<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                         AMENDMENT NO. 1 ON FORM 10-K/A

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

        FOR THE TRANSITION PERIOD FROM JUNE 1, 2002 TO DECEMBER 31, 2002

                         COMMISSION FILE NUMBER: 0-29302

                                   ----------

                             TLC VISION CORPORATION
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                                          <C>
           NEW BRUNSWICK, CANADA                                            980151150
         (State or jurisdiction of                            (I.R.S. Employer Identification No.)
       incorporation or organization)

        5280 SOLAR DRIVE, SUITE 300                                          L4W 5M8
            MISSISSAUGA, ONTARIO                                           (Zip Code)
  (Address of principal executive offices)

Registrant's telephone, including area code:                             (905) 602-2020
</Table>

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

    None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

    Common Shares, No 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 and 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. [X] Yes [ ] No

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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. [ ]

    Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). [X] Yes [ ] No

    As of June 30, 2002, the aggregate market value of the registrant's Common
Shares held by non-affiliates of the registrant was approximately $152.4
million.

    As of March 31, 2003, there were 64,595,226 shares of the registrant's
Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

     Definitive Proxy Statement for the Company's 2003 annual shareholders
meeting (incorporated in Part III to the extent provided in Items 10, 11, 12 and
13).

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


<PAGE>
Explanatory Note

This Amendment No. 1 on Form 10-K/A is being filed by the Registrant solely for
the purpose of reflecting that a cumulative effect of accounting change in the
amount of $15,174,000 recorded by the Registrant during the fiscal year ended
May 31, 2002 was made effective as of June 1, 2001, and not in the calendar
quarter ended June 30, 2002 as previously disclosed in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Item 8 Financial Statements and Supplementary Data, Footnote 3. Change in Fiscal
Year-End, unaudited comparative financial information for the seven months ended
December 31, 2002 and 2001.


During the fiscal year ended May 31, 2002, the Company recorded a $15,174,000
"Cumulative effect of accounting change" related to the early adoption of
Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible
Assets"("SFAS No. 142"). Although the final calculations of the effect of this
accounting change were determined during the May 31, 2002 annual and quarterly
closing, pursuant to the provisions of SFAS 142 the change was made effective as
of June 1, 2001, the beginning of the fiscal year ended May 31, 2002. Effective
June 1, 2002 the Company changed its fiscal year end to December 31 from May 31.
The Registrant's Annual Report on Form 10-K for the transition period from June
1, 2002 to December 31, 2002 is being amended to reflect the occurrence of this
"Cumulative effect of accounting change" in the calendar quarter ended June 30,
2001 and not in the calendar quarter ended June 30, 2002. The amendment does not
affect the Consolidated Statements of Operations for the transition period ended
December 31, 2002 or the fiscal year ended May 31, 2002 or any amounts reported
in any Balance Sheet. Please see amended sections of Form 10-K/A for more
detailed information.
<PAGE>

This Annual Report on Form 10-K (herein, together with all amendments, exhibits
and schedules hereto, referred to as the "Form 10-K") contains certain forward
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, which statements
can be identified by the use of forward looking terminology, such as "may",
"will", "expect", "anticipate", "estimate", "plans" or "continue" or the
negative thereof or other variations thereon or comparable terminology referring
to future events or results. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth elsewhere in this Form
10-K. See the "Item 1. Business - Risk Factors" for cautionary statements
identifying important factors with respect to such forward looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from results referred to in forward looking statements. Unless
the context indicates or requires otherwise, references in this Form 10-K to the
"Company" or "TLC Vision" shall mean TLC Vision Corporation and its
subsidiaries. The Company has changed its fiscal year end from May 31 to
December 31. Therefore, references in this Form 10-K to "fiscal 2002" shall mean
the 12 months ended on May 31, 2002 and "transitional period 2002" shall mean
the seven months ended on December 31, 2002. References to "$" or "dollars"
shall mean U.S. dollars unless otherwise indicated. References to "C$" shall
mean Canadian dollars. References to the "Commission" shall mean the U.S.
Securities and Exchange Commission.


                                       2
<PAGE>

                                    PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (AS RESTATED)

    The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Consolidated
Financial Statements and the related notes thereto, which are included in Item 8
of this Form 10-K. The following discussion is based upon the Company's results
under U.S. generally accepted accounting principles. Unless otherwise specified,
all dollar amounts are U.S. dollars. See Note 1 to the Consolidated Financial
Statements of the Company included in Item 8 of this Report.

OVERVIEW

    TLC Vision Corporation (formerly TLC Laser Eye Centers Inc.) and its
subsidiaries ("TLC Vision" or the "Company") is a diversified healthcare service
company focused on working with physicians to provide high quality patient care
primarily in the eye care segment. The Company's core business revolves around
refractive surgery, which involves using an excimer laser to treat common
refractive vision disorders such as myopia (nearsightedness), hyperopia
(farsightedness) and astigmatism. The Company's business model includes
arrangement ranging from owning and operating fixed site centers to providing
access to lasers through fixed site and mobile service relationships. The
Company also furnishes independent surgeons with mobile or fixed site access to
cataract surgery equipment and services through its Midwest Surgical Services,
Inc. ("MSS") subsidiary. In addition, the Company owns a 51% majority interest
in Vision Source, which provides optometric franchise opportunities to
independent optometrists. Through its OR Partners and Aspen Healthcare
divisions, TLC Vision develops, manages and has equity participation in
single-specialty eye care ambulatory surgery centers and multi-specialty
ambulatory surgery centers. In 2002, the Company formed a joint venture with
Vascular Sciences Corporation ("Vascular Sciences") to create OccuLogix, L.P., a
partnership focused on the treatment of an eye disease, known as dry age-related
macular degeneration, via rheopheresis, a process for filtering blood.

    Effective June 1, 2002, the Company changed its fiscal year-end from May 31
to December 31.

    In accordance with an Agreement and Plan of Merger with LaserVision, the
Company completed a business combination with LaserVision on May 15, 2002, which
resulted in LaserVision becoming a wholly-owned subsidiary of TLC Vision.
Accordingly, LaserVision's results are included in the Company's statement of
operations beginning on the date of acquisition. LaserVision is a leading access
service provider of excimer lasers, microkeratomes and other equipment and value
and support services to eye surgeons. The Company believes that the combined
companies can provide a broader array of services to eye care professionals to
ensure these individuals may provide superior quality of care and achieve
outstanding clinical results. The Company believes this will be the long-term
determinant of success in the eye surgery services industry.

    The Company serves surgeons who performed over 116,200 refractive and
cataract procedures at the Company's centers or using the Company's laser access
services during the seven months ended December 31, 2002.

    The Company is assessing patient, optometric and ophthalmic industry trends
and developing strategies to improve laser vision correction procedure volumes
and increased revenues. Cost reduction initiatives continue to target the
effective use of funds and our growth initiative is focusing on future
development opportunities for the Company in the eye care industry.

    The Company recognizes revenues at the time procedures are performed or
services are rendered. Revenues include amounts charged patients for procedures
performed at owned laser centers, amounts charged physicians for laser access
and service fees, and management fees from managing refractive and secondary
care practices. Under the terms of management service agreements, the Company
provides non-clinical services, which include facilities, staffing, equipment
lease and maintenance, marketing and administrative services to refractive and
secondary care practices in return for management fees. The management fees are
typically addressed as a per procedure fee. For third party payor programs and
corporations with arrangements with TLC Vision, the Company's management fee and
the fee charged by the surgeon are both discounted in proportion to the discount
afforded to these organizations. While the Company does not direct the manner in
which the surgeons practice medicine, the Company does direct the day-to-day
non-clinical operations of the centers. The management service agreements
typically are for an extended period of time, ranging from five to 15 years.
Management fees are equal to the net revenue of the physician practice, less
amounts retained by the physician groups.

