LASER VISION CENTERS INC, S-1/A, 1997-03-07

LASER VISION CENTERS INC
S-1/A, 1997-03-07
OFFICES & CLINICS OF DOCTORS OF MEDICINE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 1997

REGISTRATION NO. 333-22609

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

LASER VISION CENTERS, INC.
(EXACT NAME OF REGISTRANT IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 7311 43-1530063
(STATE OF JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBER)
</TABLE>

540 MARYVILLE CENTRE DRIVE, SUITE 200
ST. LOUIS, MISSOURI 63141
(314) 434-6900
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND INTENDED
PRINCIPAL PLACE OF BUSINESS.)

ROBERT W. MAY, ESQ.
540 MARYVILLE CENTRE DRIVE, SUITE 200
ST. LOUIS, MISSOURI 63141
(314) 434-6900
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

With copies to:
JAMES R. DANKENBRING, ESQ.
DANKENBRING, GREIMAN, OSTERHOLT &
HOFFMANN, P.C.
7733 FORSYTH BOULEVARD, SUITE 810
ST. LOUIS, MISSOURI 63105
(314) 863-7733

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

From time to time after this Registration Statement becomes effective, as
determined by the Selling Shareholders.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plan, check the following box. [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

An index to the exhibits to this Registration Statement can be found at
page .
------------------------

CALCULATION OF REGISTRATION FEE

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<CAPTION>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE DOLLAR AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED SHARE(1) PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock........................... 15,963,579 5.875 15,963,579 4,837
==========================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculation of the registration fee
pursuant to Rules 457(c) and 457(g) and based upon the average of the
reported high and low sales prices of the common stock as quoted on NASDAQ
National Market Issues on February 27, 1997.

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

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<PAGE> 2

CROSS REFERENCE SHEET

BETWEEN FORM S-1 AND PROSPECTUS

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<CAPTION>
FORM S-1 ITEM CAPTION IN PROSPECTUS
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<C> <S> <C>
Part I.
1. Front of Registration Statement and
Outside Front Cover of Prospectus....... Cover Page; Outside Front
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors...... Prospectus Summary, Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page
6. Dilution.................................. Risk Factors
7. Selling Security Holders.................. Selling Shareholders
8. Plan of Distribution...................... Plan of Distribution
9. Description of Securities to be
Registered.............................. Description of Securities to be Registered
10. Interests of Named Experts and Counsel.... Not Applicable
11. Description of Business................... Business
12. Description of Property................... Description of Property
13. Legal Proceedings......................... Legal Proceedings
14. Common Equity and Related Stockholder
Matters................................. Price Range of Common Stock and Dividend
Policy
15. Financial Statement Schedules............. Index to Consolidated Financial Statements
16. Selected Financial Data................... Selected Consolidated Financial Data
17. Supplementary Financial Information....... Selected Consolidated Financial Data
18. Management's Discussion and Analysis...... Management's Discussion and Analysis
19. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.............................. Not Applicable
20. Directors, Executive Officers, Promoters
and Control Persons..................... Directors, Executive Officers, Promoters
and Control Persons
21. Executive Compensation.................... Executive Compensation
22. Security Ownership of Certain Beneficial
Owners and Management................... Ownership of Certain Beneficial Owners and
Management
23. Certain Relationships and Related
Transactions............................ Certain Relationships and Related
Transactions
24. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities

INFORMATION NOT REQUIRED IN PROSPECTUS
25. Other Expenses of Issuance and
Distribution............................ Other Expenses of Issuance and
Distribution
26. Indemnification of Directors and
Officers................................ Indemnification of Directors and Officers
27. Recent Sales of Unregistered Securities... Recent Sales of Unregistered Securities
28. Exhibits and Financial Statements......... Exhibits; Consolidated Financial
Statements
29. Undertakings.............................. Undertakings
</TABLE>
<PAGE> 3

2,717,209 SHARES

LASER VISION CENTERS, INC.

COMMON STOCK

The 2,717,209 shares of common stock, par value $0.01 per share (the
"Common Stock"), registered hereby may be offered from time to time by
shareholders of Laser Vision Centers, Inc. (the "Selling Stockholders") through
ordinary brokerage transactions in the over-the counter market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices. Laser Vision Centers, Inc. (the "Company") will not realize
any proceeds from the sale of the common stock by the Selling Shareholders. See
"Selling Shareholders" and "Plan of Distribution." The Common Stock of the
Company is currently traded on the Nasdaq National Market under the symbol
"LVCI." On February 27, 1997, the last reported sale price of the Common Stock
by Nasdaq was $5.875 per share. See "Price Range of Common Stock and Dividend
Policy."

The Company is incorporated in Delaware. The Company's principal executive
offices are located at 540 Maryville Centre Drive, Suite 200, St. Louis,
Missouri 63141, and its telephone number is (314) 434-6900. The Company
maintains an Internet home page at www.1aservision.com. All references to the
Company refer to the Company and its subsidiaries unless the context otherwise
indicates.

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 6 TO 11.

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

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.

NO OFFERS OR SALES OF THESE SECURITIES MAY BE MADE IN THE DISTRICT OF COLUMBIA,
GUAM, HAWAII, MISSISSIPPI OR NEW YORK.

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

The date of this Prospectus is March 7, 1997

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

LASERVISION(R), LASERVISION CENTERS AND DESIGN(R), LASERVISION CENTERS(R)
LASERVISION CENTER(R) and MobilExcimer(R) are registered service marks of the
Company. This prospectus also includes trademarks of companies other than the
Company.
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," the consolidated financial statements and
notes thereto appearing elsewhere in this Prospectus.

THE COMPANY

Laser Vision Centers, Inc. is the world's largest provider of access to
excimer lasers and related services for the treatment of refractive vision
disorders and has 40 excimer lasers currently available for use in the United
States, Canada and Europe. The Company is also the world's only operator of
mobile excimer laser systems. The excimer laser can be used to treat refractive
vision disorders such as nearsightedness and astigmatism to eliminate or reduce
the need for corrective lenses. LaserVision Centers(R) operate on a shared-
access model, giving individual or group ophthalmic practices use of excimer
laser technology without investment risk or maintenance requirements, thereby
allowing optimal use of the excimer laser equipment. In addition, the Company
provides a broad range of professional services, including physician and staff
training, technical support services and maintenance and, through its
MarketVision and MedSource divisions, advertising and marketing programs and
services.

The Company has operated excimer laser centers in Canada and Europe since
1991 and 1993, respectively. Following the recent approval of the excimer laser
technology by the United States Food and Drug Administration ("FDA") to treat
certain refractive vision disorders, the Company began providing access to
excimer lasers in fixed-site centers and to develop means for providing access
to its excimer lasers at multiple locations. The Company currently owns 23
excimer lasers approved for use in the United States. The Company currently
provides excimer lasers and related services to fixed-site centers in the United
States, Canada, the United Kingdom, Finland, Greece, Sweden and Ireland and
operates the MobilExcimer(R) in Canada and the United Kingdom. In the United
States, fixed-site laser centers are operated in conjunction with Columbia
Healthcare Corporation ("Columbia Healthcare"), formerly Columbia/HCA, or by the
Company independently or through joint ventures.

Photorefractive keratectomy ("PRK") involves the use of an excimer laser to
reshape the cornea, thereby adjusting its refractive power, which in turn
eliminates or reduces the need for corrective lenses. The excimer laser can also
be used to treat a number of pathological superficial corneal disorders in a
procedure called phototherapeutic keratectomy ("PTK"). Two manufacturers, VISX,
Incorporated ("VISX") and Summit Technology, Inc. ("Summit"), recently received
FDA approval for use of their excimer lasers to perform PRK procedures for low
to moderate myopia and PTK procedures. In addition to such procedures, excimer
lasers can also be used to perform a procedure known as laser in situ
keratomileusis ("LASIK"), which may be more predictable in treating high myopia,
but which has not been specifically approved in the United States by the FDA.

An industry source estimates that 145 million people in the United States
currently use eyeglasses and/or contact lenses to correct refractive vision
disorders. Of these individuals, an estimated 66 million suffer from
nearsightedness, with approximately 60% of nearsighted persons estimated to have
vision disorders within the criteria currently approved by the FDA for treatment
with excimer lasers. The Company estimates that approximately one-fourth of all
sufferers of nearsightedness also experience astigmatism and an additional 23
million people in the United States suffer from astigmatism but do not
experience nearsightedness. According to industry sources, consumers in the
United States spent approximately $13 billion on eyeglasses, contact lenses and
other corrective lenses in 1994. The Company believes that excimer laser surgery
will make it possible for many of these people to eliminate or reduce their
reliance on corrective lenses. In particular, the Company believes that many of
the approximately 26 million contact lens users in the United States will be
particularly receptive to laser surgery because they have already chosen to use
an alternative to eyeglasses for vision correction.

with Calumet Coach Company, the world's leading manufacturer of mobile medical
systems, to build the MobilExcimer. This proprietary system gives the Company
flexibility that the Company believes is not currently available to its
competitors and is intended to help the Company achieve broader penetration of
both domestic and international markets. The Company plans to use the
MobilExcimer to provide laser access and related services to communities where
the Company's potential patient base is insufficient to sustain a fixed-site
center, thereby enhancing the Company's ability to expand quickly into multiple
markets. In June 1996 the Company submitted an application for premarket
approval ("PMA") with the FDA for use of the MobilExcimer laser for treatment of
low to moderate myopia, which was the first step in seeking approval for the
MobilExcimer. In November 1996, the company received FDA approval of its PMA and
immediately filed a Supplement with the FDA for approval of the MobilExcimer. In
addition to the MobilExcimer, the Company has also developed a strategy of
providing access to multiple sites by transporting fixed-site lasers between
sites to meet demand.

Recently, the Company has undertaken a complementary strategy to create
additional ophthalmologist demand for the Company's lasers through its
Refractive Management Services Organization ("RMSO"). The RMSO is a management
services organization through which the Company will purchase the refractive
surgery assets of the practice of ophthalmologists and enter into a management
services agreement with the practice. The Company will provide management and
marketing services in exchange for a share of the revenues of the refractive
practice. In addition, the Company will provide access to its excimer lasers and
receive a fee for each procedure performed. The first RMSO was completed in
January 1997 with Lindstrom Samuelson & Hartlen Ophthalmology Associates, P.A.
(Dr. Lindstrom is a member of the Board of Directors and the medical advisory
board.) Additional RMSO's, if any, are not anticipated until fiscal 1998.

MarketVision and MedSource comprise the Company's ophthalmic marketing
divisions. Both MarketVision and MedSource, which the Company acquired effective
February 1996, provide marketing services designed to increase ophthalmic
surgical volume. MarketVision operates as an advertising and marketing agency,
while MedSource provides services more directly related to planning, training
and consulting.

Risk factors which should be considered carefully in evaluating an
investment in the Common Stock include the absence of profitable operations, the
uncertainty of market acceptance of excimer laser surgery, competition,
government regulation, the uncertainty of FDA approval of the MobilExcimer, the
lack of long-term follow-up data and undetermined medical risks with respect to
the effect of excimer laser surgery, product liability and professional
liability, the Company's ability to manage its growth and its dependence on
current management, the possible need for additional financing and the
volatility of the price of the Common Stock.

Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the sections entitled "Risk
Factors" and "Business -- Government Regulation," as well as those discussed
elsewhere in this Prospectus.
4
<PAGE> 6

THE OFFERING

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<S> <C>
Common Stock which may be Offered by the
Selling Shareholders after this Registration.... 2,717,209 shares
Common Stock Outstanding at January 15, 1996...... 8,815,383 shares(1)
Purchase Price.................................... Market Prices
Use of Proceeds................................... The Shares offered hereby are Shares presently
owned by the Selling Shareholders. The Company
will not receive any of the proceeds from the sale
of the Shares. See "Use of Proceeds."
Nasdaq National Market Symbol..................... LVCI
</TABLE>

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth summary historical consolidated financial
data with respect to the Company for the periods ended and as of the dates
indicated. The summary historical consolidated annual financial data is derived
from the audited consolidated financial statements of the Company as of April
30, 1995 and 1996 and for the years ended April 30, 1994, 1995, and 1996
included elsewhere in this Prospectus. The summary historical consolidated
financial data for the years ended April 30, 1992 and 1993 is derived from
audited financial statements of the Company which are not included in this
Prospectus. The summary historical consolidated interim financial data is
derived from the unaudited Consolidated Condensed Financial Statements of the
Company as of and for the six months ended October 31, 1996 included elsewhere
in this Prospectus and as of and for the six months ended October 31, 1995
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1995. In the opinion of Company management, the unaudited
Consolidated Condensed Financial Statements include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of the
financial position and the results of operations for such period and as of such
dates. Operating results for the six months ended October 31, 1996 are not
necessarily indicative of results expected for the year ended April 30, 1997.
This information should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto appearing elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." See "Selected Consolidated Financial Data."

<TABLE>
<CAPTION>
OCTOBER 31,
1996
----------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 6,127
Working capital............................................. 4,052
Total assets................................................ 27,712
Non-current liabilities..................................... 5,823
Accumulated deficit......................................... (20,870)
Stockholders' equity........................................ 17,824
</TABLE>

- ---------------
(1) Does not include 39,150 shares of Common Stock reserved for issuance upon
exercise of the Company's Class C and D Warrants, 24,500 shares reserved for
issuance upon exercise of the Company's Class E Warrants, 546,245 shares
reserved for issuance upon exercise of outstanding stock options under the
Company's Incentive and Non-Qualified Stock Option Plans, 46,888 shares
reserved for issuance upon exercise of warrants issued to the placement
agent in the Company's 1993 offering of Common Stock, 1,164,700 shares
reserved for issuance upon exercise of outstanding Non-Qualified Warrants
and 510,000 shares reserved for issuance upon exercise of other unregistered
warrants outstanding as of October 31, 1996. See Note 12 of Notes to
Consolidated Financial Statements for April 30, 1996 information.

(2) Included in 1996 operating expenses is $3,063,000 related to a non-cash
charge for fixed asset impairment. See Note 4 of Notes to Consolidated
Financial Statements as of April 30, 1996.

(3) Includes $439,000 of dividends accrued on the Company's Convertible
Preferred Stock. See Note 5 of Notes to Consolidated Financial Statements.
5
<PAGE> 7

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Common Stock.

ABSENCE OF PROFITABLE OPERATIONS

The Company commenced operations in 1989 and has recorded net losses from
its LaserVision Centers division in every year since inception. The accumulated
deficit as of October 31, 1996 was approximately $20.9 million, at which time
the Company anticipated its cash and cash equivalents were sufficient to fund
operating expenses for the next nine months. The Company anticipates continued
losses from operations due to expenditures required to support its U.S.
expansion. There can be no assurance that the Company will be able to achieve
profitability, or that, if achieved, profitability will be sustained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

UNCERTAINTY OF MARKET ACCEPTANCE

The Company believes that its profitability and growth will depend upon
broad acceptance of PRK in the United States and key international markets
targeted by the Company. There can be no assurance that PRK will be accepted by
either the ophthalmic community or the general population as an alternative to
existing methods of treating refractive vision disorders. To date, PRK has not
achieved sufficient market acceptance in Europe or Canada for the Company to
sustain profitable operations, and there can be no assurance that PRK will
obtain sufficient market acceptance in the U.S. to achieve profitable
operations. Currently, patients are charged approximately $1,500 to $2,200 per
eye for the procedure. The acceptance of PRK may be affected adversely by its
cost, concerns relating to its safety and efficacy, general resistance to
surgery, the effectiveness of alternative methods of correcting refractive
vision disorders, the lack of long-term follow-up data, the possibility of
unknown side effects and the lack of third-party reimbursement for the
procedure. Many consumers may choose not to have PRK procedures performed due to
the availability of nonsurgical methods for vision correction. Any future
reported adverse events or other unfavorable publicity involving patient
outcomes from use of PRK systems could also adversely affect acceptance of the
procedure. Market acceptance could also be affected by the ability of the
Company and other participants in the PRK market to train a broad population of
ophthalmologists in the procedure. Promotional efforts by suppliers of products
or procedures which are alternatives to PRK procedures, including eyeglasses and
contact lenses, may also adversely affect the market acceptance of PRK. The
failure of PRK to achieve broad market acceptance would have a material adverse
effect on the Company's business, financial condition and results of operations.

COMPETITION

The market for providing access to excimer lasers is subject to
increasingly intense competition. The Company competes with several other
companies, including at least one manufacturer of laser equipment, in providing
access to excimer lasers in the United States and internationally. Summit, one
of two suppliers of laser equipment to the Company, opened 19 laser centers in
the United States during 1996. In January 1997 Summit announced that it planned
to divest, through sale or spin off, its vision center business. Other companies
are currently in the process of gaining FDA approval for their lasers and these
companies may elect to enter the laser center business. Other non-manufacturing
companies which have indicated they intend to operate or already operate laser
centers in the United States are: Beacon Laser Centers, Inc., Global Vision,
Inc., LCA Vision, Inc., Sight Resources, Inc., Sterling Vision, Inc., The Laser
Centre (TLC) and 20/20 Laser Centers, Inc. The Company will also compete with
laser centers operated by local operators in certain markets. There can be no
assurance that any reduction in per procedure fees that may result from
increased competition will be compensated for by an increase in procedure
volume.

The procedures offered by the Company's LaserVision Centers also compete
with other present forms of treatment for refractive disorders, including
eyeglasses, contact lenses, refractive surgery, corneal transplants and other
technologies currently under development. The Company expects that companies
which have developed or are developing new technologies or products, as well as
other companies (including established

6
<PAGE> 8

and newly formed companies) may attempt to develop new products directly
competitive with the excimer lasers that are to be utilized by the Company or
could introduce new or enhanced products with features which render the
equipment to be used by the Company obsolete or less marketable. The ability of
the Company to compete successfully will depend in large part on its ability to
adapt to technological changes and advances in the treatment of refractive
vision disorders. There can be no assurance that, as the market for excimer
laser surgery and other treatments of eye disorders develops, the Company's
equipment will not become obsolete, and if this occurs, that the Company will be
able to secure new equipment to allow it to compete effectively.

The advertising and marketing businesses in which the Company's
MarketVision and MedSource divisions are engaged are highly competitive. Clients
have the freedom to move from one advertising agency to another with comparative
ease since the relationships normally can be terminated on short notice. The
MarketVision and MedSource divisions compete with several national and regional
ophthalmic specialty marketing companies, as well as national and local
advertising agencies which may handle diverse client activities. MarketVision
and MedSource may be hampered by their affiliation with LaserVision Centers in
that some customers may consider them competitors which could adversely affect
the ability of these divisions to continue to attract outside business.

GOVERNMENT REGULATION

The manufacturing, labeling, distribution and marketing of medical devices
such as the excimer lasers to which the Company provides access are subject to
extensive and rigorous government regulation in the United States by the FDA.
Excimer lasers cannot be marketed in the United States for ophthalmic use unless
they have been approved by the FDA. Two excimer lasers, manufactured by VISX and
Summit, have received FDA approval and are marketed for PRK for low to moderate
myopia (nearsightedness) and for PTK. The Company has procured only approved
excimer lasers for use in the United States.

Changes to an approved excimer laser that affect safety and effectiveness
require additional FDA approval. An example of such a change is marketing
approved excimer lasers for other uses, such as astigmatism and hyperopia; the
lasers cannot be marketed or promoted for these uses until such approvals are
obtained. There can be no assurance that the FDA will approve any excimer laser
for any other use in a timely fashion or at all. Failure of timely FDA approval
for these other indications could have a material adverse effect on the
Company's planned expansion in the United States market. The FDA might also take
the position that an additional approval is required for the Company's practice
of transporting fixed-site lasers between sites. If the FDA were to determine
that the lasers being transported require an additional approval, the Company
could be subject to enforcement action and could be required to stop
transporting fixed-site lasers between sites. There can be no assurance that the
Company would be able to obtain such an approval in a timely fashion or at all.
Enforcement action or an inability to transport lasers between sites could have
a material adverse effect on the Company.

Once FDA approval is obtained, manufacturers are subject to continuing FDA
obligations. Medical devices are required to be manufactured in accordance with
regulations setting forth current Good Manufacturing Practices, which require
that devices be manufactured and records be maintained in a prescribed manner
with respect to manufacturing, testing and control activities. It is the FDA's
view that with respect to excimer lasers, users, as well as manufacturers are
required to comply with FDA requirements with respect to labeling and promotion.
Discovery of problems, violations of the Radiation Control for Health and Safety
Act, or future legislative or administrative action could adversely affect the
manufacturer's or the Company's ability to retain approval of its equipment.

Failure to comply with applicable FDA requirements could subject the
Company to enforcement action, including product seizures, recalls, withdrawal
of approvals, and civil and criminal penalties, any one or more of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, approvals could be withdrawn in
appropriate circumstances. Failures of the Company or its principal suppliers to
comply with regulatory requirements, or any adverse regulatory action, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

7
<PAGE> 9

Furthermore, the failure of VISX, Summit or any other manufacturers that
supply excimer lasers to the Company to comply with applicable federal, state,
or foreign regulatory requirements, or any adverse regulatory action against
such manufacturers, could limit the supply of lasers or limit the ability of the
Company to use the lasers. The inability of the Company to obtain lasers for
sale or use in the United States or elsewhere due to lack of regulatory
approval, or otherwise, could prevent the Company from establishing or
maintaining LaserVision Centers or MobilExcimers, which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Government Regulation."

Medical device laws and regulations are also in effect in many of the
countries in which the Company currently conducts or may in the future conduct
business outside the U.S. These range from comprehensive device approval
requirements to requests for product data or certifications. The number and
scope of these requirements are increasing. International regulatory
requirements vary by country and there can be no assurance that the
manufacturers of the excimer lasers to which the Company provides access will
receive additional international regulatory approvals. Failure to receive such
approvals in, or meet the requirements of, any country could prevent the Company
from operating in that country, which could have a material adverse effect on
the Company's business, financial condition and results of operations. Medical
device laws and regulations are also in effect in some states in which the
Company currently conducts or may in the future conduct business. State and
foreign medical device laws and regulations could have a material adverse effect
on the Company's business, financial condition and results of operation.

UNCERTAINTY OF FDA APPROVAL OF MOBILEXCIMER

Certain FDA officials have advised the Company that they believe that
excimer lasers are not approved for use in the MobilExcimer, and that such
approval would be required before the Company could operate the MobilExcimer in
the United States. The MobilExcimer system has not been approved for use in the
United States by the FDA. In June 1996, the Company submitted a PMA application
with the FDA for the use of the excimer laser for treatment of low to moderate
myopia, which is the first step in seeking approval for the MobilExcimer. In
November 1996, the company received FDA approval of its PMA and immediately
filed a supplement with the FDA for approval of the MobilExcimer. The process of
obtaining approval of a PMA supplement can be lengthy, expensive and uncertain.
It is uncertain when, if ever, the FDA will approve excimer lasers for mobile
use.

