<PAGE>   1


                                    FORM 10Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                  For the quarterly period ended March 31, 1999

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from __________________ to _________________________
Commission file number: 0-22977

                             VISION TWENTY-ONE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

FLORIDA                                               59-3384581
(STATE OR OTHER JURISDICTION OF INCORPORATION         (I.R.S. EMPLOYER
OR ORGANIZATION)                                      IDENTIFICATION NO.)

7360 BRYAN DAIRY ROAD
LARGO, FLORIDA                                        33777
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (727) 545-4300

                                 NOT APPLICABLE
          (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
--------------------------------------------------------------------------------

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [ ]    No  [X]
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

    The registrant had 15,147,588 Shares outstanding as of May 31, 1999.


<PAGE>   2



                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                -----------------------------
                                                                     1998             1999
                                                                ------------      -----------
<S>                                                             <C>               <C>
Revenues:
  LADS operations, net ....................................     $ 20,571,734      $36,904,292
  Managed care ............................................       13,007,310       14,184,912
  Buying group ............................................       13,725,148       14,777,722
                                                                ------------      -----------
                                                                  47,304,192       65,866,926
                                                                ------------      -----------

Operating expenses:
  LADS operating expenses .................................       15,253,449       30,829,448
  Medical claims ..........................................        9,658,487       10,371,748
  Cost of buying group sales ..............................       12,794,985       14,062,211
  General and administrative ..............................        5,790,370        6,517,289
  Depreciation and amortization ...........................        1,351,763        2,184,938
  Merger costs ............................................          508,443               --
  Start-up and software development costs .................           67,019               --
                                                                ------------      -----------
                                                                  45,424,516       63,965,634
                                                                ------------      -----------

Income from operations ....................................        1,879,676        1,901,292
Interest expense ..........................................          662,984        1,885,115
                                                                ------------      -----------
Income before income taxes ................................        1,216,692           16,177
Income taxes ..............................................          328,507               --
                                                                ------------      -----------
Income before extraordinary charge ........................          888,185           16,177
Extraordinary charge - early extinguishment of debt .......          397,190               --
                                                                ------------      -----------
Net income ................................................     $    490,995      $    16,177
                                                                ============      ===========
Earnings per common share:
  Income  before extraordinary charge .....................     $       0.06      $        --
  Extraordinary charge ....................................            (0.03)              --
                                                                ------------      -----------
Net earnings per common share .............................     $       0.03      $        --
                                                                ============      ===========
Earnings per common share - assuming dilution:
  Income before extraordinary charge ......................     $       0.06      $        --
  Extraordinary charge ....................................            (0.03)              --
                                                                ------------      -----------

Net earnings per common share - assuming dilution .........     $       0.03      $        --
                                                                ============      ===========
</TABLE>




    See accompanying notes to the condensed consolidated financial statements



                                       1
<PAGE>   3




                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,         MARCH 31,
                                                                                                   1998                1999
                                                                                               -------------      -------------
<S>                                                                                            <C>                <C>
                                                       ASSETS
Current Assets:
  Cash and cash equivalents ..............................................................     $   6,052,423      $   8,344,119
  Accounts receivable due from:
     Patients and buying group members, net ..............................................        17,143,261         18,461,947
     Managed Professional Associations ...................................................         3,028,117          2,175,022
     Managed health benefits payors ......................................................         1,573,799            492,856
  Inventories ............................................................................         3,308,813          3,698,485
  Prepaid expenses and other current assets ..............................................         3,166,836          3,795,000
                                                                                               -------------      -------------
         Total current assets ............................................................        34,273,249         36,967,429
Fixed assets, net ........................................................................        15,222,586         16,171,510
Intangible assets, net ...................................................................       132,232,027        131,557,684
Deferred income taxes ....................................................................         6,300,000          6,300,000
Other assets .............................................................................         2,561,717          2,742,102
                                                                                               -------------      -------------
         Total assets ....................................................................     $ 190,589,579      $ 193,738,725
                                                                                               =============      =============

                                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .......................................................................     $   6,951,099      $  10,223,142
  Accrued expenses .......................................................................         6,279,213          5,480,362
  Medical claims payable .................................................................         4,713,995          3,320,409
  Accrued compensation ...................................................................         3,716,787          5,663,183
  Accrued restructuring charge ...........................................................         2,796,000          2,515,607
  Current portion of long-term debt ......................................................         2,143,149          2,398,447
  Current portion of obligations under capital leases ....................................           538,820            397,874
                                                                                               -------------      -------------
         Total current liabilities .......................................................        27,139,063         29,999,024

Deferred rent payable ....................................................................           253,258            267,802
Obligations under capital leases .........................................................           474,891            509,211
Long-term debt, less current portion .....................................................        81,217,396         81,362,547
Deferred leasehold incentive .............................................................           271,358            260,393
Deferred income taxes ....................................................................         7,512,000          7,512,000
Stockholders' equity:
   Preferred stock, $.001 par value; 10,000,000 shares authorized: no shares issued ......                --                 --
   Common stock, $.001 par value; 50,000,000 shares authorized; 15,067,025
     (December 31, 1998) and 15,070,968 (March 31, 1999) shares issued
     and outstanding .....................................................................            15,067             15,071
  Additional paid in capital .............................................................        89,196,292         89,259,171
  Common stock to be issued (105,164 shares) .............................................         1,053,664          1,053,664
  Deferred compensation ..................................................................          (300,435)          (273,360)
  Notes receivable from officer ..........................................................          (172,984)          (172,984)
  Accumulated deficit ....................................................................       (16,069,991)       (16,053,814)
                                                                                               -------------      -------------
         Total stockholders' equity ......................................................        73,721,613         73,827,748
                                                                                               -------------      -------------
         Total liabilities and stockholders' equity ......................................     $ 190,589,579      $ 193,738,725
                                                                                               =============      =============
</TABLE>


    See accompanying notes to the condensed consolidated financial statements



                                       2
<PAGE>   4



                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>                                                                                                 THREE MONTHS ENDED
                                                                                                               MARCH 31,
                                                                                                    -----------------------------
                                                                                                        1998              1999
                                                                                                    ------------      -----------
<S>                                                                                                 <C>               <C>
OPERATING ACTIVITIES
Net income ....................................................................................     $    490,995      $    16,177
Adjustments to reconcile net income to net cash provided by operating activities:
   Extraordinary charge - early extinguishment of debt ........................................          635,190               --
   Depreciation and amortization ..............................................................        1,351,763        2,184,938
   Amortization of deferred leasehold incentive ...............................................               --           10,965
   Amortization of loan fees ..................................................................           28,050               --
   Non-cash compensation expense ..............................................................           40,083           50,620
   Amortization of deferred compensation ......................................................               --           27,075
   Changes in operating assets and liabilities, net of effects from business combinations:
     Accounts receivable, net .................................................................       (5,150,069)        (237,743)
     Inventories ..............................................................................           37,255         (389,672)
     Prepaid expenses and other current assets ................................................         (266,022)        (628,164)
     Other assets .............................................................................         (139,095)        (217,300)
     Accounts payable .........................................................................         (550,048)       3,272,043
     Accrued expenses .........................................................................        2,190,520         (798,851)
     Accrued compensation .....................................................................          623,890        1,946,396
     Accrued restructuring charge .............................................................               --         (280,393)
     Deferred rent payable ....................................................................               --           14,544
     Medical claims payable ...................................................................        1,014,780       (1,393,586)
     Due to/from Managed Professional Associations ............................................        1,443,597          853,095
                                                                                                    ------------      -----------
          Net cash provided by operating activities ...........................................        1,750,889        4,430,144

INVESTING ACTIVITIES
Payments for fixed assets, net ................................................................         (983,335)      (1,902,863)
Payments for acquisitions, net of cash acquired ...............................................       (1,838,177)        (172,721)
Payments for capitalized acquisition costs ....................................................       (1,715,910)        (332,035)
                                                                                                    ------------      -----------
          Net cash used in investing activities ...............................................       (4,537,422)      (2,407,619)

