to an increase
in the demand for secondary and tertiary eye care services. As such, provider
networks that can deliver and effectively manage all levels of eye care are
becoming increasingly attractive to health insurance companies that are then
able to market comprehensive "carve out" eye care plans covering not only
primary eye care, but also secondary and tertiary eye care. Additionally, health
insurance companies, including HMOs and other managed care companies, are
contracting with eye care provider networks on a capitated basis to provide eye
care services as well as all related administrative and quality assurance
services. In 1995, 45% of HMO contracts with specialty care networks (i.e., eye
care, dentistry and other medical specialties) were capitated, up from 35% in
1994.

Emerging Eye Care Delivery Models. Optometrists and ophthalmologists have
traditionally provided eye care services on a fee-for-service basis, primarily
through independent, office-based practices. The fee-for-service model provides
few incentives for the efficient utilization of resources and, the Company
believes, has contributed to increases in health care costs at rates
significantly higher than inflation. Concerns over the accelerating costs of
health care have resulted in the increasing prominence of managed care,
pressuring eye care providers to deliver care at a lower cost while maintaining
quality. The Company believes that this recent focus on cost containment has
placed independent optometry and ophthalmology practices at a disadvantage.
These practices typically lack the capital to expand, develop information and
billing systems, and purchase new technologies, which often facilitate increased
patient visits and per patient revenue, improve quality of care and reduce
costs. These practices also lack the cost accounting and quality management
systems necessary to allow eye care providers to enter into capitated or
risk-sharing contracts with private third-party payors. Finally, small to
mid-sized eye care provider groups and individual practices often have higher
operating costs because overhead must be spread over a relatively small revenue
base.

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<PAGE> 40

In order to remain competitive in the changing eye care service
environment, optometrists and ophthalmologists are increasingly seeking to
affiliate with larger organizations, which offer skilled and experienced
management, improved access to payors and their enrollees, more sophisticated
information systems, greater capital resources and more efficient cost
structures. Much of this consolidation is taking place through the formation of
physician practice management companies ("PPMs"). Eye care PPMs are growing in
response to the demand by managed care companies for larger practice groups
which can offer full service, quality eye care over a wide geographic area. This
consolidation is still in the early stages as less than 2% of optometrists and
ophthalmologists have affiliated with a PPM. However, the mere consolidation of
practices and creation of a PPM will most likely not, in itself, be sufficient
to enhance the competitive position of combined eye care professional groups.
Rather, the Company believes that a cost efficient eye care delivery system
integrated within local markets is required to effectively compete in today's
changing eye care industry.

THE VISION TWENTY-ONE LOCAL AREA DELIVERY SYSTEM ("LADS")

Developing Integrated LADS (The LADS Model)

LADS are designed to provide for integrated networks of eye care providers
which offer the full continuum of eye care services in local markets. This
continuum of eye care services begins with primary eye care services provided by
optometrists practicing at free-standing clinics, optometrists located in retail
optical locations and primary care ophthalmologists. To provide greater access
for patients seeking primary eye care, the Company affiliates with both
optometrists and retail optical centers. To facilitate this patient access, the
Company has strategic affiliations with two major national retail optical
chains, one regional optical chain and numerous smaller, independent retail
optical centers. The Company generally has an affiliated optometrist in or
adjacent to each affiliated retail optical center that is located within a LADS.

Once patients have initially accessed a LADS to obtain primary eye care
services, they are well positioned to move within the LADS to the next
appropriate level of eye care. The Company affiliates with general
ophthalmologists and cataract surgeons that provide secondary eye care, with
subspecialty ophthalmologists (including subspecialties such as oculoplastics,
retina/vitreous and cornea) that provide tertiary eye care, and with ASCs that
provide facility services. LADS are especially attractive to managed care
companies because the Company's Affiliated Providers are able to deliver all
levels of eye care to the managed care plan's members.

Each Affiliated Provider generally begins as a fully credentialed Contract
Provider who delivers eye care services to members of the Company's contracted
managed care plans. The Company intends to acquire the business assets, employ
the non-professional personnel of and enter into Management Agreements with
select Contract Providers who then become Managed Providers. To date, the
Company has successfully acquired the business assets of 63 Contract Providers.
In addition, the Company intends to add optometry clinics located within retail
optical centers of leading national retail optical chains. To date, the Company
has added five optometry clinics located within retail optical centers and has
reached a tentative agreement with a leading optical retailer to add at least 20
additional internally developed optometry clinics throughout the first quarter
of 1998.

The successful integration of optometrists, ophthalmologists and ASCs is a
key component to the development of each LADS. The integration of Affiliated
Providers is accomplished through the implementation of proprietary quality
assurance, management and governance programs (the "V-21 TEAM CARE" program).
The V-21 TEAM CARE quality assurance program is administered by the Company's
Credentialing Committee, Clinical Protocol and Risk Management Committee, Peer
Review Committee, Outcome

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<PAGE> 41

Assessment and Utilization Review Committee and a Medical Advisory Board whose
members include select Affiliated Providers. The V-21 TEAM CARE quality
assurance program provides for (i) the review and implementation of technology
standards and clinical protocols for the provision of high quality and cost
effective eye care services, and (ii) continuing assessments as to the quality
of facilities, equipment, record keeping, physician credentials, utilization
trends and clinical outcomes. The integration of Managed Providers is
accomplished through the V-21 TEAM CARE management and governance programs. The
V-21 TEAM CARE management program includes (i) development of LADS-specific and
practice-specific strategic plans, (ii) integration of operations, personnel,
facilities and equipment, (iii) consolidation of specialty and ancillary
services and (iv) coordination of marketing initiatives. The V-21 TEAM CARE
governance program establishes an active local governance structure consisting
of Practice Advisory Councils, Local Advisory Councils and a National Appeals
Council. These councils are designed to provide for substantial involvement and
clinical leadership by select Managed Providers in the local operations,
physician relationships and business development plans within each practice and
LADS.

Increasing Patient Revenue and Cost Efficiencies

Managed care initiatives are implemented for each LADS to enable the
Affiliated Providers to gain incremental market share and increased patient
visits. In conjunction with its affiliated retail optical centers and affiliated
optometrists, the Company jointly markets regional primary eye care networks to
managed vision plans. In addition, the Company markets regional networks of
affiliated ophthalmologists and ASCs to managed care plans for the provision of
medical and surgical eye care. More importantly, the Company is able to market
each of its LADS to managed care plans seeking to contract with integrated
networks of optometrists, ophthalmologists, retail optical centers and ASCs that
can offer all primary, secondary and tertiary eye care services pursuant to
comprehensive "carve out" eye care plans.

The Company also seeks to increase patient visits for each LADS through
cooperative marketing initiatives. The Company assists in developing cooperative
marketing campaigns between affiliated optometrists and optical retailers to
attract incremental fee-for-service primary eye care patients. The Company and,
in some cases, managed care companies sponsor extensive free community screening
activities. The Company has also initiated outreach programs through its Managed
Providers, such as providing primary eye care to long-term care facilities and
more complicated tertiary care to rural areas where such care might otherwise
not be available.

The Company also seeks to generate incremental per patient revenue for its
Managed Providers by providing access to new eye care services and products for
its LADS. This may be as a core service for fee-for-service patients or as a
value-added option for managed care patients over and above their insured
benefit. Patients are educated at the primary eye care level on new products and
procedures, including refractive surgery, oculoplastic procedures, pediatric
services, eye wear upgrades, specialty contact lenses and accessories. By
facilitating the addition of new eye care services and products, the Company is
able to leverage existing facilities and equipment to generate incremental per
patient revenue for the Company's Managed Providers. For example, the Company's
Chief Medical Officer, Richard Lindstrom, M.D., a world renowned refractive
surgeon, is assisting in the development of refractive surgery initiatives for
each LADS.

Finally, the Company develops and implements a practice development program
to increase productivity and efficiency thereby reducing costs per patient. The
practice development program includes re-engineering patient flow, establishing
clinical protocols, providing physician development programs and practice
governance, monitoring patient feedback, and improving office design. The
Company has exclusively retained BSM Consulting Group, a highly respected leader
in ophthalmology consulting, to assist the Company in developing these practice
development programs. Additionally, the Company will continue to consolidate the
back office functions of Managed Providers, including payroll, benefit
administration, accounts payable, accounts receivables, purchasing and general
administrative services, to gain further efficiencies for its LADS.

The Company's ability to successfully manage and develop the Managed
Providers will depend on its ability to increase patient revenue and achieve
cost efficiencies for the Managed Professional Associations. The Company's
future results of operations will depend on the Company's ability to
successfully manage and

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develop its Managed Providers as the Company's management fees are directly
related to the revenues and expenses of the Managed Professional Associations.
See "Risk Factors -- Reliance on Affiliated Providers", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business --
Management Agreements."

Expanding the LADS Model to New Markets

The Company intends to continue expanding its LADS model to new markets.
The Company seeks to enter select markets where (i) the Company has a strategic
affiliation with a leading corporate retail optical provider, (ii) there is an
existing network of optometrists and ophthalmologists that the Company can
affiliate with, and/or (iii) the Company is able to obtain a managed care
contract that provides an initial patient base. Other considerations include an
analysis of the competitive environment, the legal and regulatory environment as
it pertains to delivery of eye care services and the level of managed care
penetration. The Company also intends to leverage existing managed care
relationships to expand into new markets where such managed care providers have
established a significant presence.

The Company's practice acquisition team continuously searches for
Affiliated Providers to develop additional LADS in new markets and to supplement
the eye care services offered by its LADS in existing markets. The Company's
acquisition team meets with selected acquisition candidates within a particular
local market area and evaluates such acquisition candidates on the basis of
their clinical reputation, quality of care, provider credentials, market share,
profitability and mix of payors. The Company's acquisition team also bases its
acquisition decisions on the strengths of the candidate's management team, the
stability of the practice, the existence of an ASC or optical dispensary, the
compatibility of the candidate's work philosophy and values, the potential to
expand the types of eye care services provided and the potential to increase
patient access to the candidate through the Company's managed care and practice
management initiatives. The Company's goal is to affiliate with well-respected
practices and intends to utilize such practices to assist in identifying
additional acquisition candidates for the LADS. In determining the consideration
for each acquisition, the Company primarily evaluates the acquisition criteria
along with projected future cash flows for the practice and the projected
management fee to be received.

The Company's ability to successfully expand the LADS model to new markets
will depend on a number of factors including the ability to obtain acceptable
financing to fund expansion, identify and consummate suitable acquisitions,
successfully integrate the acquisitions and effectively expand its managed care
relationships into such local markets. See "Risk Factors -- Risk Associated With
Expansion Strategy."

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LADS LOCATIONS

The following table sets forth the location of and certain data regarding
the Company's existing LADS as of October 31, 1997:

<TABLE>
<CAPTION>
AFFILIATED PROVIDERS(1)(2) AFFILIATED MANAGED
--------------------------- RETAIL(1)(2) CONTRACT
LOCAL AREA MDS ODS ASCS OPTICAL LOCATIONS LIVES(1)(3)
- ---------- ------ ------ ------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Tampa Bay.......................... 85 109 17 20 851,000
Miami.............................. 47 64 4 27 394,000
Orlando............................ 39 42 8 12 117,000
Jacksonville....................... 23 3 3 3 139,000
Tallahassee........................ 2 7 1 4 4,000
Chicago............................ 61 -- -- 18 9,000
Phoenix............................ 27 13 4 12 107,000
Tucson............................. 19 3 3 -- 50,000
Minneapolis........................ 4 11 -- -- --
Long Island........................ 73 1 -- 4 218,000
New Orleans........................ -- 6 -- 13 --
--- --- -- --- ---------
Total.................... 380 259 40 113 1,889,000
=== === == === =========
</TABLE>

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

(1) Excludes over 11,000 Contract Providers who became affiliated with the
Company pursuant to the Block Acquisition, 5,171 of which currently provide
managed vision care services nationwide to over 2.1 million exclusively
contracted patient lives.
(2) Excludes approximately 935 Contract Providers in other markets where the
Company is beginning to conduct managed care business.
(3) Represents HMO members exclusively contracted to the Company and does not
include the managed care patients directly contracted to the Affiliated
Providers or any fee-for-service patients of Managed Providers.

LADS MANAGEMENT AND SUPPORT SERVICES

The Company provides all necessary management and support services to
develop and expand its LADS. The Company employs over 97 team members at its
corporate headquarters and approximately 442 team members located within the
LADS to provide a wide range of management and support services, including
information services, managed care development, practice integration and
development, administration, credentialing, provider relations, outcome
assessment, human resources, financial management, marketing and communications,
member services, and purchasing.

Information Services. The Company's management information system combines
current computer technology with proprietary software developed over the past
ten years that integrates front-end practice management, back-end corporate
management, managed care administration, accounting, and marketing. The Company
utilizes its management information system to coordinate patient flow and
administer patient documentation; track patient inquiries/problems from
inception to resolution; support credentialing of Affiliated Providers;
administer managed care contracts, including billing, collection and claims
processing; and organize marketing initiatives. Furthermore, the Company's
proprietary software allows it to effectively manage sophisticated risk-sharing
arrangements with Affiliated Providers and third-party payors, administer
disease state management initiatives, and track and assess utilization trends.
By electronically integrating all aspects of LADS management, the Company is
able to decrease duplication of efforts, enhance quality control, and maximize
cost efficiencies.

Managed Care Development. The Company assists its Affiliated Providers in
obtaining both fee-for-service and capitated managed care contracts. After
analyzing competitive market demographics and managed care penetration, the
Company identifies potential managed care relationships. The Company's managed
care development team responds to requests for proposals (RFPs) from selected
payors and works with HMOs to develop custom eye care benefit programs and
services for their members.

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Practice Integration and Development. The Company assists in developing
the practices of its Managed Providers and the implementation of long-term
strategic initiatives to increase revenue and enhance operating efficiencies.
The Company has entered into exclusive consulting agreements with BSM Consulting
Group, a leading professional practice development consultant, and its chief
executive officer, Bruce S. Maller, to assist with the Company's practice
integration and development efforts. The Company's regional operating personnel
assist with implementing practice integration and development initiatives and
measure improvements achieved through such efforts.

Administrative Services. The Company provides certain administrative
services to its Affiliated Providers, including billing, collections,
eligibility verification and claims processing. The Company handles over 300,000
claims per year, including Medicare and Medicaid. The Company's administrative
services department utilizes sophisticated information systems to provide claims
processing support and submit claims electronically to payors in order to reduce
time for reimbursement.

Credentialing. The Company provides credentialing services according to
national standards as set forth by the National Committee for Quality Assurance
("NCQA") by which all health plans are measured for compliance with quality
assurance initiatives. All Affiliated Providers are fully credentialed. The
credentialing process includes collection of data from Affiliated Providers in
the form of an application; verification of licenses, insurance and education;
review of the Affiliated Provider's file in the National Practitioner Data Bank;
computerized management of all Affiliated Provider credentials and renewals; and
approval by an Affiliated Provider peer group. Several managed care companies
have awarded the Company "Delegated Provider" status. Delegated Provider status
is awarded only after a managed care company has audited credentialing policies
and procedures as well as each health care provider's patient files and has
determined each provider is in compliance with NCQA standards. The Company
re-credentials its Affiliated Providers every two years.

Provider Relations. The Company actively maintains its relationships and
communication with all Affiliated Providers. The Company has established
Provider Relations Representatives who educate, assist and support Affiliated
Providers and their clinic staff with respect to all their managed care needs.
Provider Relations Representatives are available 24-hours a day through a
toll-free telephone support number.

Outcome Assessment. The Company provides outcome assessment services to
its Managed Providers, including custom developed protocols and disease state
management. Through the measurement of outcomes, the Managed Providers are able
to evaluate the effectiveness of clinical initiatives. Certain of the Company's
Managed Providers have been selected as a beta site for the implementation of a
study developed by Johns Hopkins University School of Medicine to evaluate the
need for and outcome of cataract surgery. The Company is currently developing
additional disease management modules for laser and glaucoma surgery.

Human Resources. The Company provides human resource services to its
Managed Providers, including recruitment of optometrists, ophthalmologists and
clinic staff as well as administration of payroll, benefits and paid time off
programs. In addition, the Company develops training programs to enhance the
management and administrative skills of the clinic staff employed by the Company
and maintains management and administrative protocols and policies.

Financial Management. The Company provides financial management services
to its Managed Providers, including the development of budgets, implementation
of financial controls, capital budgeting and initiation of cost-containment
measures designed to improve operating and financial performance. The Company
also provides comprehensive financial analysis and cash management, tax and
accounting services.

Marketing and Communications. The Company's marketing department works in
conjunction with an outside advertising agency to create and produce marketing
materials supporting the development initiatives of its LADS and Managed
Providers. The Company's communications department develops and produces
corporate newsletters and works with the Company's Managed Providers and clinic
staff to produce feature news articles, press releases and related promotional
materials.

Member Services. The Company's Member Services Representatives provide
customer service for issues related to the Company's managed care business.
Member Services Representatives expedite the

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resolution of managed care service issues and track member service inquiries in
a database maintained by the Company. Statistics are developed and tracked to
identify trends in specific member service issues.

Purchasing. The Company purchases certain clinical and office supplies and
equipment for its Managed Providers. The Company has developed purchasing
arrangements and relationships to facilitate more efficient bulk purchasing and
delivery.

MANAGEMENT AGREEMENTS

The Company intends to continue to acquire the business assets of select
optometry and ophthalmology practices as it establishes and develops LADS and
expands into new markets. In conjunction with acquiring the assets of eye care
practices, the Company has entered, and will continue to enter, into long-term
business management agreements with the professional associations conducting
such practices (the "Managed Professional Associations") to provide management
and administrative services to Managed Professional Associations, as well as
managed care business development and administration. The Company also expects
to acquire ASC facilities.

The Company enters into Management Agreements with professional
associations managed by the Company, the initial term of which is typically 40
years. Under significantly all of the Company's Management Agreements, the
management fee ranges from 24% to 37% of the Managed Professional Associations'
gross revenues after deducting from such revenues all expenses of the clinic
other than those related to shareholders of the Managed Professional
Associations. The practice management fees earned by the Company pursuant to
these Management Agreements fluctuate depending on variances in revenues and
expenses of the Managed Professional Associations.

Under the Management Agreements, the Company is obligated, among other
things, to (i) provide, maintain and repair office and clinical equipment for
the Managed Professional Association, (ii) order and purchase all reasonable
supplies on behalf of the Managed Professional Association, (iii) provide
appropriate support services for the operation of the Managed Professional
Association's offices, (iv) assist the Managed Professional Association in
establishing and implementing quality assessment, risk management and
utilization review programs, (v) employ all management, clinicians,
administrative, clerical, secretarial, bookkeeping, accounting, payroll, billing
and collection personnel, and other nonprofessional personnel as necessary, (vi)
assist the Managed Professional Association in negotiating managed care
contracts, (vii) bill and collect professional and other fees on behalf of the
Managed Professional Association, (viii) establish and administer accounting
procedures, controls and systems for the financial books and records relating to
the business of the Managed Professional Association, (ix) monitor and maintain
the files and records of the Managed Professional Association and (x) provide
such management services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Managed Professional Association.

The Management Agreements provide that the Managed Professional Association
is responsible for, among other things, (i) hiring, supervising, and directing
certain of the Managed Professional Association's professional employees, (ii)
adopting a peer review/quality assurance program and (iii) maintaining
appropriate worker's compensation, professional and comprehensive general
liability insurance.

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<PAGE> 46

Pursuant to the Management Agreements, a Practice Advisory Council,
consisting of equal representation for the Company and the Managed Professional
Association, is responsible for (i) reviewing and making recommendations
regarding any renovation and expansion plans and capital equipment expenditures
relating to the Managed Professional Association's facilities, (ii) reviewing
and making recommendations regarding all marketing and public relations
services, (iii) reviewing and making recommendations regarding the fee schedule
and collection policies for the Managed Professional Association, (iv) approving
new non-professional ancillary services provided by the Managed Professional
Association, (v) approving and making recommendations regarding agreements with
institutional care providers and third party payors which are not in accordance
with guidelines established by the applicable Local Advisory Council (described
below), (vi) assisting the Managed Professional Association in developing
long-term strategic planning objectives, (vii) making recommendations regarding
the priority of major capital expenditures, (viii) recommending to the Managed
Professional Association the number and type of health care personnel required
for the efficient operation of the Managed Professional Association, (ix) making
recommendations regarding fee disputes, (x) approving the decision to terminate
higher level non-professional personnel employed by the Company who are
performing services at the Managed Professional Associations's offices, (xi)
approving any office relocation or expansion and the establishment of any new
ASC or optical business of the Managed Professional Association and (xii)
adopting, approving and amending the Managed Professional Association's budget.

Local Advisory Councils consist of Company representatives and delegates
from Managed Professional Associations located in each region. Each Managed
Professional Association is entitled to appoint one delegate to the Local
Advisory Council and the Company is entitled to appoint two delegates who will
have voting power equal to the combined voting power of all delegates appointed
by the Managed Professional Association. The Local Advisory Council makes
recommendations to the Company and the Managed Professional Associations as to
the regional policy and strategy issues within the region and as to (i) the
establishment of private pay fee schedules where permitted by law, (ii) the
establishment of guidelines for agreement with institutional health care
providers and third party payors and (iii) any agreement with an institutional
health care provider or third-party payor which materially differs from
guidelines established by the Local Advisory Council. The Local Advisory Council
may also select commercial carriers for professional, casualty and comprehensive
general liability insurance for the Managed Professional Associations in the
region. Finally, the Local Advisory Council considers and determines any issue
upon which the Practice Advisory Council is deadlocked, except for the
determination of the budget of each Managed Professional Association. Decisions
of the Local Advisory Council may be appealed to the National Appeal Council
consisting of one delegate appointed by each of the Local Advisory Councils and
two delegates appointed by the Company.

Each Managed Professional Association has the sole authority to set its
fees for patients, subject to obligations pursuant to managed care contracts. In
connection with managed care contracts the Managed Professional Associations may
contract directly with third-party payors. Otherwise, the managed care contracts
are entered into by the Company and at the option of the Managed Professional
Association the practice can be part of the provider group offered by the
Company in connection with the contract. See "-- Managed Care Contracts."

In accordance with its standard Management Agreement entered into with each
Managed Professional Association, the Company is responsible for, and authorized
to bill, in the Managed Professional Association's name, patients, third-party
payors and other fiscal intermediaries for all billable health care services
rendered by the practice. The Company is responsible for collecting and
receiving all payments for such health care services. Collections from
receivables are deposited by the Company into a cash collateral account from
which all amounts for the payment of expenses and other obligations are drawn.
In the event that any payments for billable services are received by the Managed
Professional Association or its employed professionals, such entities and
individuals are obligated to transfer such funds to the cash collateral account.
The Company has been provided a security interest in the cash collateral account
whereupon the Company is permitted, except where specifically limited by the
Management Agreement, to borrow against the account as well as against
receivables of the practice. The Company has the power to endorse checks payable
to the Managed

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<PAGE> 47

Professional Association. The Company continuously monitors outstanding accounts
receivable and is authorized to take certain collection actions, including
extending the time for payment of accounts, and jointly decides with the Managed
Professional Association concerning any decision to undertake extraordinary
collection efforts. The Company has the obligation to fund shortages in the
account as necessary to pay practice management expenses which must be paid as
they become due. The Company reconciles the results of its billing and
collection efforts for its Managed Professional Associations on a quarterly
basis.

The Management Agreements are terminable by either party if the other party
materially defaults in the performance of any of its obligations under the
Management Agreement and such default continues for a certain period of time
after notice, if the other party files a petition for bankruptcy or upon the
occurrence of other similar events. The Management Agreements may also be
terminated by mutual agreement in writing.

During the term of the Management Agreement, the Company and the Managed
Professional Association agree not to compete with each other in the business of
providing management services to professional associations and agree not to
disclose certain confidential and proprietary information regarding the other.
The Management Agreements require the Company and the Managed Professional
Associations to indemnify and hold harmless the other party against claims
resulting from negligent or intentional acts or omissions.

The Managed Professional Association is required under each Management
Agreement to enter into written employment agreements with each of its
professional employees containing covenants not to compete with the Managed
Professional Association in a specified geographic area for a specified period
of time after termination of the employment agreement. The employment agreements
also require the payments of significant liquidated damages in the event of a
default by shareholders of the Managed Professional Associations and certain
employees of the Managed Professional Associations, early termination by such
shareholders and key non-shareholder professionals, or a breach of the covenant
not to compete.

Upon the expiration of the term of the Management Agreement, or in the
event that the Managed Professional Association breaches the Management
Agreement, and to the extent permitted by law, the Managed Professional
Association is obligated to purchase the related assets owned by the Company
(including the unamortized portion of the Management Agreement) at book value
and assume all related liabilities. For a period of five years from the date of
the Management Agreement, the shareholders of the Managed Professional
Association are required to personally guarantee any note provided in connection
with the repurchase. If the Company breaches the Management Agreement, the
Managed Professional Association has the option to purchase the related assets
owned by the Company pursuant to terms described in the Management Agreement.

STRATEGIC AFFILIATIONS WITH RETAIL OPTICAL COMPANIES

The Company has considered it important to enter into affiliations with
retail optical companies based on their market position, name recognition,
quality of service, accessibility through extended hours, geographic
distribution, and compatibility of management and facilities with the Company's
primary eye care objectives. The Company currently has contractual affiliations
with ECCA Managed Vision Care, Inc. and For Eyes Managed Care, Inc. which have a
combined total of over 300 retail locations in 48 cities in the United States.

Under the Company's strategic relationship with ECCA, the Company makes
available its LADS to provide the full continuum of high quality, cost effective
eye care services to customers at ECCA retail optical locations (Eyemasters,
Binyons and VisionWorks) in close proximity to the LADS. Further, the Company
seeks to expand revenues at ECCA through increasing managed care business which
require easy accessibility to optical products. In return, the Company believes
its strategic affiliations with retail optical companies will assist the LADS in
increasing their managed care market share. The Company believes most HMOs
strongly prefer a recognized retail optical company as the contracted vendor for
eye wear. By "bundling" retail optical services with LADS that provides
comprehensive eye care services at the primary, secondary and tertiary levels,
the Company believes it significantly improves its joint opportunity with ECCA
to obtain managed care business. The Company expects its retail optical
affiliates to serve increasingly as an important access point to its LADS for
fee-for-service and primary care patients. Further, the Company's relationship
with ECCA has resulted in the addition of five internally developed Managed
Provider optometry clinics adjacent to five

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<PAGE> 48

ECCA retail optical locations, along with a tentative agreement to add at least
an additional 20 similar clinics throughout the remainder of 1997. These
arrangements are expected to further increase the above described benefits
sought by both parties in connection with their affiliation.

The Company is a joint venture partner in a general partnership called
"Vision 21 Plus" in which the Company and For Eyes each have a 50% interest. The
objective of the joint venture is to maximize opportunities for the Company in
managed eye care by securing contracts and providing comprehensive, fully
integrated eye care products and services to health care organizations and
self-funded employer groups. The general benefits to For Eyes in its
relationship with the Company are similar to that derived by ECCA. Under the
joint venture agreement, Vision 21 Plus is to enter into, perform and carry out
contracts and agreements related to the development of managed eye care business
and to explore opportunities to develop certain ancillary eye care businesses.

MANAGED CARE CONTRACTS

As an increasing percentage of the population is covered by managed care
organizations, the Company believes that its success will be, in part, dependent
upon its ability to negotiate managed care contracts with HMOs, health insurance
companies and other third-party payors pursuant to which services will be
provided on a risk-sharing or capitated basis. The Company also has contracts
for the provision of certain financial and administrative services related to
its indemnity insurance and fee-for-service plans. Managed care contracts are
typically for one year terms that renew automatically and the contracts are
terminable by either party on sixty days notice.

The Company's typical contracts with third-party health benefits payors
(insurance companies and HMOs) provide that the Company will arrange and pay for
eye care services that are needed by the payor's members in exchange for a fixed
amount per patient per month or a percentage of the premiums paid on behalf of
the patient, without regard to the volume of services that the patient requires.
Under these arrangements, the Company accepts the risk that the cost and
utilization of services may exceed expectations in exchange for its ability to
profit if cost and utilization are kept below expected levels. The Company can
directly benefit by effectively managing costs and utilizing its relationships
with its Affiliated Providers. Because the Company assures the credentials of
the providers, establishes quality and utilization control systems and
implements payment arrangements with the providers, third-party payors are able
to use their limited resources in other areas where they have greater expertise.

RECENT DEVELOPMENTS

In October 1997, the Company closed in escrow one acquisition and entered
into an agreement with respect to another acquisition (the October Acquisitions)
of the business assets of two ophthalmology clinics, two optical dispensaries,
and one ASC located in Brandon, Florida and Minneapolis, Minnesota. Concurrently
with the acquisitions, the Company entered into long-term Management Agreements
with the related professional associations employing three optometrists and five
ophthalmologists.

In September 1997, the Company closed in escrow the September Acquisitions
consisting of the business assets of four ophthalmology clinics and two optical
dispensaries located in Tampa, Florida, Tucson, Arizona and Setauket, New York.
Concurrently with the September Acquisitions, the Company entered into long-term
Management Agreement with the related professional associations employing eight
ophthalmologists.

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<PAGE> 49

Additionally, the Company closed in escrow the acquisition of substantially all
the business assets of a managed care company servicing two capitated managed
care contracts covering over 134,000 patient lives.

GOVERNMENTAL REGULATIONS

General Overview

The health care industry is highly regulated, and there can be no assurance
that the regulatory environment in which the Company operates will not change
significantly and adversely in the future. In general, regulation of health care
providers and companies is increasing.

There are currently several federal and state initiatives designed to amend
regulations relating to the provision of health care services, the access to
health care, the costs of health care and the manner in which health care
providers are reimbursed for their services. However, it is not possible to
predict whether any such initiatives will be enacted as legislation or, if
enacted, what their form, effective dates or impact on the Company will be.

Every state imposes licensing requirements on ophthalmologists,
optometrists and opticians ("Practitioners") and on their facilities and
services. In addition, many states require regulatory approval, including
certificates of need, before establishing certain types of health care
facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities or programs. The
execution of a management agreement with a Practitioner group currently does not
require any health care regulatory approval on the part of the Company or the
Practitioner group. However, in connection with the expansion of existing
operations and the entry into new markets, the Company and its associated
Practitioner groups may become subject to additional regulation.

Much of the revenue of the Affiliated Providers is derived from payments
made by government-sponsored health care programs (principally Medicare). These
programs are subject to substantial regulation. Any change in reimbursement
regulations, policies, practices, interpretations or statutes that places
material limitations on reimbursement amounts or practices could adversely
affect the operations of the Company. Increasing budgetary pressures at both the
federal and state level and the rapidly escalating costs of health care and
reimbursement programs have led, and may continue to lead, to significant
reductions in government reimbursements for certain medical charges and
elimination of coverage for certain individuals under these programs. Federal
legislation could result in a reduction of Medicare funding. The Company cannot
predict at this time whether or when any of such proposals will be adopted or,
if adopted and implemented, what effect such proposals would have on the
Company. Medicare rates for physician services include a work-related component
and a practice expense component. The agency that administers the Medicare
program is required by law to institute a resource-based method for establishing
the practice expense component. The initial proposal to implement this mandate
would result in a redistribution of Medicare funds from specialists and surgeons
to primary care physicians. There are two options currently being considered.
The first would increase optometrists' Medicare revenue by 11% and decrease
ophthalmologists' revenue by 6%. The second would increase optometrists'
Medicare revenue by 11% and decrease ophthalmologists' revenue by 15%. Recently
passed Medicare budget legislation delays implementation of the resource-based
method of paying for physician practice expenses until 1999, except that rates
for certain services typically provided outside a physician's office will be
reduced in 1998 where the practice expense component of the rate exceeds 110% of
the work component. The legislation also calls for a phase in that would be
completed in the year 2002. There can be no assurance that payments under
governmental programs will remain at levels comparable to present levels. In
addition, funds received under these programs are subject to audit with respect
to the proper billing for physician services and accordingly, retroactive
adjustments of revenue from these programs may occur. See "Risk
Factors -- Governmental Regulations."

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<PAGE> 50

Health Care Regulations

Business arrangements between business associations that provide practice
management services and ophthalmologists and optometrists are regulated
extensively at the state and federal levels, including regulation in the
following areas:

Corporate Practice of Optometry and Ophthalmology. The laws of many
states prohibit corporations that are not owned entirely by eye care
professionals from employing eye care professionals, having control over
clinical decision-making, or engaging in other activities that are deemed
to constitute the practice of optometry and ophthalmology. The Company
contracts with professional associations (which are owned by one or more
licensed optometrists or ophthalmologists), which in turn employ or
contract with other licensed optometrists or ophthalmologists to provide
professional services. The Company performs only non-professional services,
does not represent to the public or its customers that it provides
professional eye care services, and is not exercising influence or control
over the practices of the eye care practitioners employed by the
professional associations. Furthermore, the Management Agreements between
the Company and the Professional Associations specifically provide that all
decisions required by law to be made by professionals shall be made by the
professionals. While certain shareholders of such Managed Professional
Associations which perform the practice of medicine or optometry are also
involved in Company management, they act independently when making
decisions on behalf of their professional corporations and the Company has
no right (and does not attempt to exercise any right) to control those
decisions.

Fee-Splitting and Anti-kickback Laws.

State Law. Most states have laws prohibiting paying or receiving any
remuneration, direct or indirect, that is intended to induce referrals for
health care products or services. Many states also prohibit "fee-splitting"
by eye care professionals with any party except other eye care
professionals in the same professional corporation or practice association.
In most cases, these laws apply to the paying of a fee to another person
for referring a patient or otherwise generating business, and do not
prohibit payment of reasonable compensation for facilities and services
(other than the generation of business), even if the payment is based on a
percentage of the practice's revenues.

The Florida fee-splitting law prohibits paying or receiving any
commission, bonus, kickback, or rebate, or engaging in any split-fee
arrangement in any form for patient referrals or patronage. According to a
Florida court of appeals decision interpreting this law, it does not
prohibit a management fee that is based on a percentage of gross income of
a professional practice. However, the Florida Board of Medicine recently
issued an order determining that a management fee charged by a publicly
held national management company based upon a percentage of revenue
constitutes illegal fee-splitting. The case before the Board involved
arrangements that are different from the Company's arrangements in certain
respects, including the fact the management fee was based on a percentage
of the increase in net revenues of the practice after the management
arrangement commenced. The ruling is limited to the facts presented to the
Board. The Board's statement of the rationale for its opinion is unclear as
to whether it would also apply to arrangements similar to those utilized by
the Company. The Board of Medicine's order has been stayed to permit an
appeal to a Florida district court of appeals. The appellate court could
reverse or affirm the Board's opinion, or clarify that it is correct only
in limited situations. If the Board's order is allowed to stand without
clarification, there is a risk that the Company's arrangements with
physicians in the State of Florida could be determined to be in violation
of the fee-splitting statute. Since the same statute applies to
optometrists, a risk would also exist as to the Company's arrangements with
them. The Company's management arrangements provide that if they are
determined in the future to violate any law, the parties agree to use their
best efforts to modify the arrangement to approximate as closely as
possible, consistent with law, the economic position of the parties prior
to the modification and, if they are unable to reach agreement on a new
arrangement, to submit the matter to arbitration for the purpose of
reaching an equitable alternative arrangement. In the event the form of
Management Agreement utilized by the Company in Florida is ever determined
to be in violation of state law, and the parties or the arbitrator are
unable to arrive at a satisfactory modification to the Management
Agreement, there could be a material adverse impact on the Company's
current Florida Management Agreements

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and therefore, the Company's results of operations. On a pro forma basis
for 1996 the revenues under the Florida Management Agreements represented
approximately 5.0% of the Company's total revenue.

An Arizona law prohibits "dividing a professional fee" only if it is
done "for patient referrals," similar to the language of the Florida law.
Other states, such as Illinois and New York, have fee-splitting statutes
that have been interpreted to prohibit any compensation arrangements that
are based on a percentage of a physician's revenue, and such laws shall
preclude the Company from using its typical management arrangements at such
time as Managed Provider relationships are created in those states.

Federal Law. Federal law prohibits the offer, payment, solicitation
or receipt of any form of remuneration in return for the referral of
patients covered by federally funded health care programs such as Medicare
and Medicaid, or in return for purchasing, leasing, ordering or arranging
for the purchase, lease or order of any item or service that is covered by
a federal program. For this reason, the Management Agreements provide that
the Company will not engage in direct marketing to potential sources of
business, but will only assist the practices' personnel in these endeavors
by providing training, marketing materials and technical assistance.

Advertising Restrictions. Many states, prohibit eye care
professionals from using advertising which includes any name other than
their own, or from advertising in any manner that is likely to lead a
person to believe that a non eye care professional is engaged in the
delivery of eye care services. The Management Agreements provide that all
advertising shall conform to these requirements.

Insurance Licensure. Most states impose strict licensure requirements
on health insurance companies, HMOs, and other companies that engage in the
business of insurance. In most states, these laws do not apply to
discounted fee-for-service arrangements or networks that are paid on a
"capitated" basis, i.e. based on the number of covered persons the network
is required to serve without regard to the cost of service actually
rendered, unless the association with which the network provider is
contracting is not a licensed health insurer or HMO. There are exceptions
to these rules in some states. For example, certain states require a
license for a capitated arrangement with any party unless the risk-bearing
association is a professional corporation that employs the eye care
professionals. In the event that the Company is required to become licensed
under these laws, the licensure process can be lengthy and time consuming
and, unless the regulatory authority permits the Company to continue to
operate while the licensure process is progressing, the Company could
experience a material adverse change in its business while the licensure
process is pending. In addition, many of the licensing requirements mandate
strict financial and other requirements which the Company may not
immediately be able to meet. Once licensed, the Company would be subject to
continuing oversight by and reporting to the respective regulatory agency.

Physician Incentive Plans. Medicare regulations impose certain
disclosure requirements on managed care networks that compensate eye care
providers in a manner that is related to the volume of services provided to
Medicare patients (other than services personally provided by the
provider). If such incentive payments exceed 25 percent of the provider's
potential payments, the network is also required to show that the providers
have certain "stop loss" financial projections and to conduct certain
Medicare enrollee surveys.

"Any Willing Provider" Laws. Some states have adopted, and others are
considering, legislation that requires managed care networks to include any
provider who is willing to abide by the terms of the

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<PAGE> 52

network's contracts and/or prohibit termination of providers without cause.
Such laws would limit the ability of the Company to develop effective
managed care networks in such states.

The several laws described above have civil and criminal penalties and have
been subject to limited judicial and regulatory interpretation. They are
enforced by regulatory agencies that are vested with broad discretion in
interpreting their meaning. The Company's agreements and activities have not
been examined by federal or state authorities under these laws and regulations.
For these reasons, there can be no assurance that review of the Company's
business arrangements will not result in determinations that adversely affect
the Company's operations or that certain agreements between the Company and eye
care providers or third party payors will not be held invalid and unenforceable.
In addition, these laws and their interpretation vary from state to state. The
regulatory framework of certain jurisdictions may limit the Company's expansion
into, or ability to continue operations within, such jurisdictions if the
Company is unable to modify its operational structure to conform with such
regulatory framework. Any limitation on the Company's ability to expand could
have an adverse effect on the Company. See "Risk Factors -- Government
Regulations."

COMPETITION

The health care industry is highly competitive and subject to continual
changes in the method in which services are provided and the manner in which
health care providers are selected and compensated. The Company believes that
private and public reforms in the health care industry emphasizing cost
containment and accountability will result in an increasing shift of eye care
from highly fragmented, individual or small practice providers to larger group
practices or other eye care delivery services. Companies in other health care
industry segments, such as managers of other hospital-based specialties or
currently expanding large group practices, some of which have financial and
other resources greater than those of the Company, may become competitors in
providing management to providers of eye care services. Increased competition
could have a material adverse effect on the Company's financial condition and
results of operations. The basis for competition in the practice management area
includes service, pricing, strength of the Company's delivery network (where
applicable), strength of operational systems, the degree of cost efficiencies
and synergies, marketing strength, managed care expertise, patient access and
quality assessments and assurances programs. The Company also competes with
other providers of eye care services for managed care contracts, many of which
have greater financial and other resources than the Company. These include HMOs,
PPOs and private insurers. The basis for competition in the managed care
organization area includes administrative strength, size and quality of network,
marketing abilities, informational systems and operating efficiencies. The
future success of the Company will be directly related to its ability to expand
the managed eye care delivery network geographically, attract reputable
providers, expand the scope of services offered by associated practices (i.e.
not only optical and optometric, but also ophthalmological), and dedicate
resources to an active sales team focused exclusively on the Company's sales
effort.

EMPLOYEES

In most circumstances, at the time of its integration into the Company's
managed operations, each Managed Provider enters into an employment agreement
with his or her respective professional association. The employment agreements
with shareholder professionals are for an initial term of five years and for
non-shareholder professionals are for an initial term of two years. Shareholder
professionals are obligated to work for the full five-year term unless the
professional employment is terminated for reasons such as the professional's
death or disability or the occurrence of certain events outside the
professional's control. The professional employment agreements provide that the
employed professionals will not compete with the

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<PAGE> 53

professional association during the term of the agreement and following the
termination of the agreement for a term of two years for a shareholder
professional and one year for a non-shareholder professional in a specified
geographical area. At November 20, 1997, the Company had approximately 539
employees, of which approximately 97 were employed at the Company's headquarters
61 were employed at Block Vision's office and 442 were employed by the Company
at Managed Provider practices. The Company believes that its relationship with
its employees is good.

INSURANCE

The Company's business entails an inherent risk of claims of liability. The
optometrists and ophthalmologists with which the Company associates and certain
employees of the Company are involved in the delivery of health care services to
the public and, therefore, are exposed to the risk of professional liability
claims. Claims of this nature, if successful, could result in substantial damage
awards to the claimants that may exceed the limits of any applicable insurance
coverage. Insurance against losses related to claims of this type can be
expensive and varies widely from state to state. The Company is indemnified
under its service agreements for claims against the its Managed Providers
practices and maintains a blanket liability insurance policy for itself.
Successful malpractice claims asserted against the Managed Practices, however,
could have an adverse effect on the Company's profitability. The Company
maintains umbrella general liability insurance on a claims-made basis in the
amounts of $5.0 million per incident, and $5.0 million in the aggregate per
annum. While the Company believes it has adequate liability insurance coverage,
there can be no assurance that a pending or future claim or claims will not be
successful or, if successful, will not exceed the limits of available insurance
coverage or that such coverage will continue to be available at acceptable costs
and on favorable terms.

LITIGATION

There are no material pending legal proceedings other than routine
litigation arising in the ordinary course of business. The Company does not
believe that the results of such litigation, even if the outcome were
unfavorable to the Company, would have a material adverse effect on its
financial position.

SERVICE MARKS

The Company has applied for registration of "Vision 21," "Eye Care for the
21st Century," "A Different Point of View," "LADS," and the Company's design
logo with the United States Patent and Trademark Office in 1997, which
applications are all currently pending.

PROPERTIES

The Company leases 9,902 square feet of office space in Largo, Florida, for
its corporate headquarters. The lease is for a term through September 1998, and
the Company believes that the facility is adequate for its current needs.

The Company leases 10,586 square feet of office space in Boca Raton,
Florida for Block Vision's corporate office under a lease expiring May 31, 2001.
The Company believes that the facility is adequate for Block Vision's current
needs.

The Company leases or subleases the clinic locations it manages pursuant to
the Management Agreements with the Managed Professional Associations. The
Company anticipates that expanded facilities will be needed as the Managed
Professional Associations grow. The Company also expects to enter into leases
and subleases in the future as it acquires the allowable assets of Contract
Providers and enters into Management Agreements.

The Company also leases and subleases the ASC facilities it manages. The
Company does not expect that the current ASCs will need to be expanded. However,
the Company does anticipate that it will enter into leases and subleases as it
acquires additional ASC facilities.

The Company also leases minimal but adequate facilities in certain business
regions for regional support.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names and ages of the Company's
directors and executive officers, and positions they hold with the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Theodore N. Gillette, O.D................. 43 Chairman of the Board, Chief Executive Officer,
President and Director(1)
Richard L. Sanchez........................ 44 Chief Development Officer, Secretary and Director
Richard T. Welch.......................... 46 Chief Financial Officer, Treasurer and Director(2)
Richard L. Lindstrom, M.D................. 49 Chief Medical Officer and Director
Michael P. Block.......................... 46 President -- Block Vision
Peter J. Fontaine......................... 43 Director(1)(2)
Herbert U. Pegues, II, M.D................ 47 Director(1)(2)
Bruce S. Maller........................... 43 Director
Jeffrey I. Katz, M.D...................... 51 Director
</TABLE>

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

(1) Member of Compensation Committee
(2) Member of Audit Committee

THEODORE N. GILLETTE, O.D., CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
PRESIDENT AND DIRECTOR. Dr. Gillette has served as Chairman of the Board, Chief
Executive Officer, President, and director of the Company since its inception.
Dr. Gillette has served as President and director of the Company's wholly-owned
subsidiaries, Vision 21 Physician Practice Management Company and Vision 21
Managed Eyecare of Tampa Bay, Inc. since 1984 and 1993, respectively. He
obtained his Doctorate of Optometry from Southern California College of
Optometry in 1979 and his Bachelor of Science from Florida State University in
1975.

