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                                     [LOGO]
 
                               1995 ANNUAL REPORT
                                 AND FORM 10-K
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                               TABLE OF CONTENTS
 
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ITEM                                             PAGE NUMBER
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<S>                                         <C>
Letter to the Stockholders................            i
 
Annual Report on Form 10-K................            1
 
  Item 1. Business........................            2
 
  Item 2. Properties......................            11
 
  Item 3. Legal Proceedings...............            12
 
  Item 4. Submission of Matters to a Vote
   of Security Holders....................            14
 
  Item 5. Market for the Company's Common
   Equity and Related Stockholder
   Information............................            14
 
  Item 6. Selected Financial Data.........            15
 
  Item 7. Management's Discussion and
   Analysis of Financial Condition and
   Results of Operations..................            15
 
  Item 8. Financial Statements and
   Supplementary Data.....................            19
 
  Consolidated Financial Statements.......            19
 
  Notes to Consolidated Financial
   Statements.............................            23
 
  Report of Independent Public
   Accountants............................            32
 
  Item 14. Exhibits, Financial Statement
   Schedules and Reports on Form 8-K......            35
 
Company Directory.........................    Inside Back Cover
</TABLE>
 
<PAGE>
LETTER TO OUR STOCKHOLDERS:
 
    WHAT A DIFFERENCE A YEAR MAKES! As 1995 began, VISX
faced  significant challenges in nearly every aspect of
its business. Because of discrepancies noted by the FDA
in the  prior  year,  we  were  conducting  a  thorough
compliance  review  at our  investigational  sites. Two
significant  lawsuits  were  consuming  management  at-
tention  and Company resources. Agreements signed early
in the  Company's  history  had  granted  most  product
marketing  rights  to Alcon  Laboratories,  and further
obligated VISX to pay  25% of its  excess cash flow  to
Alcon.   The  Company  needed   a  cash  infusion  and,
reflecting these problems, the stock price had  reached
a low of $10 per share. Senior management and the Board
of Directors lacked cohesion and focus.                PHOTO OF MARK LOGAN
 
    Since  then, a series of remarkable accomplishments
has provided VISX  with a renewed  sense of energy  and
pride.  Today we have a  Company that is fully prepared
to assume  a  leadership  role  in  the  industry  VISX
pioneered:  Laser Vision Correction (LVC). A few of the
steps that got us here include:
 
    -A strong new management team and a new Board of Directors;
 
    -Cash infusions  through a  small private  placement and  a public  offering
     reinforcing VISX's presence in the equity market;
 
    -An infusion of regulatory expertise;
 
    -The  receipt of royalty revenue from international licensing agreements and
     receipt of royalties by Pillar Point Partners.
 
    When I joined the Company in November 1994, one of my top priorities was  to
strengthen  our management team.  Together with valued members  of the VISX team
already in place, we began a recruitment effort which resulted in the hiring  of
several  superbly qualified executives for key positions such as Chief Operating
Officer, Chief  Financial  Officer,  Vice President  --  Regulatory  &  Clinical
Affairs,  Vice President -- Human Resources, and Medical Monitor. VISX now has a
resourceful and highly  motivated management team  with impeccable  professional
credentials  and solidly grounded experience in the specialized fields of lasers
and vision correction. We can also report  that 1995 saw a very positive  change
in  our Board of  Directors. VISX was  able to attract  individuals to serve who
have broad business experience, a clear understanding of our potential, and  the
will to enact the bold policy changes needed.
 
    The  next issue we addressed was our  finances. In February VISX completed a
small private  placement providing  cash required  to fund  operations. We  were
confident  that in the  following months we could  increase the Company's market
value and then  raise a  larger amount  at a  higher valuation.  In November  we
renewed  and reaffirmed our presence in the equity market by completing a public
offering of common  stock, managed by  Dillon, Read &  Co. Inc. and  PaineWebber
Incorporated,  that provided net  proceeds of $64 million.  With this funding we
can move ahead vigorously  with internal growth  plans and pursue  opportunities
outside the Company to strengthen and expand our product line.
 
    In   March  1995,  VISX   introduced  the  STAR   Excimer  Laser  System  to
international markets at our Hong Kong Users' Meeting. Physicians attending  the
Hong Kong meeting were most enthusiastic and predicted that the system would set
a  new  technology standard  for Laser  Vision Correction.  Outstanding clinical
results have been compiled by some of the world's finest ophthalmologists  using
this accurate and physician-friendly Laser Vision Correction device.
 
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    We  also made steady progress on the regulatory front during 1995. In March,
after installing a new  regulatory team, we completed  an independent review  of
our  clinical sites and re-opened our clinical studies to new enrollment. At the
end of  September,  VISX  received  FDA  Pre-Market  Approval  ("PMA")  for  the
therapeutic use of the VISX Excimer Laser System. In October, the FDA Ophthalmic
Devices   Advisory  Panel  recommended  approval  of  our  PMA  application  for
Photorefractive Keratectomy (PRK),  the primary commercial  indication of  Laser
Vision  Correction. In  November, the FDA  followed that  recommendation with an
approvable letter, and on March 26, 1996 we received FDA approval for the use of
the VISX System for PRK.
 
    VISX pioneered modern Laser Vision Correction and its patents are recognized
as  the  most  fundamental  and  important  in  the  field.  During  1995,  VISX
commercialized  its intellectual property  by licensing its  technology to other
manufacturers internationally. These licenses to Aesculap-Meditec, Chiron Vision
and Herbert Schwind GmbH not only provide a revenue stream, but add strength  to
the  validity of the patents themselves and to the basic technology. In December
1995, the  Pillar Point  Partnership that  holds our  fundamental United  States
patents received its first royalty income.
 
    Finally, we resolved two major lawsuits. First, the stockholder class action
lawsuit  was settled, which  probably saved hundreds of  thousands of dollars in
legal fees and put an  end to the diversion  of management's attention from  the
business of the Company. Later in the year, we reached agreement in a derivative
lawsuit  filed on our behalf  by one of our  largest shareholders, CAP Advisers,
against our  marketing partner,  Alcon Laboratories,  Inc., and  certain  former
directors  and officers of VISX. The terms  of this agreement are very favorable
to VISX. The  agreement returns all  marketing rights to  us and eliminates  the
requirement  to pay Alcon 25%  of the Company's excess  cash flow. For the first
time, VISX exists as an independent, fully integrated company.
 
    As VISX moves into 1996, we are invigorated by our successful recovery  from
the  substantial  challenges  of  the  past. Now,  however,  there  will  be new
challenges and  opportunities  as we  build  the U.S.  Laser  Vision  Correction
market,  focusing first on the correction of low myopia, or nearsightedness, and
then astigmatism and hyperopia, or  farsightedness. Our immediate focus will  be
on  building our marketing and sales organization to meet the anticipated global
demand for  the  STAR  Excimer Laser  System.  We  have begun  this  process  by
recruiting  a  talented, experienced  sales and  marketing staff  which includes
several  key   people   from   Alcon.  These   individuals   bring   with   them
well-established professional relationships in the eyecare arena and the ability
to provide continuity and a smooth transition for our customers.
 
    Recognizing that VISX's fundamental strength has always been its technology,
we want to assure our stockholders that we will continue to pursue technological
advancements  that can lead us to revolutionary new products in the Laser Vision
Correction field. In the U.S. market, VISX  is unique in that we have chosen  to
focus  on our core strengths rather than diversify into the retail delivery side
of our  industry. We  believe this  philosophy will  help position  VISX as  the
premier service and technology company in the Laser Vision Correction market.
 
    To  all our stockholders, customers, and especially our employees, I want to
say thank  you for  your loyalty  and support  in 1995  and years  past. We  are
committed  to maintaining our momentum and building on our fine achievements. We
look forward to an eventful and rewarding 1996 as VISX moves to the forefront of
this new industry known as Laser Vision Correction.
 
                                          /s/ Mark B. Logan
                                          Mark B. Logan
                                          CHAIRMAN OF THE BOARD, PRESIDENT AND
                                          CHIEF EXECUTIVE OFFICER
 
                                       ii
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
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<S>                                     <C>
       For the fiscal year ended:               Commission file number:
           DECEMBER 31, 1995                            0-10694
</TABLE>
 
                            ------------------------
 
                               VISX, INCORPORATED
             (Exact name of Registrant as specified in its charter)
 
                            ------------------------
 
<TABLE>
<S>                                <C>
            DELAWARE                          06-1161793
    (State of incorporation)               (I.R.S. Employer
                                          Identification No.)
</TABLE>
 
                            3400 CENTRAL EXPRESSWAY
                             SANTA CLARA, CA 95051
                                 (408) 733-2020
    (Address, including zip code and telephone number, including area code,
                  of Registrant's principal executive offices)
 
<TABLE>
<S>                                   <C>
              DELAWARE                             06-1161793
------------------------------------  ------------------------------------
    (STATE OR OTHER JURISDICTION       (IRS EMPLOYER IDENTIFICATION NO.)
 OF INCORPORATION OR ORGANIZATION)
</TABLE>
 
Securities registered pursuant to Section 12 (b) of the Act: NONE
 
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.01
PAR VALUE.
 
                            ------------------------
 
    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.  /X/
 
    The aggregate market value of the Common Stock held by non-affiliates of the
registrant  as of  March 22, 1996  is approximately $508,952,000.  The number of
shares of Common Stock outstanding as of March 22, 1996 was 15,204,169.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
    Certain portions of the registrant's Proxy Statement for its Annual  Meeting
of  Stockholders to be held  on May 17, 1996  are incorporated by reference into
Part III of this report.
 
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<PAGE>
                                     PART I
 
ITEM 1.  BUSINESS
THE COMPANY
 
    VISX,  Incorporated ("VISX")  is a leader  in the design  and development of
proprietary technologies and  systems for  laser vision  correction ("LVC"),  an
outpatient  surgical  procedure to  treat  refractive vision  disorders  such as
nearsightedness, astigmatism and farsightedness with the goal of eliminating  or
reducing    reliance   on   eyeglasses   and   contact   lenses.   In   LVC,   a
computer-controlled excimer  laser  ablates,  or removes,  submicron  layers  of
tissue  from the  surface of  the cornea to  reshape the  eye, thereby improving
visual acuity. Vision correction represents  one of the largest medical  markets
with  over 100  million people  in the United  States experiencing  some form of
nearsightedness, astigmatism or farsightedness.  Industry sources estimate  that
approximately  $13 billion  was spent  on eyeglasses,  contact lenses  and other
corrective eyewear in the United States in 1994. Vision correction is  typically
paid   for  by  the  individual  receiving  treatment,  and  does  not  rely  on
reimbursement from governmental or private health care payors.
 
    Since its  inception  in  1985,  VISX  has  been  developing  a  substantial
proprietary position in system and application technology relating to the use of
lasers  for vision correction.  The Company's strategy  is to commercialize this
intellectual property position through (1) per procedure and equipment royalties
from Pillar Point Partners ("Pillar Point"), (2) international use and equipment
royalties collected under direct licensing  agreements, and (3) worldwide  sales
of the VISX System.
 
REFRACTIVE VISION DISORDERS AND LVC
 
    The human eye is approximately 25 millimeters in diameter and functions much
like  a camera, incorporating a  lens system that focuses  light (the cornea and
the lens),  a variable  aperture  system which  regulates  the amount  of  light
passing  through the  eye (the  iris) and  a film  which records  the image (the
retina).  Images  enter  the  human  eye  through  the  cornea.  In  a  properly
functioning eye, the cornea bends, or refracts, the incoming images, causing the
images to focus on the retina of the eye. Refractive vision disorders are caused
by improper curvature of the cornea, which results in the cornea being unable to
properly focus the light passing through it. As a result, the viewer perceives a
blurred   image.  Nearsightedness  (also  known   as  myopia),  astigmatism  and
farsightedness (also known as  hyperopia) are the  three most common  refractive
vision  disorders. In  a nearsighted  eye, images  are focused  in front  of the
retina. In an  astigmatic eye, images  are not focused  at any one  point. In  a
farsighted  eye, images are focused behind  the retina. Currently, eyeglasses or
contact lenses  are  most  often used  to  correct  the vision  of  people  with
refractive vision disorders.
 
    The  principal  market  for  LVC  is  the  correction  of  refractive vision
disorders such  as nearsightedness,  astigmatism  and farsightedness.  In  1993,
industry  sources estimated  that over 100  million people in  the United States
used eyeglasses or  contact lenses  to correct refractive  vision disorders.  Of
these  individuals,  approximately  60  million  are  estimated  to  suffer from
nearsightedness, with approximately 90% of nearsighted persons having  low-level
myopia.  The Company estimates that approximately one-fourth of all sufferers of
nearsightedness also experience astigmatism and an additional 23 million  people
in   the  United  States   suffer  from  astigmatism,   but  do  not  experience
nearsightedness. United  States consumers  spent  approximately $13  billion  on
eyeglasses,  contact lenses  and other corrective  eyewear in  1994 according to
industry sources. The Company believes that  LVC will make it possible for  many
of these people to eliminate or reduce their reliance on corrective eye wear. In
particular,  the  Company believes  that many  of  the approximately  26 million
contact lens users in the United States will be particularly receptive to LVC as
they have  already  chosen  to  use an  alternative  to  eyeglasses  for  vision
correction.
 
    Industry sources estimate that between 250,000 and 300,000 radial keratotomy
("RK")  procedures are performed annually in the United States. RK is a surgical
procedure in  which the  ophthalmologist uses  a  scalpel to  make a  series  of
incisions  in the cornea  with the goal  of reshaping the  cornea to correct the
patient's vision. Because RK is a manual  procedure and is not performed with  a
 
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computer-controlled  device, it is highly dependent on the surgical skill of the
ophthalmologist performing  the  procedure.  In addition,  because  RK  involves
incisions  into the corneal tissue, it weakens the structure of the cornea which
can have  adverse  consequences  as  patients age.  Furthermore,  RK  has  never
undergone  a controlled clinical study under a U.S. Food and Drug Administration
("FDA") protocol because no medical devices,  other than a scalpel, are used  in
the procedure. The Company believes, based on currently available follow-up data
and  market trends in  countries where LVC is  commercially available, that more
people will  seek vision  correction through  LVC than  through RK  because  LVC
involves  reduced surgical  risk, does  not weaken  the corneal  tissue, is less
invasive and is less dependent on the ophthalmologist's skill.
 
CORNEAL PATHOLOGIES AND PTK
 
    Corneal pathologies include traumatic and congenital defects and diseases of
the cornea which result in restricted vision. A number of conditions can cause a
clouding or opacification of the cornea, resulting in a loss of visual acuity. A
typical treatment of these  conditions is a  corneal transplant, which  involves
major  surgery, is expensive and is dependent  on the availability of a suitable
donor cornea  as well  as  on the  individual  surgeon's skill  and  experience.
Corneal  transplants  frequently produce  irregular  corneal surfaces  which can
compromise the patient's vision. Additional  major concerns relating to  corneal
transplants  are  the  possible transmission  of  viruses and  rejection  of the
transplanted tissue.  Certain  corneal  pathologies can  be  addressed  with  an
excimer   laser  system  in  a  procedure  known  as  PTK,  or  phototherapeutic
keratectomy. In PTK, submicron layers of tissue are ablated from the surface  of
the  cornea in order to remove diseased, scarred or sight-inhibiting tissue with
the principal  goal of  alleviating  the symptoms  associated with  the  corneal
pathology.  Although PTK is an important medical procedure for people who suffer
from  corneal  pathologies,  the  market  opportunity  represented  by  PTK   is
significantly smaller than that represented by LVC.
 
PROCEDURES
 
    LVC  PROCEDURE.   On March 26,  1996, the FDA  approved the use  of the VISX
System to correct mild to moderate  nearsightedness. To perform LVC, also  known
as  photorefractive keratectomy or PRK, with excimer lasers, the ophthalmologist
determines the  exact  correction  required  (which  is  measured  by  the  same
examination  used to  prescribe eyeglasses or  contact lenses)  and programs the
correction into the excimer laser system's computer. The computer calculates the
data needed to make  a precise corneal correction  which the physician  verifies
before  commencing the  laser treatment.  The excimer  laser system  emits laser
pulses to ablate  submicron (a micron  equals 0.001 of  a millimeter) layers  of
tissue  from the surface of the cornea in a pattern to reshape the front surface
of the cornea.  The depth of  tissue ablated during  the procedure typically  is
less  than one-half  of the  thickness of a  human hair.  The average procedure,
which lasts approximately 15 to 40 seconds, consists of approximately 150  laser
pulses  each  of which  lasts  several billionths  of  a second  with cumulative
exposure to  laser light  of less  than one  second. The  entire patient  visit,
including  preparation, application  of a topical  anesthetic and post-operative
dressing, generally lasts no more than 30 minutes.
 
