UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

________________________

FORM 10-K

___X__  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ______to

______________________

Commission file number 0-27610

LCA-VISION INC.

Delaware Corporation   11-2882328

(State of Incorporation)      (I.R.S. I.D.)

7840 Montgomery Road, Cincinnati, Ohio 45236

Telephone Number (513) 792-9292

_________________________

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 Par Value per Share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  [X]
 No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of February 9, 2000
was approximately $154,617,050.

The number of shares outstanding of the registrant's Common Stock as of February 9, 2000 was 51,581,506.

________________________

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of
Stockholders to be held May 8, 2000 are incorporated by reference in Items 10, 11, 12 and 13 of Part III of this
Report.



---

LCA-VISION INC.

FISCAL YEAR 1999 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

|          |                                                                                      | Page
|--------- | ------------------------------------------------------------------------------------ | ----
|Part I.   |                                                                                      |     
|Item 1.   | Business                                                                             | 3   
|Item 2.   | Properties                                                                           | 9   
|Item 3.   | Legal Proceedings                                                                    | 10  
|Item 4.   | Submission of Matters to a Vote of Security Holders                                  | 10  
|          |                                                                                      |     
|Part II.  |                                                                                      |     
|Item 5.   | Market for the Registrant's Common Equity and Related Stockholder Matters            | 11  
|Item 6.   | Selected Financial Data                                                              | 11  
|Item 7.   | Management's Discussion and Analysis of Financial Position and Results of Operations | 13  
|Item 7A.  | Quantitative and Qualitative Disclosures About Market Risk                           | 19  
|Item 8.   | Financial Statements and Supplementary Data                                          | 19  
|Item 9.   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 38  
|          |                                                                                      |     
|Part III. |                                                                                      |     
|Item 10.  | Directors and Executive Officers of the Registrant                                   | 38  
|Item 11.  | Executive Compensation                                                               | 38  
|Item 12.  | Security Ownership of Certain Beneficial Owners and Management                       | 38  
|Item 13.  | Certain Relationships and Related Transactions                                       | 38  
|          |                                                                                      |     
|Part IV.  |                                                                                      |     
|Item 14.  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                      | 39  
|          | Signatures                                                                           | 42  

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this Annual Report on Form 10-K, including information with respect to our future
business plans, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words
"believes," "may," "will," "estimates," "continues," "anticipates," "intends," "plans," "expects" and similar
expressions are intended to identify forward-looking statements. There are a number of important factors that could
cause our results to differ materially from those indicated by such forward-looking statements. These factors include
those set forth in Part II "Management's Discussion and Analysis of Financial Condition and Results of Operations -
Factors That May Affect Future Results and Market Price of Stock."

Item 1. Business.

Background and History of Company

LCA-Vision Inc. (the "Company" or "LCA-Vision") is the successor to two businesses which were founded and
controlled by Stephen N. Joffe, Laser Centers of America, Inc. and Toronto Laservision Centre, Inc.  Laser Centers
of America was founded in 1985 to assist hospitals in establishing and managing laser surgery centers, and Toronto
Laservision was one of the earliest laser vision surgery centers in Canada, which approved refractive laser surgery
several years prior to its introduction in the United States in 1996.

Laser Centers of America, Toronto Laservision and our direct corporate predecessor, Maxoil Incorporated, were
combined through a series of transactions that occurred in 1995. At that time, Maxoil was an inactive, non-operational corporation which had originally been incorporated in 1987 and had completed an initial public offering
in 1988, before ceasing its oil and gas syndication business in 1993.  In July 1995 Stephen N. Joffe purchased a
majority of the outstanding shares of the common stock and preferred stock of Maxoil Incorporated, amended its
certificate of incorporation to change the name to LCA-Vision Inc. and effected a one-for-ten reverse stock split.
The corporate headquarters were moved to Cincinnati, Ohio.  On August 31, 1995, LCA Canada Inc., a wholly-owned subsidiary of LCA-Vision, acquired all of the stock of Toronto Laservision. On September 29, 1995, Laser
Centers of America merged into LCA-Vision.

On August 18, 1997, we acquired all of the outstanding shares of Refractive Centers International, Inc., an operator
of laser vision correction centers and a majority-owned subsidiary of the refractive laser manufacturer Summit
Technology, Inc., in exchange for 17,065,579 newly-issued shares of LCA-Vision common stock.

In 1998, we raised a total of $9,463,000 of equity capital through the issuance of a new class of convertible
preferred stock to fund the continued growth of our business, and in July 1999 we raised an additional $37,300,000
of equity capital, after expenses, through a public offering of 5,000,000 shares of our common stock.

Our shares were originally traded on the Nasdaq over-the-counter electronic bulletin board.  In 1996 our common
stock began trading in the Nasdaq SmallCap Market, and following our public offering in 1999, it began trading on
the Nasdaq National Market.

The U.S. Eye Care Industry

More than 160 million Americans, or approximately 60% of our nation's population, require eyeglasses or contact
lenses to correct common refractive vision disorders and over 100 million Americans purchased eyewear in 1998.
These consumers, with a median age of approximately 35 years old, spent a total of approximately $16 billion
during 1998 on eyeglasses, contact lenses and other corrective lenses. Consumers purchased retail optical goods
through three main retail channels: (1) independent ophthalmologists, optometrists and opticians, which accounted
for 63% of sales, (2) retail chains, which accounted for 35% of sales and (3) health maintenance organizations,
which accounted for 2% of sales.

Common Refractive Vision Disorders

The population segment described above usually suffers from one or more refractive vision disorders, which result
from improper curvature of the cornea as related to the size and shape of the eye. If the cornea's curvature is not
precisely correct, it cannot properly focus the light passing through it onto the retina, and the viewer will see a
blurred image. The three most common refractive vision disorders are:

- Myopia (nearsightedness) -- images are focused in front of the retina, resulting in the blurred perception of distant
objects

- Hyperopia (farsightedness) -- images are focused behind the retina, resulting in the blurred perception of near
objects

- Astigmatism -- images are not focused on any point due to the varying curvature of the eye along different axes

Laser Vision Correction Procedures

Laser vision correction procedures are designed to reshape the outer layers of the cornea to correct refractive vision
disorders by changing its curvature with an excimer laser, which eliminates or reduces the need for corrective
lenses.

There are currently two outpatient procedures that use the excimer laser to correct common refractive vision
disorders: Laser In-Situ Keratomileusis ("LASIK") and Photorefractive Keratectomy ("PRK"). In the case of both
LASIK and PRK, prior to the procedure, an assessment is made of the correction required to program the excimer
laser. The software of the excimer laser then calculates the optimal number of pulses needed to achieve the intended
correction using a specially developed algorithm. An eyelid holder is inserted to prevent blinking and topical
anesthetic eye drops are applied. The patient reclines in a chair, eyes focused on a fixed target, while the
ophthalmologist positions the patient's cornea for the procedure. The excimer laser emits energy in a series of pulses
with each pulse lasting only several billionths of a second. High-energy ultraviolet light produced by the excimer
laser creates a "non-thermal" ablation, which removes tissue and reshapes the cornea without damaging adjacent
tissue. The amount of tissue removed depends upon the degree of the vision disorder being corrected. Following the
procedure, the front surface of the eye is flatter when corrected for nearsightedness and steeper when corrected for
farsightedness. In effect, the change made in the middle or periphery of the cornea is translated to the front surface
of the cornea which results in vision correction. A series of patient follow-up visits are scheduled with an
optometrist or ophthalmologist to monitor the corneal healing process, to verify that there are no complications and
to test the correction achieved by the laser vision correction procedure. The typical procedure takes 15 to 30 minutes
from set-up to completion. The excimer laser is generally used for less than 40 seconds.

The excimer laser used in our U.S. centers is manufactured by VISX and is currently approved to treat
nearsightedness of up to -14 diopters with astigmatism of up to -4 diopters, and farsightedness of up to +6 diopters.
The FDA recently approved the VISX laser for LASIK procedures with a treatment range of up to -14 diopters of
nearsightedness with or without -0.5 to -5.0 diopters of astigmatism.

LASIK.  LASIK came into medical use in Canada in 1994 and in the U.S. in 1996. Currently, the majority of laser
vision correction procedures are LASIK since it is believed that LASIK generally allows for:

- More precise correction than PRK for higher levels of myopia and hyperopia (with or without astigmatism),

- Greater predictability of results,

- Shorter patient recovery times and less discomfort, and

- Decreased possibility of corneal regression.

In LASIK, an FDA-approved automated microsurgical instrument called a microkeratome is used to create a thin
corneal flap, which remains hinged to the eye. Patients do not feel or see the cutting of the corneal flap, which takes
only a few seconds. The corneal flap is then laid back and excimer laser pulses are applied to the exposed surface of
the cornea to treat the eye according to the patient's prescription. The corneal flap is then folded back to its original
position and inspected to ensure that it remains secured in position by the natural suction within the cornea. Because
the surface layer of the cornea remains intact with LASIK, no bandage contact lens is required and the patient
experiences minimal discomfort. LASIK has the advantage of more rapid recovery than PRK, with most patients
seeing well enough to drive a car the next day.  The LASIK procedure allows an ophthalmologist to treat both eyes
of a patient during the same visit.

PRK.  PRK has been used medically since 1985. In PRK procedures, the ophthalmologist removes the thin layer of
cells covering the outer surface of the cornea (the epithelium), rather than creating a corneal flap, in order to apply
the excimer laser pulses to the surface of the cornea. Following the PRK procedure, a contact lens bandage is placed
on the eye to protect it. The patient typically experiences discomfort for up to 24 hours and blurred vision for up to
72 hours until the epithelium heals. To assist in alleviating discomfort and to promote corneal healing, an
ophthalmologist generally will prescribe certain topical pharmaceuticals. Although a patient usually experiences
substantial improvement in clarity of vision within a few days following the procedure, it usually takes one to three
months for the full benefit of the PRK procedure to be realized. Patients usually have one eye treated in one visit
and the second eye treated at a later visit.

The Laser Vision Correction Market

In 1995, the FDA approved the first laser to perform laser vision correction procedures in the U.S. Currently, laser
vision correction is the most rapidly growing surgical procedure in the U.S. with an estimated 443,000 procedures
performed in 1998, an increase of 122% over the 200,000 procedures performed in 1997. Industry analysts forecast
approximately 950,000 procedures were performed in 1999 and 1.4 million procedures will be performed in 2000.
Laser vision correction is an elective, private pay procedure performed on an outpatient basis.

Number of Laser Vision Correction Procedures

|1997 | 1998 | 1999 | 2000E | 2001E | 2002E
|---- | ---- | ---- | ----- | ----- | -----
|200  | 443  | 950  | 1,435 | 1,860 | 2,232



Total U.S. Laser Vision Correction Procedures*
(in thousands)

*Chart compiled using Lehman Brothers Laser Vision Correction Report December 13, 1999

The rapid growth of laser vision correction procedures performed in the U.S. is attributable to many factors which
include:

- Word of Mouth -- As the number of procedures performed increases, so does the number of patients able to attest
to the benefits of laser vision correction.

- Improved Procedure -- The LASIK procedure results in immediate improvement, minimal patient discomfort and
recovery in a matter of days.

- Expanded Applications -- The excimer laser is now approved to treat the three most common types of refractive
vision disorders: nearsightedness, farsightedness and astigmatism.

- Demographic Trends -- Deteriorating eyesight experienced by aging baby boomers is anticipated to create
increased demand for eye care services, including laser vision correction.

Our Laser Vision Correction Centers

We currently operate 24 laser vision correction centers, 21 of which are located in metropolitan markets throughout
the United States, two of which are in Canada and one of which is in Europe. Our centers are supported by
credentialed ophthalmologists and optometrists.  The ophthalmologists perform the laser vision correction
procedures, and either ophthalmologists or optometrists carry out the pre-procedure evaluations and post-procedure
follow-ups. We have performed laser vision correction procedures since 1991 and nearly all procedures are now
LASIK.

Our Business Strategy

Our business strategy is to provide laser vision correction at an affordable price. Beginning in July 1999, we began
to convert our centers to closed access facilities from open access facilities. In connection with this conversion, we
reduced the price to the patient to $2,995 for a bilateral (both eyes) LASIK procedure from the previous $4,000-$4,500.

We also changed the names of our centers to LasikPlus and began building consumer awareness of the brand name
through a saturation local media campaign that included newsprint, radio and direct mailings. At December 31,
1999 eight centers remained to be converted. During the first two weeks of January 2000, six of those centers
converted to the LasikPlus business model. The remaining two are expected to be converted by March 31, 2000.

We intend to increase penetration and market share in our current markets and expand into contiguous markets. The
key elements of our business strategy include:

Developing and implementing innovative direct marketing campaigns. Our marketing programs seek to reinforce
the LasikPlus brand name in addition to raising awareness concerning laser vision correction and promoting our
centers. We direct patient marketing efforts to three potential sources: our network's patient base, other eye care and
medical professionals' patients and consumers in general. In each market, we target a specific demographic group of
potential patients that we believe is most likely to be interested in laser vision correction. Our marketing programs
include print, television, radio and direct mail campaigns as well as brochures, videos and seminars. Our public
relations rely on placement of news stories in various media to highlight the opening of new centers or the
availability of laser vision correction services within a specific market. In most advertisements, prospective patients
are provided our web-site address for LasikPlus and LCA-Vision and a toll-free number to contact our call center
representatives who screen prospective patients and record patient names and information into our centralized
computer system for future mailings. Once patient information has been recorded, our representatives attempt to
schedule eye evaluation appointments for prospective patients with the local center ophthalmologist or optometrist
to determine whether the prospective patient is a candidate for laser vision correction. If a prospective patient elects
not to proceed with a laser vision procedure following an initial evaluation, the prospective patient's name is kept on
a follow-up mailing list and additional materials are sent out to the patient for a certain period of time.

