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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549

FORM 10QSB



|(Mark One)
|----------
|x         
|          
|          
|          
|o         
|          
|          

|LASERSIGHT   INCORPORATED                                    
|-------------------------------------------------------------
|                                                             
|(Name   of Small Business Issuer as specified in its charter)

|Delaware                                                          |  | 650273162                              
|----------------------------------------------------------------- |  | ----------------------------------------
|                                                                  |  |                                         
|State   or other jurisdiction   of incorporation or organization) |  | (I.R.S.   Employer   Identification No.)
|                                                                  |  |                                         
|6848 Stapoint Court,   Winter Park, Florida  32792               
|(Address   of principal executive offices)                       
|Issuers   telephone number :  (407) 678-9900                    

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

|Yes
x | No
o
|----- | ----

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes
o | No
x
|----- | ----

Check whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

|Yes
x | No
o
|----- | ----

Number of shares of common stock outstanding as of November 11, 2006: 9,997,993

Transitional Small Business Disclosure Format (Check one):

|Yes
o | No
x
|----- | ----

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LASERSIGHT INCORPORATED AND SUBSIDIARIES

Except for the historical information contained herein, the discussion in this report contains forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934) that involve risks and uncertainties.   LaserSights actual results could differ materially from those discussed here.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in PART  I  ITEM 1  DESCRIPTION OF BUSINESS  RISK FACTORS AND PART II  ITEM 6  MANAGEMENTS DICUSSION AND ANALYSIS OR PLAN OF OPERATION  in LaserSights Annual Report on Form 10-KSB for the year ended December 31, 2005.  LaserSight undertakes no obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect any future events or
developments.

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|         |                       | INDEX                                                                                                                                   |  |     
|-------- | --------------------- | --------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |                       |                                                                                                                                         |  | PAGE
|         |                       |                                                                                                                                         |  |     
|PART I.  | FINANCIAL INFORMATION |                                                                                                                                         | 
|         |                       |                                                                                                                                         |  |     
|         | Item 1.               | Financial Statements.                                                                                                                   |  |     
|         |                       |                                                                                                                                         |  |     
|         |                       | Condensed Consolidated Balance   Sheet as of September 30, 2006 (unaudited)                                                             |  | 3   
|         |                       |                                                                                                                                         |  |     
|         |                       | Condensed Consolidated Statements   of Operations for the Three- and Nine-Month Periods Ended September 30, 2006   and 2005 (unaudited) |  | 4   
|         |                       |                                                                                                                                         |  |     
|         |                       | Condensed Consolidated Statements   of Cash Flows for the Nine- Month Periods Ended September 30, 2006 and 2005   (unaudited)           |  | 5   
|         |                       |                                                                                                                                         |  |     
|         |                       | Notes to Condensed Consolidated   Financial Statements                                                                                  |  | 6   
|         |                       |                                                                                                                                         |  |     
|         | Item 2.               | Managements Discussion and   Analysis or Plan of Operation.                                                                            |  | 13  
|         |                       |                                                                                                                                         |  |     
|         | Item 3.               | Controls and Procedures.                                                                                                                |  | 22  
|         |                       |                                                                                                                                         |  |     
|PART II. | OTHER INFORMATION     |                                                                                                                                         | 
|         |                       |                                                                                                                                         |  |     
|         | Item 1.               | Legal Proceedings.                                                                                                                      |  | 23  
|         |                       |                                                                                                                                         |  |     
|         | Item 2.               | Unregistered Sales of Equity   Securities and Use of Proceeds.                                                                          |  | 23  
|         |                       |                                                                                                                                         |  |     
|         | Item 3.               | Defaults Upon Senior Securities.                                                                                                        |  | 23  
|         |                       |                                                                                                                                         |  |     
|         | Item 4.               | Submission of Matters to a Vote of   Security Holders.                                                                                  |  | 24  
|         |                       |                                                                                                                                         |  |     
|         | Item 5.               | Other Information.                                                                                                                      |  | 24  
|         |                       |                                                                                                                                         |  |     
|         | Item 6.               | Exhibits.                                                                                                                               |  | 24  

Page     2

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PART 1 - FINANCIAL INFORMATION

LASERSIGHT INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

|                                                                                                                                 |  | September   30, 2006 |             
|-------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ------------
|                                                                                                                                 |  |                      |             
|ASSETS                                                                                                                           |  |                      |             
|Current assets:                                                                                                                  |  |                      |             
|Cash   and cash equivalents                                                                                                      |  | $                    | 334,804     
|Accounts   receivable  trade, net                                                                                               |  |                      | 1,203       
|Inventories,   net                                                                                                               |  |                      | 1,817,758   
|Prepaid   expenses                                                                                                               |  |                      | 39,746      
|                                                                                                                                 |  |                      |             
|Total   Current Assets                                                                                                           |  |                      | 2,193,511   
|Property   and equipment, net                                                                                                    |  |                      | 111,237     
|Patents,   net                                                                                                                   |  |                      | 391,259     
|Deposits   with suppliers                                                                                                        |  |                      | 213,757     
|                                                                                                                                 |  |                      |             
|Total   Assets                                                                                                                   |  | $                    | 2,909,764   
|                                                                                                                                 |  |                      |             
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                            |  |                      |             
|Current liabilities:                                                                                                             |  |                      |             
|Notes   payable related party- $1,000,000 convertible to equity                                                                  |  | $                    | 2,320,373   
|Accounts   payable                                                                                                               |  |                      | 87,419      
|Accrued   expenses                                                                                                               |  |                      | 203,292     
|Accrued   license fees                                                                                                           |  |                      | 52,821      
|Accrued   warranty                                                                                                               |  |                      | 50,000      
|Deferred   revenue                                                                                                               |  |                      | 776,364     
|                                                                                                                                 |  |                      |             
|Total   Current Liabilities                                                                                                      |  |                      | 3,490,269   
|Note payable long term   portion                                                                                                 |  |                      | 55,206      
|Deferred royalty revenue                                                                                                         |  |                      | 3,289,127   
|Commitments and   contingencies                                                                                                  |  |                      |             
|Stockholders deficit:                                                                                                           |  |                      |             
|Convertible preferred   stock, par value $.001 per share; authorized 10,000,000 shares; none issued                              |  |                      |            
|Common stock  par value   $.001 per share; authorized    100,000,000 shares; 9,997,195 shares issued and  9,997,193 outstanding |  |                      | 9,997       
|Additional paid-in capital                                                                                                       |  |                      | 104,738,681 
|Unearned Stock Based   Compensation                                                                                              |  |                      | (59,582     
|Accumulated deficit                                                                                                              |  |                      | (108,613,934
|Less treasury stock, at   cost;  2 common shares                                                                                 |  |                      |            
|                                                                                                                                 |  |                      |             
|Total   Stockholders Deficit                                                                                                    |  |                      | (3,924,838  
|                                                                                                                                 |  |                      |             
|Total   Liabilities and Stockholders Deficit                                                                                    |  | $                    | 2,909,764   
|                                                                                                                                 |  |                      |             

See accompanying notes to the condensed consolidated financial statements.

Page     3

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LASERSIGHT INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

|                                                                                                              |  | Three   Months Ended September 30, 2006 |           | Three   Months Ended September 30, 2005 |   | Three   Months Ended September 30, 2006 |   | Three   Months Ended September 30, 2005 |          
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | --------- | --------------------------------------- | - | --------------------------------------- | - | --------------------------------------- | ---------
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Revenues:                                                                                                     |  |                                         |           |                                         |   |                                         |   |                                         |          
|Products (including   revenues from related parties of $0, $894,224, $183,060 and $3,917,829,   respectively) |  | $                                       | 37,208    |                                         | $ | 1,069,988                               |   | $                                       | 558,531  
|Royalties                                                                                                     |  |                                         | 194,091   |                                         |   | 266,091                                 |   |                                         | 585,389  
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|                                                                                                              |  |                                         | 231,299   |                                         |   | 1,336,079                               |   |                                         | 1,143,920
|Cost of revenues:                                                                                             |  |                                         |           |                                         |   |                                         |   |                                         |          
|Product   cost                                                                                                |  |                                         | (27,765   | )                                       |   | 482,969                                 |   |                                         | 194,810  
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Gross profit                                                                                                  |  |                                         | 259,064   |                                         |   | 853,110                                 |   |                                         | 949,110  
|Research and development   and regulatory expenses                                                            |  |                                         | 33,506    |                                         |   | 46,705                                  |   |                                         | 117,506  
|Other general and   administrative expenses                                                                   |  |                                         | 452,397   |                                         |   | 576,773                                 |   |                                         | 1,540,681
|Selling-related expenses                                                                                      |  |                                         | (38,304   | )                                       |   | 38,575                                  |   |                                         | (131,555 
|Amortization of intangibles                                                                                   |  |                                         | 8,379     |                                         |   | 8,379                                   |   |                                         | 25,137   
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|                                                                                                              |  |                                         | 422,472   |                                         |   | 623,727                                 |   |                                         | 1,434,263
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Income (loss) from   operations                                                                               |  |                                         | (196,914  | )                                       |   | 182,678                                 |   |                                         | (602,659 
|Other income and expenses:                                                                                    |  |                                         |           |                                         |   |                                         |   |                                         |          
|Interest   and other income                                                                                   |  |                                         |          |                                         |   | 654                                     |   |                                         | 6,758    
|Interest expense                                                                                              |  |                                         | (170,337  | )                                       |   | (78,396                                 | ) |                                         | (305,291 
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Income (loss) before income   tax (expense) benefit                                                           |  |                                         | (367,251  | )                                       |   | 104,936                                 |   |                                         | (901,192 
|Income tax (expense)/benefit                                                                                  |  |                                         |          |                                         |   |                                        |   |                                         |         
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Net Income(loss)                                                                                              |  | $                                       | (367,251  | )                                       | $ | 104,936                                 |   | $                                       | (901,192 
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Income(loss) per common   share                                                                               |  |                                         |           |                                         |   |                                         |   |                                         |          
|Basic and diluted                                                                                             |  | $                                       | (0.04     | )                                       | $ | 0.01                                    |   | $                                       | (0.09    
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          
|Weighted average number of   shares outstanding                                                               |  |                                         |           |                                         |   |                                         |   |                                         |          
|Basic and diluted                                                                                             |  |                                         | 9,997,000 |                                         |   | 9,997,000                               |   |                                         | 9,997,000
|                                                                                                              |  |                                         |           |                                         |   |                                         |   |                                         |          

See accompanying  notes to the condensed consolidated financial statements.