    Following  the  procedure,   the  ophthalmologist   may  prescribe   topical
pharmaceuticals to promote corneal healing and alleviate discomfort. Individuals
undergoing LVC may experience discomfort for approximately 24 hours, and blurred
vision  for approximately  48 to  72 hours,  after the  procedure. Although most
patients experience improvement in uncorrected vision  within a few days of  the
procedure,  it generally  takes from  two to  six months  for the  correction to
stabilize and  for  the  full  benefit  of the  procedure  to  be  realized.  An
individual  typically has  one eye  treated in  a session,  with the  second eye
treated three to six months later.
 
    The LVC  procedure  described above  can  be  performed using  a  number  of
manufacturers'  excimer laser systems,  including the VISX  System. However, the
VISX System  incorporates several  advanced technological  features that  permit
treatment  of  hyperopia  as  well  as  simultaneous  treatment  of  myopia  and
astigmatism, including a proprietary adjustable iris and proprietary software.
 
    Another refractive  procedure  that  can be  performed  with  excimer  laser
systems  is laser in  situ keratomileusis ("LASIK").  LASIK is a  variation of a
non-laser technique in which a knife, or
 
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<PAGE>
microkeratome, is used to open a flap on the surface of the cornea. Laser energy
is then used  to ablate  corneal cells  on the  exposed surface  to improve  the
person's  visual  acuity, and  the flap  is  then folded  back into  place. VISX
Systems are being used for LASIK  in several international markets. The  Company
has  not commenced clinical trials involving use of the VISX System for LASIK in
the United States. LASIK is covered by the patents held by Pillar Point, and  as
such  the procedure requires payment of a royalty to Pillar Point for each LASIK
procedure performed. SEE "RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY."
 
    PTK PROCEDURE.   PTK is an  outpatient surgical procedure  to treat  corneal
pathologies.  In this procedure, submicron layers of tissue are ablated from the
surface of the cornea  to remove diseased,  scarred or sight-inhibiting  tissue.
The  Company estimates  that VISX  Systems have  been used  worldwide to perform
approximately 10,000 PTK procedures. On September 29, 1995, the Company received
FDA approval of its Pre-Market Approval ("PMA") application for the VISX  System
for PTK.
 
PRODUCTS
 
    VISX  SYSTEM.  The VISX  System is a fully  integrated unit incorporating an
excimer laser and a computer-driven  workstation for use by an  ophthalmologist.
The system is designed to enable an ophthalmologist to perform LVC and PTK after
a  brief training program. The VISX  System automatically varies the diameter of
the laser  beam using  a  sophisticated optical  delivery system  that  provides
temporal and spatial integration of an excimer laser beam through an adjustable,
mechanical  iris. In March  1995, the Company introduced  a streamlined model of
the VISX System. This system is functionally equivalent to the prior model,  but
is  one-half its size, easier and more  economical to operate, and is capable of
treating farsightedness in addition to nearsightedness and astigmatism.
 
    Excimer lasers ablate  tissue without  generating the  heat associated  with
many  other types of lasers  that use different wavelengths  which can result in
unintended thermal damage to surrounding  tissue. The excimer laser operates  in
the  ultraviolet spectrum  and acts  on the  surface of  the cornea  without any
measurable effect in  the interior  of the  cornea, which  is approximately  500
microns thick, or the other parts of the eye.
 
    VISIONKEY  CARD.  The use of the  VISX System is controlled by a proprietary
optical memory card,  the VisionKey-Registered  Trademark- card,  which is  sold
separately and is encoded with proprietary software required to operate the VISX
System.  Approximately  30  VISX  Systems  still  in  the  field  have  not been
retrofitted to include  the VisionKey card  system. Additionally, the  VisionKey
card  provides the user with access to  software upgrades and can facilitate the
collection of patient data. One VisionKey card must be used with each  procedure
performed,  and therefore sales of the VisionKey card correlate to the number of
procedures performed, except for those procedures performed with units that have
not been retrofitted to include the VisionKey card system. The price charged per
card varies based on the package  of services and materials programmed onto  the
VisionKey  card provided to  the user. The percentage  of VISX revenues received
from sales of the VisionKey card is expected to vary based upon demographics and
other site-specific considerations.
 
MARKET ACCEPTANCE OF LVC
 
    The Company  believes that  its profitability  and growth  will depend  upon
broad  acceptance  of LVC  in the  United States  and key  international markets
targeted by the Company. There can be no assurance that LVC will be accepted  by
either  the ophthalmic community or the  general population as an alternative to
existing methods of treating refractive vision disorders. The acceptance of  LVC
may  be affected  adversely by  its cost,  concerns relating  to its  safety and
efficacy, general  resistance  to  surgery,  the  effectiveness  of  alternative
methods  of  correcting  refractive  vision  disorders,  the  lack  of long-term
follow-up data,  the  possibility of  unknown  side  effects, and  the  lack  of
third-party  reimbursement for the  procedure. Many consumers  may choose not to
have LVC due to the availability  of nonsurgical methods for vision  correction.
Any  future  reported adverse  events or  other unfavorable  publicity involving
patient outcomes from use of LVC systems manufactured by any participant in  the
LVC  market  could also  adversely affect  acceptance  of the  procedure. Market
acceptance could  also be  affected by  the  ability of  the Company  and  other
participants in the LVC market to train a broad
 
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<PAGE>
population  of  ophthalmologists  in the  procedure.  Ophthalmologist acceptance
could also be affected by the cost of the excimer laser systems used to  perform
LVC.  Promotional  efforts  by suppliers  of  products or  procedures  which are
alternatives to LVC, including eyeglasses and contact lenses, may also adversely
affect the market acceptance of LVC. The failure of LVC to achieve broad  market
acceptance  would  have a  material adverse  effect  on the  Company's business,
financial condition  and results  of operations.  SEE "--  MARKETING, SALES  AND
DISTRIBUTION."
 
    Concerns   with  respect  to   the  safety  and   efficacy  of  LVC  include
predictability and  stability  of  results.  Potential  complications  and  side
effects  include:  post-operative discomfort;  corneal  haze during  healing (an
increase  in  the  light  scattering  properties  of  the  cornea);  glare/halos
(undesirable visual sensations produced by bright lights); decreases in contrast
sensitivity;   temporary  increases  in  intraocular  pressure  in  reaction  to
procedure medication;  modest  fluctuations in  refractive  capabilities  during
healing;  modest  decrease  in  best  corrected  vision  (I.E.,  with corrective
eyewear); unintended over- or under-corrections; regression of effect; disorders
of corneal healing; corneal scars; corneal ulcers and induced astigmatism. There
can be no  assurance that long-term  follow-up data will  not reveal  additional
complications that may have a material adverse effect on acceptance of LVC which
in  turn  would  have  a  material adverse  effect  on  the  Company's business,
financial condition and results of operations.
 
RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY
 
    Protection of  the  Company's proprietary  technology  is important  to  its
business.  VISX  holds over  100 United  States  and foreign  patents, including
patents licensed to Pillar Point by VISX. VISX believes that its patents provide
a substantial proprietary position in system and application technology relating
to the use of lasers for vision correction. In addition, the Company has several
pending patent applications in  the United States and  in foreign countries.  In
the  United States, there are a number of patents covering methods and apparatus
for performing corneal surgery with ultraviolet lasers, including patents  owned
by  VISX  and Summit  Technology, Inc.  ("Summit").  Pursuant to  the agreements
establishing Pillar Point (collectively, the "Pillar Point Agreement"), VISX and
Summit each  contributed their  rights under  United States  patents  previously
issued  to them covering apparatus and  methods for performing ultraviolet laser
corneal surgery. The  Pillar Point  Agreement also provides  that certain  other
patent  rights obtained by either VISX or  Summit must be contributed or offered
to Pillar  Point, depending  upon the  nature of  the particular  patent  rights
involved.  In  addition,  there  are  also  multiple  foreign  patents  covering
apparatus for performing  excimer laser  corneal surgery,  including patents  or
patent rights held by VISX, Summit, and others.
 
    PILLAR  POINT PARTNERS.  On  June 3, 1992, VISX  and Summit entered into the
Pillar Point Agreement by virtue of which all then pending issues between Summit
and VISX  regarding the  ownership and  use of  their respective  United  States
patents for performing ultraviolet laser corneal surgery were settled. Under the
agreements,  each of  Summit and  VISX exclusively  licensed to  Pillar Point, a
partnership  consisting  of  entities  controlled  by  VISX  and  Summit,  their
respective rights under United States patents previously issued to them covering
apparatus  and  methods for  performing ultraviolet  laser corneal  surgery. The
Pillar Point  Agreement also  provides that  any patent  covering apparatus  and
methods  for performing ultraviolet laser corneal  surgery which is issued after
the date of the Pillar  Point Agreement to either  party with respect to  patent
applications filed, or which claim a priority date, at any time prior to June 3,
1993,  will automatically be contributed to  Pillar Point at no additional cost.
The Pillar Point Agreement also contains provisions requiring VISX and Summit to
offer  to  the  partnership  certain  after-acquired  precluding  patents   more
particularly defined in the Pillar Point Agreement regardless of when issued.
 
    Pillar  Point has  licensed to  each of VISX  and Summit,  on a nonexclusive
basis, the rights to the inventions  covered by the patents described above.  It
is  also contemplated that  Pillar Point will grant  licenses to other qualified
third parties.  Under the  Pillar Point  Agreement, Pillar  Point will  be  paid
 
                                       5
<PAGE>
certain  per procedure and equipment royalties by VISX and Summit. This revenue,
net of  applicable expenses,  and any  other revenue  of Pillar  Point, will  be
shared  between VISX and Summit in accordance  with the provisions of the Pillar
Point Agreement.
 
    The per procedure royalty charged by Pillar Point has been fixed at $250 per
procedure. Profits realized  from per  procedure royalties  from LVC  procedures
using an excimer laser with an adjustable iris (the only type of system approved
by,  or for which PMA applications have  been filed with, the FDA) are allocated
56% to VISX  and 44% to  Summit assuming  a $250 per  procedure royalty.  Pillar
Point profits realized from receipt of PTK per procedure royalties are allocated
51%  to VISX and 49% to Summit. However,  Pillar Point has decided not to charge
any per procedure royalties for PTK at this time.
 
    In addition, VISX and Summit are  required to pay Pillar Point royalties  of
6%  for sales of excimer  laser systems using an  adjustable iris (excimer laser
systems owned by VISX or Summit generally are not subject to royalties). Profits
from royalties on  such sales  paid to Pillar  Point are  allocated entirely  to
VISX.  If and when manufacturers other than  VISX and Summit obtain FDA approval
for excimer laser systems,  profits from royalties received  as a result of  the
sale of their equipment would be allocated 50% to VISX and 50% to Summit.
 
    OTHER  LICENSING AGREEMENTS.   In October 1995, VISX  entered into a license
agreement with Chiron Vision Corporation ("Chiron") and extended its  agreement,
originally  entered  into in  1994, with  Aesculap-Meditec GmbH  ("Meditec"). In
December 1995, VISX entered into a license agreement with Herbert Schwind GmbH &
Co. KG ("Schwind"). Under these  agreements, the Company will receive  royalties
for  sales and use of Chiron, Meditec,  and Schwind equipment in Canada and will
receive equipment royalties on all other international sales. Chiron and Meditec
are two of the largest manufacturers of excimer lasers for eye care applications
in international markets.
 
    In March 1992, the  Company and IBM signed  a license agreement that  grants
the Company nonexclusive rights under United States and foreign IBM patents that
include  claims that  cover ultraviolet  laser technology  for removal  of human
tissue. VISX has agreed to pay  a royalty of 2% of  the net sales price of  VISX
Systems  made, used, sold or otherwise transferred  by or for VISX in the United
States, Canada, Japan, Australia, Brazil and Spain. The Company also has entered
into a nonexclusive, worldwide license  agreement with Patlex Corporation  which
holds  certain  patents on  lasers.  Under this  agreement,  the Company  pays a
royalty on certain laser components of the VISX System.
 
    OTHER ARRANGEMENTS.   The  Company  also seeks  to protect  its  proprietary
technology,  in  part,  through  proprietary  confidentiality  and nondisclosure
agreements  with  employees,  consultants  and  other  parties.  The   Company's
confidentiality  agreements with its employees and consultants generally contain
industry standard provisions requiring such individuals to assign to the Company
without additional consideration any inventions conceived or reduced to practice
by them  while  employed  or  retained by  the  Company,  subject  to  customary
exceptions.  There can be  no assurance that  proprietary information agreements
with employees, consultants and  others will not be  breached, that the  Company
would have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known to or independently developed by competitors.
 
RISKS RELATING TO PILLAR POINT PARTNERS; PATENT LITIGATION
 
    The  Pillar  Point Agreement  contemplates that  royalties  will be  paid to
Pillar Point each  time a  laser system  is used to  perform LVC  in the  United
States  under licenses  granted to the  Company, Summit  or other manufacturers.
Should the Company receive PMA for LVC,  the Company will seek to establish  and
maintain  contractual  arrangements  permitting  it  to  collect  per  procedure
royalties from use of VISX Systems. There can, however, be no assurance that the
Company or Summit  will be  able to collect  such royalties.  In forming  Pillar
Point,  the Company  and Summit  endeavored to  structure the  operations of the
partnership in a manner consistent with antitrust laws. The compliance of Pillar
Point with  these  laws will  depend  upon the  activities  of the  partners,  a
determination  of what constitutes a relevant  market for purposes of such laws,
the nature of the patents, the number and
 
                                       6
<PAGE>
relative strength of  competitors in  such markets and  numerous other  factors,
many  of which are presently unknown or  are beyond the control of Pillar Point,
VISX and Summit. No assurance can be  given that the activities of Pillar  Point
will  not  be challenged  under  such laws.  In  March 1995,  Pillar  Point sued
LaserSight, Inc.  for patent  infringement  in the  Federal District  Court  for
Delaware.  In that action, LaserSight  has asserted several affirmative defenses
and has  entered  a declaratory  judgment  counterclaim asserting,  among  other
things, that the Pillar Point Agreement constitutes patent misuse. Additionally,
in  October 1995, VISX received notice that the Federal Trade Commission ("FTC")
is requesting the production of certain documents in connection with an  inquiry
relating  to whether or not Pillar Point and/or the companies that formed Pillar
Point, VISX and  Summit, have engaged  in any unfair  methods of competition  in
violation  of federal  trade regulation  laws. Any  successful challenge  to the
operation of Pillar Point or to its patents could have a material adverse effect
on the Company's business, financial condition and results of operations.
 
    There can  be no  assurance that  the United  States patent  rights held  by
Pillar  Point or international patents held  by VISX will afford any significant
degree of protection  or provide the  Company with a  competitive advantage.  In
particular,  there  can be  no assurance  that the  Pillar Point  Agreement will
preclude patent  disputes with  Summit relating  to technology  not included  in
Pillar  Point in  the United  States or relating  to any  technology outside the
United States. Failure to maintain the  protection afforded by the patents  held
by  Pillar Point and  the Company's international patents  would have a material
adverse  effect  on  the  Company's  future  revenues  and  ability  to   become
profitable.  Further, there can be no assurance  that the patents held by Pillar
Point or the  Company's international  patents will  ultimately be  found to  be
valid  or enforceable or that the Company's patent rights will deter others from
developing substantially equivalent or competitive products.
 