Attracting leading ophthalmologists and optometrists. We believe the most effective way to attract leading
ophthalmologists and optometrists is to establish ourselves as a leading provider and operator of laser vision
correction centers within the eyecare community. We assign a medical support director to our markets who is
responsible for identifying the leading ophthalmologists and optometrists located within that market. These
individuals establish contacts and promote our laser vision correction services and capabilities through attending
professional meetings and conferences, advertisements in trade journals, direct mailings, our web site and
newsletters. We then continue to work closely with ophthalmologists and optometrists participating in our laser
vision correction programs by educating them as to how to develop their laser vision correction business and
providing training and credentialing for the laser vision correction procedure, including pre-procedure evaluations
and post-procedure follow-ups.

Building and operating new laser vision correction centers. We plan to expand our business primarily through the
development of new centers in contiguous markets and within existing markets. In evaluating new and current
markets for building a laser vision correction center, we evaluate population demographics, determine the number
of existing excimer lasers and interview local ophthalmologists and optometrists. The targeted market must exhibit a
potential for generating break-even procedure volume within the first 6 to 9 months after opening, including the
necessary ophthalmologist and optometrist participation to support such levels. We seek to lease 2,000 to 3,000
square feet of space in professional office buildings located in high volume traffic areas. In addition, we have
developed standardized center plans and designs to be used in building each new center.

In December 1999, we announced the opening of two new LasikPlus centers in Maple Grove, MN and Tampa, FL.
We have announced our plan to open approximately ten new centers in 2000.

Acquiring established laser vision correction centers. We will continue to evaluate selective acquisition
opportunities located in existing and contiguous markets. This includes an evaluation of each potential laser vision
correction center's historical operating performance and clinical outcomes and verification of all credentialing,
licensures and certifications for the ophthalmologists performing procedures. Furthermore, we assess each targeted
center's physical structure, geographic location and support staff qualifications. We seek to acquire laser vision
correction centers that have established profitability and can benefit from our management and marketing programs.

We Provide Our Patients With:

Convenient access to highly credentialed ophthalmologists and optometrists. We focus on recruiting leading
ophthalmologists and optometrists who have a reputation for providing quality eye care within their respective
markets. Our ophthalmologists have completed extensive FDA-mandated training and also have met our rigorous
qualification criteria, including an extensive review of state licensure, Board certification, malpractice insurance and
historical procedure experience and clinical outcomes. In addition, all newly-recruited ophthalmologists are placed
under the supervision of a more experienced laser vision correction ophthalmologist to closely monitor clinical
outcomes and patient satisfaction.

Treatment environments designed to enhance customer satisfaction. Our centers are designed to create a patient
friendly environment and reduce any anxiety associated with laser vision correction. Each center has an
aesthetically pleasing and comfortable waiting area for patients and our center staff is focused on addressing each
patient's needs. In addition, each center provides consultation areas where the patient and center staff can discuss
procedures and financing alternatives in a private setting.

Educational consultations and materials. The education process begins with our initial contact with the patient. All
of our educational materials focus on information regarding vision correction procedures. Our call center personnel
are trained to answer questions regarding procedures and have access to both an ophthalmologist to address more
difficult inquiries and past patients to relate procedure experiences. Once in the center, potential patients receive a
consultation focused on educating the patient on vision correction procedures, how the procedure corrects the
specific refractive vision disorder that the patient presents and what results the patient should expect after the
procedure. Patients are given written materials and can view a video of the procedure or witness an actual procedure
during their initial visit. We believe that an educated patient has realistic expectations and is therefore more satisfied
with procedure results.

Regularly scheduled post-procedure follow-ups. We strive towards total patient satisfaction and have established an
"Acuity Plan" program which assures that the level of vision correction agreed to by the patient and the
ophthalmologist is achieved. We schedule post-procedure follow-ups with patients to monitor procedure results and
in those very few instances when the desired correction is not achieved in the initial procedure, the patient receives a
no-cost enhancement.

Affordable financing alternatives. Because laser vision correction procedures are elective and generally not
reimbursable by third party payors, we offer patients several financing alternatives and in certain circumstances
promotional discounts. Customers can pay for the procedure with cash, personal check, bank check, money order or
credit card. In addition, we make available multiple payment plans offered by an unaffiliated finance company. We
also provide information regarding installment plans, insurance coverage, home equity loans and payment through
employer flexible benefit plans. In the majority of the procedures financed, we bear no credit risk.

Procedure Volume

Approximately 94% of the procedures performed in our laser vision correction centers in the U.S. for the year 1999
were LASIK procedures. For the year 1998, approximately 77% of the procedures were LASIK procedures.

The table below illustrates the quarterly growth in the number of procedures performed in our consolidated centers
since the first quarter of 1996.

Our Quarterly Laser Vision Correction Procedure Volume

Number of Laser Vision Correction Procedures

|Quarter | 1996 | 1997  | 1998  | 1999 
|------- | ---- | ----- | ----- | -----
|1       | 532  | 979   | 3,887 | 7,591
|2       | 790  | 1,506 | 4,891 | 8,365
|3       | 596  | 2,375 | 5,327 | 8,769
|4       | 745  | 2,888 | 5,686 | 8,526

Competition

Laser vision correction, whether performed at one of our centers or elsewhere, competes with several surgical and
non-surgical treatments to correct refractive vision disorders including eyeglasses, contact lenses, other types of
refractive surgery (such as radial keratotomy) and corneal implants. In addition, other technologies currently under
development may ultimately prove to be more attractive to consumers than laser vision correction.

We face competition from other providers of laser vision correction. Eye care services in the U.S., including laser
vision correction services, are delivered through a fragmented system of local providers, including individual or
small groups of opticians, optometrists and ophthalmologists and chains of retail optical stores and multi-site eye
care centers. Laser vision correction chains, like LCA-Vision, are a specialized type of multi-site eye care center
that primarily provide laser vision correction. Among the laser vision correction center chains, we believe we are
one of the largest providers in terms of number of centers in the U.S.

The market for providing access to excimer lasers is highly competitive. We compete with laser centers operated by
other national operators of laser vision correction centers as well as with local operators and ophthalmologists who
have purchased their own laser. Other private and public companies which have indicated they intend to operate or
already operate laser centers in the U.S. include ClearVision Laser Centers, Inc., Laser Vision Centers, Inc.,
NovaMed Eyecare, Inc., VisionAmerica, Inc., Prime Medical Services, Inc., TLC Laser Eye Center, Inc. and Vision
Twenty-One, Inc. Certain of these companies own or operate mobile excimer laser facilities which they bring to
ophthalmologists' offices on a regularly-scheduled basis, or an as-needed basis, rather than operating fixed site
centers like ours.

In addition to competition from other chains of laser vision correction centers, we face competition from hospitals,
surgical clinics and ophthalmologists, either as sole practitioners or as a group, who practice in the same geographic
area as one of the centers. Furthermore, retail optical chains could potentially provide laser vision correction
procedures. Certain chains have entered the laser vision correction market. Management believes they have had
moderate success and have limited their involvement in the industry. The major retail optical chains are not
currently focusing on directly providing laser vision correction.

Employees

As of December 31, 1999, we had 202 employees, 155 of whom were full-time. None of our employees are subject
to a collective bargaining agreement nor have we experienced a work stoppage.

Trademarks

Not all of our trademarked names have been formally registered yet.  Where the trademark symbol is used, it is our
intention to claim a trademark on such names under common law by using the "TM" symbol.  The duration of such
trademarks under common law is the length of time we continue to use them.

Suppliers of Laser Equipment

We are not directly involved in the research, development or manufacture of ophthalmic laser systems. There are at
least four companies, Summit, VISX, Nidek and LaserSight, whose excimer laser systems have been approved by
the FDA for commercial sale in the U.S.

Government Regulation

Our operations are subject to extensive federal, state and local laws, rules and regulations affecting the health care
industry and the delivery of health care. These include laws and regulations, which vary significantly from state to
state, prohibiting unlawful rebates and division of fees, and limiting the manner in which prospective patients may
be solicited. Furthermore, contractual arrangements with hospitals, surgery centers, ophthalmologists and
optometrists, among others, are extensively regulated by state and federal law.

Failure to comply with applicable FDA requirements could subject excimer laser manufacturers and us to
enforcement action, including product seizures, recalls, withdrawal of approvals and civil and criminal penalties,
any one or more of which could have a material adverse affect on our business, financial condition and results of
operations. In addition, clearance or approvals could be withdrawn in appropriate circumstances. Failure by us or
our principal suppliers to comply with regulatory requirements, or any adverse regulatory action, could result in a
limitation on or prohibition of our use of excimer lasers which in turn would have a material adverse effect on our
business, financial condition and results of operations. Discovery of problems, violations of current laws or future
legislative or administrative action in the United States or elsewhere may adversely affect the manufacturers' ability
to obtain regulatory approval of laser equipment. Furthermore, the failure of VISX, Summit or any other
manufacturers that supply or may supply excimer lasers to us to comply with applicable federal, state, or foreign
regulatory requirements, or any adverse regulatory action against such manufacturers, could limit the supply of
lasers or limit our ability to use the lasers.

Item 2.  Properties.

Our corporate headquarters and one of our laser refractive surgery centers are located in a 32,547 sq. ft. office
building that we own in Cincinnati, Ohio. Our other laser refractive surgery centers are generally in professional
office buildings and include laser surgery rooms, private examination rooms, and patient waiting areas. The leased
space ranges in size from approximately 2,000 to 6,700 square feet; with expiration dates ranging from October 1,
2000 to December 31, 2004. We do not believe that any of the leases are material. The following table describes the
locations of our laser refractive surgery centers at December 31, 1999:

|Location                    | Leased/

Owned | Aggregate Annual

Lease Payment
|--------------------------- | -------------- | -------------------------------
|Concord, CA                 | Leased         | $50,973                        
|San Bernardino, CA          | Leased         | 57,235                         
|San Jose, CA                | Leased         | 56,060                         
|Torrance, CA                | Leased         | 58,704                         
|Helsinki, Finland (1)       | Leased         | --------                       
|Clearwater, FL              | Leased         | 52,370                         
|Schaumburg, IL              | Leased         | 53,198                         
|Annapolis, MD               | Leased         | 22,347                         
|Baltimore, MD               | Leased         | 85,000                         
|Bethesda, MD                | Leased         | 55,452                         
|Edina, MN                   | Leased         | 63,732                         
|Charlotte, NC               | Leased         | 63,592                         
|Albany, NY                  | Leased         | 70,637                         
|Amherst, NY                 | Leased         | 67,248                         
|Centerville, OH             | Leased         | 56,675                         
|Cincinnati, OH              | Owned          | -------                        
|Columbus, OH                | Leased         | 35,553                         
|Holland, OH                 | Leased         | 83,719                         
|Ft. Erie, Ontario, Canada   | Leased         | 7,383                          
|Willowdale, Ontario, Canada | Leased         | 84,921                         
|Falls Church, VA            | Leased         | 65,101                         
|Tampa, FL                   | Leased         | 102,176                        
|Maple Grove, MN             | Leased         | 112,994                        
|Beverly Hills, CA           | Leased         | 206,784                        

(1) Helsinki is leased through a joint venture. Its rent is included in the monthly administration fee charged by the
manager which is one of the investors.

Our facilities are fully utilized for current operations and we believe that suitable additional space is available to
accommodate expansion needs. The above table does not include the locations or annual rent for centers that have
been closed and we are the sublessor.

Item 3. Litigation.

We are a defendant and counter-claimant in a consolidated case entitled Cabrini Development Council, et al. v.
LCA-Vision Inc., et al., which was commenced in October, 1997 in the Supreme Court of the State of New York,
County of New York and subsequently removed to the United States District Court for the Southern District of New
York. Also named as co-defendants are various current and former employees, officers and directors. The case
involves claims and counterclaims asserted by and against us, and two other members of a New York limited
liability company formerly engaged in operating a laser refractive surgery center, and arises out of the cessation of
operations of such limited liability company.

Discovery in the action has recently concluded and all parties have filed motions for summary judgment, based on
the discovery result, to dismiss all claims of the other parties. A decision on the motions will be issued by the court
in due course.

In the opinion of management this action will not have a material adverse effect on our financial position or results
of operations.

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

Not applicable.

PART II

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

Since June 30, 1999 our common stock has been included for quotation on the Nasdaq National Market under the
symbol "LCAV". From 1996 through June 29, 1999 our common stock was included for quotation on the Nasdaq
Small Cap Market under the symbol "LCAV." There were approximately 3,002 holders of record of our Common
Stock on February 9, 2000.

The following table sets forth the range of high and low closing prices as reported by the Nasdaq National Market
since June 30, 1999 and the Nasdaq Small Cap Market prior to that date. These quotations  reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

| | 1999 | 1998 | 1997
| | ---- | ---- | ----

|               | High   | Low    | High   | Low    | High   | Low   
|-------------- | ------ | ------ | ------ | ------ | ------ | ------
|               |        |        |        |        |        |       
|First Quarter  | $4.000 | $1.375 | $2.125 | $0.844 | $6.875 | $2.375
|Second Quarter | 12.750 | 3.688  | 4.156  | 1.688  | 7.125  | 2.688 
|Third Quarter  | 12.688 | 5.000  | 3.500  | 1.250  | 3.875  | 2.750 
|Fourth Quarter | 5.500  | 3.813  | 1.500  | 1.000  | 3.625  | 1.000 



We did not pay any cash dividends on our common stock during the three years ended December 31, 1999 and do
not anticipate doing so in the future. Our loan agreement with our principal lender prohibits us from declaring or
paying any dividend or distribution, except stock dividends, on our capital stock without the lender's approval.

Item 6. Selected Consolidated Financial Data.