If the FDA approves the excimer laser for use on the MobilExcimer,
postmarket restrictions, possible loss of approval or other FDA enforcement
action, need for non-U.S. approvals and/or state and local restrictions may
apply. See "Risk Factors -- Government Regulation."

The Company believes that FDA approval for the use of an excimer laser on a
mobile unit may not be necessary. Although the Company has no present plans to
do so, the Company may decide to operate the MobilExcimer without FDA approval.
If the Company were to operate MobilExcimer units in the United States without
first receiving FDA approval, the FDA is likely to take enforcement action
against the Company, which action could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Government Regulation."

LACK OF LONG-TERM FOLLOW-UP DATA; UNDETERMINED MEDICAL RISKS

Concerns with respect to the safety and efficacy of PRK include
predictability and stability of results. Potential complications and side
effects include: post-operative discomfort; corneal haze during healing (an
increase in the light scattering properties of the cornea); glare/halos
(undesirable visual sensations produced by bright lights); decreases in contrast
sensitivity; temporary increases in intraocular pressure in reaction to
procedure medication; modest fluctuations in refractive capabilities during
healing; modest decreases in best corrected vision (i.e., with corrective
lenses); unintended over- or under-corrections; regression of effect; disorders
of corneal healing; corneal scars; corneal ulcers and induced astigmatism. The
procedure involves the removal of "Bowman's layer," an intermediate layer
between the epithelium (outer corneal layer) and the stroma (middle corneal
layer). Although clinical studies conducted to date have demonstrated no
significant adverse reactions to excimer laser removal of Bowman's layer, it is
unclear what effect this will ultimately have

8
<PAGE> 10

on the patient. There can be no assurance that long-term follow-up data will not
reveal additional complications that may have a material adverse effect on
acceptance of PRK which in turn would have a material adverse effect on the
Company's business, financial conditions and results of operations. Concern over
the safety of PRK or other procedures could in turn adversely affect market
acceptance of PRK or result in adverse regulatory action, including product
recalls, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.

PRODUCT LIABILITY AND PROFESSIONAL LIABILITY

Inherent in the use of human health care devices is the potentially
significant risk of physical injury to patients which could result in product
liability or other claims based upon injuries or alleged injuries associated
with a defect in the product's performance, which may not become evident for a
number of years. Therefore, the operation of any LaserVision Center and the use
of refractive laser equipment may result in substantial claims against the
Company by patients who allege they were injured as a result of surgical
procedures using the refractive laser equipment. The Company has "umbrella"
product and professional liability insurance in the amounts of $1.0 million
(aggregate and per occurrence), but primarily relies and intends to continue to
rely on physicians' professional liability insurance policies and manufacturers'
insurance policies for product liability coverage. The Company requires its
center operators to maintain certain levels of professional liability insurance,
and the agreements between the Company and its center operators contain certain
cross indemnification provisions. There can be no assurance, however, that
physician users will carry sufficient insurance and a partially or completely
uninsured successful claim against the Company could have a material adverse
effect on the Company's business, financial condition and results of operations.

MANAGEMENT OF GROWTH

The Company's net revenues have increased in each of the last four fiscal
years. While the Company has increased its expense levels to support its recent
and expected growth, including the hiring of additional personnel, there can be
no assurance that the Company's revenue growth can be sustained. To accommodate
its recent growth, the Company will need to implement a variety of new or
expanded business and financial systems, procedures and controls, including the
improvement of its accounting, marketing and other internal management systems.
There can be no assurance that the implementation of such systems, procedures
and controls can be completed successfully, or without disruption of the
Company's operations. Continued expansion of the Company could significantly
strain the Company's management, financial and other resources. In addition, the
Company has hired and will be required to hire in the future substantial numbers
of new employees, particularly personnel to support its MobilExcimer operations.
There can be no assurance that the Company's systems, procedures, controls and
staffing will be adequate to support the Company's operations. Failure to manage
the Company's growth effectively could have a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE UPON MANAGEMENT

The future success of the Company is dependent in part on its ability to
recruit and retain certain key personnel, including John J. Klobnak, Chief
Executive Officer and Chairman of the Board. The loss of the services of certain
members of management, or other key personnel, could have a material adverse
effect on the Company. The Company is the beneficiary of key-man life insurance
policies ranging from $500,000 to $1.0 million on certain members of management,
but there can be no assurance that the benefits under these policies will be
sufficient to compensate the Company for the loss of the services of any of such
persons.

NEED FOR ADDITIONAL FINANCING

The Company anticipates that it will require additional financing to fund
the Company's operations, including its proposed expansion of its mobile laser
access capability, during the next 24 months. As of January 31, 1997, the
company anticipates that its cash and cash equivalents are sufficient to fund
operating expenses through July 1997. The Company's future liquidity and capital
requirements will depend on numerous factors, many of which are outside the
control of the Company. Future financings may result in the

9
<PAGE> 11

issuance of senior securities or in dilution to the holders of the Common Stock.
Any such financing, if required, may not be available on satisfactory terms or
at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

VOLATILITY OF STOCK PRICE

The market price of the Common Stock has historically been subject to
substantial price volatility. Such volatility may recur in the future due to
overall market conditions or business specific factors such as the Company's
ability to effectively penetrate the market, new technological innovations and
products, changes in government regulations, developments with respect to patent
or proprietary rights, public concerns with regard to safety and efficacy of
various medical procedures, the issuance of new or changed stock market analyst
reports and recommendations, the Company's ability to meet analysts' projections
and fluctuations in the Company's financial results. In addition, the Common
Stock could experience extreme fluctuations in market price which are wholly
unrelated to the operating performance of the Company.

QUARTERLY FLUCTUATIONS IN OPERATING RESULTS

Results of operations have varied and may continue to fluctuate
significantly from quarter to quarter and will depend upon numerous factors,
including: (i) the opening and closing of centers; (ii) the purchase of
additional lasers and other equipment; (iii) competition and (iv) seasonal
factors. Historically, the Company's third quarter results have reflected fewer
procedures due to holiday schedules and less available disposable income to pay
for elective surgery such as PRK. Due to such past and future quarterly
fluctuations in operating results, quarter-to-quarter comparisons of the
Company's operating results are not necessarily meaningful and should not be
relied upon as indications of likely future performance or annual operating
results.

SHARES ELIGIBLE FOR FUTURE SALE

As of October 31, 1996, options issued pursuant to the Company's Incentive
and Non-Qualified Stock Option Plans to purchase up to 546,245 shares of Common
Stock exercisable over the next several years were outstanding at prices ranging
from $3.00 to $16.625. As of October 31, 1996, non-qualified warrants issued to
employees and consultants to purchase up to 1,164,700 shares of Common Stock
exercisable over the next several years at prices ranging from $5.00 to $12.625
were outstanding. As of October 31, 1996, Class C, D and E warrants and certain
warrants issued to underwriters in connection with the Company's 1993 public
offering to purchase an aggregate of 63,650 shares of Common Stock exercisable
over the next several years at prices ranging from $5.00 to $7.25 were
outstanding. The shares of Common Stock issuable upon exercise of the foregoing
options and warrants have been registered and will be freely tradeable upon
exercise.

As of October 31, 1996, additional warrants to purchase 510,000 shares of
Common Stock issued to employees, directors and consultants of the Company and
exercisable over the next several years at prices ranging from $5.25 to $9.00
were outstanding. The shares of Common Stock issuable upon exercise of these
warrants are not registered and may be sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144 or Rule 701.

As of October 31, 1996, 2,331,483 shares of Common Stock were reserved for
issuance upon exercise of such warrants and options. As of October 31, 1996,
there were 8,805,383 shares of Common Stock outstanding. Upon this registration,
8,656,748 of these outstanding shares will be freely tradeable without
restriction under the Securities Act unless held by affiliates.

EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS; PREFERRED STOCK

The Company's Amended Certificate of Incorporation authorizes the issuance
of "blank check" preferred stock with such designations, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Common Stock, thus making it difficult for a third party to obtain

10
<PAGE> 12

voting control of the Company. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company.

The Company's Amended Certificate of Incorporation includes certain
anti-takeover provisions designed to make the Company a less attractive target
for an acquisition of control by an outsider that does not have the support of
the Company's Board of Directors. These provisions include requirements that
certain business combinations involving persons owning beneficially at least 10%
of the Company's shares be approved by both an 80% vote of all outstanding
shares and also a majority vote of all outstanding shares not owned beneficially
by persons involved in such business combinations. These provisions may
discourage a third party from attempting to acquire control of the Company and
may lower the price that an investor may be willing to pay for shares of the
Common Stock.

ABSENCE OF DIVIDENDS

The Company has never declared or paid any cash dividends and anticipates
that for the foreseeable future it will follow a policy of not declaring
dividends and instead retaining earnings, if any, for use in its business.

INTELLECTUAL PROPERTY/PROPRIETARY TECHNOLOGY

The names LASERVISION(R), LASERVISION CENTERS AND DESIGN(R), LASERVISION
CENTERS(R), LASERVISION CENTER(R) and MobilExcimer(R) are registered U.S.
service marks of the Company. In addition, the Company owns service mark
registrations in a number of foreign countries. The Company has also secured a
patent for the MobilExcimer mounting system. The Company's service marks,
MobilExcimer patent and other proprietary technology may offer the Company a
competitive advantage in the marketplace and could be important to the success
of the Company. There can be no assurance that one or all of these registrations
will not be challenged, invalidated or circumvented in the future. The Company
is currently involved in two legal proceedings which could result in an adverse
impact on its rights to certain of such registrations. Litigation regarding
intellectual property is common and there can be no assurance that the Company's
service mark registrations and patent will significantly protect the Company's
intellectual property. The defense and prosecution of intellectual property
proceedings is costly and involves substantial commitments of management time.
Failure to successfully defend the Company's rights with respect to its
intellectual property could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Legal
Proceedings."

FOREIGN EXCHANGE RATES AND CURRENCY CONTROLS

The Company expects that a declining percentage of its revenues will be
earned outside of the U.S. and will be in currencies other than the U.S. dollar
during at least the next few years. Fluctuations in the exchange rate between
the U.S. dollar and foreign currencies, especially the U.K. pound, Canadian
dollar and Swedish krona, could adversely affect the operations of the Company
in the short term. In addition, the U.S. or foreign governments could impose
currency controls which would limit, or prohibit, the Company's access to funds
remitted outside the U.S.

USE OF PROCEEDS

The Shares offered hereby are outstanding Shares presently owned by the
Selling Shareholders named in this prospectus under "Selling Shareholders." The
Company will not receive any of the proceeds from the sale of these shares of
stock.

11
<PAGE> 13

DESCRIPTION OF SECURITIES TO BE REGISTERED

The Shares offered hereby are shares of Common Stock of the Company.
Dividends may be paid on the Common Stock of the Company at the discretion of
the Board of Directors, but no dividend or distribution may be made to holders
of Common Stock other than a dividend payable in Common Stock of the Company
until all accrued dividends on Preferred Stock of the Company have been paid.
The Common Stock has exclusive voting power except as required by law and except
to the extent that voting rights are granted in connection with the issue of
Preferred Stock. There are no preemption rights in conjunction with ownership of
the Common Stock of the Company.

The Company's Articles of Incorporation contain an anti-takeover provision
which makes the company a less attractive target for an acquisition of control
by an outsider which does not have the support of the Company's Board of
Directors. This provision requires an affirmative vote of 80% of all outstanding
shares to approve certain business combinations involving entities owning
beneficially at least 10% of the Company's shares. It also requires that such
business combinations be approved by a majority of the outstanding shares,
excluding any shares owned beneficially by entities seeking to participate in
such business combinations.

The Company's Amended Certificate of Incorporation authorizes the issuance
of "blank check" preferred stock with such designations, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Company's Common Stock, thus making it difficult for a third party to obtain
voting control of the Company. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company.

12
<PAGE> 14

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

From April 3, 1991 to November 15, 1996, the Common Stock was traded on the
over-the-counter market through Nasdaq under the symbol "LVCI" and on the Boston
Stock Exchange under the symbol "LVS." The Common Stock is currently traded on
the Nasdaq National Market under the symbol "LVCI."

The following table sets forth, for the periods indicated, the high and low
bid prices of the Common Stock as reported on the over-the-counter market
through Nasdaq.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended April 30, 1994
1st Quarter............................................... $ 53/4 $ 43/4
2nd Quarter............................................... 57/8 4
3rd Quarter............................................... 53/4 4
4th Quarter............................................... 67/8 55/8

Fiscal Year Ended April 30, 1995
1st Quarter............................................... $ 6 $ 53/8
2nd Quarter............................................... 8 51/4
3rd Quarter............................................... 8 75/8
4th Quarter............................................... 81/2 7

Fiscal Year Ended April 30, 1996
1st Quarter............................................... $ 81/2 $ 77/8
2nd Quarter............................................... 157/8 81/2
3rd Quarter............................................... 165/8 113/8
4th Quarter............................................... 151/4 123/8

Fiscal Year Ending April 30, 1997
1st Quarter............................................... $141/2 $ 7
2nd Quarter............................................... 91/8 61/8
3rd Quarter............................................... 75/8 415/16
4th Quarter to date....................................... 61/4 51/8
</TABLE>

On February 27, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $5.875 per share. As of such date, there were
approximately 400 holders of record of the Common Stock.

The Company has never declared or paid any cash dividends on its Common
Stock. The Company presently intends to retain any future earnings for use in
its business and does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.

13
<PAGE> 15

SELLING SHAREHOLDERS

The Shares being registered and offered hereunder are outstanding Shares
presently owned by the following Selling Shareholders. The Shares were acquired
by these Selling Shareholders through conversions of Preferred Stock which
occurred in June and September, 1996 or through four private placements pursuant
to Section 4(2) of the Securities Act of 1933, as amended. Pursuant to the
Preferred Stock and private placement agreements, the Company agreed to register
the Shares at its cost to remove the restriction upon free transferability. The
Company has no knowledge as to when and if any of the Selling Shareholders
desire to offer their Shares for sale upon the open market once registration is
completed.

The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of October 31, 1996 by each of the
Selling Stockholders.

<TABLE>
<CAPTION>
SHARES AND
SHARES OWNED PERCENTAGE OF
BEFORE THE SHARES BEING CLASS AFTER
OFFERING OFFERED OFFERING
------------ ------------ --------------
<S> <C> <C> <C> <C>
Randall A. Bono, Trustee............................ 40,000 36,125 3,875 0.04%
Trustees of General Electric Pension Trust.......... 324,028 174,028 150,000 1.70%
Dennis L. Ryll...................................... 251,832 94,239 157,593 1.79%
Lagunitas Partners, L.P. ........................... 144,076 62,826 81,125 0.92%
George F. Koob...................................... 30,000 30,000
Schroder Ventures International Life Sciences fund
LPI*.............................................. 632,058
Schroder Ventures International Life Sciences fund
LP2*.............................................. 140,457
Schroder Ventures International Life Sciences
Trust*............................................ 222,485
Schroder Ventures International Life Sciences Fund
Co-Investment Scheme*............................. 5,000
Schroder UK Venture Fund III Trust*................. 219,629
Schroder UK Venture Fund III LP1*................... 214,691
Schroder UK Venture Fund III LP2*................... 107,345
Drakes Landing Associates, L.P. .................... 250,000
525 Investments Limited............................. 166,666
Medical Science II Co-Investment, L.P. ............. 32,216
Medcap I, L.P. ..................................... 83,333
ActaFinance......................................... 16,666
Schroder UK Venture I Extension* Fund............... 125,000
Patrick A. Gerschel................................. 283
Allen Investment Partnership........................ 416
Dah Sing Medical Science Investment................. 1,383
Dah Sing Health and Happiness Investment............ 1,383
Healthcare First Investment......................... 283
Futuristic Healthcare Investment.................... 416
Fortunate Investments............................... 700
Friendship First Health & Happiness Investment...... 416
Viking Medical Ventures Ltd. ....................... 1,383
Tom Richardson...................................... 133
BioCapital.......................................... 1,383
547 Partners........................................ 700
Anne Devlin......................................... 133
Noram Trust......................................... 550
Nasser Menhall...................................... 3,883
Medical Science Partners II, L.P. .................. 121,000
</TABLE>

- ---------------
* Dr. Henry Simon, a Director of the Company, is the former Chairman of Schroder
Ventures International Life Sciences Advisors, which is affiliated with this
Selling Shareholder. James M. Garvey, a Director of the Company, is the CEO
and Managing Partner of Schroder Ventures Life Sciences Advisors, which is
affiliated with this Selling Shareholder.

14
<PAGE> 16

PLAN OF DISTRIBUTION

The Shares have been registered to remove their restricted status under the
Act. Although the Selling Shareholders have not advised the Company that they
currently intend to sell the Shares, pursuant to this Registration, the Selling
Shareholders may choose to sell all or a portion of the Shares from time to
time, as market conditions permit, in transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Shares, or a combination of such methods of sale, at fixed prices which may be
charged, at market prices prevailing at the time of sale, or at negotiated
prices. The shares offered hereby may be sold by one or more of the following
methods, without limitation: (a) a block trade in which a broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commission or discounts from Selling Shareholders in amounts to be
negotiated immediately prior to the sale. The Selling Shareholders and any
broker-dealers that act in connection with the sale of the Shares might be
deemed to be "underwriters" within the meaning of Section 2(11) of the Act and
any commission received by them and any profit on the resale of the Shares as
principal might be deemed to be underwriting discounts and commission under the
Act. In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule 144 might be sold under Rule 144 rather than pursuant to
this Prospectus.

15
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The statement of operations data set forth below for the years ended April
30, 1994, 1995 and 1996 and the balance sheet data at April 30, 1995 and 1996
are derived from the Consolidated Financial statements of the Company audited by
Price Waterhouse LLP, independent accountants, included elsewhere in this
Prospectus. The statement of operations data set forth below with respect to the
years ended April 30, 1992 and 1993 and the balance sheet data at April 30,
1992, 1993 and 1994 are derived from audited financial statements of the Company
which are not included in this Prospectus. The statement of operations data for
six months ended October 31, 1995 and 1996 and the balance sheet data at October
31, 1996 have been derived from the unaudited Consolidated Condensed Financial
Statements of the Company which are included elsewhere in this Prospectus. In
the opinion of the Company's management, the unaudited Consolidated Condensed
Financial Statements have been prepared on the same basis as the audited
Consolidated Financial Statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for these periods and as of such
dates. Operating results for the six months ended October 31, 1996 are not
necessarily indicative of results expected for the entire year. The data set
forth below should be read in conjunction with the consolidated financial
statements and related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 936 $ 1,180 $ 2,106 $ 3,311 $ 3,918 $ 1,732 $ 3,430
Cost of revenues................ 600 868 1,768 3,375 4,240 2,114 3,222
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)............. 336 312 338 (64) (322) (382) 208
------- ------- ------- ------- ------- ------- -------
Operating expenses:
General and administrative.... 489 605 695 1,002 2,356 697 1,892
Salaries and related
expenses................... 347 514 902 1,285 2,329 936 1,622
Depreciation and
amortization............... 69 122 250 283 230 126 208
Selling and marketing
expenses................... 25 254 391 574 916 453 991
Fixed asset impairment
provision.................. -- -- -- -- 3,063 -- --
------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 930 1,495 2,238 3,144 8,894 2,212 4,713
------- ------- ------- ------- ------- ------- -------
Loss from operations............ (594) (1,183) (1,900) (3,208) (9,216) (2,594) (4,505)
------- ------- ------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest and other income....... 84 35 21 37 437 76 163
Interest expense................ (49) (87) (156) (242) (216) (93) (189)
Minority interest in net loss of
subsidiaries.................. -- -- -- 116 192 84 103
Provision for loss on advance... -- -- (175) -- -- -- --
------- ------- ------- ------- ------- ------- -------
Other income (expense) net...... 35 (52) (310) (89) 413 -- --
------- ------- ------- ------- ------- ------- -------
Net loss........................ $ (559) $(1,235) $(2,210) $(3,297) $(8,803) $(2,527) $(4,428)
======= ======= ======= ======= ======= ======= =======
Net loss per share.............. $ (0.25) $ (0.48) $ (0.66) $ (0.82) $ (1.75) $ (0.54) $ (0.57)
======= ======= ======= ======= ======= ======= =======
Weighted average number of
shares of Common Stock
outstanding................... 2,270 2,567 3,356 4,001 5,278 4,696 8,035
======= ======= ======= ======= ======= ======= =======
</TABLE>

16
<PAGE> 18

<TABLE>
<CAPTION>
APRIL 30,
------------------------------------------------- OCTOBER 31,
1992 1993 1994 1995 1996 1996
------- ------- ------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 719 $ 787 $ 706 $ 2,126 $ 12,672 $ 6,127
Working capital (deficit)........... 643 673 (244) (1,301) 10,002 4,052
Total assets........................ 4,442 4,356 9,135 11,318 28,913 27,712
Non-current liabilities............. 603 736 2,900 791 1,763 5,823
Convertible preferred stock with
mandatory redemption provision in
2005.............................. -- -- -- -- 14,539
Accumulated deficit................. (897) (2,132) (4,342) (7,639) (16,442) (20,870)
Stockholders' equity................ 2,964 2,829 4,594 6,349 7,453 17,824
</TABLE>

17
<PAGE> 19

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

Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the sections entitled "Risk
Factors" and "Business -- Government Regulation" as well as those discussed
elsewhere in this Prospectus.

BACKGROUND

The Company was incorporated in Delaware in 1988 and initially provided
medical advertising and marketing services in the United States, primarily to
ophthalmologists. By 1991, the Company had shifted its strategic emphasis to the
emerging ophthalmic technology based on the use of excimer lasers for PRK and
acquired an excimer laser for use in a clinical center as part of clinical
trials with respect to the safety and efficacy of PRK.

Subsequent to the purchase of its first laser, the Company determined that
FDA approval for PRK in the United States would require a lengthier process than
was originally anticipated. As a result, the Company decided to enter the
international market for excimer laser surgery where regulatory restrictions
were much less prohibitive. Between late 1991 and mid-1992, the Company acquired
three commercial excimer laser centers in Canada and began developing the first
MobilExcimer unit. In July 1993, the Company opened a fourth Canadian center and
purchased six excimer lasers installed in Europe. In April 1994, the Company
acquired eight additional lasers installed in Europe. The first PRK procedure on
a MobilExcimer system was performed in Ontario, Canada in September 1994.

In anticipation of the FDA's approval of the excimer laser to perform PRK
procedures, in December 1994 the Company restated its agreement with Columbia
Healthcare pursuant to which the Company became the primary provider of excimer
lasers to Columbia Healthcare ambulatory surgery centers. In addition, by the
fall of 1995, the Company extended testing of its MobilExcimer system to
England, opened two European centers (including a Company-owned center with an
improved excimer laser system), acquired an additional MobilExcimer unit and
selected Dr. Richard Lindstrom as the Company's Medical Director.