FINANCING ACTIVITIES
Proceeds from long-term debt ..................................................................       39,222,073               --
Payments on long-term debt ....................................................................      (25,850,700)        (135,237)
Proceeds from credit facility .................................................................               --        3,394,686
Payments on credit facility ...................................................................               --       (2,859,000)
Payments for financing fees ...................................................................         (724,101)         (36,915)
Payments on capital lease obligations .........................................................               --         (106,626)
Payments to acquire treasury stock ............................................................       (1,548,084)              --
Exercise of stock options .....................................................................          107,353           12,263
Decrease in notes receivable, officers and shareholders .......................................            2,500               --
Capital distribution ..........................................................................         (245,548)              --
                                                                                                    ------------      -----------
          Net cash provided by financing activities ...........................................       10,963,493          269,171
                                                                                                    ------------      -----------

Increase in cash and cash equivalents .........................................................        8,176,960        2,291,696
Cash and cash equivalents at beginning of period ..............................................        4,048,358        6,052,423
                                                                                                    ------------      -----------
Cash and cash equivalents at end of period ....................................................     $ 12,225,318      $ 8,344,119
                                                                                                    ============      ===========
</TABLE>




    See accompanying notes to the condensed consolidated financial statements


                                       3
<PAGE>   5



                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 1999

1.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
information set forth therein have been included. The accompanying condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.

         Operating results for the three-month period ended March 31, 1999 are
not necessarily an indication of the results that may be expected for the year
ending December 31, 1999.

RECLASSIFICATION

         Certain prior period amounts have been reclassified to conform to the
current period presentation.

2.       EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
earnings per share for income from continuing operations:

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED MARCH 31,
                                                                 1998             1999
                                                             -----------      -----------
<S>                                                          <C>              <C>
Numerator:
  Numerator for basic and diluted earnings per
   share-income available to common
   stockholders .......................................      $   888,185      $    16,177
Denominator:
  Denominator for basic earnings per share-
   Weighted average shares ............................       13,840,902       14,932,697
                                                             -----------      -----------
Effect of dilutive securities:
   Stock options ......................................          181,797           39,083
   Warrants ...........................................          199,972               --
   Nonvested stock ....................................           90,678            2,769
   Contingent shares ..................................               --          105,164
                                                             -----------      -----------
Dilutive potential common shares ......................          472,447          147,016
                                                             -----------      -----------
  Denominator for diluted earnings per
   share-adjusted weighted-average shares and
   assumed conversions ................................       14,313,349       15,079,713
                                                             ===========      ===========
Basic earnings per common share .......................      $      0.06      $        --
                                                             ===========      ===========
Diluted earnings per common share .....................      $      0.06      $        --
                                                             ===========      ===========
</TABLE>


                                       4
<PAGE>   6

                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                   (CONTINUED)

3.       RESTRUCTURING PLAN

         The Company expensed business integration costs of approximately $1.3
million that were incurred during the three months ended March 31, 1999. Such
amount is included in general and administrative expenses in the consolidated
statements of operations. These business integration costs represent incremental
or redundant costs that are required to be expensed as incurred. For the three
months ended March 31, 1999, these business integration costs consisted
primarily of redundant employee costs.

         For the year ended December 31, 1998, management of the Company
committed to and commenced the implementation of a restructuring plan (the
"Restructuring Plan"), that was designed to facilitate the transformation of the
Company into an integrated eye care company. The Restructuring Plan initiatives,
which are comprised of a number of specific projects, are designed to position
the Company to take full operational and economic advantage of recent
acquisitions. The Restructuring Plan will enable the Company to complete the
consolidation and deployment of necessary infrastructure for the future,
optimize and integrate certain assets and exit certain markets. The
Restructuring Plan initiatives are expected to result in the elimination of
approximately 110 positions throughout the Company and are expected to be
completed by December 31, 1999. The initiatives to be undertaken as part of the
Restructuring Plan include the integration of managed care service centers and
business lines, the consolidation of retail back office functions and the
consolidation of certain corporate functions. The Restructuring Plan resulted in
a restructuring charge of approximately $2.8 million for the year ended December
31, 1998 and was comprised of severance costs of approximately $1.9 million and
facility and lease termination costs of approximately $0.9 million. The reserve
for the Restructuring Plan was $2.8 million at December 31, 1998.

         For the three months ended March 31, 1999, the Company utilized
approximately $0.3 million of this charge, related to severance payments. The
reserve for the Restructuring Plan was $2.5 million at March 31, 1999.


4.       LITIGATION

         In January and February 1999, four purported class action lawsuits were
filed against the Company and certain of its directors and officers. The
lawsuits were filed in United States District Court for the Middle District of
Florida, Tampa Division. The four plaintiffs generally sought to certify their
complaints as class actions on behalf of all purchasers of the Company's common
stock in the period between December 5, 1997 and November 5, 1998, and seek an
award of an unspecified amount of monetary damages to all of the members of the
purported class.

         On April 21, 1999, the cases were consolidated and one plaintiffs group
was appointed lead plaintiff by judicial order on May 6, 1999. This uncertified
consolidated class action seeks to hold the Company and two of its officers who
are also directors as well as a former officer liable for alleged federal
securities law violations. The lead plaintiffs group purports to represent a
class of plaintiffs who were allegedly defrauded by alleged misstatements and
omissions in analyst reports, trade journal articles, press releases and filings
with the Securities and Exchange Commission.

         Pursuant to the judicial order, the lead plaintiffs group must file an
amended consolidated complaint within forty-five days from May 31, 1999. The
Company is not required to respond until such amended consolidated complaint is
filed and served. The Company believes that it has substantial defenses to this
matter and intends to assert them vigorously. Management of the Company is
unable to determine the impact, if any, that the resolution of the
aforementioned uncertified class action lawsuit will have on the financial
position or results of operations of the Company.

                                       5
<PAGE>   7

                    VISION TWENTY-ONE, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                   (CONTINUED)

5.       SEGMENT REPORTING

         The Company identifies reportable segments based on management
responsibility for the strategic business units that offer different products
and services. The segments are managed separately based on the fundamental
differences in their operations. The Company's operations have been classified
into four segments: clinical and surgery centers, retail optical, managed care
and buying group. The clinical and surgery centers segment includes all activity
related to managing optometry and ophthalmology practices, refractive surgery
centers and ambulatory surgical centers. The retail optical segment includes the
operations of three retail optical chains located in Minnesota, New Jersey and
Wisconsin. The managed care segment includes the operations consisting primarily
of Block Vision, Maryland Eye Care and Vision 21 Managed EyeCare of Tampa Bay,
Inc. The buying group segment includes the operations of Block Buying Group. The
corporate segment includes general and administrative expenses associated with
the operations of the Company's corporate and regional offices and expenses not
allocated to reportable segments.

         The accounting policies of the reportable segments are the same as
those described in Note 2 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1998. The Company evaluates the performance of its
operating segments based on income before taxes, depreciation and amortization,
accounting changes, unusual items and interest expense. Summarized financial
information concerning the Company's reportable segments is shown in the
following table:


<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              1999               1998
                                                        ------------       ------------
<S>                                                     <C>                <C>
Revenues:
     Clinical and surgery centers                       $ 21,745,556       $ 13,051,588
     Retail optical                                       15,158,736          7,520,146
     Managed care                                         14,184,912         13,007,310
     Buying group                                         14,777,722         13,725,148
                                                        ------------       ------------
        Total segments                                    65,866,926         47,304,192
     Corporate                                                    --                 --
                                                        ------------       ------------
Total revenues                                          $ 65,866,309       $ 47,304,192
                                                        ============       ============

Segment Profit:
     Clinical and surgery centers                       $  3,092,156       $  2,848,100
     Retail optical                                        1,945,972            801,372
     Managed care (a)                                      1,696,972            934,196
     Buying group (b)                                        715,511            731,987
                                                        ------------       ------------
        Total segments                                     7,450,611          5,315,655
     Corporate                                            (2,066,373)        (1,508,754)
                                                        ------------       ------------
Total segment profit                                    $  5,384,238       $  3,806,901
                                                        ============       ============
</TABLE>

(a)      Managed Care segment profit includes general and administrative
         expenses related to the Buying Group which the Company is unable to
         separately identify from the general and administrative expenses of
         Block Vision.