The data set forth below should be read in conjunction with the Consolidated Financial Statements and related notes
and "Management's Discussion and Analysis of Financial Condition and Results of Operations".

| | Year Ended December 31
| | ----------------------

| | 1995(1) | 1996 | 1997 | 1998 | 1999
| | ------- | ---- | ---- | ---- | ----

| | (amounts in thousands, except per share data)
| | ---------------------------------------------

|Consolidated Statement of Operations Data:                 |           |             |              |              |         
|---------------------------------------------------------- | --------- | ----------- | ------------ | ------------ | --------
|Revenues:                                                  |           |             |              |              |         
|Laser refractive surgery                                   | $     707 | $     3,715 | $     12,917 | $     32,508 | $56,358 
|Surgery management contracts and other                     | 12,944    | 10,045      | 4,677        | 2,692        | 1,026   
|Total revenues                                             | 13,651    | 13,760      | 17,594       | 35,200       | 57,384  
|Operating costs and expenses:                              |           |             |              |              |         
|Medical professional and license fees                      | -------   | 795         | 4,489        | 13,700       | 22,930  
|Direct costs of services                                   | 5,981     | 6,937       | 8,237        | 10,763       | 11,594  
|General and administrative expenses                        | 6,305     | 7,327       | 8,006        | 10,144       | 16,226  
|Depreciation and amortization                              | 1,042     | 1,597       | 2,511        | 3,521        | 2,964   
|Other                                                      | ------    | 225         | 162          | --------     | --------
|Restructuring/impairment provision                         | ------    | -------     | 1,100        | 10,500       | (150)   
|Total expenses                                             | 13,328    | 16,881      | 24,505       | 48,628       | 53,564  
|Operating income (loss)                                    | 323       | (3,121)     | (6,911)      | (13,428)     | 3,820   
|Equity in earnings (losses) from unconsolidated
businesses | 40        | (906)       | (27)         | 354          | 316     
|Interest expense                                           | 309       | 770         | 1,140        | 786          | 169     
|Interest income                                            | 158       | 89          | 216          | 441          | 1,633   
|Other income                                               | 10        | 651         | 77           | 358          | 6       
|Income (loss) before taxes on income                       | 222       | (4,057)     | (7,785)      | (13,061)     | 5,606   
|Income tax expense (benefit)                               | 44        | -------     | 68           | 157          | (5,287) 
|Net income (loss)                                          | 178       | (4,057)     | (7,853)      | (13,218)     | 10,893  
|Dividends to preferred shareholders                        | ------    | --------    | 183          | 518          | 140     
|Income (loss) available to common
shareholders             | $   178   | $   (4,057) | $   (8,036)  | $   (13,736) | $10,753 

Item 6.  Selected Consolidated Financial Data (continued).

| |                       
| | ----------------------
| | Year Ended December 31

| | 1995(1) | 1996 | 1997 | 1998 | 1999
| | ------- | ---- | ---- | ---- | ----

| | (amounts in thousands, except per share data)
| | ---------------------------------------------

|Income (loss) per common share:                                          |         |          |          |          |         
|------------------------------------------------------------------------ | ------- | -------- | -------- | -------- | --------
|Basic                                                                    |         | $ (0.21) | $ (0.30) | $ (0.36) | $0.22   
|Diluted                                                                  |         | $ (0.21) | $ (0.30) | $ (0.36) | $0.21   
|Weighted average shares used in computation:                             |         |          |          |          |         
|Basic                                                                    |         | 19,610   | 26,709   | 37,669   | 47,991  
|Diluted                                                                  |         | 19,610   | 26,709   | 37,669   | 50,914  
|Pro forma income data(2):                                                |         |          |          |          |         
|Net income as reported                                                   | $   178 |          |          |          |         
|Provision for income taxes - pro forma                                   | 41      |          |          |          |         
|Proforma net income                                                      | $   137 |          |          |          |         
|Pro forma income per common share:                                       |         |          |          |          |         
|Basic and diluted                                                        | $  0.02 |          |          |          |         
|Pro forma weighted average shares used in
basic and diluted computations | 5,659   |          |          |          |         
|Selected Operating Data:                                                 |         |          |          |          |         
|Laser vision correction procedures                                       | 513     | 2,663    | 7,748    | 19,791   | 33,266  
|Balance Sheet Data:                                                      |         |          |          |          |         
|Cash and cash equivalents                                                | $2,587  | $  724   | $2,780   | $6,496   | $11,891 
|Short-term investments                                                   |         |          |          |          | 37,299  
|Working capital (deficit)                                                | 3,280   | (3,187)  | (1,698)  | 3,577    | 48,821  
|Total assets                                                             | 13,526  | 13,481   | 44,527   | 31,377   | 85,290  
|Debt maturing in one year                                                | 351     | 824      | 10,182   | 787      | 676     
|Total debt, excluding current portion                                    | 8,477   | 6,423    | 2,850    | 4,224    | 250     
|Accumulated (deficit) (3)                                                | (535)   | (4,592)  | (12,446) | (25,664) | (14,771)
|Total shareholders' investment                                           | 2,619   | 1,198    | 26,714   | 23,199   | 80,045  

_______________

(1) On September 25, 1995, LCA-Vision Inc. merged with Laser Centers of America Inc. At the time of the merger,
two shareholders owned an aggregate of 92% of the outstanding voting stock of LCA-Vision and 100% of Laser
Centers of America. LCA-Vision was inactive and non-operational at the time of the merger. The financial data for
1995 reflects the historical financial position and results of operations for Laser Centers of America, except for
shareholders' investment, which has been restated to show the capital structure of LCA-Vision at the time of the
merger.

(2) Prior to the merger, Laser Centers of America elected to be taxed as a subchapter S corporation. Income tax
liabilities, other than certain state and local income taxes, were included in the tax returns of its shareholders. The
pro forma statement of operations data for 1995 reflects the adjustments to the historical information assuming that
the conversion to a C corporation had taken place effective January 1, 1995. The provision for income taxes
represents an effective tax rate of 38%.

(3) Immediately prior to the merger, $6.4 million was distributed to the shareholders. This distribution represents a
portion of the subchapter S corporation earnings previously included in their taxable income. The shareholders used
the proceeds to acquire $2.0 million of LCA-Vision common stock and to loan the remainder to LCA-Vision.

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

You should read the following discussion and analysis in conjunction with the "Selected Consolidated Financial
Data" and the accompanying financial statements and related notes included elsewhere in this Form 10-K.  This
discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those discussed here. Factors that could contribute to such differences include, but are not limited
to, those discussed in "Factors That May Affect Future Results and Market Price of Stock."

Overview

We are a leading developer and operator of stand-alone laser vision correction centers. During the second half of
1999 we began converting our centers to a value-priced model whereby bilateral Lasik procedures (both eyes)
would be performed for $2,995. We also changed the name of the centers offering the value-priced model to
LasikPlus. An integral part of this conversion included our retaining ophthalmologists to perform procedures at our
centers and less dependence on offering access to other ophthalmologists. As of mid-January 2000 two centers had
not yet been converted to the LasikPlus model.

Our laser vision correction centers provide the facilities, equipment and support services for performing vision
correction procedures using state-of-the-art laser technologies. The VISX Star S2 laser, which we have in each of
our U.S. centers, can be used for correcting nearsightedness, farsightedness and astigmatism. Substantially all of the
revenues from our laser vision correction procedures are derived from our U.S. centers. We also managed multi-specialty laser surgery programs at medical facilities on a contract basis.

Our sources of revenue are:

- Laser refractive surgery, including fees for procedures performed at our consolidated centers, and

- Other, including management fees for operating laser vision correction centers of investees, contractual fees for
managing multi-specialty laser surgery programs at hospitals, marketing and education program fees, and
miscellaneous sources.

Our operating costs and expenses consist of:

- Medical professional and license fees, including per procedure fees for the ophthalmologists performing laser
vision correction and the license fee of $260 per procedure paid to VISX,

- Direct costs of services, including center rent and utilities, equipment lease and maintenance costs, surgical

supplies, center staff expense and costs related to other revenue,

- General and administrative, including marketing and advertising, headquarters staff expense, and other overhead
costs, and

- Depreciation and amortization of equipment and intangible assets recorded in the balance sheet.

Sources of Revenues

The table below summarizes our sources of revenue and their annual growth or decline for each of the three years
ended December 31, 1999:

| | 1997 | 1998 | 1999
| | ---- | ---- | ----

| | (dollars in thousands)
| | ----------------------

|Laser refractive surgery     | $12,917 | $32,508 | $56,358
|---------------------------- | ------- | ------- | -------
|Growth rate                  | 248%    | 152%    | 73%    
|Surgery management contracts | $3,064  | $1,496  | $364   
|Growth rate                  | -34%    | -51%    | -76%   
|Other                        | $1,613  | $1,196  | $662   
|Growth rate                  | -70%    | -26%    | -45%   
|Total                        | $17,594 | $35,200 | $57,384

Laser Refractive Surgery

Laser refractive surgery revenue generally includes three components: facility fees, royalty fees and medical
professional fees. Certain states prohibit us from practicing medicine, employing physicians to practice medicine on
our behalf or employing optometrists to render optometry services on our behalf. Revenues and direct costs from
centers in these states do not include the medical professionals' fee component. The contribution from laser
refractive surgery procedures for each of the three years ended December 31, is as follows: (dollars in thousands):

| | 
| | 

| | 1997 | 1998 | 1999
| | ---- | ---- | ----

| | (dollars in thousands)
| | ----------------------

|Revenue      | $12,917 | $32,508 | $56,358
|------------ | ------- | ------- | -------
|Direct Costs | 10,790  | 23,625  | 34,474 
|Contribution | $2,127  | $8,883  | $21,884

Our results of operations in any period are significantly affected by the number of laser vision procedures
performed.

The following table illustrates the growth of laser vision correction procedures performed at our consolidated
centers.

| | Wholly-owned
| | ------------

|               | 1997  | 1998   | 1999  
|-------------- | ----- | ------ | ------
|First quarter  | 979   | 3,887  | 7,591 
|Second quarter | 1,506 | 4,891  | 8,365 
|Third quarter  | 2,375 | 5,327  | 8,769 
|Fourth quarter | 2,888 | 5,686  | 8,541 
|Year           | 7,748 | 19,791 | 33,266

Other

Revenue declined because we intentionally reduced the extent to which we provided management services for
multi-specialty surgery programs at hospitals due to the difficult business environment. Renewal of our contracts
with hospital providers became increasingly difficult due to price pressures and a lengthening sales cycle. Hospital
providers and other entities were being driven to reduce costs and scaleback their operations, sometimes including
the programs that we managed. In addition, budget reductions at the facilities reduced the marketing and education
programs, key elements to a successful surgery program. Our final surgery management contract was not renewed
in the fourth quarter 1999.

Operating Costs and Expenses

1999 Compared to 1998

The following table shows the dollar amount of increase (decrease) of operating expenses from 1998 to 1999 and
the percent of revenues for each year (dollars in thousands):

| | Increase | % of Revenue
| | -------- | ------------

|                                      | (Decrease) | 1998 | 1999
|------------------------------------- | ---------- | ---- | ----
|Medical professional and license fees | $9,230     | 38.9 | 40.0
|Direct costs of services              | 831        | 30.6 | 20.2
|General and administrative expenses   | 2,594      | 22.6 | 18.4
|Marketing and advertising             | 3,488      | 6.2  | 9.9 
|Depreciation and amortization         | (557)      | 10.0 | 5.2 

Medical professional and license fees rose due to the increase in procedures.

Direct costs of services include payroll, equipment lease and maintenance, facility rent and supply costs associated
with providing our services. These costs are, for the most part, fixed and will decline as a percent of revenues with
revenue growth.

General and administrative expenses increased, but declined as a percent of revenues, due to the hiring of additional
personnel to strengthen our operations and marketing departments.  In addition, our costs associated with credit card
processing, financing programs and incentive programs for high volume physicians were higher due to increases in
procedures.

Marketing and advertising costs increased primarily due to the saturation marketing program associated with the
conversion of our centers to the LasikPlus business model.

Depreciation and amortization decreased due to write-down of goodwill required by our closing of certain acquired
centers in 1998.

Other

Equity in income from unconsolidated affiliates declined because we began accounting for our investment in The
Baltimore Laser Sight Center, Ltd. using the consolidation method effective July 1999.

Interest expense decreased $617,000 due to our reduction of bank borrowing and capital leases obligations.

Interest income increased $1,192,000 as a result of our being able to invest funds not required for current operating
needs and an increase in interest rates available on such short-term investments.

Income tax (benefit) results from the reversal of the valuation allowance required for deferred tax assets.
Approximately $7,625,000 of the reversal of the allowance was recorded in our Statement of Operations as an
income tax benefit. The remaining reversal, $7,442,000, was originally required because utilization of the net
operating loss (NOL) carryforwards acquired when we bought RCII was not, at that time, more likely than not. The
remaining reversal was recorded as a reduction of unamortized goodwill in our Consolidated Balance Sheet.

Preferred stock dividends declined due to the conversion of our convertible preferred stock to common stock.

1998 Compared to 1997

On August 18, 1997, we purchased 100% of the issued and outstanding common stock of Refractive Centers
International, Inc., then a majority-owned subsidiary of Summit Technology, Inc., for 17,065,579 shares of our
common stock. The acquisition was accounted for under the "purchase" method of accounting, as described in
Accounting Principles Board Opinion No. 16 and interpretations thereof. The results of operations for the year
ended December 31, 1997 include the revenues and expenses of Refractive Centers International subsequent to
August 18, 1997.

The increase in direct operating expenses is primarily a result of the expansion of our laser vision correction
business. Direct operating expenses comprise the significant fixed costs of performing the procedure as well as the
costs of maintaining a facility. Certain of these costs become a lesser percentage of revenue as procedure volume
increases. Direct operating expenses related to other sources of revenue are more variable and fluctuate generally
with levels of revenue.

Depreciation and amortization increased in 1998 compared to 1997 due to the increase in goodwill and property and
equipment, primarily equipment, for the laser vision correction centers acquired from Summit.

During the second quarter of 1998, we implemented a plan to restructure operations by closing seven of our centers,
primarily acquired centers. Costs associated with the restructuring include $7.3 million related to the write-off of
goodwill and leasehold improvements and $677,000 for the accrual of lease terminations and employee severance
costs. As a result of the closings, we have certain excimer lasers in storage. The restructuring provision also includes
$2.5 million related to the write-down of these excimer lasers to their net realizable value. The balance of the
accrual at December 31, 1999 was insignificant.