Page      4

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LASERSIGHT INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2006 and 2005 (unaudited)

|                                                                                                     |  | September   30, 2006 |           | September   30, 2005 |  
|---------------------------------------------------------------------------------------------------- |  | -------------------- | --------- | -------------------- | -
|                                                                                                     |  |                      |           |                      |  
|Cash flows from operating   activities                                                               |  |                      |           |                      |  
|Net income (loss)                                                                                    |  | $                    | (901,192  | )                    | $
|Adjustments to reconcile   net income (loss) to net cash provided by (used in) operating activities: |  |                      |           |                      |  
|Depreciation and   amortization                                                                      |  |                      | 37,733    |                      |  
|Amortization of discount on   note payable and deferred financing costs                              |  |                      | 168,947   |                      |  
|Amortization of stock based   compensation                                                           |  |                      | 30,490    |                      |  
|Fees added to notes payable                                                                          |  |                      | 25,512    |                      |  
|Changes   in assets and liabilities:                                                                 |  |                      |           |                      |  
|Accounts   and notes receivable, net                                                                 |  |                      | 1,445,456 |                      |  
|Inventories                                                                                          |  |                      | (231,665  | )                    |  
|Accounts   payable                                                                                   |  |                      | (10,425   | )                    |  
|Accrued   expenses                                                                                   |  |                      | (351,858  | )                    |  
|Deferred   revenue                                                                                   |  |                      | (582,273  | )                    |  
|Other                                                                                                |  |                      | (42,703   | )                    |  
|                                                                                                     |  |                      |           |                      |  
|Net cash provided by (used   in) operating activities                                                |  |                      | (411,978  | )                    |  
|Cash flows from investing   activities                                                               |  |                      |           |                      |  
|Purchases   of property and equipment                                                                |  |                      | (35,060   | )                    |  
|                                                                                                     |  |                      |           |                      |  
|Net cash used in investing   activities                                                              |  |                      | (35,060   | )                    |  
|Cash flows from financing   activities                                                               |  |                      |           |                      |  
|Borowings   on debt financing                                                                        |  |                      | 1,300,299 |                      |  
|Payments   on debt financing                                                                         |  |                      | (854,935  | )                    |  
|                                                                                                     |  |                      |           |                      |  
|Net cash provided by (used   in) financing activities                                                |  |                      | 445,364   |                      |  
|                                                                                                     |  |                      |           |                      |  
|Change in cash and cash   equivalents                                                                |  |                      | (1,674    | )                    |  
|Cash and cash equivalents,   beginning of period                                                     |  |                      | 336,478   |                      |  
|                                                                                                     |  |                      |           |                      |  
|Cash and cash equivalents,   end of period                                                           |  | $                    | 334,804   |                      | $
|                                                                                                     |  |                      |           |                      |  

See accompanying notes to the condensed consolidated financial statements.

Page      5

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LASERSIGHT INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three and Nine- Month Periods Ended September 30, 2006 and 2005

|NOTE 1 | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The accompanying unaudited, condensed consolidated   financial statements of LaserSight Incorporated and subsidiaries   (LaserSight or the Company) as of September 30, 2006, and for the three-   and nine-month periods ended September 30, 2006 and 2005, have been prepared   in accordance with the requirements of the Securities and Exchange Commission   for interim financial information and with the instructions to Form   10-QSB.  Accordingly, they do not   include all of the information and note disclosures required by accounting   principles generally accepted in the United States of America for complete   financial statements.  These condensed   consolidated financial statements should be read in conjunction with the   consolidated financial statements and notes thereto included in LaserSights   annual report on Form 10-KSB for the year ended December 31, 2005.  In the opinion of management, the   condensed
consolidated financial statements include all adjustments   necessary, consisting only of normal, recurring adjustments, for a fair   presentation of consolidated financial position and the results of operations   and cash flows for the periods presented. There are no other components of   comprehensive income other than the Companys consolidated net income (loss)   for the three- and nine-month periods ended September 30, 2006 and 2005.  The results of operations for the three-   and nine-month periods ended September 30, 2006 and 2005 are not necessarily   indicative of the operating results for the full year.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The Companys business is subject to various risks   and uncertainties, which contemplates the realization of assets and the   discharge of liabilities in the normal course of business for the foreseeable   future.  The Company has suffered   recurring losses from operations and has a significant accumulated deficit   that raises substantial doubt about its ability to continue as a going   concern.  Additionally, the product   registration of our product in China expired and we may not sell our laser in   China until our registration is approved. As China is the only market where   the company had significant sales in the past three years, being unable to   sell its products to China raises substantial doubt about its ability to   continue as a going concern. Managements plans in regard to these matters   are described below, see Notes 10 and 11.    The condensed consolidated financial statements do not include any   adjustments that
might result from the outcome of this uncertainty.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The loss of Shenzhen New Industries Medical   Development Co., Ltd. (NIMD), a related party, as a customer compounded by   the fact that we can not sell our product in China until product registration   is approved, would have a significant adverse effect on the Companys ability   to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|NOTE 2 | CRITICAL ACCOUNTING   POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The Companys condensed   consolidated financial statements have been prepared in accordance with   accounting principles generally accepted in the United States of America.   Preparation of these statements requires management to make judgments and   estimates that affect the amounts and disclosures in the financial   statements.  Actual results could   differ from these estimates. Some accounting policies have a significant   impact on amounts reported in these financial statements. A summary of   significant accounting policies and a description of accounting policies that   are considered critical may be found in our Annual Report on Form 10-KSB, for   the year ended December 31, 2005, in the Critical Accounting Policies and   Estimates section of Part II - Item 6. - Managements Discussion and Analysis   or Plan of Operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Page      6

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|       | Product cost  Product costs consist of the costs of   all machines and parts sold including refurbished laser heads. When the   Company sells refurbished laser heads it offers a discount on the sales price   if the used laser head is returned to the Company.  The Company records the estimated fair value of the used laser   head as inventory and as an offset to cost of revenues upon receipt thereof.  During the nine-month period ended   September 30, 2006, the Company received used laser heads related to previous   sales with an estimated fair value of approximately $160,300.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Warranty expense  during the nine-month period   ended September 30, 2006, the warranty period expired on several of the   lasers previously sold by the Company without further costs being incurred by   the Company. As a result, the remaining warranty expense in the amount of   $158,000, accrued for these lasers was reversed through selling-related   expenses upon the expiration of the warranties, which had the effect of   decreasing these expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 3 | PER SHARE INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Basic   income per common share is computed using the weighted average number of   common shares and contingently issuable shares (to the extent that all   necessary contingencies have been satisfied).  Diluted income per common share is computed using the weighted   average number of common shares, contingently issuable shares (to the extent   that all necessary contingencies have been satisfied), and common share   equivalents outstanding during each period. Common share equivalents,   including options and warrants to purchase Common Stock, are included in the   computation using the treasury stock method. The dilutive effect of   convertible debt securities is computed using the if-converted method. The   computation of dilutive earnings per share excludes the effect of the assumed   conversion or exercise or contingent issuance of securities that would have   an antidilutuve effect on earnings per share. 527,813 and 596,000 shares   attributable to
outstanding stock options and warrants were excluded from the   calculation of diluted earnings per share for the periods ended September 30,   2006 and 2005, respectively, because the exercise prices of the stock options   and warrants were greater than or equal to the average price of common shares   during the period, and therefore inclusion would have been antidilutive.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 4 | INVENTORIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Inventories, which consist primarily of excimer and   erbium laser systems and related parts and components, are stated at the   lower of cost or market.  Cost is   determined using the first-in first-out method.  The components of inventories at September 30, 2006 are   summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                |  | September   30, 2006 |          
|--------------- |  | -------------------- | ---------
|                |  |                      |          
|Raw material    |  | $                    | 1,088,517
|Work in Process |  |                      | 641,976  
|Finished Goods  |  |                      | 187,265  
|                |  |                      |          
|Reserve         |  |                      | (100,000 
|                |  |                      |          
|                |  | $                    | 1,817,758
|                |  |                      |          