RICHARD L. SANCHEZ, CHIEF DEVELOPMENT OFFICER, SECRETARY AND DIRECTOR. Mr.
Sanchez has served as Chief Development Officer, Secretary and director of the
Company since its inception. From 1993 until assuming his positions with the
Company, Mr. Sanchez was Vice President of Marketing and Administration of the
Company's wholly-owned subsidiary, Vision 21 Managed Eyecare of Tampa Bay, Inc.
Prior to November 1992, Mr. Sanchez worked for Exxon Corporation for over 18
years in various management positions including divisional management
responsibility for over 300 employees and $600 million in revenues. Mr. Sanchez
obtained his Bachelor of Science in Chemistry from Florida State University in
1975.

RICHARD T. WELCH, CHIEF FINANCIAL OFFICER, TREASURER AND DIRECTOR. Mr.
Welch has served as Chief Financial Officer, Treasurer and director of the
Company since August 1996. Prior to joining the Company, Mr. Welch served as
Executive Vice President of Finance and Administration and as Vice Chairman of
the Board of Directors of Sports & Recreation, Inc., a public company engaged in
the business of retail sporting goods and equipment sales generating over $500
million in annual revenue, from December 1994 to March 1996. He served as its
Chief Financial Officer and a Director from January 1992 to December 1994. Mr.
Welch is a certified public accountant and he graduated from Louisiana State
University in 1973 with a Bachelor of Science in Management and Accounting.

RICHARD L. LINDSTROM, M.D., CHIEF MEDICAL OFFICER AND DIRECTOR. Dr.
Lindstrom has served as Chief Medical Officer of the Company since September
1996 and has served as a director since January 1997. Since October 1989, Dr.
Lindstrom has maintained a private practice adjacent to the Phillips Eye
Institute in Minneapolis where he serves as the Medical Director for Research
and Teaching. Dr. Lindstrom holds 22 patents in ophthalmology and has given
numerous presentations throughout the world including 13 named lectures. He is
active on multiple educational and advisory boards including chief medical
editor of Ocular Surgery News. He has co-authored two books, published 50
chapters in other books and published over 300 articles in refereed journals.
Dr. Lindstrom graduated from the University of Minnesota Medical School in 1972
followed by a research residency and cornea fellowship at the University of
Minnesota, an Anterior

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<PAGE> 55

Segment fellowship at Mary Shields Eye Hospital in Dallas and a third fellowship
in Glaucoma/Anterior Segment at University Hospitals in Salt Lake City.

MICHAEL P. BLOCK, PRESIDENT -- BLOCK VISION. Mr. Block is the founder of
Block Vision, Inc. and has served as its Chairman of the Board, President and
Treasurer since its inception in 1984. Mr. Block is also Chairman of the Board,
President and Treasurer of BBG-COA, Inc. and Chairman of the Board of BBG-COA,
Inc.'s other subsidiaries. Mr. Block graduated from Farleigh Dickinson
University in 1973 with a Bachelor of Arts degree and has been a licensed
optician in the State of New Jersey since 1974. Mr. Block is a member of the New
Jersey Society of Dispensing Opticians, holds a Fellowship with the National
Academy of Opticianary and is a member of the Board of Overseers of Lynn
University.

PETER J. FONTAINE, DIRECTOR. Mr. Fontaine has served as a director of the
Company since July 1996. Mr. Fontaine is currently the Chairman of the Board of
Directors and Chief Executive Officer of Discount Auto Parts, Inc., a public
company engaged in the business of retail automotive parts sales, and he has
been employed by Discount Auto Parts, Inc. in various capacities since 1977. Mr.
Fontaine has served on the Board of Directors of Discount Auto Parts, Inc. since
1996 and as its Chief Executive Officer since 1994. From 1994 to January 1997,
Mr. Fontaine also served as its President.

HERBERT U. PEGUES, II, M.D., DIRECTOR. Dr. Pegues has served as a director
of the Company since November 1996. He is currently Medical Director for managed
care at the Miami Children's Hospital, Miami, Florida and administers its
physician hospital organization. He has been the Vice President/Medical Director
for Memorial Sisters of Charity Health Network in Houston, Texas from 1995 to
1996. From 1988 to 1992, Dr. Pegues was the Associate Executive Director of
Medical Affairs for Humana Healthcare Plans in Tampa, Florida and Assistant
Clinical Professor of the Department of Family Medicine at the University of
South Florida College of Medicine. Dr. Pegues graduated from the University of
Illinois College of Medicine in 1975. He received his B.A. from Grinnell College
in Grinnell, Iowa and is a Diplomate, Certified by the American Board of Family
Practice and National Board of Medical Examiners. Dr. Pegues is also a Fellow of
the American Academy of Family Physicians, and is licensed to practice medicine
in Florida.

BRUCE S. MALLER, DIRECTOR. Mr. Maller has served as a director of Vision
Twenty-One since November 1996 and is an ophthalmology practice management
consultant to the Company. He is the founder of, and has been the President of,
the BSM Consulting Group of Incline Village, Nevada since 1978. BSM provides
consulting services predominantly in the fields of ophthalmology and cardiology
to individual physicians and corporate clients such as Allergan, Inc., Boston
Scientific, Columbia/HCA Healthcare, Inc. and Vision Twenty-One. Mr. Maller has
served as a Vice-President of Summit Medical Systems, Inc., the parent company
of BSM since October 1995. Mr. Maller is a frequent lecturer for various medical
societies, including the American Academy of Ophthalmology and the American
Society of Cataract and Refractive Surgery. Mr. Maller also heads BSM Healthcare
Publications, which produces works related to the field of medical practice
management. Mr. Maller received his Bachelor of Arts degree from the University
of Colorado in 1975.

JEFFREY I. KATZ, M.D., DIRECTOR. Dr. Katz has served as a director of the
Company since January 1997. Dr. Katz has operated an ophthalmology practice at
the Eye Institute of Southern Arizona in Tucson since 1984. He also serves as a
clinical associate professor in the Department of Ophthalmology at the
University of Arizona in Tucson and is the past president of the Tucson
Ophthalmologic Society. Dr. Katz graduated from George Washington University
Medical School in 1972. He was chief of ophthalmic surgery at El Dorado Hospital
in Tucson and has served as the Medical Director for the Tucson Laboratory of
the Arizona Lions eye Bank since 1978.

Pursuant to the terms of the Company's Articles of Incorporation and
Bylaws, the Board of Directors has the power to set the number of directors. The
number of directors is presently set at eight members. The directors are divided
into three classes. Each director in a particular class is elected to serve a
three-year term or until his or her successor is duly elected and qualified. The
classes are staggered so that their terms expire in successive years resulting
in the election of only one class of directors each year. The Class I directors
are Mr. Welch and Drs. Pegues and Katz, the Class II directors are Messrs.
Sanchez and Fontaine, and the Class III directors are Drs. Gillette and
Lindstrom and Mr. Maller. The initial terms of the current Class I, Class II and
Class III directors will expire at the annual meeting of the stockholders of the
Company in 1998,

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<PAGE> 56

1999 and 2000, respectively. Officers of the Company are appointed by the Board
of Directors and hold office until the first meeting of directors following the
annual meeting of stockholders and until their successors are appointed, subject
to earlier removal by the Board of Directors.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation (the "Articles") provide that a
Director will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except: (i) for any
breach of duty of loyalty; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of laws; (iii) for
liability under the Florida Business Corporation Act (relating to certain
unlawful dividends, stock repurchases or stock redemptions); or (iv) for any
transaction from which the director derived any improper personal benefit. The
Company's Bylaws provides that the Company will indemnify each director and such
of the Company's officers, employees and agents as the Board of Directors shall
determine from time to time to the fullest extent provided by the Florida
Business Corporation Act.

The Company has entered into indemnification agreements (the
"Indemnification Agreements") with all of its directors and certain of its
officers. Similar Indemnification Agreements may from time to time be entered
into with additional officers of the Company or certain other employees or
agents of the Company. At present, there is no material pending litigation or
proceeding involving a director, officer, employee or agent of the Company where
indemnification is required or permitted, nor is the Company aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification. The Company is also empowered under its Articles to purchase
and maintain insurance or furnish similar protection on behalf of any person who
it is required or permitted to indemnify and the Company has acquired such
insurance in connection with such individuals that the Company believes is
warranted.

DIRECTORS' COMPENSATION

Directors are reimbursed for expenses in connection with attendance at
Board of Director and Committee meetings. Directors who are not officers of the
Company or affiliates of major stockholders are paid $1,000 per meeting plus
expenses. In addition, non-employee directors may be awarded options under the
Company's Stock Option Plans. See "-- Stock Option Plans."

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Audit Committee, the members of
which are Messrs. Welch, Fontaine and Pegues, and a Compensation Committee, the
members of which are Messrs. Gillette, Fontaine and Pegues. A majority of the
members of the Audit and Compensation Committees are non-employee directors.

The functions of the Audit Committee are to recommend annually to the Board
of Directors the appointment of the independent public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit, to review the results thereof with the independent public accountants,
review and approve non-audit services of the independent public accountants,
review compliance with existing major accounting and financial policies of the
Company, review the adequacy of the financial organization of the Company,
review management's procedures and policies relative to the adequacy of the
Company's internal accounting controls, review compliance with federal and state
laws relating to accounting practices and review and approve (with the
concurrence of a majority of the disinterested directors of the Company)
transactions, if any, with affiliated parties.

The functions of the Compensation Committee are to review and approve
annual salaries and bonuses for the executive officers, review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefit plans or changes thereto, to administer the Company's stock option
plans, and to carry out the responsibilities required by rules of the Securities
and Exchange Commission.

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<PAGE> 57

EXECUTIVE COMPENSATION

The following table sets forth information with respect to all compensation
paid or accrued in the year ended December 31, 1996, for services rendered in
all capacities to the Company by the Chief Executive Officer and the one other
executive officer of the Company who earned in excess of $100,000 in salary and
bonus for 1996. For the year ended December 31, 1996, no officer of the Company
other than Theodore N. Gillette, Chief Executive Officer and Richard L. Sanchez,
Chief Development Officer, received compensation in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------
NAME AND PRINCIPAL POSITION YEAR SALARY
- --------------------------- ---- ---------
<S> <C> <C>
Theodore N. Gillette, O.D., Chief Executive Officer......... 1996 $189,072
Richard L. Sanchez, Chief Development Officer............... 1996 143,984
</TABLE>

EMPLOYMENT AGREEMENTS

Theodore N. Gillette, O.D. and Richard L. Sanchez have each entered into
Employment Agreements with the Company (the "Employment Agreements"), pursuant
to which they have agreed to serve as the Company's Chief Executive Officer and
Chief Development Officer, respectively. Each Employment Agreement is for a term
of five years ending on September 30, 2001, and is renewable for subsequent
one-year terms by mutual agreement of the parties. Dr. Gillette and Mr. Sanchez
will receive annual base salaries of not less than $220,000 and $180,000,
respectively, which are subject to review by the Compensation Committee of the
Board of Directors at annual intervals and may be adjusted from time to time as
the Compensation Committee deems to be appropriate. Under the Employment
Agreements, Dr. Gillette and Mr. Sanchez have agreed to devote their best
efforts and substantially all of their business time and services to the
business and affairs of the Company. Dr. Gillette and Mr. Sanchez will each be
eligible for annual incentive bonuses, up to 50% of their annual base salary, in
an amount to be determined by the Compensation Committee to the extent that the
Company achieves certain performance measures set by the Committee. Dr. Gillette
and Mr. Sanchez are also entitled to receive stock options or other stock awards
under the Company's Stock Incentive Plan to the extent that the Compensation
Committee determines such awards to be appropriate. Each Employment Agreement
provides that in the event that employment is terminated by the Company other
than (i) for cause, (ii) upon death or disability, or (iii) upon voluntary
termination by the employee, such employee will be entitled to receive from the
Company monthly payments equal to one-twelfth of the employee's annual base
salary for each month during the remaining term of such Employment Agreement,
but not less than twenty-four months. In the event of a change in control (as
defined in the Employment Agreements), each Employment Agreement provides that
if such employee's employment is terminated other than for cause within twelve
months following a change of control of the Company, the Company shall pay such
employee thirty-six monthly payments of one-twelfth of the sum of such
employee's base salary plus his previous year's bonus. Each Employment Agreement
also contains a covenant not to compete with the Company for a period of
twenty-four months following termination of employment.

The Company and Richard T. Welch are parties to an Employment Agreement
(the "Employment Agreement"), pursuant to which Mr. Welch has agreed to serve as
Chief Financial Officer of the Company. The term of the Employment Agreement is
for two years ending on August 31, 1998, and is renewable for subsequent
one-year terms by mutual agreement of the parties. Under the Employment
Agreement, Mr. Welch will receive an annual base salary of not less than
$150,000 which is subject to review by the Compensation Committee of the Board
of Directors at annual intervals and may be adjusted from time to time as the
Compensation Committee deems to be appropriate. Under the Employment Agreement,
Mr. Welch has agreed to devote his best efforts and substantially all of his
business time and services to the business and affairs of the Company. Mr. Welch
will be eligible for annual incentive bonuses, up to 50% of his annual base
salary, in an amount to be determined by the Compensation Committee of the Board
of Directors to the extent that the Company achieves certain performance
measures set by the Committee. Under the Employment

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<PAGE> 58

Agreement, Mr. Welch received non-statutory stock options to purchase 80,000
shares of Common Stock pursuant to the Company's Stock Incentive Plan. The
options are exercisable at a price of $3.11 per share and 64,000 shares became
vested at the time of the Company's Initial Public Offering on August 18, 1997.
The remaining 16,000 shares vest pro rata on an equal basis over a four-year
period. Additionally, in July 1997 and October 1997, respectively, Mr. Welch
received non-statutory stock options to purchase 20,000 and 50,000 shares of
Common Stock, respectively, pursuant to the Company's Stock Incentive Plan.
20,000 of the options are exercisable at $10.00 per share and vest equally on
April 1, 1999 and April 1, 2000. 50,000 of the options are exercisable at
$11.375 per share and vest pro rata on an equal basis over a four year period
commencing October 27, 1999. Mr. Welch is also entitled to receive such
additional stock options or other stock awards under the Company's Stock
Incentive Plan to the extent the Compensation Committee determines such awards
to be appropriate. The Employment Agreement provides that in the event that
employment is terminated by the Company other than (i) for cause, (ii) upon
death or disability, or (iii) upon voluntary termination by the employee, such
employee shall be entitled to receive from the Company a series of monthly
payments equal to one-twelfth of the employee's annual base salary for each
month during the remaining term of such Employment Agreement, but not less than
twelve months. In the event of a change in control (as defined in the Employment
Agreement), the Employment Agreement provides that if such employee's employment
is terminated other than for cause within twelve months following a change of
control of the Company, the Company shall pay such employee a series of twelve
monthly payments of one-twelfth of the sum of such employee's base salary plus
his previous year's bonus. The Employment Agreement also contains a covenant not
to compete with the Company for a period of twelve months following termination
of employment.

At the time of the Block Acquisition, Michael Block entered into an
employment agreement with the Company (the "Employment Agreement"), pursuant to
which he has agreed to serve as President of Block Vision, Inc., the Company's
wholly-owned subsidiary. The Employment Agreement is for a term of two years
ending on October 30, 1999, and is renewable for subsequent one-year terms by
mutual agreement of the parties. Mr. Block will receive an annual base salary of
$250,000 which is subject to review by the Compensation Committee of the Board
of Directors at annual intervals and may be adjusted from time to time as the
Compensation Committee deems appropriate. Under the Employment Agreement, Mr.
Block has agreed to devote his best efforts and substantially all of his
business time and services to the business and affairs of Block Vision. Mr.
Block will be eligible for an annual incentive bonus of up to 25% of his annual
base salary, if Block Vision's earnings before interest, taxes, depreciation and
amortization reaches certain levels, which target levels will increase in 1999.
Under the Employment Agreement, Mr. Block received non-statutory stock options
to purchase 40,000 shares of Common Stock, pursuant to the Company's Stock
Incentive Plan. The options are exercisable at a price of $13.20 per share and
vest pro rata on an equal basis over a four-year period subject to acceleration
upon the occurrence of certain events. In the event 25% of Block Vision's
capitated lives are expanded to include medical and surgical services, 50% of
the unvested options would vest at such time and in the event that 50% of Block
Vision's capitated lives are expanded to include medical and surgical services,
all remaining options will vest at such time. Mr. Block is also entitled to
receive such additional stock options or other stock awards under the Company's
Stock Incentive Plan to the extent determined by the Compensation Committee as
successful integration and growth of Block Vision's occurs. The Employment
Agreement provides that in the event that employment is terminated by the
Company other than (i) for cause, (ii) upon death or disability, or (iii) upon
voluntary termination by the employee, such employee shall be entitled to
receive from the Company a series of monthly payments equal to one-twelfth of
the employee's annual base salary for each month during the remaining term of
such employment agreement, but not less than twelve months. In the event of a
change in control (as defined in the Employment Agreement), the Employment
Agreement provides that if such employee's employment is terminated other than
for cause within twelve months following a change of control of the Company, the
Company shall pay such employee a series of twelve monthly payments of
one-twelfth of the sum of such employee's base salary plus his previous year's
bonus. The Employment Agreement also contains a covenant not to compete with the
Company for a period of three years following termination of employment.

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<PAGE> 59

STOCK OPTION PLANS

In July 1996, the Board of Directors adopted, and the stockholders of the
Company approved, the 1996 Stock Incentive Plan (the "Incentive Plan") and the
1996 Affiliated Professionals Stock Plan (the "Professionals Plan," and together
with the Incentive Plan, the "Plans"). The purpose of the Plans is to provide
non-employee directors, officers, key employees, advisors and medical
professionals employed by Affiliated Practices with additional incentives by
increasing their proprietary interest in the Company or tying a portion of their
compensation to increases in the price of the Company's Common Stock. The
aggregate number of shares of Common Stock subject to the Plans is 1,600,000
shares.

The Incentive Plan permits the Company to grant incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonqualified stock options ("Nonqualified Options"), stock
appreciation rights ("SARs"), restricted shares of Common Stock ("Restricted
Shares") and performance shares of Common Stock (individually, an "Award" and
collectively, "Awards") to directors, officers, key employees and consultants of
the Company. The Professionals Plan permits the Company to grant Awards of
Nonqualified Stock Options, SARs and Restricted Shares to medical professionals
employed by Affiliated Practices. The various types of Awards are described in
more detail below.

The Incentive Plan is intended to qualify for favorable treatment under
Section 16 of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder
("Rule 16b-3") and Awards under the Incentive Plan are intended to qualify for
treatment as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code ("Section 162(m)"). Following the consummation of this
Offering, the Plans will be administered by the Compensation Committee, which
will be comprised of two or more non-employee directors who are "disinterested"
within the meaning of Rule 16b-3 and Section 162(m) (the "Committee"). The
Committee will have, subject to the terms of the Plans, the sole authority to
grant Awards under the Plans, to construe and interpret the Plans and to make
all other determinations and take any and all actions necessary or advisable for
the administration of the Plans. Prior to the consummation of this Offering, the
Plans have been administered by the Company's full Board of Directors.

Options. Options for the purchase of shares of the Common Stock may be
granted under both Plans. The exercise price for the ISOs granted under the
Incentive Plan may be no less than the fair market value of the Common Stock on
the date of grant (or 110% in the case of ISOs granted to employees owning more
than 10% of the Common Stock). Only employees of the Company are eligible to
receive ISOs. The exercise price for Nonqualified Options granted under the
Plans will generally be the fair market value of the Common Stock on the date of
grant; however, the Compensation Committee may set an exercise price at less
than fair market value if it determines that special circumstances warrant a
lower price. Options will be exercisable during the period specified in each
option agreement and will generally be exercisable in installments pursuant to a
vesting schedule to be designated by the Committee. No Option will remain
exercisable later than ten years after the date of grant (or five years from the
date of grant in the case of ISOs granted to holders of more than 10% of the
Common Stock).

SARs. Stock appreciation rights may be granted under both Plans in tandem
with Options. An SAR represents the right to receive from the Company the
difference (the "Spread"), or a percentage thereof not in excess of 100 percent,
between the exercise price of the related Option and the market value of the
Common Stock on the date of exercise of the SAR. SARs may only be exercised at a
time when the related Option is exercisable and the Spread is positive, and the
exercise requires the surrender of the related Option for cancellation. The
amount payable by the Company upon exercise may be paid in cash, Common Stock or
a combination thereof, as determined by the Committee.

Restricted Shares. Restricted Shares may be granted under both Plans. An
award of Restricted Shares involves the immediate issuance by the Company to a
participating employee of ownership of a specific number of shares of Common
Stock in consideration of the performance of services. The employee is entitled
immediately to voting, dividend and other ownership rights in the shares. The
issuance may be made without additional consideration, or for payment of an
amount that is less than the market value of the shares on the date of grant, as
the Committee may determine. Restricted Shares must be subject to a "substantial
risk of

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<PAGE> 60

forfeiture" for a period to be determined by the Committee. An example of such
forfeiture would be a provision that the employee's Restricted Shares would be
forfeited if he or she ceased to serve the Company as an officer at any time
before the end of a specified period of years. In order to enforce these
forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the
Committee for the period during which the forfeiture provisions are to continue.
The Committee may also condition the vesting of the Restricted Shares on the
achievement of specified performance objectives ("Management Objectives").

Performance Shares. Performance Shares may be granted under the Incentive
Plan. A Performance Share is the equivalent of one share of Common Stock. An
Incentive Plan participant may be granted any number of Performance Shares. The
participant will be given one or more Management Objectives to meet within a
specified period (the "Performance Period"). Maximum or minimum level of
acceptable achievement for each Management Objective will be established by the
Committee. If, by the end of the Performance Period, the specified Management
Objectives have been satisfied, the participant will be deemed to have fully
earned the Performance Shares. If the Management Objectives have not been
satisfied in full but predetermined minimum level of acceptable achievement has
been attained or exceeded, the participant will be deemed to have partly earned
the Performance Shares in accordance with a predetermined formula. To the extent
earned, the Performance Shares will be paid to the participant at the time and
in the manner determined by the Committee in cash or in shares of Common Stock
or any combination thereof.

Management Objectives may be described in terms of either Company-wide
objectives or objectives that are related to the performance of a department or
function within the Company or with respect to which the participant provides
services. The Committee may adjust any Management Objectives and the related
minimum level of acceptable achievement if, in its judgment, transactions or
events have occurred after the date of grant that are unrelated to the
participant's performance and result in distortion of the Management Objectives
or the related minimum level of acceptable achievement.

Notwithstanding the provisions of any agreement relating to an Award, in
the event of a change or threatened "change in control" (as defined in the
Plans) of the Company and in the event of certain mergers and reorganizations of
the Company, the Committee will have the discretion to (i) declare all Options
immediately exercisable, (ii) determine that all or any portion of conditions
associated with a Restricted Share or Performance Share award have been met,
(iii) grant SARs or cash bonus awards to holders of outstanding Options, (iv)
pay cash in exchange for the cancellation of Nonqualified Options, SARs,
Performance Share Awards or Restricted Shares, or (v) make other adjustments or
amendments to the Plans and outstanding Awards and/or substitute new Awards.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Executive compensation in the past has been determined by the Company's
chief executive officer and approved by the Board of Directors. After completion
of the Initial Public Offering, the Company established the Compensation
Committee of the Board of Directors, which is comprised of a majority of
non-employee independent directors and is responsible for establishing salaries,
bonuses and other compensation for the Company's executive officers.

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<PAGE> 61

CERTAIN TRANSACTIONS

The information set forth herein briefly describes transactions since the
beginning of the Company's last fiscal year between the Company and its
directors, officers and 5% stockholders. These transactions have been approved
by the Company's Board of Directors. Transactions after the Company's Initial
Public Offering, if any, with affiliated parties were approved by a majority of
the Company's independent directors and were on terms no less favorable to the
Company than those that could be obtained from unaffiliated parties.

As part of a reorganization of the Company in November 1996, the Company
completed an acquisition of all the outstanding stock of Vision 21 Managed
Eyecare of Tampa Bay, Inc. in exchange for a certain number of shares of Common
Stock of the Company. In addition, in November 1996, the Company completed an
acquisition of all of the outstanding stock of Dr. Gillette & Associates, Inc.
(renamed Vision 21 Physician Practice Management Company). The shareholders of
these entities acquired by the Company were Theodore Gillette, Richard Sanchez
and Peter Fontaine. Dr. Gillette and Mr. Sanchez are executive officers and
directors of the Company and Mr. Fontaine is a director of the Company. In
connection with these transactions, Gillette, Sanchez and Fontaine received an
aggregate of 1,724,574, 600,302 and 360,442 shares of Common Stock,
respectively.

Effective December 1, 1996 the Company acquired all the business assets of
Gillette, Beiler & Associates, #6965 P.A. ("G&A"), a Florida professional
association owned in part by Theodore Gillette, an executive officer and
director of the Company, with nine optometry offices located in Tampa, Port
Richey, Clearwater, St. Petersburg, Palm Harbor, and Seminole, Florida. As
consideration for the acquisition, G&A received 373,971 shares of Common Stock,
of which Dr. Gillette is the beneficial owner of 196,064 shares, and a
promissory note in the amount of $416,103, which bears interest at 8% per annum.
The promissory note was repaid in full from the net proceeds of the Initial
Public Offering.

The Company has an agreement to provide practice management services to
G&A, pursuant to which G&A made payments of $392,206, $423,890 and $538,982 in
1994, 1995 and 1996, respectively. In December 1996, the Company and G&A entered
into a new Management Agreement pursuant to which the Company provides practice
management services for a management fee equal to a gross percentage of the
revenue of G&A's eye care practice. Payments earned by the Company under the new
Management Agreement in the nine months ended September 30, 1997 were $920,612.

The Company entered into an Agreement with Bruce S. Maller, a director of
the Company, dated May 10, 1996, pursuant to which the Company issued to Maller
144,705 shares of Common Stock for services previously rendered by Mr. Maller to
the Company. In October 1996, the Company finalized a five-year Advisory
Agreement with Mr. Maller (the "Advisory Agreement"), pursuant to which Mr.
Maller agreed to render certain advisory services to the Company, including the
identification and integration of ophthalmology practices and the provision of
assistance to the Company with its strategic planning, growth and development.
In consideration for such services, the Company issued to Mr. Maller 125,627
shares of Common Stock. A decreasing percentage of such shares are subject to
forfeiture in the event the Advisory Agreement is terminated "for cause" prior
to January 1, 2000. The shares issued to Mr. Maller pursuant to the Advisory
Agreement are subject to certain piggyback and demand registration rights. See
"Description of Capital Stock -- Registration Rights."

The Company entered into a Services Agreement with the BSM Consulting Group
("BSM"), a consulting company which employs Mr. Maller, dated as of March 10,
1996 (the "Services Agreement"), pursuant to which BSM agreed to provide
substantial consulting services to assist the Company with its operational and
management development. The Services Agreement is for a term of five years and
the fees payable to BSM for such services are approximately $40,000 per month.
Payments earned by BSM under the Services Agreement were $332,128 and $443,344
in 1996 and the nine months ended September 30, 1997, respectively.

The Company borrowed $3.0 million from Mr. Fontaine pursuant to a
Promissory Note dated June 1996 (the "Fontaine Note") bearing interest at 8% per
annum. The Fontaine Note was repaid in full from the proceeds of the Initial
Public Offering. In addition, the Company borrowed $200,000 and $500,000 from

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<PAGE> 62

Mr. Fontaine in November and December 1996, respectively, for working capital
pursuant to unsecured promissory notes bearing interest at 8.5% per annum. The
unsecured promissory notes were repaid in full from the net proceeds from the
Initial Public Offering.

Effective September 9, 1996, the Company entered into a Services Agreement
(the "Services Agreement") with Dr. Richard L. Lindstrom, a director of the
Company, who pursuant to the Services Agreement provides certain consulting and
advisory services primarily related to assisting the Company in the
identification and integration of Affiliated Providers into the Company's
managed eye care delivery network and assistance in the development of
Affiliated Provider practices. In consideration for his services, Dr. Lindstrom
is paid an annual base salary of $60,000 and received 108,133 shares of Common
Stock, of which 40% is non-forfeitable and the remaining 60% is subject to
forfeiture in various amounts if the Services Agreement is terminated by the
Company for cause or by Dr. Lindstrom prior to August 31, 2000. The shares
issued to Dr. Lindstrom pursuant to the Services Agreement are subject to
certain piggyback and demand registration rights. See "Description of Capital
Stock -- Registration Rights."

Effective December 1, 1996, the Company acquired all the business assets of
Lindstrom, Samuelson and Hardten Ophthalmology Associates, P.A. ("Lindstrom
P.A."), in which Dr. Lindstrom owns a majority interest, at a purchase price of
247,108 shares of Common Stock of the Company, of which Lindstrom received
151,732 shares, and a promissory note in the amount of $460,416 bearing interest
at 8% per annum. The shares are subject to certain registration rights. See
"Description of Capital Stock -- Registration Rights." In connection with the
acquisition, Lindstrom P.A. and the Company entered into a Management Agreement
which provides for a management fee of 30% of the amounts remaining after
certain expenses are paid as set forth in the Management Agreement. The Company
earned fees of $338,435 under the Management Agreement in the nine months ended
September 30, 1997. The promissory note was repaid in full from the net proceeds
of the Initial Public Offering.

The Company acquired all of the stock of Midwest Eye Care Alliance, Inc.
("M.E.C.A."), a corporation in which Dr. Lindstrom owned an 8% interest, for a
total purchase price of $700,000, which was paid in full from the net proceeds
from the Initial Public Offering. The Company also entered into Regional
Services Agreements with the shareholders of M.E.C.A., including Dr. Lindstrom
(collectively the "Coordinators"), effective at the time of an initial public
offering of the Company (collectively the "Regional Agreements"). The Regional
Agreements provide for the Coordinators to render advisory services to the
Company in connection with identifying potential ophthalmology and optometry
practices in the Midwestern region of the United States for acquisition or
affiliation and assisting the Company in negotiating agreements with such
practices in exchange for specific cash compensation that varies among the
Regional Agreements. Dr. Lindstrom will receive a total of $40,000 per year for
each of three years for his advisory services.

Effective December 1, 1996, the Company acquired all the business assets of
Eye Institute of Southern Arizona, P.C. ("Eye Institute"), an Arizona
professional corporation located in Tucson, Arizona and engaged in the provision
of ophthalmology services. Jeffrey I. Katz, M.D., a director of the Company,
owns a 50% interest in Eye Institute. The acquisition was accomplished by a
merger of Eye Institute into the Company's wholly-owned subsidiary, Vision 21 of
Southern Arizona, Inc. As consideration for the acquisition, Dr. Katz received
198,306 shares Common Stock. The shares are subject to certain registration
rights. See "Description of Capital Stock -- Registration Rights." As a result
of the merger of Eye Institute with and into Vision 21 of Southern Arizona,
Inc., Vision 21 of Southern Arizona, Inc. assumed Eye Institute's role as
business manager under a Management Agreement between Eye Institute and Vital
Sight, P.C., a newly-formed Arizona professional corporation to which Eye
Institute had transferred its medical assets prior to the merger. The Management
Agreement provides for a management fee of 35% of the amounts remaining after
certain expenses are paid as set forth in the Management Agreement. The Company
earned fees of $441,185 under the Management Agreement in the nine months ended
September 30, 1997. The Company, the former shareholders of Eye Institute and
certain other related entities closed in escrow an agreement dated as of July
31, 1997 to transfer certain ASC assets from Vital Sight, P.C. and such
shareholders' limited liability company to Vision 21 of Southern Arizona, Inc.
When the State of Arizona approves Vital Sight, P.C.'s application for a license
to conduct an ASC business (which is expected by the end of November 1997), all
income associated with such ASC business shall be subject to the business
management fee. The Company's

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obligation to purchase the ASC business shall terminate if the ASC license is
not obtained within eighteen months of the closing date of the merger of Eye
Institute into Vision Twenty-One of Southern Arizona, Inc. As consideration for
this transaction, the Dr. Katz will be entitled, subject to post-closing
adjustments, to receive 69,169 shares of Common Stock.

Effective October 31, 1997, the Company acquired all of the stock of
BBG-COA, Inc., a corporation in which Michael P. Block, President of Block
Vision, Inc., and his wife owned a 25.6% interest, for a total purchase price of
approximately $35.0 million consisting of cash and Common Stock of which Mr.
Block received his pro rata share. The shares are subject to certain
registration rights. See "Description of Capital Stock -- Registration Rights."
Additionally, Mr. and Mrs. Block may receive up to an additional 56,226 shares
of Common Stock contingent upon Block Vision successfully attaining certain 1998
targets agreed to as part of the Block Acquisition. See "The
Acquisitions -- Block Acquisition."

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<PAGE> 64

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of the Company's outstanding Common Stock as of November 20, 1997 and
as adjusted to reflect the sale of the Common Stock offered hereby by (i) each
person or entity known by the Company to be the beneficial owners of more than
5% of the outstanding shares of Common Stock, (ii) each director or executive
officer of the Company who beneficially owns any shares of Common Stock, and
(iii) all directors and executive officers of the Company as a group. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of Common Stock owned by them, except to the
extent such power may be shared with a spouse.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(2)
SHARES BENEFICIALLY --------------------
NAME AND ADDRESS OWNED PRIOR TO PRIOR TO AFTER
OF BENEFICIAL OWNER(1) THE OFFERING(2) OFFERING OFFERING
- ---------------------- ------------------- -------- --------
<S> <C> <C> <C>
Theodore N. Gillette, O.D.(3)............................... 1,898,558 20.6% 16.5%
Gillette Family Limited Partnership(4)...................... 1,702,494 18.5 14.8
Sanchez Family Limited Partnership(5)....................... 593,329 6.4 5.2
Richard L. Sanchez(6)....................................... 593,329 6.4 5.2
Peter J. Fontaine........................................... 360,422 3.9 3.1
Bruce S. Maller(7).......................................... 270,331 2.9 2.3
BSM Investments Ltd......................................... 108,976 1.2 1.0
Jeffrey I. Katz, M.D........................................ 267,475 2.9 2.3
Richard L. Lindstrom, M.D................................... 259,864 2.8 2.3
Michael P. Block(8)......................................... 117,340 1.3 1.0
Richard T. Welch(9)......................................... 64,000 * *
All directors and executive officers as a group (8
persons).................................................. 3,831,319 41.6 33.3
</TABLE>

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

* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 7209 Bryan Dairy Road, Largo, Florida 34647. See
"Management -- Directors and Executive Officers," "Management -- Employment
Agreements" and "Certain Transactions" for discussion of any material
relationship which any Selling Stockholder has had with the Company within
the past three years.
(2) Based on 9,207,449 shares of Common Stock outstanding prior to this Offering
(excluding 438,596 Contingent Shares held in escrow in conjunction with
certain acquisitions) and 11,507,449 shares of Common Stock to be
outstanding immediately after the Offering excluding Contingent Shares
(assuming the Underwriters' over-allotment option is not exercised).
Pursuant to the rules of the Securities and Exchange Commission (the
"Commission"), certain shares of Common Stock which a person has the right
to acquire within 60 days of the date hereof pursuant to the exercise of
stock options are deemed to be outstanding for the purpose of computing the
percentage ownership of such person but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(3) Represents (a) 1,702,494 shares owned by the Gillette Family Limited
Partnership over which Dr. Theodore Gillette has voting control as the sole
shareholder of the corporate general partners (b) 9,077 shares owned by
Gillette, Beiler & Associates, P.A. and (c) 186,987 shares owned
individually. See "Certain Transactions."
(4) Shares are owned by the Gillette Family Limited Partnership, a Nevada
Limited Partnership, in which Dr. Theodore Gillette exercises voting
control.
(5) Shares are owned by the Sanchez Family Limited Partnership, a Nevada Limited
Partnership in which Richard L. Sanchez exercises voting control.
(6) Represents 593,329 shares owned by the Sanchez Family Limited Partnership
over which Richard L. Sanchez has voting control.
(7) Includes 108,976 owned by BSM Investment, Ltd., over which Bruce Maller has
voting control.
(8) Represents shares received in connection with the Block Acquisition and
includes 58,670 shares owned by Mr. Block's wife.
(9) Represents shares issuable pursuant to options to purchase an aggregate of
80,000 shares, of which 64,000 shares have vested and are fully exercisable.

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<PAGE> 65

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, and (ii) 10,000,000 shares of preferred stock, $.001 par
value per share (the "Preferred Stock"). As of November 20, 1997, an aggregate
of 9,207,449 shares of Common Stock were outstanding and held of record by 132
stockholders and no shares of Preferred Stock were outstanding. Upon completion
of the Offering the Company will have 11,507,449 shares of Common Stock
outstanding (11,852,449 if the Underwriters' over-allotment option is exercised
in full). Copies of the Articles of Incorporation and Bylaws have been filed as
exhibits to the Registration Statement and are incorporated by reference herein.

COMMON STOCK

Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to the prior rights of the
holders of Preferred Stock, holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors from funds legally
available therefor, and to share ratably in the assets of the Company legally
available for distribution to the stockholders in the event of liquidation or
dissolution. The Common Stock has no preemptive rights and no subscription or
redemption privileges. The Common Stock does not have cumulative voting rights,
which means the holder or holders of more than half of the shares voting for the
election of directors can elect all the directors then being elected. See
"Principal and Selling Shareholders." All the outstanding shares of Common Stock
are, and the shares being offered hereby will be, when issued and paid for,
fully paid and not liable for further call or assessment.

WARRANTS

In December 1996, the Company issued to certain unrelated parties warrants
exchangeable for an aggregate maximum of 208,333 shares of Common Stock at an
exchange price ranging from $6.00 to $7.11 per share, or in a cashless exchange
for a reduced number of shares pursuant to a formula. The warrants are
exchangeable at any time through August 18, 2002.

In February 1997, the Company issued to Piper Jaffray Healthcare Fund II
Limited Partnership ("Piper Jaffray") a warrant exchangeable for an aggregate
maximum of 333,333 shares of Common Stock at an exchange price ranging from
$6.00 to $7.11, or in a cashless exchange for a reduced number of shares
pursuant to a formula. The warrants are exchangeable at any time through August
18, 2002.

In July 1997, the Company entered into an amended and restated credit
facility in the aggregate amount of $4.9 million with Prudential, pursuant to
the Note and Warrant Purchase Agreement. Under the Note and Warrant Purchase
Agreement, the Company sold to Prudential for $126,000 a warrant exchangeable
for 210,000 shares of Common Stock at any time during the five-year period
commencing at the effective date of the Initial Public Offering, at an exercise
price of $10.00 per share (equal to the Initial Public Offering price). See
"Underwriting," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 11 to Notes to Consolidated Financial
Statements.

In October 1997, the Company received a commitment from Prudential Credit
for a credit facility in the aggregate amount of $37.0 million pursuant to the
Bridge Credit Facility. As a commitment fee for the Bridge Credit Facility,
Prudential Credit received warrants to purchase up to 50,000 shares of Common
Stock at an exercise price equal to the closing price of the Common Stock on the
date of issuance, for which Prudential Credit paid the Company $2.80 per
warrant. In addition, upon borrowings by the Company, Prudential Credit will
receive a funding fee which includes warrants to purchase up to 150,000 shares
of Common Stock calculated on a pro rata basis with respect to the actual amount
borrowed by the Company at an exercise price equal to the closing price of the
Common Stock on the date of issuance, for which Prudential Credit will pay to
the Company $2.80 per warrant. The Company has borrowed approximately $3.5
million under the Bridge Credit Facility and issued approximately 14,000
warrants for which Prudential Credit has paid in the aggregate approximately
$40,000.

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<PAGE> 66

In addition, in October 1997 the Company entered into an advisory agreement
with Prudential Securities Incorporated whereby Prudential Securities
Incorporated provides certain advisory services in connection with the Block
Acquisition. Prudential Securities Incorporated will receive an advisory fee
which includes warrants to purchase up to 25,000 shares of Common Stock at an
exercise price of $13.25 per share.

In October 1997, Prudential Securities Incorporated also received warrants
to purchase up to 10,000 shares of Common Stock at an exercise price of $13.625
per share as a retainer in connection with the Company's obtaining an
anticipated bank credit facility which is expected to provide for borrowings of
up to approximately $50.0 million. The Company expects to obtain such bank
credit facility by the end of 1997. Upon closing of such bank credit facility,
Prudential Securities Incorporated will receive certain compensation including
warrants to purchase an additional 40,000 shares of Common Stock at an exercise
price per share equal to the price of the Common Stock as of the date of closing
of such bank credit facility.

PREFERRED STOCK

The Company is authorized to issue 10,000,000 shares of Preferred Stock.
The Preferred Stock may be issued from time to time in one or more series, and
the Board of Directors is authorized to fix the dividend rights, dividend rates,
any conversion or exchange rights, any voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
the liquidation preferences and any other rights, preferences, privileges and
restrictions of any series of Preferred Stock and the number of shares
constituting such series and the designation thereof. The Company has no present
plans to issue any shares of Preferred Stock.

Depending upon the rights of such Preferred Stock, the issuance of
Preferred Stock could have an adverse effect on holders of Common Stock by
delaying or preventing a change in control of the Company, making removal of the
present management of the Company more difficult or resulting in restrictions
upon the payment of dividends and other distributions to the holders of Common
Stock.

CERTAIN FLORIDA LEGISLATION

The Company is subject to (i) the Florida Control Share Act, which
generally provides that shares acquired in excess of certain specified
thresholds will not possess any voting rights unless such voting rights are
approved by a majority vote of the corporation's disinterested shareholders, and
(ii) the Florida Fair Price Act, which generally requires supermajority approval
by disinterested directors or shareholders of certain specified transactions
between a corporation and holders of more than 10% of the outstanding shares of
the corporation (or their affiliates).

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS

Certain provisions of the Articles of Incorporation and the Bylaws of the
Company could have an anti-takeover effect. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors of the Company and in the policies formulated by the Board of
Directors and to discourage certain types of transactions, described below,
which may involve an actual or threatened change of control of the Company. The
provisions are designed to reduce the vulnerability of the Company to an
unsolicited proposal for a takeover of the Company that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of the Company. The provisions are also
intended to discourage certain tactics that may be used in proxy fights. The
Board of Directors believes that, as a general rule, such takeover proposals
would not be in the best interests of the Company and its stockholders.

Classified Board of Directors. The Articles of Incorporation provide for
the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year.

The Board of Directors believes that a classified Board of Directors will
help to assure the continuity and stability of the Board of Directors and the
business strategies and policies of the Company as determined by

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<PAGE> 67

the Board of Directors, because the likelihood of continuity and stability in
the composition of the Company's Board of Directors and in the policies
formulated by the Board will be enhanced by staggered three-year terms.

The classified board provision could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of the Company, even though such an attempt might be beneficial to the Company
and its stockholders. In addition, the classified board provision could delay
stockholders who do not agree with the policies of the Board of Directors from
removing a majority of the Board for two years, unless they can show cause and
obtain the requisite vote. See "Number of Directors; Removal" below.

Special Meetings of Stockholders. The Articles of Incorporation provide
that no business may be brought up by a stockholder at a meeting of stockholders
except in accordance with certain provisions set forth in the Articles. Such
provisions require a minimum amount of notice to the Company of any such
business and certain disclosures relating to the business intended to be brought
up.

Amendment of Certain Provisions of the Articles of Incorporation. The
Articles of Incorporation requires the affirmative vote of the holders of at
least 80% of the votes entitled to be cast by the holders of all then
outstanding shares of voting stock in order to amend the Articles' provisions
relating to (i) the classified board, (ii) the method of bringing up business at
stockholders' meetings, (iii) the limitation on the liability of directors, (iv)
indemnification of officers and directors, and (v) the required vote to amend
the foregoing provisions. These voting requirements will make it more difficult
for stockholders to make changes in the Articles which would be designed to
facilitate the exercise of control over the Company. In addition, the
requirement for approval by at least an 80% stockholder vote will enable the
holders of a minority of the voting securities of the Company to prevent the
holders of a majority or more of such securities from amending such provisions
of the Articles.

Number of Directors; Removal. The Articles of Incorporation provide that
the Board of Directors will consist of between two and fifteen members, the
exact number to be fixed from time to time by resolution adopted by a majority
of the directors then in office. The Company currently has eight directors and
no vacancies. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, the Articles provide that directors of the Company may
be removed only for cause and only by the affirmative vote of holders of a
majority of the outstanding shares of voting stock. This provision will preclude
a stockholder from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
such removal with its own nominees.