In August 1995, the Company acquired Vision Correction, Inc., an excimer
laser access provider, for Common Stock with a value of approximately $650,000.
In October 1995 and March 1996, the FDA approved the use of the excimer lasers
manufactured by Summit and VISX, respectively, for performing PRK procedures for
low to moderate myopia, making it possible for the Company to begin providing
ophthalmologists access to lasers in the United States. In early 1996, the
Company acquired MedSource, a marketing services company, to complement its
existing marketing operations for cash and Common Stock with a combined value of
approximately $300,000. During April 1996, the Company purchased assets from a
former competitor to expand its European operations for a purchase price of
approximately $300,000, including cash and assumed liabilities. In the fiscal
year ended April 30, 1996, the Company opened six LaserVision Centers in the
United States and closed five international fixed-site centers which are now
serviced by a MobilExcimer.

Due to recent improvements in excimer laser technology, international
market conditions and the resulting operational considerations, the Company
believed that the recorded carrying value of certain of its international
fixed-site assets exceeded their estimated fair values. Accordingly, the Company
recorded a non-cash impairment charge of approximately $3.1 million in the
fourth quarter of fiscal 1996. See Note 4 to Consolidated Financial Statements.

18
<PAGE> 20

CENTERS IN OPERATION

The following table shows the number of centers which the Company operated
as of the dates indicated.

<TABLE>
<CAPTION>
APRIL 30,
------------------------------------ OCTOBER 31,
CENTERS WITH LASERS 1992 1993 1994 1995 1996 1996
- ------------------- ---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
International, Fixed.................. 1 3 18 20 15 13
International, Mobile................. -- -- 1 1 2 2
Domestic.............................. 1 1 1 1 6 20
-- -- -- -- -- --
Total Centers............... 2 4 20 22 23 35
== == == == == ==
</TABLE>

RESULTS OF OPERATIONS

SIX MONTHS ENDED OCTOBER 31, 1996 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1995

The Company has continued to implement its domestic strategy. As of October
31, 1996, the Company had installed twenty lasers for domestic use. Seventeen of
these lasers were installed in Columbia/HCA Healthcare Corporation outpatient
surgery centers. Two additional lasers have been deployed for use with testing
the Company's mobile strategy. Three lasers have been moved from their original
installation site based upon management's determination that the market was not
in alignment with the Company's strategy.

The reorganization of the Company's international operations has been
completed in accordance with the plan established in the fourth quarter of
fiscal 1996. Additional international laser relocations are likely to occur to
help meet the Company's strategic goals.

Revenues

Total revenues of $3,430,000 for the six months ended October 31, 1996
increased by $1,698,000 from $1,732,000 for the six months ended October 31,
1996, or an increase of 98%

Revenues for the Laser Vision Centers division increased to $2,759,000 for
the six months ended October 31, 1996 from $977,000 for the six months ended
October 31, 1995. The increase is attributable to higher revenues from the
European centers of $581,000 and new U.S. centers of $1,225,000 partially offset
by a decrease in Canadian revenues of $24,000. The increase in U.S. revenues for
the LaserVision Centers division is attributable to the increased number of
centers in operation and procedures performed in the U.S. The increased European
revenues are primarily related to increased procedures performed with the
European mobile laser and at the centers acquired in conjunction with the New
Image acquisition. Total Canadian revenues decreased due to a decrease in
revenues in the Vancouver center, partially offset by increases in revenues for
the Canadian mobile laser.

Revenues for the MarketVision division decreased due to a shift of
attention to providing marketing for the U.S. Laser Vision Centers division
partially offset by new revenues from the Med-Source acquisition.

Cost of Revenues/Gross Profit (Loss)

Cost of revenues increased to $3,222,000 for the six months ended October
31, 1996 from $2,114,000 for the six months ended October 31, 1995. Depreciation
in cost of revenue increased to $1,559,000 from $851,000 in these respective
periods due to the increased number of U.S. lasers partially offset by decreases
in depreciation on European and Canadian lasers which were written down to
estimated fair market value during the fourth quarter of fiscal 1996.

Other costs of revenues increased to $1,663,000 for the six months ended
October 31, 1996 from $1,263,000 for the six months ended October 31, 1995 due
to increased costs for U.S. operations, including Pillar Point royalties of
$319,000 and gas costs of $75,000. Costs of revenue in Europe also increased
$107,000. Cost of revenue in Canada increased due to increased costs of $47,000
for the MobilExcimer laser. These increases were partially offset by decreases
in costs of revenue for Market Vision of $99,000, and for Canadian maintenance,
gas, and laser optics of $82,000. The net increase, when combined with the
revenue increase,

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<PAGE> 21

resulted in these other costs of revenues decreasing from 73% of total revenues
for the six months ended October 31, 1995 to 48% of total revenues for the six
months ended October 31, 1996.

Total gross profit (loss) improved from a loss of $382,000 for the six
months ended October 31, 1995 to a profit of $208,000 for the six months ended
October 31, 1996. The variable gross profit, excluding depreciation, increased
to $1,767,000 from $469,000, primarily due to increased procedures in the U.S.
and Europe.

Operating Expenses

General and administrative expenses increased from $697,000 to $1,892,000
for the six month periods ended October 31, 1995 and 1996, respectively. The
increase is primarily attributable to $260,000 of stock offering costs, an
increase of $198,000 in legal fees associated with tradename issues, an increase
of $80,000 in travel expenses, of $216,000 in office expenses associated with
the increased U.S. operations, of $83,000 of development costs associated with a
new mobile laser concept, an increase of $155,000 in European office and rent
expenses, an increase of $66,000 for additional liability insurance coverage, an
increase in professional fees of $50,000, an increase of $40,000 in bad debt
expense, and costs of producing various patient education videos of $33,000.
These increases and additional expenses have been partially offset by a $50,000
reduction of an accrual related to a lease assumption which has been finalized.

Salaries and related expenses increased from $936,000 to $1,622,000 for the
six month periods ended October 31, 1995 and 1996, respectively. The increase
was due to an increased number of employees, salary adjustments and the related
payroll taxes and fringe benefits, partially offset by a decrease in executive
incentive compensation.

Depreciation and amortization increased by $82,000 from $126,000 to
$208,000 for the six month periods ended October 31, 1995 and 1996,
respectively. The increase was primarily due to an increase in amortization of
goodwill associated with acquisitions of Med-Source and VCI and increased
depreciation for the home office.

Selling and marketing expenses increased from $453,000 to $991,000 for the
six month periods ended October 31, 1995 and 1996, respectively. The increase
was due to $292,000 of promotional cost associated with the new U.S. market, an
increase of $45,000 related to production of patient education videos, an
increase of $48,000 related to Canadian marketing, and an increase of $83,000 in
international travel.

Other Income (Expenses)

Higher interest income and minority interest in net loss of Harley Street
partially offset by higher interest expense caused the increase in other income
to $77,000 during the six months ended October 31, 1995 from $67,000 in other
income during the six months ended October 31, 1995.

FISCAL YEAR ENDED APRIL 30, 1996 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1995

During the year ended April 30, 1996, the Company expanded its relationship
with Columbia Healthcare in the U.S. through the opening of five centers at
Columbia Healthcare facilities, extended operation of its MobilExcimer system
into a European market, opened two European centers, including a Company owned
center with an improved excimer laser system, began performing commercial PRK
procedures in the U.S. market, completed three acquisitions (one mobile laser
service related, one expanding European operations and one expanding U.S.
marketing capabilities) and closed five international fixed-site centers which
are now served by the MobilExcimer.

Revenues. Total revenues increased to $3,918,000 for the year ended April
30, 1996 from $3,311,000 for the year ended April 30, 1995, or an increase of
18%.

Revenues for the LaserVision Centers division increased slightly to
$2,484,000 for the year ended April 30, 1996 from $2,478,000 for the year ended
April 30, 1995. The slight increase in revenues is attributable to a $273,000
increase in U.S. revenues and a $22,000 increase in Canadian revenues, offset by
a

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<PAGE> 22

$289,000 decrease in European revenues. The increase in U.S. revenues for the
LaserVision Centers division is attributable primarily to the increased number
of centers in operation and procedures performed in the U.S. The decreased
European revenues primarily related to a decreased number of fixed-site centers
and per procedure price fluctuations in Europe.

Revenues for the MarketVision division increased to $1,434,000 for the year
ended April 30, 1996 from $833,000 for the year ended April 30, 1995, or an
increase of 72%. The $601,000 increase in MarketVision division revenues
reflects the acquisition of MedSource in February 1996 and increased fees and
commissions earned through the division's marketing and advertising activities.

During the year ended April 30, 1996, revenues from the LaserVision Centers
division represented 63% of total revenues versus 75% for the year ended April
30, 1995. Revenues from the MarketVision division represented 37% of total
revenues during the year ended April 30, 1996 versus 25% for the year ended
April 30, 1995.

Costs of Revenues/Gross Profit (Loss). Cost of revenues increased to
$4,240,000 for the year ended April 30, 1996 from $3,375,000 for the year ended
April 30, 1995. This increase was primarily due to an increase in depreciation
to $1,973,000 from $1,589,000 in these respective periods due to the increased
inventory of lasers and other medical equipment.

Excluding laser and medical equipment depreciation, all other costs of
revenues increased by $481,000. This increase, when combined with the revenue
increase, resulted in these other costs of revenues increasing from 54% of total
revenues for the year ended April 30, 1995 to 58% of total revenues for the year
ended April 30, 1996. This $481,000 increase was primarily due to a $275,000
increase in MarketVision costs associated with the increase in MarketVision
revenues and a $206,000 increase in total costs of excimer laser maintenance,
gasses and optics on higher volumes of PRK procedures and new centers.

Total gross profit decreased to a loss of $322,000 for the year ended April
30, 1996 from a loss of $64,000 for the year ended April 30, 1995. The variable
gross profit, excluding depreciation, increased to $1,651,000 from $1,525,000,
primarily because MarketVision costs of revenue are variable costs of revenue.

Operating Expenses. General and administrative expenses increased to
$2,356,000 for the year ended April 30, 1996 from $1,002,000 for the year ended
April 30, 1995 due to a $429,000 increase in legal and professional fees, an
$85,000 increase in the provision for bad debt, a $226,000 increase in the costs
associated with developing the U.S. market and $107,000 of expenses associated
with opening a new center in Europe, a $68,000 increase in insurance expenses
and an increase of $439,000 in other general and administrative expenses.

The increase in salaries and related expenses to $2,329,000 for the year
ended April 30, 1996 from $1,285,000 for the year ended April 30, 1995 was due
to an increase of $770,000 attributable to an increased number of employees,
salary adjustments and the related payroll taxes and fringe benefits, and an
increase of $274,000 due to the executive incentive compensation program.

Depreciation and amortization decreased by $53,000 for the year ended April
30, 1996 primarily due to the elimination of the amortization of previously
deferred franchise costs of $175,000, partially offset by increased amortization
of goodwill related to acquisitions of $89,000 and a net increase in
depreciation of $33,000.

The increase in selling and marketing expenses was due to an increase of
$85,000 due to the promotion of the MobilExcimer, a $36,000 increase in European
advertising program costs and $221,000 in initial development costs for the U.S.
market.

The $3,063,000 fixed asset impairment provision was a non-cash expense, as
previously discussed.

Loss from Operations. The LaserVision Centers division's loss from
operations increased to $9,357,000 for the year ended April 30, 1996 from
$3,242,000 for the year ended April 30, 1995, primarily due to the provision for
fixed asset impairment as discussed previously, increased costs related to
commencing U.S. operations, a $311,000 increase in total depreciation and
amortization expenses, a $356,000 increase in

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variable costs of revenue and a $5,358,000 increase in operating costs. The
MarketVision division's income from operations increased to $141,000 for the
year ended April 30, 1996 from $34,000 for the year ended April 30, 1995
primarily as a result of the gross profit related to increased volume.

The domestic loss from operations increased to $3,695,000 for the year
ended April 30, 1996 from $1,707,000 for the year ended April 30, 1995 due to a
$425,000 increase in professional and legal fees, a $216,000 increase in the
loss from U.S. laser operations, a $121,000 increase in travel costs, a $581,000
increase in payroll and a $645,000 increase in other corporate overhead.

The Canadian loss from operations increased to $1,350,000 for the year
ended April 30, 1996 from $409,000 for the year ended April 30, 1995 primarily
due to the write-down of lasers and related medical equipment of $637,000 and an
increase in the loss on operations of the mobile laser of $195,000.

The European loss from operations increased to $4,312,000 for the year
ended April 30, 1996 from $1,126,000 for the year ended April 30, 1995 due to
the write-down of lasers and related medical equipment of $2,426,000, a $529,000
decrease in gross profit due to declining revenues and increased depreciation
and a $231,000 increase in overhead expenses.

Other Income (Expense). Other income (expense) increased to a net income
of $413,000 during the year ended April 30, 1996 from a net expense of $89,000
during the year ended April 30, 1995. This favorable variance was due to an
increase of $400,000 in interest income, a $76,000 increase in the minority
interest in the net loss of a subsidiary and a decrease of $26,000 in interest
expense.

FISCAL YEAR ENDED APRIL 30, 1995 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1994

The Company's operating results for the years ended April 30, 1995 and
April 30, 1994 are not readily comparable due to significant expansion. The
LaserVision Centers division's operating results for the year ended April 30,
1995 included the operation of a center in Montreal for twelve months, 13
European installations for a full year and three European centers for an average
of nine months. The LaserVision Centers division operating results for the year
ended April 30, 1994 included the operation of a center in Montreal for 9.5
months, six European installations for an average of nine months and eight
European installations for one month. Both fiscal years included the operations
of the St. Catharines and Vancouver centers for a full year. Two international
centers which were open throughout fiscal 1994 were closed during most of fiscal
1995. During fiscal 1995, three European centers were acquired and testing of a
larger MobilExcimer trailer was successfully begun in Canada with Calumet Coach
Company.

Revenues. Total revenues increased to $3,311,000 for the year ended April
30, 1995 from $2,106,000 for the year ended April 30, 1994, or an increase of
57%.

Revenues for the LaserVision Centers division increased to $2,478,000 for
the year ended April 30, 1995 from $1,517,000 for the year ended April 30, 1994,
or an increase of 63%. The $961,000 increase in revenues is attributable
primarily to a $113,000 increase in Canadian revenues and an $856,000 increase
in European revenues. The increase in Canadian revenues for the LaserVision
Centers division is attributable primarily to an increased number of procedures
at both the Company's Vancouver and Montreal centers. The increased European
revenues related to a full year of revenue from thirteen centers acquired during
the year ended April 30, 1994 and the three centers opened during the year ended
April 30, 1995. The costs of relocation of one European center partially offset
this increase.

Revenues for the MarketVision division increased to $833,000 for the year
ended April 30, 1995 from $589,000 for the year ended April 30, 1994, or an
increase of 41%. The $244,000 increase reflected the addition of several
domestic ophthalmic advertising clients which had implemented cataract and/or
refractive vision correction marketing awareness programs.

During the year ended April 30, 1995, revenues from the LaserVision Centers
division represented 75% of total revenues versus 72% for the year ended April
30, 1994. Revenues from the MarketVision division represented 25% of total
revenues during the year ended April 30, 1995 versus 28% for the year ended
April 30, 1994.

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<PAGE> 24

Cost of Revenues/Gross Profit. Cost of revenues increased to $3,375,000
for the year ended April 30, 1995 from $1,768,000 for the year ended April 30,
1994. This increase included a $620,000 increase in excimer laser and medical
equipment depreciation to $1,589,000 during the year ended April 30, 1995 from
$969,000 during the year ended April 30, 1994. This non-cash expense reflects
the increase in the number of European excimer lasers operated for the full year
ended April 30, 1995 and the purchase of additional medical equipment.

Excluding laser and medical equipment depreciation, all other costs of
revenues increased by $987,000. This increase, when combined with the revenue
increase, resulted in these other costs of revenues increasing from 38% of total
revenues for the year ended April 30, 1994 to 54% of total revenues for the year
ended April 30, 1995. This $987,000 increase was primarily due to a $221,000
increase in medical professional fees for Company-owned laser centers, a
$542,000 increase in total costs of excimer laser maintenance, gasses and optics
on higher volumes of PRK procedures and new centers and a $224,000 increase in
MarketVision costs associated with the $244,000 increase in MarketVision
revenues.

Total gross profit decreased to a loss of $64,000 for the year ended April
30, 1995 from $338,000 for the year ended April 30, 1994. The variable gross
profit, excluding depreciation and a $175,000 non-cash provision for loss
relating to an advance of funds in 1991 to an Italian company, increased to
$1,525,000 from $1,307,000, primarily because medical professional fees and
MarketVision costs of revenue are variable costs of revenue.

Operating Expenses. Operating expenses increased to $3,144,000 for the
year ended April 30, 1995 from $2,238,000 for the year ended April 30, 1994.
General and administrative expenses increased by $307,000 due to a $156,000
increase in European and U.S. professional fees (primarily for new centers and
tradename protection), a $31,000 increase in insurance expenses, a $89,000
increase associated with laser relocation costs and a $31,000 increase in travel
costs primarily associated with the Columbia Healthcare agreement.

The increase in salaries and related expenses to $1,002,000 for the year
ended April 30, 1995 from $695,000 for the year ended April 30, 1994 was
primarily due to an increase of $175,000 as a result of the hiring of new
employees in St. Louis, Canada and England, salary increases and higher
commissions on increased MarketVision revenues and a $208,000 increase due to
the executive incentive compensation program tied to the Company's stock price.

Depreciation and amortization increased by $33,000 due to the amortization
of previously deferred franchise costs of $159,000 and the increased
amortization of certain trademark costs, depreciation of new mobile equipment
and depreciation of European furniture and leasehold improvements totalling
$13,000, which were partially offset by a $139,000 decrease in depreciation of
the clinical laser.

Selling and marketing expenses increased by $183,000 primarily due to a
$100,000 increase in radio and newspaper advertising expenses for the European
centers, a $53,000 increase in European travel costs and $39,000 associated with
the initial promotion of the new MobilExcimer system. Lower radio and newspaper
advertising in western Canada partially offset these increases.

Loss from Operations. The LaserVision Centers division's loss from
operations increased to $3,242,000 for the year ended April 30, 1995 from
$1,870,000 for the year ended April 30, 1994, primarily due to a $655,000
increase in total depreciation and amortization expenses, a $398,000 increase in
variable costs of revenue and a $1,280,000 increase in operating costs which
were partially offset by a $961,000 increase in revenue. The MarketVision
division generated a $34,000 operating profit for the year ended April 30, 1995
versus a $30,000 operating loss for the year ended April 30, 1994, primarily due
to lower bad debt expenses and the gross profit on increased revenues.

The domestic loss from operations increased to $1,707,000 for the year
ended April 30, 1995 from $850,000 for the year ended April 30, 1994, primarily
due to a $264,000 increase in salaries, a $159,000 increase in franchise
amortization and a $434,000 increase in other corporate office expenses.

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The Canadian loss from operations decreased by $201,000 to $409,000 for the
year ended April 30, 1995 from $610,000 for the year ended April 30, 1994. This
improvement was primarily due to increased gross profit of $159,000.

The European loss from operations increased to $1,126,000 for the year
ended April 30, 1995 from $410,000 for the year ended April 30, 1994 due to a
$221,000 decrease in gross profit, a $145,000 increase in payroll, a $175,000
increase in professional fees, and a $175,000 net increase in other expenses.

Other Income (Expense). Other expense decreased to $89,000 for the year
ended April 30, 1995 from $310,000 for the year ended April 30, 1994. Interest
expense increased to $242,000 for the year ended April 30, 1995 from $156,000
for the year ended April 30, 1994. This increase was primarily due to a $196,000
increase in imputed (non-cash) interest expense on European laser purchases and
was partially offset by a $110,000 decrease in European and other interest
expense. The $116,000 income from minority interest in net loss of subsidiary
for the year ended April 30, 1995 relates to one of the Company's new European
operations. The $175,000 non-cash provision for loss on advance for the year
ended April 30, 1994 relates to an advance of funds in 1991 to an Italian
company.

INFLATION

The Company's operations have not been, nor are they expected to be,
materially affected by inflation.

LIQUIDITY AND CAPITAL RESOURCES

Since the completion of its initial public offering in April 1991, the
Company's primary sources of liquidity have consisted of financing from the sale
of Common Stock and Convertible Preferred Stock, revenues from marketing and
laser access services provided to ophthalmic physicians and leases. At October
31, 1996, the Company had $6,127,000 of cash and cash equivalents compared with
$12,672,000 at April 30, 1996. At October 31, 1996, the Company had working
capital of $4,052,000 compared with working capital of $10,002,000 at April 30,
1996. The ratio of current assets to current liabilities at October 31, 1996 was
2.0 to one, compared to 2.9 to one at April 30, 1996. At April 30, 1996, the
Company had $12,672,000 of cash and cash equivalents compared with $2,126,000 at
April 30, 1995. At April 30, 1996, the Company had working capital of $8,802,000
compared with a working capital deficit of $1,301,000 at April 30, 1995. The
ratio of current assets to current liabilities at April 30, 1996 was 2.71 to
one, compared to 0.69 to one at April 30, 1995.

Cash Flows from Operating Activities. Net cash used for operating
activities was $3,009,000 for the six months ended October 31, 1996 compared to
$1,430,000 for the six months ended October 31, 1995. The cash flows used for
operating activities during the six months ended October 31, 1996 primarily
represent the net loss incurred in this period less depreciation and
amortization and an increase in accounts payable and accrued liabilities
partially offset by increases in accounts receivable and prepaid expenses and
other current assets. Net cash used for operating activities was $2,879,000 for
fiscal 1996 and was $1,017,000 and $899,000 for fiscal 1995 and 1994,
respectively. The cash flows used for operating activities during fiscal 1996
primarily represent the net loss incurred in this period less depreciation,
amortization and fixed asset impairment and an accrual for one laser. The cash
flows used for operating activities in fiscal 1995 and 1994 primarily represent
the net loss incurred in these periods less depreciation and amortization.

Cash Flows from Investing Activities. Net cash used for investing
activities was $4,060,000 and $1,288,000 during the six months ended October 31,
1996 and 1995, respectively. Cash used for investing during the six months ended
October 31, 1996 was used to acquire equipment for the expanding U.S. market and
to purchase the minority interest in the Arnott Laser Vision Centre. Net cash
used for investing activities was $7,847,000 during fiscal 1996 and $1,227,000
and $2,468,000 for fiscal 1995 and 1994, respectively, and was primarily due to
the acquisition of equipment, equipment deposits and acquisitions. The increase
in acquisitions of equipment in fiscal 1996 is primarily due to expansion into
the U.S. market and continued growth in the European market.

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<PAGE> 26

Cash Flows from Financing Activities. Net cash provided by financing
activities was $524,000 and $14,536,000 during the six months ended October 31,
1996 and 1995, respectively. Loan proceeds, offset by lease payments, was the
primary source of cash provided by financing during the six months ended October
31, 1996.