    In addition, the  medical device  industry, including  the ophthalmic  laser
sector,  has been  characterized by substantial  litigation, both  in the United
States and  internationally,  regarding  patents  and  proprietary  rights.  The
Company  is engaged  in several pending  patent proceedings, both  in the United
States and internationally. In  the United States, Summit  has sued the  Company
for  infringement of a patent  held by Summit and  not licensed to Pillar Point.
Internationally, the  Company has  filed actions  alleging infringement  of  its
patents  against  certain  parties  in Canada,  and  is  involved  in opposition
proceedings challenging the issuance of  certain patents in the European  Patent
Office  ("EPO"). There can  be no assurance  that additional patent infringement
claims in the United States or in  other countries will not be asserted  against
VISX  by Summit (limited in  the United States to  patent rights not included in
Pillar Point)  or others,  or, if  asserted,  that VISX  will be  successful  in
defending  against such claims. Furthermore, Pillar  Point or VISX may undertake
additional  infringement  actions  against  others.  Infringement  actions  with
respect  to United States patents  licensed to Pillar Point  could be brought or
defended by  Pillar  Point,  although  the partners  would  have  the  right  to
initiate, pursue, defend or participate in such actions if Pillar Point declined
to  do so.  FOR ADDITIONAL  DETAIL REGARDING  THESE PATENT  PROCEEDINGS, SEE "--
LEGAL PROCEEDINGS."
 
    The defense and  prosecution of  patent proceedings is  costly and  involves
substantial commitments of management time. Adverse determinations in litigation
or  other patent proceedings to  which the Company currently  is or may become a
party could subject the Company to significant liabilities to third parties  and
require  the Company  to seek licenses  from third parties.  Although patent and
intellectual property  disputes  in the  medical  device area  have  often  been
settled  through licensing or  similar arrangements, costs  associated with such
arrangements  may   be  substantial   and  could   include  ongoing   royalties.
Furthermore,  there  can  be  no  assurance  that  necessary  licenses  would be
available to  the Company  on  satisfactory terms  or  at all.  Accordingly,  an
adverse  determination in a judicial or  administrative proceeding or failure to
obtain necessary  licenses  could prevent  the  Company from  manufacturing  and
selling its products in one or more markets, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
SEE "-- LEGAL PROCEEDINGS."
 
                                       7
<PAGE>
MARKETING, SALES AND DISTRIBUTION
 
    Through  1995 and until  March 12, 1996,  Alcon Laboratories, Inc. ("Alcon")
served as the  Company's exclusive  international distributor.  On November  20,
1995,  Alcon,  VISX and  the other  participants  in VISX's  pending stockholder
derivative  litigation   agreed  to   settle  the   litigation,  including   the
counterclaims  filed by Alcon, by filing  a definitive settlement agreement with
the Superior Court. On January 9, 1996 the Superior Court approved the  proposed
settlement  which,  according to  its terms,  automatically became  effective on
March 12, 1996, and Alcon  ceased all marketing and  sales efforts on behalf  of
VISX  as  of  that  date.  Alcon will  continue  to  service  VISX  Systems sold
internationally by Alcon.  Under the  settlement terms,  Alcon will  be able  to
market competitors' LVC systems.
 
    INTERNATIONAL  SALES AND MARKETING STRATEGY.  As a result of the termination
of  Alcon's  exclusive  marketing  rights,  the  Company  has  established   and
implemented  new  marketing  and  sales strategies  for  the  United  States and
international markets. The Company's future success will depend in large part on
its ability to establish and implement new domestic and international  marketing
and  sales strategies, and  there can be  no assurance that  the Company will be
able to do so in a timely manner  or at all. International sales may be  limited
or   disrupted  by  the  imposition   of  government  controls,  export  license
requirements, political  instability, trade  restrictions, changes  in  tariffs,
difficulties  in  staffing and  coordinating  communications among  and managing
international operations.
 
    In September 1995, the  Company received notice  that the Health  Protection
Branch  of the Canadian government approved the use of the VISX System in Canada
for treatment of low-level myopia. With this approval, VISX can market the  VISX
System  for low-level  myopia in  Canada without  labeling the  VISX System "for
investigational use" for that  indication. The Company believes  that it is  the
first and only LVC system manufacturer to receive such approval in Canada.
 
    DOMESTIC  SALES AND  MARKETING STRATEGY.   Following its receipt  of PMA for
PTK,  the  Company  has  commenced  United  States  commercialization  for  this
indication.  The VISX  System cannot  be marketed in  the United  States for LVC
unless and  until a  PMA for  LVC is  received. Effective  March 12,  1996,  the
Company  is entirely dependent on its  own internal sales and marketing efforts.
SEE "-- LEGAL PROCEEDINGS."
 
GOVERNMENT REGULATION
 
    UNITED STATES.   Ophthalmic  excimer  lasers such  as  the VISX  System  are
medical devices, and as such are subject to regulation by the FDA under the Food
Drug  and Cosmetic Act  ("FDC Act") and  by similar agencies  outside the United
States. Medical devices are classified by the FDA into class I, II or III on the
basis  of  the  controls  necessary  to  reasonably  ensure  their  safety   and
effectiveness.  Class III devices, such  as the VISX System,  are subject to the
most stringent  form of  regulation and  oversight and  cannot be  marketed  for
commercial sale in the United States until the FDA grants a PMA for the device.
 
    To obtain a PMA for a medical device, the Company was required to file a PMA
application  that included  clinical data  and the  results of  pre-clinical and
other testing sufficient to show that there is a reasonable assurance of  safety
and  effectiveness of the VISX System for  its intended conditions of use. Human
clinical studies may  be conducted only  under an FDA-approved  IDE and must  be
conducted  in accordance  with FDA  regulations. In  addition to  the results of
clinical trials, the PMA application includes other information relevant to  the
safety  and efficacy of the device, a description of the facilities and controls
used in the manufacturing  of the device, and  proposed labeling. After the  FDA
accepts  a  PMA  application for  filing,  and  after the  FDA's  review  of the
application, a public meeting is held before an FDA advisory panel in which  the
PMA  is reviewed and discussed. The panel then issues a favorable or unfavorable
recommendation to the FDA or  recommends approval with conditions. Although  the
FDA  is  not  bound  by  the panel's  recommendations,  it  tends  to  give them
significant weight.
 
                                       8
<PAGE>
    The first LVC procedure for  the treatment of nearsightedness was  performed
in  the United States in 1987 and the first PTK procedure for the treatment of a
corneal pathology was  performed in 1988.  To date, over  200 VISX Systems  have
been shipped, and the Company estimates that over 300,000 eyes have been treated
with the installed base of VISX Systems in over 35 countries.
 
    The Company has sponsored clinical trials in the United States for low-level
myopia  on 1,610 eyes.  According to two-year follow-up  data accumulated by the
Company  during  these  trials,  all  persons  undergoing  LVC  experienced   an
improvement  in visual acuity without corrective eyewear. Of the eyes treated in
these trials, approximately 86% were 20/200 or worse and approximately 94%  were
20/100  or worse prior  to treatment. Approximately  93% of the  eyes treated in
these trials improved  to 20/40  or better, the  legal requirement  to obtain  a
driver's license in most states without corrective eyewear.
 
    On  September  29,  1995,  the  Company received  FDA  approval  of  its PMA
application for  the  VISX  System for  PTK.  On  October 20,  1995,  the  FDA's
Ophthalmic  Devices  Advisory Panel  recommended approval  of the  Company's PMA
application for  the VISX  System  for treatment  of  low-level myopia,  and  on
November  17,  1995  the  FDA  notified  the  Company  that  the  Company's  PMA
application for  use of  the VISX  System  for LVC  is approvable.  The  Company
received PMA approval for LVC on March 26, 1996.
 
    Although  the Company has received PMA for  the VISX System for LVC, it will
be necessary for the  Company to seek  additional regulatory approvals,  through
either  additional PMA applications or supplements to existing PMA applications,
for additional indications for the VISX  System. There can be no assurance  that
any  such approvals would be obtained on a  timely basis, or at all. The failure
to receive  such PMAs  could have  a material  adverse effect  on the  Company's
business,  financial  condition and  results of  operations.  The Company  is in
various clinical trial stages  for other LVC indications  with the VISX  System,
including  higher  myopia  (greater  than  -6  and  less  than  -10  diopters of
correction), severe myopia (more than  -10 diopters of correction),  astigmatism
and hyperopia.
 
    OTHER  GOVERNMENT REGULATION.   Products manufactured or  distributed by the
Company pursuant to a PMA will be subject to pervasive and continuing regulation
by the FDA, including, among  other things, postmarket surveillance and  adverse
event reporting requirements. Labeling and promotional activities are subject to
scrutiny  by the FDA and, in certain instances, by the Federal Trade Commission,
and current FDA enforcement policy  prohibits the marketing of approved  medical
devices  for  unapproved uses.  Noncompliance  with applicable  requirements can
result in, among other things,  warning letters, fines, injunctions,  penalties,
recall or seizure of products, total or partial suspension of production, denial
or  withdrawal of premarket  approval of devices,  and criminal prosecution. The
FDC Act also requires the Company to manufacture its products in accordance with
Good  Manufacturing  Practices   ("GMP")  regulations,   which  impose   certain
procedural  and  documentation requirements  upon  the Company  with  respect to
manufacturing and  quality  assurance activities.  The  Company's  manufacturing
facilities  have undergone GMP compliance inspections  conducted by the FDA. The
Company's facilities,  procedures  and practices  will  be subject  to  ongoing,
periodic  GMP inspections by the FDA. The FDA has proposed amendments to the GMP
regulations  that  will  likely  increase  the  cost  of  compliance  with   GMP
requirements. There can be no assurance that the Company will not be required to
incur  significant costs to  comply with laws  and regulations in  the future or
that laws  and regulations  will not  have a  material adverse  effect upon  the
Company's business, financial condition and results of operations.
 
    VISX  is also  regulated under the  Radiation Control for  Health and Safety
Act, which  requires  laser  products  to  comply  with  performance  standards,
including  design and  operation requirements,  and manufacturers  to certify in
product labeling and in reports to the  FDA that their products comply with  all
such  standards. The law  also requires laser manufacturers  to file new product
and annual  reports,  maintain manufacturing,  testing  and sales  records,  and
report  product  defects,  affix  various warning  labels,  and  install certain
protective   devices.   In   addition,    VISX   is   subject   to    California
 
                                       9
<PAGE>
regulations  governing the manufacture  of medical devices,  including an annual
licensing requirement, and  VISX's facilities  have been inspected  by, and  are
subject to ongoing, periodic inspections by, California regulatory authorities.
 
    Sales,  manufacture and further  development of the VISX  System also may be
subject to  additional federal  regulations pertaining  to export  controls  and
environmental  and  worker protection,  as well  as to  state and  local health,
safety and other regulations that vary by locality, which may require  obtaining
additional permits. The impact of such regulations cannot be predicted.
 
    INTERNATIONAL.    Many countries  outside the  United  States do  not impose
safety and  efficacy testing  or regulatory  approval requirements  for  medical
laser  systems. International regulatory requirements  vary by country and there
can be no assurance that  VISX will receive additional international  regulatory
approvals  or  meet requirements  for  ongoing commercial  sales,  or as  to the
associated  cost  or  delay.  Failure  to  receive  approval  in,  or  meet  the
requirements of, any country would prevent the Company from selling its products
in  that  country,  which  could  adversely  affect  the  Company's  results  of
operations.
 
    In Europe, the member countries of the European Union have promulgated rules
which require  that  medical products  receive  by mid-1998  the  certifications
necessary  to affix the CE  mark to the device. The  CE mark is an international
symbol  of  adherence  to  quality  assurance  standards  and  compliance   with
applicable  European medical device directives. Certification under the ISO 9000
series of standards for quality assurance and manufacturing processes is one  of
the CE mark requirements. The Company is implementing policies and procedures to
enable  it to achieve ISO 9000 qualification  within the required time frame. In
Japan, sales of VISX Systems are limited until such time as the Company receives
regulatory approval.
 
MANUFACTURING, COMPONENTS AND RAW MATERIALS
 
    The manufacture of VISX  Systems is a  complex operation involving  numerous
procedures,  and the completed system must pass  a series of quality control and
reliability tests prior  to shipment.  VISX purchases  from various  independent
suppliers  many components  that are either  standard or built  to the Company's
proprietary specifications, and  assembles them at  its California facility.  In
addition,  the  Company  contracts with  third  parties for  the  manufacture or
assembly of  certain  components.  Several of  these  components  are  currently
provided  by a single vendor. If any  of these suppliers were to cease providing
components to the Company, the Company would be required to locate and  contract
with  a substitute supplier, and there can be no assurances that such substitute
supplier could be  located and  qualified in a  timely manner  or could  provide
required  components  on commercially  reasonable terms.  A failure  to increase
production volumes in a cost-effective or  timely manner, or an interruption  in
the  manufacturing of VISX Systems, could have  a material adverse effect on the
Company's business, financial condition and results of operations.
 
COMPETITION AND TECHNOLOGICAL CHANGE
 
    The medical device and  ophthalmic laser industries  are subject to  intense
competition  and  technological  change.  LVC using  excimer  laser  systems for
treatment of refractive disorders competes  with eyeglasses, contact lenses  and
radial  keratotomy  ("RK"),  as well  as  with other  technologies  and surgical
techniques currently under  development, such  as corneal  implants and  surgery
using different types of lasers. In the United States, the Company believes that
it and Summit are the leading manufacturers of excimer laser systems. In October
1995,  Summit received FDA approval of its PMA application for LVC for treatment
of nearsightedness. This approval enabled Summit to commence commercial sale  of
its  laser  system for  LVC in  the United  States prior  to the  Company, which
(although the Company will  receive use and  equipment royalties through  Pillar
Point)  may  have  afforded  Summit  a  competitive  advantage  with  respect to
equipment sales for LVC. The  Company's principal international competitors  are
Chiron,  Meditec, and Nidek Co., Ltd. ("Nidek").  Chiron and Meditec, as well as
Schwind, have  received  licenses  from  VISX and  are  obligated  to  pay  VISX
royalties  on system  sales. Nidek has  not taken  a license, and  VISX has sued
Nidek  and  its  users  for  patent  infringement  in  Canada.  SEE  "--   LEGAL
PROCEEDINGS."
 
                                       10
<PAGE>
    Use  of the VISX System  for PTK to treat  corneal pathologies competes with
corneal transplants, surgery and drug treatments. The VISX System also  competes
with products marketed or under development by other laser and medical equipment
manufacturers, many of which may have greater financial and other resources than
the  Company. Additionally, competitors,  both in the  United States and abroad,
may enter the excimer laser equipment manufacturing business or acquire existing
companies. Such competitors may be able to offer their products at a lower  cost
or  may develop procedures that involve  a lower per procedure cost. Competition
from new  entrants  may  be  particularly prevalent  in  those  countries  where
significant   regulatory  approvals  are  not  required.  In  addition,  medical
companies, academic  and  research institutions  and  others could  develop  new
therapies,  including  new  medical  devices  or  surgical  procedures,  for the
conditions targeted  by the  Company, which  therapies could  be more  medically
effective  and  less  expensive  than  LVC,  and  could  potentially  render LVC
obsolete. Any such  developments could  have a  material adverse  effect on  the
business, financial condition and results of operations of the Company.
 
RESEARCH AND DEVELOPMENT
 
    The   Company   intends  to   remain  a   leader   in  the   development  of
state-of-the-art laser technologies for  the treatment of ophthalmic  disorders.
Toward  this  end,  the  Company  incurred  research  and  development expenses,
including clinical  trial expenses,  of  $8.9 million,  $7.1 million,  and  $5.0
million  during the years ended December  31, 1995, 1994 and 1993, respectively.
The Company expects  to continue  spending significant amounts  in research  and
development for the foreseeable future.
 
PRODUCT LIABILITY AND INSURANCE
 
    Inherent  in  the  testing and  use  of  human health  care  devices  is the
potentially significant risk of physical  injury to patients which could  result
in  product liability  or other claims  based upon injuries  or alleged injuries
associated with a  defect in  the product's  performance, which  may not  become
evident  for  a number  of years.  The VISX  System includes  high-voltage power
supplies, cryogenic  subsystems, high-pressure  gases,  toxic gases,  and  other
potentially hazardous factors. In the event of an accident, the Company could be
liable  for any  damages that  result, and any  such liability  could exceed the
resources of  the Company.  VISX  maintains a  "claims made"  product  liability
insurance  policy in  the amount of  $4.0 million, which  represents the maximum
payout for all claims that could be made during an annual policy period. At such
time as the VISX System is marketed  commercially for LVC in the United  States,
the  Company may require  broader coverage in greater  amounts. The inability of
the Company to maintain  adequate insurance coverage at  any time could, in  the
event  of product liability or other claims in excess of the Company's insurance
coverage, have a material  adverse effect on  the Company's business,  financial
condition  and results of operations. Additionally, VISX has agreed to indemnify
certain medical institutions  where research  was sponsored by  the Company  and
certain  of  the medical  institutions participating  in the  Company's clinical
studies.
 