    Procedure volumes represent the number of laser vision correction procedures
completed for which the amount that the patient has been invoiced for the
procedure exceeds a predefined company wide per procedure revenue threshold.
Procedures may be invoiced less than the threshold amounts primarily for
promotional or marketing purposes and are not included in the procedure volume
numbers reported.

    Doctors' compensation as presented in the financial statements represents
the cost to the Company of engaging ophthalmic professionals to perform laser
vision correction services at the Company's owned laser centers and fees paid to
optometrists for

                                       3
<PAGE>

pre- and post-operative care. Where the Company manages laser centers, the
professional corporations or physicians performing the professional services at
such centers engage ophthalmic professionals. As such, the costs associated with
arranging for these professionals to furnish professional services are reported
as a cost of the professional corporation and not of the Company.

    Included in costs of revenue are the laser fees payable to laser
manufacturers for royalties, use and maintenance of the lasers, variable
expenses for consumables, and facility fees, as well as center costs associated
with personnel, facilities and depreciation of center assets.

    In Company owned centers, the Company engages doctors to provide laser
vision correction services and the amounts paid to the doctors also are reported
as a cost of revenue.

    Selling, general and administrative expenses include expenses that are not
directly related to the provision of laser correction services or cataract
services.

    In the transitional period ended December 31, 2002, the Company's procedure
volume increased by 68,800 compared to the corresponding period of 2001. The
seven-month contribution of LaserVision accounted for an increase of 76,700
while the TLC Vision procedures decreased by 7,900 to 39,500. The Company
believes that the reduction in procedure volume is indicative of overall
conditions in the laser vision correction industry. The laser vision correction
industry has experienced uncertainty resulting from a number of issues. Being an
elective procedure, laser vision correction volumes have been depressed by
economic and stock market conditions, rising employment and the uncertainty
associated with the war on terrorism currently being experienced in North
America which is reflected in a weakening of the consumer confidence index. Also
contributing to the decline in procedure volume is a wide range of consumer
prices for laser vision correction procedures, the bankruptcies of a number of
deep discount laser vision correction companies, the ongoing safety and
effectiveness concerns arising from the lack of long-term follow-up data and
negative news stories focusing on patients with unfavorable outcomes from
procedures performed at centers competing with the Company.

DEVELOPMENTS DURING TRANSITIONAL PERIOD

    GOODWILL IMPAIRMENT

    The Company adopted the accounting standard of Statement of Financial
Accounting Standard No. 142, Goodwill and Other Intangible Assets effective June
1, 2001. Under the new standard, TLC Vision is required to test of goodwill for
impairment at least annually, but more frequently if indicators of impairment
exist. An impairment analysis was conducted by TLC Vision as of November 30,
2002. To determine the amount of the impairment the Company used a fair value
methodology based on present value of expected future cash flows. The Company
determined that goodwill was impaired and recorded an impairment charge of $22.1
million in the seven-month period ended December 31, 2002. This charge was
comprised of $21.8 million that relates to the goodwill attributable to
reporting units acquired in the LaserVision acquisition and $0.3 million
relating to goodwill attributable to reporting units acquired in prior years.

    MANUFACTURER SETTLEMENT

    In July 2001, two laser manufacturers reported settling a class action
antitrust case. In August 2002, LaserVision received $8.0 million in cash as a
result of the settlement and TLC Vision received $7.1 million in cash. The cash
received by LaserVision reduced the receivable recorded in the LaserVision
purchase price allocation. The cash received by TLC Vision was recorded as a
gain of $6.8 million (net of $0.3 million for its obligations to be paid to the
minority interests).

    ACQUISITIONS

    On August 1, 2002, the Company acquired a 55% ownership interest in an
ambulatory surgery center (ASC) in Mississippi for $7.6 million in cash. The
Company also has a contingent obligation to purchase an additional 5% ownership
interest per year for $0.7 million in cash during each of the next four years.
This ASC specializes in cataract surgery, and the acquisition was accounted for
under the purchase method of accounting. Net assets acquired were $7.6 million,
which included $7.4 million of goodwill and $0.2 million of other intangible
assets.




                                       4

<PAGE>
    RESTRUCTURING

    During the transitional period ended December 31, 2002, the Company recorded
a $4.7 million restructuring charge for the closure of 13 centers and the
elimination of 36 full-time equivalent positions primarily at the Company's
Toronto headquarters. The total restructuring expense for the transitional
period of $4.2 million consists of $4.7 million offset by the reversal into
income of $0.5 million of restructuring charges related to prior year accruals
that were no longer needed as of December 31, 2002. All restructuring costs will
be financed through the Company's cash and cash equivalents. A total of $2.3
million of this provision related to non-cash costs of writing down fixed
assets, $1.0 million related to severance, and $1.0 million related to the net
future cash costs for lease commitments and costs to sublet available space
offset by sub-lease income. The lease costs will be paid out over the remaining
term of the lease.

    RESEARCH AND DEVELOPMENT

    The Company entered into a joint venture with Vascular Sciences for the
purpose of pursuing commercial applications of technologies owned or licensed by
Vascular Sciences applicable to the evaluation, diagnosis, monitoring and
treatment of age related macular degeneration. According to the terms of the
agreement, the Company purchased $3.0 million in preferred stock and has the
obligation to purchase an additional $7.0 million of preferred stock in Vascular
Sciences if Vascular Sciences attains certain milestones in the development and
commercialization of the product. If Vascular Science fails to achieve a
milestone, TLC Vision shall have no further obligations to purchase additional
shares. The Company expensed a total of $1.0 million of the investment during
the fiscal year ended May 31, 2002, and the remaining $2.0 million of the
investment was expensed as research and development expense during the seven
months ended December 31, 2002.

    DIVESTITURE

    In July 1997, TLC Vision acquired 100% interest in Vision Source, Inc.
("Vision Source") for share consideration. Vision Source is a franchiser of
private optometric practitioners. In fiscal 2002, the Company signed a
restricted stock incentive plan and related agreements which will allow the
current management of Vision Source to be awarded up to 49% of the common shares
of Vision Source provided certain performance requirements are achieved by May
31, 2005. As of May 31, 2002, 26% of the performance requirement was achieved,
resulting in a charge to income of $0.8 million, which was reported as cost of
revenues in the other healthcare services segment. In December 2002, the Company
awarded the remaining 23% of common stock to the Vision Source management before
all performance requirements were met resulting in a charge to income of $0.4
million. In return for the early award of the remaining 23% interest, Vision
Source converted the Company's $7.0 million of preferred stock to a $7.0 million
note payable accruing interest at 7% annually.

    INVESTMENTS

     In December 2002, the Company wrote down by $2.1 million its investment in
a privately held company that develops an implantable product that corrects and
maintains vision. That company is actively seeking additional funding at this
time and has received a term sheet from a venture capital firm that indicates
significant dilution to the existing shareholders. The Company wrote down the
investment to $0.5 million to reflect the estimated market value of the
investment.