During the six months ended October 31, 1996, ten lasers held for sale as
of April 30, 1996 were sold for their net book value of $1.2 million and four
lasers (3 new, 1 used) were purchased for international use for a total of $1.7
million.

Eight lasers were purchased for use in the United States during the six
months ended October 31, 1996. Equipment deposits were utilized for a portion of
the laser purchases. In addition, during the quarter ended October 31, 1996
financing was obtained for eight lasers originally purchased with cash. The four
and one-half year loan restricts $1,650,000 of the cash proceeds until certain
payment and financial performance criteria are met. The portion of restricted
cash which will become unrestricted within a year is classified as a current
asset. The Company assumed the lease obligations for up to one excimer laser in
August 1996.

During the six months ended October 31, 1996, all of the shares of
restricted convertible preferred stock were converted to 2,349,991 shares of
restricted common stock in accordance with the terms of the purchase agreement.

Net cash provided by financing activities during fiscal 1996 was
$21,272,000 and was primarily due to proceeds received from a private placement
of the Company's Convertible Preferred Stock with a provision for mandatory
redemption in 2005 and the exercise of warrants. Net cash provided by financing
activities for fiscal 1995 was $3,664,000 and was primarily due to proceeds from
the exercise of warrants and private stock offerings offset by the repayment of
certain notes payable and capitalized lease obligations. For fiscal 1994, net
cash provided by financing activities was $3,286,000 and was primarily due to
proceeds received from the exercise of warrants and private stock offerings.

The Company anticipates that its current cash and cash equivalents will be
sufficient to fund operating expenses through July 1997, including any capital
expenditures not financed by leasing.

The Company anticipates that it will require additional financing to fund
the Company's operations, including its proposed expansion of its mobile laser
access capability, during the next 24 months. The Company's future liquidity and
capital requirements will depend on numerous factors, many of which are outside
the control of the Company. Future financings may result in the issuance of
senior securities or in dilution to the holders of the Common Stock. Any such
financing, if required, may not be available on satisfactory terms or at all.

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BUSINESS

The Company is the world's largest provider of access to excimer lasers and
related services for the treatment of refractive vision disorders and has 40
lasers currently available for use in the United States, Canada and Europe. The
Company is also the world's only operator of mobile excimer laser systems. The
excimer laser can be used to treat refractive vision disorders such as
nearsightedness and astigmatism to eliminate or reduce the need for corrective
lenses. LaserVision Centers operate on a shared-access model, giving individual
or group ophthalmic practices use of excimer laser technology without investment
risk or maintenance requirements, thereby allowing optimal use of the excimer
laser equipment. In addition, the Company provides a broad range of professional
services, including physician and staff training, technical support services and
maintenance and, through its MarketVision and MedSource divisions, advertising
and marketing programs and services.

The Company has operated excimer laser centers in Canada and Europe since
1991 and 1993, respectively. Following the recent approval of the excimer laser
technology by the FDA to treat certain refractive vision disorders, the Company
began providing access to excimer lasers in fixed-site centers and to develop
means for providing access to its excimer lasers at multiple locations. The
Company currently owns 23 excimer lasers approved for use in the United States,
and provides access at 20 domestic centers. The Company currently provides
excimer lasers and related services to fixed-site centers in the United States,
Canada, the United Kingdom, Finland, Greece, Sweden and Ireland and operates the
MobilExcimer in Canada and the United Kingdom. In the United States, fixed-site
laser centers are operated in conjunction with Columbia Healthcare or by the
Company independently or through joint ventures.

In addition to operating fixed-site centers, the Company has developed a
proprietary MobilExcimer system, which is a self-contained mobile refractive
laser surgery center duplicating all of the equipment and services typically
found in a fixed-site location. The Company has entered into a mutually
exclusive agreement with Calumet Coach Company, the world's leading manufacturer
of mobile medical systems, to build the MobilExcimer. This proprietary system
gives the Company flexibility which the Company believes is not currently
available to its competitors and is intended to help the Company achieve broader
penetration of both domestic and international markets. The Company plans to use
the MobilExcimer to provide laser access and related services to communities
where the Company's potential patient base is insufficient to sustain a fixed-
site center, thereby enhancing the Company's ability to expand quickly into
multiple markets. In November 1996, the Company received PMA approval for use of
the excimer laser for treatment of low to moderate myopia, and immediately filed
a supplement with the FDA for approval at the MobilExcimer. In addition to the
MobilExcimer, the Company has also developed a strategy of providing access to
multiple sites by transporting fixed-site lasers between sites to meet demand.

As of October 31, 1996 the Company provided access to 35 lasers -- 13 in
Europe, 2 in Canada and 20 in the United States. The Company also has two mobile
systems in operation, one in Europe and one in Canada. The Company continues to
explore opportunities to expand both its domestic and international operations.

VISION DISORDERS

The human eye is approximately 25 millimeters in diameter and functions
much like a camera, incorporating a lens system which focuses light (the cornea
and the lens), a variable aperture system which regulates the amount of light
passing through the eye (the iris) and film which records the image (the
retina). Light from a distant object passes through the cornea, iris, and lens,
which focus the light on the retina. The

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retina contains light sensitive receptors which transmit the image through the
optic nerve to the brain. Seventy-five percent of the focusing power of the eye
is provided by the curvature of the corneal surface.

Two major categories of vision disorders are refractive and pathological
disorders. Refractive disorders result from an inability of the optic system to
properly focus images on the retina. Nearsightedness (myopia), farsightedness
(hyperopia) and astigmatism are the most common refractive disorders. The amount
of refraction is dependent on the shape (specifically, the curvature) of the
cornea. If the curvature is not correct, the cornea cannot properly focus the
light passing through it onto the retina, and the individual will perceive a
blurred image.

Currently eyeglasses or contact lenses are most often used to treat
refractive disorders. They may also be treated by several surgical techniques
such as radial keratotomy ("RK"). RK is a surgical procedure used to correct
myopia in which an ophthalmologist uses a scalpel to make a series of cuts
approximately 400 to 450 microns deep in a radial configuration around the
periphery of the cornea. The healing of the incisions causes a flattening of the
cornea and corrects small to moderate amounts of myopia. Other techniques in use
are keratomileusis, which involves freezing the cornea and reshaping it, and
automated lamellar keratoplasty ("ALK"), which involves using a microkeratone to
remove microscopic amounts of corneal tissue.

Another major category of vision problems is pathological disorders.
Traumatic, congenital and pathological sources cause defects in the cornea which
result in restricted vision. A typical medical alternative for treatment of
these conditions is a corneal transplant which involves major surgery and is
dependent on the availability of a suitable donor cornea and on the individual
surgeon's skill and experience. Corneal transplants frequently produce irregular
corneal surfaces which compromise the patient's vision. Another major concern
regarding corneal transplantation involves the possibility of transmission of
viruses that could infect the patient.

An industry source estimates that 145 million people in the United States
currently use eyeglasses and/or contact lenses to correct refractive vision
disorders. Of these individuals, an estimated 66 million suffer from
nearsightedness, with approximately 60% of nearsighted persons estimated to have
vision disorders within the criteria currently approved by the FDA for treatment
with excimer lasers. The Company estimates that approximately one-fourth of all
sufferers of nearsightedness also experience astigmatism and an additional 23
million people in the United States suffer from astigmatism but do not
experience nearsightedness. According to industry sources, consumers in the
United States spent approximately $13 billion on eyeglasses, contact lenses and
other corrective lenses in 1994. The Company believes that excimer laser surgery
will make it possible for many of these people to eliminate or reduce their
reliance on corrective lenses. In particular, the Company believes that many of
the approximately 26 million contact lenses users in the United States will be
particularly receptive to laser surgery as they have already chosen to use an
alternative to eyeglasses for vision correction.

Industry sources estimate that 200,000 RK procedures were performed in the
United States in 1994. Because RK is a manual procedure and is not performed
with a computer-controlled device, it is highly dependent on the surgical skill
of the ophthalmologist performing the procedure. In addition, because RK
involves incisions into the corneal tissue, it weakens the structure of the
cornea which can have adverse consequences as patients age. Furthermore, RK has
never undergone a controlled clinical study under an FDA protocol because no
medical devices, other than a scalpel, are used in the procedure. The Company
believes, based on currently available follow-up data and market trends in
countries where laser surgery is commercially available, that more people will
seek vision correction through laser surgery than through RK because PRK
involves reduced surgical risk, does not weaken the corneal tissue, is less
invasive and is less dependent on the ophthalmologist's skill.

EXCIMER LASER SURGERY

An excimer laser emits energy in an extremely short pulse lasting only
several billionths of a second. High energy ultraviolet photons produced by the
excimer laser create a "non-thermal" process known as ablation which does not
heat adjacent tissue. The excimer laser can be used to treat refractive vision
disorders such as nearsightedness and astigmatism in the PRK procedure. PRK
involves using the excimer laser to resculpt the

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cornea. This adjusts the amount of refraction which in turn eliminates or
reduces the need for corrective lenses. The excimer laser can also be used to
treat a number of pathological superficial corneal disorders in a procedure
called PTK. Excimer lasers manufactured by VISX and Summit have been approved
for treatment of low to moderate myopia, and VISX is currently in the process of
pursuing FDA approval for use of its laser for the treatment of astigmatism.
Excimer lasers can also be used to perform a procedure known as LASIK in which
an ophthalmologist uses a microkeratone to open a flap on the surface of the
cornea. Laser energy is then used to ablate corneal cells on the exposed surface
to improve the person's visual acuity, and the flap is then folded back into
place. LASIK may be more predictable in treating high levels of myopia, but has
not been specifically approved in the United States by the FDA.

Excimer lasers are designed to reshape or sculpt the cornea to correct
common visual problems such as nearsightedness and astigmatism by changing the
curvature of the cornea, and therefore, the focusing power of the eye. The
laser's functions are controlled by a computer based work station. The physician
enters the patient data into the system's computer, which makes the calculations
necessary for a precise corneal correction. After a verification procedure, the
physician cleans and aligns the eye, initiates the treatment and visually
monitors the eye during surgery. The procedure lasts approximately 15 or 20
minutes and generally requires less than 40 seconds of laser time. The natural
protective cover of the cornea, called the epithelium, typically regrows in 24
to 72 hours to recreate a smooth optical surface over the laser modified
curvature of the cornea.

Some potential medical risks have been identified in connection with the
use of PRK surgery and there may be other risks which will not be known until
the procedure has been widely used and monitored. Potential complications and
side effects include: post-operative discomfort; corneal haze during healing (an
increase in the light scattering properties of the cornea); glare/halos
(undesirable visual sensations produced by bright lights); decreases in contrast
sensitivity; temporary increases in intraocular pressure in reaction to
procedure medication; modest fluctuations in refractive capabilities during
healing; modest decreases in best corrected vision (i.e., with corrective
lenses); unintended over-or under-corrections; regression of effect; disorders
of corneal healing; corneal scars; corneal ulcers and induced astigmatism.

BUSINESS STRATEGY

The Company's goal is to retain its leadership position as the world's
largest provider of access to excimer lasers and related services for ophthalmic
surgery. In order to achieve this goal, the Company will expand its
relationships with eyecare practitioners through its shared-access model, which
allows individual or group ophthalmic practices use of excimer laser technology
without investment risk or maintenance requirements. Shared access also allows
optimal use of the excimer laser systems, thereby maximizing Company revenues.

THE COMPANY'S GROWTH STRATEGY COMBINES THE FOLLOWING IMPORTANT ELEMENTS:

-- Increase Market Penetration. The Company intends to increase its
market penetration by using a combination of fixed-site laser centers
operated by the Company or as joint ventures, including through its
agreement with the Ambulatory Surgery Division of Columbia Healthcare,
expanded use of the MobilExcimer system and other methods of providing
access to its excimer lasers at multiple sites, and through its RMSO
program.

-- Promote Alliances With Physicians. A key element of the Company's
shared-access model is the promotion of alliances with physicians within a
community to maximize laser usage and resulting revenues. Through these
alliances, the Company attracts ophthalmologists who are not able or
willing to purchase, finance and maintain a laser. The Company continues to
work with the physicians after a center is opened by providing technical
support and training as well as sales and marketing expertise. By providing
these services, the Company goes beyond providing laser access and actively
works with the physicians to increase the number of consumer inquiries and
to turn such inquiries into procedures performed. The Company's RMSO
program is an integral part of this strategy.

-- Grow Through Acquisitions. The Company seeks to expand its
presence worldwide through complementary acquisitions of other laser
operators, including direct competitors, as well as acquisitions

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of businesses that provide related equipment or services. The Company
expects to take advantage of ongoing market consolidation in Europe through
strategic acquisitions of competitors. In addition, the Company believes
that the emerging market for the Company's services in the United States
will initially be fragmented, as it was in Europe, and may subsequently
offer consolidation opportunities.

-- Expand Strategic Relationships. The Company intends to solidify
and expand its existing strategic alliances with health care providers,
equipment manufacturers, major employers, managed care providers and other
third party payors in order to provide the Company access to a larger
patient base.

OPERATION OF LASER CENTERS

The Company provides access to excimer lasers and related services for
ophthalmological surgery, collecting a fee for each procedure performed by
independent ophthalmologists. Currently, patients are charged approximately
$1,500 to $2,200 per eye for the procedure. The Company's fee ranges from
approximately $400 to $1,000 per procedure, depending on the services provided
by the Company. The Company provides access to excimer lasers and related
services through fixed-site laser centers and its MobilExcimer system. The
Company currently provides excimer lasers and related services to fixed-site
centers in the United States, Canada, the United Kingdom, Finland, Greece,
Sweden and Ireland and operates the MobilExcimer in Canada and the United
Kingdom. In the United States, fixed-site laser centers are operated in
conjunction with Columbia Healthcare or by the Company independently or through
joint ventures.

COLUMBIA HEALTHCARE

The majority of the Company's currently operating U.S. laser centers
operate in selected Columbia Healthcare ambulatory surgery centers. The
Company's agreement with Columbia Healthcare provides the Company with the
exclusive right to provide excimer laser equipment and related services
(marketing, technical support and service) to Columbia Healthcare ambulatory
surgery centers. The Company and Columbia Healthcare jointly determine which
surgery centers and physician users will be served with excimer lasers
(fixed-site or mobile) through a comprehensive business planning process. This
process takes into account such factors as market demographics, the number of
potential physician users, projected case volume and competition.

Under the agreement with Columbia Healthcare, the Company provides either
the VISX or Summit excimer laser, as specified by the physician users. In some
cases, the Company may also provide other equipment such as a corneal
topographer. In addition, the Company provides physician and staff training,
technical support services and maintenance of the laser, as well as marketing
support. Marketing support includes advertising and promotional materials for
the center as well as for physician users who elect to participate in a
center-level marketing plan. Columbia Healthcare provides space in its facility
to accommodate the laser in an appropriate setting, staff to handle inquiries,
surgical and support staff and surgical disposables. Typically, the facility and
equipment portions of the surgical fee are collected by the Columbia Healthcare
center on the date of treatment and the Company is paid monthly for treatments
performed during the previous month. The Company and Columbia Healthcare each
receive a fixed fee for the equipment and services provided, with the Company
receiving a net fee of $450 to $850 per procedure depending on the services
provided.

Currently, the Company provides lasers and related services to 17 Columbia
Healthcare facilities.

MOBILEXCIMER

The MobilExcimer is a self-contained mobile refractive laser surgery
center, containing a laser and other equipment identical to that typically found
in a fixed-site location. The mobile unit is designed to offer excimer laser
access to ophthalmologists practicing in communities where the Company's
potential patient base is insufficient to support a fixed-site laser surgery
facility. Depending on such factors as case volume and distances between sites,
a MobilExcimer unit can serve up to five sites per week. The Company intends to
implement logistical and routing systems to coordinate use of the MobilExcimer
units in a manner that will

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maximize utilization of capacity and service to patients. Because the Company
will provide more services and convenient access and location, it is anticipated
that procedures performed with the MobilExcimer will typically generate higher
fees per procedure than those performed at fixed-site LaserVision Centers.
Currently, these fees are expected to range from approximately $800 to $1,000
per procedure.

The Company has entered into a mutually exclusive agreement with Calumet,
the world's leading manufacturer of mobile medical systems, which provides that
Calumet will produce and the Company will purchase a minimum of four
MobilExcimers units per year (up to an aggregate of 13) from the date of FDA
approval of the MobilExcimer through mid-1999. So long as minimum orders are
maintained, Calumet has agreed not to produce mobile laser surgery vehicles for
entities other than the Company. This agreement provides the Company with a
reliable source of supply from Calumet, which currently manufactures more than
60 percent of the mobile medical systems being used in the United States.

The mobile units are larger than many fixed laser surgery sites, with a
movable exterior wall allowing the MobilExcimer to expand in size upon reaching
its destination. The unit has electrical systems that are adaptable for use in
the U.S., Canada and Europe. The MobilExcimer can operate with port electrical
hookups or an internal generator, either of which are supported by an
uninterruptible power supply. The units utilize the Company's patented
MobilExcimer mounting system which allows the delicate internal systems of the
excimer laser to withstand the rigors associated with mobile operation.

The first PRK procedure in a MobilExcimer was performed in September 1994
by a Canadian ophthalmologist under the supervision of Dr. Stephen Trokel, the
developer of the PRK procedure using the excimer laser. The Company currently
operates two mobile units, one serving more than ten sites in Europe and the
other serving five sites in Canada. The MobilExcimer system has not been
approved for use in the United States by the FDA. In June 1996, the Company
submitted a PMA application with the FDA for the use of VISX's excimer laser
system for treatment of low to moderate myopia, which is the first step in
seeking approval for the MobilExcimer. Pursuant to an agreement with VISX
entered into in May 1996, this PMA application incorporates the information
contained in the PMA applications filed with and approved by the FDA for use of
VISX excimer lasers for PRK and PTK procedures. If its PMA application is
approved, the Company intends to submit a supplement to this PMA application to
obtain FDA approval for use of the excimer laser on the MobilExcimer. It is
uncertain when, if ever, the FDA will approve excimer lasers for mobile use. See
"Risk Factors -- Uncertainty of FDA Approval of MobilExcimer."

The Company believes that the MobilExcimer will provide logistical
flexibility in the developing market for PRK. The MobilExcimer will allow the
Company to service locations that will not currently support the installation of
a fixed-site laser. Over time, the volumes at such locations may grow to be
sufficient to support a fixed-site center. Conversely, the volumes at an
existing fixed-site center may fall. Due to the flexibility of its MobilExcimer,
the Company will be in a position to move a laser from a fixed-site center to a
more attractive location while continuing service to the existing location with
the MobilExcimer. The Company is also developing other methods of transporting
lasers to multiple locations to complement the MobilExcimer.

OTHER LASER CENTERS

U.S. Centers. The Company currently has two U.S. centers that are not
associated with Columbia Healthcare: the Company's LaserVision Center in St.
Louis, which is wholly owned and operated by the Company, and the center at the
Phillips Eye Institute in Minneapolis, which is owned and operated by a joint
venture between the Company and the facility provider. The services the Company
provides to these centers are virtually identical to those provided to centers
located at Columbia Healthcare facilities. Sites are selected based on a number
of criteria, such as the number of physicians who indicate a substantial
interest in using the center, the historical surgical volumes of these
physicians, demographic factors, the results of market research and local media
costs. The Company receives a net fee of $500 to $940 per PRK procedure
performed at these centers, depending on the services provided by the Company.

Canadian Center. The Company currently owns and operates a LaserVision
Center located in Montreal, Quebec. The Company complements the Montreal site by
employing its Canadian MobilExcimer unit to serve five additional locations in
Canada which the Company believes are not suitable for the

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investment required for a fixed site. The Company receives a net fee of $500 to
$950 (U.S.) per procedure performed at Canadian centers, depending on the
services provided by the Company.

European Centers. The Company provides access to 12 fixed-site excimer
lasers in Europe. The Company owns and directly operates three centers and one
MobilExcimer. The remaining lasers and related services are provided to other
entities pursuant to leases and associated contracts. The Company has continued
to consolidate operations in Europe and has redeployed the lasers from several
fixed-site centers which were not cost effective to operate as fixed-site
centers. The MobilExcimer system operating in Europe has enabled the Company to
continue to serve the markets formerly served by the centers which were closed,
while simultaneously reducing the fixed operating costs attributable to these
markets. The Company has also recently acquired two fixed-site centers formerly
operated by New Image Laser Centers, along with a database with the names of
17,000 potential patients for the two new centers. The Company receives a net
fee of $400 to $950 (U.S.) per European laser surgery procedure, depending on
the services provided by the Company.

RMSO

The Company has developed its RMSO program to increase its alliances with
ophthalmologists with active refractive practices, involving both RK and PRK, as
a means of increasing demand for its excimer lasers. The RMSO is a management
services company through which the Company will purchase the refractive surgery
assets of the practice of the ophthalmologist for cash.

At the same time, the Company will enter into a management services
agreement under which the Company will provide management and marketing services
to the ophthalmologist's refractive practice in exchange for a percentage of the
revenues related to the practice. The Company will also provide access to its
excimer lasers and receive a fee for each procedure performed. In exchange, the
ophthalmologist will receive Company stock, options to purchase Company stock
and cash equal to an agreed upon multiple of the practice's revenue stream.

The Company currently has only one RMSO agreement in place with Lindstrom
Samuelson & Harlen Ophthalmology Associates, P.A. (Dr. Lindstrom is a member of
the Board of Directors and the medical advisory board.) Although the Company is
negotiating with a number of other ophthalmologists, there can be no assurance
any additional RMSO agreements will be consummated.

SUPPLIERS

The current cost of an excimer laser ranges from $475,000 to $525,000, plus
sales tax, as well as $250 per U.S. PRK procedure to be paid to a partnership
between VISX and Summit which owns certain patent rights with respect to the
excimer laser. In addition, the Company will be required to pay an annual
royalty fee of approximately $44,000 to VISX with respect to a laser operated in
Canada. The purchase price includes a one or two year warranty on all parts
except the optics (mirror and glass components) which carry a 30-day warranty.
Annual maintenance and service fees are paid by the Company and are estimated at
$40,000 to $60,000 per year, but will vary with usage.

The Company currently has an available base of 40 excimer lasers worldwide,
comprised of 34 VISX and 6 Summit lasers. The Company has the flexibility to
utilize either manufacturer, depending on the preference of physician users at
each center.

MARKETVISION AND MEDSOURCE

MarketVision and MedSource derive income from several sources. Revenue is
realized from commissions earned from placing print and broadcasting media,
retainer fees for various services and mark-ups on

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direct mail and related collateral materials. While both entities enjoy their
own clientele, both are involved in administering the marketing of the Company's
LaserVision Centers.

MARKETING

The degree to which PRK, PTK and the Company's LaserVision Centers can
penetrate the potential market for vision correction will depend on a variety of
factors including, but not limited to, medical and public acceptance of these
procedures and alternative technologies. None of these factors is under the
immediate control of the Company nor is any predictable at this time.