(b)      Buying Group profit represents the gross profit from the sale optical
         products.

6.       SALE OF BUYING GROUP

         On June 4, 1999, the Company completed the sale of the Block Buying
Group. Cash proceeds received by the Company were primarily used to repay
outstanding borrowings under the Company's credit facility.





                                       6
<PAGE>   8


ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL OVERVIEW

         Vision Twenty-One, Inc. (the "Company") develops and manages local area
eye care delivery systems ("LADSsm") in 40 markets. LADS involve contractual
affiliations with local optometrists and ophthalmologists (the "Affiliated
Providers") to provide primarily vision care and refractive surgery at
independent or company-owned clinics and surgery centers. Additionally, the
Company develops retail distribution channels for its LADS through owning or
affiliating with retail optical chains, and develops managed care distribution
channels for its LADS through contracting with local health plans and other
third party payors.

         The Company began operations in 1984, providing services to seven
optometrists practicing at eight clinic locations. The Company currently
provides its services to 40 LADS located in 27 states through which
approximately 5,800 Affiliated Providers deliver eye care services. Of these
Affiliated Providers, 218 are Managed Providers, consisting of 170 optometrists
and 48 ophthalmologists practicing at 175 clinic locations, 12 ASCs and six
RSCs. In addition, the Company has over 7,000 eye care professionals available
for potential managed care business in future markets. The Company's Affiliated
Providers, in conjunction with select national retail optical chains, deliver
eye care services under the Company's 103 managed care contracts and 12 discount
fee-for-service plans covering approximately 5.2 million exclusively contracted
patient lives.

         Through the third quarter of 1998, the Company's primary focus had been
on aggressively developing LADS and expanding LADS to new markets through
acquisitions in order to provide for a complete continuum of easily accessible,
high quality and affordable eye care services. This strategy of growth through
acquisitions positioned the Company in its principal markets and the Company is
now the largest full service eye care company in the United States. The Company
now believes that there are significant internal growth and development
opportunities available within existing LADS and as a result, in the last
quarter of 1998 and thus far in 1999, the Company has slowed down its
acquisition pace. Among other things, the Company plans to focus on vision care
including opening new de novo clinics and surgery centers and expanding managed
care initiatives with a primary focus on expanding its refractive surgery
programs to take advantage of the significantly increased demand for refractive
surgery. Furthermore, the Company will focus on completing the integration of
systems, processes and management with the goal of achieving significant cost
savings in the future.

         The Company has concentrated on developing its LADs since late 1997. It
is currently analyzing certain business units within such LADS and assessing the
long-term strategic value of each existing component. The Company is also
evaluating high growth opportunities existing in the vision care sector with
special emphasis on refractive surgery in which to add additional complimentary
business to its LADs. In connection with these strategies, the Company recently
sold its Buying Group Division, the proceeds of which were used for repayment of
a portion of its bank debt.

ADDITIONAL OVERVIEW

     The Company enters into long-term management agreements ("Management
Agreements") with the professional associations or corporations ("Managed
Professional Associations") pursuant to which the Company is the sole provider
of comprehensive management, business and administrative services for the
non-professional aspects of the professional practices which obligate the
Company to provide certain facilities, equipment, accounting services,
purchasing, assistance in managed care, contract negotiations, management and
clinical personnel information systems, training and billing and collection
services.


                                       7
<PAGE>   9

Under substantially all of the Company's management Agreements, management fees
utilized in management relationships (i) with ophthalmology practices range from
20% to 37% of the Managed Professional Association's gross revenues after
deducting from such revenues all expenses of the clinic other than those related
to shareholders of the Managed Professional Associations, and (ii) with
optometrists range from 50% to 87% of gross revenues of a practice and the
Company is required to pay generally all of the expenses at the clinic with the
exception of professional salaries and benefits. The practice management fees
earned by the Company pursuant to these Management Agreements fluctuate
depending on variances in clinic revenues and expenses of the Managed
Professional Association. The Managed Professional Association derive their
revenues from fees received for the use of ASCs and sales of optical goods. The
Managed Professional Associations currently receive revenues from a combination
of sources, including capitation payments from managed care companies and
government funded reimbursements (Medicare and Medicaid).

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

     In June 1999, the Company completed the sale of its Buying Group division.
The Company applied the cash portion of the purchase price primarily to repay a
portion of outstanding borrowings under its credit facility. The sale of the
Buying Group will reduce the Company's revenues, but will be beneficial to the
Company's overall operating margins.

1998 ACQUISITIONS

         In addition to the acquisitions described below, the Company completed
the acquisition of the business assets of 54 optometry clinics, nine
ophthalmology clinics, one ambulatory surgical center, two refractive centers
and 21 optical dispensaries located in Texas, Arizona, New Jersey, Florida,
Nevada, Minnesota and Wisconsin. Business assets consist of certain non-medical
and non-optometric assets, including accounts receivable, leases, contracts,
equipment and other tangible and intangible assets. Concurrently with these
acquisitions, the Company entered into long-term management agreements
("Management Agreements") with the related professional associations employing
65 optometrists and five ophthalmologists. These acquisitions were accounted for
by recording assets and liabilities at fair value and allocating the remaining
costs to the related Management Agreements. Additionally, the Company closed the
acquisitions of all of the outstanding stock of The Complete Optical Laboratory,


                                       8
<PAGE>   10

Ltd., Corp., located in New Jersey which services the New Jersey optometry
clinics acquired by the Company, and the Company closed the acquisition of
substantially all of the business assets of a managed care company located in
Florida servicing more than 82,700 patient lives. These acquisitions were
accounted for under the purchase method of accounting. Such acquisitions are
collectively referred to herein as the "1998 Acquisitions." In connection with
these acquisitions, the Company provided aggregate consideration of
approximately $20.1 million, consisting of approximately 1.0 million shares of
Common Stock and approximately $13.5 million in cash and promissory notes in the
aggregate principal amount of $1.3 million, subject to closing adjustments. In
addition, the Company is required to provide additional contingent consideration
consisting of 282,185 shares of Common Stock and up to $2.1 million in cash, to
be paid to certain sellers if certain post-acquisition performance targets are
met. On a pro forma basis, had the 1998 Acquisitions occurred at the beginning
of 1997, the Company would have recorded $35.7 million and $16.1 million in
additional revenue for 1997 and 1998, respectively.

         The Company completed the acquisition of American SurgiSite Centers,
Inc., ("American SurgiSite") an ambulatory surgery center developer, management
and consulting company located in New Jersey, effective September 1, 1998.
American SurgiSite manages eight ambulatory surgery facilities. In connection
with this transaction, the Company paid $1.5 million in cash and issued 235,366
shares of Common Stock. In addition, the Company is required to provide
additional contingent consideration of up to $3.1 million if certain post
acquisition performance targets are met. On a pro forma basis, had this
acquisition occurred at the beginning of 1997, the Company would have recorded
$4.8 million and $3.2 million in additional revenue for 1997 and 1998,
respectively.