Equity in income from unconsolidated businesses increased because of their increased profitability. Interest expense
decreased due to significant reduction in debt. Interest income increased because we had cash to invest in overnight
cash equivalents.

Liquidity and Capital Resources

On June 30, 1999 we sold 5,000,000 shares of our common stock at a public offering price of $8.00 per share. Net
proceeds approximated $37,300,000 after deducting underwriting discounts and commissions and our offering
expenses, including the fee to be listed on the Nasdaq National Market.

We intend to use the net proceeds of the offering as follows:

- To extensively market our centers and our LasikPlus brand name,

- To open approximately ten additional laser vision correction centers in the year 2000,

- To purchase additional equipment,

- To fund possible future strategic acquisitions, and

- To provide working capital and for general corporate purposes.

Other sources of liquidity for the next year are expected to be:

- Cash generated from operations

- Proceeds from the exercise of stock options

- Credit facility and lease financing, as necessary

We generated positive cash flow from operations for the year ended December 31,1999. This was sufficient to
finance our capital expenditures, debt repayment and lease commitments.

Our short-term investments balance at December 31, 1999 was $37,299,000 of which $35,199,000 was invested in
short-term, investment grade, interest-bearing obligations of U.S. government agencies. The remaining $2,100,000
is a certificate of deposit, maturing on June 30, 2000, issued by our commercial lender.

During the quarter ended March 31, 1999, all of the outstanding shares of our Series B-1 convertible preferred stock
and accrued dividends thereon were converted into shares of our common stock. On July 31, 1999 we paid the
cumulative dividends unpaid on our Class B Preferred Stock First and Second Interim Series. The cash dividend
paid was $462,000. Subsequent to the payment of the dividend, the holders of these shares converted them into
720,478 restricted shares of our common stock. As a result of these conversions we no longer have an expense or a
liability for preferred stock dividends.

Our line of credit with The Provident Bank is $10,000,000. At December 31, 1999, the line of credit supports letters
of credit totaling $800,000 and $9,200,000 is available to us for borrowing. We also have a $10,000,000 line of
credit for the purpose of funding acquisitions.

At December 31, 1999 we had net operating loss carryforwards ("NOLs") for federal and state income tax purposes
of $32,400,000 and $17,800,000, respectively, which expire in varying amounts from 2007 through 2022. These
operating losses are available to offset future taxable income. Approximately $18,000,000 of the NOLs were
acquired when we bought Refractive Centers International, Inc. in August 1997 and their use is limited to
$2,500,000 per year under Section 382 of the Internal Revenue Code. The utilization of the NOL's will substantially
reduce our cash obligation for payment of income taxes otherwise due over the next several years.

We have announced the following for the year 2000:

- to open approximately ten new centers under the LasikPlus brand name

- to spend $15 to $20 million on marketing, advertising and promotions.

The ability to fund our marketing and advertising program, planned capital expenditures and new centers rollout
depends on our future performance, which to a certain extent, is subject to general economic, competitive,
legislative, regulatory and other factors that are beyond our control. Based upon our current level of operations and
anticipated  revenue growth, we believe that cash flow from operations, available cash and short-term investments,
and available borrowings under the credit facility from Provident Bank will be adequate to meet these  needs.

Factors That May Affect Future Results and Market Price of Stock

Our stock price is likely to be highly volatile.

The price at which our common stock will trade has been and is likely to continue to be highly volatile and may
fluctuate substantially due to a number of factors, including:

Actual or anticipated fluctuation in our results of operations,

- Changes in or our failure to meet securities analysts' expectations,

- Technological innovations,

- Increased competition,

- Conditions and trends in the laser refractive surgery industry, and

- General market conditions.

In addition, the stock market has from time to time experienced significant price and volume fluctuations that have
affected the market prices for the securities of healthcare companies, particularly laser vision correction companies.
These broad market fluctuations may result in a material decline in the market price of our common stock,
regardless of our operating performance. In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often been brought against that company. We
may become involved in this type of litigation in the future. Litigation is often expensive and diverts management's
attention and resources, which could have a material adverse effect upon our business, financial condition and
results of operations.

Laser vision correction may not achieve broad market acceptance which would limit our profitability and growth.

We believe that our profitability and expansion depends largely on acceptance of laser vision correction. There can
be no assurance that laser vision correction will become more widely accepted by ophthalmologists, optometrists or
the general population as an alternative to existing methods of treating refractive vision disorders. Acceptance of
laser vision correction may be affected adversely by:

- Concerns relating to its safety and effectiveness,

- General resistance to surgery of any type,

- The effectiveness of alternate methods of correcting refractive vision disorders,

- The lack of long-term follow-up data and the possibility involving patient outcomes from laser vision correction,
and

- Regulatory developments.

Our quarterly operating results are subject to significant fluctuations.

Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, not all
of which are in our control. Future revenue is difficult to forecast and for the foreseeable future will be influenced
by the timing and number of procedures performed.

Many of our expenses, particularly personnel costs and rents, are relatively fixed, and are incurred in part based on
expectations of future revenue. We may be unable to adjust spending quickly enough to offset any unexpected
revenue shortfall. Accordingly, any shortfall in revenue may cause significant variation in operating results in any
quarter.

Because of these factors, quarter-to-quarter comparisons of our results of operations may not be an indication of our
future performance. It is possible that, in future periods, our results of operations may be below the expectations of
public market analysts and investors. This could cause the trading of our common stock to decline.

We depend on limited sources of excimer lasers, microkeratomes and disposable blades, and shortages of these
items could hinder our ability to increase our procedure volume.

We currently use one supplier, VISX, Incorporated, for our excimer lasers in the U.S. If VISX became unwilling or
unable to supply us with excimer lasers, to repair parts or to provide services, our business could be materially
adversely affected.

We are primarily dependent on  Chiron Vision, a subsidiary of Bausch & Lomb, Incorporated, to provide the
microkeratome, blades and other disposable items we provide to ophthalmologists for the most popular type of laser
vision correction. There are a limited number of manufacturers of microkeratomes and there can be no assurance
that microkeratomes and microkeratome blades will be available in the quantities or within the time frames we
require. Any shortages in our supplies of this equipment could limit our ability to increase our volume of the LASIK
procedure.

Our business may be impaired due to government regulations which could restrict our equipment, services and
relationships with ophthalmologists, optometrists, and other healthcare providers.

We and excimer laser manufacturers are subject to extensive federal, state and foreign laws, rules and regulations,
including:

- Restrictions on the approval, distribution and use of medical devices,

- Anti-kickback statutes,

- Fee-splitting laws,

- Corporate practice of medicine restrictions,

- Self-referral laws,

- Anti-fraud provisions,

- Facility license requirements and certificates of need,

- Conflict of interest regulations, and

- Sales and use taxes.

Many of these laws and regulations are ambiguous, and courts and regulatory authorities have provided little
clarification. Moreover, state and local laws vary from jurisdiction to jurisdiction. As a result, we may not always be
able to accurately interpret applicable law, and some of our activities could be challenged.

The excimer lasers we use in our centers are medical devices that in the United States are subject to the jurisdiction
of the FDA. In addition to FDA approval for the initial uses of these excimer lasers, new uses require separate
approval. Obtaining such approval can be an expensive and time consuming process, the success of which cannot be
guaranteed. The failure of our suppliers to obtain regulatory approvals for any additional uses of excimer lasers or
otherwise comply with regulatory requirements could have a material adverse effect on our business, financial
condition or results of operations.

Failure to comply with applicable FDA requirements could subject us, ophthalmologists who use our centers or
excimer laser manufacturers to enforcement actions, including product seizure, recalls, withdrawal of approvals and
civil and criminal penalties. Any such enforcement action could have a material adverse effect on our business,
financial condition and results of operations. Further, failure to comply with regulatory requirements, or any adverse
regulatory action could result in limitations or prohibitions on our use of excimer lasers. This could have a material
adverse effect on our business, financial condition and results of operations.

An increase in the number of ophthalmologists who perform enough laser vision correction procedures to
economically justify the purchase of their own excimer lasers may harm our business.

As laser vision correction becomes more commonplace, the number of ophthalmologists who can economically
justify the purchase of their own excimer laser may increase. Laser vision correction is still a relatively new
procedure for most ophthalmologists, and it generally takes time for ophthalmologists to build up their procedure
volume. We estimate that an ophthalmologist or practice group needs to perform approximately 60 procedures a
month in one location in order to economically justify the purchase or lease of an excimer laser. The estimate is
based upon a number of factors, including current prices for excimer lasers, current procedure fees charged by
ophthalmologists and our current per procedure fee. This estimate does not take into consideration the value
ophthalmologists may place on our marketing and advertising, administrative support, maintenance and other
services we provide to ophthalmologists who use our centers.

We could be sued for patient injuries, and such claims could negatively affect our business.

A partially or completely uninsured claim against us could have a material adverse effect on our business, financial
condition and results of operations. The laser vision correction procedures performed in our centers involve a
potential risk of physical injury to patients. Such risk could result in product liability, malpractice or other  claims
brought against us based upon injuries or alleged injuries associated with a defect in a product's performance or
malpractice by an ophthalmologist or technician. Some injuries or defects may not become evident for a number of
years. Therefore, the operation of any excimer laser, microkeratome or other equipment may result in substantial
claims against us by patients who allege they were injured as a result of vision correction procedures. Although we
have "umbrella" product and professional liability insurance in the amount of $1.0 million per occurrence and $5.0
million in the aggregate, we primarily rely and intend to continue to rely on ophthalmologists' professional liability
insurance policies and manufacturers' insurance policies for product liability coverage. We require the
ophthalmologists who use our centers to maintain certain levels of professional liability insurance. We cannot assure
you that these ophthalmologists will continue to be able to obtain sufficient insurance.

Cautionary Statement Concerning Forward-Looking Statements

Information contained above in this Management's Discussion and Analysis and elsewhere in this Annual Report on
Form 10-K with respect to expected financial results and future events and trends is forward-looking, based on our
estimates and assumptions and subject to risks and uncertainties. For those statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk.

The carrying values of financial instruments including cash and cash equivalents, accounts receivable, and accounts
payable approximate fair value because of the short maturity of these instruments.

We have historically had very low exposure to changes in foreign currency exchange rates, and as such, have not
used derivative financial instruments to manage foreign currency fluctuation risk.

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

|                                                                                                | Page
|----------------------------------------------------------------------------------------------- | ----
|Report of Management                                                                            | 20  
|Report of Independent Accountants                                                               | 20  
|Consolidated Balance Sheets as of December 31, 1999 and 1998                                    | 21  
|Consolidated Statements of Operations for the three years ended December 31, 1999               | 22  
|Consolidated Statements of Cash Flows for the three years ended December 31, 1999               | 23  
|Consolidated Statements of Shareholders' Investment for the three years ended
December 31, 1999 | 24  
|Notes to Consolidated Financial Statements                                                      | 26  

REPORT OF MANAGEMENT

We, the management of LCA-Vision Inc., are responsible for the consolidated financial statements and the
information contained in this report, including its accuracy. We prepared the accompanying consolidated financial
statements in accordance with generally accepted accounting principles. In addition to selecting appropriate
accounting principles, we are responsible for the way information is presented and its reliability. To report financial
results we must often make estimates based on currently available information and judgements of current conditions
and circumstances.

We maintain an accounting system and related system of internal controls designed to provide reasonable assurance
that the financial records are accurate and that the Company's assets are protected. PricewaterhouseCoopers LLP,
independent accountants, audit the financial statements and express their opinion on them. They perform their audit
in accordance with generally accepted auditing standards.

The Audit Committee of the Board of Directors, which consists of our outside Directors, meets periodically with
management and PricewaterhouseCoopers LLP to review the activities of each in discharging their responsibilities.
The staff of PricewaterhouseCoopers LLP has free access to the Audit Committee.

|/s/ Stephen N. Joffe      | /s/ Larry P. Rapp      
|------------------------- | -----------------------
|Stephen N. Joffe          | Larry P. Rapp          
|Chairman of the Board and | Chief Financial Officer
|Chief Executive Officer   | and Treasurer          

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and

Shareholders of LCA-Vision Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations,
shareholders' investment, and cash flows present fairly, in all material respects, the financial position of LCA-Vision
Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Cincinnati, Ohio

February 4, 2000

CONSOLIDATED BALANCE SHEETS

|At December 31,
|---------------

| | 1999 | 1998
| | ---- | ----

| | (Dollars in thousands,

except per share amounts)
| | -------------------------------------------------

|Assets                                                                           |           |  |          
|-------------------------------------------------------------------------------- | --------- |  | ---------
|Current assets                                                                   |           |  |          
|Cash and cash equivalents                                                        | $  11,891 |  | $   6,496
|Short-term investments                                                           | 37,299    |  | ----     
|Accounts receivable, net                                                         | 1,971     |  | 1,119    
|Deferred tax asset                                                               | 631       |  | ----     
|Prepaid expenses, inventory and other                                            | 1,984     |  | 1,416    
|                                                                                 |           |  |          
|Total current assets                                                             | 53,776    |  | 9,031    
|                                                                                 |           |  |          
|Property and equipment, net                                                      | 9,726     |  | 9,433    
|Goodwill, net                                                                    | 902       |  | 8,304    
|Deferred tax asset                                                               | 12,950    |  | ---      
|Obligations due from shareholders, net                                           | 708       |  | 471      
|Investment in unconsolidated businesses                                          | 254       |  | 520      
|Other assets                                                                     | 6,974     |  | 3,618    
|                                                                                 |           |  |          
|Total assets                                                                     | $ 85,290  |  | $ 31,377 
|                                                                                 |           |  |          
|Liabilities and Shareholders' Investment                                         |           |  |          
|Current liabilities                                                              |           |  |          
|Accounts payable                                                                 | $   2,458 |  | $   2,030
|Accrued liabilities and taxes                                                    | 1,821     |  | 2,637    
|Debt maturing in one year                                                        | 676       |  | 787      
|                                                                                 |           |  |          
|Total current liabilities                                                        | 4,955     |  | 5,454    
|                                                                                 |           |  |          
|Long-term debt                                                                   | 250       |  | 2,724    
|Minority equity interest                                                         | 40        |  | ---      
|Commitments and contingencies                                                    | --        |  | --       
|                                                                                 |           |  |          
|Shareholders' investment                                                         |           |  |          
|Preferred stock                                                                  | ---       |  | 7,687    
|Common stock ($0.001 par value; 51,513,989 shares 
and 40,973,741 shares issued) | 111       |  | 103      
|Contributed capital                                                              | 88,348    |  | 41,701   
|Warrants                                                                         | 6,362     |  | --       
|Common stock in treasury, at cost                                                | (30)      |  | (30)     
|Accumulated (deficit)                                                            | (14,771)  |  | (25,664) 
|Foreign currency translation adjustment                                          | 25        |  | (14)     
|Accrued preferred stock dividend                                                 | ---       |  | (584)    
|                                                                                 | 80,045    |  | 23,199   
|                                                                                 |           |  |          
|Total liabilities and shareholders' investment                                   | $ 85,290  |  | $  31,377