The Company's regional managers identify potential physician users through
professional meetings and direct marketing efforts, including printed materials
and personal contact. The Company directs its patient marketing efforts at three
potential patient sources: the ophthalmologist's patient base, other eyecare and
medical professionals' patient base and consumers as a whole.

-- Ophthalmologist's Patient Base. The Company works with
ophthalmologists who have indicated an interest in using the center to
communicate with existing patients. Strategies include direct mailings with
information related to PRK, collateral and point of purchase materials to
reach patients during office visits and video tape presentations which can
be used to educate patients about PRK.

-- Other Eyecare and Medical Professionals' Patient Base. The Company
works to form alliances between its ophthalmic surgeons and optometrists.
These referral networks are valuable in referring optometric patients to a
LaserVision Center. The Company helps to form these referral networks by
offering training for the optometrists, who are then able to provide
pre-operative screenings as well as post-surgical co-management of their
patients. The Company also provides its physician users with marketing
materials designed to foster these referrals and help generate patients.

-- Consumers. The Company begins planning a center's marketing
program before the laser is shipped by analyzing available media for the
targeted demographic group. The marketing program consists of advertising
and public relations. Public relations efforts attempt to place news
stories in various media which will highlight the opening of the center and
the availability of PRK in the market. The Company utilizes radio, print,
television and direct mail to disseminate its message to prospective
patients. Prospective patients then respond to a toll free number
(888-LaserVision) and the calls are answered by Company representatives who
qualify the prospective patients and record the prospective patients' names
and related information into a computer system which can be used for
subsequent mailing lists. The representative makes an appointment with a
local center or surgeon to determine whether the prospective patient is a
candidate for the surgery. Based on its experience operating centers
internationally and providing marketing services to refractive surgeons,
the Company believes that the conversion level is higher when calls are
received and processed by a central system. Prospective patients are routed
to exams and given educational materials about PRK. If the prospective
patient elects not to proceed to surgery following the exam process, the
prospective patient's name is placed on a follow-up list and additional
materials are sent to the prospective patient over a defined period of
time.

COMPETITION

LaserVision Centers. The market for access to excimer lasers is highly
competitive. The Company competes with several other companies, including at
least one manufacturer of laser equipment, in providing access to excimer lasers
in the United States and internationally. Summit, one of two suppliers of laser
equipment to the Company, has indicated it will open approximately 20 laser
centers in the United States during 1996. Other companies are currently in the
process of gaining FDA approval for their lasers and these companies may elect
to enter the laser center business. Other nonmanufacturing companies which have
indicated they intend to operate or already operate laser centers in the United
States are: Beacon Laser Centers, Inc., Global Vision, Inc., LCA Vision, Inc.,
Sight Resources, Inc., Sterling Vision, Inc., The Laser Centre (TLC) and 20/20
Laser Centers, Inc. The Company also competes with laser centers operated by
local operators in certain markets. There can be no assurance that any reduction
in per procedure fees that may result from increased competition will be
compensated for by an increase in procedure volume.

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The treatments offered by the Company's LaserVision Centers also compete
with other present forms of treatment for refractive disorders, including
eyeglasses, contact lenses, refractive surgery, corneal transplants and other
technologies currently under development. The Company expects that companies
which have developed or are developing new technologies or products, as well as
other companies (including established and newly formed companies), may attempt
to develop new products directly competitive with the excimer lasers that are to
be utilized by the Company or could introduce new or enhanced products with
features which render the equipment to be used by the Company obsolete or less
marketable. The ability of the Company to compete successfully will depend in
large part on its ability to adapt to technological changes and advances in the
treatment of refractive vision disorders. There can be no assurance that, as the
market for excimer laser surgery and other treatments of eye disorders develops,
the Company's equipment will not become obsolete, and if this occurs, that the
Company will be able to secure new equipment to allow it to compete effectively.

MarketVision and MedSource. The advertising and marketing businesses in
which the Company's MarketVision and MedSource divisions are engaged are highly
competitive. Clients have the freedom to move from one advertising agency to
another with comparative ease since the relationships normally can be terminated
on short notice. MarketVision and MedSource compete with several national and
regional ophthalmic specialty marketing companies, as well as national and local
advertising agencies which may handle diverse client activities. MarketVision
and MedSource may be hampered by their affiliation with LaserVision Centers in
that some customers may consider them competitors which could adversely affect
the ability of these divisions to continue to attract outside business.

PATENTS AND TRADEMARKS

The names LASERVISION(R), LASERVISION CENTERS AND DESIGN(R), LASERVISION
CENTERS(R), LASERVISION CENTER(R) and MobilExcimer(R) are registered U.S.
service marks of the Company. In addition, the Company owns service mark
registrations in a number of foreign countries. The Company has also secured a
patent for the MobilExcimer mounting system. The Company's service marks,
MobilExcimer patent and other proprietary technology may offer the Company a
competitive advantage in the marketplace and could be important to the success
of the Company. There can be no assurance that one or all of these registrations
will not be challenged, invalidated or circumvented in the future. The Company
is currently involved in two legal proceedings which could result in an adverse
impact on its rights to certain of such registrations. Litigation regarding
intellectual property is common and there can be no assurance that the Company's
service mark registrations and patent will significantly protect the Company's
intellectual property. The defense and prosecution of intellectual property
proceedings is costly and involves substantial commitments of management time.
Failure to defend the Company's rights with respect to its intellectual property
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Legal Proceedings."

GOVERNMENT REGULATION

The manufacturing, labeling, distribution and marketing of medical devices
such as the excimer lasers to which the Company provides access are subject to
extensive and rigorous government regulation in the United States and in certain
other countries. The Federal Food, Drug, and Cosmetic Act requires that medical
devices introduced to the U.S. market, unless exempted by regulation, secure
either an approved PMA application or a premarket notification clearance (known
as a 510(k)). Excimer lasers are required to be the subject of an approved PMA
application.

The manufacturers of the excimer lasers to which the Company provides
access have received approval of their PMA applications for use of their lasers
in PTK and PRK procedures for the treatment of low to moderate myopia. However,
certain FDA officials have advised the Company that they believe that these
lasers are not approved for mobile use, and therefore FDA approval is required
in order to operate the MobilExcimer in the United States. In order to obtain
approval for the MobilExcimer, the Company submitted in June 1996 its own PMA
application for the FDA-approved VISX laser. In November 1996, the Company
received approval of its PMA and immediately submitted a supplement to the PMA
application to cover use of the laser in the MobilExcimer. Restrictions and
limitations imposed by the FDA could adversely

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affect the Company's ability to use or promote the MobilExcimer. Delays in
receipt of or failure to receive approval, or restrictions on the use of the
MobilExcimer, could have a material adverse effect on the Company's business,
financial condition and results of operations. The FDA may take a similar
position with respect to the Company's other methods for providing access to its
excimer lasers at multiple locations.

PMA holders and manufacturers and certain users of medical devices are
subject to continuing FDA obligations. Medical devices are required to be
manufactured in accordance with regulations setting forth current Good
Manufacturing Practices ("GMP"), which require that devices be manufactured and
records be maintained in a prescribed manner with respect to manufacturing,
testing and control activities. It is the FDA's view that with respect to
excimer lasers, users, as well as manufacturers, are required to comply with FDA
requirements with respect to labeling and promotion. The Medical Device
Reporting regulation adopted by the FDA would require that the Company provide
information to the FDA whenever there is evidence to reasonably suggest that one
of its devices may have caused or contributed to a death or serious injury, or
that there has occurred a malfunction that would be likely to cause or
contribute to a death or serious injury if the malfunction were to recur. PMA
holders and manufacturers and certain users of medical devices are subject to
periodic inspections by the FDA. Failure to comply with applicable FDA
requirements could subject the Company to enforcement action, including product
seizures, recalls, withdrawal of approvals, and civil and criminal penalties,
any one or more of which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, clearances
or approvals could be withdrawn in appropriate circumstances. Failure of the
Company or its principal suppliers to comply with regulatory requirements, or
any adverse regulatory action, could have a material adverse effect on the
Company's business, financial condition and results of operations.

The FDA has promulgated performance standards for lasers. Unless the FDA
approves a variance from such standards, manufacturers of excimer lasers must
comply with such standards as well as with special certification, labeling,
reporting and record keeping requirements. The failure of the Company or its
principal suppliers to comply with these standards could have a material adverse
effect on the Company's business, financial condition and results of operations.

In addition, federal, state and foreign laws and regulations regarding the
manufacture and marketing of medical devices are subject to change. For example,
the FDA is currently considering significant changes to its GMP and to other
regulations. The Company cannot predict what impact, if any, such changes might
have on its business; however, such changes could have a material adverse impact
on the Company's business, financial condition and results of operations.

There are currently two manufacturers, VISX and Summit, that have received
FDA approval to market excimer lasers for PTK and PRK for low to moderate
myopia. Lack of timely FDA approval for use of PRK for other indications, such
as astigmatism and hyperopia (farsightedness) could have a material adverse
effect on the Company's planned expansion in the United States market.
Furthermore, the failure of these and any other manufacturers that supply
excimer lasers to the Company to comply with applicable federal, state, or
foreign regulatory requirements, or any adverse regulatory action against such
manufacturers, could restrict the supply of lasers or restrict the ability of
the Company to provide access to the lasers. The inability of the Company to
obtain lasers for sale or use in the United States or elsewhere due to lack of
regulatory approval, or otherwise, could prevent the Company from establishing
or maintaining LaserVision Centers and MobilExcimers, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

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EMPLOYEES

The Company currently has 53 employees. Management believes that the
Company's relationship with its employees is satisfactory. As the Company
expands, it expects to add additional employees in technical, marketing and
management positions. The Company does not anticipate any difficulty in hiring
such personnel when needed.

DESCRIPTION OF PROPERTY

The Company currently occupies 9,970 square feet of space in St. Louis
County, Missouri for its corporate headquarters under a lease which expires in
2001. The Company also leases 2,700 square feet of space in St. Louis County,
Missouri for its St. Louis LaserVision Center under a lease which expires in
2001.

LVCI Management (Quebec), Inc., a wholly-owned subsidiary of the Company,
leases approximately 2,200 square feet of space in Montreal, Quebec, Canada,
which houses the Montreal LaserVision Centre. The Company's wholly-owned
European subsidiary leases approximately 3,000 square feet of space on Harley
Street in London, England, which houses the Harley Street LaserVision Centre and
has short term subleases on 2,500 square feet centers in Solihill, England and
Edinburgh, Scotland.

All other lasers operated by the Company are located in centers owned or
leased by other parties. The Company does not have any material lease
obligations associated with such centers.

LEGAL PROCEEDINGS

The Company is a party to the following material legal proceedings:

During fiscal 1992, the Company hired Chester Financial Incorporated
("CFI"), an investor relations consulting firm, and agreed to issue CFI 100,000
to 150,000 warrants to purchase the Company's common stock at $5.00 per share.
Due to CFI's failure to perform and breach of contract, the Company filed suit
against CFI, David J. Chester (an officer, director and shareholder of CFI) and
John Daniel (an employee and agent of CFI) in the Circuit Court of St. Louis
County, Missouri on December 18, 1992 to terminate the contract, void the
warrants and recover fees and expenses. The disputed warrants are not included
in Note of the financial statements. Management does not expect this claim
will have a material adverse effect upon the Company.

On March 24, 1995, the Company filed suit against 20/20 Laser Centers, Inc.
("20/20") in the United States District Court for the Southern District of
California alleging trade mark, service mark and trade name infringements and
other related violations of law. An agreement in principle was reached to settle
the lawsuit between the Company and 20/20. No payment will be made by either
party to the other and 20/20 has agreed to certain restrictions on its use of
the term "Laser vision correction." A formal settlement agreement is currently
being finalized.

A lawsuit entitled Lanny S. Odin v. Laser Vision Centers, Inc. and Medical
Care International, Inc., was filed in the Circuit court of St. Louis County,
Missouri on August 5, 1996. This case involves a claim for unspecified damages
by a former franchisee of the Company against the Company and Medical Care
International, Inc., assignee of the franchises. The Company intends to
vigorously defend the lawsuit.

35
<PAGE> 37

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The directors, executive officers and key personnel of the Company, their
positions with the Company, and their ages are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John J. Klobnak.......................... 46 Chairman of the Board and Chief Executive
Officer
Alan F. Gillam........................... 54 President, Director
Robert W. May............................ 49 Vice-Chairman of the Board, General
Counsel and Secretary
B. Charles Bono III...................... 49 Executive Vice President, Chief Financial
Officer and Treasurer
James C. Wachtman........................ 35 Executive Vice President and Chief
Operating Officer -- North America
Dr. Henry Simon.......................... 66 Director
James M. Garvey.......................... 48 Director
Richard Lindstrom, M.D................... 49 Director
Steven C. Straus......................... 40 Director
</TABLE>

JOHN J. KLOBNAK. Mr. Klobnak has served as Chairman of the Board and Chief
Executive Officer of the Company since 1993. From 1990 to 1993, Mr. Klobnak
served as the Company's President and Chief Executive Officer. From 1986 to
1990, he served as Chief Operating Officer and subsequently President of
MarketVision, a partnership acquired by the Company upon its inception in 1990.
Prior to 1986, Mr. Klobnak was an advertising and marketing consultant.

ALAN F. GILLAM. Since 1993, Mr. Gillam has served as President and, until
June 1, 1996, as Chief Operating Officer of the Company. From 1991 to 1993, Mr.
Gillam was the International Director of the excimer laser project for Alcon
Surgical, Inc., a division of one of the world's largest eyecare specialty
companies. Prior to 1991, Mr. Gillam was area director for Alcon in Northern
Europe and Africa.

ROBERT W. MAY, ESQ. Mr. May joined the Company as its Vice-Chairman and
General Counsel in September 1993. Prior to joining the Company as a full-time
employee, Mr. May served as Corporate Secretary and a director of the Company
and was a partner in the St. Louis, Missouri law firm of May and Berne, the
former general corporate counsel for the Company, from 1985 until 1993.

B. CHARLES BONO III. Mr. Bono joined the Company as Executive Vice
President, Chief Financial Officer and Treasurer in 1992. From 1980 to 1992, Mr.
Bono was employed by Storz Instrument Company, a global marketer of ophthalmic
devices and pharmaceutical products, serving as Vice President of Finance from
1987 to 1992. He is not related to Frank J. Bono III, Vice President of Sales
for the Company.

JAMES C. WACHTMAN. Mr. Wachtman joined the Company as Chief Operating
Officer -- North American Operations effective May 30, 1996. From 1983 until he
joined the Company, Mr. Wachtman was employed by McGaw, Inc., a manufacturer of
disposables for home infusion, in various positions. Most recently, he served as
Vice President/Operations of CAPS, a hospital pharmacy division of McGaw.

DR. HENRY SIMON. Dr. Simon has served as a director of the Company since
November 1995. Since 1996, he has served as Chairman and from 1993 to 1996 as
CEO and Managing Partner of Schroder Ventures International Life Sciences
Advisers, a venture capital advisory company. Dr. Simon serves as Chairman of
Mitel, Inc., a manufacturer of telecommunications equipment and Shire
Pharmaceutical Group plc, a British company. Dr. Simon is also a director of
Chiroscience plc and Micromass in the U.K.

JAMES M. GARVEY. Mr. Garvey has served as a director of the Company since
November 1995. Mr. Garvey serves as Chief Executive Officer and Managing Partner
of Schroder Ventures Life Sciences Advisors, a venture capital advisory company
which he joined in May of 1995. From 1989 to 1995, Mr. Garvey was Director of
Allstate Venture Capital, the $600 million venture capital division of Allstate
Corp., after initially directing Allstate Venture Capital's health care
investment activity. Mr. Garvey is currently a director

36
<PAGE> 38

of Allscrips Pharmaceutical and J&C Healthcare and has served as director and
Chairman of several public and private healthcare companies.

RICHARD L. LINDSTROM, M.D. Dr. Lindstrom has served as a director of the
Company since November 1995. Since 1979, Dr. Lindstrom has been engaged in the
private practice of ophthalmology and has been the President of Lindstrom,
Samuelson & Hardten Ophthalmology Associates, P.A. since 1989. In 1989, Dr.
Lindstrom founded the Phillips Eye Institute Center for Teaching & Research, a
ophthalmic research and surgical skill education facility, and he currently
serves as the center's Medical Director. Dr. Lindstrom has served as an
Associate Director of the Minnesota Lions Eye Bank since 1987. From 1980 to
1989, he served as a Professor of Ophthalmology at the University of Minnesota.
Dr. Lindstrom received his M.D. and his B.A. and B.S. degrees from the
University of Minnesota.

STEVEN C. STRAUS. Mr. Straus has served as a director of the Company since
January 1996. He currently serves as Senior Vice President of the Ambulatory
Surgery Division of Columbia Healthcare, the world's largest for-profit health
care provider. Mr. Straus was employed in a similar capacity with Medical Care
America, Inc. from 1993 until Medical Care America was merged into Columbia
Healthcare Corporation in 1994. From 1986 to 1993, Mr. Straus held various
positions with Baxter Healthcare Corporation and from 1978 to 1985 was employed
by American Hospital Supply Corporation.

All directors hold office until the next annual meeting of stockholders or
the election and qualification of their successors. Other than Non-Qualified
Stock Options and/or warrants, directors of the Company do not receive any
compensation for their services as members of the Board of Directors but are
entitled to reimbursement for expenses incurred in connection with their
attendance at Board of Directors meetings. Officers are appointed by the Board
of Directors and serve at the discretion of the Board.

37
<PAGE> 39

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid to five executive
officers earning total compensation at annual rates in excess of $100,000 during
the fiscal year ended April 30, 1996:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
NAME AND FISCAL WARRANTS AND
PRINCIPAL POSITION YEAR SALARY BONUS(B) OPTIONS
------------------ ----------- -------- -------- ------------
<S> <C> <C> <C> <C>
John J. Klobnak...................... April, 1996 $186,000(a) $124,330 0
Chief Executive Officer
April, 1995 $146,575 $ 56,835 25,000(c)
85,000(d)
April, 1994 $143,000 $ 16,250 116,000(e)
52,500(f)
13,000(g)
Alan F. Gillam....................... April, 1996 $185,340(a) $123,890 0
President
April, 1995 $146,063 $ 56,636 25,000(c)
80,000(d)
April, 1994 $142,500 $ 16,193 219,000(e)
50,000(f)
12,000(g)
Robert W. May........................ April, 1996 $156,710(a) $104,750 0
Secretary and General
Counsel April, 1995 $123,880 $ 47,880 25,000(c)
75,000(d)
April, 1994 $120,000 $ 15,692 47,500(f)
11,500(g)
30,000(j)
B. Charles Bono III.................. April, 1996 $143,950(a) $ 96,230 0
Executive Vice President
Chief Financial Officer April, 1995 $113,410 $ 43,975 15,000(c)
and Treasurer 50,000(d)
April, 1994 $110,000 $ 12,500 8,500(g)
T. Wesley Dunn....................... April, 1996 $125,000(al) $ 10,400 75,000(h)
Vice President --
Marketing
</TABLE>

- ---------------
(a) Annual compensation rate as of April 30, 1996, effective since October 11,
1995.
(a1) Effective since February 1, 1996.
(b) Earned during fiscal year, paid by the following May or June.
(c) Warrants with exercise price of $7.75 per share.
(d) Unregistered warrants with exercise price of $9.00 per share.
(e) Warrants received as part of new employment contract with exercise price of
$5.00 per share.
(f) Warrants with exercise price of $7.50 per share.
(g) Warrants with exercise price of $5.00 per share.
(h) Non-Qualified Warrants with exercise price of $12.625 per share.

38
<PAGE> 40

WARRANT AND OPTION GRANTS LAST FISCAL YEAR

The following table shows information regarding each stock option or
warrant granted during fiscal 1996 to each of the named executive officers. The
potential realizable values that would exist for these options or warrants are
based on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date of grant over the full term of the option as required by SEC
regulations. Actual gains, if any, on stock options and warrant exercises are
dependent on the future performance of the Common Stock.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED
NUMBER OF OPTIONS AND ANNUAL RATES
SHARES WARRANTS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS AND EMPLOYEES EXERCISE FOR OPTION
NAME AND WARRANTS IN FISCAL PRICE PER EXPIRATION TERM(2)
POSITION GRANTED(1) YEAR SHARE DATE 5%($)/10%($)
-------- ----------- ----------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
John J. Klobnak................ 0 N/A N/A N/A N/A
Robert W. May.................. 0 N/A N/A N/A N/A
Alan F. Gillam................. 0 N/A N/A N/A N/A
B. Charles Bono................ 0 N/A N/A N/A N/A
T. Wesley Dunn................. 75,000 62.5% $12.625 January 31, $261,604/
2001 $ 578,077
</TABLE>

- ---------------
(1) Options and warrants granted to employees under the 1994 Non-Qualified
Warrant Plan and the 1990 Incentive Stock Option Plan vest ratably over
periods from two to three years and are granted at prices equal to or
greater than the market price on the date of grant.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and, therefore, are not intended to forecast
possible future appreciation, if any, of the Company's stock price.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF FY-END FY-END(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME UPON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- --------- ---------------- -------------------
<S> <C> <C> <C> <C>
John J. Klobnak................ 20,000 $191,250 360,666/45,834 $2,915,277/$253,648
Chief Executive Officer
Alan F. Gillam................. 50,000 $463,281 290,167/45,833 $2,355,188/$256,250
President
Robert W. May.................. 30,000 $259,379 157,750/43,750 $1,088,563/$245,313
Secretary and
General Counsel
B. Charles Bono, III........... 4,100 $ 30,863 100,917/27,083 $718,500/$150,000
Exec. VP, CFO
and Treasurer
T. Wesley Dunn................. 0 $ 0 9,375/65,625 $15,234/$106,641
Vice President --
Marketing
</TABLE>

- ---------------
(1) Calculated using a $14.25 closing price per share of the Company's common
stock as reported by Nasdaq on April 30, 1996.

39
<PAGE> 41

EMPLOYMENT AGREEMENTS

During fiscal 1996, the Company entered into three-year contracts with John
J. Klobnak, Alan F. Gillam, Robert W. May and B. Charles Bono III. These
contracts provide for base salaries and the potential payment of certain bonuses
conditioned upon increases in the price of the Company's Common Stock. During
fiscal 1996, 1995 and 1994, $449,000, $208,000 and $62,000, respectively, were
provided for these bonuses. Under these contracts, termination of employment by
the Company without cause will result in payment by the Company to the Employee
of the total compensation due for the remainder of the term of the contract or
eighteen month's compensation, whichever is greater. Termination of employment
by the employee under certain limited circumstances will result in the payment
by the Company to the Employee of the total compensation due for the remainder
of the term of the contract or two year's compensation, whichever is greater.