         The Company completed the acquisition of Vision World, Inc. ("Vision
World"), a retail optical chain located in Minneapolis, Minnesota, effective
June 30, 1998. Vision World consists of 38 retail clinics and 30 optometrists.
In connection with this transaction, the Company paid $16.1 million in cash, net
of cash acquired. In addition, the Company is required to provide additional
contingent consideration of up to $600,000 in cash if certain post-acquisition
performance targets are met. On a pro forma basis, had this acquisition occurred
at the beginning of 1997, the Company would have recorded $27.0 million and
$13.5 million in additional revenue for 1997 and 1998, respectively.

         In March 1998, the Company completed a transaction with EyeCare One
Corp. ("EyeCare One") and Vision Insurance Plan of America, Inc. ("VIPA").
EyeCare One was the parent company of Stein Optical which operates 16 optometric
retail locations in Milwaukee, Wisconsin. VIPA holds a single service insurance
license and delivers vision care benefits to approximately 19,000 patient lives
in Wisconsin. These transactions were accounted for by the Company as a pooling
of interests. The costs of approximately $718,000 incurred in connection with
these transactions were charged to expense. In connection with these
transactions, the Company issued 1,109,806 shares of Common Stock, valued at
approximately $10.5 million.

         In January 1998, the Company completed the acquisition of The Eye DRx,
a retail optical chain of 19 retail clinics located in Bloomfield, New Jersey.
In connection with this transaction, the Company paid $7.2 million in cash and
issued 522,600 shares of Common Stock. In addition, the Company is required to
provide additional contingent consideration of 19,398 shares of Common Stock if
certain post acquisition performance targets are met. In conjunction with this
acquisition, the Company entered into Management Agreements with the Managed
Professional Associations' stockholders. On a pro forma basis, had this
transaction occurred at the beginning of 1997, the Company would have recorded
$19.1 million in additional revenue for 1997.



                                       9
<PAGE>   11

RESTRUCTURING PLAN AND CERTAIN ACCOUNTING MATTERS

         The Company recognized various accounting impacts in the fourth quarter
of 1998 relative to a restructuring plan announced in 1998 (the "Restructuring
Plan"). The Restructuring Plan initiatives which are comprised of a number of
specific projects, are designed to position the Company to take full operational
and economic advantage of various key acquisitions, allow the Company to
complete the consolidation and deployment of necessary infrastructure for the
future, and optimize and integrate certain acquired assets. The Company expects
to achieve savings up to $8.0 million annually in connection with such
restructuring program once it is fully implemented, which is expected to be
accomplished by the end of 1999. The total restructuring and other charges and
business integration costs recorded in 1998 were $8.9 million. (See Note 15 of
the Company's Annual Report on Form 10-K - Special Charges to the Consolidated
Financial Statements). The Restructuring Plan resulted in the accrual of a
reserve for restructuring costs at December 31, 1998 in the amount of
approximately $2.8 million. These initiatives include: a) the integration of
managed care service centers and business lines, b) the consolidation of retail
back office functions, and c) the consolidation of certain corporate functions.
As provided for in the Restructuring Plan, the Company also expensed other
charges and related business integration costs related to the Restructuring Plan
that were incurred during the fourth quarter of 1998. These costs represent
incremental, redundant costs as well as internal costs that resulted directly
from the development and initial implementation of the Restructuring Plan, but
that are required to be expensed as incurred. All other charges and business
integration costs that were expensed as incurred during 1998 were approximately
$6.1 million. These other charges and business integration costs consist
primarily of: a) charge offs related to exiting certain markets, b) charge offs
of capitalized costs that will not be realized as a result of the Restructuring
Plan, and c) redundant employee costs and expenses for severed employees through
the date of severance. In addition, these costs include training costs,
rebranding costs, relocation costs, retention payments, and lease costs for
facilities that have been planned for closure. The Company expects to record
approximately $3.1 million during fiscal 1999 for business integration costs
expected to be incurred, until such time as the Restructuring Plan has been
fully implemented.

         Several unusual accounting items occurred in 1998 (which specific costs
related thereto are not expected to occur again in the future). These unusual
items consisted of restructuring and other charges and business integration
costs of $8.9 million related to the previously announced Restructuring Plan
discussed above, merger costs of $0.7 million, start-up and software development
costs of $0.9 million, an extraordinary charge of $1.3 million related to early
extinguishment of debt and expenses for the Company's previously disclosed
intercompany reconciliation and other items totaling $3.6 million. The $3.6
million consisted of $1.6 million of expenses related to the results of the
Company's previously announced unreconciled item and $2.0 million of one time
items related to revenue recognition of acquisition integration fees and
receivable write offs. As a result of the Company's reconciliation of
intercompany accounts, change in accounting for start-up costs and software
development costs, and the change in accounting treatment for revenue
recognition regarding acquisition integration fees 1998, the Company will
restate, to the extent material, its previously reported 1998 Quarterly
Financial Results, by filing Amended Form 10 - Qs for 1998.

         As previously announced, the unreconciled items referenced above
required extensive analysis of the financial statements from fiscal years 1996,
1997 and 1998 for many of the Company's acquired entities, resulting in a delay
in filing the Company's 10-K. The identified items substantially resulted from
the different accounting systems used for each entity during the prior periods.
Currently, these entities are operating on a single accounting management
information system using thin client server technology to connect them to
corporate headquarters over a private intranet network.



                                       10
<PAGE>   12

         Revenues for the first quarter ended March 31, 1999 increased over 30%
to $65.9 million while EBITDA, before business integration costs of $1.3 million
(see Note 3 - Restructuring Plan), increased over 20% to $5.4 million. Excluding
the impact of business integration costs in 1999 as a result of the Company's
previously disclosed Restructuring Plan, net income was $1.3 million, or $0.09
per share on a diluted basis or inclusive of business integration costs,
$16,177. The Company did not have a tax provision in the first quarter of 1999.
These business integration costs are expected to continue to be incurred by the
Company through 1999 on a diminishing basis.






















                                       11
<PAGE>   13



RESULTS OF OPERATIONS

         The following table sets forth, as a percentage of total revenues,
certain items in the Company's statement of operations for the periods
indicated. As a result of the 1997 and 1998 Acquisitions, the Company does not
believe that the historical percentage relationships for the three months ended
March 31, 1998 and 1999 reflect the Company's expected future operations.

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                                  MARCH 31
                                                           --------------------
                                                            1998          1999
                                                           ------        ------
<S>                                                        <C>           <C>
Revenues:
  LADS operations, net................................       43.5%         56.0%
  Managed care........................................       27.5          21.5
  Buying group........................................       29.0          22.5
                                                           ------        ------
         Total revenues                                     100.0         100.0
                                                           ------        ------

Operating expenses:
  LADS operating expenses.............................       32.3          46.8
  Medical claims......................................       20.4          15.8
  Cost of buying group sales..........................       27.0          21.3
  General and administrative..........................       12.2           9.9
  Depreciation and amortization.......................        2.9           3.3
  Merger costs........................................        1.1            --
  Start-up and software development costs.............        0.1            --
                                                           ------        ------
         Total operating expenses                            96.0          97.1
                                                           ------        ------

Income from operations................................        4.0           2.9
Interest expense......................................        1.4           2.9
                                                           ------        ------
Income before income taxes............................        2.6            --
Income taxes..........................................        0.7            --
                                                           ------        ------
Income before extraordinary charge....................        1.9            --
Extraordinary charge - early extinguishment of debt...        0.9           --
                                                           ------        ------
         Net income...................................        1.0%          1.6%
                                                           ======        ======

Medical claims ratio..................................      74.3%          73.1%
                                                           ======        ======
</TABLE>


Three-Month Period Ended March 31, 1999 Compared to Three-Month Period Ended
March 31, 1998

         Revenues. Revenues increased 39% from $47.3 million for the three
months ended March 31, 1998 to $65.9 million for the three months ended March
31, 1999. This increase was caused primarily by an increase in LADS operations
net revenues attributable to the 1998 Acquisitions. Comparable clinic revenues
increased more than 15% over 1998 levels for practices managed by the Company
for the entire year. Managed care revenues on a comparable basis increased 9%
over 1998. The Company's revenue mix has changed due to the acquisition of
Vision World, Inc. which was acquired in July 1998.