Page        7

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|NOTE  5 | AMENDED LOAN AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | The Company signed a three-year     note with Heller Healthcare Finance, Inc (Heller) and GE Healthcare     Financial Services, Inc., as successor-in-interest to Heller (collectively     GE) on August 30, 2004 (the GE Note). The GE Note was to expire on June     30, 2007.  The GE Note bore interest     of 9% and was secured by all Company assets. The GE Note contained certain     covenants, which required the Company to maintain a minimum inventory     balance of $1,500,000, minimum quarterly revenues of $1,000,000 and an     annual net income provision.  For     the year ended December 31, 2005 and any subsequent trailing twelve month     periods, as measured on the last day of each calendar quarter, the     Companys earnings before interest, taxes, depreciation and amortization     could not fall below $550,000. As of June 30, 2006, we were not in     compliance with all covenants of our loan agreement with
GE. The Company     had not met minimum quarterly revenue targets of $1,000,000, a rolling     twelve-month $550,000 of EBIDTA and had not presented a budget for 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | On June 7, 2006, the Company received a letter     from GE that advised the Company that, if not waived by GE within ten days,     the specified defaults would become Events of Default under the GE Note,     which would allow GE to accelerate the amounts due under the GE Note.      The amount that would be due at that time was approximately $629,434,     consisting of $476,077 of principal and $153,357 of fees.  GE also     presented the Company a proposed Forbearance Agreement pursuant to which GE     would forbear from exercising its rights and remedies under the GE Note     with respect to the specified defaults until the earlier of (i) June 30,     2006, or (ii) the occurrence or existence of Events of Default under the GE     Note other than the specified defaults.  Under that agreement, the     Company would be required to pay immediately a fee of $10,000, and an     additional $10,000 would be added to the indebtedness under the
GE     Note.  However, on June 13, 2006, GE agreed to waive the defaults     without any additional charge to the Company and to extend until July 31,     2006, the date on which the specified defaults will become Events of     Default under the GE Note. The Company agreed to the terms of the     waiver letter and pursued alternative financing arrangements during this     waiver period.                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | The Company and its subsidiary, LaserSight     Technologies, Inc. (together, the Borrowers) entered into a Loan     Agreement (the NIIC Loan Agreement) with New Industries Investment     Consultants (HK) Ltd. (the Lender), an affiliate of the Company (see Note     6), dated as of July 26, 2006. The NIIC Loan Agreement enabled the Company     to meet the GE deadline and avoid paying any additional fees. On July 27,     2006 the Company paid off the GE Note balance in full, with a cash payment     of $575,561. The NIIC Loan Agreement provides for a loan to the Company     (the Loan) in the maximum principal amount of $3,000,000.  This loan     balance included the $1 million DIP financing, which is convertible to     2,500,0000 shares of common stock. During the quarter ended September 30,     2006, the line was drawn upon for an additional $1.3 million. Interest of     nine percent (9%) per annum will accrue on
the unpaid balance of the Loan,     and such interest and the entire balance of principal, fees, costs and     expenses shall be due and payable on June 30, 2007 (the Maturity     Date).  The Loan may be prepaid, in full or in part, without     penalty.  The Company agreed to pay a fee to the Lender of $15,000, as     well as the Lenders reasonable transaction costs related to the Loan, all     of which will be due on the Maturity Date.  If not paid by the     Maturity Date, the unpaid balance of the Loan will bear interest at the     rate of twelve percent (12%) per annum. The balance on the loan at     September 30, 2006 was $2.3 million.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Other terms and conditions of the Loan are nearly     identical to the terms and conditions set forth in the Promissory Note and     Security Agreement dated December 1, 2003, and the Restated Promissory Note     dated August 31, 2004, made by the Borrowers in favor of the Lender (the     Prior Loan Documents).  Such terms and conditions from the Prior     Loan Documents were incorporated by reference into the NIIC Loan Agreement,     to the extent that such terms and conditions do not conflict with the terms     and conditions specifically set forth in the NIIC Loan Agreement.      However, a significant difference is that the Loan is not convertible into     shares of the common stock of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|       | GE was issued a warrant to     purchase 100,000 shares of common stock at $0.25 per share, or $0.40 per     share if the New Industries Investment Group (see Note 6), converts its DIP     loan to equity.  The warrant expires     June 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 6 | CHINA BACKGROUND                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Shenzhen New Industries Medical Development Co.,     Ltd. (NIMD) was founded and incorporated by the Medical Investment     Department in 1995 by its parent company, New Industries Investment Group     (NII) of the Peoples Republic of China. It specializes in marketing and     distribution of LASIK surgery devices and equipment, as well as in     investment and operation of LASIK clinical centers in Chinese market.                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | In the past decade, NIMD invested and operated     PRK/LASIK excimer laser refractive surgery centers in joint venture with     hospitals and medical institutes in China. New Industries Investment     Consultants (H.K.) Ltd (NIIC) specializes in hi-tech business investment     and consulting services. It is registered in Hong Kong. It was incorporated     in 1994 by its principal investor Mr. Xianding Weng (a major shareholder of     NII, NIIs CEO and the Companys Chairman of the Board of Directors). NIIC,     NII and NIMD are collectively referred to herein as the China Group.                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | In 2003 and 2004, the China Group provided $2     million of debtor-in-possession (DIP) financing to the Company.  On June 30, 2004, $1 million of the DIP     financing was converted into 6,850,000 shares of common stock. In the third     quarter of 2006, the China Group provided another $1.3 million of     financing, (see Note 5).  As of     September 30, 2006, the China Group controlled approximately 72% of the     Companys common stock.  Company     revenues from the China Group were approximately $0 and $183,000 in the three     months and nine months ended September 30, 2006, and were approximately     $0.9 million and $3.9 million in the three months and nine months ended     September 30, 2005, respectively.      Accounts receivable due from the China Group as of September 30,     2006 was zero.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 7 | STOCK BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The Company accounts for share based payments made     to employees in accordance with SFAS 123 (R) Share-based Payments which     requires all share-based payments to employees, including grants of     employee stock options, to be recognized in the income statement based on     their fair values. The fair value is typically recorded as unearned stock     based compensation and then amortized to expense over the vesting period.                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The per share weighted-average fair value of stock     options granted during the year ended December 31, 2005, was approximately     $0.21, on the dates of grant using the Black Scholes option-pricing model     with the following weighted-average assumptions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                        |  | 2005 |                
|----------------------- |  | ---- | ---------------
|                        |  |      |                
|Expected dividend yield |  |      | 0%             
|Volatility              |  |      | 1,383% - 1,503%
|Risk-free interest rate |  |      | 4.47 -  4.67%  
|Expected life (years)   |  |      | 10             

| | In May 2005 and December 2005, the Board of     Directors approved the issuance of options to purchase 498,000 shares and     69,813 shares, respectively, of the Companys Common Stock with an     estimated fair value of approximately $119,000.  The options were issued to employees and Directors and have     various vesting schedules, but all are exercisable for ten years.     Amortization of unearned stock-based compensation for the three and nine     months ended September 30, 2006 was $9,750 and $29,250, respectively.     Amortization of unearned stock-based compensation for the three and nine     months ended September 30, 2005 was $31,000. During 2006 the Company has     not issued any employee stock options.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|NOTE 8 | CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Liquidity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The Company incurred a net loss and had negative     cash flows during the nine-months ended September 30, 2006 and had an     accumulated deficit of approximately $109 million at September 30,     2006.  Additionally, the Companys     revenues declined and are significantly dependant upon NIMD (see Notes 6     and 10).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Accordingly, the Companys ability to continue as     a going concern is uncertain and dependent upon achieving improved     operating results and cash flows or obtaining additional equity capital     and/or debt financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Italian Distributor.  In February 2003, an Italian court issued an order     restraining LaserSight Technologies from marketing our AstraPro software at     a trade show in Italy.  This     restraining order was issued in favor of LIGI Tecnologie Medicali S.p.a.     (LIGI), a distributor of our products, and alleged that our AstraPro     software product infringes certain European patents owned by LIGI.  We had retained Italian legal counsel to     defend us in this litigation, and we were informed that the Italian court     had revoked the restraining order and ruled that LIGI must pay our     attorneys fees in connection with our defense of the restraining     order.  In addition, our Italian     legal counsel informed us that LIGI had filed a motion for a permanent     injunction. We believe that our AstraPro software does not infringe the     European patents owned by LIGI, but due to limited cash flow the Company     has not defended
its position.      Management believes that the outcome of this litigation will not     have a material adverse impact on LaserSights business, financial condition     or results from operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Routine Matters.      In addition, we are involved from time to time in routine litigation     and other legal proceedings incidental to our business.  Although no assurance can be given as to     the outcome or expense associated with any of these proceedings, we believe     that none of such proceedings, either individually or in the aggregate,     will have a material adverse effect on the financial condition of     LaserSight.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|NOTE 9 | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The Companys operations principally include     refractive products.  Refractive     product operations primarily involve the development, manufacture and sale     of ophthalmic lasers and related devices for use in vision correction     procedures.  Patent services involve     the revenues and expenses generated from the ownership of certain     refractive laser patents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Operating profit is total revenue less operating     expenses.  In determining operating     profit for operating segments, the following items have not been     considered:  general corporate     expenses, non-operating income and expense and income tax expense.     Identifiable assets by operating segment are those that are used by or     applicable to each operating segment.      General corporate assets consist primarily of deferred financing     costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The table below summarizes information about reported     segments as of and for the three and nine months ended September 30, 2006     and 2005:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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SEGMENT INFORMATION