On February 1, 1996, the Company entered into an eighteen month employment
agreement with T. Wesley Dunn to serve as Vice President -- Marketing. This
agreement provides for an annual salary of $125,000 and a one time $10,400 cash
bonus, plus an additional bonus as determined by the Compensation Committee in
addition to cost of living adjustments. Under this contract, termination of
employment by the Company without cause will result in payment by the Company to
the Employee of the total compensation due for the remainder of the term of the
contract or twelve month's compensation, whichever is greater. Termination of
employment by the employee under certain limited circumstances will result in
the payment by the Company to the Employee of the total compensation due for the
remainder of the term of the contract or two year's compensation, whichever is
greater.

On June 1, 1996, the Company entered into an eighteen month employment
agreement with James C. Wachtman to serve as Chief Operating Officer -- North
American Operations. This agreement provides for an annual salary of $140,000,
plus an additional bonus as determined by the Compensation Committee in addition
to cost of living adjustments. Under this contract, termination of employment by
the Company without cause will result in payment by the Company to the Employee
of the total compensation due for the remainder of the term of the contract or
twelve month's compensation, whichever is greater. Termination of employment by
the employee under certain limited circumstances will result in the payment by
the Company to the Employee of the total compensation due for the remainder of
the term of the contract or two year's compensation, whichever is greater.

COMPENSATION COMMITTEE INTERLOCK AND INSIDER
PARTICIPATION IN COMPENSATION DECISION

During the last completed fiscal year, John J. Klobnak, Dr. Henry Simon and
Richard L. Lindstrom, M.D. served as members of the Compensation Committee of
the Company's Board of Directors. During that fiscal year, Mr. Klobnak served as
Chief Executive Officer of the Company. Mr. Klobnak has previously served as the
Company's President. During the last fiscal year, Dr. Henry Simon was an
employee of Schroder Ventures Life Sciences Advisors, Inc., an affiliate of the
holder of 1,666,665 shares of Common Stock of the Company.

40
<PAGE> 42

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's common stock as of December 23,
1996 by (i) all those known by the Company to be beneficial owners of more than
5% of the Company's common stock, (ii) all of the Company's directors and (iii)
all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
DIRECTORS, OFFICERS NUMBER OF SHARES COMMON SHARES
AND 5% SHAREHOLDERS BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------- ------------------ ------------------
<S> <C> <C>
John J. Klobnak(1).......................................... 542,041 5.87%
540 Maryville Centre Drive, Suite 200
St. Louis, Missouri 63141
Alan F. Gillam(2)........................................... 338,167 3.70%
540 Maryville Centre Drive, Suite 200
St. Louis, Missouri 63141
Robert W. May(3)............................................ 203,150 2.25%
540 Maryville Centre Drive, Suite 200
St. Louis, Missouri 63141
Dr. Henry Simon(4).......................................... 1,669,329 18.93%
20 Southampton Street
London WC2E 7QG ENGLAND
James M. Garvey(4).......................................... 1,668,929 18.93%
One Beacon Street, Suite 4500
Boston, Massachusetts 02108
Richard L. Lindstrom, M.D.(5)............................... 66,296 0.75%
710 East 24th Street
Minneapolis, Minnesota 55391
Steven C. Straus(6)......................................... 2,064 0.02%
13455 Noel Road, 21st Floor
Dallas, Texas 75240
All Directors and Executive Officers as a Group(7)(8)....... 3,025,820 30.25%
</TABLE>

Pursuant to the rules of the Securities and Exchange Commission, shares of
common stock which an individual or group has a right to acquire within sixty
(60) days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage of ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.
- ---------------
(1) Includes presently exercisable options and warrants to purchase 417,708
shares of common stock granted to Mr. Klobnak by the Board of Directors
pursuant to the Company's Incentive Stock Option Plan, the Non-Qualified
Warrant Plan and other unregistered warrants. Mr. Klobnak also owns an
additional 23,709 common stock options and warrants which are not presently
exercisable. See "Executive Compensation -- Stock Option Plan" and
"Executive Compensation -- Employment Agreements."

(2) Includes presently exercisable warrants and options to purchase 336,617
shares of common stock granted to Mr. Gillam by the Board of Directors
pursuant to the Non-Qualified Warrant Plan, the Incentive Stock Option Plan
and other unregistered warrants. Mr. Gillam also owns 33,833 warrants and
options which are not presently exercisable.

(3) Includes presently exercisable warrants and options granted to Mr. May by
the Board of Directors to purchase 201,450 shares of common stock pursuant
to the Non-Qualified Warrant Plan, the Incentive Stock Option Plan and other
unregistered warrants. Mr. May also owns 32,500 warrants and options which
are not presently exercisable.

41
<PAGE> 43

(4) Beneficial ownership established by virtue of membership on the Board of
Directors of the Company as the representative of Schroder Ventures Life
Sciences Advisors, Inc., an affiliate of the holders of 1,666,665 shares of
the Common Stock of the Company. Includes presently exercisable options
granted to Dr. simon and to Mr. Garvey, respectively, by the Board of
Directors to purchase 1,664 shares of common stock each. Each also own 8,336
options which are not presently exercisable.

(5) Includes presently exercisable unregistered warrants and options granted to
Dr. Lindstrom by the Board of Directors to purchase 51,664 shares of common
stock, 6,823 restricted shares of common stock he received as an officer and
director of Vision Correction, Inc. a Minneapolis-based company acquired by
the Company in August, 1995 and 3,609 restricted shares of common stock he
received as the Medical Director for the Company. Dr. Lindstrom also owns
68,336 unregistered warrants and options which are not presently
exercisable.

(6) Includes presently exercisable options to Mr. Straus by the Board of
Directors to purchase 1,664 shares of common stock. Mr. Straus also owns
8,336 options which are not presently exercisable.

(7) Included presently exercisable options and warrants to purchase an aggregate
of 1,130,939 shares of common stock granted to five executive officers
(three which are also directors) of the Company. An additional 138,728
options and warrants to purchase shares of common stock are owned but are
not presently exercisable by these executive officers. See "Executive
Compensation -- Stock Option Plan" and "Executive Compensation -- Employment
Agreements."
(8) Includes presently exercisable options and warrants to purchase an aggregate
of 1,012,431 shares of common stock granted to directors, (three of which
are also executive officers of the Company). An additional 183,386 options
and warrants to purchase shares of common stock are owned but not presently
exercisable by these directors.

As required by the Securities and Exchange Commission rules under Section
16 of the Securities and Exchange Act of 1934, the Company notes that during the
fiscal year ended April 30, 1996, all reports regarding transactions in the
Company's common stock were timely filed.

As of December 23, 1996, all Convertible Preferred Stock was converted to
Common Stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has loaned $36,565 to Alan F. Gillam, President, and holds a
non-interest bearing Promissory Note dated December 6, 1993 in that amount. The
money was loaned to Mr. Gillam to facilitate the purchase of a residence for Mr.
Gillam and his family when he relocated to the St. Louis area subsequent to
being hired by the Company. The Promissory Note is secured by a Deed of Trust on
Mr. Gillam's previous residence.

Dr. Henry Simon and James M. Garvey are both members of the Board of
Directors and employees of Schroder Ventures Life Sciences Advisors, an
affiliate of the holder of 1,666,665 shares of the Common Stock of the Company
which resulted from conversion of 100,000 shares of the Company's Convertible
Preferred Stock in June, 1996.

Dr. Richard Lindstrom is a member of the Board of Directors and has entered
into an RMSO agreement with the Company.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of

42
<PAGE> 44

appropriate jurisdiction the question whether such indemnification by it is
against the public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

Section 6 of the Company's Certificate of Incorporation provides for
indemnification of the officers and directors of the Company to the fullest
extent permitted by the laws of the State of Delaware.

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Dankenbring, Greiman, Osterholt &
Hoffmann, P.C., St. Louis, MO.

EXPERTS

The financial statements as of April 30, 1996 and 1995 and for each of the
three years in the period ended April 30, 1996 included in this Prospectus have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Company with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Judiciary Plaza, Washington, D.C. 20549 and at its regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 75 Park Place, Room 1228, New York, New York 10007. Copies of
such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of that Web site is
http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, with respect to the securities offered by
this Prospectus. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and to the exhibits.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to in this Prospectus are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement
may be inspected without charge at the Commission's principal office and copies
may be obtained upon payment of the prescribed fee at the Public Reference Room
of the Commission at 450 Fifth Street, NW, Washington, DC 20549. Any person
receiving a copy of this Prospectus may obtain without charge, upon written or
oral request, a copy (without exhibits) of any of the documents incorporated by
reference herein. Requests should be directed to the Director of Corporate
Communications, 540 Maryville Centre Drive, Suite 200, St. Louis, Missouri
63141, (314) 434-6900.

The common stock of the Company is listed on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") under the symbol
LVCI.

The Company distributes to its shareholders an annual report containing
financial statements audited by certified public accountants. The Company may,
from time to time, also furnish to its shareholders interim reports, as
determined by management.

43
<PAGE> 45

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................... F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheet as of April 30, 1995 and
1996................................................... F-2
Consolidated Statements of Operations for the years ended
April 30, 1994, 1995, 1996............................. F-3
Consolidated Statements of Changes in Stockholders' Equity
for the years ended April 30, 1994, 1995, 1996......... F-4
Consolidated Statements of Cash Flows for the years ended
April 30, 1994, 1995, 1996............................. F-5
Notes to Consolidated Financial Statements................ F-6
Consolidated Condensed Balance Sheet (Unaudited) as of
April 30, 1996 and October 31, 1996.................... F-17
Consolidated Condensed Statements of Operations
(Unaudited) for the Three and Six Month Periods Ended
October 31, 1995 and 1996.............................. F-18
Consolidated Condensed Statement of Changes in
Stockholders' Equity (Unaudited) for the Six Months
Ended October 31, 1996................................. F-19
Consolidated Condensed Statements of Cash Flows
(Unaudited) for the Six Month Periods Ended October 31,
1995 and 1996.......................................... F-20
Notes to Unaudited Interim Consolidated Financial
Statements............................................. F-21
</TABLE>

44
<PAGE> 46

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Laser Vision Centers, Inc. and Subsidiaries

In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Laser Vision Centers, Inc. and its subsidiaries as of April 30, 1996 and April
30, 1995, and the results of their operations and their cash flows for each of
the three years in the period ended April 30, 1996, 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.

As discussed further in Note 4, effective in the fourth quarter of the year
ended April 30, 1996, the Company 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."

/s/ PRICE WATERHOUSE LLP
--------------------------------------
PRICE WATERHOUSE LLP

St. Louis, Missouri
June 14, 1996

F-1
<PAGE> 47

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
APRIL 30,
--------------------------
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $12,672,000 $ 2,126,000
Accounts receivable, net of allowance of $286,000 and
$157,000, respectively................................. 805,000 587,000
Prepaid expenses and other current assets................. 483,000 164,000
Assets held for sale (Note 4)............................. 1,200,000 --
----------- ------------
Total current assets................................. 15,160,000 2,877,000
Property and equipment:
Laser equipment (Notes 4, 6 and 7)........................ 9,474,000 9,941,000
Medical equipment (Note 4)................................ 352,000 386,000
Mobile equipment.......................................... 892,000 508,000
Furniture and fixtures.................................... 1,019,000 396,000
----------- ------------
11,737,000 11,231,000
Less-accumulated depreciation............................... (1,323,000) (3,288,000)
----------- ------------
10,414,000 7,943,000
Equipment deposits.......................................... 1,765,000 80,000
----------- ------------
Net property and equipment........................... 12,179,000 8,023,000
Other assets (Note 2)....................................... 1,574,000 418,000
----------- ------------
Total assets................................................ $28,913,000 $ 11,318,000
=========== ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of notes payable (Note 6)................. $ 1,858,000 $ 3,013,000
Current portion of obligations under capital leases (Note
7)..................................................... 467,000 94,000
Accounts payable.......................................... 870,000 490,000
Accrued liabilities....................................... 1,963,000 581,000
----------- ------------
Total current liabilities............................ 5,158,000 4,178,000
Non-current liabilities:
Notes payable (Note 6).................................... 342,000
Capital lease obligations (Note 7)........................ 1,375,000 64,000
Deferred revenue and other................................ 275,000 80,000
Minority interests (Note 3)............................... 113,000 305,000
----------- ------------
1,763,000 791,000
Commitments and contingencies (Notes 9 and 10)
Convertible preferred stock with mandatory redemption
provision in 2005 (Note 5)................................ 14,539,000
Stockholders' equity (Notes 11 and 12):
Common stock, par value $.01 per share, 50,000,000
authorized; 6,415,993 and 4,452,555 shares issued and
outstanding, respectively.............................. 64,000 45,000
Paid-in-capital........................................... 23,831,000 13,943,000
Accumulated deficit....................................... (16,442,000) (7,639,000)
----------- ------------
7,453,000 6,349,000
----------- ------------
Total liabilities, redeemable preferred stock and
stockholders' equity................................ $28,913,000 $ 11,318,000
=========== ============
</TABLE>

See Notes to Consolidated Financial Statements.

F-2
<PAGE> 48

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
---------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................. $ 3,918,000 $ 3,311,000 $ 2,106,000
Cost of revenues (includes $1,973,000, $1,589,000 and
$969,000 of depreciation, respectively)............ 4,240,000 3,375,000 1,768,000
----------- ----------- -----------
Gross profit (loss)............................. (322,000) (64,000) 338,000
Operating expense:
General and administrative......................... 2,356,000 1,002,000 695,000
Salaries and related expenses...................... 2,329,000 1,285,000 902,000
Depreciation and amortization...................... 230,000 283,000 250,000
Selling and marketing expenses..................... 916,000 574,000 391,000
Fixed asset impairment provision (Note 4).......... 3,063,000 -- --
----------- ----------- -----------
8,894,000 3,144,000 2,238,000
----------- ----------- -----------
Loss from operations............................ (9,216,000) (3,208,000) (1,900,000)
Other income (expenses):
Interest and other income.......................... 437,000 37,000 21,000
Interest expense................................... (216,000) (242,000) (156,000)
Minority interest in net loss of subsidiary (Note
3).............................................. 192,000 116,000
Provision for loss on advance (Note 10)............ -- -- (175,000)
----------- ----------- -----------
Net loss........................................ $(8,803,000) $(3,297,000) $(2,210,000)
=========== =========== ===========
Net loss per share (Note 2)..................... $ (1.75) $ (.82) $ (.66)
Weighted average number of common shares
outstanding........................................ 5,278,000 4,001,000 3,356,000
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE> 49

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED APRIL 30, 1996

<TABLE>
<CAPTION>
NOTE
COMMON STOCK RECEIVABLE, TOTAL
-------------------- PAID-IN ACCUMULATED COMMON STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY
--------- ------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1993............ 2,913,000 $29,000 $ 6,032,000 $ (2,132,000) $(1,100,000) $ 2,829,000
Issuance of 950,000 units of common
stock and Class F warrants in
public offering (Note 12),
including over allotment of F
warrants to underwriters........... 950,000 10,000 3,784,000 3,794,000
Cancellation of 275,000 shares of
common stock (Note 10)............. (275,000) (3,000) (922,000) 1,100,000 175,000
Exercise of Class A warrants......... 1,000 6,000 6,000
Net loss for year ended April 30,
1994............................... -- -- -- (2,210,000) -- (2,210,000)
--------- ------- ----------- ------------ ----------- -----------
Balance at April 30, 1994............ 3,589,000 36,000 8,900,000 (4,342,000) 4,594,000
Exercise of Class A, B and F
warrants........................... 726,955 8,000 4,142,000 4,150,000
Issuance of common stock in private
offering (Note 11)................. 125,000 1,000 835,000 836,000
Exercise of incentive and
non-qualified stock options........ 11,600 66,000 66,000
Net loss for year ended April 30,
1995............................... -- -- -- (3,297,000) -- (3,297,000)
--------- ------- ----------- ------------ ----------- -----------
Balance at April 30, 1995............ 4,452,555 45,000 13,943,000 (7,639,000) -- 6,349,000
--------- ------- ----------- ------------ ----------- -----------
Exercise of incentive and
non-qualified options.............. 100,210 1,000 468,000 469,000
Exercise of C, D, non-qualified,
underwriter and other warrants..... 363,294 3,000 2,137,000 2,140,000
Exercise of Class B and F warrants... 1,159,690 12,000 6,910,000 6,922,000
Issuance of common stock in private
offering (Note 11)................. 242,218 2,000 1,143,000 1,145,000
Issuance of common stock in
conjunction with acquisitions (Note
3)................................. 98,026 1,000 911,000 912,000
Costs associated with issuance of
convertible preferred stock with
mandatory redemption provision..... (1,242,000) (1,242,000)
Dividends accrued on convertible
preferred stock (Note 5)........... (439,000) (439,000)
Net loss for the year ended April 30,
1996............................... -- -- -- (8,803,000) -- (8,803,000)
--------- ------- ----------- ------------ ----------- -----------
Balance at April 30, 1996............ 6,415,993 $64,000 $23,831,000 $(16,442,000) $ -- $ 7,453,000
========= ======= =========== ============ =========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE> 50

LASER VISION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating expenses:
Net loss.................................................. $(8,803,000) $(3,297,000) $(2,210,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 2,203,000 1,872,000 1,219,000
Fixed asset impairment.................................. 3,063,000
Imputed interest........................................ 74,000 212,000 16,000
Provision for loss on advance........................... 175,000
Provision for uncollectible accounts receivable......... 75,000 32,000 66,000
Changes in operating assets and liabilities, excluding
the effects of acquisitions:
Increase in accounts receivable....................... (52,000) (386,000)
Increase in prepaid expenses and other current
assets............................................. (319,000) (92,000) (69,000)
Increase in other assets.............................. (54,000) (94,000)
Increase in accounts payable.......................... 380,000 138,000 124,000
Increase in accrued liabilities....................... 746,000 328,000 166,000
Decrease in minority interest......................... (192,000) (116,000) --
----------- ----------- -----------
Net cash used by operating activities............ (2,879,000) (1,017,000) (899,000)
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of equipment.................................. (5,993,000) (1,147,000) (2,818,000)
Equipment deposits........................................ (1,685,000) (80,000) (25,000)
Decrease in restricted cash............................... 375,000
Acquisition of New Image.................................. (169,000) -- --
----------- ----------- -----------
Net cash used by investing activities..................... (7,847,000) (1,227,000) (2,468,000)
=========== =========== ===========
Cash flows from financing activities:
Proceeds from private offering, redeemable preferred...... 14,100,000
Private placement offering costs, redeemable preferred.... (1,117,000)
Proceeds from private offerings, common................... 1,220,000 903,000 4,750,000
Private placement offering costs, common.................. (75,000) (67,000) (956,000)
Net proceeds from exercise of Class A, B and F Warrants... 6,922,000 4,150,000 6,000
Net proceeds from exercise of other warrants.............. 2,140,000
Proceeds from exercise of incentive and nonqualified stock
options................................................. 469,000 66,000
Payment on notes payable.................................. (2,135,000) (1,305,000) (375,000)
Principal payments under capital lease obligations........ (252,000) (83,000) (139,000)
----------- ----------- -----------
Net cash provided by financing activities................... 21,272,000 3,664,000 3,286,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... 10,546,000 1,420,000 (81,000)
Cash and cash equivalents at beginning of year... 2,126,000 706,000 787,000
----------- ----------- -----------
Cash and cash equivalents at end of year......... $12,672,000 $ 2,126,000 $ 706,000
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Notes payable issued for laser purchases.................. $ 675,000 $ 1,359,000 $ 5,914,000
Capital lease obligations related to laser purchases...... 1,936,000
Accrued dividends and offering costs, private placement
redeemable preferred.................................... 564,000
Acquisitions -- Fair value of assets acquired............... 1,676,000
Liabilities assumed....................................... (595,000)
Common stock issued....................................... (912,000)
-----------
Cash paid................................................. 169,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................. $ 127,000 $ 31,000 $ 140,000
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE> 51

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF ORGANIZATION

Laser Vision Centers, Inc. (the Company), provides access to excimer lasers
and related services for the treatment of refractive vision disorders and has 30
lasers currently in use in the United States, Canada and Europe. The Company is
the world's only operator of mobile excimer laser systems. The excimer laser can
be used to treat refractive optical disorders such as nearsightedness and
astigmatism to eliminate or reduce the need for corrective lenses. LaserVision
Centers(R) operate on a shared-access model, giving individual or group
ophthalmic practices use of the technology without investment risk or
maintenance requirements and allowing optimal use of the equipment. In addition,
the Company provides a broad range of professional services, including physician
and staff training, technical support services and maintenance and, through its
MarketVision and MedSource divisions, advertising and marketing programs and
services.

Photorefractive keratectomy (PRK) involves the use of an excimer laser to
reshape the cornea, thereby adjusting its refractive power, which in turn
eliminates or reduces the need for corrective lenses. The excimer laser can also
be used to treat a number of pathological superficial corneal disorders in a
procedure called phototherapeutic keratectomy (PTK). Two manufacturers, VISX,
Incorporated (VISX) and Summit Technology, Inc. (Summit) recently received
approval by the United States Food and Drug Administration (FDA) for use of
their excimer lasers to perform PRK for low to moderate myopia and PTK. In
addition to such procedures, excimer lasers can also be used to perform
procedures known as laser in situ keratomileusis (LASIK), which may be more
predictable in treating high levels of myopia, but which has not been
specifically approved in the United States by the FDA.

The Company has operated excimer laser centers in Canada and Europe since
1991 and 1993, respectively. The Company currently provides excimer lasers and
related services to fixed-site centers in Canada, the United Kingdom, Finland,
Greece, Sweden and Ireland and operates the MobilExcimer(R) in Canada and the
United Kingdom. With the recent approval of the excimer laser technology by the
FDA to treat certain refractive vision disorders, the Company currently operates
centers in the United States and plans to continue to open U.S. centers. Risk
factors associated with the successful implementation of the Company's business
strategy include the absence of profitable operations, the uncertainty of market
acceptance of excimer laser surgery, competition, the Company's dependence on
limited sources of excimer lasers, government regulation, the uncertainty of FDA
approval of the MobilExcimer, the lack of long-term follow-up data and
undetermined medical risks with respect to the effect of excimer laser surgery,
product liability and professional liability, the Company's ability to manage
its growth and its dependence on current management and the possible need for
additional financing. In the United States, fixed-site laser centers are
operated in conjunction with Columbia Healthcare Corporation (Columbia
Healthcare), formerly Columbia/HCA, or by the Company independently or through
joint ventures.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, as well as the reported amounts
of revenue and expenses. Actual results could differ from those estimates.

Cash equivalents

The Company considers unrestricted cash, as well as short-term investments
purchased with an original maturity of three months or less, to be cash
equivalents. Cash and cash equivalents included money market funds of $7,903,000
($1,711,000 in 1995) and short term commercial paper of $4,500,000 at April 30,
1996.

F-6
<PAGE> 52

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Credit risk

Financial instruments which potentially subject the Company to
concentrations of credit risks consist principally of funds held in commercial
paper, money market accounts and trade receivables.