REGISTRATION RIGHTS

The Company has granted holders of 3,518,813 shares of Common Stock
received in connection with the Company's acquisitions of the allowable assets
of certain optometric and ophthalmology practices certain piggyback and demand
registration rights pursuant to registration rights agreements. In general, each
holder has piggyback registration rights with respect to a maximum of 60% (30%
of which may be registered pursuant to an initial public offering) of such
holder's shares in the event the Company proposes to file a registration
statement under the Securities Act of 1933 for the purposes of effecting an
underwritten public offering of shares of the Company's Common Stock. Each
holder also has demand registration rights, which are effective one year after
completion of the Initial Public Offering, to obligate the Company to file up to
two registration statements covering shares that were not registered in a prior
registration statement up to the 60% maximum. These rights expire two years from
the date of completion of an initial public offering and are subject to certain
conditions and limitations, including the right of the Company to limit the
number of shares included in the registration statement to the amount
recommended by the managing underwriter. The Company is obligated to pay all
costs and expenses of the registration statement except for underwriting
discounts, fees and commissions.

The Company has granted certain piggyback and demand registration rights to
Bruce Maller and Richard Lindstrom with respect to a total of 378,463 shares of
Common Stock. Following an initial public offering of Common Stock of the
Company, if the Company proposes to file a registration statement under the
Securities

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<PAGE> 68

Act for purposes of effecting a public offering of the Company's Common Stock,
Maller and Lindstrom will be entitled to include up to 20% of their shares in
the registration statement. If Maller and Lindstrom are unable to sell 20% of
their shares pursuant to such piggyback registration rights, they may require
the Company, on one occasion, to file a registration statement under the
Securities Act registering such number of shares as is necessary to permit them
to sell the full 20%. These rights expire upon the expiration of their
respective advisory and services agreements with the Company and are subject to
certain conditions and limitations, including the right of the Company to limit
the number of shares included in the registration statement to the amount
recommended by the managing underwriter. The Company is obligated to pay all
costs and expenses of the registration statement except for underwriting
discounts, fees and commissions.

The Company has granted certain piggyback and demand registration rights to
Michael Block, his wife, Saree Block and certain unrelated parties (the "BBG
Shareholders") with respect to an aggregate of 475,397 shares issued in
connection with the Company's acquisition of the stock of BBG-COA, Inc. In the
event the Company files a registration statement under the Securities Act for
purposes of effecting a public offering of shares of Common Stock, the BBG
Shareholders will be entitled to include their shares in the registration
statement. The BBG Shareholders also have demanded registration rights to
obligate the Company at any time after six months from the date of any public
offering, on up to two occasions, to use its best efforts to file a registration
statement covering shares not registered in a prior registration statement.
These rights are subject to certain conditions and limitations including the
right of the Company to limit the number of shares in the registration to the
amount recommended by the managing underwriter. The Company is obligated to pay
all costs and expenses of the registration statement except for underwriting
discounts and commissions.

The Company has granted certain piggyback and demand registration rights to
Prudential, Piper Jaffray and certain unrelated parties (the "Warrant Holders")
with respect to a maximum total of 1,026,666 shares of Common Stock underlying
the warrants issued to the Warrant Holders. In the event the warrants are
exchanged for shares, the Warrant Holders have piggyback registration rights
with respect to the shares in the event the Company proposes to file a
registration statement under the Securities Act for purposes of effecting a
public offering of shares of the Common Stock. Each of the Warrant Holders also
have demand registration rights to obligate the Company at any time after six
months from the date of any public offering, on one occasion, to use its best
efforts to file a registration statement covering any or all shares not
registered in a prior registration statement. These rights are subject to
certain conditions and limitations, including the right of the Company to limit
the number of shares in the registration to the amount recommended by the
managing underwriter. The Company is obligated to pay all costs and expenses of
the registration statement except for underwriting discounts, fees and
commissions.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar of the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 11,507,449 shares of
Common Stock outstanding (11,852,449 if the Underwriters' over-allotment option
is exercised in full). Of these shares, the 2,300,000 shares offered hereby and
the 2,100,000 shares sold in the Initial Public Offering will be freely
tradeable without restriction or further registration under the Securities Act
except for those shares, if any, purchased by "affiliates" of the Company as
that term is defined in Rule 144 under the Securities Act. The remaining
7,107,449 shares outstanding are "Restricted Securities" as that term is defined
in Rule 144 and fall into three categories: (i) 2,834,683 shares held by
"affiliates" who have already held their shares for more than one year, (ii)
1,227,360 shares held by affiliates who have not held their shares for more than
one year and (iii) 3,045,406 shares held by non-affiliates who have not held
their shares for more than one year. In addition, 1,600,000 shares of Common
Stock are reserved under the Plans for exercise of stock options granted by the
Company, of which options to purchase approximately 792,667 shares have been
granted (the "Option Shares"). See "Management -- Stock Option Plans." Finally,
1,026,666 shares of Common Stock are reserved for issuance in the event the
warrants issued to Prudential, Piper Jaffray and certain unrelated parties are
exercised (the "Warrant Shares"). See "Description of Capital Stock -- Warrants"
and "Underwriting."

The Restricted Securities may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144. Rule 144 imposes certain restrictions and
limitations on resale. In general, under Rule 144 as currently in effect, any
affiliate of the Company or any person (or persons whose shares are aggregated
in accordance with the Rule), who has beneficially owned Restricted Securities
for at least one year would be entitled to sell, within any three-month period a
number of such shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 120,244 shares after the
Offering), or the reported average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale restrictions and notice requirements and
to the availability of current public information concerning the Company. A
person (or persons whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned such shares for at least two years, is currently entitled to
sell such shares under Rule 144(k) without regard to the availability of current
public information, volume limitations, manner of sales provisions or notice
requirements. Currently, 2,834,683 Restricted Securities held by affiliates are
eligible for sale in the public market pursuant to Rule 144, but are subject to
certain "lock-up" agreements described below and beginning December 31, 1997;
January 15, 1998; July 1, 1998; and October 31, 1998, respectively, 343,175;
483,449; 79,645 and 121,702 Restricted Securities held by affiliates will be
eligible for sale in the public market pursuant to Rule 144 unless otherwise
registered pursuant to certain registration rights agreements, but are subject
to certain lock-up and other contractual arrangements described below. Beginning
on December 31, 1997; January 15, 1998; March 27, 1988; April 1, 1998; May 1,
1998; June 1, 1998; July 1, 1998; September 1, 1998; October 1, 1998, October
31, 1998 and October 1998, respectively, 308,668; 1,064,305; 29,053; 128,541;
180,561; 429,084; 69,169; 397,212; 64,402, 353,695 and 37,092 Restricted
Securities held by non-affiliates will be eligible for sale on the public market
pursuant to Rule 144 unless otherwise registered pursuant to certain
registration rights agreements, but are subject to certain lock-up and other
contractual agreements related to Rule 144 described below.

The Company and certain of its officers and directors which include
affiliates holding 3,727,147 Restricted Securities, have executed agreements
pursuant to which each has agreed not to, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or any other securities convertible into, or
exercisable or exchangeable for, Common Stock or other capital stock of the
Company or any right to purchase or acquire Common Stock or other capital stock
of the Company, for a period of 180 days after the date of this Prospectus,
without the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, except for bona fide gifts or transfers effected by
such stockholders other than on any securities exchange or in the
over-the-counter market to donees or transferees that agree to be bound by

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similar agreements. Prudential Securities Incorporated may, in its sole
discretion, at any time and without notice, release all or any portion of the
shares of Common Stock subject to such agreements. In addition, certain
non-affiliates of the Company holding 1,254,470 Restricted Securities had
entered into contractual 180-day lock-up agreements from the date of the Initial
Public Offering similar to the above agreements which prohibit the direct or
indirect disposition of shares without the prior written consent of Prudential
Securities Incorporated until the expiration of such lock-up agreements. Such
non-affiliates have also contractually agreed with the Company to be bound by
the same Rule 144 restrictions placed on affiliates of the Company.

The Option Shares are subject to all the limitations on resale imposed by
Rule 701. In general, shares subject to Rule 701 are subject to the resale
restrictions of Rule 144. However, with respect to resales by non-affiliates, 90
days after the date of this Prospectus, the Option Shares may be resold without
conformance with Rule 144 except for its manner of sale limitation. With respect
to resale of Option Shares by affiliates, all Rule 144 limitations continue to
apply except the one-year holding period. Additionally, the Company filed a Form
S-8 registration statement under the Securities Act to register the shares of
Common Stock subject to then outstanding stock options and the 933,333 shares of
Common Stock issuable pursuant to the Incentive Plan. Shares covered by this
registration statement will thereupon be eligible for sale in the public
markets, subject to lock-up agreements, to the extent applicable. See
"Management." The Warrant Shares are also subject to registration rights
agreements requiring the Company to register such shares under certain
circumstances and otherwise will be eligible for resale subject to all of the
limitations on resale imposed by Rule 144.

Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect market prices for the Common Stock and
could impair the Company's future ability to obtain capital through offerings of
equity securities.

69
<PAGE> 71

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Wheat, First Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the underwriting agreement (the "Underwriting
Agreement"), to purchase from the Company the number of shares of Common Stock
set forth below opposite their respective names:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Prudential Securities Incorporated.......................... 1,084,296
Wheat, First Securities, Inc................................ 722,860
Cowen & Company............................................. 82,141
Lehman Brothers Inc......................................... 82,141
PaineWebber Incorporated.................................... 82,141
Salomon Brothers Inc........................................ 82,141
Robert W. Baird & Co. Incorporated.......................... 41,070
William Blair & Company, L.L.C.............................. 41,070
Piper Jaffray Inc........................................... 41,070
Raymond James & Associates, Inc............................. 41,070
---------
Total................................................ 2,300,000
=========
</TABLE>

The Company is obligated to sell, and the Underwriters are obligated to
purchase, all the shares of Common Stock offered hereby if any are purchased.

The Underwriters, through their Representatives, have advised the Company
that they propose to offer the Common Stock initially at the public offering
price set forth on the cover page of this Prospectus; that the Underwriters may
allow to selected dealers a concession of $0.30 per share; and that such dealers
may reallow a concession of $0.10 per share to certain other dealers. After the
Offering, the offering price and the concessions may be changed by the
Representatives.

The Company has granted the Underwriters options, exercisable for 30 days
from the date of this Prospectus, to purchase up to 345,000 additional shares of
Common Stock at the public offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. The Underwriters
may exercise such options solely for the purpose of covering over-allotments
incurred in the sale of the shares of Common Stock offered hereby. To the extent
such options are exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to 2,300,000.

Certain of the Company's officers and directors, who in the aggregate
beneficially own approximately 3,831,319 shares of Common Stock, the Company and
certain other stockholders of the Company, have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital stock
or any securities convertible into, or exercisable or exchangeable for, any
shares of Common Stock or other capital stock of the Company or any right to
purchase or acquire Common Stock or other capital stock of the Company, for a
period of 180 days after the date of this Prospectus without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
other than stock issued by the Company in connection with acquisitions and the
exercise of currently outstanding stock options and except for bona fide gifts
or transfers effected by such stockholders other than on any securities exchange
or in the over-the-counter market to donees or transferees that agree to execute
and be bound by such agreements. Prudential Securities Incorporated may, in its
sole discretion, at any time and without prior notice, release all or any
portion of the shares of Common Stock subject to such agreement. In addition,
certain non-affiliates of the Company holding 1,254,470 Restricted Securities
had entered into contractual 180-day lock-up agreements from the date of the
Initial Public Offering similar to the above agreements which prohibit the
direct or

70
<PAGE> 72

indirect disposition of shares until the expiration of such lock-up agreements
without the prior written consent of Prudential Securities Incorporated.

The Company has agreed to indemnify the several Underwriters and contribute
to losses arising out of certain liabilities, including liabilities under the
Securities Act.

In connection with the Offering, certain Underwriters or their respective
affiliates who are qualified market makers on the Nasdaq National Market may
engage in passive market making transactions in the Common Stock of the Company
on the Nasdaq National Market in accordance with Rule 103 of Regulation M under
the Exchange Act during the business day prior to the pricing of the Offering
before the commencement of offers and sales of Common Stock. Passive market
makers must comply with applicable volume and price limitations and must be
identified as such. In general, a passive market maker must display its bid at a
price not in excess of the highest independent bid for such security; if all
independent bids are lowered below the passive market maker's bid, however, such
big must then be lowered when certain purchase limits are exceeded.

In connection with the Offering, certain Underwriters and their respective
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the Common Stock. Such transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M
under the Securities Exchange Act of 1934, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 345,000 shares of Common Stock, by
exercising the Underwriters' over-allotment option referred to above. In
addition, Prudential Securities Incorporated, on behalf of the Underwriters, may
impose "penalty bids" under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or any selling group member) for the
account of the other Underwriters, the selling concession with respect to Common
stock that is distributed in the Offering but subsequently purchased for the
account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph are required, and,
if they are undertaken, they may be discontinued at any time.

At June 30, 1997, an affiliate of Prudential Securities Incorporated loaned
an aggregate of $4.9 million to the Company, represented by a senior secured
note bearing interest at a rate of 10% per annum, payable monthly, and was paid
in full from the net proceeds of the Initial Public Offering. In connection with
the loan, the Company sold to Prudential for $126,000 a warrant to purchase
210,000 shares of Common Stock at a purchase price per share equal to the
Initial Public Offering price. The warrants are exchangeable at any time during
the five-year period commencing at the effective date of the Initial Public
Offering. Subject to the restrictions on transfer, the shares of Common Stock
underlying the warrant are accorded one demand registration right exercisable at
any time between one and five years after the effective date of the Initial
Public Offering and unlimited piggyback registration rights exercisable at any
time before seven years after the effective date of the Initial Public Offering.
Under the terms of the warrant, neither the warrant nor the Common Stock issued
upon exercise of the warrant may be transferred, assigned, pledged or
hypothecated for a period of one year following the effective date of the
Initial Public Offering. See "Description of Capital Stock -- Warrants" and
"-- Registration Rights," and "Shares Eligible for Future Sale."

In October 1997, the Company received a commitment from Prudential Credit
for a credit facility in the aggregate amount of $37.0 million pursuant to the
Bridge Credit Facility. Approximately $27.0 million of the Bridge Credit
Facility is available, if needed, to fund the cash portion of the Block
Acquisition to the extent the net proceeds from this Offering are insufficient
for such purpose. The remaining balance of approximately $10.0 million of the
Bridge Credit Facility is available for optometry and ophthalmology practice
acquisitions. To date, the Company has borrowed approximately $3.5 million for
use in the funding of certain acquisitions. Approximately $5.6 million of the
Bridge Credit Facility is expected to be used to finance a portion of the

71
<PAGE> 73

Block Acquisition after completion of the Offering. Amounts borrowed pursuant to
the Bridge Credit Facility are secured by a first security interest in all of
the Company's assets. The Bridge Credit Facility must be repaid at the earlier
of six months from the date of any borrowing from the Bridge Credit Facility or
closing of a future public offering by the Company. The Bridge Credit Facility
contains negative and affirmative covenants and agreements requiring the
maintenance of certain financial ratios. As a commitment fee for the Bridge
Credit Facility, Prudential Credit received warrants to purchase up to 50,000
shares of Common Stock at an exercise price equal to the closing price of the
Common Stock on the date of issuance, for which Prudential Credit paid the
Company $2.80 per warrant. In addition, upon borrowings by the Company,
Prudential Credit will receive a funding fee which includes warrants to purchase
up to 150,000 shares of Common Stock calculated on a pro rata basis with respect
to the actual amount borrowed by the Company at an exercise price equal to the
closing price of the Common Stock on the date of issuance, for which Prudential
Credit will pay to the Company $2.80 per warrant. The Company has borrowed
approximately $3.5 million under the Bridge Credit Facility and issued
approximately 14,000 warrants for which Prudential Credit has paid in the
aggregate approximately $40,000.

In addition, in October 1997 the Company entered into an advisory agreement
with Prudential Securities Incorporated whereby Prudential Securities
Incorporated agreed to provide certain advisory services to the Company in
connection with the Block Acquisition. Prudential Securities Incorporated will
receive an advisory fee which includes warrants to purchase up to 25,000 shares
of Common Stock at an exercise price of $13.25 per share.

LEGAL MATTERS

Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company by Shumaker, Loop &
Kendrick, LLP, Tampa, Florida and for the Underwriters by King & Spalding,
Atlanta, Georgia. Members in the law firm of Shumaker, Loop & Kendrick, LLP own
an aggregate of approximately 17,000 shares of Common Stock as of October 20,
1997.

EXPERTS

The financial statements of the following entities, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent certified public accountants, to the extent indicated in their
reports thereon also appearing elsewhere in this Prospectus and the Registration
Statement:

- Vision Twenty-One, Inc. and Subsidiaries
- Northwest Eye Specialists, P.L.L.C.
- Cambridge Eye Clinic, P.A. -- John W. Lahr, Optometrist, P.A. and
Eyeglass Express Optical Lab, Inc.
- J & R Kennedy, O.D., P.A. and Roseville Opticians, Inc.
- Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A. and Vision
Correction Centers, Inc.
- Jerald B. Turner, M.D., P.A.
- Eye Institute of Southern Arizona, P.C.
- Optometric Eye Care Centers, P.A.
- Dr. Smith and Associates, P.A. #6950, Dr. Smith and Associates, P.A.
#6958, and Dr. Smith and Associates, P.A. #6966

72
<PAGE> 74

- Daniel B. Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye
Specialists of Arizona Network, P.C.; and Sharona Optical, Inc.
- Gillette, Beiler & Associates, P.A.
- Swagel-Wootton Eye Center, Ltd. and Aztec Optical Limited Partnership
- Cochise Eye & Laser, P.C.
- Richard L. Short, D.O., P.A. d/b/a Eye Associates of Pinellas

The financial statements of BBG-COA, Inc., as of April 30, 1997 and 1996
and for each of the three years in the period ended April 30, 1997 included in
this Prospectus and Registration Statement have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants.

Such financial statements have been included herein in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.

ADDITIONAL INFORMATION

The Company is subject to the informational requirement of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission.

The Company has filed with the Commission a Registration Statement on Form
S-1 (herein, together with all amendments, exhibits and schedules, referred to
as the "Registration Statement"), under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to the Company and
the Common Stock offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and in each such
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference.

Reports and other information filed by the Company with the Commission and
copies of the Registration Statement can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington D.C. 20549, and should also be available for inspection
and copying at the following regional offices of the Commission: 7 World Trade
Center, Suite 1300, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Suite 1400 Chicago, Illinois 60661-2511. Copies of such
material also may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates,
and through the Commission's Internet address at "http://www.sec.gov".

73
<PAGE> 75

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation....................................... F-5
Unaudited Pro Forma Consolidated Statements of
Operations -- Year Ended December 31, 1996................ F-6
Unaudited Pro Forma Consolidated Statements of
Operations -- Nine-Month Period Ended September 30,
1997...................................................... F-7
Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1997........................................ F-8
Notes to Unaudited Pro Forma Consolidated Financial
Information............................................... F-9

FINANCIAL STATEMENTS OF VISION TWENTY-ONE, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants.......... F-14
Consolidated Balance Sheets as of December 31, 1995 and 1996
and September 30, 1997 (Unaudited)........................ F-15
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and the Nine-Month
Periods Ended September 30, 1996 and 1997 (Unaudited)..... F-16
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1994, 1995 and 1996 and
the Nine-Month Period Ended September 30, 1997
(Unaudited)............................................... F-17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and the Nine-Month
Periods Ended September 30, 1996 and 1997 (Unaudited)..... F-18
Notes to Consolidated Financial Statements.................. F-19

FINANCIAL STATEMENTS OF BBG-COA, INC.
Report of Independent Certified Public Accountants.......... F-32
Consolidated Balance Sheets as of April 30, 1996 and 1997... F-33
Consolidated Statements of Operations and Accumulated
Deficit for the Years Ended April 30, 1995, 1996 and
1997...................................................... F-34
Consolidated Statements of Cash Flows for the Years Ended
April 30, 1995, 1996 and 1997............................. F-35
Notes to Consolidated Financial Statements.................. F-36
Consolidated Balance Sheet as of July 31, 1997
(Unaudited)............................................... F-42
Consolidated Statements of Operations and Accumulated
Deficit for the Three-Month Periods Ended July 31, 1996
and 1997 (Unaudited)...................................... F-43
Consolidated Statements of Cash Flows for the Three-Month
Periods Ended July 31, 1996 and 1997 (Unaudited).......... F-44
Notes to Consolidated Financial Statements (Unaudited)...... F-45

FINANCIAL STATEMENTS OF EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
Report of Independent Certified Public Accountants.......... F-46
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-47
Statements of Operations for the Year Ended December 31,
1995 and Eleven-Month Period Ended November 30, 1996...... F-48
Statements of Stockholders' Equity (Deficit) for the Year
Ended December 31, 1995 and Eleven-Month Period Ended
November 30, 1996......................................... F-49
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-50
Notes to Financial Statements............................... F-51
</TABLE>

F-1
<PAGE> 76

FINANCIAL STATEMENTS OF
DANIEL B. FELLER, M.D., P.C., D/B/A
PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants.......... F-55
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-56
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-57
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and the Eleven-Month Period Ended
November 30, 1996......................................... F-58
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-59
Notes to Combined Financial Statements...................... F-60

FINANCIAL STATEMENTS OF NORTHWEST EYE SPECIALISTS, P.L.L.C.
Report of Independent Certified Public Accountants.......... F-66
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-67
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-68
Statements of Partners' Equity for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-69
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-70
Notes to Financial Statements............................... F-71

FINANCIAL STATEMENTS OF LINDSTROM, SAMUELSON & HARDTEN
OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
Report of Independent Certified Public Accountants.......... F-75
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-76
Combined Statements of Operations for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-77
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-78
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-79
Notes to Combined Financial Statements...................... F-80

FINANCIAL STATEMENTS OF CAMBRIDGE EYE CLINIC, P.A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
Report of Independent Certified Public Accountants.......... F-85
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-86
Combined Statements of Operations for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-87
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended December 31, 1996................................... F-88
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-89
Notes to Combined Financial Statements...................... F-90

FINANCIAL STATEMENTS OF OPTOMETRIC EYE CARE CENTERS, P.A.
Report of Independent Certified Public Accountants.......... F-96
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-97
</TABLE>

F-2
<PAGE> 77

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-98
Statements of Stockholders' Equity for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-99
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-100
Notes to Financial Statements............................... F-101

FINANCIAL STATEMENTS OF JERALD B. TURNER, M.D., P.A.
Report of Independent Certified Public Accountants.......... F-105
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-106
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-107
Statements of Stockholder's Equity for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-108
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-109
Notes to Financial Statements............................... F-110

FINANCIAL STATEMENTS OF GILLETTE, BEILER & ASSOCIATES, P.A.
Report of Independent Certified Public Accountants.......... F-113
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-114
Statements of Operations for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-115
Statements of Stockholders' Deficit for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-116
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-117
Notes to Financial Statements............................... F-118

FINANCIAL STATEMENTS OF J & R KENNEDY, O.D., P.A.
AND ROSEVILLE OPTICIANS, INC.
Report of Independent Certified Public Accountants.......... F-123
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-124
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-125
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-126
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-127
Notes to Combined Financial Statements...................... F-128

FINANCIAL STATEMENTS OF DR. SMITH AND ASSOCIATES, P.A.
#6950, DR. SMITH AND ASSOCIATES,
P.A. #6958, AND DR. SMITH AND
ASSOCIATES P.A. #6966
Report of Independent Certified Public Accountants.......... F-133
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-134
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-135
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-136
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-137
Notes to Combined Financial Statements...................... F-138
</TABLE>

F-3
<PAGE> 78

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS OF SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP
Report of Independent Certified Public Accountants.......... F-143
Combined Balance Sheets as of December 31, 1996 and May 31,
1997 (Unaudited).......................................... F-144
Combined Statements of Operations for the Year Ended
December 31, 1996 and the Five-Month Periods Ended May 31,
1996 and 1997 (Unaudited)................................. F-145
Combined Statements of Stockholders' (Partners') Equity for
the Year Ended December 31, 1996 and the Five-Month Period
Ended May 31, 1997 (Unaudited)............................ F-146
Combined Statements of Cash Flows for the Year Ended
December 31, 1996 and the Five-Month Periods Ended May 31,
1996 and 1997 (Unaudited)................................. F-147
Notes to Combined Financial Statements...................... F-148

FINANCIAL STATEMENTS OF RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS
Report of Independent Certified Public Accountants.......... F-152
Balance Sheet as of December 31, 1996....................... F-153
Statement of Income for the Year Ended December 31, 1996.... F-154
Statement of Stockholder's Equity for the Year Ended
December 31, 1996......................................... F-155
Statement of Cash Flows for the Year Ended December 31,
1996...................................................... F-156
Notes to Financial Statements............................... F-157

FINANCIAL STATEMENTS OF COCHISE EYE & LASER, P.C.
Report of Independent Certified Public Accountants.......... F-163
Balance Sheets as of July 31, 1996 and April 30, 1997
(Unaudited)............................................... F-164
Statements of Income for the Year Ended July 31, 1996 and
the Nine-Month Periods Ended April 30, 1996 and 1997
(Unaudited)............................................... F-165
Statements of Stockholders' Equity for the Year Ended July
31, 1996 and the Nine-Month Period Ended April 30, 1997
(Unaudited)............................................... F-166
Statements of Cash Flows for the Year Ended July 31, 1996
and the Nine-Month Periods Ended April 30, 1996 and 1997
(Unaudited)............................................... F-167
Notes to Financial Statements............................... F-168
</TABLE>

F-4
<PAGE> 79

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION

BASIS OF PRESENTATION

Effective December 1, 1996, Vision Twenty-One, Inc. (the "Company")
acquired substantially all of the assets, primarily consisting of accounts
receivable, leases, contracts, equipment and other tangible and intangible
assets (the "business assets"), and assumed certain liabilities of 10
ophthalmology and optometry practices located in Minnesota, Arizona and Florida
(the "1996 Acquisitions"). In conjunction with the 1996 Acquisitions, the
Company entered into various business management agreements (the "Management
Agreements") with the professional associations operating those practices. From
March 1, 1997 to the Company's Initial Public Offering on August 18, 1997, the
Company acquired the business assets of one optometry clinic, 11 ophthalmology
clinics, six optical dispensaries and four ASCs located in Arizona and Florida
(the "Pre IPO Acquisitions"). In conjunction with the Pre IPO Acquisitions, the
Company entered into Management Agreements with the professional associations
operating the practices. In September 1997, the Company closed in escrow the
acquisition of the business assets of four ophthalmology clinics and two optical
dispensaries located in Arizona, Florida and New York and acquired the business
assets of a managed care company (the "September Acquisitions"). In October
1997, the Company closed in escrow one acquisition and entered into an agreement
with respect to another acquisition of the business assets of one optical
dispensary, two ophthalmology clinics and one ASC located in Florida (the
"October Acquisitions"). In conjunction with the September and October
Acquisitions, the Company entered into various Management Agreements with the
professional associations operating those practices. Effective October 31, 1997,
the Company acquired all of the issued and outstanding stock of BBG-COA, Inc.
(the "Block Acquisition"). The Pre IPO Acquisitions, the September Acquisitions
and the October Acquisitions are collectively referred to as the "1997
Acquisitions." Except for the Company's acquisitions of managed care companies
and the Block Acquisition, which were accounted for under the purchase method of
accounting, its acquisitions have been accounted for by recording the assets and
liabilities at fair value and allocating the remaining costs to the related
Management Agreements.

The following unaudited pro forma consolidated financial statements are
based on the historical consolidated financial statements of the Company,
adjusted to give effect to the transactions described below. The unaudited pro
forma consolidated statements of operations of the Company for the year ended
December 31, 1996 give effect to the following transactions as if they had
occurred on January 1, 1996: (i) the 1996 Acquisitions, (ii) the 1997
Acquisitions, (iii) the Block Acquisition, (iv) the Initial Public Offering and
the application of the net proceeds therefrom and (v) the Offering and the
application of the net proceeds therefrom. The unaudited pro forma consolidated
statements of operations of the Company for the nine-month period ended
September 30, 1997 give effect to the following transactions as if they had
occurred on January 1, 1996: (i) the 1997 Acquisitions, (ii) the Block
Acquisition, (iii) the Initial Public Offering and the application of the net
proceeds therefrom and (iv) the Offering and the application of the net proceeds
therefrom. The unaudited pro forma consolidated balance sheet of the Company as
of September 30, 1997 gives effect to the October Acquisitions and the Block
Acquisition at that date and the consummation of the Offering and the
application of the estimated net proceeds therefrom.

The unaudited pro forma consolidated financial statements are based on the
historical financial statements of the Company, Block Vision and the
professional or other entities which owned the business assets which were the
subject of the 1996 and 1997 Acquisitions and give effect to the 1996
Acquisitions, the 1997 Acquisitions, the Block Acquisition, the Initial Public
Offering and the Offering and the assumptions and adjustments described in the
notes thereto. The unaudited pro forma consolidated financial information does
not purport to indicate what the results of operations or financial condition of
the Company would have been if the 1996 and 1997 Acquisitions, the Block
Acquisition, the Initial Public Offering and the Offering had been effected on
the dates indicated or to project the future results of operations or financial
condition of the Company. Such pro forma financial information should be read in
conjunction with the consolidated financial statements of the Company and the
financial statements of the other entities included in this Prospectus.

F-5
<PAGE> 80

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
COMPANY BLOCK 1996 AND
FOR THE TWELVE-MONTH FOR THE TWELVE-MONTH BLOCK 1997
PERIOD ENDED PERIOD ENDED ACQUISITION ACQUISITIONS
DECEMBER 31, 1996 DECEMBER 31, 1996 ADJUSTMENTS ADJUSTMENTS
-------------------- -------------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Practice management
fees................... $ 1,942,843 $37,538,000(2)
Managed care............. 7,315,196 $12,279,598 3,492,000(1)
Buying group sales....... 54,832,374
Other revenue............ 305,654 26,244 3,000(1)
----------- ----------- ----------- -----------
9,563,693 67,138,216 -- 41,033,000
Operating expenses:
Practice management
expenses............... 1,244,173 30,504,000(2)
Medical claims........... 9,128,659 8,741,585 2,919,000(1)
Cost of buying group
sales.................. 52,084,442 --
Salaries, wages and
benefits............... 1,889,395 2,530,611 (90,000)(4) 38,000(1)
2,438,000(14)
Business development..... 1,926,895 --
General and
administrative......... 1,208,678 2,274,141 322,000(1)
230,000(14)
Depreciation and
amortization........... 126,046 556,000 (372,000)(5) 2,338,000(3)
1,371,000(5)
----------- ----------- ----------- -----------
15,523,846 66,186,779 909,000 38,789,000
Income (loss) from
operations............... (5,960,153) 951,437 (909,000) 2,244,000
Interest expense.......... 159,484 333,074 988,000(13) 204,000(6)
----------- ----------- ----------- -----------
Income (loss) before
income taxes............. (6,119,637) 618,363 (1,897,000) 2,040,000
Income tax expense
(benefit)................ -- 391,194 (356,194)(8) (1,536,000)(8)
----------- ----------- ----------- -----------
Net income (loss)......... $(6,119,637) $ 227,169 $(1,540,806) $ 3,576,000
=========== =========== =========== ===========
Net income (loss) per
common share............. $ (1.02)
===========
Weighted average number of
common shares
outstanding.............. 5,979,543
===========

<CAPTION>
INITIAL
PUBLIC
OFFERING PRO FORMA
PRO FORMA AND OTHER CONSOLIDATED
CONSOLIDATED ADJUSTMENTS AFTER OFFERING
------------ ----------- --------------
<S> <C> <C> <C>
Revenues:
Practice management
fees................... $ 39,480,843 $ 39,480,843
Managed care............. 23,086,794 23,086,794
Buying group sales....... 54,832,374 54,832,374
Other revenue............ 334,898 334,898
------------ --------- ------------
117,734,909 -- 117,734,909
Operating expenses:
Practice management
expenses............... 31,748,173 31,748,173
Medical claims........... 20,789,244 20,789,244
Cost of buying group
sales.................. 52,084,442 52,084,442
Salaries, wages and
benefits............... 6,806,006 6,806,006

Business development..... 1,926,895 1,926,895
General and
administrative......... 4,034,819 4,034,819
--
Depreciation and
amortization........... 4,019,046 4,019,046

------------ --------- ------------
121,408,625 -- 121,408,625
Income (loss) from
operations............... (3,673,716) -- (3,673,716)
Interest expense.......... 1,684,558 (359,000) 1,743,558
418,000(16)
------------ --------- ------------
Income (loss) before
income taxes............. (5,358,274) (59,000) (5,417,274)
Income tax expense
(benefit)................ (1,501,000) (22,000)(8) (1,523,000)
------------ --------- ------------
Net income (loss)......... $ (3,857,274) $ (37,000) $ (3,894,274)
============ ========= ============
Net income (loss) per
common share............. $ (0.50) $ (0.40)(9)
============ ============
Weighted average number of
common shares
outstanding.............. 7,647,492 9,751,176(9)
============ ============
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-6
<PAGE> 81

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
COMPANY BLOCK
FOR THE NINE-MONTH FOR THE NINE-MONTH BLOCK 1997
PERIOD ENDED PERIOD ENDED ACQUISITION ACQUISITIONS
SEPTEMBER 30, 1997 JULY 31, 1997 ADJUSTMENTS ADJUSTMENTS
------------------ ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Practice management fees.... $19,684,406 $11,388,000(2)
Managed care................ 9,307,430 $11,878,000 1,461,000(1)
Buying group revenue........ 40,389,000 --
Other revenue............... 451,925 147,000 --
----------- ----------- ----------- -----------
29,443,761 52,414,000 -- 12,849,000
----------- ----------- ----------- -----------
Operating expenses:
Practice management
expenses.................. 15,977,619 9,190,000(2)
Medical claims.............. 8,052,709 8,103,000 1,186,000(1)
Cost of buying group
sales..................... 38,360,000 --
Salaries, wages and
benefits.................. 3,405,067 2,228,000 (68,000)(4) --
General and
administrative............ 1,339,555 1,770,000 104,000(1)
Depreciation and
amortization.............. 954,313 530,000 (297,000)(5) 808,000(3)
1,028,000(5) --
----------- ----------- ----------- -----------
29,729,263 50,991,000 663,000 11,288,000
----------- ----------- ----------- -----------
Income (loss) from
operations.................. (285,502) 1,423,000 (663,000) 1,561,000
Interest expense............. 740,777 181,000 847,000(13) --
----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... (1,026,279) 1,242,000 (1,510,000) 1,561,000
Income tax expense
(benefit)................... -- 601,000 (315,000)(8) 201,000(8)
----------- ----------- ----------- -----------
Income (loss) before
extraordinary charge(15).... $(1,026,279) $ 641,000 $(1,195,000) $ 1,360,000
=========== =========== =========== ===========
Income (loss) before
extraordinary charge per
common share(15)............ $ (0.15)
===========
Weighted average number of
common shares outstanding... 6,670,779
===========

INITIAL PUBLIC
OFFERING AND PRO FORMA
PRO FORMA OTHER CONSOLIDATED
CONSOLIDATED ADJUSTMENTS AFTER OFFERING
------------ -------------- --------------
<S> <C> <C> <C>
Revenues:
Practice management fees.... $31,072,406 $31,072,406
Managed care................ 22,646,430 22,646,430
Buying group revenue........ 40,389,000 40,389,000
Other revenue............... 598,925 598,925
----------- --------- -----------
94,706,761 94,706,761
----------- --------- -----------
Operating expenses:
Practice management
expenses.................. 25,167,619 25,167,619
Medical claims.............. 17,341,709 17,341,709
Cost of buying group
sales..................... 38,360,000 38,360,000
Salaries, wages and
benefits.................. 5,565,067 5,565,067
General and
administrative............ 3,213,555 3,213,555
Depreciation and
amortization.............. 3,023,313 3,023,313
--
----------- --------- -----------
92,671,263 -- 92,671,263
----------- --------- -----------
Income (loss) from
operations.................. 2,035,498 -- 2,035,498
Interest expense............. 1,768,777 (700,000)(7) 1,391,777
323,000(16)
----------- --------- -----------
Income (loss) before income
taxes....................... 266,721 377,000 643,721
Income tax expense
(benefit)................... 487,000 142,000(8) 629,000
----------- --------- -----------
Income (loss) before
extraordinary charge(15).... $ (220,279) $ 235,000 $ 14,721
=========== ========= ===========
Income (loss) before
extraordinary charge per
common share(15)............ $ (0.03) $ --
=========== ===========
Weighted average number of
common shares outstanding... 7,647,492 9,751,176
=========== ===========
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-7
<PAGE> 82

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
COMPANY BLOCK
AS OF AS OF BLOCK OCTOBER
SEPTEMBER 30, JULY 31, ACQUISITION ACQUISITION
1997 1997 ADJUSTMENTS ADJUSTMENTS
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 2,615,335 $ 338,845 (750,000)(11) $(1,792,000)(10)
(426,000)(13)
204,000(13)
5,615,000(13)
Accounts receivable............. 7,471,833 6,562,298 --
Other receivables............... 1,321,389 --
Prepaid expenses and other
current assets................ 889,941 56,858 --
----------- ----------- ----------- -----------
Total current assets...... 12,298,498 6,958,001 4,643,000 (1,792,000)
Fixed assets, net................. 3,263,943 977,787 --
Intangible assets................. 28,050,825 5,051,204 29,211,942(11) 3,150,000(7)
590,000(7)
Other assets...................... 157,489 258,513 --
----------- ----------- ----------- -----------
Total assets.............. $43,770,755 $13,245,505 $33,854,942 $ 1,948,000
=========== =========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................ $ 955,998 $ 6,601,635 --
Accrued expenses................ 967,261 193,956 421,000(13) --
Accrued acquisition and offering
costs......................... -- --
Accrued compensation............ 1,317,385 --
Due to managed professional
associations.................. 1,814,691 --
Due to selling shareholders..... 3,800,228 25,600,000(11)
Current portion of long-term
debt.......................... 112,889 5,615,000(13) --
Current portion of obligations
under capital leases.......... 289,742 27,511 --
Medical claims payable.......... 1,457,866 --
----------- ----------- ----------- -----------
Total current
liabilities............. 10,716,060 6,823,102 31,636,000 --
Deferred rent payable............. 262,376 --
Obligations under capital
leases.......................... 111,046 -- --
Long-term debt, less current
portion......................... 66,264 3,124,134 --
Other long-term liabilities....... 40,211
Deferred income taxes............. 1,716,000 590,000(10)
Stockholders' equity:
Common stock.................... 8,591 13,638 (13,638)(11) 101(10)
458(11)
Additional paid-in capital...... 40,269,136 3,828,365 (3,828,365)(11) 1,357,899(10)
6,049,542(11)
70,000(11)
204,000(13)
Deferred compensation........... (435,810) --
Accumulated deficit............. (8,942,908) (583,945) 583,945(11) --
(370,000)(13)
(477,000)(13)
----------- ----------- ----------- -----------
Total stockholders'
equity.................. 30,899,009 3,258,058 2,218,942 1,358,000
----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity.... $43,770,755 $13,245,505 $33,854,942 $ 1,948,000
=========== =========== =========== ===========

OFFERING PRO FORMA
PRO FORMA AND OTHER CONSOLIDATED
CONSOLIDATED ADJUSTMENTS AFTER OFFERING
------------ ------------ --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 5,805,180 $ (5,615,000)(12) $ 195,180
43,000(16)
(38,000)(16)

Accounts receivable............. 14,034,131 14,034,131
Other receivables............... 1,321,389 1,321,389
Prepaid expenses and other
current assets................ 946,799 946,799
------------ ------------ -----------
Total current assets...... 22,107,499 (5,610,000) 16,497,499
Fixed assets, net................. 4,241,730 4,241,730
Intangible assets................. 66,053,971 66,053,971

Other assets...................... 416,002 416,002
------------ ------------ -----------
Total assets.............. $ 92,819,202 $ (5,610,000) $87,209,202
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUI
Current liabilities:
Accounts payable................ $ 7,557,633 $ 7,557,633
Accrued expenses................ 1,582,217 285,000(16) 1,867,217
Accrued acquisition and offering
costs......................... -- --
Accrued compensation............ 1,317,385 1,317,385
Due to managed professional
associations.................. 1,814,691 1,814,691
Due to selling shareholders..... 29,400,228 $ (3,800,228)(12) --
(25,600,000)(12)
Current portion of long-term
debt.......................... 5,727,889 3,800,228(16) 9,528,117
Current portion of obligations
under capital leases.......... 317,253 317,253
Medical claims payable.......... 1,457,866 1,457,866
------------ ------------ -----------
Total current
liabilities............. 49,175,162 (25,315,000) 23,860,162
Deferred rent payable............. 262,376 262,376
Obligations under capital
leases.......................... 111,046 111,046
Long-term debt, less current
portion......................... 3,190,398 3,190,398
Other long-term liabilities....... 40,211 40,211
Deferred income taxes............. 2,306,000 2,306,000
Stockholders' equity:
Common stock.................... 9,150 2,300(12) 11,450

Additional paid-in capital...... 47,950,577 19,982,700(12) 67,976,277
43,000(16)

Deferred compensation........... (435,810) (435,810)
Accumulated deficit............. (9,789,908) (38,000)(16) (10,112,908)
(285,000)(16)

------------ ------------ -----------
Total stockholders'
equity.................. 37,734,009 19,705,000 57,439,009
------------ ------------ -----------
Total liabilities and
stockholders' equity.... $ 92,819,202 $ (5,610,000) $87,209,202
============ ============ ===========
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-8
<PAGE> 83

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION

(1) The Company has acquired two managed care businesses -- one on December
1, 1996 (a 1996 Acquisition) and the other on September 1, 1997 (a 1997
Acquisition). These adjustments reflect the pro forma additional managed care
revenue, medical claims, salaries, wages and benefits and general and
administrative expenses that would have been generated by each business if the
1996 Acquisition and the 1997 Acquisition had occurred on January 1, 1996. The
managed care revenue, medical claims, salaries, wages and benefits and general
and administrative expenses for the nine-month period ended September 30, 1996
reflect the pro forma additional amounts that would have been incurred if the
1997 Acquisition had occurred on January 1, 1996.

<TABLE>
<CAPTION>
TWELVE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
12/31/96 9/30/97
------------ ------------
<S> <C> <C>
Revenues:
Managed care.............................................. $3,492,000 $1,461,000
Other..................................................... 3,000 --
---------- ----------
3,495,000 1,461,000
---------- ----------
Expenses:
Medical claims............................................ 2,919,000 1,186,000
Salaries, wages and benefits.............................. 38,000 --
General and administrative................................ 322,000 104,000
---------- ----------
3,279,000 1,290,000
---------- ----------
Net......................................................... $ 216,000 $ 171,000
========== ==========
</TABLE>

(2) The practice management fees and practice management expenses for the
year ended December 31, 1996 reflect the pro forma additional practice
management fee revenue that would have been earned through the management of the
related managed professional entities under the Management Agreements if the
1996 Acquisitions (which were effective on December 1, 1996) and the 1997
Acquisitions had occurred on January 1, 1996, less approximately $479,000 earned
by the Company on a historical basis through a management agreement with managed
professional entities included in the 1996 Acquisitions. The practice management
fees and practice management expenses for the nine-month period ended September
30, 1997 reflect the pro forma additional practice management fee revenue that
would have been earned through the management of the related managed
professional entities under the Management Agreements if the 1997 Acquisitions
had occurred on January 1, 1996. This revenue represents reimbursement of
practice management expenses incurred by the Company, including depreciation of
fixed assets. In addition, the Company receives a percentage (ranging from 24 to
37 percent) of the related managed professional entities net earnings before
interest, taxes and shareholder physician expenses, as determined under the
related Management Agreements.

F-9
<PAGE> 84

The following analysis summarizes the adjustments related to practice
management fees:

<TABLE>
<CAPTION>
1996 AND 1997
ACQUISITION ADJUSTMENTS
---------------------------
TWELVE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
12/31/96 9/30/97
------------ ------------
<S> <C> <C>
Practice management fee summary:
Reimbursement of practice management expenses:
Practice management expenses.............................. $30,504,000 $ 9,190,000
Depreciation.............................................. 1,140,000 347,000
----------- -----------
31,644,000 9,537,000
Share of Managed Professional Associations' net earnings.... 6,373,000 1,851,000
----------- -----------
38,017,000 11,388,000
Less management fee earned by the Company through a
management agreement with a Managed Professional
Association for the eleven-month period ended November 30,
1996...................................................... (479,000) --
----------- -----------
Practice management fee revenue............................. $37,538,000 $11,388,000
=========== ===========
</TABLE>

The share of Managed Professional Associations' net earnings was computed
as follows:

<TABLE>
<CAPTION>
TWELVE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
12/31/96 9/30/97
------------ ------------
<S> <C> <C>
Gross practice revenues..................................... $52,887,000 $15,707,000
less defined practice expenses including depreciation..... 31,644,000 9,537,000
----------- -----------
Managed Professional Associations'
net earnings.............................................. $21,243,000 $ 6,170,000
Weighted-average management fee percentage.................. 30% 30%
----------- -----------
Share of Managed Professional Associations'
net earnings.............................................. $ 6,373,000 $ 1,851,000
=========== ===========
</TABLE>

The pro forma adjustments for practice management fees and practice
management expenses are based on the actual results of operations of the
individual practices, as adjusted for the terms of the Management Agreements.
While the Company expects the operations of the practices to improve under its
management, there can be no assurance that operations will not deteriorate.
However, the Company believes this information is the best available objective
information upon which to evaluate the performance of the practices.