EMPLOYEES
 
    As of December  31, 1995,  VISX had  132 full-time  employees, 13  temporary
employees  and nine consultants. Of the  full-time employees, 62 are employed in
manufacturing and service, 46 in research and development and regulatory, and 24
in general administrative and marketing  positions. None of VISX's employees  is
covered  by a  collective bargaining  agreement. The  Company believes  that its
relations with its employees are good.
 
ITEM 2.  PROPERTIES
 
    VISX's operations  are currently  located  in a  52,000 square  foot  leased
facility  in Santa  Clara, California.  Effective March  8, 1996,  the lease was
extended to the space directly above the space currently leased by the  Company,
for  a  total of  108,844  square feet.  The lease  for  the entire  facility is
extended  to  seven  years  following  substantial  completion  of  the   tenant
improvements  to  the  second  floor,  with an  option  to  extend  the  term an
additional five years. Based on current plans for expansion to the second floor,
the Company anticipates  that the  tenant improvements  will be  complete in  or
about  June 1996. The Company believes its facilities are sufficient to meet its
current and reasonably anticipated future requirements.  SEE NOTE 7 OF NOTES  TO
CONSOLIDATED FINANCIAL STATEMENTS.
 
                                       11
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS
PATENT PROCEEDINGS AND LITIGATION
 
    The  Company is a party  to a number of  patent-related legal proceedings in
the  United  States   and  in  several   international  jurisdictions.   Adverse
determinations  in one or more  of such proceedings could  limit or restrict the
Company from  manufacturing,  marketing  or  selling  its  products  in  certain
markets,  limit the Company's ability to  collect use and equipment royalties in
certain markets and have a material,  adverse effect on the Company's  business,
financial  condition and results of  operations. These proceedings are discussed
separately below.
 
    CANADA.  In February 1994,  the Company filed suit  in the Federal Court  of
Canada  against Nidek and its Canadian  distributor for infringement of three of
VISX's Canadian patents. In August 1994, the Canadian trial court dismissed most
of Nidek's counterclaims against  VISX, and Nidek  has appealed this  dismissal.
The  Nidek appeal  does not  stay or  delay the  trial of  VISX's claims against
Nidek. In July 1995, the Company notified Chiron, LaserSight, Meditec, Nidek and
Summit, and all of the doctors known to be using their equipment in Canada, that
such manufacturers'  products  infringe  VISX's Canadian  patents.  The  Company
offered  all such manufacturers the opportunity to take a license in Canada. The
Company entered into  license agreements  with Chiron, Meditec  and Schwind  for
systems  sold in  Canada. The Company's  offer to enter  into license agreements
expired on  September 1,  1995, and  on  September 5,  1995, the  Company  filed
lawsuits  in Canada against  LaserSight, Summit and  their respective customers.
The Company has  also added Nidek's  Canadian customers to  the lawsuit  already
filed  between the Company  and Nidek. The Company  is seeking injunctive relief
and unspecified money  damages against  all defendants in  Canada. The  Canadian
actions other than the Nidek proceedings are in the pleading stage.
 
    EUROPE.   During the  last two years,  Carl Zeiss GmbH,  Summit, and Schwind
each filed oppositions to one or more of VISX's European patents before the EPO.
The Company has filed written submissions  in response to these oppositions.  On
October  17, 1995, the EPO held a hearing  in the first of these oppositions and
rendered a  decision  to  revoke  the patent.  The  Company  has  appealed  this
decision.  The patent at  issue is directed  to comparative topography apparatus
and is neither currently in use in  the VISX System nor part of the  fundamental
VISX  patents for vision correction. The  Company expects to appeal the decision
once it receives a written  opinion from the EPO. The  EPO held hearings in  two
additional  opposition  proceedings  in  December 1995,  and  both  patents were
maintained with  amended  claim  language.  Due to  the  nature  of  the  patent
opposition process (in which claims can be reworded to overcome the opposition),
it  is impossible to predict the outcome of the two opposition proceedings still
pending.  In  August  1995,  the  Company  sued  Schwind  in  Germany,  alleging
infringement  of certain of the Company's European patents. In addition, Schwind
has filed a nullity action in Germany against one of VISX's European patents. In
connection with  the settlement  of  disputes between  the two  companies,  VISX
dropped  its lawsuit  against Schwind for  patent infringement,  and Schwind has
withdrawn both the nullity action and the opposition.
 
    AZEMA PATENT.  On  August 30, 1995,  Summit sued the  Company in the  United
States  for  infringement  of a  United  States  patent held  by  Summit. Summit
acquired the rights  to the  patent in  1993, and  Pillar Point  elected not  to
acquire  rights to the patent from Summit  at that time. The lawsuit claims that
the manufacture  and  export  of VISX  Systems  from  the United  States  is  an
infringement  of the  patent. The Company  believes that the  lawsuit is without
merit and intends to vigorously defend  its position. The Company believes  that
the  resolution of this  matter will not  have a material  adverse effect on the
Company's financial position or results of operations. Nevertheless, the cost of
defending this action could be significant,  and there can be no assurance  that
the  VISX System  will be held  not to infringe  the patent. In  such event, the
Company could be subject  to significant liabilities to  Summit and it could  be
necessary for the Company to seek a license from Summit in order for the Company
to  manufacture, market and sell products in  the United States. There can be no
assurance that a license would  be available on acceptable  terms or at all.  It
might  also be necessary for the Company  to attempt to redesign the VISX System
so that it no longer infringes the patent,
 
                                       12
<PAGE>
although there  can be  no assurance  that any  such redesign  efforts would  be
successful. Additionally, a redesign of the VISX System, depending on its scope,
could entail delays in FDA approval of the redesign.
 
PRODUCT LIABILITY
 
    VISX requires all clinical investigators to advise persons treated in United
States  clinical trials that  the procedure is investigational  and has not been
determined to be safe or effective by the FDA and requires that signed  consents
be  obtained  prior  to  treatment.  Notwithstanding  these  requirements, three
individuals who were treated in United States clinical trials of the VISX System
have sued their ophthalmologists and  VISX following their surgery. These  suits
are  currently pending in  Michigan, New Jersey  and Pennsylvania. VISX believes
that it has  meritorious defenses to  these actions, and  that their  resolution
will  not have a material adverse effect  on the Company's financial position or
results of  operations. However,  all three  suits are  in the  early stages  of
discovery and there can be no assurance as to their outcome.
 
STOCKHOLDER DERIVATIVE LITIGATION
 
    In  September 1994, an action was filed  in the Superior Court of California
as a derivative action  on behalf of  the Company by  CAP Advisers Limited,  CAP
Trust  and Osterfak  Limited (collectively,  the "CAP  Group"), who collectively
owned in excess of 10% of the Company's outstanding Common Stock at the time the
action was filed. The action named as defendants several former officers of  the
Company, former directors of the Company including representatives of Alcon, and
Alcon  and  certain of  its affiliates.  The suit  alleged, among  other things,
breaches of  fiduciary  duties involving  the  failure to  exercise  appropriate
oversight  over regulatory  affairs and  the Alcon  marketing agreements  by the
named individual defendants as well as breaches of certain of Alcon's  marketing
obligations  under  the Company's  agreements  with Alcon,  and  sought monetary
damages in  excess  of  $2.25  billion  from  Alcon  and  the  named  individual
defendants.  Alcon  made  counterclaims against  the  CAP Group  and  two former
directors of the Company  not named in the  original suit for interference  with
the Company's contractual relationship with Alcon.
 
    On  November 20, 1995,  VISX, Alcon and  the CAP Group  agreed to settle the
litigation, including the counterclaims filed  by Alcon, by filing a  definitive
settlement  agreement with the  Superior Court. On January  9, 1996 the Superior
Court  approved  the  proposed  settlement   which,  according  to  its   terms,
automatically  became effective on  March 12, 1996, at  which time the Company's
marketing agreements  with Alcon  terminated.  As part  of the  settlement,  the
Company was obligated to reimburse the CAP Group for legal fees and expenses and
certain  other related expenses incurred by  them, as well as indemnify officers
and directors for their legal fees  and expenses. These costs were estimated  to
total  $3,150,000 and were accrued as of December 31, 1995. The Company believes
that no further material adverse effect  on the Company's financial position  or
results of operations will result from this matter.
 
SECURITIES CLASS ACTION LITIGATION
 
    In  September 1994,  various actions  were filed  in United  States District
Court for the Northern  District of California against  the Company and  several
former  and current directors and officers of the Company alleging violations of
federal securities laws.  These actions  were consolidated into  a single  class
action.  The plaintiffs  in the class  action alleged that  from periods ranging
from November 1993 to October 1994, the Company issued misleading statements and
failed to make required disclosures  about the Company's business prospects  and
the  status of FDA process relating to approval of the VISX System, in violation
of  certain  Federal  securities  laws.   The  amount  of  damages  sought   was
unspecified.  In December 1995, the District  Court approved a settlement of the
securities class action lawsuit against the Company. The net cost of  settlement
after insurance reimbursement was $2,250,000.
 
                                       13
<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No  matters were submitted to  a vote of security  holders during the fourth
quarter of 1995.
 
                                    PART II
 
ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    The Company's Common Stock is traded  on the Nasdaq National Market tier  of
The  Nasdaq Stock  MarketSM under  the symbol  "VISX." The  following table sets
forth for the  periods indicated  the high  and low  sale prices  of the  Common
Stock.
 
<TABLE>
<CAPTION>
                                                                          HIGH         LOW
                                                                       -----------  ---------
<S>                                                                    <C>          <C>
1994
  First Quarter......................................................  $    28.750  $  15.500
  Second Quarter.....................................................       21.250     13.750
  Third Quarter......................................................       22.000     11.750
  Fourth Quarter.....................................................       14.500     10.000
1995
  First Quarter......................................................  $    15.875  $  10.000
  Second Quarter.....................................................      14.3125     10.875
  Third Quarter......................................................       24.125     13.000
  Fourth Quarter.....................................................       40.125     18.750
</TABLE>
 
    On  March 1, 1996, the  last reported sale price of  the Common Stock on the
Nasdaq National  Market  was $31.25  per  share. As  of  such date,  there  were
approximately  735 holders of record of  the Common Stock. The Nasdaq quotations
represent prices between dealers without adjustment for retail markup,  markdown
or commission and may not necessarily represent actual transactions.
 
    The  Company has  never declared  or paid any  cash dividends  on its Common
Stock. The Company presently  intends to retain any  future earnings for use  in
its  business and does  not anticipate paying  any cash dividends  on its Common
Stock in the foreseeable future.
 
                                       14
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA
 
    The following selected financial  data has been  derived from the  Company's
audited  consolidated financial statements. The historical financial data should
be read in conjunction with the Company's consolidated financial statements  and
notes thereto.
 
                  SELECTED CONSOLIDATED FINANCIAL INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                          -----------------------------------------------------
                                             1995        1994      1993      1992        1991
                                          ----------   --------  --------  ---------   --------
<S>                                       <C>          <C>       <C>       <C>         <C>
STATEMENT OF OPERATIONS DATA:
  Total revenues........................  $16,703      $ 17,896  $ 22,074  $20,285     $ 13,171
  Cost of revenues......................    9,749        11,774    12,030   12,551        8,285
  Total costs and expenses..............   27,408        25,230    22,266   30,859*      15,573
  Loss from operations..................  (10,705)       (7,334)     (192) (10,574)*     (2,402)
  Net income (loss).....................  (14,765)**     (6,264)      179   (9,551)*     (1,817)
  Net income (loss) per share...........  $ (1.20)**   $   (.60) $    .02  $  (.98)*   $   (.22)
  Weighted average number of shares and
   equivalents outstanding..............   12,311        10,372    10,540    9,706        8,214
BALANCE SHEET DATA:
  Cash and short-term investments.......  $75,219      $ 11,161  $ 11,847  $ 9,135     $  6,823
  Working capital.......................   77,665        11,842    15,733   14,003        7,595
  Total assets..........................   91,078        20,627    22,917   23,033       25,157
  Deferred revenue and other long-term
   obligations..........................    --              409       659      664          699
  Accumulated deficit...................  (51,568)      (36,803)  (30,539) (30,718)     (21,167)
  Stockholders' equity..................   79,881        13,993    18,024   16,207       19,603
</TABLE>
 
------------------------
 *Includes  a $6.0 million charge or $0.62  per share for purchased research and
  development incurred in connection with an acquisition.
 
**Includes a $5.4 million charge or $0.44 per share for litigation settlements.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
OVERVIEW
 
    Since its inception, VISX has been engaged in the design and development  of
proprietary  technologies and  systems for LVC  and has  been manufacturing such
systems since 1987.  In 1994, the  Company determined that  it was necessary  to
strengthen its management as well as to devote increased attention to regulatory
affairs and monitoring of activities at clinical trial sites. This determination
arose,  in part,  as the Company  became aware of  procedural and administrative
irregularities  at  three  of  the   Company's  clinical  sites  following   FDA
inspections  in September 1994, which were conducted as part of the FDA's normal
oversight responsibility.  The issues  raised  by the  FDA inspections  did  not
involve concerns over patient safety or the efficacy of the VISX System.
 
    On  November 1,  1994, the Company  hired Mark  B. Logan as  Chairman of the
Board, President  and  Chief  Executive  Officer  to  strengthen  its  executive
management. In 1995, the Company hired Jordan D. Haller, M.D. as Vice President,
Regulatory  and Clinical Affairs,  and retained Marc G.  Odrich, M.D. as Medical
Monitor to  provide additional  oversight of  clinical trials.  During 1994  and
throughout  1995, the  Company underwent  a transition  from a  primary focus on
development and clinical evaluation of the Company's products to a  broad-based,
market-driven  strategy to  expand and  commercialize the  Company's proprietary
technology. In May 1995, Elizabeth Davila  joined the Company as Executive  Vice
President and Chief Operating Officer to help implement this new strategy.
 
                                       15
<PAGE>
    Until  May 26, 1995, Alcon  was a related party to  the Company by virtue of
its representation on the Company's board of directors. Alcon's  representatives
did  not  stand  for reelection  at  the Company's  1995  stockholders' meeting.
Accordingly, Alcon  is no  longer considered  a related  party to  the  Company.
Certain  portions of  the derivative litigation  brought by  stockholders of the
Company related to Alcon's marketing of the VISX System. On January 9, 1996  the
California  Superior Court approved a settlement  reached by Alcon, VISX and the
other participants  in  VISX's  stockholder derivative  litigation  pursuant  to
which,  among other things, the  domestic and international marketing agreements
between VISX and Alcon were terminated in early 1996. SEE NOTES 2 AND 8 OF NOTES
TO  CONSOLIDATED   FINANCIAL   STATEMENTS,   "RELATIONSHIP   WITH   ALCON"   AND
"LITIGATION."
 
    In  March 1995, the Company introduced a  new, streamlined model of the VISX
System. On September  29, 1995,  the Company received  FDA approval  of its  PMA
application  for  the  VISX System  for  PTK.  On October  20,  1995,  the FDA's
Ophthalmic Devices  Advisory Panel  recommended approval  of the  Company's  PMA
application  for the VISX System for  treatment of low-level myopia. On November
17, 1995 the Company  received an approvable  letter from the  FDA for the  VISX
System  for treatment of  low level myopia,  and on March  26, 1996, the Company
received final approval from the FDA for use of the VISX System for LVC for mild
to moderate nearsightedness.
 
RESULTS OF OPERATIONS
 
    1995 COMPARED TO 1994
 
    The 28% decline in  product sales was  due to a  significant drop in  system
sales  to Alcon, the  Company's exclusive international  distributor through the
end of 1995. Alcon, accounting for 66% of product sales in 1995 compared to  92%
in  1994, reduced their purchases  in an effort to  lower their inventory levels
and in anticipation of  the termination of  their exclusive marketing  agreement
with   the  Company  in  early  1996.   Additionally,  in  connection  with  the
introduction of the  new model  VISX System, the  Company agreed  to reduce  the
distributor  price charged  to Alcon for  the earlier model  system during 1995.
These effects were only partially offset by the direct sale of a small number of
systems in the U.S. at higher average selling prices. The Company was allowed to
begin selling the VISX System  in the U.S. after  the Company received PMA  from
the FDA in September 1995 for PTK applications.
 