         LADS Operating Expenses. LADS operating expenses increased 102% from
$15.3 million for the three months ended March 31, 1998 to $30.8 million for the
three months ended March 31, 1999. LADS operating expenses consist of salaries,
wages and benefits of certain clinic staff, professional fees, medical supplies,
advertising, building and occupancy costs, and other general and administrative
costs related to the operation of clinics and ASCs. This increase was primarily
caused by the 1998 Acquisitions which includes the acquisition of Vision World,
Inc.


                                       12
<PAGE>   14

         Medical Claims. Medical claims expense increased 7% from $9.7 million
for the three months ended March 31, 1998 to $10.4 million for the three months
ended March 31, 1999. The Company's medical claims ratio decreased from 74.3%
for the three months ended March 31, 1998 to 73.1% for the three months ended
March 31, 1999. Medical claims expense consists of payments by the Company to
its Affiliated Providers for vision care wellness services, medical and surgical
eye care services and facility services. These payments are based on fixed
payments received (as determined by the number of eye care procedures performed
relative to other Affiliated Providers) or negotiated fee-for-service schedules.

         Cost of Buying Group Sales. Cost of buying group sales were incurred by
the Company as a result of its acquisition of Block Vision in 1998. The cost of
buying group sales consists of the costs of various optical products which are
shipped directly to the providers of eye care services. As noted above, the
Company completed the sale of the Block Buying Group on June 4, 1999.

         General and Administrative. General and administrative increased 13%
from $5.8 million for the three months ended March 31,1998 to $6.5 million for
the three months ended March 31,1999. General and administrative expenses
primarily consist of salaries, wages and benefits related to management and
administrative staff located at the Company's corporate headquarters retail
chains back offices and its managed care service centers. As a percentage of
revenues, general and administrative expenses decreased from 12.2% for the three
months ended March 31, 1998 to 9.9% for the three months ended March 31, 1999.
This decrease was caused primarily by increased economies of scale resulting
from the Company's expanding business.

         General and administrative expenses for the three months ended March
31, 1999 include approximately $1.3 million of business integration costs
discussed above, which are expected to be eliminated throughout 1999.

         Depreciation and Amortization. Depreciation and amortization expense
increased from $1.4 million for the three months ended March 31, 1998 to $2.2
million for the three months ended March 31, 1999. As a percentage of revenues,
depreciation and amortization expense increased from 2.8% for the three months
ended March 31, 1998 to 3.3% for the three months ended March 31, 1999. This
increase was caused primarily by the 1998 Acquisitions.

         Merger Costs. Merger costs were incurred as a result of the 1998
EyeCare One pooling of interests and consisted primarily of professional fees.

         Interest Expense. Interest expense increased 184% from $0.7 million for
the three months ended March 31, 1998 to $1.9 million for the three months ended
March 31, 1999. The increase was caused by an increase in the debt outstanding
from $40.3 million at March 31, 1998 to $84.7 million at March 31, 1999.



                                       13
<PAGE>   15


LIQUIDITY AND CAPITAL RESOURCES

         The Company has historically funded its working capital and capital
expenditure requirements primarily through institutional borrowings and private
debt and equity financings. Net cash provided by operating activities for the
three months ended March 31, 1998 and 1999 was $1.8 million and $4.4 million,
respectively. The Company experiences increases in certain balance sheet
accounts which result primarily from normal working capital needs.

         Net cash used in investing activities for the three months ended March
31, 1998 was $4.5 million, and primarily resulted from the payments for
acquisitions, including capitalized acquisition costs. Net cash used in
investing activities for the three months ended March 31, 1999, was $2.4
million, and primarily resulted from purchases of medical equipment and office
furniture.

         Net cash provided by financing activities for the three months ended
March 31, 1998 was $11.0 million and was attributable to debt and equity
financings and higher levels of institutional borrowings to support the
Company's internal expansion and acquisition activities. Net cash provided by
financing activities for the three months ended March 31, 1999 was $0.3 million
and is primarily attributable to internal expansion efforts.

         On January 30, 1998, the Company entered into a five-year, $50.0
million bank credit agreement (the "Credit Agreement") with the Bank of Montreal
as agent (the "Agent") for a consortium of banks. The Credit Agreement, which
matures in January 2003, provided the Company with a revolving credit facility
component in an aggregate amount of up to $10.0 million and a term loan
component in an aggregate amount of up to $40.0 million. The Credit Agreement is
secured by a pledge of the stock of substantially all of the Company's
subsidiaries and the assets of the Company and certain of its subsidiaries and
is guaranteed by certain of the Company's subsidiaries. The Credit Agreement
contains negative and affirmative covenants and agreements which place
restrictions on the Company regarding disposition of assets, capital
expenditures, additional indebtedness, permitted liens and payment of dividends,
as well as requiring the maintenance of certain financial ratios. The interest
rate on the Credit Agreement is, at the option of the Company, either (i) the
London InterBank Offered Rate plus an applicable margin rate, (ii) the greater
of (a) the Agent's prime commercial rate or (b) the "federal funds" rate plus
0.5%, or (iii) a fixed rate loan as determined by the Agent at each time of
borrowing. At the closing of the Credit Agreement the Company used approximately
$26.9 million of its available borrowing to repay the outstanding balance under
the Company's Bridge Credit Facility with Prudential Credit and related accrued
interest and transaction costs. The Company had used approximately $48.3 million
of its available borrowings under the Credit Agreement.

         On July 1, 1998, the Company entered into a restated $100.0 million
bank credit agreement with the Bank of Montreal as agent for a consortium of
banks (the "Restated Credit Agreement"). The Restated Credit Agreement was used
in part to early extinguish the Company's outstanding balance of approximately
$48.3 million under its prior Credit Agreement. The remaining balance under the
Restated Credit Agreement has been accessed in the past for working capital and
general corporate purposes, and for acquisitions. The Restated Credit Agreement
included a seven-year term loan of $70.0 million and a $30.0 million five-year
revolving and acquisition facility. Other terms and conditions were
substantially the same as the prior Credit Agreement with a slightly higher
margin spread on the seven-year term portion.

         On February 23, 1999, the Company entered into an amendment to the
Restated Credit Agreement (the "First Amendment"). The First Amendment provided
a $50.0 million term loan maturing in June 2005 with quarterly principal
payments of one percent beginning in June 1999, a $20.0 million term loan
maturing in June 2003 with quarterly principal payments of approximately $1.3
million



                                       14
<PAGE>   16

beginning in September 2000, a $12.5 million term loan which was to be
utilized for acquisitions and capital expenditures maturing in June 2003, and a
$7.5 million revolving facility maturing in June 2003. The First Amendment also
revised certain of the covenants and included a slightly higher margin spread on
the seven-year term portion. Other terms and conditions were substantially the
same as the Restated Credit Agreement. On June 11, 1999, the Company entered
into a second amendment to the Restated Credit Agreement (the "Second Amendment"
and together with the Restated Credit Agreement and the First Amendment, the
"Amended Credit Agreement"). The Second Amendment principally revised certain
financial covenants in connection with the credit facility which the Company was
previously unable to meet and resulted in the early termination of the Company's
unused portion of its borrowing capacity relative to the acquisition component
of the credit facility, which was scheduled to expire June 30, 1999. Of the $7.5
million of borrowings under the revolving facility, the Company currently has
limited availability of $1.7 million. As of June 10, 1999, the Company had used
approximately $78.0 million of its available borrowings under the Amended Credit
Agreement. The Company is currently evaluating its capital structure and various
financing alternatives as it considers its working capital needs over the
foreseeable future.