(3) Depreciation and amortization reflect depreciation of the related
managed professional entities' fixed assets acquired over their estimated useful
life and amortization of intangible assets over an average life of 25 years:

<TABLE>
<CAPTION>
1996 AND 1997
ACQUISITION ADJUSTMENTS
---------------------------
TWELVE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
12/31/96 9/30/97
------------ ------------
<S> <C> <C>
Fixed assets(a)............................................. $ 1,140,000 $ 347,000
Intangible assets(b)........................................ 1,198,000 461,000
----------- ----------
$ 2,338,000 $ 808,000
=========== ==========
</TABLE>

(a) Depreciation on fixed assets is calculated on a straight-line method
over the estimated useful lives of the various classes of assets, which range
from three to seven years.

(b) Amortization of intangible assets is calculated on a straight-line
method over an average life of 25 years. Included in amortization expense is
$191,000 and $109,000 for the twelve-month period ended

F-10
<PAGE> 85

December 31, 1996 and the nine-month period ended September 30, 1997,
respectively, for the addition to intangible assets and corresponding increase
in deferred income taxes for the value of the portion of the Management
Agreements acquired in non-taxable transactions as if they had occurred on
January 1, 1996 and January 1, 1997, respectively.

(4) The adjustment reduces certain salaries of the management of Block by
$90,000 and $68,000 for the twelve-month period ended December 31, 1996 and the
nine-month period ended September 30, 1997, respectively, to levels that will be
paid by the Company.

(5) The adjustment removes the goodwill amortization previously recorded by
Block of $372,000 and $297,000 for the twelve-month period ended December 31,
1996 and the nine-month period ended September 30, 1997, respectively, and
records the goodwill amortization of $1,371,000 and $1,028,000 for the
twelve-month period ended December 31, 1996 and the nine-month period ended
September 30, 1997, respectively, related to the acquisition of Block by the
Company.

(6) The adjustment to interest expense reflects the additional interest on
the notes issued and the debt assumed in conjunction with the 1996 Acquisitions
as if the 1996 Acquisitions occurred on January 1, 1996, as follows:

<TABLE>
<CAPTION>
CARRYING
AMOUNT INTEREST INTEREST
DESCRIPTION 12/31/96 RATE PERIOD EXPENSE
- ----------- ---------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Unsecured notes payable issued to
stockholders of the Managed
Professional Associations on
12/1/96............................ $1,924,959 8.00% 1/1/96 -- 11/30/96 $141,000
Certain notes payable and capital
lease obligations assumed of the
Managed Professional Associations
on 12/1/96......................... 744,481 9.25% 1/1/96 -- 11/30/96 63,000
--------
$204,000
========
</TABLE>

(7) The adjustment reflects the savings on interest expense due to the
repayment of debt with proceeds from the Initial Public Offering.

<TABLE>
<CAPTION>
TWELVE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
12/31/96 9/30/97
------------ ------------
<S> <C> <C>
Unsecured notes payable, 8%................................. $274,000 $275,000
Senior subordinated note, 10%............................... 1,300 114,000
Senior subordinated note, 10%............................... -- 122,000
Certain notes payable and capital lease obligations,
9.25%..................................................... 83,700 --
Credit facilities, 10%...................................... -- 189,000
-------- --------
$359,000 $700,000
======== ========
</TABLE>

(8) The adjustment records the income tax expense (benefit) that would have
been recorded if the transactions had occurred on January 1, 1996. The expense
(benefit) is calculated using an estimated average income tax rate of 38% and
income before income taxes adjusted for the amortization of the non-deductible
goodwill resulting from the Block Acquisition.

(9) To reflect the pro forma net income (loss) per common share assuming an
increase in the weighted average number of outstanding shares that would have
been necessary to repay the selling shareholders of Block $19,985,000,
representing an increase of 2,103,684 shares.

(10) The adjustment reflects the October Acquisitions. The fair value of
the net assets and Management Agreements associated with the October
Acquisitions is expected to approximate $3,150,000. The October Acquisitions
were financed through the payment of $1,792,000 in cash and the issuance of
101,000 shares of the Company's Common Stock, valued at the average closing
prices of the Company's Common Stock five days before and after the closing
dates. The acquisition adjustment assumes the fair value of the net business
assets is immaterial and, accordingly, allocates the entire fair value of
$3,150,000 to intangible assets, principally representing the fair value of the
Management Agreements. The Company has also recorded an

F-11
<PAGE> 86

addition to intangible assets of $590,000 with a corresponding increase in
deferred income taxes for the value of the portion of the Management Agreements
acquired in non-taxable transactions.

(11) The adjustments reflect the Block Acquisition which was effective
October 31, 1997. The Company delivered 458,365 shares of the Company's Common
Stock valued at $13.20 per share based on the average closing prices of the
Company's Common Stock in the five days before the closing date. The Company is
obligated to pay $25,600,000 in cash on the earlier of consummation of the
Offering or November 30, 1997. Goodwill was estimated as follows:

<TABLE>
<S> <C> <C>
Value of Company Common Stock............................... $ 6,050,000
Cash to be paid to selling shareholders..................... 25,600,000
Transaction fee paid in cash................................ 750,000
Transaction fee paid in warrants............................ 70,000
-----------
32,470,000
Recorded net book value of Block............................ $3,258,058
Less previously recorded goodwill........................... 5,051,204 (1,793,146)
---------- -----------
Resulting goodwill.......................................... 34,263,146
Previously recorded goodwill................................ 5,051,204
-----------
Net increase in goodwill.......................... $29,211,942
===========
</TABLE>

The Company anticipates that it will amortize the goodwill over a 25 year
life. The Company will continue to evaluate the appropriate value of the assets
and liabilities, the purchase price allocation and the amortization period for
the goodwill. The adjustments also record the amounts due to selling
shareholders of $25,600,000; the issuance of $6,050,000 in the Company Common
Stock; payment of $750,000 in cash and $70,000 in warrants for certain
transaction fees to be incurred in connection with the Block Acquisition; and
the elimination of Block's historical equity accounts. There is no adjustment to
deferred income taxes because the goodwill is non-deductible. If the Company
subsequently determines that there are identifiable intangible assets, the
amortization period for those amounts will be adjusted accordingly and deferred
income taxes will also be recorded, which will increase the amount of goodwill.

(12) The adjustments reflect the Company's intent to sell 2,300,000 shares
of Common Stock in the Offering resulting in net proceeds of $19,985,000. Such
proceeds will be used to repay the selling shareholders of Block of $19,985,000.
Additionally, the selling shareholders of Block will be paid $5,615,000 from
borrowings on the bridge loan credit facility, for a total payment of
$25,600,000 to the selling shareholders of Block.

(13) The adjustments reflect the Company's entering into a bridge loan
credit facility in October 1997 to borrow up to $37.0 million to complete the
acquisition of Block if the Offering is not completed in a timely manner and to
borrow approximately $5.6 million on the bridge loan credit facility to be used
to repay the selling shareholders of Block. To enter into the borrowing
arrangement, the Company paid $370,000 in cash and issued 50,000 warrants for
which it received $140,000 in cash. The terms of the bridge loan credit facility
require the Company to pay an additional funding fee and issue additional
warrants when it draws on the borrowing arrangement. The borrowing of
approximately $5.6 million on the bridge loan credit facility will result in the
Company's paying a funding fee of $56,000 and issuing 22,764 in additional
warrants for which the Company will receive $64,000 in cash. Because the cash
fees paid are not refundable, they are recognized as an expense in the unaudited
pro forma consolidated statement of operations for the year ended December 31,
1996 and the nine-month period ended September 30, 1997. The adjustment also
reflects the additional interest expense of $562,000 and $421,000 for the year
ended December 31, 1996 and the nine-month period ended September 30, 1997,
respectively, that would have been incurred from the borrowing of approximately
$5.6 million on the bridge loan credit facility at an estimated interest rate of
10.0%.

(14) The adjustment increases the salaries, wages and benefits for the year
ended December 31, 1996 by $2,438,000 and general and administrative expenses
for the year ended December 31, 1996 by $230,000 to the level incurred in the
first six months of 1997 to reflect the expense of the additional infrastructure
needed to

F-12
<PAGE> 87

manage the 1996 Acquisitions and the 1997 Acquisitions. The adjusted salaries,
wages and benefits and general and administrative expenses for the year ended
December 31, 1996 equal the annualized expenses incurred through June 30, 1997
for the same activities.

(15) Net income (loss) excludes the extraordinary charge for early
extinguishment of debt for $323,346.

(16) The adjustment reflects the borrowing of approximately $3.8 million on
the bridge loan credit facility to be used to repay the September acquisitions'
selling shareholders. The borrowing of approximately $3.8 million on the bridge
loan credit facility will result in the Company paying a funding fee of $38,000
and issuing 15,418 in additional warrants for which the Company will receive
$43,000 in cash. Because the cash fee paid is not refundable, it is recognized
as an expense in the unaudited pro forma consolidated statement of operations
for the year ended December 31, 1996 and the nine-month period ended September
30, 1997. The adjustment also reflects the additional interest expense of
$380,000 and $285,000 for the year ended December 31, 1996 and the nine-month
period ended September 30, 1997, respectively, that would have been incurred
from the borrowing of approximately $3.8 million on the bridge loan credit
facility at an estimated interest rate of 10.0%.

F-13
<PAGE> 88

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Vision Twenty-One, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Vision
Twenty-One, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vision Twenty-One, Inc. and subsidiaries at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

Tampa, Florida
March 22, 1997,
except for Note 11, as to which the date is
July 29, 1997
/s/ ERNST & YOUNG LLP

F-14
<PAGE> 89

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 42,272 $ 67,353 $ 2,615,335
Accounts receivable, net of allowance for doubtful
accounts of $685,000 and $2,620,000 in 1996 and
1997, respectively................................. -- 1,968,587 7,471,833
Other receivables..................................... -- 185,263 1,321,389
Prepaid expenses and other current assets............. 999 192,789 889,941
----------- ----------- -----------
Total current assets.......................... 43,271 2,413,992 12,298,498
Fixed assets, net....................................... 98,726 1,941,259 3,263,943
Intangible assets, net of accumulated amortization of
$29,125 and $298,340 in 1996 and 1997, respectively... -- 11,022,396 28,050,825
Deferred offering costs................................. -- 287,792 --
Other assets............................................ 23,222 46,792 157,489
----------- ----------- -----------
Total assets.................................. $ 165,219 $15,712,231 $43,770,755
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................................... $ 99,931 $ 529,427 $ 955,998
Accrued expenses...................................... 1,617 946,519 967,261
Accrued acquisition and offering costs................ -- 1,362,012 --
Accrued compensation.................................. 55,872 546,740 1,317,385
Due to Managed Professional Associations.............. 27,741 -- 1,814,691
Note payable to related party......................... 250,000 -- --
Due to selling shareholders........................... -- -- 3,800,228
Current portion of long-term debt..................... 51,127 48,249 112,889
Current portion of obligations under capital leases... -- 43,849 289,742
Medical claims payable................................ 1,056,141 1,793,861 1,457,866
----------- ----------- -----------
Total current liabilities..................... 1,542,429 5,270,657 10,716,060
Deferred rent payable................................... -- 263,006 262,376
Obligations under capital leases........................ -- 71,870 111,046
Long-term debt, less current portion ($9,288, $5,983,098
and $0 to related parties in 1995, 1996 and 1997,
respectively)......................................... 61,840 7,570,974 66,264
Deferred income taxes................................... -- -- 1,716,000
Stockholders' equity (deficit):
Preferred stock, $.001 par value; no shares authorized
in 1995 and 10,000,000 shares authorized in 1996
and 1997; no shares issued......................... -- -- --
Common stock, $.001 par value; 50,000,000 shares
authorized; 2,324,876 (1995), 3,715,625 (1996) and
8,591,234 (1997) shares issued and outstanding..... 2,325 3,716 8,591
Additional paid-in capital............................ 32,271 4,736,361 40,269,136
Common stock to be issued (1,491,397 shares in
1996).............................................. -- 5,905,965 --
Deferred compensation................................. -- (517,035) (435,810)
Accumulated deficit................................... (1,473,646) (7,593,283) (8,942,908)
----------- ----------- -----------
Total stockholders' equity (deficit).......... (1,439,050) 2,535,724 30,899,009
----------- ----------- -----------
Total liabilities and stockholders' equity
(deficit)................................... $ 165,219 $15,712,231 $43,770,755
=========== =========== ===========
</TABLE>

See accompanying notes.

F-15
<PAGE> 90

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE-MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------- -------------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Practice management fees
($392,206, $423,890 and
$479,004 from a related
party in 1994, 1995 and
1996, respectively)......... $ 392,206 $ 423,890 $ 1,942,843 $ 555,408 $19,684,406
Managed care................... 668,590 2,446,010 7,315,196 5,307,075 9,307,430
Other revenue.................. 131,098 211,746 305,654 163,344 451,925
---------- ----------- ----------- ----------- -----------
1,191,894 3,081,646 9,563,693 6,025,827 29,443,761
Operating expenses:
Practice management expenses... -- -- 1,244,173 -- 15,977,619
Medical claims................. 551,408 2,934,180 9,128,659 7,319,446 8,052,709
Salaries, wages and benefits... 537,864 903,966 1,889,395 1,374,832 3,405,067
Business development........... -- -- 1,926,895 -- --
General and administrative
(including $53,000 to
related parties for rent in
1996)....................... 237,702 443,374 1,208,678 662,213 1,339,555
Depreciation and
amortization................ 13,052 18,005 126,046 35,222 954,313
---------- ----------- ----------- ----------- -----------
1,340,026 4,299,525 15,523,846 9,391,713 29,729,263
---------- ----------- ----------- ----------- -----------
Loss from operations............. (148,132) (1,217,879) (5,960,153) (3,365,886) (285,502)
Interest expense................. 4,444 8,557 159,484 66,147 740,777
---------- ----------- ----------- ----------- -----------
Loss before income taxes......... (152,576) (1,226,436) (6,119,637) (3,432,033) (1,026,279)
Income taxes..................... -- -- -- -- --
---------- ----------- ----------- ----------- -----------
Loss before extraordinary
charge......................... (152,576) (1,226,436) (6,119,637) (3,432,033) (1,026,279)
Extraordinary charge -- early
extinguishment of debt......... -- -- -- -- 323,346
---------- ----------- ----------- ----------- -----------
Net loss............... $ (152,576) $(1,226,436) $(6,119,637) $(3,432,033) $(1,349,625)
========== =========== =========== =========== ===========
Loss before extraordinary charge
per common share............... $ (.03) $ (.21) $ (1.02) $ (.57) $ (.15)
---------- ----------- ----------- ----------- -----------
Extraordinary charge per common
share.......................... -- -- -- -- (.05)
---------- ----------- ----------- ----------- -----------
Net loss per common share........ $ (0.03) $ (0.21) $ (1.02) $ (.57) $ (.20)
========== =========== =========== =========== ===========
Weighted average number of common
shares outstanding............. 5,979,543 5,979,543 5,979,543 5,979,543 6,670,779
========== =========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-16
<PAGE> 91

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON TOTAL
COMMON STOCK ADDITIONAL STOCK STOCKHOLDERS'
------------------ PAID-IN TO BE DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL ISSUED COMPENSATION DEFICIT (DEFICIT)
--------- ------ ----------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994........... 2,324,876 $2,325 $ 54,185 -- $ -- $ (94,634) $ (38,124)
Net loss........................... -- -- -- -- -- (152,576) (152,576)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1994......... 2,324,876 2,325 54,185 -- -- (247,210) (190,700)
Net loss........................... -- -- -- -- -- (1,226,436) (1,226,436)
Capital distribution............... -- -- (21,914) -- -- -- (21,914)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1995......... 2,324,876 2,325 32,271 -- -- (1,473,646) (1,439,050)
Sale of common stock............... 360,442 360 999,640 -- -- -- 1,000,000
Issuance of shares of common stock
for 1996 Acquisitions consummated
effective December 1, 1996....... 651,842 652 2,580,645 -- -- -- 2,581,297
1,491,397 shares of common stock to
be issued in 1997 for 1996
Acquisitions consummated
effective December 1, 1996....... -- -- -- 5,905,965 -- -- 5,905,965
Issuance of detachable stock
purchase warrants................ -- -- 125,000 -- -- -- 125,000
Issuance of shares of common stock
for prior service................ 144,705 145 401,410 -- -- -- 401,555
Issuance of shares of common stock
for advisory agreement........... 125,627 126 348,488 -- (348,614) -- --
Issuance of shares of common stock
for services agreement........... 108,133 108 299,960 -- (180,041) -- 120,027
Amortization of deferred
compensation..................... -- -- -- -- 11,620 -- 11,620
Net loss........................... -- -- -- -- -- (6,119,637) (6,119,637)
Capital distribution............... -- -- (51,053) -- -- -- (51,053)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1996......... 3,715,625 3,716 4,736,361 5,905,965 (517,035) (7,593,283) 2,535,724
Unaudited:
Initial public offering of common
shares........................... 2,100,000 2,100 18,054,361 -- -- -- 18,056,461
Issuance of shares of common stock
for business combinations........ 2,775,609 2,775 17,077,664 (5,905,965) -- -- 11,174,474
Issuance of detachable stock
purchase warrants................ -- -- 203,500 -- -- -- 203,500
Sale of detachable stock purchase
warrant.......................... -- -- 126,000 -- -- -- 126,000
Compensatory stock options
accounted for under SFAS 123..... -- -- 71,250 -- -- -- 71,250
Amortization of deferred
compensation..................... -- -- -- -- 81,225 -- 81,225
Net loss........................... -- -- -- -- -- (1,349,625) (1,349,625)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT SEPTEMBER 30,
1997(Unaudited).................... 8,591,234 $8,591 $40,269,136 -- $(435,810) $(8,942,908) $30,899,009
========= ====== =========== ========== ========= =========== ===========
</TABLE>

See accompanying notes.

F-17
<PAGE> 92

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE-MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------- --------------------------
1994 1995 1996 1996 1997
--------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................... $(152,576) $(1,226,436) $(6,119,637) $(3,432,033) $(1,349,625)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary charge -- early extinguishment
of debt................................... -- -- -- -- 323,346
Depreciation and amortization............... 13,052 18,005 126,046 35,222 954,313
Noncash compensation expense................ -- -- 521,582 -- 71,250
Amortization of deferred compensation....... -- -- 11,620 -- 81,225
Interest accretion.......................... -- -- -- -- 41,477
Changes in operating assets and liabilities,
net of effects from business combinations:
Accounts receivable, net.................. 13,827 -- (298,328) (568,128) (3,170,230)
Other receivables......................... -- -- (185,263) 80,481 (1,136,126)
Prepaid expenses and other current
assets.................................. 308 516 (22,766) (11,412) (461,214)
Other assets.............................. -- -- (32,984) (122,836) (110,697)
Accounts payable.......................... 5 87,141 429,496 252,109 104,223
Accrued expenses.......................... 170 614 119,955 (1,617) (190,486)
Accrued acquisition and offering costs.... -- -- 522,963 -- --
Accrued compensation...................... 10,525 43,138 48,342 90,594 436,289
Medical claims payable.................... 127,539 928,602 737,720 1,156,689 (335,995)
Due to Managed Professional
Associations............................ 17,557 10,184 (27,741) (27,741) 1,814,691
--------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............... 30,407 (138,236) (4,168,995) (2,548,672) (2,927,559)
INVESTING ACTIVITIES
Purchases of furniture and equipment, net..... (13,783) (68,138) (443,577) (253,055) (272,044)
Payments for business acquired................ -- -- -- -- (700,000)
Payments for capitalized acquisition costs.... -- (20,240) (1,138,829) (1,071,330) (3,928,495)
--------- ----------- ----------- ----------- -----------
Net cash used in investing
activities......................... (13,783) (88,378) (1,582,406) (1,324,385) (4,900,539)
FINANCING ACTIVITIES
Net proceeds from sale of common stock........ -- -- 750,000 750,000 19,530,000
Payments for offering costs................... -- -- -- -- (1,473,539)
Proceeds from long term debt.................. 11,700 310,413 4,950,000 3,266,187 2,000,000
Payments on long term debt.................... (15,451) (32,694) (56,729) (22,173) (9,806,381)
Net proceeds from line of credit.............. -- -- 184,264 -- --
Proceeds from credit facility................. -- -- -- -- 4,874,000
Payments on credit facility................... -- -- -- -- (4,874,000)
Sale of detachable stock purchase warrant..... -- -- -- -- 126,000
Capital distribution.......................... -- (21,914) (51,053) (49,855) --
--------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............... (3,751) 255,805 5,776,482 3,944,159 10,376,080
--------- ----------- ----------- ----------- -----------
Increase in cash.............................. 12,873 29,191 25,081 71,102 2,547,982
Cash and cash equivalents at beginning of
period...................................... 208 13,081 42,272 42,272 67,353
--------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period.... $ 13,081 $ 42,272 $ 67,353 $ 113,374 $ 2,615,335
========= =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest...... $ 4,000 $ 9,000 $ 17,000 $ 12,000 $ 883,000
========= =========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Common stock issued upon conversion of a note
payable..................................... -- -- $ 250,000 $ 250,000 --
========= =========== =========== =========== ===========
</TABLE>

See Note 2 regarding affiliations with practices financed through the issuance
of common stock and notes payable.

See accompanying notes.

F-18
<PAGE> 93

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. DESCRIPTION OF BUSINESS

Vision Twenty-One, Inc. and Subsidiaries (Vision Twenty-One or the Company)
is a Florida corporation formed in May 1996 as a holding company. The Company's
principal subsidiaries include Vision 21 Physician Practice Management Company
(MSO) and Vision 21 Managed Eyecare of Tampa Bay, Inc. (MCO). The MSO provides
business management services for eye care professionals and related businesses.
The MCO is a managed care organization which contracts with third-party health
benefits payors to provide eye care services through a network of associated
optometry and ophthalmology practices, retail optical companies and ambulatory
surgical centers. Most of the managed care contracts are for one year terms
which automatically renew and the contracts are terminable by either party on
sixty days notice. Revenues from one payor constituted approximately 95%, 94%
and 79% of managed care revenues and 53%, 75% and 60% of total revenues for the
years ended December 31, 1994, 1995 and 1996, respectively. Any adverse
development in the Company's relationship with this payor would have a material
adverse effect on the Company's results of operations and financial condition.

Vision Twenty-One was formed to be a holding company to own the MSO and
MCO. The MSO and MCO were owned in identical proportions by two executive
officers and a member of the Board of Directors of the Company. During 1996, the
Company acquired the MSO and MCO through an exchange of 2,685,318 shares of
Common Stock for all of the outstanding shares of the MSO and MCO. There was no
other consideration paid by the Company. This transaction was accounted for as a
reorganization of companies under common control in a manner similar to that
used in a pooling of interests transaction. As a result, the accompanying
financial statements have been prepared to reflect the accounts of the Company
as if the reorganization had occurred as of the beginning of the earliest period
presented.

2. AFFILIATIONS WITH PRACTICES

Effective December 1, 1996, the Company acquired substantially all of the
assets and assumed certain liabilities of 10 ophthalmology and optometry
practices (the Managed Professional Associations) located in Minnesota, Arizona
and Florida. The 1996 Acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining cost to the related
Management Agreements. In conjunction with these acquisitions, the Company
entered into various business management agreements (Management Agreements) with
the Managed Professional Associations and the Managed Professional Associations'
stockholders (collectively referred to as the 1996 Acquisitions). Under the
Management Agreements, the Company provides management, marketing and
administrative services to the Managed Professional Associations in return for a
management fee. The Management Agreements have a 40-year life and are cancelable
only for breach of its provisions or insolvency. The Managed Professional
Associations employ ophthalmologists and optometrists and provide all eye care
services to patients.

F-19
<PAGE> 94

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the 1996 Acquisitions and an allocation of the purchase price
are as follows:

<TABLE>
<S> <C>
Net assets acquired:
Current and other assets.................................. $ 1,850,108
Furniture and equipment................................... 1,495,877
Business management agreements............................ 11,051,521
Liabilities assumed....................................... (2,274,959)
-----------
Net assets acquired............................... $12,122,547
===========
Consideration for net assets acquired:
Capitalized acquisition costs............................. $ 1,710,326
Long-term notes payable issued............................ 1,924,959
Common stock issued and to be issued...................... 8,487,262
-----------
Total consideration............................... $12,122,547
===========
</TABLE>

Vision Twenty-One issued 651,842 shares of Common Stock in 1996 and
1,491,397 shares of Common Stock in 1997. The shares which were issued in 1997
were reported as Common Stock to be issued as of December 31, 1996, in
connection with the 1996 Acquisitions. All 2,143,239 shares of Common Stock were
valued at $3.96 per share based on an independent valuation. In connection with
the 1996 Acquisitions, the Company holds in escrow 79,805 shares of Common
Stock. Such shares of Common Stock held in escrow will be issued to the sellers
of three of the ophthalmology and optometry practices if certain financial goals
are met during the twelve-month period ending November 30, 1997. Such financial
goals were established to resolve certain differences between the Company and
the owners of the three ophthalmology and optometry practices regarding the
purchase price valuations of the respective practices. Any shares of Common
Stock held in escrow which are ultimately issued by the Company if such
financial goals are met will be treated as an adjustment of the purchase price
of the assets acquired from the three ophthalmology and optometry practices.
Based upon information to date, management of the Company believes that the
ultimate issuance of any such shares held in escrow will not have a material
adverse effect on the results of operations, financial condition or liquidity of
the Company.

As part of the purchase price allocation, no consideration has been
allocated to employment and noncompete agreements between the Company and the
Managed Professional Associations' stockholders because the Company believes
these agreements have no material value.

During 1996, the Company incurred $1,710,326 of acquisition costs which
were capitalized and allocated to the assets acquired and Management Agreements
entered into, including $839,049 which is included in accrued acquisition
expenses in the accompanying consolidated balance sheets.

The following unaudited pro forma information presents the Company's
approximate results of operations with pro forma adjustments for 1995 as if the
1996 Acquisitions had been consummated as of January 1, 1995; for 1996 as if the
1996 Acquisitions and eleven acquisitions completed in 1997 (Note 11) had been
consummated as of January 1, 1996; and for the nine-month period ended September
30, 1997 as if the eleven acquisitions completed in 1997 had been consummated as
of January 1, 1997. This pro forma information does not purport to be indicative
of what would have occurred had the acquisitions been made as of those dates or
of results which may occur in the future.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE-MONTH
------------------------- PERIOD ENDED
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Pro forma information (unaudited):
Total revenues.................................... $18,983,000 $47,558,000 $40,014,000
Income (loss) before extraordinary charge......... $ 836,000 $(2,998,000) $ (7,000)
Net income (loss)................................. $ 836,000 $(2,998,000) $ (330,000)
Net income (loss) per common share................ $ 0.14 $ (0.43) $ (0.05)
</TABLE>

F-20
<PAGE> 95

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. The Company does not own any interests in or control the activities
of the Managed Professional Associations. Accordingly, the financial statements
of the Managed Professional Associations are not consolidated with those of the
Company.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim financial statements as of September 30, 1997 and for the
nine-month periods ended September 30, 1996 and 1997 do not provide all
disclosures included in the annual financial statements. These interim
statements should be read in conjunction with the annual audited financial
statements and the footnotes thereto. Results for the 1997 interim period are
not necessarily indicative of the results for the year ending December 31, 1997.
However, the accompanying interim financial statements reflect all adjustments
which are, in the opinion of management, of a normal and recurring nature
necessary for a fair presentation of the financial position and results of
operations of the Company.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

REVENUE RECOGNITION

Managed Care

Managed care revenues are derived from monthly capitation payments from
health benefits payors which contract with the Company for the delivery of eye
care services. The Company records this revenue at contractually agreed-upon
rates.

Practice Management Fees

Prior to December 1, 1996, practice management fee revenue was earned
through contractual arrangements between the Company and several optometry
practices under common control. This revenue totaled $392,206, $423,890 and
$479,004 for the years ended December 31, 1994, 1995 and 1996, respectively.

Subsequent to December 1, 1996, practice management fee revenue was earned
through management of the Managed Professional Associations under the Management
Agreements. This revenue represents reimbursement of practice management
expenses incurred by the Company, including depreciation expense of $54,164 and
$335,409 (unaudited) for the year ended December 31, 1996 and the nine-month
period ended September 30, 1997, respectively. In addition, the Company receives
a percentage (ranging from 24 to 37 percent) of the Managed Professional
Associations' net earnings before interest, taxes, and shareholder physician
expenses, as

F-21
<PAGE> 96

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

determined under the related Management Agreements. For the year ended December
31, 1996 and the nine-month period ended September 30, 1997, this revenue was as
follows:

<TABLE>
<CAPTION>
NINE-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Medical service revenues of Managed Professional
Associations....................................... $1,667,025 $23,683,791
Less amounts retained by physician shareholders of
Managed Professional Associations.................. (203,186) (3,999,385)
---------- -----------
Management fees under Management Agreements with
Managed Professional Associations.................. $1,463,839 $19,684,406
========== ===========
</TABLE>

Included in net management fees are amounts representing reimbursement of
expenses for practice management expenses and a portion of depreciation and
amortization. These amounts were $1,298,337 for the year ended December 31, 1996
and $16,313,028 (unaudited) for the nine-month period ended September 30, 1997.

Other Revenues

Other revenues consist of fees earned through consulting and other
contractual arrangements.

MEDICAL CLAIMS PAYABLE

In accordance with the capitation contracts entered into with certain
health benefits payors, the MCO is responsible for payment of providers' claims.
Medical claims payable represent provider claims reported to the MCO and an
estimate of provider claims incurred but not reported (IBNR).

The Company and its actuary estimate the amount of IBNR using standard
actuarial methodologies based upon the average interval between the date
services are rendered and the date claims are reported and other factors
considered relevant by the Company.

Prior to December 1, 1996, certain medical claims were paid to several
optometry practices under common control. Expense related to these transactions
totaled approximately $81,000, $299,000 and $249,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of all current assets and current liabilities
approximates their fair value because of their short-term nature. The fair value
of long-term debt approximates its carrying value based on current rates offered
to the Company for debt of similar maturities.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE

Accounts receivable represent amounts due from the Managed Professional
Associations.

FIXED ASSETS

Fixed assets are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the various classes of
assets, which range from three to seven years. Leasehold improvements are
amortized using the straight-line method over the shorter of the term of lease
or the

F-22
<PAGE> 97

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimated useful life of the improvements. Routine maintenance and repairs are
charged to expense as incurred, while betterments and renewals are capitalized.

DEFERRED OFFERING COSTS

Deferred offering costs consist primarily of costs deferred in connection
with the Company's anticipated initial public offering. These costs were charged
against the offering proceeds when the initial public offering was completed in
August, 1997.

TRANSACTIONS AND BUSINESS DEVELOPMENT COSTS

Direct, external legal, accounting and other costs associated with
successful acquisitions are capitalized as part of the related purchase price
allocation. External costs associated with unsuccessful acquisitions, including
start-up consulting services (Note 10), are expensed and are shown as business
development expense in the accompanying consolidated statements of operations.
All internal costs associated with acquisitions are expensed as incurred.

INTANGIBLE ASSETS

Intangible assets consist of the Management Agreements with the Managed
Professional Associations. The Management Agreements have 40-year terms and are
being amortized on a straight-line method over an average life of 25 years. In
evaluating the useful life of a Management Agreement, the Company considers the
operating history and other characteristics of each practice. The primary
consideration is the degree to which a practice has demonstrated its ability to
extend its existence indefinitely. In making this determination, the Company
considers (i) the number of physicians recruited into the practice, (ii) the
number of staff members, including physicians, (iii) the number of locations,
and (iv) the complexity of the procedures being performed, including disease
treatment and control.

The Company anticipates that the Emerging Issues Task Force of the
Financial Accounting Standards Board will be evaluating certain matters relating
to the physician practice management industry, which the Company expects to
include a review of accounting for business combinations. The Company is unable
to predict the impact, if any, that this review may have on the Company's
acquisition strategy, allocation of purchase price related to acquisitions, and
amortization life assigned to intangible assets.

Amortization expense with respect to intangible assets was $29,125 and
$516,389 (unaudited) for the year ended December 31, 1996 and the nine-month
period ended September 30, 1997, respectively.

The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (SFAS 121). In accordance with SFAS 121, the
Company reviews the carrying value of its intangible assets at least quarterly
on an entity-by-entity basis to determine if facts and circumstances exist which
would suggest that the intangible assets may be impaired or that the
amortization period needs to be modified. Among the factors the Company
considers in making the evaluation are changes in the Managed Professional
Associations' market position, reputation, profitability and geographical
penetration. If indicators are present which may indicate impairments, the
Company will prepare a projection of the undiscounted cash flows of the specific
practice and determine if the intangible assets are recoverable based on these
undiscounted cash flows. If impairment is indicated, then an adjustment will be
made to reduce the carrying amount of the intangible assets to fair value.

CONCENTRATIONS OF CREDIT RISK

The Company does not believe that there are any credit risks associated
with receivables due from governmental agencies. Any concentration of credit
risk from other payors of the Managed Professional Associations is limited by
the number of patients and payors. The Company and the Managed Professional
Associations do not require any form of collateral from their patients or
third-party payors.

F-23
<PAGE> 98

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company places cash and cash equivalents with high-quality financial
institutions. At times, the Company maintains cash balances in excess of amounts
insured by the Federal Deposit Insurance Corporation (FDIC).

NET LOSS PER COMMON SHARE

Net loss per common share amounts in the consolidated statements of
operations are based upon the weighted average number of common shares
outstanding in each period and the guidance in a Staff Accounting Bulletin (SAB)
of the Securities and Exchange Commission. According to the SAB, stock, options
and warrants issued within a one-year period prior to the filing of an initial
public offering and at prices less than the proposed public offering price must
be reflected as outstanding for all reported periods.

In February 1997, the FASB issued Statement No. 128 (SFAS 128), Earnings
Per Share, which establishes new standards for computing and presenting earnings
per share. SFAS 128 is effective for financial statements issued for periods
after December 15, 1997, including interim periods. Management has not yet
determined whether the implementation of SFAS 128 will have any impact on the
Company's per share amounts.

CONTINGENT CONSIDERATION

As part of its business strategy, the Company enters into various
transactions to acquire substantially all of the assets of various eye care
practices and enters into business management agreements with the eye care
practices. In connection with certain of the acquisitions, the Company will hold
shares of its common stock in escrow as contingent consideration. Such shares of
common stock held in escrow are due to the owners of the certain eye care
practices if certain financial goals are met in the future, generally within
twelve to eighteen months of the effective date of the acquisition. The
financial goals are established on an acquisition by acquisition basis and are
generally established to resolve differences between the Company and the
applicable eye care practices regarding the purchase price valuation.

Depending on the relevant facts and circumstances of each acquisition and
the business reason for issuing contingent consideration, the Company accounts
for the issuance of common stock held in escrow as either additional purchase
consideration or compensation to the owners of the applicable eye care practices
utilizing the provisions of Emerging Issues Task Force Issue No. 95-8(EITF
95-8). Under EITF 95-8, the factors to be considered in making the
aforementioned accounting determination include, but are not limited to, terms
of continuing employment, components of the shareholder group, reasons for
contingent payment provisions, formulas for determining contingent consideration
and other agreements and issues.

COMMON STOCK TO BE ISSUED

Common stock to be issued represents stock to be issued in connection with
certain of the 1996 Acquisitions consummated on December 1, 1996. The stock was
issued in January 1997.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). In 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), which is effective for fiscal years
beginning after December 15, 1995. Under SFAS 123, the Company may elect to
recognize stock-based compensation expense based on the fair value of the awards
or continue to account for stock-based compensation under APB 25, and disclose
in the financial statements the effects of SFAS 123 as if the recognition
provisions were adopted.

F-24
<PAGE> 99

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company accounts for any stock-based compensation arrangements not
specifically addressed by APB 25 under the fair value provisions of SFAS 123,
including options granted to non-employees and professionals employed by the
Managed Professional Associations. The amounts for 1995 and 1996 are immaterial.
The pro forma disclosures required by SFAS 123 are provided for all stock-based
compensation which are accounted for under APB 25 (Note 10).

INCOME TAXES

The Company has applied the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109), which requires an
asset and liability approach for financial accounting and reporting. Deferred
income tax assets and liabilities are determined based upon differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and lives that will be in effect when the
differences are expected to reverse.

4. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
DESCRIPTION 1995 1996
- ----------- -------- ----------
<S> <C> <C>
Office furniture and equipment.............................. $189,973 $1,828,855
Leased equipment............................................ -- 119,825
Leasehold improvements...................................... 6,264 169,335
-------- ----------
196,237 2,118,015
Less accumulated depreciation and amortization.............. (97,511) (176,756)
-------- ----------
$ 98,726 $1,941,259
======== ==========
</TABLE>

Depreciation and amortization of fixed assets totaled approximately
$13,000, $18,000 and $97,000 in 1994, 1995 and 1996, respectively.

5. NOTE PAYABLE TO RELATED PARTY

Note payable to related party consists of the following as of December 31:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Note payable to a stockholder, due October 1, 1996, with
interest at 10% per annum. In 1996, the note was exchanged
for shares of the Company's common stock.................. $250,000 $ --
======== ========
</TABLE>

F-25
<PAGE> 100

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured notes payable to a stockholder, interest
and principal due on January 1, 1998, with
interest at 8.5% per annum...................... $ -- $ 700,000 --
Notes payable under $300,000 line of credit, due
on demand, bearing interest at prime plus 1%
(9.5% at December 31, 1995 and 9.25% at December
31, 1996). Interest due monthly. The notes are
collateralized by accounts receivable and were
refinanced with a bank in 1997 (Note 11)........ -- 252,124 --
Unsecured note payable to a stockholder, due on
demand, with interest at 9% per annum. Interest
due monthly. The note was refinanced with a bank
in 1997 (Note 11)............................... -- 293,262 --
Unsecured note payable to a stockholder with
interest at 8% per annum. Interest and principal
due upon completion of an initial public
offering........................................ -- 3,000,000 --
Unsecured notes payable to stockholders, interest
at 8%. Principal and interest due the earlier of
15 business days after closing of an initial
public offering or March 1, 1998................ $ -- $1,924,959 --
10% senior subordinated notes, interest due
semiannually at an effective rate of 13.5%. The
notes are unsecured and mature on the earlier of
a first liquidity event (initial public
offering) or December 19, 1999 (Notes 10 and
11)............................................. -- 1,125,000 --
Other long term debt.............................. 112,967 323,878 179,153
---------- ---------- ----------
112,967 7,619,223 179,153
Less current portion.............................. (51,127) (48,249) (112,889)
---------- ---------- ----------
$ 61,840 $7,570,974 $ 66,264
========== ========== ==========
</TABLE>

As of December 31, 1996, the aggregate principal maturities of long-term
debt, without giving effect to an initial public offering and assuming the $3
million unsecured note payable to stockholder is repaid in 1998, are as follows:

F-26
<PAGE> 101

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. CAPITAL LEASE OBLIGATIONS

The Company leases equipment under noncancelable capital leases (with an
initial or remaining term in excess of one year). Future minimum lease
commitments are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997...................................................... $ 54,413
1998...................................................... 50,195
1999...................................................... 31,604
2000...................................................... 14,706
2001...................................................... 1,364
--------
Total minimum lease payments................................ 152,282
Less amount representing interest........................... (36,563)
--------
Present value of minimum lease payments..................... $115,719
========
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

Commitments

The Company leases its headquarters, store locations and certain office
equipment under noncancelable operating lease arrangements which expire at
various dates, most with options for renewal. Certain locations are leased from
stockholders of the Managed Professional Associations. As of December 31, 1996,
future minimum lease payments under noncancelable operating leases with original
terms of more than one year are as follows:

<TABLE>
<S> <C>
1997........................................................ $ 1,624,776
1998........................................................ 1,620,771
1999........................................................ 1,440,429
2000........................................................ 1,278,998
2001........................................................ 1,167,241
Thereafter.................................................. 8,730,469
-----------
Total....................................................... $15,862,684
===========
</TABLE>

Rent expense in 1994, 1995 and 1996 was approximately $61,000, $76,000 and
$280,000, respectively. Rent expense related to locations leased from
stockholders of the Managed Professional Associations was approximately $53,000
during 1996.

Malpractice

The Company and the Managed Professional Associations are insured with
respect to medical malpractice risks primarily on a claims-made basis.
Management is aware of a claim pending against one of the Managed Professional
Associations. The Company also is named in the suit; however, management of the
Company believes that the Company ultimately will be dismissed from the suit.
The claim, which alleges medical malpractice, and which relates to an incident
which occurred prior to December 1, 1996, is currently in the discovery stage
and no trial date has been set. The Managed Professional Association has
determined that its insurer is liable for any damages resulting from the claim
which are within the Managed Professional Association policy limits, as well as
the professional costs to defend the Managed Professional Association against
the claim. The insurer is currently providing the defense for the claim. In the
opinion of Management, the ultimate result of this matter will not have a
material adverse effect on the results of operations, financial condition or
liquidity of the Company.

F-27
<PAGE> 102

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Losses resulting from unreported claims cannot be estimated by management
and therefore, an accrual has not been included in the accompanying consolidated
financial statements.

9. INCOME TAXES

The Company did not have a current or deferred tax provision or benefit for
the years ended December 31, 1994, 1995 and 1996 or the nine months ended
September 30, 1995 and 1996 due to its net losses.

At December 31, 1995 and 1996 and at September 30, 1997, the Company had
temporary differences between amounts of assets and liabilities for financial
reporting purposes and such amounts measured by income tax reporting purposes.
The Company also has net operating loss (NOL) carryforwards available to offset
future taxable income. Significant components of the Company's deferred tax
assets and liabilities are as follows:

<TABLE>
<CAPTION>
DEFERRED TAX ASSET (LIABILITY)
---------------------------------------
DECEMBER 31,
----------------------- SEPTEMBER 30,
TEMPORARY DIFFERENCES/CARRYFORWARDS 1995 1996 1997
- ----------------------------------- --------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash to accrual adjustments...................... $ 47,489 $ 469,859 $ 470,000
Net operating losses............................. 67,249 1,735,723 2,243,000
Other............................................ -- 220,418 220,000
--------- ----------- -----------
Total deferred tax assets.............. 114,738 2,426,000 2,933,000
Identifiable intangible assets not deductible for
tax purposes................................... -- (1,190,582) (4,290,000)
Other deferred tax liabilities................... (3,859) (278,282) (278,000)
Valuation allowance.............................. (110,879) (957,136) (81,000)
--------- ----------- -----------
Net deferred taxes..................... $ -- $ -- $(1,716,000)
========= =========== ===========
</TABLE>

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Income tax benefit at the statutory rate............ $(51,876) $(416,987) $(2,080,676)
Permanent differences............................... 59,197 78,078 7,888
S-Corporation (income) loss......................... (7,435) 248,185 924,203
State taxes, net of federal benefit................. (12) (9,686) (122,628)
Change in valuation allowance....................... 126 100,410 1,271,213
-------- --------- -----------
Income taxes........................................ $ -- $ -- $ --
======== ========= ===========
</TABLE>

The Company has net operating loss carryforwards of approximately
$4,612,000 at December 31, 1996 that expire in various amounts from 2008 to
2011. These net operating loss carryforwards will be subject to the "ownership
change" rules of Section 382 of the Internal Revenue Code of 1986 and may be
limited as to their future use if there are changes in ownership exceeding 50%.

10. STOCKHOLDERS' EQUITY

Issuance of Stock

The Company entered into an agreement in 1993 to issue common stock in
exchange for cash received in 1993. The related shares of common stock were not
physically issued until June 30, 1996. For financial

F-28
<PAGE> 103

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reporting purposes the Company has presented these shares of common stock as if
they had been issued in 1993 since the ownership interest in those shares had
transferred in 1993.