Three months ended September 30,

|                       |  | Operating          Revenues |           | Operating     Profit (Loss) |   | Total     Assets |   | Depreciation     and      Amortization |           | Capital      Expenditures |  
|---------------------- |  | --------------------------- | --------- | --------------------------- | - | ---------------- | - | -------------------------------------- | --------- | ------------------------- | -
|                       |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|2006                   |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Operating  segments:   |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Refractive products    |  | $                           | 37,208    |                             | $ | (324,315         | ) | $                                      | 2,909,764 |                           | $
|Patent services        |  |                             | 194,091   |                             |   | 194,091          |   |                                        |          |                           |  
|General corporate      |  |                             |          |                             |   | (66,690          | ) |                                        |          |                           |  
|                       |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Consolidated     total |  | $                           | 231,299   |                             | $ | (196,914         | ) | $                                      | 2,909,764 |                           | $
|                       |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|2005                   |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Operating  segments:   |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Refractive products    |  | $                           | 1,069,988 |                             | $ | 66,965           |   | $                                      | 4,552,024 |                           | $
|Patent services        |  |                             | 266,091   |                             |   | 266,091          |   |                                        |          |                           |  
|General corporate      |  |                             |          |                             |   | (150,378         | ) |                                        | 194,840   |                           |  
|                       |  |                             |           |                             |   |                  |   |                                        |           |                           |  
|Consolidated     total |  | $                           | 1,336,079 |                             | $ | 182,678          |   | $                                      | 4,746,864 |                           | $
|                       |  |                             |           |                             |   |                  |   |                                        |           |                           |  

Nine   months ended September 30,

|                       |  | Operating          Revenues |           | Operating     Profit      (Loss) |   | Total     Assets |   | Depreciation     and      Amortization |           | Capital      Expenditures |  
|---------------------- |  | --------------------------- | --------- | -------------------------------- | - | ---------------- | - | -------------------------------------- | --------- | ------------------------- | -
|                       |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|2006                   |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Operating  segments:   |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Refractive products    |  | $                           | 558,531   |                                  | $ | (939,178         | ) | $                                      | 2,909,764 |                           | $
|Patent services        |  |                             | 585,389   |                                  |   | 585,389          |   |                                        |          |                           |  
|General corporate      |  |                             |          |                                  |   | (248,870         | ) |                                        |          |                           |  
|                       |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Consolidated     total |  | $                           | 1,143,920 |                                  | $ | (602,659         | ) | $                                      | 2,909,764 |                           | $
|                       |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|2005                   |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Operating  segments:   |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Refractive products    |  | $                           | 4,222,546 |                                  | $ | 378,718          |   | $                                      | 4,552,024 |                           | $
|Patent services        |  |                             | 797,303   |                                  |   | 797,303          |   |                                        |          |                           |  
|General corporate      |  |                             |          |                                  |   | (640,280         | ) |                                        | 194,840   |                           |  
|                       |  |                             |           |                                  |   |                  |   |                                        |           |                           |  
|Consolidated     total |  | $                           | 5,019,849 |                                  | $ | 535,741          |   | $                                      | 4,746,864 |                           | $
|                       |  |                             |           |                                  |   |                  |   |                                        |           |                           |  

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|NOTE 10 | REGISTRATION OF PRODUCT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company started the renewal registration     process to sell our laser products in China in early 2005. Our laser     product registration in China expired in December 2005.  Until we receive the renewal of the     product registration, we cannot sell our laser products in China.                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | After responding to requests for more information     from the State Food and Drug Administration in China and conducting tests     at a government-selected laboratory, our application for renewal was     accepted in early 2006. More information was required and provided after     the application submission. We cannot predict when the renewal will be     granted.                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Our product CE certificate expired in February of     2006. We could not sell our products to customers where CE certification is     required until we received the renewed certificate. We received the renewed     certificates for our LaserScan LSX (the laser) and AstraMax (the corneal     topography system) on July 25, 2006.                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | We received the Registration Certificate to market     our AstraMax (the corneal topography system) in China on March 8, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|NOTE 11 | NEW BUSINESS MODEL DEVELOPMENT IN CHINA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company is currently developing and evaluating     a revenue-sharing business model (Per Procedure Fees charged to users, the     PPF model) with the Companys users in China. To  capitalize on the fast growth of the procedure     volumes in Chinas market, management believes that this business model     will provide the Company with a long-term steady cash flow and better     profitability from the market. This revised business model would be     implemented on a prospective basis.                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Using the similar concept, we have recently launched     our custom-ablation software package AstraPro (cornea topography guided     custom-ablation) in China with the charge of per procedure fees to the     users (Custom-ablation Per Procedure Fees, or the CPPF model) to     capitalize on the increasing use of the custom-ablation procedures with     long-term revenue from the users. We have not received any revenues from     this product yet. We expect our new subsidiary, LaserSight Shenzhen, to be     marketing this product.                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|NOTE 12 | NEW CHINESE SUBSIDIARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Companys wholly owned subsidiary, LaserSight     Technologies, Inc., a Delaware corporation has formed a wholly owned     Chinese subsidiary company, LaserSight Technologies (Shenzhen) Co., Ltd.     (the China Subsidiary), which has offices in Shenzhen, China.  The     Chinese government issued a business license to the China Subsidiary on     September 25, 2006, and its term of existence is from August 18, 2006,     until August 18, 2026.  The Company made an initial capital investment     in the China Subsidiary in the amount of US$75,000.  The China     Subsidiarys principal business is to conduct sales of the Companys     products and services in China.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The following persons serve as directos and     officers of the China subsidiary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Xian Ding Weng - Director, Chairman of the Board     and President (Mr. Weng also serves as the Chairman of the Board of the     Company.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Danghui (David) Liu - Director (Mr. Liu also     serves as the President and CEO of the Company.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Bing Liang  serves as Director and Vice President                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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Item   2. Managements Discussion and Analysis or Plan of Operation.

Forward-Looking   Statements and Associated Risks

THIS   QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE   BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM   ACT OF 1995.  THESE FORWARD-LOOKING   STATEMENTS ARE BASED ON MANAGEMENTS CURRENT EXPECTATIONS, ESTIMATES AND   PROJECTIONS, BELIEFS AND ASSUMPTIONS. WORDS SUCH AS ANTICIPATES, EXPECTS,   INTENDS, PLANS, BELIEVES, SEEKS, ESTIMATES, VARIATIONS OF SUCH   WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING   STATEMENTS.  THESE STATEMENTS ARE NOT   GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS,   UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE,   ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN   ANY SUCH FORWARD-LOOKING STATEMENTS.    THESE RISKS AND UNCERTAINTIES INCLUDE THOSE DISCUSSED IN PART I
   ITEM 1  DESCRIPTION OF BUSINESS  RISK FACTORS AND, PART II  ITEM 6    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN    OF OPERATION CONTAINED IN THE COMPANYS FORM 10-KSB FOR THE YEAR   ENDED DECEMBER 31, 2005, AS FILED WITH THE SECURITIES AND EXCHANGE   COMMISSION.  UNLESS REQUIRED BY LAW,   THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING   STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR   OTHERWISE.  INVESTORS SHOULD REVIEW   THIS QUARTERLY REPORT IN COMBINATION WITH THE COMPANYS ANNUAL REPORT ON FORM   10-KSB IN ORDER TO HAVE A MORE COMPLETE UNDERSTANDING OF THE PRINCIPAL RISKS   ASSOCIATED WITH AN INVESTMENT IN THE COMPANYS STOCK.

Overview

LaserSight   is principally engaged in the manufacture and supply of narrow beam scanning   excimer laser systems, topography-based diagnostic workstations, and other   related products used to perform procedures that correct common refractive   vision disorders such as nearsightedness, farsightedness and   astigmatism.  Since 1994, we have   marketed our laser systems commercially in over 30 countries worldwide.  We are currently focused on selling in   selected international markets; primarily China.

We   have significant liquidity and capital resource issues relative to the timing   of our accounts receivable collection and the successful completion of new   sales compared to our ongoing payment obligations and our recurring losses   from operations and net capital deficiency raises substantial doubt about our   ability to continue as a going concern.    We have experienced significant losses and operating cash flow   deficits, and we expect that operating cash flow deficits will continue   without improvement in our operating results.

Bankruptcy

On   September 5, 2003 we filed for Chapter 11 bankruptcy protection and   reorganization.  We operated in this   manner from September 5, 2003 through June 10, 2004, when the re-organization   was approved by the Bankruptcy Court. A final decree of bankruptcy was   obtained on December 22, 2004.  As a   result of the bankruptcy re-structuring, we have recorded credits for debt   forgiveness of approximately $15.3 million during the three months ended June   30, 2004.  Additionally, we recognized   charges of approximately $8.0 million during 2003 for patent impairment,   accounts receivable and inventory write offs.  We cancelled all of its outstanding common and preferred stock,   including warrants and options, and issued 9,997,195 new common shares on   June 30, 2004.  We emerged from   bankruptcy with approximately $0.7 million in unsecured liabilities,   approximately $2.1
million in secured debt, approximately $5.3 million in   deferred revenue and approximately $1.0 million of DIP financing provided by   a related party, as part of the approved bankruptcy plan.  The related party converted $1.0 million   of the DIP financing for an additional 6,850,000 common shares.