         On November 20, 1997, the Company completed the sale of 2,300,000
shares of its Common Stock at a price of $9.50 in a secondary public offering
(the "Secondary Offering"). The net proceeds of $20.5 million from the Secondary
Offering were used to fund a portion of the consideration for the Block
Acquisition.

         In October 1997, the Company received a commitment from Prudential
Securities Credit Corporation ("Prudential Credit") for a credit facility in the
aggregate amount of $37.0 million pursuant to a Note Purchase Agreement (the
"Bridge Credit Facility"). Approximately $27.0 million of the Bridge Credit
Facility was available, if needed, to fund the cash portion of the Block
Acquisition to the extent the net proceeds from the Company's Secondary Offering
were insufficient for such purpose. The remaining balance of approximately $10.0
million of the Bridge Credit Facility was available for optometry and
ophthalmology practice acquisitions. The Company borrowed $5.6 million and $6.5
million for use in funding the cash portions of the Block Acquisition and
LaserSight Acquisitions, respectively. Additionally, the Company borrowed
approximately $3.5 million for use in the funding of certain optometry and
ophthalmology practice acquisitions. Amounts borrowed pursuant to the Bridge
Credit Facility were secured by a first security interest in all of the
company's assets. The Bridge Credit Facility was required to be repaid at the
earlier of six months from the date of any borrowing from the Bridge Credit
Facility or upon the closing of any future debt or equity offering by the
Company. The Bridge Credit Facility contained negative and affirmative covenants
and agreements which included covenants requiring the maintenance of certain
financial ratios. The Company repaid its Bridge Credit Facility borrowings in
full from available proceeds under its Credit Agreement.

         On August 18, 1997, the Company completed the sale of 2,100,000 shares
of its Common Stock at a price of $10.00 per share in an initial public offering
(the "Initial Public Offering"). The net proceeds from the Initial Public
Offering were used to repay substantially all of the Company's outstanding
indebtedness and to provide funding to acquisitions of optometry and
ophthalmology clinics and ASCs.

         In April 1997, the Company entered into a credit facility in the
aggregate amount of $4.9 million with Prudential Securities Group Inc.
("Prudential") pursuant to a "Note and Warrant Purchase Agreement" (as amended
and restated, the Note and Warrant Purchase Agreement). The proceeds from the
borrowing were used to repay the Company's credit facility with Barnett Bank
N.A. in the principal amount of $2.0 million and for general working capital
purposes. Under the Note and Warrant Purchase Agreement, the Company issued a
senior note secured by all the Company's assets (the "Prudential Note"). The
Prudential Note accrued interest at 10% per annum with a maturity of the earlier
of January



                                       15
<PAGE>   17

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

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

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

         For the year ended December 31, 1998, the Company completed the 1998
Acquisitions and, in connection with the 1998 Acquisitions, the Company provided
aggregate consideration of approximately $37.5 million consisting of 1.6 million
shares of Common Stock, $21.9 million in cash and promissory notes in the
aggregate principal amount of approximately $1.3 million, subject to
post-closing adjustments. In addition, the Company is required to provide
additional contingent consideration, consisting of 301,583 shares of Common
Stock, and up to $2.1 million in cash, to be paid to certain sellers if certain
post-acquisition performance targets are met.

         Effective September 1, 1998, the Company completed the acquisition of
American SurgiSite Centers, Inc., an ambulatory surgery center developer,
management and consulting company located in New Jersey. In connection with this
transaction, the Company paid $1.47 million in cash and 235,366 shares. In
addition, the Company is required to provide additional contingent consideration
of up to $3.1 million if certain post acquisition performance targets are met.

         Effective June 30, 1998, the Company completed the acquisition of
Vision World, a retail optical chain located in Minneapolis, Minnesota,
effective June 30, 1998. In connection with this transaction, the Company paid
$16.1 million in cash, net of cash acquired. In addition, the Company is
required to provide additional contingent consideration of up to $0.6 million in
cash if certain post-acquisition performance targets are met.

         In March 1998, the Company completed a pooling of interests transaction
with EyeCare One and VIPA, Inc. In connection with the pooling transaction, the
Company issued 1,109,806 shares of Common Stock, subject to post-closing
adjustments, valued at approximately $10.5 million.

         Effective December 1, 1997, the Company completed the LaserSight
Acquisition in exchange for aggregate consideration paid to the seller of
approximately $13.0 million, consisting of $6.5 million in cash and 820,085
shares of Common Stock, subject to certain post-closing adjustments. The cash
portion of the consideration paid by the Company for the LaserSight Acquisition
was financed through a letter amendment to the Company's credit facility with
Prudential Securities Credit Corporation. On March 11, 1998, the Company
redeemed 168,270 shares of its Common Stock pursuant to the Stock Distribution
Agreement from LaserSight, Inc., for an aggregate purchase price of
approximately $1.5



                                       16
<PAGE>   18

million. Such shares were subsequently reissued by the Company in connection
with the EyeCare One acquisition.

         Effective October 31, 1997, the Company completed the Block Acquisition
in exchange for aggregate consideration paid to the sellers of approximately
$35.0 million, consisting of $25.6 million in cash, 458,365 shares of Common
Stock, subject to certain post-closing adjustments and 219,633 shares of Common
Stock to be held in escrow as contingent consideration, of which 109,816 shares
are to be delivered by the Company to the sellers if EBITDA of Block Vision
reaches $4.5 million for the year ended December 31, 1998. The remaining 109,817
shares will be deliverable on a pro rata escalating basis if Block Vision
reaches $4.5 million of EBITDA for 1998 with the full contingent consideration
deliverable upon Block Vision attaining $4.9 million of EBITDA for 1998. There
were no contingent shares issued for the year ended December 31, 1998, as EBITDA
of Block Vision did not reach the required level.

         During 1997, the Company also completed the 1997 Acquisitions, and in
connection with the 1997 Acquisitions, the Company provided aggregate
consideration of $20.1 million, consisting of 1,480,122 shares of Common Stock,
$6.7 million in cash and $364,000 in promissory notes. Additionally, the Company
is required to provide additional contingent consideration, consisting of
approximately 174,021 shares of Common Stock, approximately $821,000 in cash,
and approximately $467,000 in shares of Common Stock, to be paid to certain
sellers if post-acquisition performance targets are met.

         The Company has treated as deferred compensation the issuance of shares
of restricted stock in September and October 1996 for future services related to
various business development initiatives and management incentives. In September
1996, the Company entered into a five-year services agreement with its Chief
Medical Officer and current director of the Company and issued 108,133 shares of
restricted Common Stock. These shares were valued at $2.77 per share or
$300,000. Of these shares, 40% vested immediate and the Company recorded a
business development charge of $120,000. The remaining 60% of the shares were
recorded as an offset in stockholders' equity as deferred compensation for
$180,000. In October 1996, the Company entered into a five-year advisory
agreement with an industry consultant and issued 125,627 shares of restricted
Common Stock, which vest over the life of the advisory agreement. These shares
were valued at $2.77 per share or $349,000. The Company recorded the issuance of
these shares as an offset in stockholders' equity as deferred compensation. This
deferred compensation is being amortized as the shares vest on a pro rata basis.

         Intangible assets consist of the excess of the purchase price over the
fair values of the net assets acquired from the business acquisitions, which is
being amortized on a straight-line method over 25 or 30 years, and the
Management Agreements with the Managed Professional Associations. The Management
Agreements have 40-year terms and are being amortized on a straight line method
over 25 years. Intangible assets represented approximately 70% of the Company's
total assets at March 31, 1999. In determining the useful life of a Management
Agreement, the Company considers the operating history and other characteristics
of each practice. A principal consideration is the degree to which the practice
has demonstrated its ability to extend its existence indefinitely. The carrying
value of intangible assets is evaluated for recoverability whenever adverse
effects or changes in circumstances indicate that the carrying amount may not be
recoverable. Among other factors, the Company considers in making the valuation
are changes in the Managed Professional Associations market position,
reputation, profitability, and geographic penetration.