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF OPERATIONS



| | Years Ended December 31,
| | ------------------------

| |      |      |     
| | ---- | ---- | ----
| | 1999 | 1998 | 1997

| | (Dollars in thousands, except per share amounts)
| | ------------------------------------------------

|Revenues                                                    |                |               |  |               
|----------------------------------------------------------- | -------------- | ------------- |  | --------------
|Laser refractive surgery                                    | $     56,358   | $     32,508  |  | $       12,917
|Other                                                       | 1,026          | 2,692         |  | 4,677         
|                                                            |                |               |  |               
|                                                            | 57,384         | 35,200        |  | 17,594        
|                                                            |                |               |  |               
|Operating costs and expenses                                |                |               |  |               
|Medical professional and license fees                       | 22,930         | 13,700        |  | 4,489         
|Direct costs of services                                    | 11,594         | 10,763        |  | 8,237         
|General and administrative expenses                         | 10,555         | 7,961         |  | 6,747         
|Marketing and advertising                                   | 5,671          | 2,183         |  | 1,259         
|Depreciation and amortization                               | 2,964          | 3,521         |  | 2,511         
|Restructuring/impairment provision                          | (150)          | 10,500        |  | 1,100         
|Other                                                       | --             | --            |  | 162           
|                                                            |                |               |  |               
|Operating income (loss)                                     | 3,820          | (13,428)      |  | ( 6,911)      
|                                                            |                |               |  |               
|Equity in earnings (losses) from  unconsolidated
businesses | 316            | 354           |  | (27)          
|Minority interest in earnings of consolidated
affiliate     | (32)           | ---           |  | ---           
|Interest expense                                            | 169            | 786           |  | 1,140         
|Interest income                                             | 1,633          | 441           |  | 216           
|Other income                                                | 38             | 358           |  | 77            
|                                                            |                |               |  |               
|Income (loss) before taxes on income                        | 5,606          | (13,061)      |  | (7,785)       
|                                                            |                |               |  |               
|Income tax (benefit) expense                                | (5,287)        | 157           |  | 68            
|                                                            |                |               |  |               
|Net income (loss)                                           | 10,893         | (13,218)      |  | (7,853)       
|                                                            |                |               |  |               
|Preferred stock dividends                                   | 140            | 518           |  | 183           
|                                                            |                |               |  |               
|Income (loss) applicable to common stock                    | $     10,753   | $  (13,736)   |  | $     (8,036) 
|                                                            |                |               |  |               
|Income (loss) per common share                              |                |               |  |               
|Basic                                                       | $         0.22 | $      (0.36) |  | $       (0.30)
|Diluted                                                     | $         0.21 | $      (0.36) |  | $       (0.30)
|                                                            |                |               |  |               
|Weighted average shares outstanding

Basic                  | 47,991,307     | 37,669,471    |  | 26,709,184    
|Diluted                                                     | 50,913,942     | 37,669,471    |  | 26,709,184    

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

|Years Ended December 31,
|------------------------

| | 1999 | 1998 | 1997
| | ---- | ---- | ----

| | (Dollars in thousands)
| | ----------------------

|Cash flows from operating activities                                       |           |              |  |           
|-------------------------------------------------------------------------- | --------- | ------------ |  | ----------
|Net income (loss)                                                          | $  10,753 | $ (13,736)   |  | $ (8,036) 
|Adjustments to reconcile net income (loss) to                              |           |              |  |           
|net cash provided (used) by operating activities:                          |           |              |  |           
|Depreciation and amortization                                              | 2,964     | 3,521        |  | 2,511     
|Deferred income taxes                                                      | (6,994)   |              |  |           
|Restructuring/impairment provision                                         | (150)     | 10,500       |  | 1,100     
|Equity in (income) loss of unconsolidated  businesses                      | (316)     | (354)        |  | 27        
|Compensation paid in common stock                                          | 375       |              |  |           
|Provision for bad debts                                                    | 328       |              |  |           
|Other items, net                                                           | 104       |              |  |           
|Changes in working capital, net of effects from

acquisition of businesses |           |              |  |           
|Accounts receivable                                                        | (251)     | 424          |  | (989)     
|Prepaid expenses, inventory and other                                      | (923)     | 476          |  | 334       
|Accounts payable                                                           | (106)     | 199          |  | 824       
|Accrued liabilities and other                                              | (168)     | 69           |  | 219       
|Net cash provided by (used in) operating activities                        | 5,616     | 1,099        |  | (4,010)   
|                                                                           |           |              |  |           
|Cash flows from investing activities                                       |           |              |  |           
|Cash acquired in acquisition of business                                   |           |              |  | 10,007    
|Purchase of property and equipment                                         | (1,527)   | (1,946)      |  | (603)     
|Proceeds from sale of property and equipment                               | 200       | 1,211        |  |           
|Purchase of short-term investments                                         | (35,199)  | (2,100)      |  |           
|Beginning cash of consolidated affiliate                                   | 1,032     |              |  |           
|Loans and advances to affiliated companies                                 |           | 570          |  |           
|Loans to shareholders                                                      |           | (2,100)      |  |           
|Other, net                                                                 |           | (382)        |  | (64)      
|Net cash provided by (used in) investing activities                        | (35,494)  | (4,747)      |  | 9,340     
|Cash flows from financing activities                                       |           |              |  |           
|Principal payments of long-term debt and capital

lease obligations        | (2,585)   | (482)        |  | (3,743)   
|Proceeds from sale of common stock, net                                    | 37,300    |              |  |           
|Exercise of stock options and warrants                                     | 1,020     | 51           |  | 56        
|Preferred stock cash dividends paid                                        | (462)     |              |  |           
|Proceeds from bank borrowings                                              |           | 2,100        |  | 6,280     
|Repayment of bank borrowings                                               |           | (9,651)      |  |           
|Proceeds from sale of convertible preferred

stock, net                    |           | 9,463        |  |           
|Other, net                                                                 |           | (17)         |  | 33        
|Net cash provided by financing activities                                  | 35,273    | 1,464        |  | 2,626     
|                                                                           |           |              |  |           
|Increase (decrease) in cash and cash equivalents                           | 5,395     | (2,184)      |  | 7,956     
|                                                                           |           |              |  |           
|Cash and cash equivalents at beginning of year                             | 6,496     | 8,680        |  | 724       
|                                                                           |           |              |  |           
|Cash and cash equivalents at end of year                                   | $  11,891 | $      6,496 |  | $    8,680

See Notes to Consolidated Financial Statement

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT



| | Years Ended December 31,
| | ------------------------

| | 1999 | 1998 | 1997
| | ---- | ---- | ----

| | Shares | Amount | Shares | Amount | Shares | Amount
| | ------ | ------ | ------ | ------ | ------ | ------

| | (Dollars in Thousands)
| | ----------------------

|Preferred Stock                        |            |         |            |            |            |           
|-------------------------------------- | ---------- | ------- | ---------- | ---------- | ---------- | ----------
|Class A                                |            |         |            |            |            |           
|Balance at beginning of year           | 1,668      |         | 1,668      |            | 1,668      |           
|Shares converted to common stock       | (962)      |         |            |            |            |           
|Shares received for payment of advance | (706)      |         |            |            |            |           
|Balance at end of year                 | ---        |         | 1,668      |            | 1,668      |           
|                                       |            |         |            |            |            |           
|Class B Interim Series                 |            |         |            |            |            |           
|Balance at beginning of year           | 12.6       | $2.522  | 12.6       | $    2,522 | 12.6       | $    2,522
|Shares converted to common stock       | (12.6)     | (2,522) | --         | --         | --         | --        
|Balance at end of year                 | ---        | ---     | 12.6       | 2,522      | 12.6       | 2,522     
|                                       |            |         |            |            |            |           
|Class B1 Convertible                   |            |         |            |            |            |           
|Balance at beginning of year           | 5,702      | 5,165   |            |            |            |           
|Shares issued                          |            |         | 10,000     | 10,000     |            |           
|Transaction fees                       |            |         |            | (537)      |            |           
|Shares converted to common stock       | (5,702)    | (5,165) | (4,298)    | (4,298)    |            |           
|Balance at end of year                 | ---        | ---     | 5,702      | 5,165      |            |           
|Total preferred stock                  | ---        | ---     |            | 7,687      |            | 2,522     
|                                       |            |         |            |            |            |           
|Common Stock                           |            |         |            |            |            |           
|Balance at beginning of year           | 40,973,741 | 103     | 36,664,816 | 96         | 19,590,012 | 79        
|Shares issued:                         |            |         |            |            |            |           
|Acquisition agreement                  |            |         | 200,000    |            | 17,065,579 | 17        
|Conversion of Preferred Stock:         |            |         |            |            |            |           
|Class A                                | 14,925     |         |            |            |            |           
|Class B Interim                        | 720,477    |         |            |            |            |           
|Class B1 Convertible and dividends     | 3,994,642  | 4       | 4,088,856  | 4          |            |           
|Exercise of warrants                   | 14,064     |         |            |            |            |           
|Waiver of Preferred Stock              |            |         |            |            |            |           
|Class B2 Convertible                   |            |         |            |            |            |           
|Purchase option                        | 190,472    | 1       |            |            |            |           
|Sale of stock                          | 5,000,000  | 5       |            |            | 20,128     |           
|Employee plans                         | 603,818    | 1       | 20,000     |            |            |           
|Other                                  | 1,850      | (3)     | 69         | 3          | (10,903)   |           
|Balance at end of year                 | 51,513,989 | 111     | 40,973,741 | 103        | 36,664,816 | 96        
|                                       |            |         |            |            |            |           
|Warrants                               |            |         |            |            |            |           
|Balance at beginning of year           |            |         |            |            |            |           
|Issued                                 |            | 6,362   |            |            |            |           
|Balance at end of year                 |            | 6,362   |            |            |            |           
|                                       |            |         |            |            |            |           
|Treasury Stock                         |            |         |            |            |            |           
|Balance at beginning of year           | 10,909     | (30)    | 10,909     | (30)       |            |           
|Shares received for payment of advance |            |         |            |            | 10,909     | (30)      
|Balance at end of year                 | 10,909     | (30)    | 10,909     | (30)       | 10,909     | (30)      

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (continued)

| | Years Ended December 31,
| | ------------------------

| | 1999 | 1998 | 1997
| | ---- | ---- | ----

| | Shares | Amount | Shares | Amount | Shares | Amount
| | ------ | ------ | ------ | ------ | ------ | ------

| | (Dollars in Thousands)
| | ----------------------

|Contributed Capital                                                 |  |          |  |           |  |          
|------------------------------------------------------------------- |  | -------- |  | --------- |  | ---------
|Balance at beginning of year                                        |  | 41,701   |  | 36,776    |  | 3,177    
|Shares issued:                                                      |  |          |  |           |  |          
|Acquisition agreement                                               |  | (81)     |  | 580       |  | 33,543   
|Conversion of Preferred Stock:                                      |  |          |  |           |  |          
|Class B Interim                                                     |  | 2,487    |  |           |  |          
|Class B1 Convertible                                                |  | 5,426    |  | 4,411     |  |          
|Exercise of warrants                                                |  | 28       |  |           |  |          
|Waiver of Preferred Stock                                           |  |          |  |           |  |          
|Class B2 Convertible                                                |  |          |  |           |  |          
|purchase option                                                     |  | 375      |  |           |  |          
|Sale of stock                                                       |  | 37,295   |  |           |  | 56       
|Employee plans                                                      |  | 991      |  | 51        |  |          
|Tax benefit from stock option exercise                              |  | 891      |  |           |  |          
|Dividends on Conversion of Class B1
    Convertible Preferred Stock |  | (262)    |  | (117)     |  |          
|Preferred stock dividends paid                                      |  | (462)    |  |           |  |          
|Other                                                               |  | (39)     |  |           |  |          
|Balance at end of year                                              |  | 88,348   |  | 41,701    |  | 36,776   
|                                                                    |  |          |  |           |  |          
|Accumulated (deficit)                                               |  |          |  |           |  |          
|Balance at beginning of year                                        |  | (25,664) |  | (12,446)  |  | (4,593)  
|Net income (loss)                                                   |  | 10,893   |  | (13,218)  |  | (7,853)  
|Balance at end of year                                              |  | (14,771) |  | (25,664)  |  | (12,446) 
|                                                                    |  |          |  |           |  |          
|Foreign Currency Translation Adjustment                             |  |          |  |           |  |          
|Balance at beginning of year                                        |  | (14)     |  | (21)      |  | 12       
|Translation adjustments                                             |  | 39       |  | 7         |  | (33)     
|Balance at end of year                                              |  | 25       |  | (14)      |  | (21)     
|                                                                    |  |          |  |           |  |          
|                                                                    |  |          |  |           |  |          
|Accrued Preferred Stock Dividend                                    |  |          |  |           |  |          
|Balance at beginning of year                                        |  | (584)    |  | (183)     |  |          
|Dividends accrued                                                   |  |          |  |           |  |          
|Class B Interim                                                     |  | (100)    |  | (177)     |  | (183)    
|Class B1 Convertible                                                |  | (40)     |  | (341)     |  |          
|Dividends paid Class B Interim                                      |  | 462      |  |           |  |          
|Conversion of Class B1 Convertible
Preferred Stock                  |  | 264      |  | 117       |  |          
|Balance at end of year                                              |  | --       |  | (584)     |  | (183)    
|                                                                    |  |          |  |           |  |          
|Total Shareholders' Investment                                      |  | $80,045  |  | $  23,199 |  | $  26,714

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Description of Business and Summary of Significant Accounting Policies

Business

We are a leading developer and operator of free-standing laser refractive surgery centers. Our laser refractive
surgery centers provide the facilities, equipment and support services for performing various corrective eye
surgeries that employ state-of-the-art laser technologies. The laser vision correction surgeries performed in our
centers are primarily laser in situ keratomileusis ("LASIK") and photorefractive keratectomy ("PRK"). The excimer
laser, which we have in each of our U.S. centers, can treat nearsightedness, farsightedness and astigmatism. We
previously managed multi-specialty laser surgery programs at medical facilities on a contract basis.