CRITICAL ACCOUNTING POLICIES

    IMPAIRMENT OF GOODWILL

     The Company accounts for its goodwill in accordance with SFAS 142, which
requires the Company to test goodwill for impairment annually and whenever
events occur or circumstances change that would more likely than not reduce the
fair value of the reporting unit below its carrying value. SFAS No. 142 requires
the Company to determine the fair value of its reporting units. Because quoted
market prices do not exist for the Company's reporting units, the Company uses
the present value of expected future cash flows to estimate fair value.
Management must make significant judgments and estimates about future conditions
to estimate future cash flows. Unforeseen events and changes in circumstances
and market conditions including general economic and competitive conditions,
could result in significant changes in those estimates and material charges to
income. During the transitional period ended December 31, 2002 and the fiscal
year ended May 31, 2002, the Company determined that significant impairments in
the value of the goodwill had occurred and recorded a charge to earnings in
both periods.




                                       5

<PAGE>

     IMPAIRMENT OF LONG-LIVED ASSETS

     The Company accounts for its long-lived assets in accordance with SFAS 144,
which requires the Company to assess the recoverability of these assets when
events or changes in circumstances indicate that the carrying amount of the
long-lived asset (group) might not be recoverable. If impairment indicators
exist, the Company determines whether the projected undiscounted cash flows will
be sufficient to cover the carrying value of such assets. This requires the
Company to make significant judgements about the expected future cash flows of
the asset group. The future cash flows are dependent on general and economic
conditions and are subject to change. A change in these assumptions could result
in material charges to income. During the fiscal year ended May 2002, the
Company determined that a significant impairment in the value of its intangible
assets and certain of its fixed assets had occurred and recorded a charge to
earnings.

     INVESTMENTS

    Periodically the Company invests in marketable and non-marketable equity
securities. The Company accounts for its marketable equity available for sale
securities in accordance with SFAS 115, which requires the Company to record
these investments at market value as of the end of each reporting period.
Changes in market value are recorded as other comprehensive income except when
declines in market value below cost are considered to be other than temporary.
The Company accounts for its non-marketable equity securities under the cost
method of accounting as the Company does not exercise significant influence over
the investees. For these investments the Company assesses the value of the
investment by using information acquired from industry trends, the management of
these companies, and other external sources as well as recent stock
transactions. Based on the information acquired, an impairment charge is
recorded when management believes an investment has experienced a decline in
value that is other than temporary. The determination of whether a decline in
market value is considered other than temporary involves making significant
judgments considering factors such as the length of duration of the decline and
factors specific to each investment. During the fiscal year ended May 31, 2002
and the transitional period ended December 31, 2002, the Company determined an
other than temporary decline had occurred in certain investments and recorded a
significant charge to income.

RISK FACTORS

     See "Item 1 -  Business - Risk Factors."

SEVEN MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE SEVEN MONTHS ENDED DECEMBER
31, 2001

     As used herein, "existing TLC Vision" refers to TLC Vision locations in
existence prior to the merger with LaserVision in May 2002.

     Revenues for the seven months ended December 31, 2002 were $100.2 million,
a $29.9 million increase over revenues of $70.3 million for the seven months
ended December 31, 2001. The contribution of LaserVision during the seven-month
period ended December 31, 2002 added $44.9 million of revenues while the
existing TLC Vision revenue decreased by $15.2 million or 22%. Approximately 76%
of total revenues for the seven months ended December 2002 were derived from
refractive services compared to 87% during the seven months ended December 31,
2001.

     Revenues from the refractive segment for the seven months ended December
31, 2002 were $76.2 million, an increase of $14.9 million or 24%, over revenues
of $61.3 million from refractive activities for the seven months ended December
31, 2001. LaserVision added $30.7 million of refractive revenues, while the
existing TLC Vision refractive revenue decreased by $15.8 million, or 26%.

     Revenues from owned centers for the seven months ended December 31, 2002
were $29.8 million, an increase of $3.1 million, or 11%, from the revenues of
$26.7 million for the seven months ended December 31, 2001. LaserVision
accounted for $5.9 million of such revenues, while the existing TLC Vision
revenue decreased by $2.8 million, or 10%.

     Revenues from managed centers for the seven months ended December 31, 2002
were $25.0 million, a decrease of $9.6 million, or 28%, from the revenues of
$34.6 million for the seven months ended December 31, 2001. As LaserVision does
not have a managed service product, there was no contribution from LaserVision
for the seven months ended December 2002.

     Revenues from access services for the seven months ended December 31, 2002
were $21.5 million. Because access revenues are a product offering of
LaserVision only, the Company did not report any associated access revenue in
the seven months ended December 31, 2001 for the existing TLC Vision business.




                                       6

<PAGE>
     Approximately 92,900 refractive procedures were performed for the seven
months ended December 31, 2002, compared to approximately 47,400 procedures for
the seven months ended December 31, 2001. LaserVision accounted for 53,400
procedures while the TLC Vision procedures decreased by 7,900 to 39,500. The
Company believes that the reduction in procedure volume was indicative of
overall conditions in the laser vision correction industry. The laser vision
correction industry has experienced uncertainty resulting from a number of
issues. Being an elective procedure, laser vision correction volumes have been
depressed by economic and stock market conditions, rising unemployment and the
uncertainty associated with the war on terrorism currently being experienced in
North America which is reflected in the consumer confidence index. Also
contributing to the decline was a wide range in consumer prices for laser vision
correction procedures, the bankruptcies of a number of deep discount laser
vision correction companies, the ongoing safety and effectiveness concerns
arising from the lack of long-term follow-up data and negative news stories
focusing on patients with unfavorable outcomes from procedures performed at
centers competing with the Company.

     The cost of refractive revenues from eye care centers for the seven months
ended December 31, 2002 was $64.6 million, an increase of $17.0 million, or 36%,
over the cost of refractive revenues of $47.6 million for the seven months ended
December 31, 2001. LaserVision cost of revenue for 2002 was $24.0 million while
the existing TLC Vision's cost of revenue decreased by $7.1 million, or 15%.

     The cost of revenues from owned centers for the seven months ended December
31, 2002 was $27.0 million, an increase of $4.8 million, or 22%, from the cost
of revenues of $22.2 million from the seven months ended December 31, 2001.
LaserVision cost of revenue for 2002 was $5.3 million while the existing TLC
Vision cost of revenue decreased $0.5 million, or 2%.

     The cost of revenues from managed centers for the seven months ended
December 31, 2002 was $22.2 million, a decrease of $3.2 million, or 13%, from
the cost of revenues of $25.4 million from the seven months ended December 31,
2001. As LaserVision does not have a managed service product, the Company did
not report any additional cost from LaserVision for the seven months ended
December 31, 2002.

     The cost of revenues from access services for the seven months ended
December 31, 2002 was $15.4 million. Access services are a product offering of
LaserVision only, therefore, there was no associated access cost of revenue in
the seven months ended December 31, 2001 from the existing TLC Vision business.

     Reductions in cost of revenue were consistent with reduced doctors
compensation resulting from lower procedure volumes, reductions in royalty fees
on laser usage and reduced personnel costs. The cost of revenues for refractive
centers include a fixed cost component for infrastructure of personnel,
facilities and minimum equipment usage fees which has resulted in cost of
revenues decreasing at a slower rate than the decrease in the associated
revenues.

     Revenues from other healthcare services for the seven months ended December
31, 2002, were $23.9 million, an increase of $14.9 million from revenues of $9.0
million for the seven months ended December 31, 2001. LaserVision accounted for
$14.2 million of the increase while the existing TLC Vision revenue increased by
$0.7 million, or 6%. Approximately 24% of the total revenues for the seven
months ended December 31, 2002 were derived from other healthcare services
compared to 13% during the seven months ended December 31, 2001.