As of April 30, 1996 and 1995, the Company has deposited $12,406,000 and
$1,747,000, respectively, in commercial paper and money market accounts at
financial institutions. Management believes the credit risk related to these
funds is limited due to the short-term nature of the accounts.

Management believes the credit risk related to its trade receivables is
limited due to the Company's large number of customers and that its allowance
for doubtful accounts is adequate.

Property and equipment

Property and equipment is stated at cost, or at estimated fair value for
long-lived assets determined to be impaired. Expenditures for repairs and
maintenance are charged to expense as incurred. Depreciation and amortization
are computed utilizing the straight-line method. In the opinion of management,
this method is adequate to allocate the cost of equipment over its estimated
useful lives which range from four to five years. Depreciation for commercial
lasers and other equipment is included in cost of revenues. Depreciation for the
clinical laser and furniture and fixtures is classified as an operating expense.

Impairment of long-lived assets

The Company reviews for the impairment of long-lived assets when events or
changes in circumstances indicate that an asset's carrying value may not be
recoverable. In reviewing for impairment, if the carrying value of an asset is
greater than the sum of the undiscounted projected cash flows attributable to
that asset, an impairment loss is recognized. The impairment loss is based on
the fair value of the asset which is determined based on market prices,
discounted cash flows or the best information available. See Note 4 for the
impairment provision and the adoption 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").

Other assets

Other assets at April 30 consist of the following:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Goodwill, net of $89,000 and $8,000 amortization,
respectively (Note 3)..................................... $1,108,000 $242,000
Tradename and servicemark costs, net of $30,000 and $15,000
amortization, respectively................................ 152,000 167,000
VCI deposits in escrow (Note 3)............................. 256,000
Rent deposits and other, net................................ 58,000 9,000
---------- --------
$1,574,000 $418,000
========== ========
</TABLE>

The goodwill, tradename and servicemark costs are being amortized over 5 to
15 years.

Revenue

Laser revenues are recognized when the surgical procedures are performed.
Advertising revenues are recognized as earned, upon delivery of print media or
upon broadcast of TV or radio advertisements.

F-7
<PAGE> 53

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cost of revenues

Cost of revenues include laser and medical equipment depreciation, laser
maintenance including optics and gasses, Pillar Point royalty fees, professional
medical services and medical supplies for the LaserVision Centers division. For
the MarketVision division, cost of revenues includes client media and production
costs which are deferred during production and expensed when the client is
billed. Advertising costs are expensed as incurred and included in selling and
marketing expenses for the LaserVision Centers division.

Deferred revenue

Deferred revenue, included in other assets, relates to funds received from
ophthalmologists under agreements with the Company to provide excimer laser
access. When laser training and access are provided and the deposits are
released, the revenue will be recorded.

Minority interests

The minority interests on the consolidated balance sheet relate to a
49.998% interest in a European subsidiary (see Note 3) and a 10% interest in one
Canadian subsidiary.

Income taxes

The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recorded based on the difference
between the income tax basis of assets and liabilities and their carrying
amounts for financial reporting purposes.

Foreign Currency Translation

The accounts of the Company's foreign subsidiaries are maintained in their
respective local currencies. The accompanying consolidated financial statements
have been translated and adjusted to reflect U.S. dollars on the bases presented
below.

Assets and liabilities are translated into U.S. dollars at year-end
exchange rates. Income and expense items are translated at average rates of
exchange prevailing during the year. Foreign currency translation adjustments
and transaction gains and losses are immaterial amounts and are included in
earnings currently.

Loss per share

Net loss per common share is based upon the weighted average number of
shares outstanding during the period and includes dividends accrued on the
convertible preferred stock. The calculation excludes common stock equivalent
shares when their inclusion in such calculations would have been antidilutive.

Reclassifications

Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the current year presentation.

3. ACQUISITIONS

Effective April 5, 1996, the Company's European subsidiary acquired certain
assets and assumed certain liabilities of New Image Laser Centres Limited (New
Image) for approximately $169,000 paid upon acquisition and $60,000 which is
payable September 15, 1996. Assets acquired include accounts receivable, medical
equipment, leasehold improvements and furniture and fixtures. Liabilities
assumed include the obligation to provide patient follow-up exams for treatment
commenced prior to the acquisition date. The acquisition was accounted for in
accordance with the purchase method of accounting; the acquisition cost

F-8
<PAGE> 54

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximated the fair value of the net assets acquired and no goodwill has been
recorded. The 1996 consolidated financial statements include the revenues and
expenses of New Image from the acquisition date.

Effective February 1, 1996, the Company acquired the stock of Med-Source,
Inc. (Med Source) for 21,845 shares of the Company's unregistered common stock
issued at the $12.125 market price when the transaction was negotiated, and
$35,000. The acquisition was accounted for in accordance with the purchase
method of accounting; the acquisition cost exceeded the fair value of the net
assets acquired resulting in approximately $282,000 of goodwill. To increase
ophthalmic surgical volumes, Med Source provides marketing services in the areas
of planning, training, and consulting. The April 30, 1996 consolidated financial
statements include all assets and liabilities of Med Source and reflect the
revenues and expenses of Med Source since the acquisition date.

In August 1995, the Company acquired the stock of Vision Correction, Inc.
of Minnesota (VCI) for 76,181 shares of the Company's unregistered common stock
issued at the $8.50 market price. The principal assets acquired were site
agreements with eye centers, clinics and individual doctors in nine states with
respect to access to mobile excimer lasers. The 25 agreements, each of which
required a $10,000 deposit by the eye center, clinic or doctor, require the
Company to provide certain services including regular access to a mobile excimer
laser in return for an agreement by the eye center, clinic or doctor to
exclusively use mobile lasers provided by the Company for all PRK or similar
services. The agreements become effective when the Company gives notice of its
intention to provide access to a mobile excimer laser and continues thereafter
for an initial term of 2 years and on a year to year basis thereafter unless
notice of termination is given. The eye centers, clinics and doctors may
terminate the agreements if the agreements do not become effective on or before
December 31, 1997. The VCI acquisition was accounted for in accordance with the
purchase method of accounting; the acquisition cost exceeded the fair value of
the net assets acquired resulting in the recording of goodwill totaling
$664,000.

Effective November 1, 1994, the Company's European subsidiary acquired a
majority interest of Arnott Laser Vision Centre Limited (currently doing
business as Harley Street Laser Vision Centre "HSLVC") in London, England for
approximately $39,000. The step acquisition of HSLVC was accounted for pursuant
to the purchase method of accounting. HSLVC subsequently acquired approximately
$104,000 of equipment and the existing excimer laser surgery practice from the
minority owners of HSLVC in exchange for a non-interest bearing note of
approximately $354,000, resulting in the recording of goodwill of $250,000. In
June 1995, HSLVC consolidated operations and moved to a new leased facility on
Harley Street in London. As specified in the acquisition agreement, the Company
agreed to purchase a new excimer laser for approximately $500,000 to be used at
the Harley Street facility in exchange for a non-interest bearing note of HSLVC.
The April 30, 1996 and 1995 consolidated financial statements include the
operations of HSLVC since the acquisition date and reflect the equity and other
obligations due to the minority owners as a non-current liability.

4. FIXED ASSET IMPAIRMENT PROVISION

In connection with the Company's continuing evaluation of the
recoverability of its assets, a fixed asset impairment charge of $3,063,000 was
recognized in the fourth quarter of fiscal 1996. This resulted from a
reorganization of the Company's international operations in connection with the
approval by the Food and Drug Administration (FDA) of the Summit laser in
October 1995 and the VISX laser in March 1996, for performance of certain PRK
procedures in the United States. The Company had 22 Model B VISX lasers
dedicated to its European and Canadian operations as of February 1, 1996. The
intent of the Company had been to move a number of these lasers to the United
States after the FDA approval. The Company also expected these lasers to be
upgradeable to treat hyperopia (farsightedness). However, in the fourth quarter
of fiscal 1996 the Company was informed of VISX's decision not to upgrade the
Model B lasers to treat hyperopia and of its decision to effectively prohibit
the reimporting of Model B lasers. As a result, the

F-9
<PAGE> 55

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company was unable to upgrade the international lasers for use in the United
States and, thus, had an excess of international equipment which could not treat
hyperopia.

Accordingly, the Company entered into negotiations to sell 10 excess lasers
for $1,200,000, resulting in an impairment provision of $1,350,000. Such lasers
are classified as assets held for sale on the balance sheet at April 30, 1996
and will be sold prior to October 31, 1996.

The Company revised its international business plan in April 1996 to take
into account FDA approval, increased emphasis on activity in the United States,
international market conditions and the market acceptance of PRK procedures to
date. It reduced the number of fixed sites in Europe and Canada, redeployed a
number of lasers and selected a number of sites to be served by mobile lasers.
Because of this significant change in business conditions, the Company assessed
the projected undiscounted future cash flows of the remaining European and
Canadian excimer lasers and related medical equipment and determined that cash
flows were insufficient to recover the carrying value of these assets. As a
result, the Company recorded an additional provision for impairment of
$1,713,000 to record those assets at fair value based upon current market
prices. These assets, with a carrying value of $1,235,000, will continue to be
used in international operations.

The total original cost of the above equipment was $9,542,000 and the
accumulated depreciation at the time of the write-downs was $4,044,000.

Furthermore, the Company implemented SFAS 121 in the fourth quarter and its
adoption had no direct impact on the Company.

5. CONVERTIBLE PREFERRED STOCK WITH MANDATORY REDEMPTION PROVISION IN 2005

The Company's amended Articles of Incorporation authorize the Board of
Directors to issue 1,000,000 shares of preferred stock, at $.01 par value per
share, in one or more series, designated by them as to rights, preferences,
terms and limitations. In fiscal 1995, the Board of Directors authorized the
sale of up to 180,000 shares of convertible preferred stock via a private
placement at a price per share and under terms to be determined. In October
1995, the Company received $14,100,000 from the sale of 141,000 shares of
restricted convertible preferred stock with a mandatory redemption provision in
2005, at the holders' option. The related offering costs of $1,242,000 were
deducted from paid-in-capital. These restricted preferred shares, par value
$100, are convertible into 2,349,991 shares of common stock at a conversion
price of $6 per share, have a stated dividend rate beginning after three years
of 8% (after two years under certain circumstances) and have limited piggy-back
registration rights in the event of any public offering of common stock and
mandatory registration rights after two years. For the year ended April 30,
1996, dividends of $439,000 were accrued and are reflected in the calculation of
net loss per common share. These shares are expected to be converted into
2,349,991 shares of common stock upon consummation of the proposed stock
offering and, in that case, the accrued dividends would not be payable (see Note
14).

6. NOTES PAYABLE

In April and June 1994 and May and July 1995, the Company entered into
agreements to purchase VISX lasers. The purchase agreements required periodic
repayments over eighteen to twenty-four months to the seller, bearing no stated
interest rate (interest was imputed at 6%). At April 30, 1996 and 1995, the
outstanding balances relating to these purchase agreements totaled $1,847,000
and $3,355,000, respectively. Subsequent to April 30, 1996, the Company repaid
the outstanding balance under these purchase agreements.

7. OBLIGATIONS UNDER CAPITAL LEASES

In September 1995, the Company acquired two excimer lasers for use in the
United States. The lasers were financed by five year capital leases requiring
principal payments totaling $1,024,000 and bearing interest

F-10
<PAGE> 56

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

at 11% per annum. In January 1996, the Company acquired two additional excimer
lasers for use in the United States. The lasers were primarily financed by three
and one-half year term capital leases requiring principal payments totaling
$912,000 and bearing interest at 12% per annum.

Future minimum payments under capital leases as of April 30, 1996 are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
APRIL 30, AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1997........................................................ $ 643,000
1998........................................................ 571,000
1999........................................................ 571,000
2000........................................................ 364,000
2001........................................................ 87,000
----------
Total minimum lease payments................................ 2,236,000
Less amount representing interest........................... (394,000)
Less current portion........................................ (467,000)
----------
Long-term portion of obligations under capital leases at 11%
to 12%.................................................... $1,375,000
==========
</TABLE>

Assets under capital leases totaled $2,353,000 and $440,000, respectively,
at April 30, 1996 and 1995. Depreciation of leased assets was $265,000, $101,000
and $122,000 for the years ended April 30, 1996, 1995 and 1994, respectively.

8. INCOME TAXES

At April 30, 1996, the Company has net operating loss carryforwards of
approximately $13.3 million available to offset future taxable income, expiring
2006 through 2011. The Company has recorded a deferred tax asset of
approximately $5.3 million with an offsetting valuation allowance at April 30,
1996. For purposes of recording deferred tax assets, no future taxable income is
assumed given the results of operations of the Company to date.

The components of deferred taxes at April 30 are as follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net operating loss.......................................... $ 5,430,000 $ 3,006,000
Depreciation................................................ (172,000) (72,000)
Other....................................................... 59,000 42,000
----------- -----------
Net asset................................................... 5,317,000 2,976,000
Valuation allowance......................................... (5,317,000) (2,976,000)
----------- -----------
Total deferred taxes................................... $ -0- $ -0-
=========== ===========
</TABLE>

The components of income tax expense are as follows for the fiscal years
ending April 30:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
Computed expected tax benefit............................... $ 3,521 $ 1,319 $ 884
Impairment provision........................................ (1,225)
Change in valuation allowance............................... (2,341) (1,319) (884)
Other....................................................... 45
------- ------- -----
Income tax expense........................................ $ -0- $ -0- $ -0-
======= ======= =====
</TABLE>

F-11
<PAGE> 57

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

Agreements to lease or purchase laser equipment

Effective May 30, 1996, the Company agreed to purchase three new excimer
lasers and one used excimer laser for use primarily in Europe for a total of
$1.7 million due during the first half of fiscal 1997. At April 30, 1996, the
Company has agreed to purchase twelve VISX excimer lasers (approximate purchase
price of $6 million) and has an option to purchase twenty more (approximate
purchase price of $10 million). The Company is also negotiating to assume the
lease obligations for up to three excimer lasers.

Employment agreements

During fiscal 1996, the Company entered into three-year contracts with four
officers of the Company provide for base salaries and the potential payment of
certain bonuses. During fiscal 1996, 1995 and 1994, $449,000, $208,000 and
$62,000, respectively, were provided for these bonuses which were tied to the
price of the Company's common stock. Six other key employees have employment
contracts for one year to eighteen month periods.

Operating leases

The Company has office and laser center lease agreements in St. Louis,
Minneapolis, Montreal, London, Edinburgh and Solihull. The respective leases
commenced in 1993, 1994 and 1996 and shall end in 1998, 2000 and 2001.
Approximate future minimum rental payments under the leases are as follows.

<TABLE>
<CAPTION>
YEAR ENDING MINIMUM RENTAL
APRIL 30, PAYMENTS
- ------------------------------------------------------------ --------------
<S> <C>
1997........................................................ $370,000
1998........................................................ 297,000
1999........................................................ 270,000
2000........................................................ 243,000
2001........................................................ 168,000
</TABLE>

Related rental expenses totaled $184,000, $98,000 and $71,000 for the years
ended April 30, 1996, 1995 and 1994, respectively.

Claims

During fiscal 1992, the Company hired an investor relations consulting firm
and agreed to issue the firm 100,000 to 150,000 warrants to purchase the
Company's common stock at $5.00 per share. Due to failure to perform and breach
of contract, the Company filed a claim against the firm during fiscal 1993 to
rescind the contract, void the warrants and recover fees and expenses. The
disputed warrants are not included in Note 12 of these consolidated financial
statements. Management does not expect this claim, currently in the trial
preparation process, to have a material adverse effect upon the Company's future
results of operations, liquidity or financial condition.

10. LEGAL PROCEEDINGS

The Company is party to the following legal proceedings:

On October 8, 1993, the Company filed suit in the Circuit Court of St.
Louis County, Missouri, against Laser Vision Centers International SpA (SpA) in
connection with disputes between Company and SpA arising out of a proposed
agreement between the parties. On December 17, 1993, the court entered judgment
by default in the Company's favor: (i) terminating and rescinding any and all
agreements and proposed

F-12
<PAGE> 58

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreements between the parties; (ii) for money damages in the amount of $175,000
and (iii) ordering the return of 275,000 shares of common stock which was issued
to SpA. Accordingly, in the year ended April 30, 1994, the Company recorded a
$175,000 provision for loss on the advance and the cancellation of the 275,000
shares of common stock and related note receivable, common stock. In June 1994,
SpA filed a Motion to Vacate the Judgment in the lawsuit. SpA's motion was
denied in April 1995, but SpA has filed an appeal which is currently awaiting a
ruling from the Missouri Court of Appeals.

On November 17, 1994, the Company brought suit against LaserVision Centers
West, Inc. (LVCWI) in the United States District Court for the Eastern District
of Missouri alleging trade mark, service mark and trade name infringements and
other related violations of law. The Company seeks to have LVCWI enjoined from
any further use of these marks or names or any others which are confusingly
similar to those registered to and used by the Company. In addition, the Company
seeks damages, attorney fees and a declaratory judgment that no agreement exists
between the parties. LVCWI has counterclaimed against the Company for breach of
contract. On July 7, 1995, this action was transferred to the United States
District Court for the Central District of California. The case is in the final
stages of discovery. The Company intends to vigorously pursue the prosecution of
this suit.

On March 24, 1995, the Company filed suit against 20/20 Laser Centers, Inc.
(20/20) in the United States District Court for the Southern District of
California alleging trade mark, service mark and trade name infringements and
other related violations of law. The various counts in this suit arose from
20/20's use of the marks or name "Laser Vision" and "Laser Vision Correction."
The Company seeks to have 20/20 enjoined from any further use of these marks or
names or any others which are confusingly similar to those registered and used
by the Company. The Company also seeks damages and attorney fees in conjunction
with this action. On June 23, 1995, by stipulated agreement of the parties, this
action was transferred to the United States District Court for the District of
Maryland, Greenbelt Division. 20/20 has counterclaimed for cancellation of the
Company's registered marks LASERVISION, LASERVISION CENTERS AND DESIGN,
LASERVISION CENTER and LASERVISION CENTERS. The Company intends to vigorously
pursue the prosecution of this suit.

Management does not expect these legal proceedings, individually or in the
aggregate, to have a material adverse effect upon the Company's future results
of operations, liquidity or financial condition.

11. CAPITAL STOCK

In November 1993, the Company completed a second public offering for
950,000 units at a price to the public of $5.00 per unit. Each unit consisted of
one share of common stock and one Class F warrant which allows the holder to
purchase one share of common stock for $6.00 on or before April 3, 1995. The
underwriter subsequently exercised its over allotment option and acquired
142,500 Class F warrants bringing the total number of Class F warrants issued to
1,092,500. In connection with this second public offering, the Company sold to
the representative, for $.001 per warrant, underwriter warrants to purchase up
to 95,000 units at $7.25 per unit over a five-year period.

During fiscal 1994, the expiration date for the Class A warrants was
extended to August 1994 and the expiration date for the Class B warrants was
extended to April 1995. In addition, the exercise price for the Class B warrants
was reduced to $6.00 per share. Prior to expiration, a total of 401,220 Class A
warrants were exercised (288,780 Class A warrants expired without being
exercised) and 401,220 Class B warrants were issued. During fiscal 1995, the
expiration date for the Class B warrants and the Class F warrants was extended
to February 6, 1996. All Class B and F warrants were exercised by February 6,
1996 except for 7,295 which expired unexercised.

F-13
<PAGE> 59

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In September 1994, stockholders approved an increase in the number of
authorized common shares from 10,000,000 to 50,000,000 and an amendment to the
Company's Certificate of Incorporation requiring super majority (80%) approval
of certain business combinations.

In April 1995, the Company sold 125,000 shares of unregistered common stock
to two investors at $7.225 per share, less solicitation and offering costs.
These stockholders also received certain piggyback registration rights and the
option to (1) convert their common shares for any convertible preferred stock
subsequently issued under a private offering or (2) receive additional common
shares at no cost to bring the average price per share down to a $.25 discount
to the conversion price as anti-dilution rights. In May and September 1995, the
Company sold an additional 168,500 shares of unregistered common stock to two
other investors under substantially similar terms. In October 1995, these
investors elected to receive 73,718 additional shares of common stock in
connection with their anti-dilution rights.

12. STOCK OPTIONS AND WARRANTS

The Company has two plans under which stock options may be granted, one
plan under which registered warrants may be granted and also has issued
unregistered warrants. These plans are administered by the Board of Directors
whose Compensation Committee recommends option and warrant grants for officers,
directors and key consultants of the Company.

The 1990 Incentive Stock Option Plan (the Option Plan) was approved by
stockholders of the Company on March 5, 1990 and amended by the stockholders on
April 22, 1992 and January 19, 1996. Under the terms of the Option Plan, the
Company has reserved for issuance to key employees and officers of the Company
700,000 shares of common stock. The exercise price may not be less than the
market price of the common stock on the date of grant. Options are nonassignable
and may be exercised only by the employee while employed by the Company or
within three months after termination of employment unless due to death or
disability. Options are exercisable in increments over four years and expire no
later than ten years from the date of the grant. Of the 283,485 options
outstanding as of April 30, 1996, 78,750 were granted to officers and 204,735
were granted to other employees. In May 1996, 10,000 options were granted to a
new officer at $12.50 per share.

The 1990 Non-Qualified Stock Option Plan (the Plan) was approved by the
stockholders of the Company on March 5, 1990, and amended by the stockholders on
April 22, 1992 and January 19, 1996. Under the terms of the Plan, as amended,
the Company has reserved 600,000 shares of common stock for issuance upon
exercise of options granted to outside directors and consultants. At April 30,
1996, the Company had 151,000 options outstanding under the Plan of which
135,000 were issued to a former outside director and 16,000 were issued to
consultants. In May 1996, 80,000 options were issued to the four outside members
of the Board of Directors and the four members of the Company's medical advisory
board (one of whom is also a Board member) at an exercise price of $12.625 per
share, which approximated the fair market value at the date of grant.

Under the 1994 Non-Qualified Warrant Plan, as amended on January 19, 1996,
the Company has reserved 1,500,000 shares of common stock for issuance upon
exercise of registered warrants granted to certain employees, directors and
consultants, of which 104,250 were exercised during fiscal 1996 and 901,250
warrants were outstanding as of April 30, 1996. Such warrants generally vest
ratably over a twenty four month period and are exercisable over a five year
period. During fiscal 1995, 824,500 unregistered warrants were converted to
Non-Qualified Warrants with the same exercise price per share and 120,000
Non-Qualified Warrants were issued to certain consultants, officers and
employees at the market price. During fiscal 1996, 61,000 Non-Qualified Warrants
were issued to a Company officer at $12.625 per share, the market price at the
date of the grant. In May 1996, certain officers (including new officers) and
employees were granted a total of 234,000 warrants at an average market price of
$12.46 per share, which approximated the fair market value at the date of grant.