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China   Transaction

In   February 2004, we received a commitment from Shenzhen New Industries Medical   Development Co., Ltd. (NIMD), a related party purchaser, to purchase at   least $12.0 million worth of our products during the 12-month period ending   February 2005 and to distribute our products in Mainland China, Hong Kong,   Macao and Taiwan.  The purchase   agreement provides for two one-year extensions. From February 2004 through   September 2005, approximately $10.1 million worth of products were sold under   this agreement. Product issues reduced shipments during the third and fourth   quarters of 2004 and the first and second quarters of 2005.  These issues have been resolved through   revisions to product crating for shipment, software modifications and revised   shipper instructions. An extension has not been signed, but the parties have   continued to conduct business under similar terms
as set forth in the   purchase agreement.

WaveLight   Transaction

In   March 2005 we executed a worldwide non-exclusive license agreement with   WaveLight Laser Technologie AG (WaveLight) to use and reproduce the Lin   Scanning Patents for products to be used in ophthalmic surgery, which became   effective on March 3, 2005, and an option to acquire a license to the   Companys Apple Patents. Both the non-exclusive license and the option   include certain WaveLight co-enforcement rights. As consideration for the   license, we had received payments totaling $900,000 by October 2005, and we   will receive no additional payments. $45,000 in broker fees were paid to an   unrelated party for their assistance in closing this transaction.  The agreement terminates when the patents   expire, or earlier in the event of the occurrence of certain events of   default.

New   Business Model

Since   the beginning of 2006, we have been developing a revenue-sharing business   model with the users of our products in China, (Per Procedure Fees charged to   users, or the PPF model). We believe this business model will provide us   long-term, steady cash flow and better profitability and that it will allow   us to capitalize on the fast growth of the procedure volumes in Chinas   market. This revised business model will be implemented on a prospective basis.   The plan concept is to charge less at the original purchase date, but to   charge a PPF fee over the life of the contract. To prepare for these changes   in offering our business model, we are considering seeking capital infusion   by long-term loan or equity offering. Contrary to our previous expectations,   we have not yet obtained any trial results of our PPF model in China because   of a lack of capital. These   changes
of business model may not happen if the company receives no new   capital infusion by long-term loan or equity offering.

Using   the similar concept, we have recently launched our custom-ablation software   package AstraPro (cornea topography guided custom-ablation) in China with the   charge of per procedure fees to the users (Custom-ablation Per Procedure   Fees, or the CPPF model) to capitalize on the increasing use of the   custom-ablation procedures with long-term revenue from the users. We have not   received any revenues from this product yet. We expect our new subsidiary,   LaserSight Shenzhen, to be marketing this product.

New   Chinese Subsidiary

The Companys wholly   owned subsidiary, LaserSight Technologies, Inc., a Delaware corporation, has   formed a wholly owned Chinese subsidiary company, LaserSight Technologies   (Shenzhen) Co., Ltd. (the China Subsidiary), which has offices in Shenzhen,   China.  The Chinese government issued a business license to the China   Subsidiary on September 25, 2006, and its term of existence is from August   18, 2006, until August 18, 2026.  The Company made an initial capital   investment in the China Subsidiary in the amount of US$75,000.  The   China Subsidiarys principal business is to conduct sales of the Companys   products and services in China.

Results   of Operations

The   following table sets forth for the periods indicated information derived from   our statements of operations for those periods expressed as a percentage of   net sales, and the percentage change in such items from the comparable prior   year period.  Any trends illustrated   in the following table are not necessarily indicative of future results.

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As a Percentage of Net   Sales

|                                                      |  | Three     Months     Ended      September 30, |       | Nine     Months      Ended      September 30, |  |       | Three  Months Ended September 30, |      |       | Nine     Months      Ended      September 30, | 
|----------------------------------------------------- |  | --------------------------------------------- | ----- | --------------------------------------------- |  | ----- | --------------------------------- | ---- | ----- | --------------------------------------------- | 
|                                                      |  |                                               |       |                                               |  |       |                                  
|                                                      |  | 2006                                          |       | 2005                                          |  | 2006  |                                   | 2005 |       | 2006 vs.     2005                             | 
|                                                      |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Statement of Operations Data:                         |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Net     Revenues:                                     |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Refractive products                                   |  |                                               | 16.1  | %                                             |  | 80.1  | %                                 |      | 48.8  | %                                             | 
|Patent services                                       |  |                                               | 83.9  | %                                             |  | 19.9  | %                                 |      | 51.2  | %                                             | 
|                                                      |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Net Revenues                                          |  |                                               | 100.0 | %                                             |  | 100.0 | %                                 |      | 100.0 | %                                             | 
|Cost     of Revenue                                   |  |                                               | -12.0 | %                                             |  | 36.1  | %                                 |      | 17.0  | %                                             | 
|                                                      |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Gross     Profit (1)                                  |  |                                               | 112.0 | %                                             |  | 63.9  | %                                 |      | 83.0  | %                                             | 
|Research,     development and regulatory expenses (2) |  |                                               | 14.5  | %                                             |  | 3.5   | %                                 |      | 10.3  | %                                             | 
|Other     general and administrative expenses         |  |                                               | 195.6 | %                                             |  | 43.2  | %                                 |      | 134.7 | %                                             | 
|Selling-related     expenses (3)                      |  |                                               | -16.6 | %                                             |  | 2.9   | %                                 |      | -11.5 | %                                             | 
|Amortization     of intangibles                       |  |                                               | 3.6   | %                                             |  | 0.6   | %                                 |      | 2.2   | %                                             | 
|                                                      |  |                                               |       |                                               |  |       |                                   |      |       |                                               | 
|Net     Income (loss) from operations                 |  |                                               | -85.1 | %                                             |  | 13.7  | %                                 |      | -52.7 | %                                             | 

|   
|---
|(1)
|   
|(2)
|   
|(3)

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Three Months Ended September 30, 2006,   Compared to Three Months Ended September 30, 2005

Our   consolidated revenues totaled approximately   $231,000 for the three months ended September 30, 2006, a decrease of   approximately $1.1 million or 83% compared to revenues for the three months   ended September 30, 2005 of approximately   $1.3 million. The decrease was primarily attributable to decreased sales of   laser systems as a result of the expiration of our product registration in   China. No lasers systems or AstraMax systems were sold in the third quarter   of 2006, and four were sold in the third quarter of 2005. For the three   months ended September 30, 2006, parts revenues were $36,000 compared to   $189,000 for the three months ended September 30, 2005. Our 2006 budget   projected laser sales at 27 for the year. Due to the   product registration restriction and the new business model testing in China,   we adjusted our projection of   sales to ship 2 lasers and one
AstraMax®   diagnostic workstations this year. Because we did not receive product   registration renewals in China as planned, we do not expect to sell any more   lasers this year.

Net   revenues from patent services decreased by approximately $72,000, or 27%, from approximately $266,000 for the three months ended September 30,   2005 to approximately $194,000   for the three months ended September 30, 2006. The reduction in royality   revenues is due to a portion of the deferred revenue becoming fully   amortized. During the first quarter of 2005, the Company licensed its Lin   scanning patent for $855,000, net of expenses of $45,000. This deferred   revenue is being amortized over the remaining life of the patent,   approximately seven years.

Geographically,   China has become our most significant market, even though there was no   revenue from China during the three months ended September 30, 2006, as   compared to approximately $1.1   million for the three months ended September 30, 2005.

Consolidated   cost of sales includes direct material costs, manufacturing wages, inbound   freight, rework, scrap and standard cost variances.  For the three months ended September 30, 2006, consolidated   cost of sales was ($27,000) on net revenues of $231,000, compared to the same   period in 2005 when our cost of sales was approximately $483,000 or 36% of   net revenues. For the three months ended September 30, 2006, consolidated   cost of sales was ($27,000) on product revenues of $37,000, compared to the   same period in 2005 when our cost of sales was approximately $681,000 or 45%   of product revenues. The improvement of 2006 margins is primarily related to   reclaimed inventory from returned lasers of $94,000. For the remainder of   2006, our emphasis will be on continued unit cost reductions driven by   efficient purchasing and limited re-design of our product. Our goal is to   maintain a
47% consolidated cost of sales.

Selling-related expenses consist of those items directly   related to sales activities, including commissions on sales, royalty or   license fees, warranty expenses, and costs of shipping and installation.   Selling-related expenses for the three months ended September 30, 2006   decreased $77,000, or 199%, to ($38,000) from $39,000 during the three months   ended September 30, 2005. This decrease was primarily attributable to the   reversal of warranty reserves, as well as reduced licensing fees, and lower   shipping costs due to lower sales.    For the three months ended September 30, 2006, selling-related   expenses were lower primarily due to the reduction in the warranty reserve   and shipping costs. Warranty reserves in the amount of $39,000 for lasers   moving out of warranty during the three months ended September 30, 2006 were   reversed in the current period. Our current plan
projects our selling-related   expense ratio to be 9% of net revenues for the remainder of 2006.