     The cost of revenues from other healthcare services for the seven months
ended December 31, 2002 was $16.2 million, an increase of $11.4 million, from
cost of revenues of $4.8 million for the seven months ended December 31, 2001.
LaserVision accounted for $9.2 million of the increase while the existing TLC
Vision cost of revenues increased by $2.2 million.

     General and administrative expenses increased to $24.6 million for the
seven months ended December 31, 2002 from $22.8 million for the seven months
ended December 31, 2001. The seven months ended December 31, 2002 included a
$1.3 million charge for potential medical malpractice claims. Although the
Company has reduced overhead and infrastructure cost as part of the Company's
cost reduction initiatives, the combined infrastructure cost of TLC Vision and
LaserVision was higher than TLC Vision incurred by itself during the seven
months ended December 31, 2001.

     Marketing expenses decreased to $8.3 million for the seven months ended
December 31, 2002 from $9.2 million for the seven months ended December 31,
2001. This reflected decreased spending on marketing programs identified in
conjunction with the Company's cost-reduction initiatives.




                                       7

<PAGE>
     Amortization expenses decreased to $4.1 million for the seven months ended
December 31, 2002 from $6.0 million for the seven months ended December 31,
2001. The decrease in amortization expense was largely a result of the
significant impairment charge in May 2002, which reduced the fair value of PMA's
and the related ongoing amortization.

     Research and development expenses reflected $2.0 million invested in
Vascular Sciences. Since the technology was in the development stage and was not
available commercially and had not received Food and Drug Administration
approval, the Company accounted for this investment as a research and
development arrangement whereby investments were expensed as Vascular Sciences
expends amounts. If the product becomes commercially available, incremental
investments may be recorded as long-term assets.

     The Company determined its goodwill was impaired and recorded a charge of
$22.1 million for the seven months ended December 31, 2002. This charge was
comprised of $21.8 million that relates to the goodwill attributable to
reporting units acquired in the LaserVision acquisition and $0.3 million
relating to goodwill attributable to reporting units acquired in prior years. In
addition, the Company's adoption of SFAS 142 resulted in a transitional
impairment loss of $15.2 million, which was recorded as a cumulative effect of a
change in accounting principle during the seven months ended December 31, 2001.

     In December 2002, TLC Vision wrote down its investment in a privately held
company by $2.1 million. That company, which develops an implantable product
that corrects and maintains vision is actively seeking additional funding at
this time and has received a term sheet from a venture capital firm that
indicates significant dilution to the existing shareholders. TLC Vision wrote
down the investment to $0.5 million to reflect the estimated market value of the
investment.

     During the transitional period ended December 31, 2002, the Company
recorded a $4.7 million restructuring charge for the closure of 13 centers and
the elimination of 36 full time equivalent positions primarily at the Company's
Toronto headquarters. The total restructuring expense for the transitional
period was $4.2 million which consists of the $4.7 million offset by the
reversal into income of $0.5 million of restructuring charges related to prior
year accruals that were no longer needed as of December 31, 2002. All
restructuring costs will be financed through the Company's cash and cash
equivalents. A total of $2.3 million of this provision related to non-cash costs
of writing down fixed assets, $1.0 million related to severance, and $1.0
million related to the net future cash costs for lease commitments and costs to
sublet available space offset by sub-lease income. The lease costs will be paid
out over the remaining term of the lease.

     The following table details restructuring charges recorded during the
transitional period ended December 31, 2002:

<Table>
<Caption>
                                                                                           ACCRUAL BALANCE
                                                                                                 AS OF
                                        RESTRUCTURING        CASH            NON-CASH        DECEMBER 31,
                                          CHARGES          PAYMENTS         REDUCTIONS           2002
                                        ------------     ------------      ------------    ---------------
<S>                                     <C>              <C>               <C>             <C>

   Severance                            $      1,120     $       (466)     $         --      $        654
   Lease commitments, net of
      sub-lease income                           978               --                --               978
   Write-down of fixed assets                  2,266               --            (2,266)               --
   Sale of center to third party                 342               --                --               342
                                        ------------     ------------      ------------      ------------
Total restructuring charges             $      4,706     $       (466)     $     (2,266)     $      1,974
                                        ============     ============      ============      ============
</Table>

     The Company is currently reviewing its space for its international
headquarters near Toronto. No restructuring charge has been made relating to
this facility as no decision has been made with regard to the use or disposal of
this facility and the Company continues to use this facility for certain
functions. Any costs associated with exiting or renegotiating the lease on this
facility, which could be material, would be charged against income in future
periods.

     Other income and expense for the seven months ended December 31, 2002
consisted of $6.8 million of income from the settlement of an antitrust lawsuit.
In August 2002, LaserVision received $8.0 million from its portion of the
settlement and TLC Vision received $7.1 million from its portion of the
settlement. The $8.0 million relating to the activities of LaserVision
represented a contingent asset acquired by the Company and was included in the
purchase price allocation at May 15, 2002 as an other asset. The $7.1 million
settlement received related to TLC Vision has been recorded as a gain of $6.8
million (net of $0.3 million for its obligations to be paid to the minority
interests) in other income and expense for the period.

     During the transitional period, the Company recorded $0.9 million of income
from the termination of the Surgicare agreement to purchase Aspen Healthcare
from the Company. On May 16, 2002, the Company agreed to sell the capital stock
of its Aspen Healthcare ("Aspen") subsidiary to SurgiCare Inc. ("SurgiCare") for
a purchase price of $5.0 million in cash and warrants for




                                       8

<PAGE>
103,957 shares of common stock of SurgiCare with an exercise price of $2.24 per
share. On June 14, 2002, the purchase agreement for the transaction was amended
due to the failure of Surgicare to meet its obligations under the agreement. The
amendment established a new closing date of September 14, 2002 and required
SurgiCare to issue 38,000 shares of SurgiCare common stock and to pay $0.8
million to the Company, prior to closing, all of which was non-refundable.
SurgiCare failed to perform under the purchase agreement, as amended, and as a
result, the purchase agreement was terminated and the Company recorded the gain
in other income and expense for the period.

     During the transitional period, the Company recorded a reduction in the
carrying value of capital assets of $1.0 million, within the refractive segment,
reflecting the disposal of certain of the Company's lasers. The amount is
included in other income and expense. These lasers do not represent the most
current technology available and the Company has made the decision to dispose of
them below their carrying cost.

     Interest (expense) income, net reflects interest revenue from the Company's
cash position offset by interest expense from debt and lease obligations. An
increase to debt in the second quarter of fiscal 2002 from the corporate
headquarters sale-leaseback arrangement resulted in additional increases to
interest costs. Interest revenues have decreased since the Company has reduced
cash and cash equivalent balances during the seven months ended December 31,
2002 compared to the corresponding period in the prior year. In addition
interest yields on cash balances have been lower, offset by a gain in foreign
currency translation to U.S. dollars related to the Company's Canadian
operations.

     Income tax expense increased to $0.9 million for the seven-month period
ended December 31, 2002 from $0.5 million for the seven months ended December
31, 2001. The $0.9 million tax expense consisted of state taxes of $0.6 million
for certain of the Company's subsidiaries where a consolidated state tax return
cannot be filed and $0.3 million of foreign taxes for one of the Company's
foreign subsidiaries.