    Service  and  other  revenues, covering  primarily  customer  service, spare
parts, VisionKey cards  and license royalties,  increased 115% due  to a  larger
installed  base  of VISX  Systems  and due  to  royalty payments  received under
license agreements signed from late 1994 through 1995.
 
    Including product sales, service and other revenues, Alcon accounted for 63%
of the Company's total  revenue in 1995,  compared to 86% in  1994. Alcon was  a
related  party through May 26, 1995 and product sales to Alcon through that date
were reported as "Product sales to Alcon, a related party" and thereafter  sales
to  Alcon  were reported  as "Product  sales." SEE  NOTES  1 AND  2 OF  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
 
    Cost of revenues decreased to 58% of total revenue from 66% due primarily to
the following  factors: (1)  $1,500,000  of expense  recorded  in 1994  for  the
disposition of the Company's model 2015 product line, (2) higher average selling
prices  on  systems sold  in the  U.S. in  1995 and  (3) royalty  license income
received under  license agreements  signed from  late 1994  through 1995.  These
items  were offset partially by lower average  selling prices in 1995 on systems
distributed internationally through Alcon.
 
    Marketing,  general  and  administrative  expenses  increased  38%  due   to
increased marketing costs paid to Alcon, additional personnel expense and higher
legal costs related to litigation and patent enforcement.
 
    Research,  development and regulatory expenses increased 25% due principally
to additional staff,  consulting and  regulatory expenses  necessary to  conduct
United   States  clinical  trials,  compile  clinical  results  and  pursue  PMA
applications filed with the FDA.
 
                                       16
<PAGE>
    The change in Other Income (Expense) was due primarily to the settlement  of
two  lawsuits: (1) a  securities class action lawsuit  against the Company which
cost $2,250,000 net  of insurance reimbursement,  and (2) a  lawsuit filed as  a
derivative  action  on  behalf  of  the  Company  by  a  stockholder  which cost
$3,150,000 in reimbursement of legal fees and expenses to various parties to the
suit. SEE  NOTE  8  "LITIGATION"  FOR  FURTHER  EXPLANATION  OF  THESE  MATTERS.
Partially  offsetting the  costs of  litigation settlements  was higher interest
income which increased mainly due to investment earnings on funds raised in  the
November 1995 common stock offering.
 
    1994 COMPARED TO 1993
 
    The   22%  decline  in  product  sales  was  due  to  a  reduced  number  of
international systems sold  during the  second half of  the year  to Alcon,  the
Company's exclusive international distributor. Alcon's inventory of VISX Systems
increased  in the first half of 1994 and as such Alcon required fewer units from
VISX in the second  half of the year  to satisfy international customer  demand.
Alcon  accounted for 92% of the Company's product sales in 1994, compared to 94%
in 1993.
 
    Service and other revenues, covering primarily customer service, spare parts
and VisionKey cards, increased  5% due primarily  to increased service  revenues
and  increased sale of parts  and accessories due to  a larger installed base of
VISX Systems  internationally  and  an  increase in  the  number  of  procedures
performed  as the installed  base of VISX  Systems increased. Including revenues
from the sale of parts and VisionKey  cards, Alcon accounted for 86% and 87%  of
total revenues in 1994 and 1993, respectively.
 
    Cost  of revenues  declined 2% as  a result  of lower material  costs due to
fewer units shipped during 1994, partially offset by increased costs  associated
with  the product  transition to  the new  model VISX  System and  $1,500,000 of
expense recorded for the disposition of a product line. Gross margins  decreased
to  34% in 1994 compared to 46% in 1993 due to the lower volume of units shipped
during 1994, and costs associated with the product transition and disposition of
a product  line. The  Company recorded  an  expense of  $1,500,000 in  1994  for
disposition  of  the  model  2015  excimer  system  product  line.  The  Company
determined not to  pursue FDA approval  of the model  2015 system,  discontinued
clinical  trials of  such system  as of  August 31,  1994 and  withdrew the IDEs
pursuant to which those trials were conducted. The Company has not  manufactured
the model 2015 system since 1990.
 
    Marketing,  general and administrative expenses  increased 21% due primarily
to increases in patent enforcement  expenses, other legal expenses and  expenses
associated  with a  reduction in workforce  implemented in the  third quarter of
1994.
 
    Research, development and regulatory expenses increased 43% due to increased
regulatory expenses  necessary to  monitor and  support United  States  clinical
trials and to manage processing of the Company's PMA applications to the FDA.
 
    Other  income, net increased $699,000 primarily as a result of the Company's
patent license  agreement  with Meditec  entered  into in  September  1994.  The
license  agreement included  a payment  for past  infringement and  provides for
ongoing royalty payments based upon future sales.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Since its  inception,  the  Company's  primary  sources  of  liquidity  have
consisted  of financing from the sale of common stock and revenues from the sale
of VISX Systems. Cash  and cash equivalents  and short-term investments  totaled
$75,219,000  at December 31, 1995 compared  to $11,161,000 at December 31, 1994.
Working capital totaled $77,665,000 at December 31, 1995 compared to $11,842,000
at December 31,  1994. The increase  was primarily the  result of the  Company's
sale of common stock. A private placement of 1,200,000 shares of common stock in
February  1995 generated  $12,234,000 of net  proceeds and a  public offering of
2,875,000 shares of common stock in  November 1995 generated $63,885,000 of  net
proceeds.
 
    Cash  flow used  for operating  activities in  1995 was  impacted by several
factors: (1) lower sales of systems, (2) increased spending on clinical  testing
in the United States and pursuit of approval of
 
                                       17
<PAGE>
PMA  applications with the FDA, (3) a build  up of inventory to support sales of
the new model VISX System, particularly  in the U.S., (4) increased  receivables
arising  from  U.S. system  sales late  in the  fourth quarter  of 1995  and (5)
payments  to  settle  the  securities  class  action  litigation.  Approximately
$3,150,000  of cash will be paid in  1996 to reimburse legal expenses related to
the settlement of the  stockholder derivative litigation (see  Notes 2 and 8  of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS).
 
    The  Company  anticipates that  its current  cash  and cash  equivalents and
short-term investments  will be  sufficient to  fund operating  expenses for  at
least  the next  two years, including  anticipated capital  expenditures. If the
Company were to receive FDA  approval to market the VISX  System for LVC in  the
United States, the Company could require additional capital to fund larger-scale
manufacturing  of  the VISX  System, additional  trade  receivables, as  well as
future product  development. There  can be  no assurance  that capital  will  be
available  when needed or, if available, that the terms for obtaining such funds
will be favorable to the Company or will not result in dilution to the Company's
stockholders.
 
    In October 1995, the Financial  Accounting Standards Board issued  Statement
of   Financial  Accounting  Standards  No.   123,  "Accounting  for  Stock-Based
Compensation." The  Company is  not required  to adopt  the provisions  of  this
statement  until its fiscal year 1996. The  provisions of this statement must be
made on  a  prospective  basis.  The  Company  plans  to  adopt  the  disclosure
provisions  of this statement in 1996, and  believes the effect on its financial
position and results of operations, upon adoption, will not be significant.
 
                                       18
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                      VISX, INCORPORATED AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                           -----------------------
                                                                                              1995         1994
                                                                                           -----------  ----------
<S>                                                                                        <C>          <C>
CURRENT ASSETS
  Cash and cash equivalents..............................................................  $    32,332  $   11,161
  Short-term investments.................................................................       42,887      --
  Accounts receivable:
    Trade................................................................................        6,667         268
    Alcon, a related party...............................................................      --            2,659
  Inventories............................................................................        6,742       3,792
  Prepaid expenses.......................................................................          234         187
                                                                                           -----------  ----------
      Total current assets...............................................................       88,862      18,067
Property and equipment, net..............................................................        1,565       1,450
Other assets.............................................................................          651       1,110
                                                                                           -----------  ----------
                                                                                           $    91,078  $   20,627
                                                                                           -----------  ----------
                                                                                           -----------  ----------
 
                                        LIABILITIES & STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
  Accounts payable.......................................................................  $     2,506  $    2,058
  Accrued liabilities....................................................................        8,691       4,167
                                                                                           -----------  ----------
      Total current liabilities..........................................................       11,197       6,225
                                                                                           -----------  ----------
Deferred revenue & other long-term obligations...........................................      --              409
                                                                                           -----------  ----------
Commitments and Contingencies (Notes 7 and 8)
Stockholders' equity:
  Common stock -- $.01 par value, 30,000,000 shares authorized; 15,173,855 and 11,024,808
   shares issued at December 31, 1995 and 1994, respectively.............................          152         110
  Additional paid-in capital.............................................................      131,185      50,689
  Accumulated deficit....................................................................      (51,568)    (36,803)
  Unrealized holding gains on available-for-sale securities..............................          112      --
  Less: 0 and 500,000 common stock treasury shares at December 31, 1995 and 1994,
   respectively, at cost.................................................................      --               (3)
                                                                                           -----------  ----------
      Total stockholders' equity.........................................................       79,881      13,993
                                                                                           -----------  ----------
                                                                                           $    91,078  $   20,627
                                                                                           -----------  ----------
                                                                                           -----------  ----------
</TABLE>
 
      The accompanying notes are an integral part of these balance sheets.
 
                                       19
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                                --------------------------------
                                                                                   1995       1994       1993
                                                                                ----------  ---------  ---------
<S>                                                                             <C>         <C>        <C>
REVENUES:
  Product sales...............................................................  $    9,305  $   1,240  $   1,092
  Product sales to Alcon, a related party.....................................       1,680     13,993     18,450
  Service and other revenues..................................................       5,718      2,663      2,532
                                                                                ----------  ---------  ---------
      Total revenues..........................................................      16,703     17,896     22,074
                                                                                ----------  ---------  ---------
COSTS AND EXPENSES:
  Cost of revenues............................................................       9,749     11,774     12,030
  Marketing, general and administrative.......................................       8,800      6,371      5,272
  Research, development and regulatory........................................       8,859      7,085      4,964
                                                                                ----------  ---------  ---------
      Total costs and expenses................................................      27,408     25,230     22,266
                                                                                ----------  ---------  ---------
Loss from Operations..........................................................     (10,705)    (7,334)      (192)
                                                                                ----------  ---------  ---------
OTHER INCOME (EXPENSE):
  Interest income.............................................................       1,340        472        295
  Other income................................................................      --            598         76
  Litigation settlement.......................................................      (5,400)    --         --
                                                                                ----------  ---------  ---------
    Other income (expense), net...............................................      (4,060)     1,070        371
                                                                                ----------  ---------  ---------
Net income (loss).............................................................  $  (14,765) $  (6,264) $     179
                                                                                ----------  ---------  ---------
                                                                                ----------  ---------  ---------
Net income (loss) per share...................................................  $    (1.20) $   (0.60) $    0.02
                                                                                ----------  ---------  ---------
                                                                                ----------  ---------  ---------
Weighted average number of shares and equivalents outstanding.................      12,311     10,372     10,540
                                                                                ----------  ---------  ---------
                                                                                ----------  ---------  ---------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       20
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                             COMMON STOCK       ADDITIONAL                 UNREALIZED                   TOTAL
                                        ----------------------    PAID-IN    ACCUMULATED     HOLDING     TREASURY    STOCKHOLDERS'
                                         SHARES      AMOUNT       CAPITAL      DEFICIT        GAINS        STOCK        EQUITY
                                        ---------  -----------  -----------  ------------  -----------  -----------  ------------
<S>                                     <C>        <C>          <C>          <C>           <C>          <C>          <C>
Balance, December 31, 1992............     10,396   $     104   $    46,824   $  (30,718)   $  --        $      (3)   $   16,207
Exercise of stock options.............        177           2           682       --           --           --               684
Exercise of warrants and options
 issued to underwriters...............        114           1           953       --           --           --               954
Net income............................     --          --           --               179       --           --               179
                                        ---------       -----   -----------  ------------       -----        -----   ------------
Balance, December 31, 1993............     10,687         107        48,459      (30,539)      --               (3)       18,024
Exercise of stock options.............        265           3         1,488       --           --           --             1,491
Exercise of warrants issued to
 Underwriters.........................         35      --               350       --           --           --               350
Issuance of common stock under the
 Employee Stock Purchase Plan.........         38      --               392       --           --           --               392
Net loss..............................     --          --           --            (6,264)      --           --            (6,264)
                                        ---------       -----   -----------  ------------       -----        -----   ------------
Balance, December 31, 1994............     11,025         110        50,689      (36,803)      --               (3)       13,993
Exercise of stock options.............        544           6         4,115       --           --           --             4,121
Sale of common stock in a private
 placement, net of issuance costs.....      1,200          12        12,222       --           --           --            12,234
Retirement of treasury shares.........       (500)         (5)            2       --           --                3        --
Proceeds of public stock offering net
 of issuance costs....................      2,875          29        63,856       --           --           --            63,885
Issuance of common stock under the
 Employee Stock Purchase Plan.........         30      --               301       --           --           --               301
Adjustment for unrealized holding
 gains on available-for-sale
 securities...........................     --          --           --            --              112       --               112
Net loss..............................     --          --           --           (14,765)      --           --           (14,765)
                                        ---------       -----   -----------  ------------       -----        -----   ------------
Balance, December 31, 1995............     15,174   $     152   $   131,185   $  (51,568)   $     112    $  --        $   79,881
                                        ---------       -----   -----------  ------------       -----        -----   ------------
                                        ---------       -----   -----------  ------------       -----        -----   ------------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       21
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                                --------------------------------
                                                                                   1995       1994       1993
                                                                                ----------  ---------  ---------
<S>                                                                             <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................................................  $  (14,765) $  (6,264) $     179
Adjustments to reconcile net income (loss) to net cash provided by (used for)
 operating activities:
Depreciation and amortization.................................................         610        609        550
CHANGES IN ASSETS AND LIABILITIES:
  Decrease (increase) in trade accounts receivable............................      (6,399)       791        478
  Decrease in accounts receivable from Alcon..................................       2,659      1,031      1,589
  Decrease (increase) in inventories..........................................      (2,950)      (586)       519
  Decrease (increase) in prepaid expenses.....................................         (47)       (22)       324
  Decrease (increase) in other assets.........................................         438        228        (12)
  Increase (decrease) in accounts payable.....................................         448      1,044       (940)
  Increase (decrease) in accrued liabilities..................................       4,524        947       (988)
  Decrease in deferred revenue and other long-term obligations................        (409)      (250)    --
                                                                                ----------  ---------  ---------
  Net cash provided by (used for) operating activities........................     (15,891)    (2,472)     1,699
                                                                                ----------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures........................................................        (704)      (447)      (620)
  Short-term investments
    Available-for-sale securities
      Purchases...............................................................     (38,526)    --         --
    Held-to-maturity securities
      Purchases...............................................................      (9,066)    --         --
      Proceeds from maturities................................................       4,817     --         --
                                                                                ----------  ---------  ---------
      Net cash used for investing activities..................................     (43,479)      (447)      (620)
                                                                                ----------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock..................................      80,541      2,233      1,638
  Repayments of long-term obligations and capital leases......................      --         --             (5)
                                                                                ----------  ---------  ---------
    Net cash provided by financing activities.................................      80,541      2,233      1,633
                                                                                ----------  ---------  ---------
    Net increase (decrease) in cash and cash equivalents......................      21,171       (686)     2,712
  Cash and cash equivalents, beginning of period..............................      11,161     11,847      9,135
                                                                                ----------  ---------  ---------
  Cash and cash equivalents, end of period....................................  $   32,332  $  11,161  $  11,847
                                                                                ----------  ---------  ---------
                                                                                ----------  ---------  ---------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       22
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    THE  COMPANY.  VISX, Incorporated (the  "Company" or "VISX") is incorporated
in Delaware  and  is  engaged  in the  design  and  development  of  proprietary
technologies  and systems for  laser vision correction  ("LVC"). The Company has
developed and  manufactures  a device  (the  "VISX System")  which  utilizes  an
excimer  laser to  reshape the surface  of the cornea  to treat nearsightedness,
astigmatism and  farsightedness  and is  intended  to reduce  or  eliminate  the
patient's  dependence on corrective lenses. The device is also intended to treat
other eye disorders, such as opacities and superficial scars.
 