Revenue by source is comprised of:

-  Laser refractive surgery - fees for surgeries performed at our consolidated centers.

-  Other - management fees for operating laser vision correction centers of investees; contractual fees for managing
multi-specialty laser surgery programs at hospitals; marketing and education program fees; and miscellaneous
sources.

Certain operating costs and expenses:

-  Medical professional and license fees - per procedure fees for the ophthalmologist performing laser vision
correction and the license fee of $260 per procedure in the U.S. paid to the laser manufacturer.

-  Direct costs of services - center rent and utilities, equipment lease and maintenance costs, surgical supplies, center
staff expense, and costs related to other revenue.

-  General and administrative - headquarters staff expense and other overhead costs.

- Depreciation and amortization - periodic charges to income for the costs of equipment and intangible assets
recorded in the Consolidated Balance Sheet.

Consolidation Policy

We use two different methods to report our investments in our subsidiaries and other companies - consolidation and
the equity method.

Consolidation

We use consolidation when we own a majority of the voting stock of the subsidiary. This means the accounts of our
subsidiaries are combined with our accounts. We eliminate intercompany balances and transactions when we
consolidate these accounts. Our consolidated financial statements include the accounts of:

- LCA-Vision Inc.,

- LCA-Vision (Ohio), Inc.,

- Refractive Centers International, Inc. and Subsidiaries, and

- LCA-Vision (Canada) Inc. and Subsidiaries

- The Baltimore Laser Sight Center, Ltd.

Equity Method

We use the equity method to report investments in businesses where we hold a 20% to 50% voting interest, giving
us the ability to exercise significant influence, but not control, over operating and financial policies. Under the
equity method we report:

- our interest in the entity as an investment in our Consolidated Balance Sheets, and

- our percentage share of the earnings (losses) in our Consolidated Statements of Operations.

We own 43% of Silmalaseri Oy and report our investment under the equity method.

Use of Estimates

Management makes estimates and assumptions when preparing financial statements under generally accepted
accounting principles. These estimates and assumptions affect various matters including:

- our reported amounts of assets and liabilities in our Consolidated Balance Sheets at the dates of the financial
statements,

- our disclosure of contingent assets and liabilities at the dates of the financial statements, and

- our reported amounts of revenues and expenses in our Consolidated Statements of Operations during the reporting
periods.

Actual amounts could differ from those estimates.

Reclassifications

We have reclassified certain prior-year amounts for comparative purposes. These reclassifications did not affect
consolidated financial position, net losses or cash flows for the years presented.

Cash and Cash Equivalents

For the purpose of  reporting our cash flows, we consider highly liquid investments with a maturity of 90 days or
less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates market value.

Short-term Investments

Our short-term investments consist primarily of time deposits and obligations of U.S. government agencies with a
maturity of 90 days or more when purchased. Short-term investments are stated at cost, which approximates market
value. Our short-term investments at December 31, 1999 were (dollars in thousands):

|Federal Home Mortgage Corporation notes |        
|--------------------------------------- | -------
|due January 28, 2000                    | $15,200
|due February 15, 2000                   | 19,999 
|Certificate of deposit due              |        
|June 30, 2000                           | 2,100  
|                                        | $37,299

Property and Equipment, Goodwill, and Depreciation and Amortization

Property and Equipment

We show our property and equipment at its original cost. At the time property or equipment is retired, sold, or
otherwise disposed of, the related cost and accumulated depreciation or amortization are deducted from the amounts
reported in the Consolidated Balance Sheet and any gains or losses on disposition are recognized in the
Consolidated Statements of Operations. We expense repair and maintenance costs as incurred.

Goodwill

Goodwill is the excess of the acquisition cost of the businesses over the fair value of the identifiable net assets
acquired. We amortize goodwill using the straight-line method over 40 years.

Depreciation and Amortization

We compute depreciation using the straight-line method which recognizes the cost of the asset over its estimated
useful life. We use the following estimated useful lives for computing the annual depreciation expense: building, 5
to 31 years; furniture and fixtures, 5 to 7 years; medical equipment, 3 to 5 years; other equipment, 3 to 5 years.
Amortization of leasehold improvements is recorded in the Consolidated Statements of Operations using the
straight-line method based on the lesser of the useful life of the improvement or the lease term.

We assess the impairment of property and equipment and goodwill related to our consolidated subsidiaries
whenever events or circumstances indicate that the carrying value might not be recoverable. Estimates of future cash
flows are used to determine if there is impairment; discounted cash flows are used to determine the amount of
impairment.

Financial Instruments

Concentration of Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of temporary cash investments
and short-term investments. Our policy is to place our temporary cash investments in overnight repurchase
agreements with The Provident Bank, the financial institution that provides our lines of credit.

Credit risk with respect to short-term investments is limited because the investments consist of obligations of
agencies of the U.S. government and they mature in less than one year.

Fair Values of Financial Instruments

The fair value of our cash and cash equivalents, short-term investments, trade receivables and accounts payable
approximate their fair values due to their short term maturities.

Revenue Recognition

We recognize revenues as services are performed. For procedures performed in certain states we do not record the
physician component of the procedure fee as revenue or expense.

Stock-Based Compensation

We account for stock-based employee compensation plans under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Effective January 1, 1996, we adopted the
disclosure-only provision of SFAS No. 123, "Accounting for Stock-Based Compensation," and related
interpretations.

Per Share Data

Basic loss per share data is earnings or loss applicable to common shareholders divided by weighted average
common shares outstanding. Diluted per share data is earnings or loss applicable to common shareholders divided
by weighted average common shares outstanding plus potential common shares from dilutive securities such as
options and convertible securities. The table shows how we calculated diluted earnings per share and diluted shares
outstanding for the year ended December 31, 1999 (amounts in thousands, except per share amounts).

|                                                                | Income Numerator | Shares Denominator | Per-Share Amount
|--------------------------------------------------------------- | ---------------- | ------------------ | ----------------
|Net income                                                      | $10,893          |                    |                 
|Dividends to preferred shareholders                             | (140)            |                    |                 
|                                                                |                  |                    |                 
|Basic EPS                                                       |                  |                    |                 
|Income available to common shareholders                         | 10,753           | 47,991             | $0.22           
|                                                                |                  |                    |                 
|Effect of Dilutive Securities                                   |                  |                    |                 
|Convertible preferred stock                                     | 140              | 812                |                 
|Stock options                                                   |                  | 2,051              |                 
|Warrants                                                        |                  | 60                 |                 
|                                                                |                  |                    |                 
|Diluted EPS                                                     |                  |                    |                 
|Income available to common shareholders
and assumed conversions | $10,893          | 50,914             | $0.21           

The weighted average shares for the years ended December 31, 1998 and 1997 diluted calculations do not assume
exercise of any stock options or conversion of other securities since they would result in a reduced loss per share.

2.  Shareholders' Investment

Common Stock

We are authorized to issue up to 110 million shares of common stock.

On June 30, 1999 we sold 5,000,000 shares of our common stock at a public offering price of $8.00 per share. Net
proceeds approximated $37,300,000 after deducting discounts and commissions and our offering expenses,
including the fee to be listed on the Nasdaq National Market.

Preferred Stock

At December 31, 1999, there are no shares of preferred stock issued and outstanding.

Class A

In February 1999 certain holders exchanged their shares of Class A Preferred Stock for 14,925 shares of our
common stock. In 1999 our principal shareholder paid approximately $34,000 of a note due us with his shares of
Class A Preferred Stock. We retired the shares of Class A Preferred Stock received.

Class B

First and Second Interim Series

Our Board of Directors declared the payment of the cumulative unpaid dividend on our Class B Preferred Stock
First and Second Interim Series to the holders of record on July 31, 1999. The cash dividend paid was $462,000.
Subsequent to the payment of the dividend, the holders of the 12.6 shares issued and outstanding converted their
shares into 720,477 restricted shares of our common stock.

6% Series B-1 Convertible Preferred Stock

At December 31, 1998, 5,702 shares of the 6% Series B-1 convertible preferred stock were outstanding. During the
three months ended March 31, 1999, these shares and dividends totaling $264,000 were converted into 3,994,642
shares of common stock.

The holders of these shares had the right to purchase an additional $5 million of convertible preferred stock under
the same terms and conditions as the 6% Series B-1 Convertible Preferred Stock until May 11, 1999. In March 1999
certain majority holders of these shares agreed to accept 165,076 shares of our common stock in exchange for their
waiving their option to purchase the additional convertible preferred stock. In June 1999 a former holder of these
shares agreed to accept 25,396 shares of our common stock in the same type of exchange. These agreements
resulted in a non-cash charge of $375,000 recorded as other expense in the Condensed Consolidated Statement of
Operations for the year ended December 31, 1999.

Warrants

During 1999, we issued warrants to purchase a total of 925,000 shares of common stock at prices ranging from $2
to $12 per share. The warrants were issued to an investment banking firm and a joint venture partner.

Warrants to purchase 110,936 shares at $2 per share are currently exercisable. Warrants for 14,064 shares were
exercised.  Warrants to purchase 800,000 shares at $12 per share were issued during the third quarter of 1999 of
which 200,000 are currently exercisable; the remaining warrants become exercisable in equal installments of
200,000 each as of December 31, 1999, 2000, and 2001.

The warrants resulted in pre-paid expense for book purposes, using the Black-Scholes method, of $6,363,000. This
compensation will be amortized to income over a three year period which coincides with the term of the agreement
with Cole National Corporation to market laser vision correction as a managed care benefit. Amortization of
$39,000 is recorded in our 1999 Consolidated Statement of Operations.

3. Acquisitions

Refractive Centers International, Inc.

On August 18, 1997, we issued 17,065,579 shares of our common stock to Summit Technology, Inc. ("Summit")
and certain individuals for 100% of the issued and outstanding common stock of Refractive Centers International,
Inc. ("RCII").

On May 4, 1998, we issued 200,000 shares of our common stock to an investment banking firm as compensation for
services related to the acquisition of RCII. The shares were recorded at their fair value on the date of issuance.

We accounted for the acquisition of RCII using the purchase method of accounting as described in Accounting
Principles Board Opinion No. 16, "Business Combinations," and related interpretations. The purchase method
required us to record in our Consolidated Balance Sheet the fair values of the assets and liabilities at the date of the
acquisition. We recorded the difference between the acquisition cost and the fair value of the identifiable net assets
acquired as goodwill.

The fair value of the assets acquired and liabilities assumed consisted of cash - $10,007,000; other net working
capital - $664,000; equipment - $9,511,000; and goodwill - $12,802,000.

4. Restructuring/Impairment Provision

During the second quarter of 1998 we implemented a plan to close seven centers that were not contributing to our
profitability. The centers closed were primarily centers which had been operated by RCII. Costs associated with the
closings include $7,287,000 related the write-off of goodwill and leasehold improvements, $677,000 for the accrual
of costs for terminating leases and employees, and $2,536,000 for the write-down of idled lasers to their net
realizable values.

At the time of completing the acquisition of RCII, we implemented a program to close certain centers, both acquired
and existing, and reduce overhead costs. We recorded a $1,000,000 restructuring provision for these closings
including $620,000 for facility rent and employee severance associated with closing the RCII centers as part of the
purchase price. Our 1997 Consolidated Statement of Operations includes revenues of $414,000 and operating losses
of $343,000 for these centers.

We also wrote-off our investment in two of our unconsolidated businesses whose laser refractive surgery centers
were closed and wrote-down certain product inventory to its net realizable value. We recorded a provision of
$1,100,000 in 1997 for the anticipated costs of these decisions.

In 1999 we credited to income $150,000 of this accrual because actual expenses were lower than anticipated when
the accrual was established. Costs totaling $848,000 and $899,000 were charged against these accruals in 1998 and
1997, respectively.  The balance of the accruals at December 31, 1999 was insignificant.

5. Credit Arrangements

On June 29, 1998 we entered into an $8,000,000 credit facility with The Provident Bank ("Provident"). At the same
time we repaid our borrowing from, and terminated our relationship with, another lender. In May 1999 the credit
facility was increased to $10,000,000. We also were granted a $10,000,000 line of credit for the purpose of funding
acquisitions.

The Provident facility, as amended, matures on June 30, 2000. The facility can be used to support up to $2,000,000
of letters of credit issued by Provident and to support up to $2,500,000 of capital costs financed by leases entered
into with an affiliate of Provident. Borrowings under the working capital portion of the facility bear interest at 1/2%
above Provident's prime rate or LIBOR plus 2 1/2% . We have the option to convert up to $3,500,000 of working
capital borrowings to a term loan. Substantially all of our assets are pledged as collateral.

The credit facility also supports letters of credit totaling $800,000 at December 31, 1999. The credit facility, for
which there is no formal compensating balance, requires us to pay a commitment fee based of .25% on the unused
portion. At December 31, 1999 we had $9,200,000 available to us under the credit facility.

The credit facility requires us to maintain certain financial ratios and amounts. We are to maintain tangible net
worth of at least $45,000,000 and the ratio of our earnings before interest expense, taxes and depreciation and
amortization ("EBITDA") on a trailing 12 months basis must be greater than 2.0 times the sum of our current
maturities of capital lease obligations and trailing 12 months interest expense.