     The loss before cumulative effect of change in accounting principle for
the seven months ended December 31, 2002 was $43.4 million or $0.68 per share
compared to a loss of $44.8 million or $1.19 per share for the seven months
ended December 31, 2001. This decreased loss primarily reflected the positive
impact of the antitrust settlement and cost-cutting initiatives partially offset
by the reduction in refractive procedures and revenues. As a result of the
LaserVision acquisition in May 2002, there were more common shares outstanding
during the seven months ended December 31, 2002.

FISCAL YEAR ENDED MAY 31, 2002 COMPARED TO FISCAL YEAR ENDED MAY 31, 2001

     Revenues for fiscal 2002 were $134.8 million, which was a 23% decrease over
$174.0 million for the prior fiscal year. Approximately 86% of total revenues
were derived from refractive services in fiscal 2002 compared to 93% in fiscal
2001.

     Revenues from refractive activities for fiscal 2002 were $115.9 million,
which is 28.1% lower than the prior fiscal year's $161.2 million. Approximately
95,000 procedures were performed in fiscal 2002 compared to approximately
122,800 procedures in fiscal 2001. Management believes that the decrease in
procedure volume and the associated reduction of revenue was indicative of the
overall condition of the laser vision correction industry. The laser vision
correction industry has experienced uncertainty resulting from a wide range in
consumer prices for laser vision correction procedures, the recent bankruptcies
of a number of deep discount laser vision correction companies, the ongoing
safety and effectiveness concerns arising from the lack of long-term follow-up
data and negative news stories focusing on patients with unfavorable outcomes
from procedures performed at centers competing with TLC Vision centers. In
addition, as an elective procedure, laser vision correction volumes have been
further depressed by economic conditions currently being experienced in North
America. The Company maintains its stated objective of being a premium provider
of laser vision correction services in an industry that has faced significant
pricing pressures. Despite pricing pressures in the industry, the Company's net
revenue after doctor compensation per procedure, for fiscal 2002 increased by 5%
in comparison to fiscal 2001. The increase was largely a result of deep discount
surgery providers filing for bankruptcy thus relieving some of the price
pressures that have occurred in prior fiscal years.

     Revenues from other healthcare services was $18.8 million in fiscal 2002,
an increase of over 47% in comparison to $12.8 million in fiscal 2001.
Approximately 14% of total revenues were derived from other healthcare services
in fiscal 2002 compared to 7% in fiscal 2001. The increase in revenues reflected
revenue growth in the network marketing and management and the professional
healthcare facility management subsidiaries, while revenues in the secondary
care management, and asset management subsidiaries reflected little or moderate
growth.




                                       9

<PAGE>

    Cost of revenues from other healthcare services was $11.5 million in fiscal
2002, an increase of over 14% in comparison to $10.1 million in fiscal 2001. The
increase in cost of revenue reflected the increase in revenue growth in the
network marketing and management and the professional healthcare facility
management subsidiaries. The cost of revenues for other healthcare services
centers in fiscal 2001 included the cost of TLC Visions eyeVantange.com
subsidiary. EyeVantage.com incurred a significant amount of cost without
offsetting revenue, thereby resulting in cost of revenues increasing at a lesser
rate than the increase in the associated revenues in fiscal 2002.

    Net loss from other healthcare services was $13.8 million in fiscal 2002, in
comparison to a net loss of $18.6 million for 2001. The loss for fiscal 2002
included $12.0 million for the impairment of goodwill and $2.0 million for the
write down of investments in other healthcare services. The loss for fiscal 2001
included the activities of eyeVantage.com, Inc., which generated losses of $5.6
million. Net loss for fiscal 2002 does not reflect the activities of
eyeVantage.com, Inc. due to the decision by the Company in fiscal 2001 to cease
material funding of this subsidiary and the resulting decision by
eyeVantage.com, Inc. to abandon its e-commerce enterprise. The profit from other
healthcare services for fiscal 2002 of $0.2 million excluding the impairment and
investment write downs, reflected an increase from the loss of $1.3 million for
fiscal 2001 (excluding eyeVantage.com, Inc. and restructuring costs). The
improved profitability for 2002 was due primarily to increased revenues while
managing the cost structure thus increasing gross margins.

    In the final quarter of fiscal 2000 and during fiscal 2001, the Company
entered into practice management agreements with a number of surgeons resulting
in an increase in intangible assets to reflect the value assigned to these
agreements. These intangible assets are amortized over the term of the
applicable agreements. These agreements have resulted, either directly or
indirectly, in lower per procedure fees being paid to the applicable surgeons
and a corresponding reduction in doctors' compensation to offset the increased
amortization costs. The result was an increase to the net revenue after doctors'
compensation per procedure ratio. The Company's operating results for fiscal
2002 included a non-cash pre-tax charge of $31.0 million to record the
impairment in the carrying value of certain practice management agreements on
which the carrying value exceeded the fair value as of May 31, 2002.

    The cost of refractive revenues from eye care centers for fiscal 2002 was
$86.3 million, 13.6% less than cost of refractive revenues of $99.9 million in
fiscal 2001. These reductions were in-line with reduced doctors compensation
resulting from lower procedure volumes, reductions in royalty fees on laser
usage and reduced personnel costs. These reductions were offset by a reduction
in the carrying value of capital assets of $2.6 million reflecting a reduction
of the Company's LaserSight lasers to $0 and two VISX lasers to $75,000 each.
These lasers do not represent the most current technology available and the
Company has made the decision to write the lasers down to current market value
and will evaluate the best option for utilization or upgrade of these lasers.
The cost of revenues for refractive centers include a fixed cost component for
infrastructure of personnel, facilities and minimum equipment usage fees which
has resulted in cost of revenues decreasing at a lesser rate (13.6% for fiscal
2002, as compared to fiscal 2001) than the decrease in the associated revenues.
Cost of revenues of owned centers include the cost of doctor compensation. Cost
of doctor compensation varies in relation to revenues. Accordingly, when
combined with the conversion of a number of owned centers to managed centers,
the cost of revenues of owned centers reflect a much larger variance in the
decrease in the costs of revenues in comparison to managed centers.

    Selling, general and administrative expenses decreased to $52.5 million in
fiscal 2002 from $67.8 million in fiscal 2001, a decrease of $15.3 million or
22.6%. This decrease was primarily attributable to decreased marketing costs,
decreased infrastructure costs and reductions associated with Corporate
Advantage and Third Party Payer programs, each identified in conjunction with
the Company's cost reduction initiatives.

    Interest (income)/expense reflects interest revenue from the Company's net
cash and cash equivalent position. Interest revenue has been consistently
decreasing throughout the year as a result of the Company's declining cash
position and a decrease on the interest yields throughout the year. This
decrease also includes an increase in interest expense resulting from additional
long-term debt and as a result of the sale-leaseback transaction of the
corporate international headquarters in Canada in the second quarter.

    Depreciation and amortization expense decreased to $11.4 million in the
current fiscal year from $14.8 million in fiscal 2001, primarily as the result
of the Company's early adoption of SFAS No. 142, thus eliminating the
requirement for the goodwill amortization. The adoption of this statement
resulted in decreased amortization expense of approximately $2.8 million for
fiscal 2002. Depreciation and amortization expense has also decreased due to
fewer capital additions resulting from limited development of new centers and
the closure of certain existing centers.