    USE OF ESTIMATES.   The  preparation of financial  statements in  conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates and  assumptions  that  affect  the reported  amounts  of  assets  and
liabilities  and disclosure of contingent assets  and liabilities at the date of
the financial  statements and  the  reported amounts  of revenues  and  expenses
during the reporting period. Actual results could differ from those estimates.
 
    PRINCIPLES  OF CONSOLIDATION.  The consolidated financial statements include
the accounts  of the  Company  and its  subsidiaries  after the  elimination  of
significant intercompany accounts and transactions.
 
    CASH  AND CASH  EQUIVALENTS.  The  Company considers all  highly liquid debt
instruments purchased with an original  maturity of 90 days  or less to be  cash
equivalents.
 
    SHORT-TERM INVESTMENTS.  In 1994, the Company adopted Statement of Financial
Accounting   Standards  No.  115  ("SFAS   No.  115")  "Accounting  for  Certain
Investments in Debt and Equity Securities."  The adoption of this statement  did
not have any effect on the Company's financial position or results of operations
as  the Company did not have any investments in debt or equity securities during
1994.   Held-to-maturity   securities    are   stated    at   amortized    cost.
Available-for-sale  securities are carried at  fair value, with unrealized gains
and losses, net of tax, recorded in stockholders' equity. The cost of securities
sold is based on the specific identification method.
 
    INVENTORIES.  Inventories  consist of  purchased parts and  systems and  are
stated  at the lower  of cost or  market, using the  first-in, first-out method.
Inventory costs include material, labor, and overhead. Inventories consisted  of
the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                           --------------------
                                                                             1995       1994
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Raw Materials and Subassemblies..........................................  $   2,878  $   1,394
Work-in-Process..........................................................      1,348      2,398
Finished Goods...........................................................      2,516     --
                                                                           ---------  ---------
                                                                           $   6,742  $   3,792
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>
 
                                       23
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    PROPERTY  AND EQUIPMENT.   Property and  equipment is  depreciated using the
straight-line method over estimated useful lives of the assets, generally  three
to  seven  years or,  in the  case of  leasehold improvements,  the term  of the
related lease. Property  and equipment is  stated at cost  and consisted of  the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                           --------------------
                                                                             1995       1994
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Furniture and fixtures...................................................  $     986  $     813
Machinery and equipment..................................................      3,120      2,676
Leasehold improvements...................................................        119        103
                                                                           ---------  ---------
                                                                               4,225      3,592
Less -- accumulated depreciation and amortization........................     (2,660)    (2,142)
                                                                           ---------  ---------
Property and equipment, net..............................................  $   1,565  $   1,450
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>
 
    REVENUE  RECOGNITION.  The Company recognizes  revenue on product sales when
the products are  shipped. Service  revenue is  recognized as  the services  are
performed. An allowance for installation, training and warranty costs is made at
the time sales are recognized.
 
    RECLASSIFICATIONS.   Certain items from prior year financial statements have
been reclassified to conform with current year presentation.
 
    NET INCOME (LOSS) PER SHARE.   Net income per share  data for 1993 has  been
computed  using the weighted average number  of common shares outstanding, after
giving effect to  dilutive common  stock equivalents.  Common stock  equivalents
consist  of the dilutive shares issuable upon  the exercise of stock options and
warrants (using the  treasury stock method).  Net loss per  share data has  been
computed  using the  weighted average number  of shares  outstanding during each
period;  dilutive  common  stock  equivalents   have  been  excluded  from   the
computation as their effect would be to reduce the net loss per share amount.
 
    CONCENTRATION  OF CREDIT  RISK; MAJOR  CUSTOMERS AND  EXPORT REVENUES.   The
Company's credit risk in its  accounts receivable has concentrated primarily  in
sales  to Alcon. Internationally, Alcon has  bought product from the Company and
sold direct to  end-users. The  Company recognized  $7,280,000, $13,993,000  and
$18,450,000  in revenues from  the sale of  VISX Systems to  Alcon for the years
ended December 31, 1995, 1994 and  1993, respectively. Including sales of  parts
and  VisionKey cards, Alcon accounted for 63%, 86% and 87% of total revenues for
the years ended December  31, 1995, 1994 and  1993, respectively. The  Company's
past  marketing  agreements  with Alcon  required  the Company  to  nominate two
representatives of Alcon for election to the Company's Board of Directors. Alcon
was a related party to  the Company due to  its representation on the  Company's
Board  of Directors. Alcon  representatives did not stand  for reelection at the
Company's 1995 stockholders' meeting  on May 26,  1995. Accordingly, after  such
date,  Alcon  was no  longer  considered a  related  party to  the  Company. The
accompanying financial statements reflect transactions  with Alcon up until  May
26, 1995 as related party transactions (see Note 2).
 
                                       24
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Export  revenues accounted for  74%, 85% and  86% of revenues  for the years
ended December  31,  1995, 1994  and  1993, respectively.  The  following  table
represents export revenues by geographic region (in thousands):
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                             -------------------------------
                                                               1995       1994       1993
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Europe.....................................................  $   9,297  $  12,653  $  18,450
Canada.....................................................      1,833      1,790     --
Pacific Rim, Central & South America.......................      1,162        790        453
                                                             ---------  ---------  ---------
                                                             $  12,292  $  15,233  $  18,903
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
</TABLE>
 
    ACCOUNTING  FOR STOCK-BASED  COMPENSATION.   In October  1995, the Financial
Accounting Standards Board  issued Statement of  Financial Accounting  Standards
No.  123, "Accounting for Stock-Based Compensation." The Company is not required
to adopt  the provisions  of this  statement  until its  fiscal year  1996.  The
provisions  of this statement must  be made on a  prospective basis. The Company
plans to adopt the disclosure provisions of this statement in 1996, and believes
the effect on its financial position  and results of operations, upon  adoption,
will not be significant.
 
NOTE 2. RELATIONSHIP WITH ALCON
 
    MARKETING  AGREEMENT.    In  1987,  the  Company  amended  its then-existing
agreement  with  Alcon  Laboratories,   Inc.  and  Alcon  Pharmaceuticals   Ltd.
(collectively  "Alcon")  whereby the  Company  granted a  license  and exclusive
marketing rights  for the  VISX System  to Alcon,  and in  1988, Alcon  advanced
$2,500,000  to the  Company to  defray development  costs. In  January 1990, the
Company and Alcon entered into a Second Amended and Restated Marketing Agreement
("Marketing Agreement") which amended and  restated the marketing agreement,  as
it  pertained to  domestic marketing.  The Marketing  Agreement granted  Alcon a
license and exclusive  marketing rights  for the  Company's VISX  System in  the
U.S.,  and Alcon was required to collect a per-procedure fee and remit it to the
Company. The Marketing  Agreement contained provisions  to repay the  $2,500,000
previously  advanced to defray development  costs. The Company repaid $1,000,000
of that amount  in 1992. Under  the Marketing Agreement  the Company  reimbursed
Alcon  for costs it incurred  on behalf of the  Company throughout the year. The
Company recorded  expenses of  $1,281,000, $120,000  and $90,000  for the  years
ended   December  31,  1995,  1994  and   1993,  respectively,  related  to  the
reimbursement of these costs. These expenses were recorded in marketing, general
and administrative  expenses  in  the accompanying  consolidated  statements  of
operations.
 
    In addition, per the agreement Alcon was entitled to the following payments:
(1)  VISX was contingently  liable to Alcon  for $1,500,000, the  balance of the
$2,500,000 previously advanced. This payment was to  be made at the end of  each
year,  to the  extent VISX  had Annual  Cash Flow,  as defined  in the Marketing
Agreement. (2)  VISX was  obligated to  reimburse Alcon  for certain  additional
approved  costs not previously reimbursed, to  the extent the Company had Annual
Cash Flow. (3) Thereafter, Alcon would receive 25% of the Company's Excess  Cash
Flow,  as defined in the  Marketing Agreement. During the  term of the Marketing
Agreement no payments accrued  or became due and  payable under the segments  of
the Marketing Agreement described in (1), (2) and (3), above.
 
    On  January 9, 1996, the California  Superior Court approved a settlement of
all matters between Alcon, VISX and the other participants in VISX's stockholder
derivative litigation. Under the terms of the agreement, Alcon has ceased, after
the transition period of 60 days, all  marketing and sales efforts on behalf  of
VISX.  However, Alcon will continue to service VISX Systems sold internationally
by Alcon. Alcon has agreed to cooperate with the Company in various respects  to
facilitate the transition resulting from termination of the marketing agreements
with Alcon. Under the settlement terms,
 
                                       25
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2. RELATIONSHIP WITH ALCON (CONTINUED)
Alcon  will be able  to market competitors' LVC  systems. Also, under settlement
terms, the Company is released from its contingent obligation to reimburse Alcon
for $1.5  million  of developmental  expenses  for the  VISX  System  previously
advanced  by Alcon. Additionally, Alcon's right  to receive 25% of VISX's future
excess cash flow is also terminated. (See Note 8).
 
    INSURANCE/INDEMNIFICATION.  Under the  Marketing Agreement, the Company  was
required  to  indemnify Alcon,  its  affiliates and  their  respective officers,
directors, partners, employees and stockholders for damages, up to an  aggregate
of  $4,000,000, arising out of the design,  manufacture or authorized use of the
VISX Systems or any claim that  the manufacture, design, use, marketing or  sale
of the VISX Systems infringes any patent owned or controlled by any third party.
The  indemnity did  not cover  damages resulting  from negligence, recklessness,
willful misconduct or  unauthorized act  of any  party seeking  indemnification.
VISX maintained a product liability policy sufficient to cover the $4,000,000.
 
    CLINICAL  AND REGULATORY.  In September 1994, VISX and Alcon signed a letter
of intent  pursuant to  which Alcon  agreed to  provide interim  regulatory  and
clinical assistance to the Company. During 1994, the Company recognized expenses
of  $400,000 related  to these  services provided  by Alcon.  Effective February
1995, the Company terminated the interim regulatory and clinical agreement  with
Alcon.
 
NOTE 3. INVESTMENTS
 
    Investments in securities consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31, 1995
                                                                                ---------------------------------
                                                                                              GROSS     AGGREGATE
                                                                                           UNREALIZED     FAIR
                                                                                  COST        GAINS       VALUE
                                                                                ---------  -----------  ---------
<S>                                                                             <C>        <C>          <C>
Short-Term Investments
  Available-for-Sale Securities
    Debt securities of the U.S. Treasury and U.S. government corporations and
     agencies.................................................................  $  30,400   $      91   $  30,491
    Debt securities of U.S. corporations......................................      8,126          21       8,147
  Held-to-Maturity Securities
    U.S. Treasury bills                                                             4,249      --           4,249
                                                                                ---------       -----   ---------
                                                                                   42,775         112      42,887
Cash Equivalents
  Available-for-Sale Securities
    Debt securities of U.S. corporations......................................     26,022      --          26,022
                                                                                ---------       -----   ---------
    Total investments                                                           $  68,797   $     112   $  68,909
                                                                                ---------       -----   ---------
                                                                                ---------       -----   ---------
</TABLE>
 
    There   were  no  gross  realized  gains  or  losses  on  available-for-sale
securities. The net adjustment to unrealized holding gains on available-for-sale
securities included in stockholders' equity totaled $112,000 and $0 in 1995  and
1994,  respectively. All available-for-sale securities held at December 31, 1995
mature in two years  or less. All held-to-maturity  securities held at  December
31, 1995 mature by May 31, 1996.
 
                                       26
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4. ACCRUED LIABILITIES
 
    Accrued liabilities consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                           --------------------
                                                                             1995       1994
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Payroll and related accruals.............................................  $   1,626  $     729
Accrued warranty, installation, and training expenses....................        861        657
Product line disposition.................................................        561      1,437
Accrued royalties........................................................        585        318
Deposits and deferred revenue............................................        615        101
Accrued litigation settlement expenses (see note 8)......................      3,150     --
Other....................................................................      1,293        925
                                                                           ---------  ---------
                                                                           $   8,691  $   4,167
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>
 
NOTE 5. STOCKHOLDERS' EQUITY
 
    COMMON  STOCK.    On February  14,  1995,  the Company  concluded  a private
placement of 1,200,000 shares of its Common Stock at a price of $10.85 per share
and received net proceeds of  approximately $12,234,000. Certain holders of  the
shares  purchased in the private placement demanded registration of those shares
for resale  under the  Securities Act  of 1933,  pursuant to  the terms  of  the
private  placement agreement. The Company filed for registration of those shares
in April 1995. On November 8, 1995,  the Company completed a public offering  of
2,875,000  shares of  its common  stock at  a price  of $23.75  and received net
proceeds of approximately $63,885,000.
 
    STOCK OPTION PLANS.  The Company has reserved shares of its common stock for
issuance upon the exercise of stock  options granted to the Company's  employees
under  six separate option plans. In 1993,  the Company adopted a Flexible Stock
Incentive Plan (the "1993  Plan") and reserved 1,000,000  shares. The 1993  Plan
permits  the  issuance of  incentive or  non-qualified  stock options  and stock
grants to employees, consultants and non-employee directors of the Company  with
an  exercise price not  less than 85%  of the fair  market value on  the date of
grant (100% for incentive  stock options). Options granted  under the 1993  Plan
generally  vest 25% one year after the date of grant and ratably thereafter over
three years and expire ten years from the date of grant. In addition to the 1993
Plan, the Company has  options outstanding under its  1983, 1987, 1988 and  1990
option  plans, which  have generally the  same eligibility and  vesting terms as
options granted under the 1993 Plan. The Company also grants 2,000 shares of the
Company's   common    stock    annually   to    each    non-employee    director
 
                                       27
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5. STOCKHOLDERS' EQUITY (CONTINUED)
of  the Company. Options granted to non-employee directors of the Company become
fully exercisable six months after the  date of grant; however, unvested  shares
are  subject to  repurchase as set  forth in  the agreement. A  summary of stock
option activity for all plans follows:
 
<TABLE>
<CAPTION>
                                                             SHARES UNDER OPTION     EXERCISE PRICE
                                                             -------------------  ---------------------
<S>                                                          <C>                  <C>
December 31, 1992..........................................         1,198,964     $       1.70 - $16.15
  Granted..................................................           320,755             9.88 -  14.75
  Exercised................................................          (176,531)            1.70 -  16.15
  Canceled.................................................           (93,301)            5.25 -  16.15
                                                                   ----------     ---------------------
December 31, 1993..........................................         1,249,887             3.00 -  16.15
  Granted..................................................           545,910            11.25 -  19.25
  Exercised................................................          (262,642)            5.25 -  16.15
  Canceled.................................................           (59,340)           5.25 -  17.125
                                                                   ----------     ---------------------
December 31, 1994..........................................         1,473,815             3.00 -  19.25
  Granted..................................................           622,000           11.375 -  36.00
  Exercised................................................          (587,196)            3.00 -  16.50
  Canceled.................................................          (118,241)          10.84 -  19.875
                                                                   ----------     ---------------------
December 31, 1995..........................................         1,390,378     $       5.25 - $36.00
                                                                   ----------     ---------------------
                                                                   ----------     ---------------------
</TABLE>
 
    EMPLOYEE STOCK PURCHASE PLAN.   The Company has  an Employee Stock  Purchase
Plan  ("the  Purchase Plan").  The Purchase  Plan is  available to  all eligible
full-time employees, excluding those owning 5%  or more of the Company's  stock.
Pursuant to the Purchase Plan, employees can purchase the Company's common stock
at  85% of fair  market value, in  an amount up  to 10% of  the employee's wages
during the semiannual plan purchase  period. Employees purchased 30,449  shares,
37,892  shares  and 0  shares under  the  Purchase Plan  during the  years ended
December 31, 1995, 1994 and 1993, respectively.
 
    OPTION AGREEMENT.  The Company assumed  a stock option that VISX  California
granted  to an officer  to purchase 66,195  shares of common  stock at $5.70 per
share. These options were exercised during 1994.
 