6. Debt

At December 31, 1998 we had a term loan borrowing under our credit facility of $2,053,000. The loan had an
interest rate of 7.45% and required monthly installments of $12,000 plus interest until June 30, 2000 when the
remaining principal balance of $1,705,000 would become due. In March 1999 we repaid the loan balance of
$2,030,000. We used the proceeds of the borrowing to purchase a certificate of deposit from Provident with a
maturity date of June 30, 2000. The certificate of deposit pays interest monthly at a rate of 5.7% per annum.

The following table displays the details of debt maturing within one year (dollars in thousands):

|                          | December 31,
|------------------------- | ------------
|                          | 1999        
|Capital lease obligations | $676        
|Bank term loan            |             
|                          | $676        

7. Obligations Due from Shareholders and Their Affiliates, Net

The following table displays the details of net obligations due to us in 1999 and 1998 as reported in our
Consolidated Balance Sheets (dollars in thousands):

| | December 31,
| | ------------

|                                                  | 1999      | 1998      
|------------------------------------------------- | --------- | ----------
|Due to us:                                        |           |           
|Note receivable shareholders                      | $77       | $2,100    
|Receivable from shareholder's affiliated company  | 631       | 738       
|Accrued interest                                  |           | 60        
|Due from us:                                      |           |           
|Notes payable shareholders                        |           | 1,500     
|Accrued interest                                  |           | 568       
|Accrued Interim Series B preferred stock dividend |           | 359       
|Net obligation due us                             | $     708 | $      471

At December 31, 1998 we owed our principal shareholders notes in the principal amount of $1,500,000 and interest
of $568,000. These shareholders owed us $2,100,000 which was collateralized by our obligation to them. In March
1999 we repaid the obligations due shareholders of $2,094,000 by netting the amount against the advance to
shareholders.

Our principal shareholder is the majority stockholder of an inactive ambulatory surgical center. We have no
investment in this surgery center; however, we did lease a portion of our headquarters building and provided other
administrative services. During 1998 we purchased the leasehold improvements that had been paid by the surgery
center for $872,000, their book value at the time of purchase. During 1998 we also advanced $576,000 to the
surgery center. Generally accepted accounting principles required us to record a portion of the surgery center's
losses using the equity method of accounting. We recorded losses of $265,000 in 1998. During 1999 we acquired
computer equipment and software from the surgery center at their book value of $103,000. The account receivable
was reduced by this amount.

8. Investment in Unconsolidated Businesses

Our investment in unconsolidated businesses are comprised of the following (dollars in thousands):

| | December 31,
| | ------------

|                                       | 1999 | 1998
|-------------------------------------- | ---- | ----
|Silmalaseri Oy                         | $254 | $103
|The Baltimore Laser Sight Center, Ltd. |      | 417 

In July 1999, two other investees in The Baltimore Laser Sight Center, Ltd. ("Baltimore") owning approximately
53% resigned as members and their membership interests were redeemed by Baltimore. This redemption increased
our ownership to approximately 97% which requires our combining Baltimore's accounts with our accounts
beginning in the third quarter 1999. Our results of operations for the year ended December 31, 1999 include revenue
of $4,810,000 and net income of $901,000 earned by Baltimore for the six months ended December 31, 1999.
Included in equity in earnings of unconsolidated affiliates is $234,000 which represents our percentage share of the
earnings for the six months ended June 30, 1999.

Combined summary financial information for these investments follows (dollars in thousands):

| | December 31,
| | ------------

|                    | 1999   | 1998       
|------------------- | ------ | -----------
|Financial Position: |        |            
|Current assets      | $281   | $     1,830
|Total assets        | 404    | 2,604      
|Total liabilities   | 122    | 1,443      
|Members' equity     | 282    | 1,161      
|                    |        |            
|Operating Results:  |        |            
|Revenue             | $1,076 | $     3,787
|Net income          | 318    | 1,365      

In 1997, we wrote off our investments in Excimer Associates LLC and The Georgia Laser Sight Center, Ltd.
resulting in a charge to income of $250,000 which was included in the restructuring provision.

9. Income Taxes

The components of income tax expense (benefit) for the three years ended December 31, 1999 are presented in the
following table (dollars in thousands):

|                                 | 1999     | 1998    | 1997   
|-------------------------------- | -------- | ------- | -------
|Current:                         |          |         |        
|Federal                          | $1,603   |         |        
|State and local                  | 183      |         |        
|Foreign                          | 80       | $157    | $68    
|Total                            | 1,866    | 157     | 68     
|                                 |          |         |        
|Deferred:                        |          |         |        
|Federal                          | 411      | (2,234) | (2,647)
|State and local                  | 61       | (329)   | (389)  
|Total                            | 472      | (2,563) | (3,036)
|                                 |          |         |        
|Income tax expense (benefit)     | 2,338    | (2,406) | (2,968)
|Valuation allowance              | (7,625)  | 2,563   | 3,036  
|                                 |          |         |        
|Net income tax expense (benefit) | $(5,287) | $157    | $68    

We did not record a provision for U.S. federal and state income taxes in 1998 and 1997 because of our net losses
and net loss carryforwards. We are not required to pay franchise taxes in most of the states in which we have
operations due to our net operating loss carryforwards. We have included the franchise taxes paid in general and
administrative expenses in our Consolidated Statements of Operations.

The foreign tax provisions consist primarily of Canadian income taxes. We have made no provision for U.S. income
taxes on undistributed earnings from our international businesses because it is our intention to reinvest those
earnings in those operations. If those earnings are distributed in the form of dividends, we may be subject to both
foreign withholding taxes and U.S. income taxes net of allowable foreign tax credits.

Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant
components of our deferred tax assets are shown in the following table (dollars in thousands):

| | December 31,
| | ------------

|                                | 1999    | 1998    
|------------------------------- | ------- | --------
|Net operating loss carryforward | $12,368 | $13,750 
|Accounts receivable             | 234     | 140     
|Property and equipment          | 666     | 215     
|Equity investments              | 156     | 351     
|Inventories                     |         | 173     
|Marketable securities           |         | 138     
|Notes payable to shareholders   |         | 185     
|Other                           | 157     | 253     
|                                | 13,581  | 15,067  
|Valuation allowance             |         | (15,067)
|                                |         |         
|Net deferred tax assets         | $13,581 | $---    

For the year ended December 31, 1999 we reassessed the realizability of our deferred tax assets. As a result of our
improving levels of and trend in profitability we concluded that realization of these deferred tax assets was more
likely than not and that the valuation allowance was no longer required.

Approximately $7,625,000 of the reversal of the allowance was recorded in our Statement of Operations as an
income tax benefit. The remaining reversal, $7,442,000, was originally required because utilization of the NOL
carryforwards acquired when we bought RCII was not, at that time, more likely than not. This reversal was recorded
as a reduction of unamortized goodwill.

The following table shows the principal reasons for the difference between the statutory federal income tax rate of
34% and the tax benefit shown in our Consolidated Statement of Operations (dollars in thousands):

|                                           | 1999     | 1998 | 1997
|------------------------------------------ | -------- | ---- | ----
|Tax at statutory federal rate              | $1,949   |      |     
|State income taxes, net of federal benefit | 318      |      |     
|Foreign income tax                         | 80       | $157 | $68 
|Change in valuation allowance              | (7,625)  |      |     
|Other                                      | (9)      |      |     
|                                           |          |      |     
|Income tax provision (benefit)             | $(5,287) | $157 | $68 

During 1999 certain employees exercised incentive stock options and sold the shares within the holding period
required by Section 422 of the Internal Revenue Code. These sales result in a compensation deduction of
$2,300,000 for federal income tax purposes only. The tax benefit of approximately $891,000 has been recorded in
our Consolidated Balance Sheets as a reduction of income taxes payable and an addition to Contributed Capital.

At December 31, 1999 we have net operating loss carryforwards for federal and state income tax purposes of
$32,400,000 and $17,800,000 respectively. These expire in varying amounts from 2007 until 2022. Approximately
$18,000,000 of federal net operating loss carryforwards and $15,750,000 state net operating loss carryforwards
were acquired when we bought RCII. Our ability to use these acquired net operating loss carryforwards is limited to
approximately $2,500,000 per year under Code Section 382 of the Internal Revenue Code. Federal and state net
operating loss carryforwards utilized in 1999 approximated $3,300,000.

10.  Leasing Arrangements

We lease office space for our centers and equipment for use in our operations under both capital and operating
leases. Capital leases were primarily used for financing the lasers in our first five centers; we now finance the cost
of lasers using operating leases.

This table displays our aggregate minimal rental commitments under noncancellable leases for the periods shown
(dollars in thousands):

| | December 31, 1999
| | -----------------

|                                          | Capital Leases | Operating
Leases
|----------------------------------------- | -------------- | ----------------
|Year                                      |                |                 
|2000                                      | $606           | $5,307          
|2001                                      | 63             | 3,040           
|2002                                      |                | 1,120           
|2003                                      |                | 652             
|2004                                      |                | 314             
|Thereafter                                |                |                 
|Total minimum rental commitment           | 669            | $10,434         
|Less interest                             | 21             |                 
|Present values of minimum lease payments  | 648            |                 
|Less current installments                 | 585            |                 
|Long-term obligation at December 31, 1999 | $ 63           |                 

Total rent expense under operating leases amounted to $4,299,000 in 1999, $3,900,000 in 1998, and $1,700,000 in
1997. As of December 31, 1999, the total minimum sublease rentals to be received in the future under
noncancellable operating leases was approximately $447,000.

11. Employee Benefits

Savings Plan

We sponsor a savings plan under Internal Revenue Code Section 401(k) to provide an opportunity for eligible
employees to save for retirement on a tax-deferred basis. Under this plan, we make discretionary contributions to
the participants' accounts. We made contributions of $20,000 in 1999, $26,000 in 1998 and none in 1997.

Stock Option Plans

We have two stock incentive plans, the 1995 Long Term Stock Incentive Plan ("1995 Plan") and the 1998 Long
Term Stock Incentive Plan ("1998"). A maximum of 2.5 million shares are reserved for the 1995 Plan and 5 million
shares for the 1998 Plan. The Compensation Committee of the Board of Directors administers the 1995 and 1998
Plans. In 1998 the Compensation Committee decided to reprice the exercise price of 973,750 stock options
previously granted to $1.1875 per share, the market price at the date of repricing.

The Plans permit us to issue incentive and/or nonqualified stock options to purchase shares of common stock, stock
appreciation rights, and stock awards to employees and consultants. The 1998 Plan is used to grant stock options to
our non-employee directors. Non-employee directors receive an option to purchase 75,000 shares of our common
stock upon initial election or appointment and an automatic option grant of 12,500 shares upon reelection. Prior to
our shareholders approving the 1998 Plan, we granted our non-employee directors stock options under the LCA-Vision Inc. Directors' Nondiscretionary Stock Option Plan which was discontinued in 1998.

Stock options are granted with an exercise price not less than fair market value on the date of grant. Stock options
granted have generally been exercisable over 3-5 years and the maximum term is 10 years from the date of grant.

The table summarizes the status of our 1995 and 1998 Plans:

|                     | Stock Options | Weighted-Average
Exercise Price
|-------------------- | ------------- | -------------------------------
|                     |               |                                
|Outstanding,         |               |                                
|December 31, 1996    | 1,818,625     | $4.06                          
|Granted              | 647,500       | 3.26                           
|Cancelled/forfeited  | (634,563)     | 4.95                           
|                     |               |                                
|Outstanding          |               |                                
|December 31, 1997    | 1,831,562     | 4.03                           
|Granted              | 843,600       | 1.02                           
|Exercised            | (20,000)      | 2.56                           
|Cancelled/forfeited  | (650,337)     | 2.84                           
|                     |               |                                
|Outstanding          |               |                                
|December 31, 1998    | 2,004,825     | 1.82                           
|Granted              | 2,730,500     | 3.01                           
|Exercised            | (603,818)     | 1.64                           
|Cancelled/forfeited  | (735,050)     | 2.76                           
|                     |               |                                
|Outstanding          |               |                                
|December 31, 1999    | 3,396,457     | $2.44                          
|                     |               |                                
|Options exercisable, |               |                                
|December 31,         |               |                                
|1997                 | 405,913       | $4.34                          
|1998                 | 524,625       | 2.31                           
|1999                 | 612,106       | 1.99                           

The following table summarizes information about the stock options granted under the 1995 and 1998 Plans that are
outstanding at December 31, 1999:

| | Stock Options Outstanding | Stock Options Exercisable
| | ------------------------- | -------------------------

|Range of

exercise prices | Shares    | Weighted-average
remaining
contractual lite | Weighted-average
exercise price | Shares  | Weighted-average
exercise price
|------------------------- | --------- | ------------------------------------------- | ------------------------------- | ------- | -------------------------------
|$0.875-$1.813             | 2,465,291 | 8.4 years                                   | $1.25                           | 498,638 | $1.38                          
|3.000-4.938               | 565,666   | 9.5 years                                   | 4.13                            | 68,468  | 2.72                           
|5.250-11.125              | 365,500   | 9.4 years                                   | 7.89                            | 45,000  | 7.61                           
|Total                     | 3,396,457 | 8.7 years                                   | 2.44                            | 612,106 | 1.99                           

At December 31, 1999 a total of 3,479,725 are available for granting stock options under the 1995 and 1998 Plans.

The following table is a summary of the status of our discontinued Directors Nondiscretionary Stock Option Plan:

|                           | Stock Options | Weighted-average
Exercise Price
|-------------------------- | ------------- | -------------------------------
|Outstanding,               |               |                                
|December 31, 1997          | 226,250       | $4.83                          
|Granted                    | 78,750        | 3.25                           
|Outstanding,               |               |                                
|December 31, 1998 and 1999 | 305,000       | $4.42                          

As of December 31, 1999, a total of 121,250 options with a weighted-average exercise price of $5.01 are
exercisable under this discontinued plan.