                                       10


<PAGE>
    The Company's adoption of SFAS 142 resulted in a transitional impairment
loss of $15.2 million, which was recorded as a cumulative effect of a change in
accounting principle in the first quarter of fiscal 2002. In addition, the
Company's operating results for fiscal 2002 included a non-cash pretax charge of
$50.7 million to reduce the carrying value of goodwill for which the carrying
value exceeded the fair value as of May 31, 2002, including $45.9 million
related to the impairment of goodwill from the acquisition of LaserVision and
$4.8 million for the impairment of goodwill from prior acquisitions.

    Intangible assets whose useful lives are not indefinite are amortized on a
straight-line basis over the term of the applicable agreement to a maximum of 15
years. Current amortization periods range from 5 to 15 years. In establishing
these long-term contractual relationships with the Company, key surgeons in many
cases have agreed to receive reduced fees for laser vision correction procedures
performed. The reduction in doctors' compensation offsets in part the increased
amortization of the intangible practice management agreements.

    Statement of Financial Accounting Standard No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
requires long-lived assets included within the scope of the Statement be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of those long-lived assets might not be recoverable -
that is, information indicates that an impairment might exist. Given the
significant decrease in the trading price of the Company's common stock, current
period operating or cash flow loss combined with its history of operating or
cash flow losses, the Company identified certain practice management agreements
where the recoverability was impaired. As a result, the Company recorded an
impairment charge of $31 million in 2002.

    TLC Vision made its first investment in Lasersight Incorporated
("Lasersight") prior to the beginning of fiscal 2000. Lasersight is a company
involved in the research and development of new laser technology. From the time
of purchase through the third quarter of fiscal 2000, the market value of the
investment exceeded the carrying value at each quarter end. However, by November
31, 2001, the Company believed that the impairment should be considered other
than temporary for a number of reasons including: the impairment is very
substantial relative to the original purchase price, the impairment has
persisted for more than nine months; sufficient time has passed to determine
that the market place has not reacted well to FDA approval of Lasersight's new
technology. As a result, the Company recorded a total impairment charge of $20.1
million during fiscal 2002.

    With respect to its investment in LaserVision TLC Vision wrote down its
investment in LaserVision by $1.8 million in the period prior to the merger, due
to an other than temporary decline in its value. Finally, the Company has
recorded impairment charges of $2.0 million on its investment in Britton Vision
Associates and of $2.2 million on other investments.

    During fiscal 2002, the Company implemented a restructuring program to
reduce employee costs in line with current revenue levels, close certain under
performing centers and eliminating duplicate functions caused by the merger with
LaserVision. By May 31, 2002, this program resulted in total cost for severance
and office closures of $8.8 million of which $2.3 million was paid out in cash
prior to May 31, 2002. All restructuring costs will be financed through the
Company's cash and cash equivalents.

(a) The Company continued its objective of reducing employee costs in line with
    revenues. This activity occurred in two stages with total charges of $2.8
    million. The first stage of reductions were identified in the second and
    third quarters of fiscal 2002 and resulted in restructuring charges of $2.2
    million, all of which had been paid out in cash or options by the end of the
    fiscal year. This reduction impacted 89 employees of whom 35 were working in
    laser centers with the remaining 54 working within various corporate
    functions. The second stage of the cost reduction required the Company to
    identify the impact of its acquisition of LaserVision on May 15, 2002 and
    eliminate surplus positions resulting from the acquisition. The majority of
    these costs were paid by the end of December 2002.

(b) As part of the Company restructuring subsequent to its acquisition of
    LaserVision in May 2002, six centers were identified for closure: such
    centers were identified based on managements earning criteria, earnings
    before interest, taxes, depreciation and amortization. These closures
    resulted in restructuring charges of $4.9 million reflecting a write-down of
    fixed assets of $1.9 million and cash costs of $3.0 million which include
    net lease commitments (net of costs to sublet and sub-lease income) of $2.7
    million, ongoing laser commitments of $0.7 million, termination costs of a
    doctor's contract of $0.1 million and severance costs impacting 21 center
    employees of $0.1 million. The lease costs will be paid out over the
    remaining term of the lease.




                                       11

<PAGE>

(c) The Company also identified seven centers where management determined that
    given the current and future expected procedures, the centers had excess
    leased capacity or the lease arrangements were not economical. The Company
    assessed these seven centers to determine whether the excess space should be
    subleased or whether the centers should be relocated. The Company provided
    $1.0 million related to the costs associated with sub-leasing the excess or
    unoccupied facilities. A total of $0.3 million of this provision related to
    non-cash costs of writing down fixed assets and $0.7 million represented net
    future cash costs for lease commitments and costs to sublet available space
    offset by sub-lease income that is projected to be generated. The lease
    costs will be paid out over the remaining term of the lease.

    The following table details restructuring charges incurred for the year
ended May 31, 2002:

<Table>
<Caption>
                                                                                  ACCRUAL                                 ACCRUAL
                                                                                  BALANCE                                 BALANCE
                                                                                    AT                                      AT
                                     RESTRUCTURING     CASH        NON-CASH       MAY 31,       CASH        NON-CASH    DECEMBER 31,
                                       CHARGES       PAYMENTS     REDUCTIONS       2002       PAYMENTS     REDUCTIONS       2002
                                     -------------   ---------    ----------    ----------   ----------    ----------   ------------
<S>                                    <C>          <C>           <C>           <C>          <C>           <C>          <C>

   Severance.........................  $    2,907   $   (2,219)   $     (222)   $      466   $     (235)   $     (212)   $       19
   Lease commitments, net of
   sublease income...................       2,765           --            --         2,765         (897)           85         1,953
   Termination costs of doctors
     contracts.......................         146          (80)           --            66          (66)           --            --
   Laser commitments.................         652           --            --           652           --          (352)          300
   Write-down of fixed assets........       2,280           --        (2,280)           --           --            --            --
                                       ----------   ----------    ----------    ----------   ----------    ----------    ----------

Total restructuring and other
  charges...........................   $    8,750   $   (2,299)   $   (2,502)   $    3,949   $   (1,198)   $     (564)   $    2,272
                                       ==========   ==========    ==========    ==========   ==========    ==========    ==========
</Table>

    Income tax expense decreased to $1.8 million in fiscal 2002 from $2.2
million in fiscal 2001. This decrease reflected the Company's losses incurred in
fiscal 2002 offset by the impact of the tax liabilities associated with the
Company's investments in profitable subsidiaries that are less than 80% owned
and the requirement to reflect minimum tax liabilities relevant in Canada,
United States and certain other jurisdictions. As of May 31, 2002, the Company
had net operating losses available for carry forward for income tax purposes of
approximately $81.2 million, which were available to reduce taxable income of
future years.

    The Canadian losses can only be utilized by the source company whereas the
United States losses are utilized on a United States consolidated basis. The
Canadian losses of $23.9 million expire as follows:

<Table>
<S>                                                <C>
         May 31,
         2003..................................      $   2,290
         2004..................................          1,509
         2005..................................            831
         2006..................................            315
         2007..................................            580
         2008..................................          9,724
         2009..................................          8,647
</Table>

    The United States losses of $58.0 million expire between 2012 and 2022. The
Canadian and United States losses include amounts of $3.2 million and $14.7
million respectively relating to the acquisitions of 20/20 and BeaconEye, the
availability and timing of utilization of which may be restricted.