Other   general and administrative expenses decreased by $124,000, or 22%, to   $452,000 in the three months ended September 30, 2006, from $577,000 for the   same period in 2005. The decrease was primarily due to lower consulting fees,   loan audit fees, salaries, travel, computer upgrade fees and insurance   premiums. We project our general and administrative expenses to maintain at   $450,000 per quarter.

Research,   development and regulatory expenses decreased by $13,000 to $34,000 for the   three months ended September 30, 2006 from $47,000 for the three months ended   September 30, 2005. The decrease was for reduced costs of material purchases.   Our operating plan for fiscal 2006 projected business levels that would   require research, development and regulatory expenses to be similar to 2005.

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In   the three months ended September 30, 2006, amortization of intangibles   remained unchanged at $8,400. In accordance with our operating plan,   amortization of intangibles will be at a rate of approximately $33,000 per   year.

Other   income and expense for the three months ended September 30, 2006 consisted of   the following:

| |  | In the three     months ended September 30, 2006, we accrued $170,000 in interest     expense.  All of the accrued     interest was paid except for $34,900 of accrued interest for the DIP     financing. The interest expense includes $132,800 of amortized financing     costs.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For   the three months ended September 30, 2006 and 2005, we had no income tax   expense due to our net operating loss carryforwards.

Net   loss for the three months ended September 30, 2006 was approximately $367,000   compared to a $105,000 net income for the same period in 2005, a decrease of   approximately $472,000. This $472,000 decrease in the current quarter was   comprised approximately of:

| |  | decreased gross profit of $594,000 due to lower     revenues.                                                     
| | - | ------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                   
| |  | decreased G&A expenses of $124,000 due to     lower insurance, salaries & consulting fees.                        
| |   |                                                                                                                   
| |  | increased interest expense of $92,000 due to     payoff on loan balance and fully amortizing deferred loan costs. 
| |   |                                                                                                                   
| |  | reduced R&D expenses of $13,000 for material     purchases.                                                       
| |   |                                                                                                                   
| |  | decreased selling-related expenses of $77,000     related to reduced warranty estimates and unit shipping charges.

Nine Months Ended September 30, 2006,   Compared to Nine Months Ended September 30, 2005

Our   consolidated revenues totaled approximately   $1.1 million for the nine months ended September 30, 2006, a decrease of   approximately $3.9 million or 77% compared to revenues for the nine months   ended September 30, 2005 of approximately   $5.0 million. The decrease was primarily attributable to decreased sales of   laser systems. Two lasers systems were sold in the first nine months of 2006,   and 17 were sold in the first nine months of 2005. For the nine months ended   September 30, 2006, parts revenues were $165,000 compared to $350,000 for the   nine months ended September 30, 2005. This also included a $0.1 million   reduction in sales of our AstraMax
® diagnostic workstation; no AstraMax sales were recorded in the nine months   ended September 30, 2006 compared to four for the comparable period in 2005. Due to the product registration   restriction and the new business model testing in China, we adjusted our projection of sales to   ship 2 lasers and one AstraMax
® diagnostic workstations this year.   Because we did not receive product registration renewals in China as planned,   we do not expect to sell any more lasers this year.

Net   revenues from patent services decreased by approximately $212,000, or 27%, from approximately $797,000 for the nine months ended September 30,   2005 to approximately $585,000   for the nine months ended September 30, 2006. The reduction in royalty   revenue is due to a portion of the deferred revenue becoming fully amortized.   During the first quarter of 2005, the Company licensed its Lin scanning   patent for $855,000, net of expenses of $45,000. This deferred revenue is   being amortized over the remaining life of the patent, approximately seven   years.

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Geographically,   China has become our most significant market, with approximately $183,000 in revenue during   the nine months ended September 30, 2006, as compared to approximately $3.9 million for the   nine months ended September 30, 2005.

Consolidated   cost of sales includes direct material costs, manufacturing wages, inbound   freight, rework, scrap and standard cost variances.  For the nine months ended September 30, 2006, consolidated cost   of sales of $195,000 was approximately 17% of net revenues of $1.1 million,   compared to the same period in 2005 when our cost of sales was approximately   43% of net revenues. For the nine months ended September 30, 2006,   consolidated cost of sales of $195,000 was approximately 35% of product   revenues of $585,000, compared to the same period in 2005 when our cost of   sales was approximately 51% of product revenues. The improvement of 2006   margins is primarily related to improved margins on part sales, return of   deposits on gas cylinders of $11,000 and reclaimed inventory from returned   lasers of $218,000. Our goal is to maintain a 47% consolidated cost of sales.

Selling-related   expenses consist of those items directly related to sales activities,   including commissions on sales, royalty or license fees, warranty expenses,   and costs of shipping and installation. Selling-related expenses for the nine   months ended September 30, 2006 decreased $444,000, or 142%, to ($132,000)   from $312,000 during 2005. This decrease was primarily attributable to the   reversal of warranty reserves, as well as reduced licensing fees, and lower   shipping costs due to lower sales.    During the nine-month period ended September 30, 2006, the warranty   period expired on several of the lasers previously sold by the Company   without further costs being incurred by the Company. As a result, the   remaining warranty expense accrued for these lasers in the amount of $158,000   was reversed through selling-related expenses upon the expiration of the   warranties. Our current
plan projects our selling-related expense ratio to be   9% of net revenues for the remainder of 2006.

Other   general and administrative expenses decreased by $301,000, or 16%, to $1.5   million in the nine months ended September 30, 2006, from $1.8 million for   the same period in 2005. The decrease was primarily due to lower legal fees,   and accounting fees, salaries, annual meeting expenses and insurance   premiums. We project our general and administrative expenses to maintain at   $450,000 per quarter.

Research,   development and regulatory expenses decreased by $29,000 to $118,000 for the   nine months ended September 30, 2006 from $147,000 for the nine months ended   September 30, 2005. Even though our resources are limited, we continue to offer   improvements to our product, and we were required to make unplanned material   purchases for the CE mark testing effort. Our operating plan for fiscal 2006   projected business levels that would require research, development and   regulatory expenses to be similar to 2005.

In   the nine months ended September 30, 2006, amortization of intangibles   remained unchanged at $25,100. In accordance with our operating plan,   amortization of intangibles will be at a rate of approximately $33,000 per   year.

Other   income and expense for the nine months ended September 30, 2006 consisted of   the following:

| |  | We received $6,757 of interest income on notes     receivable.                                                                                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                   
| |  | $6,108 was     received as abandoned property from various states.                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                   
| |  | In the nine     months ended September 30, 2006, we accrued $305,300 in interest     expense.  All of the accrued     interest was paid except for $79,900 of accrued interest for the DIP     financing. The interest expense includes $188,400 of amortized financing     costs.

For   the nine months ended September 30, 2006 and 2005, we had no income tax   expense due to our net operating loss carry-forwards.

Net   loss for the nine months ended September 30, 2006 was approximately $901,000   compared to a $289,000 net income for the same period in 2005, a decrease of   approximately $1.2 million. This $1.2 million decrease in the first nine   months of 2006 was comprised approximately of:

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| |  | decreased gross profit of $1.9 million due to     lower revenues.                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                           
| |  | decreased G&A expenses of $301,000 due to     lower insurance, lease expense and professional fees for auditing and tax     preparation. As well as 2005 annual shareholder meeting expenses, which did     not occur in 2006 and audit fees added to the GE note payable.
| |   |                                                                                                                                                                                                                                                                           
| |  | decreased interest expense of $56,000 due to lower     loan balances.                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                           
| |  | decreased selling related expenses of $444,000     related to reduced warranty estimates and unit shipping charges.                                                                                                                                                       

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Inflation   and Currency Fluctuation

Inflation   and currency fluctuations have not previously had a material impact upon the   results of operations and are not expected to have a material impact in the   near future.

Liquidity and Capital Resources

On   September 5, 2003 we filed for Chapter 11 bankruptcy protection and   reorganization. We operated in this manner from September 5, 2003 through   June 10, 2004, when the re-organization was approved by the Bankruptcy Court,   effective June 30, 2004. A final decree of bankruptcy was obtained on   December 22, 2004. We cancelled all of our outstanding common and preferred   stock, including warrants and options, and issued 9,997,195 new common shares   on June 30, 2004.  We emerged from bankruptcy   with approximately $0.7 million in unsecured liabilities, approximately $2.1   million in secured debt, approximately $5.3 million in deferred revenue and   approximately $1.0 million of DIP financing provided by NIIC.  NIIC converted $1.0 million of the DIP   financing for additional equity.

With   the new revenues expected from the China Group and projected sales to other   customers, management expects that our cash and cash equivalent balances and   funds from operations (which are principally the result of sales and   collection of accounts receivable) may not be sufficient to meet our   anticipated operating cash requirements for the next several months. Our   plans include the raising of additional capital through the issuance of debt   or equity to finance the new business model. This expectation is based upon   assumptions regarding cash flows and results of operations over the next   several months and is subject to substantial uncertainty and risks beyond our   control. If these assumptions prove incorrect, the duration of the time   period during which we could continue operations could be materially shorter.