Stock Option Plans

In July 1996, the Board of Directors adopted, and the stockholders of the
Company approved, two stock option plans: the Stock Incentive Plan (the
Incentive Plan) and the Affiliated Professionals Stock Plan (the Professionals
Plan and together with the Incentive Plan, the Plans). The purpose of the Plans
is to provide directors, officers, key employees, advisors and professionals
employed by the Managed Professional Associations with additional incentives by
increasing their proprietary interest in the Company or tying a portion of their
compensation to increases in the price of the Company's common stock. The
aggregate number of shares of common stock reserve for issuance related to the
Incentive Plan and the Professionals Plan is 1,000,000 shares and 600,000
shares, respectively. During 1996, the Company granted 459,667 and 102,333 stock
options to employees and non-employees, respectively, under the provisions of
the Plans with exercise prices equal to the estimated fair market value of the
Company's stock on the date of grant of $3.11 to $7.11. Compensation expense
under SFAS No. 123 for the 102,333 options issued to nonemployees was immaterial
for the year ended December 31, 1996 and approximately $70,000 (unaudited) for
the nine-month period ended September 30, 1997. The options vest over three to
four-year periods.

A summary of the Plans is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Options outstanding......................................... 562,000 649,667
Options exercisable......................................... -- 64,000
</TABLE>

The weighted average grant-date fair value of all options granted during
1996 was $1.91. The weighted average remaining contractual life of those options
is 3.4 years.

Pro forma information regarding net income is required by SFAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for 1996: risk-free interest
rate of 6.0%; a dividend yield of zero; volatility factors of the expected
market price of the Company's common stock based on industry trends; and a
weighted-average expected life of the options of 3.4 years. In addition, for pro
forma purposes, the estimated fair value of the options is amortized to expense
over the options' vesting period. Based on these assumptions, the pro forma net
loss and net loss per common share for the year ended December 31, 1996 would be
approximately $(6,235,000) and $(1.04), respectively.

Stock Compensation

In May 1996, the Company granted 144,705 shares of common stock to a
consultant as compensation for prior service (the Grant). In October 1996, the
Company entered into advisory and services agreements (the Agreements) with the
consultant and its chief medical officer whereby they would be entitled to
233,760 shares of common stock as compensation over the term of the Agreements.
The Company recorded issuance of the common stock at its fair value on the dates
of the Agreements and Grant. The expense is recognized in 1996 for the Grant and
over the related terms for the Agreements. For the year ended December 31, 1996,
the Company recognized expense of approximately $401,000 and $132,000, related
to the Grant and Agreements, respectively.

F-29
<PAGE> 104

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Warrants

During December 1996, the Company issued $1.25 million, 10% senior
subordinated notes (the Senior Notes) along with detachable warrants. The
warrants allow the holders to purchase 208,333 shares, subject to certain
adjustments, of the Company's common stock upon payment of $6 per share, subject
to certain adjustments. The Company has allocated $125,000 of the proceeds to
the warrants, representing their estimated fair value at the date of issuance,
as determined by an investment banking firm. The Senior Notes are limited in
aggregate principal amount to $1.25 million and mature on the earlier of a first
liquidity event or December 19, 1999. The Senior Notes bear stated interest at
the rate of 10% per annum payable semiannually in arrears on June 19 and
December 19, with an effective interest rate of 13.5% (Note 11). An amount equal
to the estimated value of the warrants will be amortized using the interest
method over the term of the Senior Notes.

11. SUBSEQUENT EVENTS

On February 7, 1997, the Company obtained a $2 million revolving line of
credit (LOC) from a commercial bank with interest at the rate of prime plus 1%.
Borrowings under the LOC are due on demand and are collateralized by
substantially all assets of the Company. A stockholder is also a guarantor of
the LOC. The proceeds from the LOC were used to refinance certain outstanding
debt as of December 31, 1996 and to provide additional working capital.

On February 28, 1997, the Company issued a $2 million, 10% senior
subordinated note with a detachable warrant to purchase 333,333 shares, subject
to certain adjustments, of the Company's common stock upon payment of $6 per
share, subject to certain adjustments. The Company allocated $200,000 of the
proceeds to the warrant, representing its estimated fair value at the date of
the transaction as determined by an investment banking firm. The warrant expires
on December 19, 2003. The note is due upon the earlier of a first liquidity
event (initial public offering) or December 19, 1999. The effective interest
rate on the note is 13.5% and the proceeds will be used to provide additional
working capital. An amount equal to the estimated value of the warrants will be
amortized using the interest method over the term of the note.

On April 11, 1997, the Company entered into a $4.88 million credit facility
bearing interest at 10%. The terms of the credit facility were amended on June
13, 1997 and July 29, 1997. The terms of the credit facility require the Company
to use $2 million of the proceeds from the credit facility to repay the $2
million revolving line of credit referred to above, with assignment of the
related collateral to the new lender. The remaining proceeds will be used to
provide additional working capital. The terms of the credit facility require the
Company to sell to the lender a warrant to purchase up to 210,000 shares of
common stock at a purchase price per share equal to the initial public offering
price. The warrant will be exercisable during the five-year period commencing at
the effective date of the Company's initial public offering. In addition to the
exercise price, the lender will pay the Company $126,000 for the warrant. The
Company believes the consideration paid and the exercise prices represent the
fair value of the warrant. Accordingly, no amounts will be amortized to interest
expense. The terms of the credit facility extend the maturity of the credit
facility to the earlier of January 1, 1998 or completion of an initial public
offering. The credit facility was repaid with proceeds of the Company's initial
public offering which was completed in August, 1997.

On June 6, 1997, the Company's Board of Directors approved a 1-for-1.5
reverse stock split pursuant to the Company's initial public offering of common
stock. All share and per share amounts in the accompanying financial statements
have been restated to retroactively reflect the reverse split.

12. OTHER TRANSACTIONS (UNAUDITED)

During 1997, the Company acquired eight additional eye care practices, one
managed care company, a medical consulting company and an ambulatory surgical
center. The Company also intends to enter into

F-30
<PAGE> 105

VISION TWENTY-ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

business management agreements with these entities. The acquisitions have been
and will be accounted for by recording assets and liabilities at fair value and
allocating the remaining cost to the related Management Agreements. The fair
value of the net assets and business management agreements associated with these
entities is expected to approximate $16.2 million (subject to certain
adjustments), and will be paid through the issuance of 1,284,212 shares of the
Company's common stock (subject to certain adjustments), $3.8 million due to
selling shareholders and $700,000 in cash. The amount due to selling
shareholders will be paid upon completion of the post-closing adjustment period,
which is no more than ninety days from the closing date of the transactions. The
Common Stock to be issued in connection with these acquisitions will be valued
at $3.96 to $10.30 per share. An additional 197,470 shares of Common Stock will
be held in escrow. The shares held in escrow will be due the owners of certain
of the eye care practices if certain financial goals are met in the
eighteen-month period following the effective date of the transactions
(generally at several dates through February 1999). Such financial goals were
established to resolve certain differences between the Company and the owners of
the eye care practices regarding the purchase price valuations of the practices.
Any additional shares of Common Stock held in escrow which are ultimately issued
by the Company if such financial goals are met will be treated as an adjustment
of the purchase price of the assets acquired from the eye care practices. Based
upon information to date, management of the Company believes that the ultimate
issuance of any such shares held in escrow will not have a material adverse
effect on the results of operations, financial condition or liquidity of the
Company.

On August 18, 1997, the Company completed a public offering (the "Initial
Public Offering") of 2,100,000 shares of Common Stock. The Initial Public
Offering price was $10.00 per share, resulting in gross offering proceeds of
$21,000,000. Net proceeds to the Company, net of underwriters' discount and
other offering expenses, were $18,056,461 (unaudited). The net proceeds of the
offering were used to repay outstanding debt and for other general corporate
uses. In connection with the early extinguishment of certain indebtedness repaid
from the net proceeds of the Initial Public Offering, the Company incurred an
extraordinary charge of $323,346 (unaudited) during the nine months ended
September 30, 1997.

On October 10, 1997, the Company received a written commitment for a bridge
loan credit facility of $37,000,000 at an interest rate of the three-month
London Interbank Offered Rate plus 400 basis points. The loan will be due at the
earlier of six months from closing of the loan or the completion of an
additional equity offering. The loan will be collateralized by all assets of the
Company.

On October 15, 1997, the Company signed a letter of intent to acquire all
of the outstanding stock of BBG-COA, Inc. and all related subsidiaries and
affiliated companies ("Block Vision") from Block Vision's shareholders for a
maximum amount of $37.5 million comprised of cash and Common Stock of the
Company. The Company will account for the acquisition by recording the assets
and liabilities at their fair values and allocating the remaining cost to
goodwill.

F-31
<PAGE> 106

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
and Shareholders of
BBG-COA, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and accumulated deficit and of
cash flows present fairly, in all material respects, the financial position of
BBG-COA, Inc. and its subsidiaries (the "Company") at April 30, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended April 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Fort Lauderdale, Florida
July 1, 1997, except as to Note 10,
which is as of August 19, 1997

F-32
<PAGE> 107

BBG-COA, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
APRIL 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 653,228 $ 704,312
Accounts receivable:
Receivables from buying group members, less allowance
for doubtful accounts of $35,632 and $56,406.......... 6,031,354 6,441,516
Managed vision care fees receivable.................... 284,529 211,484
Receivables from fee for service plans................. 727,802 18,128
Other.................................................. 237,603 106,862
Prepaid expenses and other current assets................. 81,334 143,510
Prepaid income taxes...................................... 191,971 273,055
Deferred income taxes..................................... 31,810 122,243
----------- -----------
Total current assets.............................. 8,239,631 8,021,110
Restricted cash............................................. 125,000 125,000
Furniture, fixtures and purchased software, net............. 915,913 482,225
Other assets................................................ 50,826 156,083
Goodwill, less accumulated amortization of $2,684,636 and
$2,312,735................................................ 5,144,180 5,516,081
----------- -----------
Total assets...................................... $14,475,550 $14,300,499
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations.............. $ 33,750 $ 40,000
Accounts payable:
Payables to buying group suppliers..................... 5,726,000 6,126,767
Managed vision care claim reserves..................... 1,507,835 1,018,607
Fee for service plans claims payable................... 719,455 13,458
Accrued liabilities....................................... 306,699 394,311
----------- -----------
Total current liabilities......................... 8,293,739 7,593,143
Line of credit.............................................. 3,302,352 4,446,415
Capital lease obligations................................... 18,414 24,890
----------- -----------
Total liabilities................................. 11,614,505 12,064,448
----------- -----------
Shareholders' equity
Common stock, $0.01 par value, authorized 3,000,000
shares; issued and outstanding 1,363,814 shares........ 13,638 13,638
Additional paid-in capital................................ 3,828,365 3,828,365
Accumulated deficit....................................... (980,958) (1,605,952)
----------- -----------
Total shareholders' equity........................ 2,861,045 2,236,051
----------- -----------
Total liabilities and shareholders' equity........ $14,475,550 $14,300,499
=========== ===========
</TABLE>

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

F-33
<PAGE> 108

BBG-COA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Buying group sales.................................... $54,589,487 $56,361,820 $63,245,994
Managed vision care division fees..................... 14,386,981 8,283,865 --
----------- ----------- -----------
Total revenues................................ 68,976,468 64,645,685 63,245,994
Expenses:
Cost of product -- buying group....................... 51,816,568 53,448,373 58,287,963
Cost of service -- managed vision care division....... 10,220,761 5,965,721 --
Selling and administrative expenses................... 5,474,972 4,747,000 4,135,986
Provision for relocation costs........................ -- -- 552,000
----------- ----------- -----------
67,512,301 64,161,094 62,975,949
Income from operations.................................. 1,464,167 484,591 270,045
Interest expense........................................ 291,354 364,163 335,956
Other (income) expense, net............................. (14,303) 36,454 31,348
----------- ----------- -----------
Income (loss) before income taxes....................... 1,187,116 83,974 (97,259)
Provision for income taxes.............................. 562,122 166,479 126,188
----------- ----------- -----------
Net income (loss)............................. 624,994 (82,505) (223,447)
Accumulated deficit -- beginning of year................ (1,605,952) (1,523,447) (1,300,000)
----------- ----------- -----------
Accumulated deficit -- end of year...................... $ (980,958) $(1,605,952) $(1,523,447)
=========== =========== ===========
</TABLE>

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

F-34
<PAGE> 109

BBG-COA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................................ $ 624,994 $ (82,505) $(223,447)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization......................... 646,901 478,256 455,220
Changes in assets and liabilities
(Increase) decrease in accounts receivable.......... (503,298) (510,244) 426,424
Decrease (increase) in prepaid expenses and other
current assets................................... 62,176 53,292 (119,765)
Decrease (increase) in prepaid income taxes......... 81,084 (215,000) (42,654)
Decrease (increase) in deferred income taxes........ 90,433 187,640 (134,142)
Increase in restricted cash......................... -- (125,000) --
Decrease (increase) in other assets................. 105,257 (78,386) 14,021
Increase (decrease) in accounts payable............. 794,458 1,502,110 (368,754)
(Decrease) increase in accrued liabilities.......... (87,612) (1,044,481) 710,756
Other............................................... -- 37,337 --
----------- --------- ---------
Net cash provided by operating activities........ 1,814,393 203,019 717,659
----------- --------- ---------
Cash flows from investing activities
Capital expenditures..................................... (708,688) (347,175) (51,513)
----------- --------- ---------
Net cash used in investing activities............ (708,688) (347,175) (51,513)
----------- --------- ---------
Cash flows from financing activities
(Repayments of) proceeds from revolving credit loan,
net................................................... (1,144,063) 881,675 (33,220)
Repayments of capital lease obligations.................. (12,726) (37,000) (11,304)
Repayments of long-term debt and notes
payable -- shareholders............................... -- (370,000) (666,667)
----------- --------- ---------
Net cash (used in) provided by financing
activities..................................... (1,156,789) 474,675 (711,191)
----------- --------- ---------
Net (decrease) increase in cash............................ (51,084) 330,519 (45,045)
Cash -- beginning of year.................................. 704,312 373,793 418,838
----------- --------- ---------
Cash -- end of year........................................ $ 653,228 $ 704,312 $ 373,793
=========== ========= =========
Supplemental cash flow information
Cash paid during the year for:
Interest.............................................. $ 291,354 $ 378,000 $ 364,290
=========== ========= =========
Income taxes.......................................... $ 652,532 $ 265,000 $ 251,400
=========== ========= =========
</TABLE>

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

F-35
<PAGE> 110

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

NATURE OF BUSINESS

BBG-COA, Inc. (the "Company") through its wholly-owned subsidiary, Block
Vision, Inc. ("BVI") (formerly Block Buying Group, Inc.), provides billing and
collection services to suppliers of optical products, through its buying group
division ("buying group"). The Company, through its managed care division and
through BVI's wholly-owned subsidiary, Block Vision of Texas, Inc. ("BVT")
provides vision benefit management services to health maintenance organizations,
preferred provider organizations and other managed care entities.

BASIS OF PRESENTATION AND CONSOLIDATION

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and reflect management's estimates and
assumptions, such as those regarding managed vision care costs that affect the
recorded amounts. These consolidated financial statements include the accounts
of the Company and its subsidiaries. All material intercompany transactions have
been eliminated. References to 1997, 1996 and 1995 refer to the fiscal years
ended April 30, 1997, 1996 and 1995, respectively.

REVENUE RECOGNITION

The buying group business provides billing and collection services to
suppliers of optical products, whereby providers receive merchandise from
suppliers for direct shipment to the providers. The Company pays the vendors and
likewise bills the providers for such products. The Company receives revenue by
retaining generally 5% of the total receivables collected by the Company. This
commission revenue is included in buying group sales in the accompanying
statements of operations and is recognized upon shipment of merchandise by the
suppliers.

The managed vision care division of the Company provides vision care
administrative services to health maintenance organizations and other groups,
generally based on predetermined monthly fees. The Company reimburses
participating vision care providers for vision care services rendered by such
providers to enrollees of the Company's clients.

CASH AND CASH EQUIVALENTS

Short-term investments with a maturity of three months or less at the time
of purchase are reported as cash equivalents and include a certificate of
deposit.

RESTRICTED CASH

The Company established a Texas subsidiary during 1996 which is subject to
various regulatory restrictions. At April 30, 1997 and 1996, the Company
maintained a minimum required surplus of $125,000, including a statutory deposit
of $50,000.

FURNITURE, FIXTURES AND PURCHASED SOFTWARE

Furniture, fixtures and purchased software are carried at cost less
accumulated depreciation and amortization. Depreciation and amortization expense
is computed using the straight-line method based on estimated useful lives of
the assets ranging from 5 to 7 years.

GOODWILL

The cost of acquired businesses in excess of values assigned to net assets
is amortized over 20 years. Amortization expense for each of the years ended
April 30, 1997, 1996 and 1995 was $371,901, and is included in selling and
administrative expenses. The Company periodically reviews the recoverability of
goodwill from future cash flows, and adjusts the carrying value as required. At
April 30, 1997 and 1996, the Company determined that goodwill, net of
accumulated amortization, was not impaired.

F-36
<PAGE> 111

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MANAGED VISION CARE CLAIM RESERVES

The Company has accrued a liability for unpaid claims of $546,054 and
$328,142 at April 30, 1997 and 1996, respectively, and a liability for claims
incurred but not reported (IBNR) of $961,781 and $690,465 at April 30, 1997 and
1996, respectively. The liability for IBNR claims includes amounts for which
services by a vision care provider have been rendered but are not yet paid and
an estimate of costs incurred but not reported. Accruals are based on
estimations of the Company's incurred claims. The accrued liabilities for unpaid
claims and for claims incurred but not reported are included in accounts
payable.

INCOME TAXES

The Company provides for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes." SFAS No. 109 requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. Under this method, deferred tax assets and liabilities are determined
based on the differences between the financial statement carrying amounts and
the tax bases of assets and liabilities using enacted tax rates in effect in the
year in which the differences are expected to reverse.

CASH FLOW INFORMATION

Certain noncash transactions are excluded from the consolidated statement
of cash flows as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ---- --------
<S> <C> <C> <C>
Noncash investing and financing activities
Fixed assets acquired under capital leases................ $29,181 $ -- $113,194
</TABLE>

STOCK BASED COMPENSATION

The Company's employee stock option plan is accounted for using the
intrinsic value method as prescribed by Accounting Principles Board Opinion No.
25 ("APB 25"). Effective May 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock Based
Compensation". SFAS No. 123 establishes a fair value based accounting method of
accounting for stock based compensation plans. As permitted under the Statement,
the Company has elected to continue to apply the provisions of APB 25 and to
comply with the disclosure requirements of SFAS No. 123. There was no effect on
the Company's results of operations or financial position upon adoption of the
Statement (see Note 7).

2. FURNITURE, FIXTURES AND PURCHASED SOFTWARE

Furniture, fixtures and purchased software consist of the following:

<TABLE>
<CAPTION>
APRIL 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Furniture and fixtures...................................... $ 442,088 $ 368,354
Computer equipment.......................................... 432,603 383,147
Purchased software.......................................... 933,735 348,237
Leasehold improvements...................................... 16,001 16,001
---------- ----------
1,824,427 1,115,739
Less: Accumulated depreciation and amortization............. 908,514 633,514
---------- ----------
$ 915,913 $ 482,225
========== ==========
</TABLE>

F-37
<PAGE> 112

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in selling and administrative expenses is depreciation and
amortization expense for the years ended April 30, 1997, 1996 and 1995 of
$275,000, $106,355 and $83,319, respectively. The Company leases certain
computer equipment under capital leases with an aggregate cost of $142,375 and
$113,058 at April 30, 1997 and 1996, respectively.

3. DEBT AND CREDIT AGREEMENTS

<TABLE>
<CAPTION>
APRIL 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Line of credit.............................................. $3,302,352 $4,446,415
Capital lease obligations................................... 52,164 64,890
---------- ----------
3,354,516 4,511,305
Less: Current portion....................................... 33,750 40,000
---------- ----------
$3,320,766 $4,471,305
========== ==========
</TABLE>

At April 30, 1997 and 1996, the Company had $3,302,352 and $4,446,415,
respectively, outstanding under a financing agreement (the "Agreement") with
NationsBank. The Agreement expires on September 30, 1997. Under the Agreement,
borrowings under a line of credit facility are limited to the lesser of
$6,500,000 or approximately 85% of accounts receivable (maximum line of
approximately $6,189,095 at April 30, 1997). The Agreement also contains a
letter of credit facility which is limited to $2,200,000. The exposure under the
letters of credit, calculated from time to time, reduces the amount available
under the line of credit. As of April 30, 1997 and 1996, the Company had caused
letters of credit to be issued to suppliers to guarantee future payments for up
to $1,425,000 and $1,770,000, respectively. The outstanding borrowings under the
line of credit bear interest at the prime interest rate plus 1%. Additionally,
the Company is required to pay a commitment fee of .5% annually on the unused
portion of the commitment. Borrowings under the Agreement are secured by
substantially all assets of the Company. The Agreement, as amended, contains
certain financial covenants including the maintenance of minimum levels of
profitability and maximum debt to equity leverage ratios.

4. INCOME TAXES

A summary of the provision (benefit) for income taxes follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current
Federal.............................................. $402,748 $(33,654) $188,305
State................................................ 68,942 13,493 72,337
-------- -------- --------
471,690 (20,161) 260,642
-------- -------- --------
Deferred
Federal.............................................. 76,728 136,166 (98,027)
State................................................ 13,704 51,474 (36,545)
-------- -------- --------
90,432 187,640 (134,572)
-------- -------- --------
$562,122 $167,479 $126,070
======== ======== ========
</TABLE>

At April 30, 1997, 1996 and 1995, the Company has net operating loss
carryforwards of approximately $0, $95,000 and $0, respectively, for both
financial reporting and federal income tax purposes. Differences between book
and taxable income primarily relate to non-deductible amortization of goodwill.

F-38
<PAGE> 113

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect of temporary differences which give rise to deferred income
tax assets as of April 30, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Allowance for doubtful accounts............................. $13,408 $ 20,037
Returns and allowance reserve............................... -- 30,400
Net operating loss carryforwards............................ -- 32,020
Deferred gains.............................................. 6,593 11,850
Other....................................................... 11,809 27,936
------- --------
Deferred tax asset.......................................... $31,810 $122,243
======= ========
</TABLE>

5. CREDIT AND CONCENTRATION RISK

Financial instruments which subject the Company to concentrations of credit
risk consist principally of buying group accounts receivables. The Company
provides credit, in the normal course of business, to a large number of
optometrists.

Revenues generated from sales of products from one vendor constituted
approximately 15%, 16% and 19% of the Company's buying group sales revenue
during the years ended April 30, 1997, 1996 and 1995, respectively. Revenues
generated from sales of products from a second vendor constituted 14%, 13% and
12% of the Company's buying group sales revenue during the years ended April 30,
1997, 1996 and 1995, respectively.

Capitation payments generated from three managed care customers comprised
12%, 11% and 7% of total capitation payments during the year ended April 30,
1997.

6. EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) plan to which employees can contribute 1%
- -15% of their pretax salary. The Company makes a discretionary match of this
amount. During the years ended April 30, 1997 and 1996, the Company's expense
for this plan was $57,364 and $33,478, respectively.

During the year ended April 30, 1995, the Company sponsored defined benefit
and contribution plans. The Company's pension expense under these plans in 1995
was $75,323.

7. STOCK OPTIONS

In May 1993, the Company adopted an incentive stock option plan ("Plan"),
which authorized the granting of options to purchase 100,000 shares of the
Company's common stock. On June 15, 1993, the Company granted 67,500 options to
key employees at an option price of $4.33 per share which was determined to be
the fair market value on the date of grant. In fiscal year 1995, 6,250 options
lapsed due to the resignation of an employee. On May 18, 1995, the Company
authorized the grant of 23,750 options at an option price of $7.00 per share
which was determined to be the fair market value on the date of grant. Of the
23,750 options authorized for grant in May 1995, only 21,250 were issued. On
December 26, 1995, the Company granted the remaining 17,500 options to key
employees at an option price of $7.00 per share which was determined to be the
fair market value on the date of grant. These options vest over 36 to 48 months
and can be exercised over a 10-year period beginning with the respective date of
grant. At April 30, 1997, there were no options available for issuance under the
Plan and no options had been exercised as of April 30, 1997.

The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal year 1996: dividend yield of 0%; risk-free
interest rate of 6.76%; and expected lives of 7.5 years.

F-39
<PAGE> 114

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the Company's stock option plan as of and for each of the
three years ended April 30, 1997 is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.......... 100,000 $5.36 61,250 $4.33 67,500 $4.33
Granted................................. -- -- 41,250 7.00 -- --
Exercised............................... -- -- -- -- -- --
Forfeited............................... -- -- (2,500) 7.00 (6,250) 4.33
------- ----- ------- ----- ------ -----
Outstanding at end of year................ 100,000 $5.36 100,000 $5.36 61,250 $4.33
======= ===== ======= ===== ====== =====
Weighted-average fair value of options
granted during the year................. $ -- $7.00 $ --
===== ===== =====
</TABLE>

The following table summarizes information about stock options outstanding
at April 30, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------
WEIGHTED
AVERAGE WEIGHTED
RANGE OF CONTRACTUAL AVERAGE
EXERCISE REMAINING EXERCISE
PRICES NUMBER LIFE PRICE
-------- ------- ----------- --------
<S> <C> <C> <C>
$4.33.................................................... 61,250 6 years $4.33
$7.00.................................................... 38,750 8 years 7.00
- ------------- ------- --------- -------
$4.33 - $7.00............................................ 100,000 7 years $5.36
============= ======= ========= =======
</TABLE>

8. RELOCATION COSTS

In January 1995, the Company's Board of Directors approved the relocation
of the Company's operations to Florida. In 1995, the Company recorded a $552,000
charge for the costs associated with the move. These charges cover office moving
costs, severance payments to approximately 15 employees not relocating, and
moving costs for employees relocating including closing costs and real estate
commissions on new homes.

9. COMMITMENTS

OPERATING LEASES

The Company leases its office facilities and various equipment. Total
rental expense for the years ended April 30, 1997, 1996 and 1995 was $256,648,
$227,662 and $149,316, respectively. Approximate minimum annual rental
commitments under non-cancelable operating leases at April 30, 1997 are as
follows:

<TABLE>
<S> <C>
1998........................................................ $224,731
1999........................................................ 199,926
2000........................................................ 205,055
2001........................................................ 210,804
2002........................................................ 17,637
Thereafter.................................................. --
--------
$858,153
========
</TABLE>

F-40
<PAGE> 115

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CUSTOMER CONTRACTS

The Company has entered into several contracts with health maintenance
organizations ("HMO's"). These contracts define a business relationship whereby
the Company, through its network of providers, arranges vision care services to
members of the HMO's pursuant to a predetermined reimbursement schedule. The HMO
contracts generally have a term of one to two years, but generally may be
terminated by either party without cause on 60-90 days notice.

10. SUBSEQUENT EVENT

On August 19, 1997, the Company and NationsBank entered into a verbal
agreement to renew the Company's line of credit facility through September 30,
1998.

* * * * *

F-41
<PAGE> 116

BBG-COA, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
JULY 31,
1997
-----------
(UNAUDITED)
<S> <C>
ASSETS
Current assets
Cash...................................................... $ 338,845
Accounts receivable:
Receivables from buying group members, less allowance
for doubtful accounts of $41,632..................... 5,058,177
Managed vision care fee receivables.................... 718,420
Receivables from fee for service plans................. 785,701
Prepaid expenses and other current assets................. 41,848
Prepaid income taxes...................................... (9,163)
Deferred income taxes..................................... 24,173
-----------
Total current assets.............................. 6,958,001
Restricted cash............................................. 125,000
Furniture, fixtures and purchased software, net............. 977,787
Other assets................................................ 133,513
Goodwill, less accumulated amortization of $2,777,612....... 5,051,204
-----------
Total assets...................................... $13,245,505
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations.............. $ 27,511
Accounts payable:
Payables to buying group suppliers..................... 4,830,741
Managed vision care claim reserves..................... 1,207,326
Fee for service plans claims payable................... 563,568
Accrued liabilities....................................... 193,956
-----------
Total current liabilities......................... 6,823,102
Line of credit.............................................. 3,124,134
Other long-term liabilities................................. 40,211
-----------
Total liabilities................................. 9,987,447
-----------
Shareholders' equity
Common stock, $0.01 par value, authorized 3,000,000
shares;
issued and outstanding 1,363,814 shares................ 13,638
Additional paid-in capital................................ 3,828,365
Accumulated deficit....................................... (583,945)
-----------
Total shareholders' equity........................ 3,258,058
-----------
Total liabilities and shareholders' equity........ $13,245,505
===========
</TABLE>

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

F-42
<PAGE> 117

BBG-COA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
JULY 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Buying group sales........................................ $13,921,435 $14,021,144
Managed vision care division fees......................... 3,913,145 2,883,234
----------- -----------
Total revenues.................................... 17,834,580 16,904,378
Expenses:
Cost of product -- buying group........................... 13,233,812 13,322,123
Cost of service -- managed vision care division........... 2,418,131 1,973,292
Selling and administrative expenses....................... 1,428,039 1,257,195
----------- -----------
17,079,982 16,552,610
Income from operations............................ 754,598 351,768
Interest expense............................................ 60,228 92,968
Other income, net........................................... (8,596) (8,363)
----------- -----------
Income before income taxes.................................. 702,966 267,163
Provision for income taxes.................................. 305,953 210,259
----------- -----------
Net income........................................ 397,013 56,904
Accumulated deficit -- beginning of period.................. (980,958) (1,605,952)
----------- -----------
Accumulated deficit -- end of period........................ $ (583,945) $(1,549,048)
=========== ===========
</TABLE>

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

F-43
<PAGE> 118

BBG-COA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
JULY 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 397,013 $ 56,904
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization.......................... 164,975 140,975
Changes in assets and liabilities
Decrease in accounts receivable...................... 718,990 1,179,937
Decrease in prepaid expenses and other current
assets.............................................. 39,486 30,963
Decrease in prepaid income taxes..................... 201,134 109,064
Decrease in deferred income taxes.................... 7,637 41,734
Increase in other assets............................. (82,687) (41,875)
Decrease in accounts payable......................... (1,351,655) (1,186,636)
Decrease in accrued liabilities...................... (112,743) (220,019)
Other................................................ 40,211 115,502
----------- -----------
Net cash provided by operating activities......... 22,361 226,549
----------- -----------
Cash flows from investing activities
Capital expenditures...................................... (133,874) (143,380)
----------- -----------
Net cash used in investing activities............. (133,874) (143,380)
----------- -----------
Cash flows from financing activities
Repayments of revolving credit loan, net.................. (178,217) (436,518)
Repayments of capital lease obligations................... (24,653) (13,015)
----------- -----------
Net cash used in financing activities............. (202,870) (449,533)
----------- -----------
Net decrease in cash........................................ (314,383) (366,364)
Cash -- beginning of period................................. 653,228 704,312
----------- -----------
Cash -- end of period....................................... $ 338,845 $ 337,948
=========== ===========
Supplemental cash flow information
Cash paid during the period for:
Interest............................................... $ 60,227 $ 92,968
=========== ===========
</TABLE>

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

F-44
<PAGE> 119

BBG-COA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The consolidated financial statements of BBG-COA, Inc. and its subsidiaries
(the "Company") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The interim
financial data is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for interim periods.

These consolidated financial statements should be read in conjunction with
the audited financial statements and the notes thereto contained in the
prospectus.

The Company believes that the maturation of the Company's managed vision
care business and the Company's termination of certain unprofitable managed
vision care contracts has resulted in lower participant utilization and higher
gross profits on the Company's managed vision care business during the quarter
ended July 31, 1997. However, the results of operations for the three month
period ended July 31, 1997 are not necessarily indicative of the results to be
expected for the full year.

2. AMENDMENT OF FINANCING AGREEMENT

On October 1, 1997, the Company and NationsBank executed an amendment to
the Company's financing agreement to extend the maturity date of the agreement
to September 30, 1998 and to amend various covenants specified in the agreement.

3. SALE OF COMPANY

On October 13, 1997, BBG-COA's Board of Directors approved the terms of a
letter of intent for the acquisition by Vision Twenty-One, Inc. of 100% of the
issued and outstanding shares of BBG-COA's common stock for $35.0 million
consideration consisting of cash and the common stock of Vision Twenty-One, Inc.
plus the assumption of certain indebtedness. Additional shares of common stock
will be held in escrow as contingent consideration, deliverable upon the
attainment of certain operating results.

F-45
<PAGE> 120

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholders
Eye Institute of Southern Arizona, P.C.

We have audited the accompanying balance sheets of Eye Institute of
Southern Arizona, P.C. (the Company) as of December 31, 1995 and November 30,
1996, and the related statements of operations, stockholders' equity (deficit),
and cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Eye Institute of Southern
Arizona, P.C. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 15, 1997

F-46
<PAGE> 121

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 2,494 $ 49,943
Patient accounts receivable, net of allowances for
contractual adjustments and uncollectible accounts of
$612,000 and $466,000 at December 31, 1995 and November
30, 1996, respectively................................. 383,887 438,549
Due from related parties.................................. -- 8,032
Other receivables......................................... 94,023 39,113
Prepaid expenses.......................................... 14,354 14,818
---------- ----------
Total current assets.............................. 494,758 550,455
Deferred tax asset.......................................... 48,672 128,068
Property, equipment and improvements, net................... 1,552,728 1,463,539
---------- ----------
Total assets...................................... $2,096,158 $2,142,062
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 21,462 $ 42,844
Accrued compensation...................................... 180,022 141,449
Other current liabilities................................. 115,365 56,484
Due to related parties.................................... 57,985 --
Deferred tax liability.................................... 48,672 128,068
Current portion of capital lease obligation............... 50,884 55,107
---------- ----------
Total current liabilities......................... 474,390 423,952
Capital lease obligation, net of current portion............ 1,998,256 1,947,389
Stockholders' equity (deficit):
Common stock, $5 par value: 100,000 shares authorized;
2,000 shares issued and outstanding.................... 10,000 10,000
Deficiency in retained earnings........................... (386,488) (239,279)
---------- ----------
Total stockholders' equity (deficit).............. (376,488) (229,279)
---------- ----------
Total liabilities and stockholders' equity
(deficit)....................................... $2,096,158 $2,142,062
========== ==========
</TABLE>

See accompanying notes.

F-47
<PAGE> 122

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $3,649,990 $2,747,555
Premium revenue........................................... -- 69,401
Other..................................................... 355,644 338,774
---------- ----------
Total revenues.................................... 4,005,634 3,155,730
Expenses:
Salaries and benefits -- physicians....................... 2,522,538 1,658,590
Salaries and benefits -- other............................ 726,974 630,409
General and administrative................................ 358,936 298,254
Building and equipment rent............................... 175,918 168,424
Interest expense.......................................... 166,084 152,371
Depreciation and amortization............................. 112,175 100,473
---------- ----------
Total expenses.................................... 4,062,625 3,008,521
---------- ----------
Net income (loss)................................. $ (56,991) $ 147,209
========== ==========
</TABLE>

See accompanying notes.

F-48
<PAGE> 123

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK DEFICIENCY IN STOCKHOLDERS'
---------------- RETAINED EQUITY
SHARES AMOUNT EARNINGS (DEFICIT)
------ ------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................ 2,000 $10,000 $(329,497) $(319,497)
Net loss............................................ -- -- (56,991) (56,991)
----- ------- --------- ---------
BALANCE AT DECEMBER 31, 1995.......................... 2,000 10,000 (386,488) (376,488)
Net income.......................................... -- -- 147,209 147,209
----- ------- --------- ---------
BALANCE AT NOVEMBER 30, 1996.......................... 2,000 $10,000 $(239,279) $(229,279)
===== ======= ========= =========
</TABLE>

See accompanying notes.

F-49
<PAGE> 124

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (56,991) $147,209
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 112,175 100,473
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (122,887) (54,662)
Due from related parties............................... 23,951 (8,032)
Other receivables...................................... (74,157) 54,910
Prepaid expenses....................................... 2,627 (464)
Accounts payable, accrued compensation and other
current liabilities................................... 46,505 (76,072)
Due to related parties................................. 42,152 (57,985)
--------- --------
Net cash provided by (used in) operating
activities...................................... (26,625) 105,377
INVESTING ACTIVITIES
Purchases of property and equipment......................... (24,783) (11,284)
--------- --------
Net cash used in investing activities....................... (24,783) (11,284)
FINANCING ACTIVITIES
Repayment of capital lease obligations...................... (46,984) (46,644)
--------- --------
Net cash used in financing activities....................... (46,984) (46,644)
--------- --------
Increase (decrease) in cash................................. (98,392) 47,449
Cash, beginning of period................................... 100,886 2,494
--------- --------
Cash, end of period......................................... $ 2,494 $ 49,943
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 165,691 $148,741
========= ========
Cash paid for income taxes.................................. $ 40,168 $ --
========= ========
</TABLE>

See accompanying notes.

F-50
<PAGE> 125

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Eye Institute of Southern Arizona, P.C., an Arizona Professional Company
(the Company), operates a professional medical practice in Tucson, Arizona,
specializing in general ophthalmology.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. The Company's
building is held under a capital lease agreement. Depreciation and amortization,
including amortization of assets held under capital lease agreements, are
computed using the straight-line method, with useful lives generally ranging
from 5 to 31 years. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates less
allowances for contractual adjustments for patients covered by Medicare, the
Arizona Health Care Cost Containment System (AHCCCS) and various other discount
arrangements. Payments received under these programs and arrangements, which
generally are based on predetermined rates, are generally less than the
Company's customary charges, and the differences are recorded as contractual
adjustments at the time the related service is rendered.

The Company has contracted, effective August 1, 1996, with CIGNA as a
qualified provider of general ophthalmology services. The Company receives a
monthly capitation payment for all plan members in its assigned geographic area.
The premium revenue is paid pursuant to CIGNA HealthCare of Arizona guidelines
and administered on their behalf by Connecticut General Life Insurance Company.

On December 1, 1996, the Company contracted with FHP as a qualified
provider of general ophthalmology services. The Company will receive a monthly
capitation payment for all plan members in its assigned geographic area. The
premium revenue will be paid pursuant to FHP guidelines and administered on
their behalf by the Eye Specialists of Arizona Network.

The following table summarizes the percent of patient service revenues by
payor class:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medicare................................................... 35% 38%
FHP and CIGNA.............................................. 36 31
Other (including self-pay)................................. 29 31
--- ---
100% 100%
=== ===
</TABLE>

Laws and regulations governing the Medicare and AHCCCS programs are complex
and subject to interpretation. The Company believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrong doing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCCS programs.

F-51
<PAGE> 126

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes (SFAS 109). Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount for cash approximates its fair value because of its
short-term maturity. The fair value of the Company's capital lease obligation
cannot be determined due to its related party nature.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

2. RELATED PARTY TRANSACTIONS

Kuskat Investment Company (Kuskat) owns certain real property and surgical
equipment which the Company leases. Kuskat is owned by the two shareholders of
the Company. Rent expense for property owned by Kuskat totaled approximately
$176,000 and $168,000 for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996, respectively.

Due (to) from related parties consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Due to stockholders......................................... $(29,290) $(21,375)
Due (to) from Kuskat........................................ (43,025) 22,757
Employee advances........................................... 14,330 6,650
-------- --------
$(57,985) $ 8,032
======== ========
</TABLE>

3. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Building under capital lease................................ $ 2,450,000 $ 2,450,000
Leasehold improvements...................................... 53,005 53,005
Medical equipment........................................... 75,184 76,775
Office equipment............................................ 36,967 45,515
Automobiles................................................. 66,964 66,964
Computer equipment.......................................... 44,251 44,251
Other....................................................... 16,005 16,619
----------- -----------
2,742,376 2,753,129
Accumulated depreciation and amortization................... (1,189,648) (1,289,590)
----------- -----------
$ 1,552,728 $ 1,463,539
=========== ===========
</TABLE>

F-52
<PAGE> 127

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. LEASE COMMITMENTS

The Company leases office space and medical equipment under capital and
operating leases.

Future minimum lease commitments under a related party capital lease and
noncancelable operating leases (with terms of one year or more) consist of the
following at November 30, 1996:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
----------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 17,748 $ 13,265
Year ending December 31:
1997...................................................... 212,976 159,180
1998...................................................... 212,976 159,180
1999...................................................... 212,976 145,915
2000...................................................... 212,976 --
2001...................................................... 212,976 --
Thereafter................................................ 2,644,291 --
----------- --------
Total minimum lease payments................................ 3,726,919 $477,540
========
Less amount representing interest........................... (1,724,423)
-----------
Present value of minimum lease payments..................... $ 2,002,496
===========
</TABLE>

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Contribution carryforward................................. $ 663 $ 663
Net operating loss carryforward........................... 48,675 71,622
Lease capitalized for financial reporting purposes........ 207,771 196,746
Accumulated depreciation.................................. 59,474 62,615
-------- --------
316,583 331,646
Valuation allowance......................................... 267,911 203,578
-------- --------
Total deferred tax assets......................... $ 48,672 $128,068
======== ========
DEFERRED TAX LIABILITIES
Current:
Accrual to cash adjustment................................ $ 48,672 $128,068
-------- --------
Total deferred tax liabilities.................... $ 48,672 $128,068
======== ========
</TABLE>

F-53
<PAGE> 128

EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $(19,377) $ 50,051
Permanent differences....................................... 8,892 3,494
State taxes, net of federal benefit......................... (1,832) 9,355
Change in valuation allowance............................... 12,598 (64,333)
Personal service corporation status......................... (281) 1,433
-------- --------
$ -- $ --
======== ========
</TABLE>

SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $267,911 and $203,578 valuation allowance at December 31, 1995
and November 30, 1996, respectively, is necessary to reduce the deferred tax
assets to the amount that will more likely than not be realized. The change in
the valuation allowance for the current year is $(64,333). At November 30, 1996
and December 31, 1995, the Company has available net operating loss
carryforwards of approximately $174,000 and $119,000, respectively, which expire
in the years 2010 and 2011, respectively.

6. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $3 million per incident, with a
$5 million annual limit. In addition, the Company has an umbrella policy which
provides coverage of $3 million per claim, with a $5 million annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.

7. RETIREMENT PLAN

The Company maintains an employee savings plan under Section 401(k) of the
Internal Revenue Code. The plan covers substantially all employees. Management
has elected to not make matching or discretionary contributions to the plan.

8. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 595,000 shares of Vision common stock. In connection therewith,
the Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
Company.

The financial statements of the Company have been prepared as supplemental
information about the association to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.

F-54
<PAGE> 129

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Daniel B. Feller, M.D., P.C., d/b/a
Paradise Valley Eye Specialists;
Eye Specialists of Arizona Network, P.C.; and
Sharona Optical, Inc.

We have audited the accompanying combined balance sheets of Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye Specialists of
Arizona Network, P.C.; and Sharona Optical, Inc. (collectively referred to as
the Company), as of December 31, 1995 and November 30, 1996, and the related
combined statements of income, stockholders' equity, and cash flows for the year
ended December 31, 1995 and the eleven-month period ended November 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Daniel B. Feller,
M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye Specialists of Arizona
Network, P.C.; and Sharona Optical, Inc. at December 31, 1995 and November 30,
1996, and the combined results of their operations and their cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30, 1996
in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 17, 1997

F-55
<PAGE> 130

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 32,543 $ 36,711
Patient accounts receivable, net.......................... 110,452 80,081
Inventory................................................. 60,768 62,450
Prepaid expenses and other................................ 7,808 6,929
-------- --------
Total current assets.............................. 211,571 186,171
Property and equipment, net................................. 314,307 242,204
Deposits.................................................... 10,363 10,363
-------- --------
Total assets...................................... $536,241 $438,738
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 23,033 $ 70,260
Accrued salaries and benefits............................. 36,017 30,015
Notes payable and current portion of long-term debt....... 36,560 32,786
Current portion of obligations under capital leases....... 10,385 11,097
Deferred tax liability...................................... 23,632 11,468
-------- --------
Total current liabilities......................... 129,627 155,626
Deferred tax liability...................................... 27,377 23,039
Loan payable -- stockholder................................. -- 4,648
Long-term debt, less current portion........................ 97,412 58,914
Obligations under capital leases, less current portion...... 35,264 25,060
Stockholders' equity:
Common stock, $1 par value: PVES -- 100,000 shares
authorized, 500 shares issued and outstanding;
ESAN -- 10,000 shares authorized, issued and
outstanding; Sharona Optical -- 500,000 shares
authorized, 5,000 shares issued and outstanding........ 15,500 15,500
Retained earnings......................................... 231,061 155,951
-------- --------
Total stockholders' equity........................ 246,561 171,451
-------- --------
Total liabilities and stockholders' equity........ $536,241 $438,738
======== ========
</TABLE>

See accompanying notes.