    The loss for fiscal 2002 was $161.8 million, or $4.13 per share, compared to
a loss of $37.8 million or $1.00 per share for fiscal 2001. This increased loss
primarily reflected the impact of reduced refractive revenues, the reduction in
carrying values of capital and intangible assets, the reduction in the carrying
value of goodwill and the write down of investments offset partially by reduced
costs and decreased depreciation and amortization. The Company has undertaken
initiatives intended to address patient, optometric and ophthalmic industry
trends and expectations to improve laser vision correction procedure and revenue
volumes. Cost initiatives are targeting effective use of funds and a growth
initiative is focusing on the future development opportunities for the Company
in the laser vision eye care service industry.






                                       12

<PAGE>
FISCAL YEAR ENDED MAY 31, 2001 COMPARED TO FISCAL YEAR ENDED MAY 31, 2000

    Revenues for fiscal 2001 were $174.0 million, which was a 13.5% decrease
compared to revenues of $201.2 million for fiscal 2000. Approximately 93% of
total revenues were derived from refractive services as compared to 95% in
fiscal 2000.

    Revenues from eye care centers for fiscal 2001 were $161.2 million, which
was 15.2% lower than revenues of $190.2 million for fiscal 2000. Approximately
122,800 procedures were performed in fiscal 2001 compared to 134,200 procedures
in fiscal 2000. The decrease in procedure volume and the associated reduction of
revenue reflects the condition of the laser vision correction industry, which
had experienced uncertainty due to a wide range in consumer prices for laser
vision correction procedures, the bankruptcies of a number of deep discount
laser vision correction companies and the ongoing safety and effectiveness
concerns arising from the lack of long-term follow-up data and negative news
stories focusing on patients with unfavorable outcomes from procedures performed
at competing centers. Due to the pricing pressures in the industry and the lower
procedure prices offered pursuant to discounts associated with the Company's
Corporate Advantage Program, the Company's net revenue after doctor
compensation, per procedure, for fiscal 2001 declined by 8% in comparison to
fiscal 2000.

    In the final quarter of fiscal 2000 and during fiscal 2001, the Company
completed practice management agreements with a number of surgeons resulting in
an increase in intangible assets to reflect the value assigned to these
agreements. These intangible assets are being amortized over the term of the
applicable agreements. These agreements have resulted, either directly or
indirectly, in lower per procedure fees being paid to the applicable surgeons
and a corresponding reduction in doctors' compensation to offset the increased
amortization costs. The result was an increase to the net revenue after doctors'
compensation per procedure ratio.

    The cost of refractive revenues from eye care centers for fiscal 2001 was
$99.9 million, which was 16.8% lower than fiscal 2000's cost of refractive
revenues of $120.0 million. This reduction was primarily due to reduced doctors
compensation resulting from lower procedure volumes, lower royalty fees on laser
usage and lower personnel costs.

    Selling, general and administrative expenses increased to $67.8 million in
fiscal 2001 from $66.6 million in fiscal 2000. This reflected increased
marketing costs aimed at raising consumer awareness of TLC Vision's brand. In
addition, the increased expense was due to increased consulting costs, legal
costs and infrastructure costs incurred to support our growth strategy. These
costs were partially offset by reductions associated with Corporate Advantage
and Third Party Payer programs identified in conjunction with the Company's cost
reduction initiatives.

    Interest (income)/expense and other expenses reflected interest revenue from
the Company's cash position which resulted from positive cash flow from
operations and the result of a public offering in the fourth quarter of fiscal
1999. The lack of any material additions to long-term debt and capital leases on
equipment resulted in reducing interest costs on debt, as the various debt
instruments approach maturity. Reduced cash and cash equivalent balances during
the year combined with lower interest yields resulted in lower interest
revenues.

    The increase in depreciation expense was largely a result of new centers and
the additional depreciation and amortization associated with the Company's
acquisitions during fiscal 2000 and 2001. The significant increase in the
amortization of intangibles was the result of successfully establishing
long-term contractual relationships with a number of surgeons during the final
quarter of fiscal 2000 and during fiscal 2001. Goodwill and intangibles are
amortized on a straight-line basis over the term of the applicable agreement to
a maximum of fifteen years. Amortization periods used during fiscal 2001 range
from five to fifteen years. In establishing the long-term contractual
relationships with these key surgeons, the surgeon in many cases had agreed to
receive reduced fees for laser vision correction procedures performed. The
reduction in doctors' compensation partially offsets the increased amortization
of the intangible practice management agreements.

    Restructuring and other charges (see "Note 20 - Restructuring and Other
Charges") in fiscal 2001, reflect decisions that were made to:

        a)  Ease support of the Company's e-commerce enterprise eyeVantage.com,
            Inc. ("eyeVantage"). The decision to close activities at eyeVantage
            was the result of a number of factors including:

            (i)   Increased difficulty by dotcom enterprises to obtain funding
                  due to concerns within the investment community regarding
                  perceived value;

            (ii)  eyeVantage was not able to obtain required financing to
                  continue operations;



                                       13
<PAGE>

            (iii) eyeVantage was not able to meet expectations on the
                  development of its products and services;

            (iv)  eyeVantage had not established a revenue base sufficient to
                  meet operating requirements or to attract outside investment;
                  and

            (v)   The operating costs on a monthly basis were in excess of $1.0
                  million and the Company did not feel there was sufficient
                  future value to continue to support eyeVantage operations.

    The decision to close activities resulted in a restructuring charge of $11.7
million which reflected the estimated impact of the write-down of goodwill of
$8.7 million, the write-down of fixed assets of $2.1 million, employee
termination costs of $1.7 million representing the termination costs of 29
employees, accounts receivable losses of $0.4 million and $1.1 million of costs
incurred in the closing process which included legal, administrative and lease
commitment costs. These losses were offset by a gain of $2.3 million resulting
from the reduction in the purchase obligation associated with the Optical
Options, Inc. acquisition (see "Note 2- Acquisitions - 2001 Transactions -
iii").

        a)  Reflect potential losses from an equity investment in secondary care
            activities of $1.0 million. Due to a deteriorating relationship with
            the operations management team and the Company's strategic decision
            to withdraw from the management of secondary care practices where
            possible, the Company transferred its investment to an equity
            investment in return for a future earnings percentage. The equity
            investment has not acknowledged a liability to the Company for this
            investment, and the Company had not received any funds from the
            equity investment's earnings from the transferred investment. As a
            result the Company deemed it prudent to provide against the
            potential loss resulting from the inability to recover value of the
            investment transferred to the equity investment.

        b)  Close three eye care centers for which the Company recorded costs of
            $1.4 million, sell its ownership in another eye care center, which
            created a loss of $0.3 million and incurred a cost of $0.1 million
            to terminate plans to open another eye care center. During fiscal
            2001, the Company had undertaken to restructure its operations to
            eliminate those centers, which were identified as not capable of
            being profitable. These centers had been impacted by a number of
            challenges such as:

            (i)   proximity to existing centers managed by the Company;

            (ii)  local marketplace heavily impacted by discount laser vision
                  correction providers which impaired the ability to compete as
                  a premium laser vision correction provider;

            (iii) expectations of optometric network to generate sufficient
                  interest in laser vision correction were not met; and

            (iv)  the occupancy costs of a center (acquired as part of a
                  multi-center acquisition) impacting the ability to lower costs
                  in line with revenues.

        c)  Undertake an extensive review of its internal structures, its
            marketplace, its resources and its strategies for the future. The
            review resulted in the restructuring of the Company's goals and
            structures to meet its future needs. The Company utilized the
            services of a national consulting firm to facilitate this internal
            restructuring process, whose participation was completed in the
            third quarter of fiscal 2001 with an associated cost of $1.6
            million.

        d)  Fully provide for its $0.9 million portfolio investment in Vision
            America. This investment was deemed to be permanently impaired
            during fiscal 2001. Subsequent to this decision Vision America filed
            for bankruptcy and is currently in the process of liquidating its
            assets. The Company will reflect any amounts recovered from this
            investment if and when the amount and timing of any amounts to be
            recovered becomes determinable.

        e)  Accrue for, in the fourth quarter, an award from an arbitration
            hearing involving TLC Vision Network Services Inc. that was issued
            against the Company. The cumulative liability arising from the award
            was $2.1 million, which was fully provided for, in the fourth
            quarter of fiscal 2001. Payment of this liability was deferred until
            explorations of all legal alternatives have been completed.