F-14
<PAGE> 60

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Of the 435,000 unregistered warrants outstanding as of April 30, 1996,
325,000 were issued to officers, employees and consultants during fiscal 1995 at
$9.00 per share (above the market price). During fiscal 1996, 30,000
unregistered warrants were exercised and 110,000 unregistered warrants were
issued to consultants. In May 1996, 125,000 unregistered warrants were granted
to new officers of the Company at the current market price of $12.50 per share.
Unregistered warrants are exercisable over a five year period and vest at
varying rates ranging from immediately to three years.

Information with respect to the above plans is as follows:

<TABLE>
<CAPTION>
1990 1990
INCENTIVE NON-QUALIFIED 1994
STOCK OPTION STOCK OPTION UNREGISTERED NON-QUALIFIED
PLAN PLAN WARRANTS WARRANT PLAN
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Outstanding at April 30, 1993................ 310,045 235,000 -- --
Exchanged ($5.91 to $6.35)................... (217,000) (72,500) 289,500
Granted ($5.00 to $5.50 options; $5.00 to
$7.50 warrants)............................ 92,000 67,000 565,000
Canceled..................................... (4,500) (52,500) -- --
-------- ------- -------- --------
Outstanding at April 30, 1994................ 180,545 177,000 854,500 --
Exercised ($5.00 to $5.75)................... (1,600) (10,000)
Exchanged ($5.00 to $7.50)................... (824,500) 824,500
Granted ($5.38 to $7.75 options; $5.31 to
$9.00 warrants)............................ 109,000 25,000 325,000 120,000
Canceled..................................... (1,250) -- -- --
-------- ------- -------- --------
Outstanding at April 30, 1995................ 286,695 192,000 355,000 944,500
Exercised ($3.00 to $7.75)................... (59,210) (41,000) (30,000) (104,250)
Granted ($12.50 to $16.625 options; $5.25 to
$12.625 warrants).......................... 59,000 110,000 61,000
Canceled..................................... (3,000) -- -- --
-------- ------- -------- --------
Outstanding at April 30, 1996................ 283,485 151,000 435,000 901,250
======== ======= ======== ========
Average price per share at
April 30,
1994.................................... $ 4.41 $ 5.38 $ 5.79 $ --
1995.................................... $ 5.62 $ 5.67 $ 8.66 $ 5.89
1996.................................... $ 7.42 $ 5.78 $ 8.11 $ 6.40
Exercisable at April 30,
1994.................................... 100,545 145,750 363,151 --
1995.................................... 165,570 159,500 57,083 737,347
1996.................................... 170,235 151,000 239,583 827,041
</TABLE>

The Company also has the following warrants outstanding as of April 30,
1996:

24,000 Class C and 15,150 Class D-Exercisable for one share of common
stock, at a price of $5.00 per share, expire December 24, 1997

24,500 Class E-Exercisable for one share of common stock, at a price
of $5.00 per share, expire January 6, 1998

46,888 Underwriter warrants-Exercisable for one share of common stock,
at a price of $7.25 per share, expire November 9, 1998

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), which addresses accounting for stock option, purchase
and award plans. SFAS 123 specifies that companies utilize either the "fair
value based method" or the "intrinsic value based method" for valuing stock
options granted. The Company will

F-15
<PAGE> 61

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adopt SFAS 123 as required in fiscal 1997, and expects to utilize the "intrinsic
value based method" for valuing stock options granted. The Company anticipates
that, when adopted, SFAS 123 will not have a material effect on its financial
position or results of operations.

13. BUSINESS SEGMENT INFORMATION

After allocating certain corporate expenses and determining the primary
geographic area for mobile equipment, business segment information for the years
ended April 30, 1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
LASERVISION CENTERS DIVISION
---------------------------------------
FOREIGN
------------------------- MARKETVISION
DOMESTIC CANADA EUROPE DIVISION TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED APRIL 30, 1996
Revenues................................. $ 286,000 $ 943,000 $ 1,255,000 $ 1,434,000 $ 3,918,000
----------- ----------- ----------- ------------ -----------
Income (loss) from operations............ $(3,695,000) $(1,350,000) $(4,312,000) $ 141,000 $(9,216,000)
----------- ----------- ----------- ------------ -----------
Minority interest in net loss of
subsidiary............................. 192,000
Interest/other income.................... 437,000
Interest expense......................... (216,000)
-----------
Net loss............................... $(8,803,000)
Identifiable assets...................... $23,667,000 $ 561,000 $ 4,027,000 $ 658,000 $28,913,000
----------- ----------- ----------- ------------ -----------
Capital expenditures..................... $ 7,213,000 $ 426,000 $ 981,000 $ 7,000 $ 8,604,000
----------- ----------- ----------- ------------ -----------
Depreciation and amortization............ $ 285,000 $ 467,000 $ 1,430,000 $ 20,000 $ 2,203,000
----------- ----------- ----------- ------------ -----------
YEAR ENDED APRIL 30, 1995
Revenues................................. $ 12,000 $ 921,000 $ 1,545,000 $ 833,000 $ 3,311,000
----------- ----------- ----------- ------------ -----------
Income (loss) from operations............ $(1,707,000) $ (409,000) $(1,126,000) $ 34,000 $(3,208,000)
----------- ----------- ----------- ------------ -----------
Minority interest in net loss of
subsidiary............................. 116,000
Interest/other income.................... 37,000
Interest expense......................... (242,000)
-----------
Net loss............................... $(3,297,000)
-----------
Identifiable assets...................... $ 2,613,000 $ 1,741,000 $ 6,767,000 $ 197,000 $11,318,000
----------- ----------- ----------- ------------ -----------
Capital expenditures..................... $ 371,000 $ 508,000 $ 1,627,000 $ -- $ 2,506,000
----------- ----------- ----------- ------------ -----------
Depreciation and amortization............ $ 236,000 $ 388,000 $ 1,248,000 $ -- $ 1,872,000
----------- ----------- ----------- ------------ -----------
YEAR ENDED APRIL 30, 1994
Revenues................................. $ 20,000 $ 808,000 $ 689,000 $ 589,000 $ 2,106,000
----------- ----------- ----------- ------------ -----------
Loss from operations..................... $ (850,000) $ (610,000) $ (410,000) $ (30,000) $(1,900,000)
----------- ----------- ----------- ------------ -----------
Interest/other income.................... 21,000
Interest expense......................... (156,000)
Loss on advance.......................... (175,000)
-----------
Net loss............................... $(2,210,000)
-----------
Identifiable assets...................... $ 1,446,000 $ 1,497,000 $ 6,025,000 $ 167,000 $ 9,135,000
----------- ----------- ----------- ------------ -----------
Capital expenditures..................... $ 27,000 $ 142,000 $ 5,914,000 $ -- $ 6,083,000
----------- ----------- ----------- ------------ -----------
Depreciation and amortization............ $ 224,000 $ 466,000 $ 527,000 $ 2,000 $ 1,219,000
----------- ----------- ----------- ------------ -----------
</TABLE>

F-16
<PAGE> 62

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1996 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 6,127,000 $12,672,000
Restricted cash........................................... 276,000
Receivables, net of allowances of $394,000 and $286,000,
respectively........................................... 1,068,000 805,000
Prepaid expenses and other current assets................. 646,000 483,000
Assets held for sale (Note 4)............................. 1,200,000
----------- -----------
Total Current Assets................................. 8,117,000 15,160,000
Equipment
Laser equipment........................................... 16,048,000 9,474,000
Medical Equipment......................................... 569,000 352,000
Mobile equipment.......................................... 1,311,000 892,000
Furniture and fixtures.................................... 1,263,000 1,019,000
-Accumulated depreciation................................. (3,005,000) (1,323,000)
----------- -----------
16,186,000 10,414,000
Equipment deposits........................................ 272,000 1,765,000
----------- -----------
Total Equipment, Net................................. 16,458,000 12,179,000
Other Assets
Restricted cash........................................... 1,374,000
Goodwill, net of amortization............................. 1,339,000 1,108,000
VCI deposits.............................................. 229,000 256,000
Tradename and service mark costs, net..................... 146,000 152,000
Rent deposits and other, net.............................. 49,000 58,000
----------- -----------
Total Other Assets................................... 3,137,000 1,574,000
----------- -----------
Total Assets................................................ $27,712,000 $28,913,000
=========== ===========
CURRENT LIABILITIES
Current portion of notes payable.......................... $ 565,000 $ 1,858,000
Current portion of capitalized lease obligations.......... 569,000 467,000
Accounts payable.......................................... 1,855,000 870,000
Accrued liabilities....................................... 1,076,000 1,963,000
----------- -----------
Total Current Liabilities............................ 4,065,000 5,158,000
Non-Current Liabilities
Notes payable............................................. 3,663,000
Capitalized lease obligations............................. 1,634,000 1,375,000
Deferred revenue.......................................... 226,000 275,000
Minority interests........................................ 113,000
Other liabilities......................................... 300,000
----------- -----------
Total Non-Current Liabilities........................ 5,823,000 1,763,000
Commitments and Contingencies
Convertible Preferred Stock with Mandatory Redemption
Provision in 2005, 0 and 141,000 shares outstanding,
respectively.............................................. 14,539,000
Stockholders' Equity
Common stock, par value of $.01 per share, 50,000,000
shares authorized; 8,805,383 and 6,415,993 shares
issued and outstanding, respectively................... 88,000 64,000
Paid-in capital........................................... 38,606,000 23,831,000
Accumulated deficit....................................... (20,870,000) (16,442,000)
----------- -----------
Total Stockholders' Equity........................... 17,824,000 7,453,000
----------- -----------
Total Liabilities and Stockholders' Equity........... $27,712,000 $28,913,000
=========== ===========
</TABLE>

See notes to interim consolidated financial statements

F-17
<PAGE> 63

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTH PERIOD SIX MONTH PERIOD
ENDED OCTOBER 31, ENDED OCTOBER 31,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................................. $ 1,928,000 $ 960,000 $ 3,430,000 $ 1,732,000
Cost of revenues, depreciation............ 944,000 405,000 1,559,000 851,000
Cost of revenues, other................... 886,000 701,000 1,663,000 1,263,000
----------- ----------- ----------- -----------
Gross profit (loss).................. 98,000 (146,000) 208,000 (382,000)
----------- ----------- ----------- -----------
Operating Expenses:
General and administrative.............. 785,000 403,000 1,892,000 697,000
Salaries and related expenses........... 815,000 596,000 1,622,000 936,000
Depreciation and amortization........... 109,000 78,000 208,000 126,000
Selling and marketing expenses.......... 520,000 267,000 991,000 453,000
----------- ----------- ----------- -----------
2,229,000 1,344,000 4,713,000 2,212,000
----------- ----------- ----------- -----------
Loss from operations................. (2,131,000) (1,490,000) (4,505,000) (2,594,000)
Other income (expenses)
Interest and other income............... 57,000 37,000 163,000 76,000
Interest expense........................ (117,000) (27,000) (189,000) (33,000)
Imputed interest expense................ (26,000) (60,000)
Minority interest in net loss of
subsidiary........................... 55,000 50,000 103,000 84,000
----------- ----------- ----------- -----------
Net loss............................. $(2,136,000) $(1,456,000) $(4,428,000) $(2,527,000)
=========== =========== =========== ===========
Net loss per share................... $(0.25) $(0.30) $(0.57) $(0.54)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding............................. 8,537,000 4,820,000 8,035,000 4,696,000
=========== =========== =========== ===========
</TABLE>

See notes to interim consolidated financial statements

F-18
<PAGE> 64

LASER VISION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE TOTAL
------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance -- April 30, 1996......... 6,415,993 $64,000 $23,831,000 $(16,442,000) $ 7,453,000
Issuance of restricted shares of
common stock.................... 20,609 -- 160,000 -- 160,000
Exercise of incentive and
non-qualified options........... 18,790 -- 100,000 -- 100,000
Dividends accrued on convertible
preferred stock................. -- -- (126,000) -- (126,000)
Conversion of preferred stock..... 2,349,991 24,000 14,641,000 -- 14,665,000
Net loss for the six month period
ended October 31, 1996.......... (4,428,000) (4,428,000)
--------- ------- ----------- ------------ -----------
Balance -- October 31, 1996....... 8,805,383 $88,000 $38,606,000 $(20,870,000) $17,824,000
========= ======= =========== ============ ===========
</TABLE>

See notes to interim consolidated financial statements

F-19
<PAGE> 65

LASER VISION CENTERS INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW

<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
OCTOBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss.................................................. $(4,428,000) $(2,527,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 1,767,000 977,000
Imputed interest....................................... 60,000
Provision for uncollectible accounts................... 108,000 22,000
Receivables increase................................... (371,000) (33,000)
Prepaid expenses and other current asset increase...... (163,000) (105,000)
Minority interests decrease............................ (103,000) (85,000)
Tradenames/other asset decrease........................ 32,000
Accounts payable and accrued liabilities increase...... 198,000 261,000
Deferred revenue decrease.............................. (49,000)
----------- -----------
Net cash used in operating activities........... (3,009,000) (1,430,000)
Cash Flows from Investing Activities
Acquisition of equipment.................................. (3,844,000) (1,271,000)
Acquisition of goodwill................................... (206,000) (17,000)
Acquisition of minority interest.......................... (10,000)
----------- -----------
Net cash used in investing activities........... (4,060,000) (1,288,000)
Cash Flows from Financing Activities
Proceeds from private offering, preferred................. 14,100,000
Private placement offering costs, preferred............... (1,008,000)
Proceeds from exercise of stock options................... 60,000 242,000
Principal payments under capitalized lease obligations and
notes payable.......................................... (2,109,000) (2,007,000)
Proceeds from loan financing.............................. 2,573,000
Proceeds from private offerings, common................... 1,219,000
Private placement offering costs, common.................. (64,000)
Proceeds from exercise of other warrants.................. 342,000
Net proceeds from exercise of Class B and F warrants...... 1,712,000
----------- -----------
Net cash provided by financing activities................... 524,000 14,536,000
----------- -----------
Net increase (decrease) in cash and cash
equivalents................................. (6,545,000) 11,818,000
Cash and cash equivalents at beginning of period............ 12,672,000 2,126,000
----------- -----------
Cash and cash equivalents at end of period.................. $ 6,127,000 $13,944,000
=========== ===========
Non-cash investing and financing:
Conversion of preferred stock and accrual of preferred
dividends.............................................. 14,539,000
Equipment deposits and assets held for sale exchanged for
equipment.............................................. 2,693,000
Restricted cash acquired through financing................ 1,650,000
Capital lease obligations related to laser purchases...... 617,000 1,024,000
Increase in other liabilities for laser purchase.......... 300,000 675,000
Goodwill acquired for restricted common stock............. 130,000 647,000
Common stock issued to reduce liabilities................. 70,000
Med-Source purchase accounting adjustment to goodwill and
accruals............................................... 30,000
Deposits related to deferred revenue...................... 250,000
Accrued offering costs, private placement................. 200,000
</TABLE>

See notes to interim consolidated financial statements

F-20
<PAGE> 66

LASER VISION CENTERS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)

ITEM 1.

1. The information contained in the interim consolidated financial
statements and footnotes is condensed from that which would appear in the annual
consolidated financial statements. Accordingly, the interim consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and related notes thereto contained in the
April 30, 1996 Annual Report on Form 10-KSB filed by LaserVision Centers, Inc.
(the "Company") with the Securities and Exchange Commission. The unaudited
interim consolidated financial statements as of October 31, 1996 and October 31,
1995, and for the quarterly and six month periods then ended, include all normal
recurring adjustments which management considers necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results which may be expected for the entire
fiscal year. The interim consolidated financial statements include the accounts
and transactions of the Company and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated. The October 31,
1996 six month consolidated statements of operations include certain
reclassifications to conform with classifications for the three month period
ended October 31, 1996.

Cash and cash equivalents include short-term (90 day or less) commercial
paper and obligations of the U.S. government and its agencies.

The net loss per share was computed using the weighted average number of
common shares outstanding during each period. Common stock equivalents were
excluded due to their anti-dilutive effect. The loss per common share for the
six months ended October 31, 1996 and for the quarter ended October 31, 1996,
reflects $126,000 and $21,000, respectively, of accrued dividends on Convertible
Preferred Stock with Mandatory Redemption in 2005.

2. In October 1995, the Company received gross proceeds of $14,100,000 from
the sale of 141,000 shares of restricted convertible preferred stock with a
mandatory redemption provision after ten years. During the six months ended
October 31, 1996, all of the shares of restricted convertible preferred stock
were converted to 2,349,991 shares of restricted common stock in accordance with
the terms of the purchase agreement.

3. On October 15, 1996, the Company purchased the entire minority interest
in the Arnott Laser Vision Centre located in London England. The purchase price
of approximately $330,000, including $130,000 of restricted stock (17,000
shares), resulted in the extinguishment of the remaining minority interest of
$3,000 and the remainder was allocated to goodwill.

4. During the six months ended October 31, 1996, ten lasers held for sale
as of April 30, 1996 were sold for their net book value of $1,200,000 and four
new lasers were purchased for use in Europe.

5. Eight lasers were purchased for use in the United States during the six
months ended October 31, 1996. Equipment deposits were utilized for a portion of
the laser purchases. In addition, during the quarter ended October 31, 1996
financing was obtained for eight lasers originally purchased with cash. The four
and one-half year loan restricts $1,650,000 of the cash proceeds until certain
payment and financial performance criteria are met. The portion of restricted
cash which will become unrestricted within a year is classified as a current
asset.

6. During the quarter ended July 31, 1996, the Company canceled a proposed
public offering and charged $260,000 of accumulated costs related to the
offering to general and administrative expenses.

F-21
<PAGE> 67

================================================================================

NO DEALER, SALESMAN OR 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 CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES OF
COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

PAGE

Prospectus Summary..................................... 3
Risk Factors........................................... 6
Use of Proceeds........................................ 11
Description of Securities to be
Registered........................................... 12
Price Range of Common Stock and
Dividend Policy...................................... 13
Selling Shareholders................................... 14
Plan of Distribution................................... 15
Selected Consolidated Financial
Data................................................. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................................ 18
Business............................................... 26
Description of Property................................ 35
Legal Proceedings...................................... 35
Management............................................. 36
Experts................................................ 43
Available Information.................................. 43
Index to Consolidated Financial Statements............. 44

2,717,209 SHARES

LASER VISION
CENTERS, INC.

COMMON STOCK

----------------------
P R O S P E C T U S
----------------------

MARCH 7, 1996

================================================================================
<PAGE> 68

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following sets forth the costs and expenses payable by the Company in
connection with the sale of common stock being registered hereunder:

<TABLE>
<S> <C>
Registration fees........................................... $ 4,837
Printing cost............................................... $15,000
Transfer agent fees......................................... $ 1,000
Legal fees and expenses..................................... $15,000
Accounting fees and expenses................................ $10,000
Miscellaneous............................................... $ 1,000
-------
Total............................................. $46,837
=======
</TABLE>

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6 of the Company's Certificate of Incorporation provides for
indemnification of the officers and directors of the Company to the fullest
extent permitted by the laws of the State of Delaware.

Section 145 of the General Corporation Law of the State of Delaware
provides generally and in pertinent part that a Delaware corporation may
indemnify its directors and officers against expenses, judgment, fines and
settlements actually and reasonably incurred by them in connection with any
civil suit or action, except actions by or in the right of the corporation, or
in connection with any administrative or investigative proceedings if, in
connection with the matters in issue, they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of the
company and in connection with any criminal suit or proceeding, if in connection
with the matters in issue, they had no reasonably cause to believe their conduct
was unlawful. Section 145 further permits a Delaware corporation to grant its
directors and officers additional rights of indemnification through bylaw
provisions and otherwise and to purchase indemnity insurance on behalf of its
directors and officer.

The Registrant maintains a policy of insurance under which the directors
and officers of the Registrant are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in their
respective capacities as directors or officers.

RECENT SALES OF UNREGISTERED SECURITIES

1. See "Selling Stockholders."

2. Beginning in May, 1995 the Company issued 293,500 shares of unregistered
common stock in private placements of shares to four separate entities. The
total proceeds from these private placement were approximately $2,100,000.

3. On August 10, 1995, the Company entered into a stock exchange and merger
agreement with Vision Correction, Inc. ("VCI"), a Minnesota corporation in which
76,151 shares of unregistered common stock were issued to VCI.

4. On October 11, 1995, the Company issued 141,000 shares of unregistered
convertible preferred stock in a private placement. The total proceeds from this
private placement were $14,100,000. These shares have been converted into common
shares.

II-1
<PAGE> 69

The foregoing transactions were exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended, by reason of the
provisions of Section 4(2) thereof, covering transactions not involving any
public offering. The shares of Common Stock were sold to "Accredited Investors,"
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
23.1 Consent of Price Waterhouse LLP to include their report on
the consolidated financial statements for the years ended
April 30, 1994, 1995 and 1996.
</TABLE>

UNDERTAKINGS

The Company hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
Post-Effective Amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the Effective Date of the Registration Statement (or the most recent
Post-Effective Amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.

(2) That, for the purpose of determining liability under the Securities
Act, each Post-Effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a Post-Effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(5) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of the Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(6) That for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 70

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of St.
Louis, Missouri on the 12th day of February, 1997.

LASER VISION CENTERS, INC.

By: /s/ JOHN J. KLOBNAK
------------------------------------
John J. Klobnak
Chief Executive Officer and
Chairman of the Board of Directors

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ JOHN J. KLOBNAK Chief Executive Officer and February 12, 1997
- ----------------------------------------------------- Chairman of the Board of
John J. Klobnak Directors

/s/ ALAN F. GILLAM President and Director February 12, 1997
- -----------------------------------------------------
Alan F. Gillam

/s/ B. CHARLES BONO, III Executive Vice President, February 12, 1997
- ----------------------------------------------------- Principal Accounting
B. Charles Bono, III Officer, Chief Financial
Officer and Treasurer

/s/ ROBERT W. MAY Vice-Chairman of the Board, February 12, 1997
- ----------------------------------------------------- General Counsel and
Robert W. May Secretary

/s/ RICHARD L. LINDSTROM, M.D.* Director February 12, 1997
- -----------------------------------------------------
Richard L. Lindstrom, M.D.

/s/ DR. HENRY SIMON* Director February 12, 1997
- -----------------------------------------------------
Dr. Henry Simon

/s/ JAMES M. GARVEY* Director February 12, 1997
- -----------------------------------------------------
James M. Garvey

/s/ STEVEN C. STRAUS* Director February 12, 1997
- -----------------------------------------------------
Steven C. Straus

*By JOHN J. KLOBNAK,
- ----------------------------------------------------
Attorney In Fact
</TABLE>

II-3

<PAGE> 1

EXHIBIT 23.1

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 14, 1996, relating
to the financial statements of Laser Vision Centers, Inc., which appears in such
Prospectus. We also consent to the references to us under the headings "Experts"
and "Selected Financial Data" in such Prospectus. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."

PRICE WATERHOUSE LLP
St. Louis, Missouri

March 7, 1997