F-56
<PAGE> 131

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,136,324 $ 888,289
Capitation revenues....................................... 1,433,085 1,272,761
Retail income............................................. 300,110 380,715
Rental income............................................. 19,700 16,550
Interest income........................................... 1,990 4,075
---------- ----------
Total revenues.................................... 2,891,209 2,562,390
Expenses:
Cost of sales............................................. 131,388 167,630
Salaries and benefits -- physicians....................... 743,957 530,226
Salaries and benefits -- all other........................ 745,425 760,307
Professional fees......................................... 383,478 381,707
Medical supplies.......................................... 108,964 46,210
General and administrative................................ 266,992 249,929
Building and equipment rent............................... 322,411 278,973
Depreciation and amortization............................. 76,596 82,340
Insurance................................................. 39,139 29,678
Interest.................................................. 12,945 12,525
---------- ----------
Total expenses.................................... 2,831,295 2,539,525
---------- ----------
Income before income taxes.................................. 59,914 22,865
Income tax expense (benefit)................................ (10,098) (16,502)
---------- ----------
Net income........................................ $ 70,012 $ 39,367
========== ==========
</TABLE>

See accompanying notes.

F-57
<PAGE> 132

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------- --------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........................ 15,500 $15,500 $ 233,049 $ 248,549
Distributions to stockholders................. -- -- (72,000) (72,000)
Net income.................................... -- -- 70,012 70,012
------ ------- --------- ---------
BALANCE, DECEMBER 31, 1995...................... 15,500 15,500 231,061 246,561
Distributions to stockholders................. -- -- (114,477) (114,477)
Net income.................................... -- -- 39,367 39,367
------ ------- --------- ---------
BALANCE, NOVEMBER 30, 1996...................... 15,500 $15,500 $ 155,951 $ 171,451
====== ======= ========= =========
</TABLE>

See accompanying notes.

F-58
<PAGE> 133

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 70,012 $ 39,367
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 76,596 82,340
Loss on disposal of fixed assets.......................... -- 6,963
Provision for doubtful accounts........................... 1,000 --
Deferred income taxes..................................... (10,098) (16,502)
Changes in assets and liabilities:
Patient accounts receivable............................ 64,857 30,371
Inventory.............................................. (4,768) (1,682)
Prepaid expenses and other............................. 5,721 879
Accounts payable....................................... 7,493 47,227
Accrued salaries and benefits.......................... 4,729 (6,002)
Loan payable--stockholder.............................. -- 4,648
--------- ---------
Net cash provided by operating activities......... 215,542 187,609
INVESTING ACTIVITIES
Purchases of property and equipment......................... (128,337) (17,200)
--------- ---------
Net cash used in investing activities............. (128,337) (17,200)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................... 33,689 21,250
Payments of long-term debt.................................. (34,561) (63,522)
Principal payments of capital leases........................ (8,546) (9,492)
Distributions to stockholders............................... (72,000) (114,477)
--------- ---------
Net cash used in financing activities............. (81,418) (166,241)
--------- ---------
Net increase in cash........................................ 5,787 4,168
Cash at beginning of period................................. 26,756 32,543
--------- ---------
Cash at end of period............................. $ 32,543 $ 36,711
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 12,945 $ 12,525
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Purchase of property and equipment through issuance of
capital lease obligations................................. $ 19,950 $ --
========= =========
</TABLE>

See accompanying notes.

F-59
<PAGE> 134

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Daniel B. Feller, M.D., P.C. d/b/a Paradise Valley Eye Specialists (PVES),
a professional corporation, operates a professional medical practice
specializing in optometry and general ophthalmology. Eye Specialists of Arizona
Network, P.C. (ESAN), a professional corporation with common ownership, was
formed in 1994 to negotiate capitated contracts with managed care companies.
Sharona Optical, Inc., a C-corporation, operates a retail store which sells
sunglasses and eyeglass frames. All three of the corporations operate in the
Phoenix area, and are hereinafter collectively referred to as the Company. All
significant intercompany transactions have been eliminated.

INVENTORIES

Inventories are stated at cost.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is computed using
the straight-line method, with the assets' useful lives estimated at five to
seven years.

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 312,785 $ 335,500
Office equipment............................................ 186,718 191,158
Computer equipment.......................................... 99,140 104,873
Automobile.................................................. 34,494 --
--------- ---------
633,137 631,531
Less accumulated depreciation and amortization.............. (318,830) (389,327)
--------- ---------
$ 314,307 $ 242,204
========= =========
</TABLE>

Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$57,000.

Amortization expense related to capital leases is included in depreciation
and amortization in the combined statements of income.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and accounts receivable are reflected in the
financial statements at fair value because of the short-term maturity of these
instruments.

F-60
<PAGE> 135

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The carrying amount and approximate fair values of the Company's long-term
debt and obligations under capital leases at December 31, 1995 and November 30,
1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
-------------------- --------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
$179,621 $183,516 $127,857 $143,161
======== ======== ======== ========
</TABLE>

Fair value is based on quoted market rates for debt with similar terms.

PATIENT SERVICE REVENUES

Revenues are based on established billing rates less allowances and
discounts for patients covered by Medicare, the Arizona Health Care Cost
Containment System (AHCCCS) and various other discount arrangements. Payments
received under these programs and arrangements, which are based on either
predetermined rates or the cost of services, are generally less than the
Company's customary charges. Revenues are recorded net of such contractual
adjustments or policy discounts.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, the Company's net patient revenues derived from Medicare and
AHCCCS were approximately 15 percent. The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payors is limited by the number of
patients and payors.

The Company has arrangements with third-party payors under capitated
medical services contracts. Under these contracts, the Company receives fixed,
monthly fees from the third-party payors for each covered life in exchange for
assuming responsibility for the provision of specified medical services.

INCOME TAXES

Income taxes for PVES have been provided using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

ESAN and Sharona Optical, Inc. have elected to have their income taxed as S
corporations under the federal Internal Revenue Code. As a result, in lieu of
corporate income tax, ESAN and Sharona Optical, Inc.'s taxable income is passed
through to the stockholders of ESAN and Sharona Optical, Inc. and taxed at the
individual level. Accordingly, no provision or liability for federal income tax
has been reflected in these combined financial statements for ESAN and Sharona
Optical, Inc.

F-61
<PAGE> 136

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

USE OF ESTIMATES

The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.

2. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Promissory note bearing interest at prime plus .5% (9.25%
and 8.75% at December 31, 1995 and November 30, 1996,
respectively), payable in equal installments of $1,564,
principal and interest, through April 2000, collateralized
by office equipment....................................... $ 82,875 $ 65,674
Note payable with interest at 8%, payable in monthly
installments of $1,564, principal and interest, through
October 1999.............................................. 21,418 17,095
Promissory note bearing interest at prime plus .5% (9.25% at
December 31, 1995), payable in equal installments of $573,
principal and interest, paid in full October 1996......... 23,490 --
Note payable with interest at 8.25%, payable in monthly
installments of $2,731, principal and interest, through
February 1997............................................. -- 8,082
Installment loan from vendor for medical equipment.......... 6,189 849
-------- --------
133,972 91,700
Less current portion........................................ (36,560) (32,786)
-------- --------
Notes payable and long-term debt............................ $ 97,412 $ 58,914
======== ========
</TABLE>

As of November 30, 1996, maturities of notes payable and long-term debt is
as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 5,498
Year ending December 31:
1997...................................................... 29,295
1998...................................................... 24,313
1999...................................................... 24,776
2000...................................................... 7,818
-------
$91,700
=======
</TABLE>

F-62
<PAGE> 137

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. LEASE COMMITMENTS

Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 1,150 $ 17,947
Year ending December 31:
1997........................................................ 13,803 216,838
1998........................................................ 13,803 203,929
1999........................................................ 10,242 169,728
2000........................................................ 2,716 159,106
2001........................................................ -- 162,108
Thereafter.................................................. -- 229,653
------- ----------
Total minimum lease obligations............................. 41,714 $1,159,309
==========
Less amount representing interest........................... (5,557)
-------
Present value of minimum lease payments (including current
portion of $11,097)....................................... $36,157
=======
</TABLE>

4. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $5,000,000 per claim, with a $5,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.

5. RELATED PARTY TRANSACTIONS

The Company leases a medical building from a stockholder. Total lease
payments were approximately $167,000 for the eleven-month period ended November
30, 1996 and $122,000 for the year ended December 31, 1995. The Company also
leased a medical building from an employee with total lease payments
approximating $29,000 for the eleven-month period ended November 30, 1996 and
$36,000 for the year ended December 31, 1995.

The Company received rental income of approximately $17,000 for the
eleven-month period ended November 30, 1996 from a medical building sublease
arrangement with an affiliated physician. Future minimum rentals to be received
under this sublease arrangement total approximately $156,000 at November 30,
1996.

The Company paid a stockholder approximately $311,000 for the eleven-month
period ended November 30, 1996 and $448,000 for the year ended December 31, 1995
as compensation for services provided to the Company.

F-63
<PAGE> 138

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
PVES' deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Tax credit carryforward................................... $ 5,286 $ 5,286
Net operating loss carryforward........................... 2,576 5,851
-------- --------
Total deferred tax assets......................... 7,862 11,137
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 23,632 11,468
Noncurrent:
Capital lease............................................. 4,810 8,688
Depreciation expense...................................... 30,429 25,488
-------- --------
35,239 34,176
-------- --------
Total deferred tax liabilities.................... 58,871 45,644
-------- --------
Net deferred tax assets........................... $(51,009) $(34,507)
======== ========
</TABLE>

Components of the income tax provision (benefit) which relates only to PVES
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 NOVEMBER 30, 1996
----------------------------- -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal.................. $ -- $ (9,038) $ (9,038) $ -- $(12,866) $(12,866)
State.................... -- (1,060) (1,060) -- (3,636) (3,636)
------- -------- -------- ------- -------- --------
$ -- $(10,098) $(10,098) $ -- $(16,502) $(16,502)
======= ======== ======== ======= ======== ========
</TABLE>

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate........................ $ 20,371 $ 7,774
Permanent differences..................................... 356 356
S corporation income...................................... (24,732) (21,865)
State taxes, net of federal benefit....................... (700) (2,400)
Tax credit................................................ (5,286) --
Personal service corporation status....................... (107) (367)
-------- --------
$(10,098) $(16,502)
======== ========
</TABLE>

At December 31, 1995 and November 30, 1996, PVES has available net
operating loss carryforwards of approximately $6,000 (which expires in 2010) and
$14,000 (which expires in 2011), respectively.

F-64
<PAGE> 139

DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists, Eye Specialists of
Arizona Network, P.C., and Sharona Optical, Inc. were acquired by Vision
Twenty-One, Inc. (Vision) in exchange for approximately 421,000 shares of Vision
common stock and notes of approximately $150,000. In connection therewith, the
Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.

The combined financial statements of Daniel B. Feller, M.D., P.C., d/b/a
Paradise Valley Eye Specialists; Eye Specialists of Arizona Network, P.C.; and
Sharona Optical, Inc. have been prepared as supplemental information about the
association to which Vision will provide management services following
consummation of the acquisition. The Company previously operated as a separate
independent association. The historical financial position, results of
operations and cash flows do not reflect any adjustments relating to the
acquisition.

F-65
<PAGE> 140

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Northwest Eye Specialists, P.L.L.C.

We have audited the accompanying balance sheets of Northwest Eye
Specialists, P.L.L.C. (the Company) as of December 31, 1995 and November 30,
1996, and the related statements of income, partners' equity, and cash flows for
the year ended December 31, 1995 and the eleven-month period ended November 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northwest Eye Specialists,
P.L.L.C. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 15, 1997

F-66
<PAGE> 141

NORTHWEST EYE SPECIALISTS, P.L.L.C.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $135,148 $122,445
Patient accounts receivable, net of allowances for
uncollectible accounts of approximately $49,000 and
$96,000 at December 31, 1995 and November 30, 1996,
respectively........................................... 195,209 349,974
Due from related parties.................................. 32,420 32,107
Prepaid expenses.......................................... 24,963 40,384
Inventories............................................... -- 65,476
-------- --------
Total current assets.............................. 387,740 610,386
Property, equipment and improvements, net................... 105,841 141,201
Other assets................................................ 27,072 27,072
-------- --------
Total assets...................................... $520,653 $778,659
======== ========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 53,832 $250,386
Accrued compensation...................................... 34,421 72,452
Accrued distributions to physicians....................... -- 101,260
Other accrued liabilities................................. 8,727 8,018
Profit sharing payable.................................... 51,162 30,000
Due to related parties.................................... 7,082 7,082
Short-term borrowings..................................... -- 45,000
Current maturities of obligations under capital leases.... 7,962 8,341
-------- --------
Total current liabilities......................... 163,186 522,539
Obligations under capital leases, net of current portion.... 19,742 12,337
Partners' equity............................................ 337,725 243,783
-------- --------
Total liabilities and partners' equity............ $520,653 $778,659
======== ========
</TABLE>

See accompanying notes.

F-67
<PAGE> 142

NORTHWEST EYE SPECIALISTS, P.L.L.C.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,302,823 $2,160,519
Sales of optical goods.................................... -- 250,901
Other..................................................... 42,399 2,964
---------- ----------
Total revenues.................................... 2,345,222 2,414,384
Expenses:
Salaries, wages and benefits.............................. 559,124 620,435
Cost of optical goods sold................................ -- 94,901
Medical supplies.......................................... 177,681 156,962
General and administrative................................ 430,894 571,594
Insurance................................................. 190,045 146,808
Building and equipment rent............................... 120,000 140,657
Depreciation and amortization............................. 26,372 27,688
Consulting fee to physician............................... -- 11,000
Interest.................................................. 50,817 5,353
---------- ----------
Total expenses.................................... 1,554,933 1,775,398
---------- ----------
Net income........................................ $ 790,289 $ 638,986
========== ==========
</TABLE>

See accompanying notes.

F-68
<PAGE> 143

NORTHWEST EYE SPECIALISTS, P.L.L.C.

STATEMENTS OF PARTNERS' EQUITY

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Partners' equity, beginning of period....................... $ 278,895 $ 337,725
Net income................................................ 790,289 638,986
Cash contributions from partners.......................... 75,321 --
In-kind capital contributions from partner................ 120,000 151,657
Distributions to partners................................. (926,780) (884,585)
--------- ---------
Partners' equity, end of period............................. $ 337,725 $ 243,783
========= =========
</TABLE>

See accompanying notes.

F-69
<PAGE> 144

NORTHWEST EYE SPECIALISTS, P.L.L.C.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 790,289 $ 638,986
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 26,372 27,688
In-kind capital contributions from partner................ 120,000 151,657
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (25,534) (154,765)
Due from related parties............................... (3,025) 313
Prepaid expenses....................................... (17,529) (15,421)
Inventories............................................ -- (65,476)
Accounts payable, accrued expenses and other........... 17,350 313,974
--------- ---------
Net cash provided by operating activities......... 907,923 896,956
INVESTING ACTIVITIES
Cash contributions from partners............................ 75,321 --
Purchases of property and equipment......................... (66,650) (63,048)
--------- ---------
Net cash provided by (used in) investing activities......... 8,671 (63,048)
FINANCING ACTIVITIES
Proceeds from short-term borrowings......................... -- 45,000
Principal payments on capital leases........................ (7,041) (7,026)
Distributions to partners................................... (926,780) (884,585)
--------- ---------
Net cash used in financing activities....................... (933,821) (846,611)
--------- ---------
Decrease in cash............................................ (17,227) (12,703)
Cash at beginning of period................................. 152,375 135,148
--------- ---------
Cash at end of period....................................... $ 135,148 $ 122,445
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 48,013 $ 5,353
========= =========
</TABLE>

See accompanying notes.

F-70
<PAGE> 145

NORTHWEST EYE SPECIALISTS, P.L.L.C.

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Northwest Eye Specialists, P.L.L.C. (the Company), an Arizona Professional
Company, operates a professional medical practice in Tucson, Arizona,
specializing in general ophthalmology and surgery. Per the operating agreement
dated June 1, 1993, the Company will cease to exist upon the occurrence of
certain events or on December 31, 2050. Each member's liability for the debts
and obligation of the Company shall be limited as set forth in the Arizona
Limited Liability Company Act, Section 29-651.

INVENTORIES

Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, "optical goods"). Inventories are stated at the
lower of cost or market, with cost determined on a specific-identification
basis.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation,
including amortization of assets held under capital lease obligations, is
computed using the straight-line method, with the assets' useful lives ranging
from 5 to 39 years. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 57,827 $ 74,611
Office equipment............................................ 38,120 42,954
Optical shop equipment...................................... 15,000 19,158
Medical equipment held under capital leases................. 39,924 39,924
Leasehold improvements...................................... 7,121 44,393
-------- --------
157,992 221,040
Less accumulated depreciation and amortization.............. (52,151) (79,839)
-------- --------
$105,841 $141,201
======== ========
</TABLE>

Amortization expense related to capital leases is included in depreciation
and amortization in the accompanying statements of income.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare, Arizona
Health Care Cost Containment System (AHCCCS) and various other discount
arrangements. Payments received under these programs and arrangements, which are
based on predetermined rates, are generally less than the Company's established
billing rates and the differences are recorded as contractual adjustments at the
time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 53% and 52%, respectively, of the Company's net
patient service revenues were derived from the Medicare and AHCCCS programs. The
Company does not believe that there are any credit risks associated with
receivables due from governmental agencies. Concentration of credit risk from
other payors is

F-71
<PAGE> 146

NORTHWEST EYE SPECIALISTS, P.L.L.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

limited by the number of patients and payors. The Company does not require any
form of collateral from its patients or third-party payors.

INCOME TAXES

The Company was organized as an Arizona Limited Liability Company and is
taxed as a partnership for federal and state income tax purposes. As a result,
in lieu of corporate income taxes, the Company's taxable income is passed
through to the partners of the Company and taxed at the individual taxpayer
level in accordance with their ownership interests. As a result, the
accompanying financial statements include no provision for income taxes for the
Company.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash reflects its fair value because of the
short-term maturity of that financial instrument. It is not practicable to
estimate the fair value of the Company's capital lease obligation because the
Company's incremental borrowing rate cannot reasonably be determined.

2. RELATED PARTY TRANSACTIONS

The Company leases its operating facilities and certain equipment from a
partner of the Company. Expenses under such leases amounted to approximately
$120,000 and $141,000 for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996, respectively. Such amounts are recognized as
in-kind capital contributions from partner because no payment was made to the
partner.

The Company recognized expense of $11,000 for the eleven-month period ended
November 30, 1996 under a consulting agreement with a partner of the Company.
Such amount is recognized as in-kind capital contributions from partner because
no payment was made to the partner.

The Company reimbursed a partner in 1995 for interest on a loan relating to
the Company's facility. Such interest expense reimbursement was approximately
$51,000 for the year ended December 31, 1995. Although the partner incurred
interest on the loan in 1996, the Company did not reimburse the partner for such
interest in 1996.

F-72
<PAGE> 147

NORTHWEST EYE SPECIALISTS, P.L.L.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. LEASE COMMITMENTS

At November 30, 1996, approximate future minimum rental commitments under
noncancelable operating leases (with an initial or remaining term in excess of
one year) and a capital lease are as follows (including related party leases):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASE
---------- -------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 10,984 $ 820
Year ending December 31:
1997...................................................... 133,955 9,845
1998...................................................... 134,492 9,845
1999...................................................... 121,820 2,461
2000...................................................... 120,000 --
Thereafter................................................ 6,000,000 --
---------- -------
Total minimum lease obligations............................. $6,521,251 22,971
==========
Less amount representing interest........................... (2,293)
-------
Present value of minimum lease obligations.................. $20,678
=======
</TABLE>

4. RETIREMENT PLAN

The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to the plan was
approximately $52,000 and $44,000 for the year ended December 31, 1995 and for
the eleven-month period ended November 30, 1996, respectively.

5. MALPRACTICE INSURANCE

The Company carries separate occurrence based malpractice insurance
policies for each of its two physicians. This insurance provides separate
per-occurrence coverage of $2,000,000 and $3,000,000, respectively, for the two
physicians with an aggregate limit of $4,000,000 and $5,000,000, respectively.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.

6. SHORT-TERM BORROWINGS

Short-term borrowings represent a bank revolving line of credit of $75,000
for working capital needs, of which $30,000 is available at November 30, 1996.
The maturity date is June 16, 1997. Interest payments are due monthly with
interest accruing at the bank's prime rate (9.25% at November 30, 1996). The
revolving line of credit is collateralized by the Company's receivables and
guaranteed by the partners.

7. COMMITMENTS AND CONTINGENCIES

Other assets include an investment in an unrelated limited liability
investment company with a book value of $27,072 at December 31, 1995 and
November 30, 1996. Under the investment agreement, the investment company may
require additional capital contributions from the Company not to exceed $50,000
in the aggregate. Additional capital contributions of approximately $3,000 have
been made through November 30, 1996.

F-73
<PAGE> 148

NORTHWEST EYE SPECIALISTS, P.L.L.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. OTHER REVENUE

Through December 31, 1995, an unrelated organization operated an optical
shop on the Company's premises. Other revenue for the year ended December 31,
1995 includes approximately $41,000 received by the Company related to the
optical shop arrangement with such unrelated organization.

9. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 492,000 shares of Vision common stock and notes of approximately
$396,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.

The financial statements of the Company have been prepared as supplemental
information about the associations to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.

F-74
<PAGE> 149

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A.
and Vision Correction Centers, Inc.

We have audited the accompanying combined balance sheets of Lindstrom,
Samuelson & Hardten Ophthalmology Associates, P.A. and Vision Correction
Centers, Inc. as of December 31, 1995 and November 30, 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Lindstrom,
Samuelson & Hardten Ophthalmology Associates, P.A. and Vision Correction
Centers, Inc. at December 31, 1995 and November 30, 1996, and the combined
results of their operations and their cash flows for the year ended December 31,
1995 and the eleven-month period ended November 30, 1996 in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 14, 1997

F-75
<PAGE> 150

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 353 $177,637
Patient accounts receivable, net of allowance for doubtful
accounts of approximately $51,000 and $48,000 at
December 31, 1995 and November 30, 1996,
respectively........................................... 305,103 290,272
Other receivables......................................... 5,000 11,706
Prepaid expenses.......................................... 12,473 3,932
-------- --------
Total current assets.............................. 322,929 483,547
Property, equipment and improvements, net................... 584,653 455,448
Other assets................................................ 51,912 36,771
-------- --------
Total assets...................................... $959,494 $975,766
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $125,531 $257,421
Due to related party...................................... -- 84,825
Revolving credit note payable............................. -- 60,000
Current portion of long-term debt......................... 53,713 46,439
Current portion of obligations under capital leases....... 81,419 111,817
-------- --------
Total current liabilities......................... 260,663 560,502
Long-term debt.............................................. 106,938 65,079
Obligations under capital leases, net of current portion.... 388,299 316,473
Stockholders' equity:
Common stock, $1 par value: 100 shares authorized, issued
and outstanding........................................ 100 100
Retained earnings......................................... 203,494 33,612
-------- --------
Total stockholders' equity........................ 203,594 33,712
-------- --------
Total liabilities and stockholders' equity........ $959,494 $975,766
======== ========
</TABLE>

See accompanying notes.

F-76
<PAGE> 151

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,679,914 $3,404,975
Other..................................................... 61,171 57,991
---------- ----------
Total revenues.................................... 2,741,085 3,462,966
Expenses:
Compensation to physician stockholders.................... 884,903 947,780
Salaries, wages and benefits.............................. 585,386 746,251
Advertising............................................... 239,904 240,848
Professional fees -- related party........................ -- 591,455
Professional fees -- other................................ 197,680 164,794
General and administrative................................ 263,856 332,598
Medical supplies.......................................... 82,429 118,665
Insurance................................................. 73,697 31,496
Building and equipment rent............................... 162,534 171,980
Depreciation and amortization............................. 257,730 235,047
Interest.................................................. 79,674 51,934
---------- ----------
Total expenses.................................... 2,827,793 3,632,848
---------- ----------
Net loss.......................................... $ (86,708) $ (169,882)
========== ==========
</TABLE>

See accompanying notes.

F-77
<PAGE> 152

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------ --------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995............................... 100 $100 $ 290,202 $ 290,302
Net loss............................................. -- -- (86,708) (86,708)
--- ---- --------- ---------
BALANCE, DECEMBER 31, 1995............................. 100 100 203,494 203,594
Net loss............................................. -- -- (169,882) (169,882)
--- ---- --------- ---------
BALANCE, NOVEMBER 30, 1996............................. 100 $100 $ 33,612 $ 33,712
=== ==== ========= =========
</TABLE>

See accompanying notes.

F-78
<PAGE> 153

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (86,708) $(169,882)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 257,730 235,047
(Gain) loss on disposal of fixed assets................... (8,477) 1,096
Changes in assets and liabilities:
Patient accounts receivable, net....................... (20,851) 14,831
Other receivables...................................... 6,000 (6,706)
Prepaid expenses....................................... (1,298) 8,541
Accounts payable and accrued expenses.................. 16,867 116,807
Due to related party................................... -- 84,825
--------- ---------
Net cash provided by operating activities......... 163,263 284,559
INVESTING ACTIVITIES
Purchases of property and equipment......................... (55,947) (47,884)
(Increase) decrease in other assets......................... (1,089) 4,700
--------- ---------
Net cash used in investing activities....................... (57,036) (43,184)
FINANCING ACTIVITIES
Proceeds from issuance of revolving credit note payable..... -- 80,000
Payment of revolving credit note payable.................... -- (20,000)
Payment of long-term debt................................... (83,898) (49,133)
Principal payments on capital leases........................ (60,035) (74,958)
--------- ---------
Net cash used in financing activities....................... (143,933) (64,091)
--------- ---------
(Decrease) increase in cash................................. (37,706) 177,284
Cash at beginning of period................................. 38,059 353
--------- ---------
Cash at end of period....................................... $ 353 $ 177,637
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 72,954 $ 56,000
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITY
Capital lease obligations incurred to acquire equipment..... $ 45,889 $ 33,530
========= =========
Loan and vendor accounts payable incurred to acquire
equipment................................................. $ 24,856 $ 15,083
========= =========
</TABLE>

See accompanying notes.

F-79
<PAGE> 154

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A. (Practice), a
Minnesota corporation, operates a professional medical practice, specializing in
general ophthalmology and surgery. Vision Correction Centers, Inc. (VCC), a
Minnesota corporation with common ownership with the Practice, was formed in
1994 to provide ophthalmic surgery services. Both corporations operate in the
greater Minneapolis and St. Paul area, and are hereinafter collectively referred
to as the Company. During 1995, VCC transferred all of its assets and
liabilities to the Practice and ceased all operations. All significant
intercompany transactions have been eliminated.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at five to seven years. Routine maintenance and repairs are
charged to expense as incurred, while costs of betterments and renewals are
capitalized.

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 991,724 $1,043,715
Office furniture and equipment.............................. 147,760 181,938
Computer software........................................... 25,021 25,521
Leasehold improvements...................................... 35,752 37,170
---------- ----------
1,200,257 1,288,344
Less accumulated depreciation and amortization.............. (615,604) (832,896)
---------- ----------
$ 584,653 $ 455,448
========== ==========
</TABLE>

Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$558,000. Included in office furniture and equipment as of November 30, 1996 are
assets acquired through capital leases with original costs of approximately
$15,000.

Amortization expense related to capital leases is included in depreciation
and amortization in the combined statements of operations.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and revolving credit note payable reported in
the combined financial statements reflects their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and obligations under
capital leases because the Company's incremental borrowing rate cannot
reasonably be determined.

NET PATIENT SERVICE REVENUES

F-80
<PAGE> 155

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

than the Company's established billing rates and the differences are recorded as
contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 23% and 19%, respectively, of the Company's net
patient service revenues were derived from the Medicare and Medicaid programs.
The Company does not believe that there are any credit risks associated with
receivables due from governmental agencies. Concentration of credit risk from
other payors is limited by the number of patients and payors. The Company does
not require any form of collateral from its patients or third-party payors.

Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquires have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.

ADVERTISING COSTS

The Company expenses advertising costs as incurred.

INCOME TAXES

Income taxes for VCC have been provided using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

The Practice is taxed under the provisions of Subchapter S of the Internal
Revenue Code, which generally provides that in lieu of corporate taxes, the
stockholders shall be taxed on the Practice's taxable income in accordance with
their ownership interests. As a result, the accompanying combined financial
statements include no provision for income taxes for the Practice.

USE OF ESTIMATES

The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.

OTHER ASSETS

The Company purchased a physician practice in 1994. Costs of approximately
$43,000 and $32,000 (net of accumulated amortization of approximately $14,000
and $25,000) as of December 31, 1995 and November 30, 1996, respectively, are
included in other assets in the combined financial statements. The costs are
being amortized over five years and the related expense is included in
depreciation and amortization in the combined statements of operations.

F-81
<PAGE> 156

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

2. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Bank term loan bearing interest at prime plus 1% (9.75% and
9.25% at December 31, 1995 and November 30, 1996,
respectively), payable in equal installments of $3,000
(principal and interest) through December 1998............. $100,475 $ 75,219
Note payable with interest imputed at 10%, payable in
monthly installments of $1,200 (principal and interest)
through September 1999..................................... 44,876 36,299
Installment loan from vendor for medical equipment......... 15,300 --
-------- --------
160,651 111,518
Less current portion....................................... (53,713) (46,439)
-------- --------
$106,938 $ 65,079
======== ========
</TABLE>

The term loan is collateralized by substantially all of the assets of the
Company.

As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 4,222
Year ending December 31:
1997...................................................... 46,239
1998...................................................... 50,693
1999...................................................... 10,364
--------
$111,518
========
</TABLE>

3. LEASE COMMITMENTS

Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 21,757 $ 15,277
Year ending December 31:
1997...................................................... 160,267 186,950
1998...................................................... 183,857 194,322
1999...................................................... 120,395 201,654
2000...................................................... 11,990 208,986
2001...................................................... 1,364 106,326
-------- --------
Total minimum lease payments................................ 499,630 $913,515
========
Less amount representing interest........................... (71,340)
--------
Present value of minimum lease payments..................... $428,290
========
</TABLE>

F-82
<PAGE> 157

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. INCOME TAXES

At December 31, 1995, VCC had no deferred tax assets or liabilities as the
result of the sale of its assets to the Practice. This sale resulted in income
during 1995 for tax purposes.

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
1995
--------
<S> <C>
Income taxes at the statutory rate.......................... $(29,481)
Permanent differences....................................... 28,573
S-corporation income........................................ 14,448
State taxes, net of federal benefit......................... 2,576
Benefit of graduated rates.................................. (6,825)
Change in valuation allowance............................... (9,291)
--------
$ --
========
</TABLE>

The change in the valuation allowance for the year ended December 31, 1995
was $9,291.

5. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $5,000,000 per incident, with a
$5,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $2,000,000 per claim, with a $4,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.

6. RETIREMENT PLAN

The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $42,000 for the year ended December 31, 1995 and for the
eleven-month period ended November 30, 1996.

7. COMMITMENTS

The Company has employment agreements with each of the three
physician-stockholders which provide for, among other things, base pay and
incentive compensation based on the Company's net income. Additionally, the
Company has a deferred compensation agreement with each physician-stockholder
which provides for compensation in the event of voluntary or involuntary
termination. In connection with the transaction described in Note 9, each of the
aforementioned agreements was terminated.

The Company has a revolving credit note payable of $100,000 due on demand,
bearing interest at a rate of prime plus 0.5% (8.75% at November 30, 1996). As
of November 30, 1996, the Company had $60,000 outstanding on this revolving
credit note payable.

8. RELATED PARTY TRANSACTIONS

During the eleven-month period ended November 30, 1996, the Company
incurred costs of approximately $591,000 for the use of laser equipment owned by
Laser Vision Centers, Inc. (LVC). As of

F-83
<PAGE> 158

LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

November 30, 1996, $84,825 was payable to LVC and is included in due to related
party in the combined balance sheets. The majority stockholder of the Company is
a shareholder and director of LVC.

Subsequent to November 30, 1996, the Company executed a letter of intent
with LVC whereby the Company will sell certain equipment and assets with a net
book value of approximately $225,000. The letter of intent also states that the
Company will enter into a management service agreement with LVC for the
performance of various management services related to refractive surgery.

9. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 371,000 shares of Vision common stock and notes of approximately
$460,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.

The combined financial statements of the Company have been prepared as
supplemental information about the associations to which Vision will provide
management services following consummation of the acquisition. The Company
previously operated as a separate independent association. The historical
financial position, results of operations and cash flows do not reflect any
adjustments relating to the acquisition.

F-84
<PAGE> 159

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Cambridge Eye Clinic, P.A. --
John W. Lahr, Optometrist, P.A. and
Eyeglass Express Optical Lab, Inc.

We have audited the accompanying combined balance sheets of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc. as of December 31, 1995 and November 30, 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc. at December 31, 1995 and November 30, 1996, and the combined results
of their operations and their cash flows for the year ended December 31, 1995
and the eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 10, 1997

F-85
<PAGE> 160

CAMBRIDGE EYE CLINIC, P. A.--
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,061 $ 83,302
Patient accounts receivable, net of allowances for
uncollectible accounts of approximately $37,000 and
$25,000 at December 31, 1995 and November 30, 1996,
respectively........................................... 191,680 129,517
Other receivables......................................... 3,374 15,668
Inventories............................................... 207,968 210,701
Prepaid expenses.......................................... 11,381 11,581
-------- --------
Total current assets.............................. 459,464 450,769
Deferred tax assets......................................... 31,433 33,237
Other assets................................................ 600 462
Property, equipment and improvements, net................. 149,518 101,922
-------- --------
Total assets...................................... $641,015 $586,390
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 65,151 $141,222
Note payable to stockholder............................... 5,946 5,946
Demand notes payable...................................... 5,363 1,857
Current maturities of long-term debt...................... 24,795 22,330
Deferred tax liabilities.................................. 141,368 89,277
-------- --------
Total current liabilities......................... 242,623 260,632
Long-term debt, net of current portion...................... 155,480 161,557
Stockholders' equity:
Common stock, no par value: 2,500 shares authorized; 1,250
shares issued and outstanding.......................... -- --
Additional paid-in capital................................ 42,389 42,389
Note receivable from stock sales.......................... (12,850) --
Retained earnings......................................... 213,373 148,840
Treasury stock at cost (750 shares)....................... -- (27,028)
-------- --------
Total stockholders' equity........................ 242,912 164,201
-------- --------
Total liabilities and stockholders' equity........ $641,015 $586,390
======== ========
</TABLE>

See accompanying notes.

F-86
<PAGE> 161

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $ 537,834 $ 527,068
Sales of optical goods.................................... 900,826 749,783
Other income.............................................. 2,080 2,724
---------- ----------
Total revenues.................................... 1,440,740 1,279,575
Expenses:
Compensation to physician stockholder..................... 65,175 62,306
Salaries, wages and benefits.............................. 582,086 639,931
Cost of optical goods sold................................ 348,984 316,115
General and administrative................................ 182,769 177,697
Insurance................................................. 15,791 6,891
Building and equipment rent............................... 136,965 125,894
Depreciation.............................................. 60,878 42,458
Interest.................................................. 21,759 16,931
Other..................................................... 6,503 3,107
---------- ----------
Total expenses.................................... 1,420,910 1,391,330
---------- ----------
Income (loss) before income taxes........................... 19,830 (111,755)
Income tax expense (benefit)................................ 7,984 (47,222)
---------- ----------
Net income (loss)........................................... $ 11,846 $ (64,533)
========== ==========
</TABLE>

See accompanying notes.

F-87
<PAGE> 162

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTE
NO-PAR ADDITIONAL RECEIVABLE TOTAL
COMMON PAID-IN FROM RETAINED TREASURY STOCKHOLDERS'
STOCK SHARES CAPITAL STOCK SALES EARNINGS STOCK EQUITY
------------ ---------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995..... 1,250 $42,389 $(12,850) $201,527 $ -- $231,066
Net income................... -- -- -- 11,846 -- 11,846
----- ------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1995... 1,250 42,389 (12,850) 213,373 -- 242,912
Net loss..................... -- -- -- (64,533) -- (64,533)
Payment on note receivable
from stock sales.......... -- -- 12,850 -- -- 12,850
Purchase of treasury stock at
cost...................... -- -- -- -- (27,028) (27,028)
----- ------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996... 1,250 $42,389 $ -- $148,840 $(27,028) $164,201
===== ======= ======== ======== ======== ========
</TABLE>

See accompanying notes.

F-88
<PAGE> 163

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 11,846 $(64,533)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 60,878 42,458
Loss on disposal of property, equipment and
improvements........................................... -- 2,774
Provision for deferred taxes.............................. 3,715 (53,895)
Changes in assets and liabilities:
Patient accounts receivable, net....................... 16,921 62,163
Other receivables...................................... 10,135 (12,294)
Inventories............................................ (7,968) (2,733)
Prepaid expenses....................................... (11,381) (200)
Other assets........................................... (320) 138
Accounts payable and accrued expenses.................. (28,483) 76,071
-------- --------
Net cash provided by operating activities......... 55,343 49,949
INVESTING ACTIVITIES
Proceeds from collection on notes receivable from stock
sales..................................................... -- 12,850
Proceeds from sale of property, plant and equipment....... -- 2,364
Purchases of property, equipment and improvements......... (42,350) --
-------- --------
Net cash (used in) provided by investing
activities...................................... (42,350) 15,214
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 20,000 21,500
Repayment of long-term debt and demand notes payable........ (62,696) (21,394)
Purchase of treasury stock.................................. -- (27,028)
Proceeds from issuance of note payable to stockholder....... 5,946 --
-------- --------
Net cash used in financing activities............. (36,750) (26,922)
-------- --------
(Decrease) increase in cash................................. (23,757) 38,241
Cash at beginning of period................................. 68,818 45,061
-------- --------
Cash at end of period....................................... $ 45,061 $ 83,302
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 21,202 $ 16,931
======== ========
Cash paid during the year for income taxes.................. $ -- $ 6,673
======== ========
</TABLE>

See accompanying notes.

F-89
<PAGE> 164

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Cambridge Eye Clinic, P. A. -- John W. Lahr, Optometrist, P.A. (the Clinic)
is a Minnesota corporation which operates professional medical practices,
specializing in general ophthalmology and optometry. The Clinic's service area
is Cambridge, Minnesota, and surrounding communities in North Branch, Mora,
Sandstone and Pine City, Minnesota.

The combined financial statements include the accounts of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc., which are companies under common ownership and are collectively
referred to herein as the "Company." All intercompany accounts and transactions
have been eliminated from these combined financial statements.

CASH EQUIVALENTS

The Company considers all liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation is
computed using accelerated methods, with the assets' useful lives estimated at
19 years for leasehold improvements and three to seven years for the other asset
categories. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.

INCOME TAXES

Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which generally are based on predetermined rates, are
generally less than the Company's customary charges, and the differences are
recorded as contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 35% of the Company's net patient service
revenues were derived from services rendered to Medicare and Medicaid patients.
The Company does not believe that there are any credit risks associated with

F-90
<PAGE> 165

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

receivables due from governmental agencies. Concentration of credit risk from
other third-party payors is limited by the number of patients and payors. The
Company does not require any form of collateral from its patients or third-party
payors.

Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquiries have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expenses
amounted to $26,182 for the year ended December 31, 1995 and $21,740 for the
eleven-month period ended November 30, 1996.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents reported in the combined
financial statements reflects its fair value because of the short-term nature of
that financial instrument. It is not practicable to estimate the fair value of
the Company's long-term debt because the Company's incremental borrowing rate
cannot reasonably be determined.

2. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Equipment................................................... $ 504,616 $ 504,616
Leasehold improvements...................................... 19,088 19,088
Furniture and fixtures...................................... 102,544 102,544
Vehicles.................................................... 18,051 --
Other....................................................... 15,547 15,547
--------- ---------
659,846 641,795
Less accumulated depreciation............................... (510,328) (539,873)
--------- ---------
$ 149,518 $ 101,922
========= =========
</TABLE>

F-91
<PAGE> 166

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
10% note payable due in 180 monthly installments of $526
principal and interest through January 2000............... $ 20,760 $ 16,705
8% note payable due in 120 monthly installments of $89
principal and interest through July 1996.................. 2,182 --
8.25% note payable due in 173 monthly installments of $1,050
principal and interest through May 2003................... 69,366 62,840
Bank term loan payable due in 102 monthly installments of
$143 principal and interest at 1% over the Wall Street
Journal's prime rate, through September 2, 1996........... 1,501 --
Line of credit secured by the Clinic's receivables,
equipment and inventory, payable in monthly installments.
A final payment of the unpaid principal balance plus
accrued interest is due and payable December 1, 2001. The
interest rate is 2.75% over the Wall Street Journal's
prime rate................................................ 86,466 104,342
-------- --------
180,275 183,887
Less current portion........................................ (24,795) (22,330)
-------- --------
$155,480 $161,557
======== ========
</TABLE>

Maturities under the long-term debt agreements described above are as
follows:

<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
Month ending December 31, 1996.............................. $ 1,860
Year ending December 31:
1997...................................................... 22,370
1998...................................................... 35,254
1999...................................................... 39,307
2000...................................................... 36,113
2001...................................................... 33,704
Thereafter................................................ 15,279
--------
$183,887
========
</TABLE>

4. LEASE COMMITMENTS

Rent expense relating primarily to operating leases for office space is
classified as building and equipment rent in the accompanying combined
statements of operations.

F-92
<PAGE> 167

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease commitments under noncancelable operating leases (with
an initial or remaining term in excess of one year) at November 30, 1996 are as
follows (including related party leases):

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 3,458
Year ending December 31:
1997...................................................... 41,494
1998...................................................... 41,494
1999...................................................... 41,494
2000...................................................... 41,494
2001...................................................... 41,494
Thereafter................................................ 65,699
--------
Total minimum lease obligations................... $276,627
========
</TABLE>

5. INCOME TAXES

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Net operating loss carryforward........................... $ 31,433 $33,237
-------- -------
Total deferred tax assets......................... 31,433 33,237
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 141,368 89,277
-------- -------
Net deferred tax liabilities...................... $109,935 $56,040
======== =======
</TABLE>

Components of the income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED ELEVEN-MONTH PERIOD ENDED
DECEMBER 31, 1995 NOVEMBER 30, 1996
--------------------------- -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal................................... $2,476 $2,835 $5,311 $3,871 $(41,129) $(37,258)
State..................................... 1,793 880 2,673 2,802 (12,766) (9,964)
------ ------ ------ ------ -------- --------
$4,269 $3,715 $7,984 $6,673 $(53,895) $(47,222)
====== ====== ====== ====== ======== ========
</TABLE>

F-93
<PAGE> 168

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31 NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $ 6,742 $(36,821)
Permanent differences....................................... 2,532 (6,845)
State taxes, net of federal benefit......................... 1,684 2,459
Benefit of graduated rates.................................. (3,082) (4,815)
Personal service corporation status......................... 108 (1,200)
------- --------
$ 7,984 $(47,222)
======= ========
</TABLE>

SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that no valuation allowance at December 31, 1995 and November 30,
1996 is necessary to reduce the deferred tax assets to the amount that will more
likely than not be realized. At November 30, 1996, the Company has available net
operating loss carryforwards of approximately $83,000, which expire in the year
2011.

6. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 aggregate annual limit. In addition, the Company has an umbrella
policy which provides coverage of $1,000,000 per claim, with a $3,000,000
aggregate annual limit. Management is not aware of any reported claims pending
against the Company not covered by its malpractice insurance policy. Losses
resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.

7. RETIREMENT PLAN

The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $7,000 for the year ended December 31, 1995 and $10,000 for the
eleven-month period ended November 30, 1996.

8. RELATED PARTY TRANSACTIONS

The Company leases office space from the general stockholder. Rent expense
on these leases amounted to approximately $125,000 for the year ended December
31, 1995 and $114,000 for the eleven-month period ended November 30, 1996.

F-94
<PAGE> 169

CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 116,000 shares of Vision common stock. In connection therewith,
the Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.

F-95
<PAGE> 170

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Optometric Eye Care Centers, P.A.

We have audited the accompanying balance sheets of Optometric Eye Care
Centers, P.A. as of December 31, 1995 and November 30, 1996, and the related
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1995 and the eleven-month period ended November 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Optometric Eye Care Centers,
P.A. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 17, 1997

F-96
<PAGE> 171

OPTOMETRIC EYE CARE CENTERS, P.A.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 23,954 $ 19,271
Accounts receivable, net of allowances for uncollectible
accounts of approximately $1,000 at December 31, 1995
and November 30, 1996.................................. 79,508 71,152
Inventories............................................... 82,397 109,106
Deferred tax asset........................................ -- 238
Other current assets...................................... 392 3,300
-------- --------
Total current assets.............................. 186,251 203,067
Deferred tax asset.......................................... 5,020 10,772
Property, equipment and improvements........................ 68,858 37,002
-------- --------
Total assets...................................... $260,129 $250,841
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 44,376 $ 54,642
Income taxes payable...................................... -- 3,096
Current maturities of obligations under capital leases.... 7,002 3,744
Current maturities of long-term debt...................... 24,196 27,132
-------- --------
Total current liabilities......................... 75,574 88,614
Long-term debt.............................................. 87,262 61,963
Obligations under capital leases............................ 18,644 6,817
Stockholders' equity:
Common stock, $1 par value: 2,500 shares authorized; 1,000
shares issued and outstanding.......................... 1,000 1,000
Retained earnings......................................... 77,649 92,447
-------- --------
Total stockholders' equity........................ 78,649 93,447
-------- --------
Total liabilities and stockholders' equity........ $260,129 $250,841
======== ========
</TABLE>

See accompanying notes.