         The Company believes the effects of inflation have not had a material
adverse impact on its operations or financial condition to date. Substantial
increases in prices in the future, however, could have a material adverse effect
on the Company's results of operations.



                                       17
<PAGE>   19

         The Company has grown significantly with acquisitions funded with stock
of the Company. The Company may use its Common Stock as consideration for future
acquisitions in conjunction with its expansion strategy where it believes the
transaction will be accretive, which will be a factor in the Company's future
acquisitions, financial position and performance. The number of shares of Common
Stock the Company is ultimately required to provide in connection with its
acquisitions and the Company's ability to use stock in acquisitions will be
affected by the market price for its Common Stock and the number or shares so
provided will affect the Company's earnings per share.

         In 1999, thus far, the Company has operated and grown principally
through the use of positive operating capital cash flows and with a total sale
of $1.1 million in Company stock in two private transactions. As a result of the
Second Amendment, certain limited borrowings are now available to the Company.

         In connection with the Company's business integration plan described
above, the Company expects to spend approximately $4.9 million for severance and
other employee termination benefits in fiscal 1999. Additionally, the Company
currently expects to spend approximately $3.0 million for capital expenditures
and $3.0 million for new operating leases of equipment in fiscal 1999 which
includes costs to open new ASCs and new refractive surgery centers. Based upon
the Company's short-term anticipated capital needs for operation of its
business, general corporate purposes, along with furtherance of certain growth
objectives, management believes that the combination of the funds expected to be
provided from the Company's operations, limited accessibility under the credit
facility, accessibility to operating leases for certain new equipment and
currently anticipated future sources, will be sufficient for the short term. In
order to fully implement its vision care initiatives, including full
implementation of its refractive surgery program throughout its LADS markets the
Company will seek additional working capital in the very near future and is
currently analyzing its options relative to the same. Additionally, to the
extent additional capital resources are currently needed for acquisitions or
other significant matters, the Company expects to utilize supplemental
borrowings to the extent available and/or the net proceeds, if feasible, from
the offering of debt or equity securities. Any inability of the Company to
achieve acceptable financing as sought in the future would have an adverse
effect on the Company.

YEAR 2000 READINESS DISCLOSURE

         Currently many computer systems in use today were designed and
developed using two digits, rather than four, to specify the calendar year and
as a result, such systems are unable to recognize the year "2000". The inability
of a computer system to recognize the year "2000" could cause many computer
applications to fail or create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies essential
to its operations that could be affected by the year "2000" computer problem.

         The Company has implemented a plan of action which it believes will
make its computer systems year "2000 compliant." The Company is actively
addressing operational concerns regarding the year "2000" and is reviewing its
systems to identify those that may be affected by the year "2000."

         The Company divides its information technology software into the
following four general categories: (i) Financial (general ledger, financial and
management reporting, accounts payable, payroll and fixed assets), (ii) Retail
Chains (integrated-Point of Sale, Purchase Order Management, and Inventory
Control Systems), (iii) Practice Management (including billing, collection,
accounts receivables and third party billing) and (iv) Managed Care. The Company
is in various stages of readiness with respect to its information technology
within each category. The Company's Financial



                                       18
<PAGE>   20

Category has been certified Year 2000 compliant by the third party software
vendor providing the software to the Company. The Company has selected the Delta
Optical Computer System (the "Delta System") as its integrated system for Retail
Chains category. The Delta System has been implemented in its Stein Optical
Division. As part of the Company's Restructuring Plan, the Delta System will be
implemented in the remaining two retail chain divisions. The Company has
received certification that the Delta System is Year 2000 compliant.
Historically, the Company's philosophy with respect to the Practice Management
category of software is to utilize the third party software legacy systems in
place as long as they capably served a practices needs. Currently, the Company
has been advised that the third party software suppliers it utilizes for the
Practice Management category have either installed or have scheduled to install
over the next several months, Year 2000 upgrades. The Managed Care category
generally has custom software that has been upgraded for Year 2000 compliance
and final testing is scheduled over the next several months.

         The Company has initiated communications with significant suppliers,
customers and other third parties with which the Company does business, to
minimize disruptions to the Company's operations resulting from the year "2000"
problem and to ensure that any significant year "2000" problem will not have an
adverse effect on the Company's operations. The Company expects to work with
such parties to resolve or minimize year "2000" problems. The Company does not
expect the cost associated with its year "2000" compliance efforts to have a
material effect on the Company's future financial condition and results of
operation. The Company believes it currently has no material exposure to
contingencies related to the year "2000" issue and accordingly has not developed
a contingency plan. However, there can be no assurances that events outside the
control of the Company will not occur as a result of the year "2000" problem and
that such events would not have a material adverse effect on the Company.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                  MARKET RISK.

         The Company is exposed to changes in interest rates primarily as a
result of borrowing activities, under its Amended Credit Agreement, which is
used to maintain liquidity and fund the Company's business operations. The
nature and amount of the Company's debt may vary as a result of future business
requirements, market conditions and other factors. The extent of the Company's
interest rate risk is not quantifiable or predictable because of the variability
of future interest rates and business financing requirements, but the Company
does not believe such risk is material. The Company did not use derivative
instruments to adjust the Company's interest rate risk profile during the three
months ended March 31, 1999.




                                       19
<PAGE>   21


         SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Form 10-Q and certain information provided periodically in writing
and orally by the Company's designated officers and agents including the annual
report contain certain statements which constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The terms "Vision Twenty-One,"
"company," "we," "our" and "us" refer to Vision Twenty-One, Inc. The words
"expect," "believe," "goal," "plan," "intend," "estimate," and similar
expressions and variations thereof are intended to specifically identify
forward-looking statements. Those statements appear in this Form 10-Q,
particularly "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and include statements regarding the intent, belief or
current expectations of the company, its directors or its officers with respect
to, among other things;

         (i)      our financial prospects;

         (ii)     the successful integration of both completed and any future
                  acquisitions;

         (iii)    our ability to efficiently and effectively manage the Managed
                  Providers;

         (iv)     our financing plans including our ability to obtain
                  satisfactory working capital through additional offerings of
                  debt or equity;

         (v)      trends affecting our financial condition or results of
                  operations including our stock price and its potential impact
                  on the number of shares utilized in acquisitions and on future
                  earnings per share;

         (vi)     our growth strategy and operating strategy including the shift
                  in focus to internal growth and opening new de novo clinics
                  and surgery centers, expanding managed care initiatives,
                  vision care and refractive surgery programs;

         (vii)    the impact on us of current and future governmental
                  regulations;

         (viii)   our current and future managed care contracts and the impact
                  such contracts have on gross profit;

         (ix)     our ability to continue to recruit Affiliated Providers, to
                  convert certain of the Affiliated Providers to Managed
                  Providers, and to maintain our relationships with Affiliated
                  Providers;

         (x)      our ability to continue the strategic relationships with
                  affiliated retail optical companies;

         (xi)     our strategic initiatives in vision care and refractive
                  surgery;

         (xii)    our ability to operate the managed care business efficiently,
                  profitably and effectively;

         (xiii)   our integration of systems and implementation of cost savings
                  and reduction plans;

         (xiv)    the future LADS overall operating margins;

         (xv)     our year 2000 readiness and the readiness of third parties;



                                       20
<PAGE>   22

         (xvi)    our expected savings from the restructuring programs;

         (xvii)   our current and expected future revenue and the impact of any
                  acquisition and the consolidation of infrastructure may have
                  on our future performance;

         (xviii)  our current run rate for laser vision correction procedures
                  and the expected growth of such procedures and return on
                  invested capital;

         (xviv)   our late filing of the 10-Q and 10-K; and

         (xx)     the purported class action complaints filed against the
                  company.