The   Company started the renewal registration process to sell our laser products   in China in early 2005. Our laser product registration in China expired in   December 2005.  Until we receive the   renewal of the product registration, we cannot sell our laser products in   China. After responding to requests for more information from the State Food   and Drug Administration in China and conducting tests at a government   selected laboratory, our application for renewal was accepted in early   2006.  We cannot predict when the   renewal will be granted. Our product CE certificate expired in February 2006,   and renewed in July 2006.

We   continue to face liquidity and capital resource issues relative to the timing   of the successful completion of new sales compared to our ongoing payment   obligations.  To continue our   operations, we will need to generate increased revenues, collect them and   reduce our expenditures relative to our recent history.  While we are working to achieve these   improved results, we cannot give assurances that we will be able to generate   increased revenues and collections to offset required cash expenditures.  Our revenues from the China Group were   approximately $183,000 in the nine-months ended September 30, 2006. Accounts   receivable due from the China Group as of September 30, 2006 was zero. The   loss of the China Group as a customer or the non-payment or slow payment of   monies owed to us could have a significant adverse effect on our ability to   continue as a going
concern.

The Company signed a three-year note with Heller   Healthcare Finance, Inc (Heller) and GE Healthcare Financial Services,   Inc., as successor-in-interest to Heller (collectively GE) on August 30,   2004 (the GE Note). The GE Note was to expire on June 30, 2007.  The GE Note bore interest of 9%.  Covenants required the Company to maintain   a minimum inventory balance of $1,500,000, minimum quarterly revenues of   $1,000,000 and an annual net income provision.  For the year ended December 31, 2005 and any subsequent   trailing twelve month periods, as measured on the last day of each calendar   quarter, the Companys earnings before interest, taxes, depreciation and   amortization could not fall below $550,000. As of June 30, 2006, we were not   in compliance with all covenants of our loan agreement. The Company had not   met minimum quarterly
revenue targets of $1,000,000, a rolling twelve-month   $550,000 of EBIDTA and had not presented a budget for 2006.

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On   June 7, 2006, the Company received a letter GE advised the Company that, if   not waived by GE within ten days, the specified defaults would become Events   of Default under the GE Note, which would allow GE to accelerate the amounts   due under the GE Note.  The amount that would be due at that time was   approximately $629,434, consisting of $476,077 of principal and $153,357 of   fees.  GE also presented the Company a proposed Forbearance Agreement   pursuant to which GE would forbear from exercising its rights and remedies   under the GE Note with respect to the specified defaults until the earlier of   (i) June 30, 2006, or (ii) the occurrence or existence of Events of Default   under the GE Note other than the specified defaults.  Under that   agreement, the Company would be required to pay immediately a fee of $10,657,   and an additional $10,000 would be added to
the indebtedness under the GE   Note.  However, on June 13, 2006, GE verbally agreed to waive the   defaults without any additional charge to the Company and to extend until   July 31, 2006, the date on which the specified defaults will become Events   of Default under the GE Note.  The Company agreed to the terms of the   waiver letter and pursued alternative financing arrangements during this   waiver period.

The   Company and its subsidiary, LaserSight Technologies, Inc. (together, the   Borrowers) entered into a Loan Agreement (the NIIC Loan Agreement) with   New Industries Investment Consultants (HK) Ltd. (the Lender), an affiliate   of the Company (see Note 6), dated as of July 26, 2006. The NIIC Loan   Agreement enabled the Company to meet the GE deadline and avoid paying any   additional fees. On July 27, 2006 the Company paid off the GE Note balance in   full, with a cash payment of $575,561.The NIIC Loan Agreement provides for a   loan to the Company (the Loan) in the maximum principal amount of   $3,000,000.  This loan balance included the $1 million DIP financing,   which is convertible to 2,500,0000 shares of common stock. During the quarter   ended September 30, 2006, the line was drawn upon for an additional $1.3   million. Interest of nine
percent (9%) per annum will accrue on the unpaid   balance of the Loan, and such interest and the entire balance of principal,   fees, costs and expenses shall be due and payable on June 30, 2007 (the   Maturity Date).  The Loan may be prepaid, in full or in part, without   penalty.  The Company agreed to pay a fee to the Lender of $15,000, as   well as the Lenders reasonable transaction costs related to the Loan, all of   which will be due on the Maturity Date.  If not paid by the Maturity   Date, the unpaid balance of the Loan will bear interest at the rate of twelve   percent (12%) per annum. The balance on the loan at September 30, 2006 was   $2.3 million.

Other   terms and conditions of the Loan are nearly identical to the terms and   conditions set forth in the Promissory Note and Security Agreement dated   December 1, 2003, and the Restated Promissory Note dated August 31, 2004,   made by the Borrowers in favor of the Lender (the Prior Loan   Documents).  Such terms and conditions from the Prior Loan Documents   were incorporated by reference into the NIIC Loan Agreement, to the extent   that such terms and conditions do not conflict with the terms and conditions   specifically set forth in the NIIC Loan Agreement.  However, a   significant difference is that the Loan is not convertible into shares of the   common stock of the Company.

There   can be no assurance as to the correctness of the assumptions underlying our   business plan or our expectations regarding our working capital requirements   or our ability to continue operations.    Our ability to continue operations is based on factors including the   success of our sales efforts in China and in other foreign countries where   our efforts will initially be primarily focused, increases in accounts   receivable and inventory purchases when sales increase, the uncertain impact   of the market introduction of our AstraMax diagnostic workstations, and the   absence of unanticipated product development and marketing costs.

During   the nine months ended September 30, 2006 operating cash flow was negative   primarily due to collections of accounts receivable. However, our change in   cash was negative primarily due to income statement losses.  Our expectations regarding future working   capital requirements and our ability to continue operations are based on   various factors and assumptions that are subject to substantial uncertainty   and risks beyond our control, and no assurances can be given that these   expectations will prove correct.  The   occurrence of adverse developments related to these risks and uncertainties   or others could result in our incurring unforeseen expenses, being unable to   generate additional sales, to collect new and outstanding accounts   receivable, to control expected expenses and overhead, or to negotiate   payment terms with creditors, and we would likely be unable to continue
operations.

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|Item 3. | Controls and Procedures.
|------- | ------------------------

We   maintain disclosure controls and procedures that are designed to ensure that   information required to be disclosed in our Exchange Act reports is recorded,   processed, summarized and reported within the time periods specified in the   Securities and Exchange Commissions rules and forms and that such   information is accumulated and communicated to our management, including our   Chief Executive Officer and Chief Financial Officer, as appropriate, to allow   for timely decisions regarding required disclosure. In designing and   evaluating the disclosure controls and procedures, our management recognizes   that any controls and procedures, no matter how well designed and operated,   can provide only reasonable assurance of achieving the desired control   objectives, and our management is required to apply its judgment in   evaluating the cost-benefit relationship of possible controls and
procedures.

We   carry out a variety of on-going procedures, under the supervision and with   the participation of our management, including our Chief Executive Officer   and our Chief Financial Officer, to evaluate the effectiveness of the design   and operation of our disclosure controls and procedures. Our Chief Executive Officer and Chief   Financial Officer have concluded that such controls and procedures are   currently effective at the reasonable assurance level.

There have   been no changes in our internal controls over financial reporting that   occurred during our last fiscal quarter to which this report relates that   have materially affected, or are reasonably likely to materially affect, our   internal controls over financial reporting.

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PART II - OTHER INFORMATION

|Item 1 | Legal Proceedings.
|------ | ------------------

Certain   legal proceedings against LaserSight are described in Item 3 (Legal   Proceedings) of LaserSights Form 10-KSB for the year ended December 31,   2005, and in Note 9 to the Financial Statements in Part I, Item 1 of this   report, which are incorporated herein by this reference.

|Item 2     | Unregistered Sales of Equity     Securities and Use of Proceeds.
|---------- | ----------------------------------------------------------------
|           |                                                                 
|           | Not applicable.                                                 
|           |                                                                 
|Item     3 | Defaults     Upon Senior Securities.                            

The   Company signed a three-year note with Heller Healthcare Finance, Inc   (Heller) and GE Healthcare Financial Services, Inc., as successor-in-interest   to Heller (collectively GE) on August 30, 2004 (the GE Note). The GE Note   was to expire on June 30, 2007.  The   GE Note bore interest of 9%.    Covenants required the Company to maintain a minimum inventory balance   of $1,500,000, minimum quarterly revenues of $1,000,000 and an annual net   income provision.  For the year ended   December 31, 2005 and any subsequent trailing twelve month periods, as   measured on the last day of each calendar quarter, the Companys earnings   before interest, taxes, depreciation and amortization could not fall below   $550,000. As of June 30, 2006, we were not in compliance with all covenants   of our loan agreement. The Company had not met minimum
quarterly revenue   targets of $1,000,000, a rolling twelve-month $550,000 of EBIDTA and had not   presented a budget for 2006.