F-97
<PAGE> 172

OPTOMETRIC EYE CARE CENTERS, P.A.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $ 213,384 $ 242,793
Sale of optical goods..................................... 811,509 820,392
Other..................................................... 7,775 1,780
---------- ----------
Total revenues.................................... 1,032,668 1,064,965
Expenses:
Compensation -- physician stockholders.................... 192,463 218,126
Salaries, wages and benefits.............................. 252,922 247,992
Cost of optical goods sold................................ 333,145 310,367
General and administrative................................ 102,887 139,730
Contract services......................................... 1,766 15,170
Optical and clinical supplies............................. 7,893 10,893
Insurance................................................. 9,945 2,164
Building and equipment rent............................... 56,717 52,361
Depreciation and amortization............................. 43,987 33,111
Interest.................................................. 18,741 15,081
---------- ----------
Total expenses.................................... 1,020,466 1,044,995
---------- ----------
Income before income taxes.................................. 12,202 19,970
Provision for income taxes.................................. 2,815 5,172
---------- ----------
Net income........................................ $ 9,387 $ 14,798
========== ==========
</TABLE>

See accompanying notes.

F-98
<PAGE> 173

OPTOMETRIC EYE CARE CENTERS, P.A.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................... 1,000 $1,000 $68,262 $69,262
Net income............................................. -- -- 9,387 9,387
----- ------ ------- -------
BALANCE AT DECEMBER 31, 1995............................. 1,000 $1,000 77,649 78,649
Net income............................................. -- -- 14,798 14,798
----- ------ ------- -------
BALANCE AT NOVEMBER 30, 1996............................. 1,000 $1,000 $92,447 $93,447
===== ====== ======= =======
</TABLE>

See accompanying notes.

F-99
<PAGE> 174

OPTOMETRIC EYE CARE CENTERS, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 9,387 $ 14,798
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 43,987 33,111
Changes in assets and liabilities:
Patient accounts receivable, net....................... (9,766) 8,356
Inventories............................................ (3,928) (26,709)
Other current assets................................... 1,658 (2,908)
Deferred income taxes.................................. (6,891) (5,990)
Accounts payable and accrued expenses.................. 5,435 10,266
Income taxes payable................................... -- 3,096
-------- --------
Net cash provided by operating activities......... 39,882 34,020
INVESTING ACTIVITIES
Purchases of property plant and equipment................... -- (1,255)
-------- --------
Net cash used in investing activities....................... -- (1,255)
FINANCING ACTIVITIES
Repayment of long-term debt................................. (21,351) (22,363)
Repayment of capital lease obligations...................... (6,065) (15,085)
-------- --------
Net cash used in financing activities....................... (27,416) (37,448)
-------- --------
Net increase (decrease) in cash............................. 12,466 (4,683)
Cash at beginning of period................................. 11,488 23,954
-------- --------
Cash at end of period....................................... $ 23,954 $ 19,271
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 18,741 $ 15,081
======== ========
Cash paid during the year for income taxes.................. $ 3,900 $ 4,200
======== ========
</TABLE>

See accompanying notes.

F-100
<PAGE> 175

OPTOMETRIC EYE CARE CENTERS, P.A.

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Optometric Eye Care Centers, P.A. (the Company), a Minnesota corporation,
operates a professional medical practice, specializing in general optometry. The
Company's service area is Fridley, Minnesota, and the surrounding communities of
Minneapolis, Minnesota.

INVENTORIES

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 137,125 $ 137,551
Leasehold improvements...................................... 94,971 94,971
Office equipment and furniture.............................. 34,795 35,624
--------- ---------
266,891 268,146
Less accumulated depreciation and amortization.............. (198,033) (231,144)
--------- ---------
$ 68,858 $ 37,002
========= =========
</TABLE>

Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$38,000.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash reported in the financial statements reflects
its fair value because of the short-term maturity of this financial instrument.
It is not practicable to estimate the fair value of the Company's long-term debt
and obligations under capital lease because the Company's incremental borrowing
rate cannot reasonably be determined.

PATIENT SERVICE REVENUES

Net patient service revenues are based on establishing billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995, approximately 6% and 81% of the
Company's gross patient service revenues were derived from Medicare and various
third-party programs, respectively. For the eleven-month period ended November
30, 1996, approximately 5% and 76% of the Company's gross patient service
revenues were derived from Medicare and various third-party programs,
respectively. The Company does not believe that there are any credit risks
associated with receivables due from governmental agencies.

F-101
<PAGE> 176

OPTOMETRIC EYE CARE CENTERS, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of credit risk from other payors is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.

INCOME TAXES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

2. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Bank term loan, bearing interest at prime plus 2.5% (11.00%
and 11.25% at December 31, 1995 and November 30, 1996,
respectively), payable in equal monthly installments of
$2,957 (principal and interest) through October 1999...... $111,458 $ 89,095
Less current portion........................................ (24,196) (27,132)
-------- --------
$ 87,262 $ 61,963
======== ========
</TABLE>

As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:

<TABLE>
<S> <C>
Month ending December 1996.................................. $ 2,149
Year ending December 31:
1997...................................................... 27,377
1998...................................................... 30,545
1999...................................................... 29,024
-------
$89,095
=======
</TABLE>

F-102
<PAGE> 177

OPTOMETRIC EYE CARE CENTERS, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. LEASE COMMITMENTS

Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Month ending December 1996.................................. $ 3,256 $ 416
Year ending December 31:
1997...................................................... 31,224 4,990
1998...................................................... 27,330 4,990
1999...................................................... 2,275 2,159
------- -------
Total minimum lease payments...................... $64,085 12,555
=======
Less amount representing interest........................... (1,994)
-------
Present value of minimum lease payments (including current
portion of $4,080)........................................ $10,561
=======
</TABLE>

4. INCOME TAXES

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Current:
Allowance for doubtful accounts........................... $ -- $ 238
Noncurrent:
Depreciation expense...................................... 5,020 10,772
------ -------
Total deferred tax assets......................... $5,020 $11,010
====== =======
</TABLE>

Components of the income tax provision (benefit) consist of the following:

<TABLE>
<CAPTION>
ELEVEN-MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, 1995 NOVEMBER 30, 1996
------------------------------ ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
-------- --------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Federal....................... $5,436 $(3,996) $1,440 $ 6,473 $(3,474) $2,999
State......................... 4,270 (2,895) 1,375 4,689 (2,516) 2,173
------ ------- ------ ------- ------- ------
$9,706 $(6,891) $2,815 $11,162 $(5,990) $5,172
====== ======= ====== ======= ======= ======
</TABLE>

F-103
<PAGE> 178

OPTOMETRIC EYE CARE CENTERS, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate........................ $ 4,149 $ 6,790
Permanent differences..................................... 256 1,436
State taxes, net of federal benefit....................... 963 748
Benefit of graduated rates................................ (2,553) (3,802)
------- -------
$ 2,815 $ 5,172
======= =======
</TABLE>

5. MALPRACTICE INSURANCE

The Company carries malpractice insurance for each of its physicians
written on an occurrence basis. This insurance provides coverage of $1 million
per incident, with a $2 million annual limit. In addition, the Company has an
umbrella policy which provides coverage of $3 million per incident, with a $3
million annual limit. Management is not aware of any reported claims pending
against the Company. Losses resulting from unreported claims cannot be estimated
by management and, therefore, are not included in the accompanying financial
statements.

6. RELATED PARTY TRANSACTIONS

The physician stockholders of the Company provide all optometry services
for the Company and their salaries and related benefits are reported as
compensation -- physician stockholders in the accompanying statements of income.
Salaries and benefits of approximately $18,000 and $19,000 for the year ended
December 31, 1995 and the eleven-month period ended November 30, 1996,
respectively, which are paid to a related party, are included in salaries, wages
and benefits in the accompanying statements of income.

7. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 94,700 shares of Vision common stock and notes of approximately
$46,800. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision, will provide substantially all
nonmedical services to the practice.

F-104
<PAGE> 179

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholder
Jerald B. Turner, M.D., P.A.

We have audited the accompanying balance sheets of Jerald B. Turner, M.D.,
P.A. as of December 31, 1995 and November 30, 1996, and the related statements
of income, stockholder's equity, and cash flows for the year ended December 31,
1995 and the eleven-month period ended November 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jerald B. Turner, M.D., P.A.
at December 31, 1995 and November 30, 1996, and the results of its operations
and its cash flows for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996 in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP
Tampa, Florida
February 26, 1997

F-105
<PAGE> 180

JERALD B. TURNER, M.D., P.A.

BALANCE SHEETS

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 10,072 $ 14,666
Accrued salaries, wages and benefits...................... 59,539 128,192
Note payable to stockholder............................... -- 293,262
-------- --------
Total current liabilities......................... 69,611 436,120
Stockholder's equity:
Common stock, $1 par value: 7,500 shares authorized; 500
shares issued and outstanding.......................... 500 500
Additional paid-in capital................................ 7,822 7,822
Retained earnings......................................... 356,713 477,602
-------- --------
Total stockholder's equity........................ 365,035 485,924
-------- --------
Total liabilities and stockholder's equity........ $434,646 $922,044
======== ========
</TABLE>

See accompanying notes.

F-106
<PAGE> 181

JERALD B. TURNER, M.D., P.A.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,262,429 $1,520,911
Sales of optical goods.................................... 13,123 90,407
Other..................................................... 816 2,568
---------- ----------
Total revenues.................................... 1,276,368 1,613,886
Expenses:
Compensation to physician stockholder..................... 526,735 423,641
Salaries, wages and benefits.............................. 414,263 682,687
Cost of optical goods sold................................ 8,439 37,857
Medical supplies.......................................... 20,909 20,824
Optical supplies.......................................... 1,709 6,972
General and administrative................................ 80,054 119,429
Insurance................................................. 11,272 14,415
Building rent............................................. 67,998 61,531
Depreciation.............................................. 67,552 113,577
Repairs and maintenance................................... 9,070 4,269
Interest.................................................. -- 7,795
---------- ----------
Total expenses.................................... 1,208,001 1,492,997
---------- ----------
Net income........................................ $ 68,367 $ 120,889
========== ==========
</TABLE>

See accompanying notes.

F-107
<PAGE> 182

JERALD B. TURNER, M.D., P.A.

STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995...................... 500 $500 $7,822 $288,346 $296,668
Net income.................................... -- -- -- 68,367 68,367
--- ---- ------ -------- --------
BALANCE AT DECEMBER 31, 1995.................... 500 500 7,822 356,713 365,035
Net income.................................... -- -- -- 120,889 120,889
--- ---- ------ -------- --------
BALANCE AT NOVEMBER 30, 1996.................... 500 $500 $7,822 $477,602 $485,924
=== ==== ====== ======== ========
</TABLE>

See accompanying notes.

F-108
<PAGE> 183

JERALD B. TURNER, M.D., P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 68,367 $120,889
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 67,552 113,577
Loss on disposal of property, equipment and
improvements........................................... -- 1,600
Changes in operating assets and liabilities:
Increase in patient accounts receivable, net........... (9,749) (32,641)
Increase in inventories................................ (25,020) (7,114)
Decrease (increase) in prepaid expenses and other
current assets........................................ 4,043 (14,225)
Increase in accounts payable and accrued expenses...... 8,031 4,594
Increase in accrued salaries, wages and benefits....... 8,877 68,653
--------- --------
Net cash provided by operating activities......... 122,101 255,333
INVESTING ACTIVITIES
Purchases of property, equipment and improvements........... (113,451) (16,846)
--------- --------
Net cash used in investing activities....................... (113,451) (16,846)
FINANCING ACTIVITIES
Net cash provided by financing activities................... -- --
--------- --------
Increase in cash............................................ 8,650 238,487
Cash at beginning of period................................. 50,379 59,029
--------- --------
Cash at end of period....................................... $ 59,029 $297,516
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ -- $ 5,605
========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
Note payable incurred to acquire property, equipment and
improvements.............................................. $ -- $293,262
========= ========
</TABLE>

See accompanying notes.

F-109
<PAGE> 184

JERALD B. TURNER, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Jerald B. Turner, M.D., P.A., a Florida corporation (the Company), operates
a professional medical practice, specializing in general ophthalmology. The
Company's service area is Clearwater, Florida, and surrounding communities in
Pinellas County, Florida.

INVENTORIES

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at five to ten years for equipment, furniture and fixtures, and
seven to thirty-nine years for leasehold improvements. Routine maintenance and
repairs are charged to expense as incurred, while costs of betterments and
renewals are capitalized.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which generally are based on predetermined rates, are
generally less than the Company's established billing rates, and the differences
are recorded as contractual adjustments at the time the related service is
rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 61% and 64%, respectively, of the Company's net
patient service revenues were derived from third-party payors (Medicare,
Medicaid and managed care contracts). The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payors is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.

Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.

INCOME TAXES

The Company has elected to have its income taxed as an S Corporation under
the federal Internal Revenue Code. As a result, in lieu of corporate income tax,
the Company's taxable income is passed through to the stockholder of the Company
and taxed at the individual level. Accordingly, no provision or liability for
federal income tax has been reflected in these financial statements.

F-110
<PAGE> 185

JERALD B. TURNER, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount for cash reported in the balance sheets approximates
its fair value because of its short-term nature. It is not practicable to
estimate the fair value of the Company's note payable to stockholder due to its
related party nature.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying footnotes. Actual results could differ from those estimates.

2. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment.......................................... $ 368,662 $ 567,746
Computer equipment......................................... 66,885 132,494
Furniture and fixtures..................................... 141,177 152,755
Leasehold improvements..................................... 3,800 26,421
--------- ---------
580,524 879,416
Less accumulated depreciation.............................. (385,829) (489,790)
--------- ---------
$ 194,695 $ 389,626
========= =========
</TABLE>

3. OPERATING LEASES

The Company leases office space at $1,148 per month under a short-term
operating lease expiring July 31, 1997 and a month-to-month lease in a space
owned by the physician stockholder for $5,000 per month. Lease agreements
generally provide for the payment of taxes, insurance, utilities and repairs by
the lessee.

4. NOTE PAYABLE TO STOCKHOLDER

On November 15, 1996, the Company entered into an unsecured demand note
agreement for approximately $293,000 at 9% with its principal stockholder,
Jerald B. Turner, M.D. The proceeds were used during the eleven-month period
ended November 30, 1996 to purchase property, equipment and improvements and
interest is payable monthly. Interest expense during the eleven-month period
ended November 30, 1996 amounted to $7,795.

5. MALPRACTICE INSURANCE

The Company carries claims-made medical malpractice insurance for each of
its physicians. This insurance provides coverage of $1,000,000 per incident,
with a $3,000,000 aggregate annual limit. In the normal course of business, the
Company has been named in various medical malpractice lawsuits; however,
management is not aware of any reported claims currently pending against the
Company. Losses from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.

F-111
<PAGE> 186

JERALD B. TURNER, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. PROFIT SHARING PLAN

The Company maintains an employee profit sharing plan covering
substantially all employees and the physician stockholder. Under the Plan, the
Company may make discretionary contributions subject to various limits. Total
Company expense related to this plan was approximately $53,000 and $64,000 for
the year ended December 31, 1995 and the eleven-month period ended November 30,
1996, respectively. Company contributions to the physician stockholder are
included in compensation to physician stockholder in the accompanying statements
of income.

7. SUBSEQUENT EVENTS

OPERATING LEASE AGREEMENT WITH PHYSICIAN STOCKHOLDER

On December 1, 1996, the Company and the physician stockholder executed a
long-term lease agreement expiring in the year 2001 under which the Company
leases office space in a building owned by the physician stockholder. The lease
agreement provides for the payment of taxes, insurance, utilities and repairs by
the lessee. The Company, at its option, can renew the lease at rental rates
adjusted by the consumer price index.

Future minimum lease payments as of November 30, 1996 are as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 7,782
Year ending December 31,
1997...................................................... 93,380
1998...................................................... 93,380
1999...................................................... 93,380
2000...................................................... 93,380
2001...................................................... 85,598
Thereafter................................................ --
--------
$466,900
========
</TABLE>

SALE OF ASSETS

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 194,000 shares of Vision common stock and notes of approximately
$231,000. In connection therewith, Jerald B. Turner, M.D., principal
stockholder, entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.

F-112
<PAGE> 187

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Gillette, Beiler & Associates, P.A.

We have audited the accompanying balance sheets of Gillette, Beiler &
Associates, P.A. as of December 31, 1995 and November 30, 1996, and the related
statements of operations, stockholders' deficit, and cash flows for the year
ended December 31, 1995 and the eleven-month period ended November 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gillette, Beiler &
Associates, P.A. at December 31, 1995 and November 30, 1996, and the results of
its operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996, in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
March 22, 1997

F-113
<PAGE> 188

GILLETTE, BEILER & ASSOCIATES, P.A.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 52,425 $ 16,846
Patient accounts receivable, net of allowance for
doubtful accounts of $14,000 in 1995 and $32,000 in
1996.................................................. 87,602 105,932
Due from related party................................... 27,741 79,722
--------- ---------
Total current assets............................. 167,768 202,500
Property and equipment, net................................ 179,243 187,023
Goodwill................................................... -- 127,574
--------- ---------
Total assets..................................... $ 347,011 $ 517,097
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued compensation..................................... $ 183,147 $ 221,962
Accounts payable and accrued expenses.................... 62,855 32,794
Current portion of loans payable to stockholder.......... 37,094 58,832
Notes payable and current portion of long-term debt...... 180,693 154,413
Due to related parties................................... -- 144,941
--------- ---------
Total current liabilities........................ 463,789 612,942
Loans payable to stockholder, less current portion......... 58,832 --
Long-term debt, less current portion....................... 162,832 93,926
Deferred rent payable...................................... 264,032 263,163
Other long-term liabilities................................ 18,012 14,834
Stockholders' deficit:
Common stock, $.01 par value: 50,000 shares authorized;
37,775 and 40,500 shares issued and outstanding in
1995 and 1996, respectively........................... 378 405
Additional paid-in capital............................... -- 127,547
Accumulated deficit...................................... (620,864) (595,720)
--------- ---------
Total stockholders' deficit...................... (620,486) (467,768)
--------- ---------
Total liabilities and stockholders' deficit...... $ 347,011 $ 517,097
========= =========
</TABLE>

See accompanying notes.

F-114
<PAGE> 189

GILLETTE, BEILER & ASSOCIATES, P.A.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,752,187 $3,086,443
Patient service revenue -- related party.................. 298,543 190,376
Other income.............................................. 53,336 --
---------- ----------
Total revenues.................................... 3,104,066 3,276,819
Expenses:
Salaries and benefits -- optometrists..................... 1,832,844 1,856,888
Salaries and benefits -- other............................ 156,712 193,676
Management fees to related party.......................... 423,890 479,004
Advertising............................................... 25,236 16,187
Professional fees......................................... 55,326 12,600
General and administrative................................ 75,345 138,006
Medical supplies.......................................... 27,513 23,924
Insurance................................................. 30,116 50,552
Building and equipment rent............................... 452,695 400,586
Depreciation and amortization............................. 36,880 49,763
Interest.................................................. 41,693 30,489
---------- ----------
Total expenses.................................... 3,158,250 3,251,675
---------- ----------
Net income (loss)................................. $ (54,184) $ 25,144
========== ==========
</TABLE>

See accompanying notes.

F-115
<PAGE> 190

GILLETTE, BEILER & ASSOCIATES, P.A.

STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995..................... 37,775 $378 $ -- $(565,005) $(564,627)
Distributions.............................. -- -- -- (1,675) (1,675)
Net loss................................... -- -- -- (54,184) (54,184)
------ ---- -------- --------- ---------
BALANCE, DECEMBER 31, 1995................... 37,775 378 -- (620,864) (620,486)
Purchase of minority interest.............. 2,725 27 127,547 -- 127,574
Net income................................. -- -- -- 25,144 25,144
------ ---- -------- --------- ---------
BALANCE, NOVEMBER 30, 1996................... 40,500 $405 $127,547 $(595,720) $(467,768)
====== ==== ======== ========= =========
</TABLE>

See accompanying notes.

F-116
<PAGE> 191

GILLETTE, BEILER & ASSOCIATES, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (54,184) $ 25,144
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 36,880 49,763
Provision for bad debts................................... 14,000 17,573
Amortization of deferred rent and other................... 53,050 (12,817)
(Gain) loss on disposal of fixed assets................... (22,909) --
Changes in assets and liabilities:
Patient accounts receivable............................ (62,436) (35,903)
Due from related party................................. (10,183) (51,981)
Accrued compensation................................... 144,612 38,815
Accounts payable and accrued expenses.................. 20,077 (21,291)
Due to related parties................................. -- 144,941
--------- ---------
Net cash provided by operating activities......... 118,907 154,244
INVESTING ACTIVITIES
Purchases of property and equipment......................... (187,004) (57,543)
Proceeds from disposal of fixed assets...................... 37,909 --
--------- ---------
Net cash used in investing activities............. (149,095) (57,543)
FINANCING ACTIVITIES
Borrowings on revolving credit note......................... -- 196,012
Payments of revolving credit note........................... -- (222,627)
Proceeds from issuance of long-term debt.................... 276,737 13,179
Payments of long-term debt.................................. (167,052) (81,750)
Payments of related party debt.............................. (49,109) (37,094)
--------- ---------
Net cash provided by (used in) financing
activities.................................................. 60,576 (132,280)
--------- ---------
Increase (decrease) in cash................................. 30,388 (35,579)
Cash at beginning of period................................. 22,037 52,425
--------- ---------
Cash at end of period....................................... $ 52,425 $ 16,846
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 39,000 $ 34,000
========= =========
Goodwill recorded in connection with purchase of minority
interest.................................................. $ -- $ 127,574
========= =========
</TABLE>

See accompanying notes.

F-117
<PAGE> 192

GILLETTE, BEILER & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION

Gillette, Beiler & Associates, P.A., a Florida corporation, operates
professional optometry practices in 11 VisionWorks stores located in the Tampa
Bay area.

The following corporations (the Predecessor Practices) previously operated
as entities under common control:

Drs. Gillette, Beiler & Associates, P.A.
Dr. Gillette & Associates, Tampa, P.A.
Dr. Gillette & Associates, St. Petersburg, P.A.
Dr. Gillette & Associates, Palm Harbor, P.A.
Dr. Gillette & Associates, Sarasota, P.A.
Dr. Gillette & Associates, St. Petersburg East, P.A.
Dr. Gillette & Associates, North Tampa, P.A.
Dr. Gillette & Associates, South Tampa, P.A.
Dr. Gillette & Associates, #6978, P.A.

Effective November 27, 1996, the Predecessor Practices merged with Dr.
Gillette & Associates, #6965, P.A. (the Surviving Practice). On December 31,
1996, the Surviving Practice changed its name to Gillette, Beiler & Associates,
P.A. (the Company). Each outstanding share of the Predecessor Practices was
converted into shares of the Company. This transaction was accounted for as a
reorganization of companies under common control in a manner similar to that
used in a pooling of interests transaction, except for a minority interest which
was recorded under the purchase method. The accompanying financial statements
have been prepared to reflect the accounts of the Company as if the
reorganization had occurred as of the beginning of the earliest period
presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is computed using
the straight-line method, with the assets' useful lives estimated at five to
seven years. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Office furniture and equipment.............................. $ 765,350 $ 822,893
Less accumulated depreciation............................... (586,107) (635,870)
--------- ---------
$ 179,243 $ 187,023
========= =========
</TABLE>

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash, accounts receivable and short-term borrowings
reported in the financial statements reflect their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and other noncurrent
liabilities because the Company's incremental borrowing rate cannot reasonably
be determined.

F-118
<PAGE> 193

GILLETTE, BEILER & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances and contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, patient service revenue -- related party was earned through
contractual arrangements between the Company and an association under common
control.

The Company does not believe that there are any credit risks associated
with receivables due from governmental agencies. Concentration of credit risk
from other payors is limited by the number of patients and payors. The Company
does not require any form of collateral from its patients or third-party payors.

ADVERTISING COSTS

The Company expenses advertising costs as incurred.

INCOME TAXES

The Company has elected to have its income taxed as an S corporation under
the federal Internal Revenue Code. As a result, in lieu of corporate income tax,
the Company's taxable income is passed through to the stockholders of the
Company and taxed at the individual level. Accordingly, no provision or
liability for federal income tax has been reflected in the financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

INTANGIBLE ASSETS

Goodwill is being amortized over its estimated useful life of 40 years.

F-119
<PAGE> 194

GILLETTE, BEILER & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt and consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Notes payable under $100,000 line of credit, due on demand.
Interest due monthly at prime plus 1% (9.5% at December
31, 1995 and 9.25% at November 30, 1996). The note is
collateralized by accounts receivable..................... $ 94,475 $ 67,860
Bank term loans due in monthly installments of $663
(principal and interest) through 2000. The loans bear
interest at 12.5% and 14% and are collateralized by
certain equipment. The loans were refinanced with a bank
in 1997 and will be due on demand......................... 28,066 23,907
Notes payable to a corporation due in monthly installments
of $7,218 (principal and interest) through 2000. The notes
bear interest ranging from the prime rate plus .5% to the
prime rate plus 2% (8.75% to 10.25% at November 30, 1996)
and are collateralized by certain equipment............... 220,984 156,572
-------- ---------
343,525 248,339
Less current portion........................................ (180,693) (154,413)
-------- ---------
$162,832 $ 93,926
======== =========
</TABLE>

As of November 30, 1996, maturity of long-term debt is as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 74,463
Year ending December 31:
1997...................................................... 79,950
1998...................................................... 41,411
1999...................................................... 41,906
2000...................................................... 10,609
--------
$248,339
========
</TABLE>

F-120
<PAGE> 195

GILLETTE, BEILER & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. LOANS PAYABLE TO STOCKHOLDER

Loans payable to stockholder consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to the majority stockholder of the Company due
in monthly installments of $2,005 (principal and
interest) through 1999. The note bears interest at 9.75%
and is collateralized by certain equipment. The note was
refinanced with a bank in 1997........................... $ 75,093 $ 58,832
Unsecured note payable to the majority stockholder of the
Company due in monthly principal installments of $2,083
through 1996, plus interest at the rate of prime plus 1%.
The note was fully paid in 1996.......................... 18,750 --
Note payable to the majority stockholder of the Company due
in monthly principal installments of $694 through 1996
plus interest at the rate of prime plus 2%. The note was
collateralized by certain equipment, and was fully paid
in 1996.................................................. 2,083 --
-------- --------
95,926 58,832
Less current portion....................................... (37,094) (58,832)
-------- --------
$ 58,832 $ --
======== ========
</TABLE>

5. LEASE COMMITMENTS

Future minimum lease commitments under noncancelable operating leases (with
an initial or remaining term in excess of one year) at November 30, 1996 are as
follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 38,217
Year ending December 31,
1997...................................................... 458,604
1998...................................................... 465,604
1999...................................................... 470,604
2000...................................................... 477,604
2001...................................................... 482,604
Thereafter................................................ 2,393,117
----------
$4,786,354
==========
</TABLE>

6. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
optometrists. This insurance provides coverage of $1 million per incident, with
a $3 million annual limit.

Management is aware of a claim pending against the Company. The claim,
which alleges medical malpractice, and which relates to an incident which
occurred prior to December 1, 1996, is currently in the discovery stage and no
trial date has been set. The Company has determined that its insurer is liable
for any damages resulting from the claim which are within the Company's policy
limits, as well as the costs to defend the Company against the claim. The
insurer is currently providing the defense for the claim. In the opinion of
management, the ultimate result of this matter will not have a material adverse
effect on the results of operations, financial condition or liquidity of the
Company.

Losses resulting from unreported claims cannot be estimated by management
and, therefore, are not included in the accompanying financial statements.

F-121
<PAGE> 196

GILLETTE, BEILER & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (a related company -- Vision)
in exchange for 560,957 shares of Vision common stock and notes of $416,103. In
connection with this transaction, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.

F-122
<PAGE> 197

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
J & R Kennedy, O.D., P.A.
and Roseville Opticians, Inc.

We have audited the accompanying combined balance sheets of J & R Kennedy,
O.D., P.A. and Roseville Opticians, Inc. as of December 31, 1995 and November
30, 1996, and the related combined statements of income, stockholder's equity,
and cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of J & R Kennedy,
O.D., P.A. and Roseville Opticians, Inc. at December 31, 1995 and November 30,
1996, and the combined results of their operations and their cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30, 1996
in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
March 21, 1997

F-123
<PAGE> 198

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 25 $ 4,761
Patient accounts receivable............................... 71,488 77,529
Due from stockholder...................................... 1,623 2,779
Inventories............................................... 104,787 107,827
Prepaid expenses and other current assets................. 7,646 5,972
-------- --------
Total current assets.............................. 185,569 198,868
Property, equipment and improvements, net................... 75,238 76,848
Noncurrent deferred tax asset............................... -- 8,309
-------- --------
Total assets...................................... $260,807 $284,025
======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank overdraft............................................ $ 30,980 $ 3,547
Accounts payable and accrued expenses..................... 67,374 88,606
Taxes payable............................................. 6,993 17,006
Current deferred tax liability............................ 14,130 14,076
Current maturities of long-term debt...................... 5,271 5,751
-------- --------
Total current liabilities......................... 124,748 128,986
Long-term debt.............................................. 14,946 9,709
Noncurrent deferred tax liability........................... 322 --
Stockholder's equity:
Common stock, $1 par value: 75,000 shares authorized;
1,010 shares issued and outstanding.................... 1,010 1,010
Retained earnings......................................... 119,781 144,320
-------- --------
Total stockholder's equity........................ 120,791 145,330
-------- --------
Total liabilities and stockholder's equity........ $260,807 $284,025
======== ========
</TABLE>

See accompanying notes.

F-124
<PAGE> 199

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenue:
Net patient service revenues.............................. $296,386 $324,416
Sale of optical goods..................................... 671,309 663,095
Other..................................................... 170 74
-------- --------
Total revenue..................................... 967,865 987,585
Expenses:
Compensation to physician stockholder..................... 231,838 221,875
Salaries, wages and benefits.............................. 267,728 314,686
Cost of optical goods sold................................ 233,276 234,154
General and administrative................................ 130,904 118,589
Insurance................................................. 6,345 4,114
Building and equipment rent............................... 52,259 48,066
Depreciation and amortization............................. 10,585 12,302
Interest.................................................. 1,319 939
-------- --------
Total expenses.................................... 934,254 954,725
-------- --------
Income before income taxes.................................. 33,611 32,860
Provision for income taxes.................................. 14,856 8,321
-------- --------
Net income.................................................. $ 18,755 $ 24,539
======== ========
</TABLE>

See accompanying notes.

F-125
<PAGE> 200

J & R KENNEDY, O.D., P.A.
AND ROSEVILLE OPTICIANS, INC.

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................... 1,010 $1,010 $101,026 $102,036
Net income............................................. -- -- 18,755 18,755
----- ------ -------- --------
BALANCE AT DECEMBER 31, 1995............................. 1,010 1,010 119,781 120,791
Net income............................................. -- -- 24,539 24,539
----- ------ -------- --------
BALANCE AT NOVEMBER 30, 1996............................. 1,010 $1,010 $144,320 $145,330
===== ====== ======== ========
</TABLE>

See accompanying notes.

F-126
<PAGE> 201

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 18,755 $ 24,539
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 10,585 12,302
Deferred income taxes..................................... 7,863 (8,685)
Changes in assets and liabilities:
Patient accounts receivable............................ (16,354) (6,041)
Due from stockholder................................... (1,623) (1,156)
Inventories............................................ (24,425) (3,040)
Prepaid expenses and other current assets.............. (4,899) 1,674
Bank overdraft and accounts payable and accrued
expenses.............................................. 30,319 (6,201)
Taxes payable.......................................... 6,993 10,013
-------- --------
Net cash provided by operating activities......... 27,214 23,405
INVESTING ACTIVITIES
Purchases of property and equipment......................... (47,456) (13,912)
-------- --------
Net cash used in investing activities............. (47,456) (13,912)
FINANCING ACTIVITIES
Borrowings from third parties............................... 23,000 -
Repayment of borrowings from third parties.................. (2,783) (4,757)
-------- --------
Net cash provided by (used in) financing
activities...................................... 20,217 (4,757)
-------- --------
(Decrease) increase in cash................................. (25) 4,736
Cash at beginning of year................................... 50 25
-------- --------
Cash at end of year......................................... $ 25 $ 4,761
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 1,300 $ 1,000
======== ========
</TABLE>

See accompanying notes.

F-127
<PAGE> 202

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

J & R Kennedy, O.D., P.A. and Roseville Opticians, Inc. (the Company),
commonly controlled Minnesota C corporations, operate as a professional medical
practice, specializing in general optometry and as an optical retail dispensary,
respectively. The Company's primary service area is Roseville, Minnesota, and
surrounding communities in Ramsey County, Minnesota.

INVENTORIES

Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, optical goods). Inventories are stated at the
lower of cost or market, with cost determined on an average cost basis.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at 5 to 10 years for equipment, furniture and fixtures and
automobiles, and 31 years for leasehold improvements. Routine maintenance and
repairs are charged to expense as incurred, while costs of betterments and
renewals are capitalized.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash reflects its fair value because of the
short-term maturity of that financial instrument. It is not practicable to
estimate the fair value of the Company's long-term debt because the Company's
incremental borrowing rate cannot reasonably be determined.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates, and the differences are
recorded as contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 19% and 24%, respectively, of the Company's net
patient service revenues were derived from third-party payors (Medicare,
Medicaid, and managed care contracts). The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payers is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.

Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquiries have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.

F-128
<PAGE> 203

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

USE OF ESTIMATES

2. RELATED PARTY TRANSACTIONS

The Company paid approximately $6,000 for the year ended December 31, 1995
and $7,000 for the eleven-month period ended November 30, 1996 for services
rendered to the Company by a related organization with certain common ownership.

The Company has an amount due from stockholder of $1,623 at December 31,
1995 and $2,779 at November 30, 1996. Such amounts relate to personal expenses
paid by the Company on behalf of the stockholder.

3. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Equipment................................................... $ 191,111 $ 205,023
Furniture and fixtures...................................... 47,183 47,183
Automobiles................................................. 16,752 16,752
Leasehold improvements...................................... 18,690 18,690
--------- ---------
273,736 287,648
Less accumulated depreciation............................... (198,498) (210,800)
--------- ---------
$ 75,238 $ 76,848
========= =========
</TABLE>

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to bank at 10% with monthly payments of $586,
including interest, due May 1999.......................... $20,217 $15,460
Less current portion........................................ (5,271) (5,751)
------- -------
$14,946 $ 9,709
======= =======
</TABLE>

F-129
<PAGE> 204

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 458
Year ending December 31:
1997...................................................... 5,800
1998...................................................... 6,407
1999...................................................... 2,795
-------
$15,460
=======
</TABLE>

5. INCOME TAXES

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Charitable contribution................................... $ 426 $ 446
Net operating loss carryforward........................... 5,127 14,890
-------- -------
5,553 15,336
Valuation allowance......................................... -- (1,152)
-------- -------
Total deferred tax assets......................... 5,553 14,184
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 14,130 14,076
Noncurrent:
Depreciation.............................................. 5,875 5,875
-------- -------
Total deferred tax liabilities.................... 20,005 19,951
-------- -------
Net deferred tax liabilities...................... $(14,452) $(5,767)
======== =======
</TABLE>

Components of the income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED ELEVEN-MONTH PERIOD ENDED
DECEMBER 31, 1995 NOVEMBER 30, 1996
---------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Federal............................ $5,337 $5,987 $11,324 $12,978 $(6,579) $6,399
State.............................. 1,656 1,876 3,532 4,028 (2,106) 1,922
------ ------ ------- ------- ------- ------
$6,993 $7,863 $14,856 $17,006 $(8,685) $8,321
====== ====== ======= ======= ======= ======
</TABLE>

F-130
<PAGE> 205

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $11,834 $5,301
Permanent differences....................................... 421 413
State taxes, net of federal benefit......................... 2,332 1,087
Change in valuation allowance............................... - 1,152
Personal service corporation status......................... 269 368
------- ------
$14,856 $8,321
======= ======
</TABLE>

Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, requires a valuation allowance to reduce the deferred tax assets reported
if, based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $1,152 valuation allowance at November 30, 1996 is necessary
to reduce the deferred tax assets to the amount that will more likely than not
be realized. The change in the valuation allowance for the current year is
$1,152. At December 31, 1995 and November 30, 1996, the Company has available
net operating loss carryforwards of approximately $13,000 and $37,000,
respectively, which expire in the year 2011.

6. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $2,000,000 per claim, with a $2,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.

7. RETIREMENT PLAN

The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $2,000 and $4,000 for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996, respectively.

8. SUBSEQUENT EVENTS

On December 1, 1996 and December 20, 1996, the Company renewed
noncancelable operating leases for office space. The effective date of the
leases is December 1, 1996 and they are scheduled to terminate on

F-131
<PAGE> 206

J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

November 30, 2001. The former operating leases had expired as of November 30,
1996. Approximate future minimum rental commitments under the noncancelable
operating leases are as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 4,488
Year ending December 31:
1997...................................................... 55,194
1998...................................................... 56,883
1999...................................................... 58,626
2000...................................................... 60,418
2001...................................................... 56,932
--------
$292,641
========
</TABLE>

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 115,000 shares of Vision common stock and notes of approximately
$79,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.

The combined financial statements of the Company have been prepared as
supplemental information about the association to which Vision will provide
management services following consummation of the acquisition. The Company
previously operated as a separate independent association. The historical
combined financial position, results of operations and cash flows do not reflect
any adjustments relating to the acquisition.

F-132
<PAGE> 207

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Dr. Smith and Associates, P.A. #6950,
Dr. Smith and Associates, P.A. #6958, and
Dr. Smith and Associates, P.A. #6966

We have audited the accompanying combined balance sheets of Dr. Smith and
Associates, P.A. #6950, Dr. Smith and Associates, P.A. #6958, and Dr. Smith and
Associates, P.A. #6966 (the Company) as of December 31, 1995 and November 30,
1996, and the related combined statements of income, stockholders' equity, and
cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Dr. Smith and
Associates, P.A. #6950, Dr. Smith and Associates, P.A. #6958, and Dr. Smith and
Associates, P.A. #6966 at December 31, 1995 and November 30, 1996, and the
combined results of their operations and their cash flows for the year ended
December 31, 1995 and the eleven-month period ended November 30, 1996 in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
January 17, 1997

F-133
<PAGE> 208

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

COMBINED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 19,750 $ 28,200
Accrued expenses and other current liabilities............ 57,570 68,514
Amounts due under line of credit.......................... -- 14,000
Due to affiliate.......................................... 12,705 39,591
Income tax payable........................................ 1,182 --
Current portion of long-term debt......................... 38,917 39,931
Current portion of obligations under capital leases....... 26,220 25,428
-------- --------
Total current liabilities......................... 156,344 215,664
Long-term debt.............................................. 52,130 15,442
Obligations under capital leases............................ 48,717 25,469
Stockholders' equity:
Common stock, $.01 par value; 30,000 shares authorized,
and 3,000 shares issued and outstanding................ 30 30
Additional paid-in capital................................ 8,180 8,180
Retained earnings......................................... 124,869 130,109
-------- --------
Total stockholders' equity........................ 133,079 138,319
-------- --------
Total liabilities and stockholders' equity........ $390,270 $394,894
======== ========
</TABLE>

See accompanying notes.

F-134
<PAGE> 209

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,019,159 $ 990,014
Other..................................................... 18,248 14,137
---------- ----------
Total revenues.................................... 1,037,407 1,004,151
Expenses:
Compensation to physician stockholder..................... 75,000 70,000
Salaries, wages and benefits.............................. 511,033 547,622
General and administrative................................ 169,513 164,967
Medical supplies.......................................... 6,524 5,269
Building and equipment rent............................... 83,600 100,477
Depreciation and amortization............................. 35,038 35,442
Interest.................................................. 24,169 14,478
---------- ----------
Total expenses.................................... 904,877 938,255
---------- ----------
Income before income taxes.................................. 132,530 65,896
Provision for income taxes.................................. 1,182 --
---------- ----------
Net income........................................ $ 131,348 $ 65,896
========== ==========
</TABLE>

See accompanying notes.

F-135
<PAGE> 210

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995....................... 3,000 $30 $8,180 $ 28,006 $ 36,216
Net income................................... -- -- -- 131,348 131,348
Distributions................................ -- -- -- (34,485) (34,485)
----- --- ------ -------- --------
BALANCE, DECEMBER 31, 1995..................... 3,000 30 8,180 124,869 133,079
Net income................................... -- -- -- 65,896 65,896
Distributions................................ -- -- -- (60,656) (60,656)
----- --- ------ -------- --------
BALANCE, NOVEMBER 30, 1996..................... 3,000 $30 $8,180 $130,109 $138,319
===== === ====== ======== ========
</TABLE>

See accompanying notes.

F-136
<PAGE> 211

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $131,348 $ 65,896
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 35,038 35,442
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (4,178) 15,334
Prepaid expenses....................................... -- (699)
Due from stockholder................................... (62,718) (42,219)
Accounts payable....................................... 15,036 8,450
Accrued expenses and other current liabilities......... 39,320 10,944
Due to affiliate....................................... (24,203) 26,886
Income tax payable..................................... 1,182 (1,182)
-------- ---------
Net cash provided by operating activities......... 130,825 118,852
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (53,736) (4,027)
Other....................................................... 11,318 --
-------- ---------
Net cash used in investing activities............. (42,418) (4,027)
FINANCING ACTIVITIES
Borrowings on line of credit................................ -- 14,000
Distributions to shareholders............................... (34,485) (60,656)
Payment of capital lease obligations........................ (28,999) (24,040)
Payment of long-term debt................................... -- (35,674)
-------- ---------
Net cash used in financing activities............. (63,484) (106,370)
-------- ---------
Net increase in cash and cash equivalents................... 24,923 8,455
Cash and cash equivalents at beginning of period............ (1,385) 23,538
-------- ---------
Cash and cash equivalents at end of period........ $ 23,538 $ 31,993
======== =========
</TABLE>

See accompanying notes.

F-137
<PAGE> 212

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Dr. Smith and Associates, P.A. #6950 (P.A. #6950), a C corporation, Dr.
Smith and Associates, P.A. #6958 (P.A. #6958), an S corporation, and Dr. Smith
and Associates, P.A. #6966 (P.A. #6966), an S corporation, operate under common
ownership as a professional medical practice, specializing in general optometry.
These corporations are located in the Miami, Florida, area and are hereinafter
collectively referred to as the Company. All significant intercompany
transactions have been eliminated.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Property and equipment under
capital leases are stated at the net present value of the future minimum lease
payments at the inception of the related leases. Depreciation is computed using
straight-line and accelerated methods, with the assets' useful lives estimated
at five to seven years. Amortization expense related to capital leases is
included in depreciation and amortization in the combined statements of income.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and amounts due under line of credit reported
in the combined financial statements reflects their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and obligations under
capital leases because the Company's incremental borrowing rate cannot
reasonably be determined.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.

For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 12% and 14%, respectively, of the Company's net
patient service revenues were derived from third-party payors. The Company does
not believe that there are any credit risks associated with receivables due from
governmental agencies. Concentration of credit risk from other payors is limited
by the number of patients and payors. The Company does not require any form of
collateral from its patients or third-party payors.

F-138
<PAGE> 213

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

Income taxes for P.A. #6950 have been provided using the liability method
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109). Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

P.A. #6958 and P.A. #6966 have elected to have their income taxed under the
provisions of Subchapter S of the federal Internal Revenue Code. As a result, in
lieu of corporate tax, #6958's and #6966's taxable income is passed through to
the stockholders of #6958 and #6966 and taxed at the individual level.
Accordingly, no provision or liability for federal income tax for #6958 and
#6966 has been reflected in these combined financial statements.

USE OF ESTIMATES

2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 34,751 $ 37,552
Computer equipment.......................................... 25,556 26,782
Office furniture and equipment.............................. 4,380 4,380
Equipment under capital lease............................... 244,605 244,605
--------- ---------
309,292 313,319
Less accumulated depreciation and amortization.............. (185,903) (221,345)
--------- ---------
$ 123,389 $ 91,974
========= =========
</TABLE>

3. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to vendor with interest imputed at 10.75%,
payable in monthly installments of $528 through 1997
(collateralized by certain equipment)..................... $ 30,470 $ 21,450
Note payable to landlord bearing interest at prime plus 1%
(9.65% and 9.25% at December 31, 1995 and November 30,
1996, respectively), payable in monthly installments
through 1998)............................................. 60,577 33,923
-------- --------
91,047 55,373
Less current portion........................................ (38,917) (39,931)
-------- --------
$ 52,130 $ 15,442
======== ========
</TABLE>

F-139
<PAGE> 214

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

As of November 30, 1996, maturity of long-term debt is as follows:

<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 3,283
Year ending December 31:
1997...................................................... 40,031
1998...................................................... 12,059
1999...................................................... --
-------
Total............................................. $55,373
=======
</TABLE>

Interest payments approximate interest expense for the year ended December
31, 1995 and for the eleven-month period ended November 30, 1996.