         You are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward looking
statements as a result of various factors. The factors that might cause such
differences include, among others, the following:

         (i)      in the event the company experiences future operating and net
                  losses;

         (ii)     any material inability to successfully integrate and
                  profitably operate our acquisitions or to successfully open
                  integrate and profitably operate de novo clinics, refractive
                  surgery centers and ASCs;

         (iii)    any material inability to acquire additional sufficient
                  capital and financing at a reasonable cost to fund our
                  long-term growth strategy or to maintain compliance with our
                  credit facility;

         (iv)     the inability to expand our managed care business, renew
                  existing managed care contracts or maintain and expand our
                  Contract Provider Network;

         (v)      our inability to successfully and profitably operate our
                  managed care business or for existing managed care contracts
                  to positively impact gross profit;

         (vi)     our ability to maintain our relationships with our managed
                  clinics and the managed clinics' inability to operate
                  profitably;

         (vii)    changes in state and/or federal governmental regulations which
                  could materially affect our ability to operate or materially
                  affect our profitability;

         (viii)   the inability to maintain or obtain required licensure in the
                  states in which we operate and in the states in which we may
                  seek to operate in the future,

         (ix)     the degree current shortages in refractive surgery equipment
                  adversely impacts the Company's access to same;

         (x)      consolidation of our competitors, poor operating results by
                  our competitors, or adverse governmental or judicial rulings
                  against our competitors;

         (xi)     any failure by us to meet analysts expectations;

         (xii)    our stock price;


                                       21
<PAGE>   23

         (xiii)   any adverse change in our medical claims to managed care
                  revenue ratio;

         (xiv)    the effect of any future stock overhang in the market place
                  (where the available stock for sale would be in excess of
                  demand) and any negative impact on our stock price as a result
                  of the overhang;

         (xv)     our inability to realize any significant benefits, cost
                  savings or reductions from our restructuring program;

         (xvi)    the non-compliance or readiness of the company or third
                  parties with respect to year "2000" issues;

         (xvii)   our inability to successfully increase and expand vision care
                  and refractive surgery programs and other desired initiatives
                  complimentary to our LADS business;

         (xxiii)  unexpected cost increases,

         (xviv)   our inability to successfully defend against the class action
                  lawsuits or any additional litigation that may arise;

         (xx)     any reduction in coverage of and ratings by analysts following
                  us and other factors including those identified in our filings
                  from time-to-time with the SEC.

         The Company undertakes no obligation to publicly update or revise
forward looking statements to reflect events or circumstances after the date of
this Form 10-Q and annual report or to reflect the occurrence of unanticipated
events.








                                       22
<PAGE>   24



                                     PART II
                                OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         Except as described below, the Company is not a party to any material
litigation and is not aware of any threatened material litigation:

         The Company, certain of its executive officers who are also directors
and a former officer are named as defendants in several purported class action
lawsuits filed in the Untied States District Court for the middle District of
Florida, Tampa Division. The complaints allege, principally, that the Company
and the other defendants issued materially false and misleading statements
related to the Company's integration of its acquisitions, in violation of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The plaintiffs seek to certify their complaints as class
actions on behalf of all purchasers of the Company's common stock in the period
between December 5, 1997 and November 5, 1998, and seek and award of an
unspecified amount of monetary damages to all of the members of the purported
class. The purported class action lawsuit were as follows: (i) Tad McBride
against Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch, and
Michael P. Block (filed on January 22, 1999); (ii) Robert Rosen v. Vision
Twenty-One, Inc., Theodore N. Gillette and Richard T. Welch (filed on January
27, 1999); (iii) Charles Murray against Vision Twenty-One, Inc., Theodore N.
Gillette, Richard T. Welch and Michael P. Block (filed on January 29, 1999); and
(iv) Sam Cipriano, on behalf of himself and all others similarly situated v.
Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P.
Block.

         On April 20, 1999, pursuant to a motion and order, these complaints
were consolidated into one case captioned: Tad McBride, Plaintiff, v. Vision
Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael Block and
the lead plaintiff's group is required to file and serve an amended complaint
within forty-five days from May 31, 1999. The case is still uncertified and as
of June 11, 1999 the Company had not been served with an amended complaint.
While it is impossible to predict the outcome or impact of such litigation,
management believes this litigation is without merit and intends to vigorously
defend the lawsuit.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


(a)      Exhibits.  See Exhibit Index attached hereto.





                                       23
<PAGE>   25



                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER             EXHIBIT
------             -------
<S>               <C>
3.1*              Amended and Restated Articles of Incorporation of Vision
                  Twenty-One, Inc.(1)

3.2*              Bylaws of Vision Twenty-One, Inc.(1)

4.13*             Credit Agreement dated as of January 30, 1998 among Vision
                  Twenty-One, Inc. the Banks Party Hereto and Bank of Montreal
                  as Agent.(2)

4.14*             Amended and Restated Credit Agreement dated as of July 1, 1998
                  among Vision Twenty-One, Inc., and the Bank of Montreal as
                  Agent for a consortium of banks.(3)

4.15*             First Amendment to the Amended and Restated Credit Agreement
                  dated as of February 23, 1999 among Vision Twenty-One, Inc.,
                  the Banks party hereto and Bank of Montreal as Agent for the
                  Banks.(4)

4.16*             Second Amendment to the Amended and Restated Credit Agreement
                  dated as of June 11, 1999 among Vision Twenty-One, Inc., the
                  Banks party hereto and Bank of Montreal as Agent for the
                  Banks.(4)

                  (The Company is not filing any instrument with respect to
                  long-term debt that does not exceed 10% of the total assets of
                  the Company and the Company agrees to furnish a copy of such
                  instrument to the Commission upon request.)

10.59*            Credit Agreement dated as of January 30, 1998 among Vision
                  Twenty-One, Inc., the Banks Party Hereto and Bank of Montreal
                  as Agent filed as Exhibit 4.13 to this Report and incorporated
                  herein by reference.

10.60*            Amended and Restated Credit Agreement dated as of July 1, 1998
                  among Vision Twenty-One, Inc. the Banks Party Hereto and Bank
                  of Montreal as Agent, filed as Exhibit 4.14 to this Report and
                  incorporated herein by reference.

10.61*            First Amendment to the Amended and Restated Credit Agreement
                  dated as of February 23, 1999 among Vision Twenty-One, Inc.,
                  the Banks party hereto and Bank of Montreal as Agent for the
                  Banks, filed as Exhibit 4.15 to this report and incorporated
                  herein by reference.

10.62*            Second Amendment to the Amended and Restated Credit Agreement
                  dated as of June 11, 1999 among Vision Twenty-One, Inc., the
                  Banks party thereto and Bank of Montreal as Agent for the
                  Banks, filed as Exhibit 4.16 to this Report and incorporated
                  herein by reference.

10.64             Employment Agreement dated February 8, 1999 between Vision
                  Twenty-One, Inc. and Robert P. Collins

27                Financial Data Schedule for March 31, 1999 (for SEC use only).
</TABLE>

---------------
*Previously filed as an Exhibit in the Company filing identified in the footnote
  following the Exhibit Description and incorporated herein by reference.

         (1) Registration Statement on Form S-1 filed on June 13, 1997
             (File No. 333-29213).
         (2) Form 8-K filed February 10, 1998.
         (3) Form 8-K filed July 10, 1998.
         (4) Form 10-K filed June 18, 1999.



                                       24
<PAGE>   26




                                    SIGNATURE

                  Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized, in the city of Largo, State of
Florida on June 24, 1999.


                                           VISION TWENTY-ONE, INC.
                                           Registrant





                                           /s/ Richard T. Welch
                                           ------------------------------------
                                           Richard T. Welch
                                           Chief Financial Officer
                                           (The Principal Accounting Officer and
                                           Duly Authorized Officer)











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