On   June 7, 2006, the Company received a letter GE advised the Company that, if   not waived by GE within ten days, the specified defaults would become Events   of Default under the GE Note, which would allow GE to accelerate the amounts   due under the GE Note.  The amount that would be due at that time was   approximately $629,434, consisting of $476,077 of principal and $153,357 of   fees.  GE also presented the Company a proposed Forbearance Agreement   pursuant to which GE would forbear from exercising its rights and remedies   under the GE Note with respect to the specified defaults until the earlier of   (i) June 30, 2006, or (ii) the occurrence or existence of Events of Default   under the GE Note other than the specified defaults.  Under that   agreement, the Company would be required to pay immediately a fee of $10,000,   and an additional $10,000 would be added to
the indebtedness under the GE   Note.  However, on June 13, 2006, GE verbally agreed to waive the   defaults without any additional charge to the Company and to extend until   July 31, 2006, the date on which the specified defaults will become Events   of Default under the GE Note.  The Company agreed to the terms of the   waiver letter and pursued alternative financing arrangements during this   waiver period.

The   Company and its subsidiary, LaserSight Technologies, Inc. (together, the   Borrowers) entered into a Loan Agreement (the NIIC Loan Agreement) with   New Industries Investment Consultants (HK) Ltd. (the Lender), an affiliate   of the Company (see Note 6), dated as of July 26, 2006. The NIIC Loan   Agreement enabled the Company to meet the GE deadline and avoid paying any   additional fees. On July 27, 2006 the Company paid off the GE Note balance in   full, with a cash payment of $575,561.The NIIC Loan Agreement provides for a   loan to the Company (the Loan) in the maximum principal amount of   $3,000,000.  This loan balance included the $1 million DIP financing,   which is convertible to 2,500,0000 shares of common stock. During the quarter   ended September 30, 2006, the line was drawn upon for an additional $1.3   million. Interest of nine
percent (9%) per annum will accrue on the unpaid   balance of the Loan, and such interest and the entire balance of principal,   fees, costs and expenses shall be due and payable on June 30, 2007 (the   Maturity Date).  The Loan may be prepaid, in full or in part, without   penalty.  The Company agreed to pay a fee to the Lender of $15,000, as   well as the Lenders reasonable transaction costs related to the Loan, all of   which will be due on the Maturity Date.  If not paid by the Maturity   Date, the unpaid balance of the Loan will bear interest at the rate of twelve   percent (12%) per annum. The balance on the loan at September 30, 2006 was   $2.3 million.

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Other   terms and conditions of the Loan are nearly identical to the terms and   conditions set forth in the Promissory Note and Security Agreement dated   December 1, 2003, and the Restated Promissory Note dated August 31, 2004,   made by the Borrowers in favor of the Lender (the Prior Loan   Documents).  Such terms and conditions from the Prior Loan Documents   were incorporated by reference into the NIIC Loan Agreement, to the extent   that such terms and conditions do not conflict with the terms and conditions   specifically set forth in the NIIC Loan Agreement.  However, a   significant difference is that the Loan is not convertible into shares of the   common stock of the Company.

|Item 4     | Submission of Matters to a Vote     of Security Holders.
|---------- | --------------------------------------------------------
|           |                                                         
|           | Not applicable.                                         
|           |                                                         
|Item     5 | Other     Information.                                  
|           |                                                         
|           | Not applicable.                                         
|           |                                                         
|Item 6     | Exhibits.                                               

| | Exhibit      Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3.1                 |  | Certificate of Incorporation, as amended (filed     as Exhibit 3.1 to the Companys Form 10-Q filed on November 14, 2002*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3.2                 |  | Bylaws, as amended (filed as Exhibit 3.2 to the     Companys Form 10-Q/A filed on November 21, 2002*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3.3                 |  | Certificate of Amendment of Certificate of     Incorporation (filed as Exhibit 10.11 to     the Companys Form 10-KSB filed on March 23, 2005*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 4.1                 |  | Rights Agreement, dated as of July 2, 1998,     between LaserSight Incorporated and American Stock Transfer & Trust     Company, as Rights Agent, which includes (i) as Exhibit A thereto the form     of Certificate of Designation of the Series E Junior Participating     Preferred Stock, (ii) as Exhibit B thereto the form of Right Certificate     (separate certificates for the Rights will not be issued until after the     Distribution Date) and (iii) as Exhibit C thereto the Summary of     Stockholder Rights Agreement (filed as Exhibit 99.1 to the Companys Form 8-K     filed July 8, 1998*).
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 10.1                |  | Product Purchase Agreement dated February 2, 2004,     between LaserSight Technologies, Inc. and Shenzhen New Industries Medical     Development Co., Ltd. (filed as Exhibit 99.8 to the Companys Form     8-K/A filed on May 4, 2004*).                                                                                                                                                                                                                                                                                                                                                                           
| |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 10.2                |  | Distribution Agreement dated August 15, 2002,     between LaserSight Technologies, Inc. and Shenzhen New Industries Medical     Development Co., Ltd. (filed as Exhibit 99.5 to the Companys Form 8-K     filed on August 30, 2002*)**.                                                                                                                                                                                                                                                                                                                                                                            

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| | 10.3  |  | Amendment No. 2 to Loan and Security Agreement     dated as of August 15, 2002, among LaserSight Incorporated and subsidiaries     and Heller Healthcare Finance, Inc. (filed as Exhibit 10.1 to the Companys Form 10-Q     filed on November 14, 2002*).                                                                                                                 
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.4  |  | Extension to Loan and Security Agreement dated as     of March 12, 2003, among LaserSight Incorporated and subsidiaries and     Heller Healthcare Finance, Inc. (filed as Exhibit 10.40 to the Companys Form     10-K filed on March 31, 2003*).                                                                                                                          
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.5  |  | Amendment No. 3 to Loan and Security Agreement     dated as of March 31, 2003 among LaserSight Incorporated and subsidiaries     and Heller Healthcare Finance, Inc. (filed as Exhibit 10.41 to the Companys Form     10-K filed on March 31, 2003*).                                                                                                                     
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.6  |  | Amendment No. 4 to Loan and Security Agreement and     Limited Waiver dated as of June 30, 2004, among LaserSight Incorporated and     subsidiaries and General Electric Capital Corporation as successor to GEHFS     Holdings, Inc., formerly known as Heller Healthcare Finance, Inc. (filed     as Exhibit 10.8 to the Companys Form 10-KSB filed on March 23, 2005*).
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.7  |  | Amended and Restated Registration Rights Agreement     dated June 30, 2004, between LaserSight Incorporated and General Electric     Capital Corporation as successor to GEHFS Holdings, Inc., formerly known as     Heller Healthcare Finance, Inc. (filed as Exhibit 10.9 to the Companys Form     10-KSB filed on March 23, 2005*).                                    
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.8  |  | Restated Promissory note for $1,000,000, effective     June 30, 2004, made in favor of New Industries Investment Consultants (HK)     Ltd. by LaserSight Incorporated and its subsidiary, LaserSight     Technologies, Inc. (filed as Exhibit 10.10 to the Companys Form     10-KSB filed on March 23, 2005*).                                                            
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.9  |  | Non-Exclusive License Agreement between the     Company and WaveLight Laser Technologie AG, dated February 24, 2005, and     effective March 3, 2005 (filed as     Exhibit 10.1 to the Companys Form 10-QSB filed on April 25, 2005*).                                                                                                                                    
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.10 |  | Amendment No. 1 to Third Amended and Restated     Secured Term Note, dated May 23, 2005, among LaserSight Incorporated and     subsidiaries and General Electric Capital Corporation (filed as Exhibit 10.2 to the Companys Form 10-QSB filed on August     5, 2005*).                                                                                                    
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.11 |  | Amendment No. 1 to Restated Promissory Note, dated     February 15, 2006, between LaserSight Incorporated and New Industries     Investment Consultants (HK) Ltd. (filed     as Exhibit 10.13 to the Companys Form 10-KSB filed on March 31, 2006*).                                                                                                                      
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.12 |  | Loan Agreement and Promissory Note, dated July 26,     2006, between LaserSight Incorporated and New Industries Investment     Consultants (HK) Ltd. (filed     as Exhibit 10.12 to the Companys Form 10-QSB filed on August 14, 2006*).                                                                                                                                  
| |       |  |                                                                                                                                                                                                                                                                                                                                                                            
| | 11    |  | Statement of Computation of Loss Per Share (included     in Financial Statements in Part I, Item 1, of this report).                                                                                                                                                                                                                                                       

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| | 31.1 |  | Certifications of Chief Executive Officer pursuant     to Rule 13a-14(a)
| | ---- |  | ------------------------------------------------------------------------
| |      |  |                                                                         
| | 31.2 |  | Certifications of Chief Financial Officer pursuant     to Rule 13a-14(a)
| |      |  |                                                                         
| | 32.1 |  | Certifications of Chief Executive Officer pursuant     to Section 1350  
| |      |  |                                                                         
| | 32.2 |  | Certifications of Chief Financial Officer pursuant     to Section 1350  

|                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------
|*Incorporated herein by reference.  File No. 0-19671.                                                                                                 
|                                                                                                                                                      
|**Confidential treatment has been granted for     portions of this document.  The     redacted material has been filed separately with the commission.

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SIGNATURES

In   accordance with the requirements of the Exchange Act, the registrant caused   this report to be signed on its behalf by the undersigned, thereunto duly   authorized.

|                           | LaserSight     Incorporated
|-------------------------- | ---------------------------
|                           |                            
|                           |                            
|Dated:   November 14, 2006 | By:                        
|                           |                            
|                           |                            
|                           |                            
|                           |                            
|                           |                            
|Dated:   November 14, 2006 | By:                        
|                           |                            
|                           |                            
|                           |                            

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