4. LEASE COMMITMENTS

Future minimum lease commitments under capital leases and noncancelable
operating leases (with an initial or remaining term in excess of one year) at
November 30, 1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 2,566 $ 9,000
Year ending December 31:
1997...................................................... 29,499 108,000
1998...................................................... 22,154 108,000
1999...................................................... 2,361 108,000
2000...................................................... 790 108,000
2001...................................................... -- 108,000
Thereafter................................................ -- 162,000
------- --------
Total minimum lease payments...................... 57,370 $711,000
========
Less amount representing interest........................... (6,473)
-------
Present value of minimum lease payments (including current
portion of $25,428)....................................... $50,897
=======
</TABLE>

F-140
<PAGE> 215

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
#6950's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Current:
Accrual to cash........................................... $ 8,722 $ --
Noncurrent:
Depreciation.............................................. 27,383 29,092
Valuation allowance......................................... (35,560) (24,593)
-------- --------
Total deferred tax assets......................... 545 4,499
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... -- 3,681
Noncurrent:
Capital lease............................................. 545 818
-------- --------
Total deferred tax liabilities.................... 545 4,499
-------- --------
Net deferred tax assets........................... $ -- $ --
======== ========
</TABLE>

Components of the income tax provision (benefit) which relate solely to
#6950 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 NOVEMBER 30, 1996
--------------------------- --------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Federal................................. $1,182 $-- $1,182 $-- $ -- $--
State................................... -- -- -- -- -- --
------ --- ------ --- ---- ---
$1,182 $-- $1,182 $-- $ -- $--
====== === ====== === ==== ===
</TABLE>

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $ 36,678 $ 17,691
Permanent differences....................................... 332 332
S-corporation income........................................ (32,250) (8,356)
State taxes, net of federal benefit......................... 508 1,032
Change in valuation allowance............................... (4,217) (10,967)
Personal service corporation status......................... 131 268
-------- --------
$ 1,182 $ --
======== ========
</TABLE>

SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that valuation allowances of $35,560 at December 31, 1995 and
$24,593 at November 30, 1996 are necessary to

F-141
<PAGE> 216

DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

reduce the deferred tax assets to the amount that will more likely than not be
realized. The change in the valuation allowance for the year ended December 31,
1995 was $(4,217) and for the current year is $(10,967).

6. MALPRACTICE INSURANCE

The Company is covered by medical malpractice liability insurance written
on an occurrence basis. This insurance provides coverage of $5,000,000 per
incident, with a $5,000,000 aggregate limit. Management is not aware of any
reported claims pending against the Company. Losses resulting from unreported
claims cannot be estimated by management and, therefore, are not included in the
accompanying combined financial statements.

7. LITIGATION

During 1996, the Company entered into an out-of-court settlement related to
a wrongful termination claim. Payment under the out-of-court settlement of
$25,000 is classified in general and administrative expenses in the 1996
combined statement of income.

8. RELATED PARTY TRANSACTIONS

Amounts due from stockholder and due to affiliate of the Company reflect
net advances and borrowings between the Company and their owner and the owner's
related interests, including other affiliated corporations. Advances to and
borrowings from the shareholder accrue interest at approximately 6.5%.

Compensation to stockholder reflects wages earned by the stockholder acting
in the capacity as an optometrist and officer of the Company. Other related
party compensation for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996 was approximately $48,000 and $18,000,
respectively.

9. LINE OF CREDIT

The Company has a revolving credit note of $50,000 due on demand, which
bears interest at prime plus 3% (11.65% and 11.25% at December 31, 1995 and
November 30, 1996, respectively). At November 30, 1996, $14,000 was outstanding
under this facility.

The revolving credit note is collateralized by substantially all of the
assets of the Company.

10. SUBSEQUENT EVENT

On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 255,000 shares of Vision common stock and notes of approximately
$145,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.

F-142
<PAGE> 217

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Swagel-Wootton Eye Center, Ltd.
and Aztec Optical Limited Partnership

We have audited the accompanying combined balance sheet of Swagel-Wootton
Eye Center, Ltd. and Aztec Optical Limited Partnership (collectively referred to
as the Company), as of December 31, 1996, and the related combined statements of
operations, stockholders' (partners') equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position at December 31, 1996
of Swagel-Wootton Eye Center, Ltd. and Aztec Optical Limited Partnership, and
the combined results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
October 12, 1997

F-143
<PAGE> 218

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MAY 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 202,973 $ 191,441
Patient accounts receivable, net.......................... 418,488 317,368
Inventories............................................... 48,786 53,742
Note receivable from stockholder.......................... 20,000 --
Prepaid expenses and other current assets................. 68,600 43,756
---------- ----------
Total current assets.............................. 758,847 606,307
Property, equipment and improvements, net................... 2,378,940 2,254,568
Notes receivable from stockholder........................... 100,000 100,000
Other assets................................................ 47,032 79,907
---------- ----------
Total assets...................................... $3,284,819 $3,040,782
========== ==========
LIABILITIES AND STOCKHOLDERS' (PARTNERS') EQUITY
Current liabilities:
Accounts payable.......................................... $ 90,552 $ 111,447
Accrued compensation...................................... 191,551 176,758
Accrued pension contribution.............................. 106,207 149,096
Current portion of long-term debt ($38,620 and $39,600 to
a related party at December 31, 1996 and May 31, 1997,
respectively).......................................... 636,921 381,421
Current portion of obligations under capital leases....... 16,321 18,750
---------- ----------
Total current liabilities......................... 1,041,552 837,472
Long-term debt, less current portion ($470,273 and $453,630
to a related party at December 31, 1996 and May 31, 1997,
respectively)............................................. 1,687,536 1,554,417
Obligations under capital leases, net of current portion.... 45,595 36,793
Stockholders' (Partners') equity:
Common stock, $1 par value: 1,000 shares authorized, 800
shares issued and outstanding.......................... 800 800
Retained earnings......................................... 359,867 494,516
Partners' capital......................................... 149,469 116,784
---------- ----------
Total stockholders' (partners') equity............ 510,136 612,100
---------- ----------
Total liabilities and stockholders' (partners')
equity.......................................... $3,284,819 $3,040,782
========== ==========
</TABLE>

See accompanying notes.

F-144
<PAGE> 219

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FIVE-MONTH
PERIOD ENDED
YEAR ENDED MAY 31,
DECEMBER 31, -----------------------
1996 1996 1997
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Net patient service revenues............................ $4,776,952 $2,366,202 $2,283,341
Sale of optical goods................................... 1,074,633 483,056 469,742
Other income............................................ 17,261 3,268 14,638
---------- ---------- ----------
Total revenues.................................. 5,868,846 2,852,526 2,767,721
Expenses:
Compensation to physician stockholders.................. 843,140 301,046 500,342
Salaries, wages and benefits............................ 2,196,575 987,640 938,631
Cost of optical goods sold.............................. 412,197 180,722 192,170
Medical supplies........................................ 530,618 251,777 228,397
Advertising............................................. 309,626 148,074 149,112
General and administrative.............................. 440,729 204,556 164,832
Utilities............................................... 83,011 36,299 39,132
Insurance............................................... 51,267 14,390 30,390
Building and equipment rent............................. 53,266 31,467 36,605
Professional fees....................................... 47,654 19,869 35,800
Depreciation and amortization........................... 254,681 110,238 103,423
---------- ---------- ----------
Total expenses.................................. 5,222,764 2,286,078 2,418,834
---------- ---------- ----------
Income from operations.................................... 646,082 566,448 348,887
Interest expense.......................................... 222,695 97,662 83,465
---------- ---------- ----------
Net income...................................... $ 423,387 $ 468,786 $ 265,422
========== ========== ==========
</TABLE>

See accompanying notes.

F-145
<PAGE> 220

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

COMBINED STATEMENTS OF STOCKHOLDERS' (PARTNERS') EQUITY

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK STOCKHOLDERS'
--------------- RETAINED PARTNERS' (PARTNERS')
NUMBER AMOUNT EARNINGS CAPITAL EQUITY
------ ------ -------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996..................... 800 $800 $279,516 $ 136,731 $ 417,047
Cash distributions......................... (7,699) (322,599) (330,298)
Net income................................. -- -- 88,050 335,337 423,387
--- ---- -------- --------- ---------
BALANCE, DECEMBER 31, 1996................... 800 800 359,867 149,469 510,136
Net income (Unaudited)..................... -- -- 134,649 130,773 265,422
Cash distributions (Unaudited)............. -- -- -- (163,458) (163,458)
--- ---- -------- --------- ---------
BALANCE, MAY 31, 1997 (UNAUDITED)............ 800 $800 $494,516 $ 116,784 $ 612,100
=== ==== ======== ========= =========
</TABLE>

See accompanying notes.

F-146
<PAGE> 221

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FIVE-MONTH
PERIOD ENDED
YEAR ENDED MAY 31,
DECEMBER 31, ---------------------
1996 1996 1997
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 423,387 $ 468,786 $ 265,422
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 254,681 110,238 103,423
(Gain) loss on disposal of equipment..................... 3,787 (1,050) (13,426)
Changes in operating assets and liabilities:
Patient accounts receivable, net...................... 46,811 26,793 101,120
Inventories........................................... (8,607) (4,390) (4,956)
Prepaid expenses and other current assets............. (10,561) 6,075 24,844
Accounts payable...................................... (103,174) (81,977) 20,895
Accrued compensation.................................. 17,704 596 (14,793)
Accrued pension contribution.......................... 653 38,088 42,889
--------- --------- ---------
Net cash provided by operating activities........ 624,681 563,159 525,418
INVESTING ACTIVITIES
Payment to stockholder..................................... (20,000) -- --
Collections from stockholders.............................. 52,918 -- 20,000
Proceeds on disposal of equipment.......................... 4,050 1,050 1,500
Purchases of property and equipment........................ (52,568) (25,045) --
--------- --------- ---------
Net cash (used in) provided by investing
activities..................................... (15,600) (23,995) 21,500
FINANCING ACTIVITIES
Proceeds from long-term debt............................... 528,989 169,520 --
Payments on long-term debt................................. (784,498) (550,530) (388,619)
Cash distributions......................................... (330,298) (125,167) (163,458)
Payments on obligations under capital leases............... (27,027) (7,173) (6,373)
--------- --------- ---------
Net cash used in financing activities............ (612,834) (513,350) (558,450)
--------- --------- ---------
Increase (decrease) in cash................................ (3,753) 25,814 (11,532)
Cash at beginning of period................................ 206,726 206,726 202,973
--------- --------- ---------
Cash at end of period...................................... $ 202,973 $ 232,540 $ 191,441
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest................... $ 219,865 $ 97,662 $ 83,465
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Capital lease obligations incurred to acquire equipment.... $ 59,390 -- --
========= ========= =========
</TABLE>

See accompanying notes.

F-147
<PAGE> 222

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Swagel-Wootton Eye Center, Ltd. (SWEC), an Arizona corporation, operates a
professional medical practice, specializing in general ophthalmology, surgery
and optometry. Aztec Optical Limited Partnership (Aztec), an Arizona limited
partnership with common ownership, operates a retail store which sells
sunglasses and eyeglass frames and lenses. Both entities operate in the greater
Phoenix area, and are hereinafter collectively referred to as the Company. All
significant intercompany transactions have been eliminated.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim financial statements as of May 31, 1997 and for the five-month
periods ended May 31, 1996 and 1997 do not provide all disclosures included in
the annual financial statements. These interim statements should be read in
conjunction with the annual audited financial statements and the footnotes
thereto. Results for the 1997 interim period are not necessarily indicative of
the results for the year ending December 31, 1997. However, the accompanying
interim financial statements reflect all adjustments which are, in the opinion
of management, of a normal and recurring nature necessary for a fair
presentation of the financial position and results of operations of the Company.

INVENTORIES

Inventories consist primarily of sunglasses and eyeglass frames and lenses
(collectively, optical goods). Inventories are stated at the lower of cost or
market, with cost determined on an average cost basis.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation is
computed using the straight-line method, with the assets' useful lives estimated
at five to thirty-one years. Routine maintenance and repairs are charged to
expense as incurred, while costs of betterments and renewals are capitalized.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare, the
Arizona Health Care Cost Containment System (AHCCS) and various other discount
arrangements. Payments received under these programs and arrangements, which are
based on predetermined rates, are generally less than the Company's established
billing rates and the differences are recorded as contractual adjustments at the
time the related service is rendered.

F-148
<PAGE> 223

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

such regulatory inquires have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCS programs.

ADVERTISING COSTS

The Company expenses advertising costs as incurred.

INCOME TAXES

SWEC has elected to have its income taxed as an S corporation for income
tax purposes. As a result, in lieu of corporate income tax, SWEC's taxable
income is passed through to the stockholders of SWEC and taxed at the individual
level.

Aztec is taxed as a partnership for income tax purposes. As a result, in
lieu of corporate income tax, Aztec's taxable income is passed through to the
partners of Aztec and taxed at the individual level.

Accordingly, no provision or liability for federal or state income tax has
been reflected in the combined financial statements of the Company.

USE OF ESTIMATES

2. NOTES RECEIVABLE

The Company has notes receivable from a stockholder of $100,000 and $20,000
at December 31, 1996, with interest at prime plus 1% (9.25% at December 31,
1996). Interest is payable annually. The $20,000 note was repaid in 1997 and the
$100,000 note will be repaid in 1998.

3. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MAY 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Note payable to an insurance company due in monthly
installments through June 2006, with interest at 10%...... $1,098,633 $1,068,694
Note payable to a stockholder of SWEC due in monthly
installments through November 2005, with interest at
9.21%..................................................... 508,893 493,230
Note payable to a bank under a $400,000 credit facility: due
in October 1997, with interest at prime plus .5% (8.75% at
December 31, 1996). The note is guaranteed by the
stockholders of SWEC...................................... 353,000 100,000
Note payable to a vendor due in monthly installments through
November 1999, with interest at 9.07%. The note is
guaranteed by a stockholder of SWEC....................... 249,550 196,647
</TABLE>

F-149
<PAGE> 224

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, MAY 31,
1996 1997
------------ -----------
<S> <C> <C>
Notes payable to a bank due in monthly principal
installments plus interest at prime plus .5% (8.75% at
December 31, 1996) through 1999. The notes are guaranteed
by the stockholders of SWEC............................... 84,049 54,853
Note payable to a finance company due in monthly
installments through December 1997, with interest at
6.9%...................................................... 6,757 3,736
Unsecured note payable to a bank under a $50,000 credit
facility: due in October 1997, with interest at prime plus
.5% (8.75% at December 31, 1996). The note is guaranteed
by a partner of Aztec..................................... 19,000 16,500
Note payable to a vendor due in monthly installments through
June 1997, with interest at 9.25%......................... 4,575 2,178
---------- ----------
2,324,457 1,935,838
Less current portion........................................ (636,921) (381,421)
---------- ----------
$1,687,536 $1,554,417
========== ==========
</TABLE>

Long-term debt is collateralized by substantially all assets of the
Company.

As of December 31, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997................................................... $ 636,921
1998................................................... 227,309
1999................................................... 226,046
2000................................................... 150,597
2001................................................... 165,927
Thereafter............................................. 917,657
----------
$2,324,457
==========
</TABLE>

4. LEASE COMMITMENTS

Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at December 31,
1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year ending December 31:
1997...................................................... $ 21,856 $ 62,124
1998...................................................... 15,336 62,124
1999...................................................... 15,336 54,994
2000...................................................... 15,336 12,758
2001...................................................... 7,668 --
-------- --------
Total minimum lease payments...................... 75,532 $192,000
========
Less amount representing interest........................... (13,616)
--------
Present value of minimum lease payments (including current
portion of $16,321)....................................... $ 61,916
========
</TABLE>

F-150
<PAGE> 225

SWAGEL-WOOTTON EYE CENTER, LTD. AND
AZTEC OPTICAL LIMITED PARTNERSHIP

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements consist of the following at December
31, 1996:

<TABLE>
<S> <C>
Land........................................................ $ 634,378
Buildings................................................... 2,172,424
Medical equipment........................................... 798,319

Office furniture and equipment.............................. 313,072
Automobiles................................................. 78,754
Leasehold improvements...................................... 15,184
-----------
4,012,131
Less accumulated depreciation and amortization.............. (1,633,191)
-----------
$ 2,378,940
===========
</TABLE>

Included in medical equipment as of December 31, 1996 are assets acquired
through capital leases with original costs of approximately $147,000.
Amortization expense related to capital leases is included in depreciation and
amortization in the combined statements of operations.

6. MALPRACTICE INSURANCE

The Company carries malpractice insurance for each of its physicians and
optometrists. The insurance for the physicians provides coverage of $3,000,000
per incident, with a $5,000,000 annual limit. The two optometrists both have
coverages of $1,000,000 per incident, with one optometrist having a $1,000,000
annual limit and the other optometrist having a $3,000,000 annual limit.
Coverage for the physicians and optometrists is on a claims-made basis, with the
exception of one optometrist who has occurrence basis coverage. Management is
not aware of any reported claims pending against the Company. Losses resulting
from unreported claims cannot be estimated by management and, therefore, are not
included in the accompanying combined financial statements.

7. RETIREMENT PLAN

The Company maintains an employees savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code which covers substantially all
employees. The Company has elected to not make matching or discretionary
contributions to this plan.

The Company maintains a money purchase pension plan which covers
substantially all employees. The Company makes annual contributions on behalf of
eligible employees based on 7.5% of the employee's compensation as defined in
the plan. Total expense related to the money purchase pension plan was
approximately $106,000 for the year ended December 31, 1996.

8. SUBSEQUENT EVENT

On June 1, 1997, substantially all assets and liabilities were acquired by
Vision Twenty-One, Inc. (Vision) in exchange for 320,000 shares of Vision common
stock. In connection therewith, the Company entered in to a 40-year service
agreement with Vision, whereby Vision will provide substantially all nonmedical
services to the practice.

The combined financial statements of the Company have been prepared as
supplemental information about the association to which Vision will provide
management services following consummation of the acquisition. The Company
previously operated as a separate independent association. The historical
financial position, results of operations and cash flows do not reflect any
adjustments relating to the acquisition.

F-151
<PAGE> 226

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Richard L. Short, D.O., P.A.
d/b/a Eye Associates of Pinellas

We have audited the accompanying balance sheet of Richard L. Short, D.O.,
P.A. d/b/a Eye Associates of Pinellas (the Company) as of December 31, 1996, and
the related statements of income, stockholder's equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Richard L. Short, D.O., P.A.
d/b/a Eye Associates of Pinellas at December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
March 14, 1997,
except for Note 12, as to which the date is
March 28, 1997

F-152
<PAGE> 227

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
ASSETS
Current assets:
Patient accounts receivable, net of allowance for
uncollectible accounts of approximately $57,000........ $332,220
Inventory................................................. 40,728
Prepaid expenses.......................................... 19,074
Prepaid rent-related party................................ 97,593
--------
Total current assets.............................. 489,615
Available-for-sale securities............................... 61,076
Property and equipment, net................................. 71,544
Deferred tax assets......................................... 7,208
--------
Total assets...................................... $629,443
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 52,266
Bank overdraft............................................ 46,415
Accrued compensation...................................... 128,237
Pension plan payable...................................... 60,000
Deferred tax liability.................................... 86,248
Current portion of long-term debt obligation.............. 21,936
--------
Total current liabilities......................... 395,102
Long-term debt obligation, net of current portion........... 80,451
Note payable and accrued interest to related party.......... 37,781
Deferred compensation....................................... 14,826
Stockholder's equity:
Common stock, $1 par value: 5,000 shares authorized; 500
shares issued and outstanding.......................... 500
Additional paid-in capital................................ 4,500
Unrealized gain on available-for-sale securities.......... 14,972
Retained earnings......................................... 81,311
--------
Total stockholder's equity........................ 101,283
--------
Total liabilities and stockholder's equity........ $629,443
========
</TABLE>

See accompanying notes.

F-153
<PAGE> 228

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Revenues:
Net patient service revenues.............................. $2,472,423
Other..................................................... 12,168
----------
Total revenues.................................... 2,484,591
Expenses:
Compensation -- physician stockholder..................... 509,614
Salaries, wages and benefits -- physicians................ 712,243
Salaries, wages and benefits -- other..................... 513,027
General and administrative................................ 307,772
Medical supplies.......................................... 193,203
Rent -- related party..................................... 183,000
Depreciation.............................................. 41,786
Interest.................................................. 15,764
----------
Total expenses.................................... 2,476,409
----------
Income before income taxes.................................. 8,182
Income tax expense.......................................... 4,740
----------
Net income........................................ $ 3,442
==========
</TABLE>

See accompanying notes.

F-154
<PAGE> 229

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

STATEMENT OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK ADDITIONAL GAIN ON TOTAL
--------------- PAID-IN AVAILABLE-FOR- RETAINED STOCKHOLDER'S
NUMBER AMOUNT CAPITAL SALE SECURITIES EARNINGS EQUITY
------ ------ ---------- --------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995....... 500 $500 $4,500 $ 8,713 $ 77,869 $ 91,582
Net income....................... -- -- -- -- 3,442 3,442
Unrealized gain on
available-for-sale
securities.................... -- -- -- 6,259 -- 6,259
--- ---- ------ ------- -------- --------
BALANCE AT DECEMBER 31, 1996....... 500 $500 $4,500 $14,972 $ 81,311 $101,283
=== ==== ====== ======= ======== ========
</TABLE>

See accompanying notes.

F-155
<PAGE> 230

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 3,442
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 41,786
Accrued interest on note payable to related party......... 3,434
Income tax expense........................................ 4,740
Changes in operating assets and liabilities:
Patient accounts receivable............................ 28,527
Inventory.............................................. (13,367)
Prepaid expenses....................................... (3,330)
Prepaid rent -- related party.......................... (18,141)
Accounts payable and accrued expenses and bank
overdraft............................................. 42,128
Accrued and deferred compensation...................... 6,345
---------
Net cash provided by operating activities......... 95,564
INVESTING ACTIVITIES
Purchases of property and equipment......................... (11,022)
Purchases of available-for-sale securities.................. (7,462)
---------
Net cash used in investing activities....................... (18,484)
FINANCING ACTIVITIES
Borrowings on long-term debt................................ 109,700
Repayment of long-term debt................................. (56,780)
Repayments to related party................................. (30,000)
Repayment of line of credit................................. (100,000)
---------
Net cash used in financing activities....................... (77,080)
---------
Increase in cash and cash equivalents....................... --
Cash and cash equivalents, beginning of year................ --
---------
Cash and cash equivalents, end of year...................... $ --
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 15,571
=========
Cash paid for income taxes.................................. $ 850
=========
</TABLE>

See accompanying notes.

F-156
<PAGE> 231

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Richard L. Short, D.O., P.A., a Florida professional corporation (the
Company), operates a professional medical practice in Pinellas Park, Florida,
specializing in ophthalmology.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less at date of purchase to be cash equivalents.

INVESTMENTS IN DEBT AND EQUITY SECURITIES

The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. The Company has evaluated
its investment policies and determined that all of its securities are classified
as available-for-sale. Management determines the appropriate classification of
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholder's equity. Realized gains and losses, and losses in
value judged to be other than temporary on available-for-sale investments, are
included in other revenue. The cost of securities sold is based on the specific
identification method.

INVENTORY

Inventory, consisting of eyeglass frames, contact lenses and optical
supplies, is stated at cost using the first-in, first-out method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method, with useful lives generally ranging from 5 to 31
years. Routine maintenance and repairs are charged to expense as incurred, while
costs of betterments and renewals are capitalized.

NET PATIENT SERVICE REVENUES

Net Patient service revenues are based on established billing rates less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which generally are based on predetermined rates, are
generally less than the Company's customary charges, and the differences are
recorded as contractual adjustments at the time the related service is rendered.

The following table summarizes the percentage of net patient service
revenues by payor class for the year ended December 31, 1996:

<TABLE>
<S> <C>
Medicare.................................................... 31%
Managed care plans.......................................... 31
Medicaid.................................................... 2
Other (including self-pay).................................. 36
---
100%
===
</TABLE>

F-157
<PAGE> 232

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

ADVERTISING COSTS

The Company expenses all advertising costs as they are incurred.
Advertising costs for the year ended December 31, 1996 was $15,178 and is
included in general and administrative expenses in the accompanying financial
statements.

INCOME TAXES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of short-term borrowings reported in the financial
statements reflects its fair value because of the short-term maturity of that
financial instrument. It is not practicable to estimate the fair value of the
Company's long-term debt because the Company's incremental borrowing rate cannot
reasonably be determined.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

2. RELATED PARTY TRANSACTIONS

The Company leases certain real property from R&R Seminole, Ltd., (the
Partnership) under a month-to-month arrangement for which no formal lease
agreement has been executed. The Company is the general partner and has a 1%
interest in the Partnership and the sole physician stockholder of the Company
and his wife are the limited partners. The Company is the guarantor of the
Partnership's mortgage note dated June 25, 1991 bearing interest at 8.875% with
an outstanding principal balance of $742,446 at December 31, 1996. Rent expense,
recorded by the Company, was approximately $183,000 in 1996 for property owned
by the Partnership. Rental payments are based on monthly principal and interest
payments due on the mortgage note payable on the property. Payments made by the
Company to the Partnership totaled $201,141 in 1996. Prepaid rent to the
Partnership totaled $97,593 at December 31, 1996.

F-158
<PAGE> 233

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. AVAILABLE-FOR-SALE SECURITIES

All available-for-sale securities are comprised of mutual funds. The
following is a summary of available-for-sale securities:

<TABLE>
<CAPTION>
GROSS UNREALIZED
----------------- ESTIMATED
COST GAINS LOSSES FAIR VALUE
------- ------- ------- ----------
<S> <C> <C> <C> <C>
1996............................................. $46,104 $14,972 $ -- $61,076
</TABLE>

There were no realized gains or losses on available-for-sale securities
during the year ended December 31, 1996.

4. PROPERTY, PLANT, AND EQUIPMENT

Property and equipment consist of the following at December 31, 1996:

<TABLE>
<S> <C>
Medical equipment........................................... $ 250,198
Office equipment and furniture.............................. 100,301
Automobile.................................................. 27,685
Leasehold improvements...................................... 17,989
---------
396,173
Accumulated depreciation.................................... (324,629)
---------
$ 71,544
=========
</TABLE>

5. LINE OF CREDIT

At December 31, 1995, the Company had $100,000 outstanding on a line of
credit with a bank. Interest on the outstanding principal amount was payable
monthly at prime (8.5% at December 31, 1995) plus 2%. The line of credit matured
in May 1996 and was repaid.

6. NOTE PAYABLE TO RELATED PARTY

In 1993, the Company issued a note payable for $40,000 to an employee
physician to purchase the assets of his optometry practice. As part of the asset
purchase agreement, the employee physician entered into an employment agreement
(the Employment Agreement) with the Company. (See Employment Agreements below
for additional information.) The outstanding principal balance on the note due
to the employee physician was $27,080 at December 31, 1996. Accrued interest on
the note payable was $10,701 at December 31, 1996. The note is payable in five
annual installments of $10,548 per year including interest at 10% per annum,
commencing July 1998.

Under the terms of the Employment Agreement, the Company is to pay the
employee physician deferred compensation of $9,551 per year for five years
beginning August 1, 1998. The payments are to be reduced by certain amounts if
the employee physician does not complete five years of service for the Company
beginning July 1, 1993. In addition, deferred compensation payments may be
reduced if the dollar value of the employee physician's practice production
averaged less than $200,000 per year during the two-year period ended July 31,
1995. The accrued liability for deferred compensation payable to the employee
physician, discounted at 8.25%, was $14,826 at December 31, 1996.

F-159
<PAGE> 234

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. LONG-TERM DEBT

Long-term debt at December 31, 1996 consists of the following:

<TABLE>
<S> <C>
Note payable to bank, interest at prime (8.25% at December
31, 1996) plus .75%, principal of $1,828 plus interest
payable monthly, collateralized by accounts receivable,
inventories, furniture and equipment, due August 2001..... $102,387
Less current maturities..................................... (21,936)
--------
Long-term debt.............................................. $ 80,451
========
</TABLE>

Aggregate maturities required on long-term debt at December 31, 1996, are
as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1997........................................................ $ 21,936
1998........................................................ 21,936
1999........................................................ 21,936
2000........................................................ 21,936
2001........................................................ 14,643
--------
$102,387
========
</TABLE>

8. INCOME TAXES

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<S> <C>
Noncurrent
Depreciation.............................................. $ 7,102
Contribution carryover.................................... 106
-------
Total deferred tax assets................................... 7,208
-------
Current accrual to cash..................................... 86,248
Total deferred tax liabilities.............................. 86,248
-------
Net deferred tax liabilities................................ $79,040
=======
</TABLE>

Components of the income tax provision (benefit) consists of the following
for the year ended December 31, 1996:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Federal..................................................... $-- $4,064 $4,064
State....................................................... -- 676 676
--- ------ ------
$-- $4,740 $4,740
=== ====== ======
</TABLE>

F-160
<PAGE> 235

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes are different from the amount computed by applying the United
States Statutory Rate to income before income taxes for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Income taxes at statutory rate.............................. $2,782
Permanent differences....................................... 1,396
State taxes, net of federal benefit......................... 446
Personal service corporation status......................... 116
------
$4,740
======
</TABLE>

SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that no valuation allowance at December 31, 1996 is necessary to
reduce the deferred tax assets to the amount that will more likely than not be
realized. There was no change in the valuation allowance in 1996. At December
31, 1996, the Company did not have available any net operating loss
carryforwards.

9. MALPRACTICE INSURANCE

The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1 million per incident, with a
$3 million annual limit. Management is not aware of any reported claims pending
against the Company. Losses resulting from unreported claims cannot be estimated
by management and, therefore, are not included in the accompanying financial
statements.

10. RETIREMENT PLAN

The Company maintains a profit-sharing plan covering all employees with two
years of service. The amount of contribution to the plan is determined annually
by the Board of Directors and may vary from zero to fifteen percent of covered
compensation.

The Company restated its profit sharing plan effective October 1, 1996 to
comply with Section 401(k) of the Federal Internal Revenue Code. The plan allows
employees with one year of service to defer up to fifteen percent of their
salary with a discretionary matching Company contribution. Total Company expense
related to the plan was $61,815 for the year ended December 31, 1996.

11. EMPLOYMENT AGREEMENTS

The Company employs several physicians through various employment
agreements. Compensation is calculated as a percentage of the dollar value of
practice production collected which is attributable to the employee physician.
The compensation percentage ranges from 40% to 70%. The employment agreements
are one year in duration and may be canceled with 90 days written notice by
either party.

In addition, if the sole stockholder of the Company should die during the
term of a certain physician employment agreement, the physician employee shall
have 15 days to match any offer received to purchase all or a portion of the
stock or assets of the Company.

12. SUBSEQUENT EVENT

On March 28, 1997, substantially all assets and liabilities of the Company
were acquired by Vision Twenty-One, Inc. (Vision) in exchange for approximately
129,000 shares of Vision common stock. In connection therewith, the Company
entered into a 40-year business management agreement with Vision, whereby Vision
will provide substantially all nonmedical services to the practice.

F-161
<PAGE> 236

RICHARD L. SHORT, D.O., P.A.
D/B/A EYE ASSOCIATES OF PINELLAS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

F-162
<PAGE> 237

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Cochise Eye & Laser, P.C.

We have audited the accompanying balance sheet of Cochise Eye & Laser, P.C.
as of July 31, 1996, and the related statements of income, stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cochise Eye & Laser, P.C. at
July 31, 1996, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tampa, Florida
March 28, 1997
except for Note 6, as to which the date is
May 1, 1997

F-163
<PAGE> 238

COCHISE EYE & LASER, P.C.

BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1996 1997
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $155,798 $256,567
Patient accounts receivable, net.......................... 333,877 262,543
Inventories............................................... 102,715 87,564
Due from related party.................................... 1,087 32,054
Prepaid expenses.......................................... 60,288 22,756
-------- --------
Total current assets.............................. 653,765 661,484
Due from related party...................................... 6,952 6,952
Property, equipment and improvements, net................... 333,273 329,528
-------- --------
Total assets...................................... $993,990 $997,964
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................ $139,105 $ --
Accounts payable.......................................... 42,595 37,634
Accrued pension contribution.............................. 126,629 60,489
Accrued compensation...................................... 28,619 42,650
-------- --------
Total current liabilities......................... 336,948 140,773
Deferred tax liability.................................... 245,710 321,710
Stockholders' equity:
Common stock, $1 par value: 50,000 shares authorized;
1,225 (1996) and 1,247 (1997) shares issued and
outstanding............................................ 1,225 1,247
Additional paid-in capital................................ 95,625 104,197
Due from stockholder......................................
Retained earnings......................................... 314,482 430,037
-------- --------
Total stockholders' equity........................ 411,332 535,481
-------- --------
Total liabilities and stockholders' equity........ $993,990 $997,964
======== ========
</TABLE>

See accompanying notes.

F-164
<PAGE> 239

COCHISE EYE & LASER, P.C.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED
YEAR ENDED APRIL 30,
JULY 31, -----------------------
1996 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Net patient service revenues............................. $2,096,246 $1,679,545 $1,627,918
Sale of optical supplies................................. 599,944 448,461 558,530
Other.................................................... 7,102 6,546 35,832
---------- ---------- ----------
Total revenues................................... 2,703,292 2,134,552 2,222,280
Expenses:
Compensation to physician stockholders................... 740,324 450,872 432,456
Salaries, wages and benefits............................. 837,029 610,318 711,509
Cost of optical supplies sold............................ 313,644 228,819 300,265
Optical, clinical and surgical supplies.................. 254,328 220,812 175,516
General and administrative............................... 156,191 101,663 174,035
Advertising.............................................. 40,285 16,234 42,236
Contract services........................................ 31,090 17,170 17,309
Insurance................................................ 23,422 4,657 27,399
Building and equipment rent.............................. 109,292 74,724 93,003
Depreciation and amortization............................ 72,927 55,452 56,997
Interest................................................. 1,415 2,183 --
---------- ---------- ----------
Total expenses................................... 2,579,897 1,782,904 2,030,725
---------- ---------- ----------
Income before income taxes....................... 123,345 351,648 191,555
---------- ---------- ----------
Income taxes............................................... 53,852 40,000 76,000
---------- ---------- ----------
Net income................................................. $ 69,493 $ 311,648 $ 115,555
========== ========== ==========
</TABLE>

See accompanying notes.

F-165
<PAGE> 240

COCHISE EYE & LASER, P.C.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 1, 1995..................... 1,113 $1,113 $ 52,762 $262,989 $316,864
Issuance of common stock.................... 112 112 42,863 -- 42,975
Net income.................................. -- -- -- 69,493 69,493
Distributions to stockholders............... -- -- -- (18,000) (18,000)
----- ------ -------- -------- --------
BALANCE AT JULY 31, 1996...................... 1,225 1,225 95,625 314,482 411,332
Issuance of common stock.................... 22 22 8,572 -- 8,594
Net income.................................. -- -- -- 115,555 115,555
----- ------ -------- -------- --------
BALANCE AT APRIL 30, 1997 (UNAUDITED)......... 1,247 $1,247 $104,197 $430,037 $535,481
===== ====== ======== ======== ========
</TABLE>

See accompanying notes.

F-166
<PAGE> 241

COCHISE EYE & LASER, P.C.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED
YEAR ENDED APRIL 30,
JULY 31, ---------------------
1996 1996 1997
---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 69,493 $ 311,648 $ 115,555
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 72,927 55,452 56,997
Income taxes.............................................. 53,852 40,000 76,000
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (73,990) (69,606) 71,334
Inventories............................................ -- 8,793 15,151
Prepaid expenses....................................... (39,908) -- 37,532
Due from related party................................. 12,858 2,897 (30,967)
Accounts payable and accrued expenses.................. 122,797 (36,381) (196,175)
--------- --------- ---------
Net cash provided by operating activities......... 218,029 312,803 145,427
INVESTING ACTIVITIES
Purchases of property, equipment and improvements........... (107,954) (98,471) (53,252)
--------- --------- ---------
Net cash used in investing activities....................... (107,954) (98,471) (53,252)
FINANCING ACTIVITIES
Payment of capital lease obligation......................... (31,513) (8,964) --
Issuance of common stock.................................... 42,975 22,538 8,594
Distributions to stockholders............................... (18,000) -- --
--------- --------- ---------
Net cash provided by (used in) financing
activities...................................... (6,538) 13,574 8,594
--------- --------- ---------
Net increase in cash equivalents............................ 103,537 227,906 100,769
Cash equivalents at beginning of period..................... 52,261 52,261 155,798
--------- --------- ---------
Cash equivalents at end of period................. $ 155,798 $ 280,167 $ 256,567
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 1,415 $ 1,313 $ --
========= ========= =========
</TABLE>

See accompanying notes.

F-167
<PAGE> 242

COCHISE EYE & LASER, P.C.

NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Cochise Eye & Laser, P.C. (the Company), an Arizona corporation, operates a
professional medical practice, specializing in general ophthalmology, surgery,
and optometry. The Company has three offices located in Sierra Vista, Benson and
Douglas, Arizona.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim financial statements as of April 30, 1997 and for the
nine-month periods ended April 30, 1996 and 1997 do not provide all disclosures
included in the annual financial statements. These interim statements should be
read in conjunction with the annual audited financial statements and the
footnotes thereto. Results for the 1997 interim period are not necessarily
indicative of the results for the year ending July 31, 1997. However, the
accompanying interim financial statements reflect all adjustments which are, in
the opinion of management, of a normal and recurring nature necessary for a fair
presentation of the financial position and results of operations of the Company.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames. Inventories are stated at the lower of cost or market, with
cost determined on a specific-identification basis.

PROPERTY, EQUIPMENT AND IMPROVEMENTS

Property, equipment and improvements are carried at cost. Depreciation and
amortization, including amortization of assets held under capital lease
agreements are computed using the straight-line method, with useful lives
generally ranging from 5 to 20 years. Routine maintenance and repairs are
charged to expense as incurred, while costs of betterments and renewals are
capitalized.

Property, equipment and improvements consist of the following at July 31,
1996:

<TABLE>
<S> <C>
Land........................................................ $ 42,710
Medical, optical and surgical equipment..................... 511,837
Office equipment and furniture.............................. 260,274
Vehicles.................................................... 20,753
Leasehold improvements...................................... 103,783
--------
939,357
Less accumulated depreciation and amortization.............. (606,084)
--------
$333,273
========
</TABLE>

Included in medical equipment as of July 31, 1996 are assets acquired
through capital leases with original costs of approximately $42,000.

Amortization expense related to capital leases was approximately $8,000 for
the year ended July 31, 1996, and is included in depreciation in the statement
of income.

F-168
<PAGE> 243

COCHISE EYE & LASER, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of all current assets and current liabilities
approximates their fair value because of their short-term nature.

NET PATIENT SERVICE REVENUES

Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare and the
Arizona Health Care Cost Containment System (AHCCS), and various other discount
arrangements. Payments received under these programs and arrangements, which
generally are based on predetermined rates, are generally less than the
Company's customary charges, and the differences are recorded as contractual
adjustments at the time the related service is rendered.

For the year ended July 31, 1996, approximately 27% of the Company's net
patient service revenues were derived from the Medicare and AHCCS programs. The
Company does not believe that there are any credit risks associated with
receivables due from governmental agencies. Concentration of credit risk from
other payors is limited by the number of patients and payors. The Company does
not require any form of collateral from its patients or third-party payors.

Laws and regulations governing the Medicare and AHCCS programs are complex
and subject to interpretation. The Company believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrong doing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCS programs.

ADVERTISING COSTS

The Company expenses advertising costs as incurred.

INCOME TAXES

USE OF ESTIMATES

F-169
<PAGE> 244

COCHISE EYE & LASER, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. INCOME TAXES

<TABLE>
<S> <C>
DEFERRED TAX ASSETS
Noncurrent:
NOL carryforward.......................................... $ 10,722
Other..................................................... 2,664
---------
Total deferred tax assets......................... 13,386
---------
DEFERRED TAX LIABILITIES
Noncurrent:
Depreciation................................................ 43,620
Accrual to cash............................................. 215,476
---------
Total deferred tax liabilities.................... (259,096)
---------
Net deferred liability...................................... $(245,710)
=========
</TABLE>

Components of the income tax provision consist of the following for the
year ended July 31, 1996:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- --------
<S> <C> <C> <C>
Federal.................................................. $ -- $ 41,987 $ 41,987
State.................................................... -- 11,865 11,865
------ -------- --------
$ -- $ 53,852 $ 53,852
====== ======== ========
</TABLE>

Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons
for the year ended July 31, 1996:

<TABLE>
<S> <C>
Income taxes at the statutory rate.......................... $41,937
Permanent differences....................................... 7,712
State taxes, net of federal benefit......................... 2,969
Personal service corporation status......................... 1,234
-------
$53,852
=======
</TABLE>

SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that no valuation allowance at July 31, 1996 is necessary to reduce
the deferred tax assets to the amount that will more likely than not be
realized. At July 31, 1996, the Company has net operating loss carryforwards of
approximately $26,000 which expire in the years 2010 and 2011.

3. MALPRACTICE INSURANCE

The Company carries malpractice insurance for its physicians and
optometrists. This insurance provides coverage of $1,000,000 per incident with a
$3,000,000 annual limit, with the exception of one optometrist who has coverage
of $2,000,000 per incident and a $4,000,000 annual limit. Coverage for the
physicians is on a claims-made basis, while coverage for the optometrists is on
an occurrence basis. In addition, the Company has an umbrella policy which
provides coverage of $1,000,000 per incident and $3,000,000 per annum.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.

F-170
<PAGE> 245

COCHISE EYE & LASER, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. RETIREMENT PLAN

The Company maintains a profit sharing plan under Section 401(k) of the
Internal Revenue Code which covers substantially all employees. The Company
makes discretionary contributions on behalf of eligible employees which are
subject to various limits. Total expense related to the profit sharing plan for
the year ended July 31, 1996 was approximately $75,000.

The Company maintains a money purchase pension plan which covers
substantially all employees. The Company makes annual contributions on behalf of
eligible employees based on 5.7% of the employee's compensation, plus 5.7% of
the employee's compensation in excess of the taxable wage base as defined in the
plan. Total expense related to the money purchase pension plan for the year
ended July 31, 1996 was approximately $52,000.

5. RELATED PARTY TRANSACTIONS

The physician stockholders of the Company provide virtually all
ophthalmology services and their related salaries and benefits are reported as
compensation to physician stockholders in the accompanying statement of income.

The Company rents the Sierra Vista building from one of its stockholders.
Total rent paid to the stockholder for the year ended July 31, 1996 approximated
$83,000, and is included in building and equipment rent in the accompanying
statement of income.

Included as a reduction to stockholders' equity is a note receivable for
$900 from a stockholder related to the purchase of common stock.

As of July 31, 1996, the Company had an amount due from an employee of
$8,039, bearing interest at 8% and payable through 2010.

6. SUBSEQUENT EVENTS

On May 1, 1997, substantially all assets and liabilities were acquired by
Vision Twenty-One, Inc. (Vision) in exchange for 169,150 shares of Vision common
stock. In connection therewith, the Company entered into a 40-year service
agreement with Vision, whereby Vision will provide substantially all nonmedical
services to the practice.

The financial statements of the Company have been prepared as supplemental
information about the Association to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.

F-171
<PAGE> 246

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<PAGE> 247

(This page intentionally left blank)
<PAGE> 248
[Inside Back Cover]

[The inside back cover sets forth the Company name and logo with pictures
depicting eyeglasses, a collage of various managed care members in the process
of receiving eye care at managed clinics; a Managed Provider; and a telephone
operator/receptionist taking calls.]
<PAGE> 249

============================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 7
The Company............................... 19
The Acquisitions.......................... 19
Relationships with Affiliated Providers
and Retail Optical Companies............ 22
Use of Proceeds........................... 23
Price Range of Common Stock............... 23
Dividend Policy........................... 23
Capitalization............................ 24
Selected Pro Forma Financial Data......... 25
Selected Financial Data................... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 27
Business.................................. 37
Management................................ 53
Certain Transactions...................... 60
Principal Stockholders.................... 63
Description of Capital Stock.............. 64
Shares Eligible for Future Sale........... 68
Underwriting.............................. 70
Legal Matters............................. 72
Experts................................... 72
Additional Information.................... 73
Index to Financial Statements............. F-1
</TABLE>

============================================================
============================================================

2,300,000 Shares

[VISION TWENTY-ONE LOGO]

Common Stock

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

PROSPECTUS
-------------------------
PRUDENTIAL SECURITIES INCORPORATED

WHEAT FIRST BUTCHER SINGER

November 20, 1997

============================================================