We apply APB No. 25 and related interpretations in accounting for our stock option plans. We have adopted the
disclosure-only provisions of SFAS No. 123. We recognize no compensation expense for our stock options granted
to employees or directors. Compensation expense for options granted to non-employees in each of the three years
ended December 31, 1999 was immaterial. If we had elected to recognize compensation expense based on the fair
value at the grant dates consistent with the provisions of SFAS no. 123, net loss and loss per share would have been
changed to the pro forma amounts indicated below (dollars in thousands, except per share amounts):

| |  | Years ended December 31,
| |  | ------------------------

|                      |             | 1999    | 1998      | 1997    
|--------------------- | ----------- | ------- | --------- | --------
|Net income (loss)     | As reported | $10,753 | $(13,736) | $(8,036)
|                      | Pro forma   | 7,813   | (15,453)  | (9,588) 
|                      |             |         |           |         
|Diluted income (loss) | As reported | $0.21   | $(0.36)   | $(0.30) 
|                      | Pro forma   | 0.15    | (0.41)    | (0.36)  

These results may not be representative of the effects on pro forma amounts for future years.

We determined the pro forma amounts using the Black-Scholes option-pricing model based on the following

assumptions:

|                          | 1999       | 1998 | 1997      
|------------------------- | ---------- | ---- | ----------
|Dividend yield            | 0%         | 0%   | 0%        
|Expected volatility       | 101%       | 92%  | 98%       
|Risk free interest rate   | 4.65-6.37% | 4.9% | 5.34-6.82%
|Expected lives (in years) | 5          | 5    | 5         

The weighted-average fair value of options granted was $1.72 per option during 1999, $.75 per option during 1998,
and  $1.14 per option during 1997.

12.  Commitments and Contingencies

We are a defendant and counter-claimant in a consolidated case entitled Cabrini Development Council, et al. v.
LCA-Vision Inc., et al., which was commenced in October, 1997 in the Supreme Court of the State of New York,
County of New York and subsequently removed to the United States District Court for the Southern District of New
York. Also named as co-defendants are various current and former employees, officers and directors. The case
involves claims and counterclaims asserted by and against us, and two other members of a New York limited
liability company formerly engaged in operating a laser refractive surgery center, and arises out of the cessation of
operations of such limited liability company.

Discovery in the action has recently concluded and all parties have filed motions for summary judgment, based on
the discovery results, to dismiss all claims of the other parties. A decision on the motions will be issued by the court
in due course.

In the opinion of management this action will not have a material adverse effect on our financial position or results
of operations.

13. Additional Financial Information

The tables below provide additional financial information related to our consolidated financial statements (dollars in
thousands):

Balance Sheet Information

| | December 31,
| | ------------

|                                          | 1999    | 1998       
|----------------------------------------- | ------- | -----------
|Receivables                               |         |            
|Trade receivables - vision                | $ 871   | $1,482     
|Trade receivables - other                 | 1,533   | 1,034      
|Allowances                                | (433)   | (1,397)    
|                                          | $1,971  | $1,119     
|                                          |         |            
|Prepaid Expenses, Inventory and Other     |         |            
|Prepaid expenses                          | $1,737  | $1,235     
|Inventory                                 | 137     | 44         
|Other                                     | 110     | 137        
|                                          |         |            
|                                          | $1,984  | $1,416     
|Property and equipment                    |         |            
|Land                                      | $375    | $375       
|Building and improvements                 | 5,326   | 5,278      
|Leasehold improvements                    | 1,962   | 1,930      
|Furniture and fixtures                    | 1,579   | 1,556      
|Equipment                                 | 7,562   | 6,702      
|Equipment under capital leases            | 978     | 784        
|Other                                     | 185     | 186        
|                                          | 17,967  | 16,811     
|Accumulated depreciation and
amortization | (9,091) | (7,398)    
|Construction in progress                  | 850     | 20         
|                                          | $9,726  | $9,433     
|Other assets                              |         |            
|Prepaid expense                           | $6,324  | $        --
|Other                                     | 650     | 1,518      
|Certificate of deposit                    |         | 2,100      
|                                          | $6,974  | $3,618     
|                                          |         |            
|Cash Flow Information                     |         |            

| | For the Year Ended December 31,
| | -------------------------------

|                                                    | 1999    | 1998   | 1997  
|--------------------------------------------------- | ------- | ------ | ------
|Cash paid during the year for                       |         |        |       
|Interest                                            | $737    | $ 854  | $ 985 
|Income taxes                                        | 35      | 157    | 68    
|Non cash investing and financing activities         |         |        |       
|Common stock issued for acquisitions                |         | 580    | 32,786
|Issuance of warrants                                | 6,363   |        |       
|Preferred shares received for payment of advance    | 706     |        |       
|                                                    |         |        |       
|Segment Information                                 |         |        |       
|We operate in one segment-laser refractive surgery. |         |        |       
|Canadian operations                                 |         |        |       
|Revenues                                            | $1,640  | $2,016 | $2,083
|Operating profit                                    | 57      | 471    | 298   
|Statement of Operations Information                 |         |        |       
|                                                    |         |        |       
|Direct costs of laser refractive surgery:           |         |        |       
|Employee costs                                      | $4,691  | $4,094 | $2,940
|Equipment rent and maintenance                      | 3,426   | 3,045  | 1,180 
|Facility rent and utilities                         | 1,258   | 1,472  | 1,002 
|Supplies, gas and other                             | 2,169   | 1,314  | 1,179 
|Total                                               | $11,544 | $9,925 | $6,301

14. Quarterly Financial Data (unaudited)

Financial results for interim periods do not necessarily indicate trends for any 12-month period. Quarterly results
can be affected by the number of procedures performed and the timing of certain expense items (dollars in
thousands, except per share amounts):

| | 1999 Quarters | 1998 Quarters
| | ------------- | -------------

|                                               | First   | Second  | Third   | Fourth  | First   | Second   | Third  | Fourth
|---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | -------- | ------ | ------
|Revenues                                       | $13,867 | $14,730 | $14,973 | $13,814 | $7,209  | $9,019   | $9,096 | $9,876
|Gross profit                                   | 5,296   | 5,812   | 5,431   | 6,321   | 1,734   | 2,838    | 2,764  | 3,401 
|Income (loss) available
to common shareholders | 1,630   | 2,347   | 1,411   | 5,365   | (1,636) | (11,602) | (759)  | 261   
|Earnings (loss) per share                      |         |         |         |         |         |          |        |       
|Basic                                          | 0.04    | 0.05    | 0.03    | 0.10    | (0.04)  | (0.32)   | (0.02) | 0.02  
|Diluted                                        | 0.04    | 0.05    | 0.02    | 0.10    | (0.04)  | (0.32)   | (0.02) | 0.02  

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

None.

PART III

Item 10.  Directors and Executive Officers of the Registrant.

The information regarding directors and executive officers required by Item 10 is incorporated by reference from
our definitive proxy statement for our annual stockholders' meeting to be held on May 8, 2000.

Item 11.   Executive Compensation.

The information required by Item 11 is incorporated by reference from our definitive proxy statement for our annual
stockholders' meeting to be held on May 8, 2000. The information specified on item 402(k) and (1) of regulation S-K and set forth in the Company's definitive proxy statement for its annual stockholders' meeting to be held on May
8, 2000 is not incorporated herein by reference.

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

The information required by Item 12 is incorporated by reference from our definitive proxy statement for our annual
stockholders' meeting to be held on May 8, 2000.

Item 13.  Certain Relationships and Related Transactions.

The information required by this Item 13 is incorporated by reference from our definitive proxy statement for our
annual stockholders' meeting to be held on May 8, 2000.

PART IV

Item 14.  Exhibits, Financial Statements Schedules, and Reports on Form 8-K.

(a)(1) List of Financial Statements

The following are the consolidated financial statements of LCA-Vision Inc. and its subsidiaries appearing elsewhere
herein:

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operations for the three years ended December 31, 1999

Consolidated Statement of Cash Flows for the three years ended December 31, 1999

Consolidated Statement of Shareholders' Investment for the three years ended December 31, 1999

(a)(2) List of Schedules

All other schedules to the consolidated financial statements are omitted as the required information is either
inapplicable or presented in the consolidated financial statements.

(a)(3) List of Exhibits

The Exhibits which are filed with this report or which are incorporated by reference are set forth in the Exhibit
Index hereto.

Exhibit

|Number    | Description of Exhibit                                                                                            
|--------- | ------------------------------------------------------------------------------------------------------------------
|3(a)(i)   | Amended Certificate of Incorporation of Registrant                                                                
|3(a)(ii)  | Amended Certificate of Designation as

to Interim Preferred Stock                                                 
|3(a)(iii) | Amended Certificate of Designation as

to Series B-1 Convertible Preferred Stock                                  
|3(b)      | Amended Bylaws of Registrant                                                                                      
|10(a)     | LCA-Vision Inc. 1995 Long-Term Stock

Incentive Plan                                                              
|10(b)     | LCA-Vision Inc. Directors' Non-Discretionary

Stock Option Plan                                                   
|10(c)     | LCA-Vision Inc. 401(k) Plan                                                                                       
|10(d)     | Loan Agreement dated June 29, 1998

between Registrant and The Provident Bank                                     
|10(e)     | LCA-Vision Inc. 1998 Long-Term

Stock Incentive Plan                                                              
|10(f)     | Promissory Note between the Registrant

and its major stockholders                                                
|10(g)     | Convertible Preferred Stock Purchase Agreement

between Registrant and Certain Purchasers dated as

of May 8, 1998
|10(h)     | Agreement between Registrant and

Donaldson, Lufkin & Jenrette Securities Corporation

dated May 4, 1998          
|21        | Subsidiaries of Registrant                                                                                        
|23        | Consent of PricewaterhouseCoopers LLP                                                                             
|24        | Powers of Attorney                                                                                                
|27        | Financial Data Schedule                                                                                           

NOTE REFERENCES:

A. Incorporated by reference to the Company's Registration Statement on Form 10-SB No. 0-27610, which became
effective on January 25, 1996.

B. Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995.

C. Incorporated by reference to Form 8-K filed July 2, 1998

D. Contained on the first page of the signature pages contained in this report.

E. Incorporated by reference to the Company's Proxy Statement relating to its October 16, 1998 Special
Stockholders Meeting

F. Incorporated by reference to Form 10-QSB filed November 12, 1998

G. Incorporated by reference to Form 10-QSB filed May 15, 1998

H. Incorporated by reference to Form 8-K filed December 4, 1996

(b)  Reports on Form 8-K

1) Form 8-K dated November 15, 1999, containing a copy of a press release announcing that procedures are up
117% from September 1999 at new LasikPlus centers in California.

2) Form 8-K dated November 19, 1999, containing a press release stating that charges filed by SEC against Credit
Bancorp in no way involved or effected the operations, financial condition or future prospects of LCA-Vision.

3) Form 8-K dated December 16, 1999, containing a press release announcing that November 1999 procedures are
up 138% from October 1999 at the LasikPlus centers.

4) Form 8-K dated December 29, 1999, announcing the opening of additional value-priced LasikPlus centers in
Minneapolis, MN and Tampa, FL.

5) Form 8-K dated January 7, 2000, announcing a 50% gain in fourth quarter 1999 procedure growth and that the
Company plans to open at least 10 new LasikPlus centers in 2000.

6) Form 8-K dated January 7, 2000 announcing that the Company converted additional centers in six cities to the
value-priced LasikPlus format.

7) Form 8-K dated February 9, 2000 announcing the Company's results of operations for the 3 and 12 months ended
December 31, 1999.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, LCA-Vision Inc., the Registrant,
has duly caused this report on Form 10-K dated February 14, 2000 to be signed on its behalf by the undersigned,
thereunto duly authorized.

LCA-Vision Inc.

By: /s/ Stephen N. Joffe

Stephen N. Joffe, Chairman and

Chief Executive Officer

Date:    February 14, 2000

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Larry P. Rapp, his or her true and lawful attorney-in-fact and agent, with full power of
substitution, and with power to act alone, to sign and execute on behalf of the undersigned any amendment or
amendments to this report on Form 10-K, and to perform any acts necessary to be done in order to file such
amendment or amendments, with exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission and each of the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or his substitutes, shall do or cause to be done by virtue hereof.

In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

|Principal Executive Officer:              |                                        | Date:            
|----------------------------------------- | -------------------------------------- | -----------------
|/s/ Stephen N. Joffe

Stephen N. Joffe    | Chairman and

Chief Executive Officer  | February 14, 2000
|Principal Accounting Officer:             |                                        |                  
|/s/ Larry P. Rapp

Larry P. Rapp          | Chief Financial Officer

and Treasurer | February 14, 2000
|Directors:                                |                                        | Date:            
|/s/ Stephen N. Joffe

Stephen N. Joffe    | Director                               | February 14, 2000
|/s/William O. Coleman

William O. Coleman | Director                               | February 18, 2000
|/s/ John H. Gutfreund

John H. Gutfreund  | Director                               | February 16, 2000
|/s/ John C. Hassan

John C. Hassan        | Director                               | February 15, 2000

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

|LCA-Vision (Ohio), Inc.                    |  |                 | Ohio           
|------------------------------------------ |  | --------------- | ---------------
|Refractive Centers International, Inc.     |  | Delaware       
|The Baltimore Laser Sight Center, Ltd.     |  | Ohio           
|LCA-Vision (Canada) Inc.                   |  |                 | Ontario, Canada
|The Toronto Laservision Centre (1992) Inc. |  | Ontario, Canada
|938051 Ontario, Inc.                       |  |                 | Ontario, Canada
|                                          

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statements of LCA-Vision Inc. on Form S-8 (File
No. 333-07621) and on Forms S-3 (File No's. 333-39179, 333-41101, 333-72691 and 333-80145) of our report
dated February 4, 2000 relating to the consolidated financial statements of LCA-Vision Inc. as of December 31,
1999 and 1998, and for each of the three years in the period ended December 31, 1999, which report is included in
this Annual Report on Form 10-K.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Cincinnati, Ohio

February 18, 2000