    WARRANTS AND STOCK OPTIONS ISSUED TO  UNDERWRITERS.  In December 1993,  Noel
Group,  Inc. ("Noel"), which  had two representatives on  the Company's Board of
Directors, exercised  a warrant  to  purchase 100,000  shares of  the  Company's
common  stock at  a purchase  price of  $8.40 per  share, which  resulted in net
proceeds to the Company of $840,000. Noel purchased the warrant in 1991 from the
underwriter that received the warrant in  1988 in connection with the  Company's
initial public offering.
 
    Also  in 1993,  options to  purchase an  additional 14,000  shares of common
stock were exercised at a  purchase price of $8.16  per share, resulting in  net
proceeds  to the Company of  $114,000. The options were  initially issued to the
underwriters in connection with the initial public offering of VISX  California.
The  Company assumed the options in connection with the 1990 acquisition of VISX
California.
 
    In January 1990, in connection with the private placement of 800,000  shares
of its common stock, the Company issued to its private placement agent a warrant
to  purchase up  to 35,000 shares  of the  Company's common stock  at a purchase
price of $10.00 per share. The  warrant became exercisable in January 1991,  and
was exercised during 1994, resulting in proceeds to the Company of $350,000.
 
                                       28
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5. STOCKHOLDERS' EQUITY (CONTINUED)
    At  December 31,  1995, there  were no  remaining warrants  or stock options
outstanding outside  of  the Company's  Stock  Option and  Purchase  plans.  The
following table summarizes the share information at December 31, 1995 related to
all Stock Option plans and the Purchase Plan.
 
<TABLE>
<CAPTION>
                                                                              AVAILABLE
                                                     SHARES                      FOR
                                                    RESERVED    OUTSTANDING  FUTURE GRANT  EXERCISABLE
                                                   -----------  -----------  ------------  -----------
<S>                                                <C>          <C>          <C>           <C>
All Option Plans.................................    2,278,532    1,390,378       --          453,932
Purchase Plan....................................      500,000      --           431,659       --
                                                   -----------  -----------  ------------  -----------
  Total..........................................    2,778,532    1,390,378      431,659      453,932
                                                   -----------  -----------  ------------  -----------
                                                   -----------  -----------  ------------  -----------
</TABLE>
 
NOTE 6. INCOME TAXES
    In  January 1993,  the Company adopted  on a prospective  basis Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for  Income
Taxes."  SFAS No. 109 is an asset  and liability approach for computing deferred
income taxes. This method requires that the statement of operations reflect  any
changes  in tax laws and  rates enacted during the  period affecting events that
have been recognized in  the Company's financial statements  or tax returns.  In
estimating  future  tax  consequences,  SFAS  No.  109  generally  considers all
expected future events other than enactments of changes in the tax law or rates.
The Company has not had  any taxable income or  related tax liabilities for  any
period  and  accordingly,  there  is  no  provision  for  income  taxes  in  the
accompanying statements of operations. As  a result, the implementation of  SFAS
No.  109 did not have any effect  on the Company's financial position or results
of operations.
 
    At December 31, 1995,  the Company had net  operating loss carryforwards  of
approximately $54,000,000 and $13,000,000 available to offset future Federal and
California  taxable income, respectively. The  Federal loss carryforwards expire
through the year 2010  and the California loss  carryforwards expire at  various
dates from 1996 through the year 2000. The availability and timing of the amount
of  prior losses  to be used  to offset taxable  income in future  years will be
limited due to various provisions, including any change in ownership interest of
the Company resulting from significant stock transactions.
 
    The components of the net deferred income tax asset as of December 31,  1995
and 1994 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                    1995        1994
                                                                                 ----------  ----------
<S>                                                                              <C>         <C>
Net operating loss carryforwards...............................................  $   19,700  $   12,700
Cumulative temporary differences (reserves)....................................       3,400       1,900
Tax credit carryforwards.......................................................       1,900       1,400
                                                                                 ----------  ----------
                                                                                     25,000      16,000
 
Valuation allowance, provision for income taxes................................     (21,700)    (14,700)
Valuation allowance, equity....................................................      (3,300)     (1,300)
                                                                                 ----------  ----------
Net deferred income tax asset..................................................  $   --      $   --
                                                                                 ----------  ----------
                                                                                 ----------  ----------
</TABLE>
 
    The  valuation  allowances consist  of  net operating  losses,  deferred tax
assets and tax credit carryforwards which may expire before the Company can  use
them.  The portion of the valuation allowance which will affect equity and which
will not be available to offset future provisions of income tax is stated in the
above table as  "Valuation allowance, equity".  The Company believes  sufficient
uncertainty  exists regarding the realizability of these items, and accordingly,
a valuation allowance has been established.
 
                                       29
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7. COMMITMENTS
    The Company leases  facilities and  equipment under  operating leases  which
expire  through 2000. Rent  expense was $666,000, $529,000  and $657,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. Future minimum lease
commitments are as follows (in thousands):
 
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S>                                                                          <C>
1996.......................................................................  $     626
1997.......................................................................        484
1998.......................................................................         55
1999.......................................................................         55
2000.......................................................................         23
                                                                             ---------
  Total minimum lease payments ............................................  $   1,243
                                                                             ---------
                                                                             ---------
</TABLE>
 
NOTE 8. LITIGATION
 
    SECURITIES CLASS ACTION LITIGATION
 
    In September  1994, various  actions were  filed in  United States  District
Court  for the Northern  District of California against  the Company and several
former and current directors and officers of the Company alleging violations  of
federal  securities laws.  These actions were  consolidated into  a single class
action. The plaintiffs  in the class  action alleged that  from periods  ranging
from November 1993 to October 1994, the Company issued misleading statements and
failed  to make required disclosures about  the Company's business prospects and
the status of FDA process relating to approval of the VISX System, in  violation
of   certain  Federal  securities  laws.  The   amount  of  damages  sought  was
unspecified. In December 1995, the District  Court approved a settlement of  the
securities  class action lawsuit against the Company. The net cost of settlement
after insurance reimbursement was $2,250,000.
 
    STOCKHOLDER DERIVATIVE LITIGATION
 
    In September 1994, an action was  filed in the Superior Court of  California
as  a derivative action  on behalf of  the Company by  CAP Advisers Limited, CAP
Trust and Osterfak  Limited (collectively,  the "CAP  Group"), who  collectively
owned in excess of 10% of the Company's outstanding Common Stock at the time the
action  was filed. The action named as defendants several former officers of the
Company, former directors of the Company including representatives of Alcon, and
Alcon and  certain of  its affiliates.  The suit  alleged, among  other  things,
breaches  of  fiduciary duties  involving  the failure  to  exercise appropriate
oversight over  regulatory affairs  and the  Alcon marketing  agreements by  the
named  individual defendants as well as breaches of certain of Alcon's marketing
obligations under  the  Company's agreements  with  Alcon, and  sought  monetary
damages  in  excess  of  $2.25  billion  from  Alcon  and  the  named individual
defendants. Alcon  made  counterclaims against  the  CAP Group  and  two  former
directors  of the Company not  named in the original  suit for interference with
the Company's contractual relationship with Alcon.
 
    On November 20, 1995,  VISX, Alcon and  the CAP Group  agreed to settle  the
litigation,  including the counterclaims filed by  Alcon, by filing a definitive
settlement agreement with the  Superior Court. On January  9, 1996 the  Superior
Court   approved  the  proposed  settlement   which,  according  to  its  terms,
automatically became effective on  March 12, 1996, at  which time the  Company's
marketing  agreements  with Alcon  terminated. As  part  of the  settlement, the
Company was obligated to reimburse the CAP Group for legal fees and expenses and
certain other related expenses incurred by  them, as well as indemnify  officers
and  directors for their legal fees and  expenses. These costs were estimated to
total $3,150,000 and were accrued as of December 31, 1995. The Company  believes
that  no further material adverse effect  on the Company's financial position or
results of operations will result from this matter.
 
                                       30
<PAGE>
                      VISX, INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 8. LITIGATION (CONTINUED)
    AZEMA PATENT LITIGATION
 
    On August 30, 1995, Summit Technology,  Inc. ("Summit") sued the Company  in
the  United States  for infringement  of a  U.S. patent  held by  Summit. Summit
acquired the  rights  to  the patent  in  1993,  and Pillar  Point  Partners,  a
partnership consisting of entities controlled by VISX and Summit, elected not to
acquire  rights to the patent from Summit  at that time. The lawsuit claims that
the manufacture  and  export  of VISX  Systems  from  the United  States  is  an
infringement  of the  patent. The Company  believes that the  lawsuit is without
merit and intends to vigorously defend  its position. The Company believes  that
the  resolution of this  matter will not  have a material  adverse effect on the
Company's financial position or results of operations. Nevertheless, the cost of
defending this action could be significant,  and there can be no assurance  that
the  VISX System  will be held  not to infringe  the patent. In  such event, the
Company could be subject  to significant liabilities to  Summit and it could  be
necessary for the Company to seek a license from Summit in order for the Company
to  manufacture, market and sell products in  the United States. There can be no
assurance that a license would  be available on acceptable  terms or at all.  It
might  also be necessary for the Company  to attempt to redesign the VISX System
so that it no longer  infringes the patent, although  there can be no  assurance
that  any such redesign efforts would be successful. Additionally, a redesign of
the VISX System, depending on its scope, could entail delays in FDA approval  of
the redesign.
 
                                       31
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To VISX, Incorporated:
 
    We  have  audited  the  accompanying consolidated  balance  sheets  of VISX,
Incorporated (a Delaware corporation) and  subsidiaries as of December 31,  1995
and  1994, and the related  consolidated statements of operations, stockholders'
equity and cash flows for each of  the three years in the period ended  December
31,  1995. 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  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In  our opinion, the financial statements  referred to above present fairly,
in all  material respects,  the  financial position  of VISX,  Incorporated  and
subsidiaries  as  of  December 31,  1995  and  1994, and  the  results  of their
operations and their cash flows for each of the three years in the period  ended
December 31, 1995 in conformity with generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
San Jose, California
January 31, 1996
 
                                       32
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
    There  have been no disagreements with the independent public accountants on
accounting and financial disclosure.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF VISX
 
    The information required by this item regarding directors of VISX, set forth
under "Election of Directors" and  "Further Information Concerning the Board  of
Directors"  in  the  Company's  definitive  Proxy  Statement  (the  "1996  Proxy
Statement") to be filed with the  Commission and relating to its Annual  Meeting
of Stockholders to be held on May 17, 1996, is incorporated herein by reference.
 
    The officers of the Company are as follows:
 
<TABLE>
<CAPTION>
NAME                                        AGE                               POSITION
--------------------------------------      ---      ----------------------------------------------------------
<S>                                     <C>          <C>
Mark B. Logan.........................          57   Chairman of the Board, Chief Executive Officer and
                                                      President
Elizabeth H. Davila...................          51   Executive Vice President, Chief Operating Officer
Katrina J. Church.....................          34   Vice President, General Counsel and Secretary
Terrance N. Clapham...................          48   Vice President, Research and Development
Jordan D. Haller, M.D.................          63   Vice President, Regulatory and Clinical Affairs
James W. McCollum.....................          41   Vice President, Marketing and Sales
Timothy R. Maier......................          47   Vice President, Chief Financial Officer
Judith A. Somerville..................          53   Vice President, Human Resources
W. Michael Wilson.....................          51   Vice President, Operations
</TABLE>
 
    MARK B. LOGAN.  Mr. Logan has served as Chairman of the Board, President and
Chief Executive Officer of the Company since November 1994. From January 1992 to
July  1994, Mr. Logan was  Chairman of the Board,  President and Chief Executive
Officer of Insmed Pharmaceuticals,  Inc., a development-stage  biopharmaceutical
company,  and has served on  its board of directors  since its founding in 1988.
Prior to 1992,  Mr. Logan  was a  Principal Associate  with McManis  Associates,
Inc.,  a Washington, D.C. based research and management firm specializing in the
health care field. From 1981 to 1985,  Mr. Logan was employed by Bausch &  Lomb,
Inc.  as President, Health Care and Consumer Group, and was a member of Bausch &
Lomb's board  of  directors.  From 1975  to  1981,  he was  employed  by  Becton
Dickinson & Company, where he held the position of Consumer Group President, and
was  responsible for  that Company's  worldwide diabetes  syringe business. From
1967 to 1974,  Mr. Logan held  various management positions  with American  Home
Products Corporation.
 
    ELIZABETH H. DAVILA.  Ms. Davila has been Executive Vice President and Chief
Operating  Officer since  May 1995.  From 1977 to  1994, Ms.  Davila held senior
management positions with  Syntex Corporation which  included Vice President  of
Quality  and Reengineering,  Vice President and  Director of  the Company's Drug
Development Optimization Program, Vice President of Marketing and Sales for  the
Syva  Company Diagnostics Division and Vice  President of Marketing and Sales of
the Syntex Ophthalmics Division.
 
    KATRINA J. CHURCH.   Ms.  Church has  been Vice  President, General  Counsel
since  January 1995  and corporate  counsel since June  1991. She  has served as
Secretary of the Company since May 1994. Before joining the Company in 1991, Ms.
Church practiced law with the firm Hopkins & Carley in San Jose, California.
 
    TERRANCE N. CLAPHAM.   Mr.  Clapham has  been Vice  President, Research  and
Development  since March 1993. He  also served as Secretary  of the Company from
November  1990  to  May  1994  and  Vice  President,  Engineering  and   Product
Development  from November 1990 to March 1993. He was a founder, Vice President,
Secretary and director of one of  the Company's predecessors from its  inception
in August 1987 until November 1990, when it was merged with the Company.
 
                                       33
<PAGE>
    JORDAN  D. HALLER, M.D.  Dr. Haller  has been Vice President, Regulatory and
Clinical Affairs since July 1995. Prior to joining VISX, Dr. Haller was  Medical
Director  of Quantum Bio-Medical Technologies from  1990. Dr. Haller also served
on  the  faculty  at  Columbia  University  and  taught  courses  in  technology
assessment,  with emphasis on government and  FDA regulation. From 1985 to 1990,
he was Medical  Director for C.R.  Bard Company.  In 1984 he  founded The  Laser
Institute   of  Pittsburgh.   Prior  to  1984,   Dr.  Haller   was  Director  of
Cardiovascular  Surgery   at  Maimonides   Medical  Center   and  a   practicing
cardiovascular surgeon.
 
    JAMES  W. MCCOLLUM.   Mr.  McCollum has  been Vice  President, Marketing and
Sales since February 1996. Prior to joining  VISX, he served as Area Director  -
North  America  for  Alcon  Laboratories and  was  responsible  for  all excimer
refractive activities  in Canada  and the  U.S. Mr.  McCollum has  held  various
senior  management positions at CooperVision, Inc., Innovision Medical Inc., and
American Hospital  Supply Corporation,  and has  over 20  years of  professional
experience,  including 15 years in  the medical device industry  and 13 years in
ophthalmic products.
 
    TIMOTHY R.  MAIER.   Mr.  Maier has  been  Vice President,  Chief  Financial
Officer  since June 1995. From  1991 to June 1995,  he served as Vice President,
Chief Financial  Officer  of GenPharm,  International,  Inc., a  privately  held
international  biotechnology company. From 1976 to  1991, Mr. Maier held various
positions  with  Spectra-Physics,   Inc.,  an   international  manufacturer   of
scientific  and  commercial laser  products.  His positions  included Operations
Manager, International Finance and Administration Manager, and Vice President of
Finance.
 
    JUDITH A.  SOMERVILLE.    Ms.  Somerville has  been  Vice  President,  Human
Resources  since September 1995 and Director,  Human Resources since March 1995.
From 1993 to  March 1995,  she served  as Corporate  Director, Compensation  and
Benefits  at VLSI Technology, Inc., a  publicly held semiconductor company. From
1990 to 1993, she  was Director, Corporate Compensation  and Benefits at  Conner
Peripherals,  Inc., an international  manufacturer of disk  drives. From 1989 to
1990, she was Corporate Compensation Manager at Hexcel Corporation. From 1980 to
1989, Ms.  Somerville  was employed  by  United Technologies  Corporation  in  a
variety of Human Resource positions.
 
    W.  MICHAEL WILSON.   Mr. Wilson  has been Vice  President, Operations since
January 1992 and served as Director of Operations from December 1991 to  January
1993.  He was Manufacturing Manager with  one of the Company's predecessors from
January to November 1990 and Manufacturing Manager of the Company from  November
1990 to December 1991.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
    The  information  required by  this  item regarding  compensation  of VISX's
directors and executive  officers set forth  in the 1996  Proxy Statement  under
"Further Information Concerning the Board of Directors -- Director Compensation"
and  "Executive Compensation" is incorporated herein by reference (except to the
extent allowed by Item 402(a)(8) of Regulation S-K).
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information required by this item regarding beneficial ownership of  the
Common  Stock by certain beneficial owners and  by management of the Company set
forth in the 1996 Proxy Statement under "Principal Stockholders" is incorporated
herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required  by this item  regarding certain relationships  and
related  transactions with management of the Company set forth in the 1996 Proxy
Statement under  "Further Information  Concerning the  Board of  Directors"  and
"Executive Compensation" is incorporated herein by reference.
 
                                       34
<PAGE>
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
<TABLE>
<S>        <C>        <C>
(a)               1.  The  following  consolidated  financial  statements of  VISX,  Incorporated  and its
                      subsidiaries are found in this Annual Report on Form 10-K for the fiscal year  ended
                      December 31, 1995:
 
                      FINANCIAL STATEMENTS
</TABLE>
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                            ---
<S>                                                                     <C>
  Consolidated Balance Sheets.........................................          19
  Consolidated Statements of Operations...............................          20
  Consolidated Statements of Stockholders' Equity.....................          21
  Consolidated Statements of Cash Flows...............................          22
  Notes to Consolidated Financial Statements..........................          23
  Report of Independent Public Accountants............................          32
</TABLE>
 
<TABLE>
<S>        <C>        <C>
                  2.  All  schedules have been omitted since the required information is not applicable or
                      is not  present in  amounts sufficient  to require  submission of  the schedule,  or
                      because   the  information  required  is  included  in  the  Consolidated  Financial
                      Statements or notes thereto.
                  3.  The Exhibits filed as a part of this  Report are listed in the Index to Exhibits  on
                      pages 37 through 39 of this Report.
(b)        REPORTS ON FORM 8-K.  None.
(c)        EXHIBITS.  See Index to Exhibits on pages 38 through 39 of this Report.
(d)        FINANCIAL STATEMENT SCHEDULES.  None.
</TABLE>
 
                                       35
<PAGE>
                                   SIGNATURES
 
    Pursuant  to  the requirements  of  Section 13  or  15(d) of  the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          VISX, Incorporated
                                          a Delaware corporation
 
                                          By:          /s/ MARK B. LOGAN
 
                                             -----------------------------------
                                                        Mark B. Logan
                                              CHAIRMAN OF THE BOARD, PRESIDENT,
                                                 AND CHIEF EXECUTIVE OFFICER
Date: March 27, 1996
 
                               POWER OF ATTORNEY
 
    Each person whose  signature appears below  hereby constitutes and  appoints
Mark  B. Logan and  Timothy R. Maier,  and each of  them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to  sign
any  amendments to  this Report  on Form 10-K,  and to  file the  same, with all
exhibits  thereto  and  other  documents  in  connection  therewith,  with   the
Securities  and Exchange Commission, granting  to said attorneys-in-fact, or his
substitute or substitutes, the power and authority to perform each and every act
and thing requisite and necessary to  be done in connection therewith, as  fully
to  all intents and purposes as he might or could do in person, hereby ratifying
and confirming all  that each of  said attorneys-in-fact, or  his substitute  or
substitutes, may do or cause to be done by virtue hereof.
 
    Pursuant  to the  requirements of the  Securities and Exchange  Act of 1934,
this report has  been signed below  by the  following persons on  behalf of  the
registrant and in the capacities and on the dates indicated.
 
             SIGNATURE                         TITLE                  DATE
-----------------------------------  -------------------------  ----------------
   PRINCIPAL EXECUTIVE OFFICER:
 
                                     Chairman of the Board,
             /s/ MARK B. LOGAN        President, Chief
-----------------------------------   Executive Officer and      March 27, 1996
           Mark B. Logan              Director
         PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
 
           /s/ TIMOTHY R. MAIER      Chief Financial Officer,
-----------------------------------   Vice President Finance     March 27, 1996
         Timothy R. Maier             and Administration
       ADDITIONAL DIRECTORS:
 
         /s/ ELIZABETH H. DAVILA     Executive Vice President,
-----------------------------------   Chief Operating Officer,   March 27, 1996
        Elizabeth H. Davila           and Director
 
          /s/ GLENDON E. FRENCH
-----------------------------------  Director                    March 27, 1996
         Glendon E. French
 
         /s/ RICHARD B. SAYFORD
-----------------------------------  Director                    March 27, 1996
        Richard B. Sayford
 
                                       36
<PAGE>
                               VISX, INCORPORATED
                               INDEX TO EXHIBITS
                                  [ITEM 14(C)]
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                DESCRIPTION                             PAGE
------     -----------------------------------------------------------------  ----
<C>        <S>                                                                <C>
  2.1*     Asset Purchase Agreement among the Company, Questek,
           Incorporated, and Lambda-Physik, dated February 1, 1993
           (PREVIOUSLY FILED AS EXHIBIT 2.2 TO ANNUAL REPORT ON FORM 10-K
           DATED MARCH 30, 1993).
  3.1*     Amended and Restated Certificate of Incorporation (PREVIOUSLY
           FILED AS EXHIBIT 3.1 TO FORM S-1 REGISTRATION STATEMENT NO.
           33-41621) as amended in Registration Statement on Form S-8
           (EXHIBIT 4.2, FILE NO. 33-53806)
  3.2*     Amended and Restated Bylaws as revised through April 25, 1991
           (PREVIOUSLY FILED AS EXHIBIT 3.2 TO FORM S-1 REGISTRATION
           STATEMENT NO. 33-46311) as amended on September 12, 1994 (EXHIBIT
           5.2 TO FORM 8-K DATED SEPTEMBER 8, 1994)
  4.1*     REFERENCE IS MADE TO EXHIBITS 3.1 AND 3.2
  4.2*     Specimen Common Stock Certificate (PREVIOUSLY FILED AS EXHIBIT
           4.2 TO ANNUAL REPORT ON FORM 10-K, FILE NO. 1-10694, FOR THE
           FISCAL YEAR ENDED DECEMBER 31, 1990)
 10.1*     Amended and Restated Marketing Agreement dated April 21, 1987
           among the Company, LRI L. P., Alcon Laboratories, Inc. and Alcon
           Pharmaceuticals, Ltd. (PREVIOUSLY FILED AS EXHIBIT 10(A) TO FORM
           S-1 REGISTRATION STATEMENT NO. 33-23844)
 10.2*     Second Amended and Restated Marketing Agreement dated December
           22, 1989 among the Company, Alcon Surgical, Inc. and Alcon
           Laboratories, Inc. (PREVIOUSLY FILED AS EXHIBIT 10(B) TO ANNUAL
           REPORT ON FORM 10-K, FILE NO. 0-17247, FOR THE FISCAL YEAR ENDED
           DECEMBER 31, 1989)
 10.3*     Letter Agreement dated December 11, 1989 among the Company,
           L'Esperance Research Incorporated and Alcon Surgical, Inc.
           (PREVIOUSLY FILED AS EXHIBIT 10(C) TO ANNUAL REPORT ON FORM 10-K,
           FILE NO. 0-17247, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1989)
 10.4*     Letter Agreement dated December 22, 1989 among the Company, Alcon
           Laboratories, Inc. and Alcon Surgical, Inc. (PREVIOUSLY FILED AS
           EXHIBIT 10(D) TO ANNUAL REPORT ON FORM 10-K, FILE NO. 0-17247,
           FOR THE FISCAL YEAR ENDED DECEMBER 31, 1989)
 10.5*     Letter Agreement dated May 22, 1990 among the Company, Alcon
           Surgical, Inc., Alcon Laboratories, Inc. and Alcon
           Pharmaceuticals, Ltd. (PREVIOUSLY FILED AS EXHIBIT 10.5 TO ANNUAL
           REPORT ON FORM 10-K, FILE NO. 1-10694, FOR THE FISCAL YEAR ENDED
           DECEMBER 31, 1990)
 10.6*     Second Amended and Restated Development Agreement dated as of
           April 21, 1987 between LRI L. P. and the Company, with Amendment
           dated July 28, 1988 (PREVIOUSLY FILED AS EXHIBIT 10(B) TO FORM
           S-1 REGISTRATION STATEMENT NO. 33-23844)
10.7 TO 10.11 SEE BELOW
10.12*     Stock Option Plan (PREVIOUSLY FILED AS EXHIBIT 10(E) TO FORM S-1
           REGISTRATION STATEMENT NO. 33-23844)
10.13*     1988 Stock Option Plan (PREVIOUSLY FILED AS EXHIBIT 10.1 TO FORM
           S-1 REGISTRATION STATEMENT NO. 33-26991)
</TABLE>
 
                                       37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                DESCRIPTION                             PAGE
------     -----------------------------------------------------------------  ----
<C>        <S>                                                                <C>
10.14*     Amendment to 1988 Stock Option Plan (PREVIOUSLY FILED AS EXHIBIT
           10.20 TO FORM S-1 REGISTRATION STATEMENT NO. 33-26991)
10.15*     1990 Stock Option Plan (PREVIOUSLY FILED AS EXHIBIT 10.39 TO
           ANNUAL REPORT ON FORM 10-K, FILE NO. 1-10694, FOR THE FISCAL YEAR
           ENDED DECEMBER 31, 1990)
10.16*     1983 Incentive Stock Option Plan (PREVIOUSLY FILED AS EXHIBIT 4.4
           TO FORM S-8 REGISTRATION STATEMENT NO. 33-53806)
10.17*     Agreement dated as of January 1, 1992, between International
           Business Machines Corporation and the Company (PREVIOUSLY FILED
           AS EXHIBIT 10.34 TO AMENDMENT NO. 1 TO FORM S-1 REGISTRATION
           STATEMENT NO. 33-46311)
10.18*     Formation Agreement dated June 3, 1992, among Summit Technology,
           Inc., VISX, Incorporated, Summit Partner, Inc., and VISX Partner,
           Inc. (PREVIOUSLY FILED AS EXHIBIT 10.1 TO FORM 8-K DATED JUNE 3,
           1992)
10.19*     General Partnership Agreement of Pillar Point Partners dated June
           3, 1992, between VISX Partner, Inc. and Summit Partner, Inc.
           (PREVIOUSLY FILED AS EXHIBIT 10.2 TO FORM 8-K DATED JUNE 3, 1992)
10.20*     License-back to VISX Agreement dated June 3, 1992, between Pillar
           Point Partners and the Company (PREVIOUSLY FILED AS EXHIBIT 10.3
           TO FORM 8-K DATED JUNE 3, 1992)
10.21*     Lease dated July 16, 1992, as amended October 2, 1992, between
           the Company and Sobrato Interests, a California limited
           partnership (PREVIOUSLY FILED AS EXHIBIT 10.1 TO FORM 10-Q FOR
           THE QUARTER ENDED SEPTEMBER 30, 1992)
10.22*     1993 Flexible Stock Incentive Plan (PREVIOUSLY FILED AS EXHIBIT
           10.28 TO ANNUAL REPORT ON FORM 10-K DATED MARCH 30, 1993)
10.23*     1993 Employee Stock Purchase Plan (PREVIOUSLY FILED AS EXHIBIT
           10.29 TO ANNUAL REPORT ON FORM 10-K DATED MARCH 30, 1993)
10.24*     Form of Subscription Agreement (PREVIOUSLY FILED AS EXHIBIT 10.24
           TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994)
10.25*     Independent Consultant Services Agreement dated October 20, 1995,
           among VISX, Donald R. Sanders, M.D. and Centers for Clinical
           Research (PREVIOUSLY FILED AS EXHIBIT 10.25 TO FORM 10-K FOR THE
           YEAR ENDED DECEMBER 31, 1994)
10.26*     Complaint filed on September 26, 1994 in the Superior Court for
           the County of Santa Clara by CAP Advisers Limited, CAP Trust, and
           Osterfak, Ltd. (PREVIOUSLY FILED AS EXHIBIT 5.1 TO FORM 8-K DATED
           SEPTEMBER 26, 1994)
10.27*     Consolidated Amended Class Action Complaint filed on February 10,
           1995 in the United States District Court for the Northern
           District of California (PREVIOUSLY FILED AS EXHIBIT 10.27 TO FORM
           10-K FOR THE YEAR ENDED DECEMBER 31, 1994)
10.28      Agreement effective as of November 20, 1995, among the Company,
           Alcon Laboratories, Inc., and Alcon Pharmaceuticals, Ltd.........
10.29      Agreement and Stipulation of Settlement filed on November 20,
           1995, in the Superior Court for the County of Santa Clara........
10.30      Second Amendment to Lease dated March 8, 1996, between the
           Company and Sobrato Interests, a California limited
           partnership......................................................
21.1*      Subsidiaries (PREVIOUSLY FILED AS EXHIBIT 21.1 TO ANNUAL REPORT
           ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994)
23.1       Consent of Independent Public Accountants........................
</TABLE>
 
                                       38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                DESCRIPTION                             PAGE
------     -----------------------------------------------------------------  ----
<C>        <S>                                                                <C>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
 10.7*     Employment Agreement dated May 22, 1990 between the Company and
           Charles R. Munnerlyn (PREVIOUSLY FILED AS EXHIBIT 10(K) TO FORM
           S-4 REGISTRATION STATEMENT NO. 33-35491)
 10.8*     Amendment to Employment Agreement dated July 21, 1994 between the
           Company and Charles R. Munnerlyn (PREVIOUSLY FILED AS EXHIBIT
           10.8 TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994)
 10.9*     Employment Agreement dated May 22, 1990 between the Company and
           Alan R. McMillen (PREVIOUSLY FILED AS EXHIBIT 10(L) TO FORM S-4
           REGISTRATION STATEMENT NO. 33-35491)
10.10*     Amendment to Employment Agreement dated October 25, 1994 between
           the Company and Alan R. McMillen (PREVIOUSLY FILED AS EXHIBIT
           10.10 TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994)
10.11*     Employment Agreement dated May 22, 1990 between the Company and
           Terrance N. Clapham (PREVIOUSLY FILED AS EXHIBIT 10(M) TO FORM
           S-4 REGISTRATION STATEMENT NO. 33-35491)
</TABLE>
 
------------------------
* Previously filed.
 
                                       39
<PAGE>
                                                                    EXHIBIT 23.1
 
                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
    As independent public accountants, we hereby consent to the incorporation of
our  report included  in this  Annual Report  on Form  10-K, into  the Company's
previously filed Registration Statements  Nos. 33-34374, 33-40519, 33-53806  and
33-69044 on Form S-8.
 
                                          ARTHUR ANDERSEN LLP
 
San Jose, California
March   , 1996
<PAGE>
                               COMPANY DIRECTORY
 
BOARD OF DIRECTORS
 
Mark B. Logan
Elizabeth H. Davila
Glendon E. French
Richard B. Sayford
 
OFFICERS
 
Mark B. Logan
Elizabeth H. Davila
Katrina J. Church
Terrance N. Clapham
Jordan D. Haller, M.D.
James W. McCollum
Timothy R. Maier
Judith A. Somerville
W. Michael Wilson
 
CORPORATE HEADQUARTERS
 
3400 Central Expressway
Santa Clara, CA 95051
Telephone 408/733-2020
Facsimile 408/773-7300
 
INQUIRIES
 
Stockholders or members of the
investment community seeking information
about VISX, Incorporated are encouraged
to contact the Company by telephone or
address their inquiries to Investor
Relations at the corporate address.
 
AUDITORS
Arthur Andersen LLP
 
LEGAL COUNSEL
 
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
 
TRANSFER AGENT AND REGISTRAR
 
The First National Bank of Boston
150 Royall Street
Canton, MA 02021
617/575-2790
 
Please  direct  any  inquiries regarding
stock transfers,  lost  certificates  or
address  changes  to the  Transfer Agent
and Registrar.
 
STOCK LISTING
 
The Company's Common Stock is listed
on the Nasdaq National Market Tier
of The Nasdaq Stock MarketSM
Symbol VISX
 
ANNUAL MEETING
 
May 17, 1996, 9:00 a.m.
Corporate Headquarters
 
TRADEMARKS
 
The VISX logo and VisionKey are Company
trademarks. Trademarks of other
companies also are referred to in this
Annual Report on Form 10-K.