                                       14
<PAGE>

    The $19.1 million for losses from restructuring and other charges consisted
of $4.7 million of cash payments for severance, lease costs, consulting services
and closure costs and $14.4 million of non-cash charges.

    Income tax expense decreased to $2.2 million in fiscal 2001 from $3.5
million in fiscal 2000. This decrease reflected the Company's losses incurred in
fiscal 2001 while including the impact of the tax liabilities associated with
the Company's partners in profitable subsidiaries and the requirement to reflect
minimum tax liabilities relevant in Canada, United States and certain other
jurisdictions.

    Revenues from Other healthcare services activities were $12.8 million in
fiscal 2001, an increase of more than 16% in comparison to $11.0 million in
fiscal 2000. Approximately 7% of total revenues were derived from other
healthcare services in fiscal 2001 compared to 5% in fiscal 2000. The increase
in revenues reflected revenue growth of greater then 25% in the network
marketing and management, professional healthcare facility management and hair
removal subsidiaries, while revenues in the secondary care management and asset
management subsidiaries reflected moderate growth.

    The net loss from other healthcare services was $18.6 million in fiscal
2001, an increase of over 280% in comparison to a net loss of $4.9 million in
fiscal 2000. The loss in fiscal 2001 included a restructuring charge of $11.7
million resulting from the decision made by the Company to no longer support the
activities of its e-commerce subsidiary eyeVantage.com, Inc. Excluding the
impact of the restructuring charge, eyeVantage.com, Inc., generated losses of
$5.6 million (2000 - $3.8 million). The loss from the remaining non-refractive
activities was $1.3 million, an increase from the loss in fiscal 2000 of $1.1
million. The increased loss in fiscal 2001 was due primarily to increased
amortization of intangibles of $0.4 million at the Company's network marketing
and management subsidiary resulting from increased goodwill arising from the
finalization of the earn-out calculations arising from the Company's 1997
acquisition of this entity (see "Note 14 - Capital Stock - a) Common Stock" and
"Note 2 - Acquisition - 2001 Transactions - ii and 2000 Transactions v.").

    The loss for fiscal 2001 was $37.8 million or $1.00 per share, compared to a
loss of $5.9 million or $0.16 cents per share for fiscal 2000. This increased
loss reflected the impact of extensive losses from the activities in the eye
care e-commerce subsidiary, restructuring and other charges, reduced revenues,
increased amortization in intangibles and the continuing investment in staff,
information systems and marketing.

LIQUIDITY AND CAPITAL RESOURCES

    During the seven months ended December 31, 2002, the Company continued to
focus its activities primarily on seeking to increase procedure volumes at its
centers and reducing operating costs. Cash and cash equivalents, short-term
investments and restricted cash were $41.6 million at December 31, 2002 compared
to $52.2 million at May 31, 2002. Working capital at December 31, 2002 decreased
to $12.5 million from $23.4 million at May 31, 2002.

    The Company's principal cash requirements have included normal operating
expenses, debt repayment, distributions to minority partners, capital
expenditures, investment in Vascular Sciences and the purchase of an ambulatory
surgery center. Normal operating expenses include doctor compensation, procedure
royalty fees, procedure medical supply expenses, travel and entertainment,
professional fees, insurance, rent, equipment maintenance, wages, utilities and
marketing.

    During the seven months ended December 31, 2002, the Company invested $3.7
million in fixed assets.

    The Company does not expect to purchase additional lasers during the next 12
to 18 months, however existing lasers may need to be upgraded. The Company has
access to vendor financing at fixed interest rates or on a per procedure fee
basis and expects to continue to have access to these financing options for at
least the next 12 months.

    As of December 31, 2002, the Company had employment contracts with 11
officers of TLC Vision or its subsidiaries to provide for base salaries, the
potential to pay certain bonuses, medical benefits and severance payments. Nine
officers have agreements providing for severance payments ranging from 12 to 24
months of base or total compensation under certain circumstances. Two officers
have agreements providing for severance payments equal to 36 months of total
compensation and future medical benefits (totaling about $2.0 million) at their
option until November 2003, and 24-month agreements thereafter.



                                       15
<PAGE>
    As of December 31, 2002 the Company has commitments relating to operating
leases for rental of office space and equipment and long-term marketing
contracts, which require future minimum payments aggregating to approximately
$34.7 million. Future minimum payments over the next five years and thereafter
are as follows:

<Table>
<S>                                                 <C>
2003.........................................       $ 9,690
2004.........................................         8,824
2005.........................................         7,731
2006.........................................         3,651
2007.........................................         2,761
Thereafter...................................         2,025
</Table>

    As of December 31, 2002 the Company had a commitment with a major laser
manufacturer ending November 30, 2004 for the use of that manufacturer's lasers
which require future minimum lease payments aggregating $5.1 million. Future
minimum lease payments in aggregate and over the remaining two years are as
follows:

<Table>
<S>                                      <C>
2003..............................       $ 2,040
2004..............................         3,060
</Table>

    One of the Company's subsidiaries, together with other investors, has
jointly and severally guaranteed the obligations of an equity investee. Total
liabilities of the equity investee under guarantee amount to approximately $2.1
million at December 31, 2002.

    In July 2001, two excimer laser manufacturers reported settling a class
action antitrust case. In August 2002, LaserVision received approximately $8.0
million from their portion of the settlement which reduced other current assets
and TLC Vision received approximately $7.1 million of which $6.8 million was
recorded in other income and expense.

    On August 1, 2002, the Company acquired a 55% ownership interest in an
ambulatory surgery center (ASC) in Mississippi for $7.6 million in cash. The
Company also has a contingent obligation to purchase an additional 5% ownership
interest per year for $0.7 million in cash during each of the next four years.
This ASC specializes in cataract surgery, and the acquisition was accounted for
under the purchase method of accounting. Net assets acquired were $7.6 million,
which included $7.4 million of goodwill and $0.2 million of other intangible
assets.

    On July 25, 2002, the Company entered into a joint venture with Vascular
Sciences for the purpose of pursuing commercial applications of technologies
owned or licensed by Vascular Sciences applicable to the evaluation, diagnosis,
monitoring and treatment of age-related macular degeneration. According to the
terms of the agreement, the Company purchased $2.0 million in preferred stock in
August 2002, which was subsequently recorded as research and development
expense.

    The Company estimates that existing cash balances and short-term
investments, together with funds expected to be generated from operations and
credit facilities, will be sufficient to fund the Company's anticipated level of
operations and expansion plans for the next 12 to 18 months.

CASH PROVIDED BY OPERATING ACTIVITIES

    Net cash provided by operating activities was $8.8 million for the seven
months ended December 31, 2002. The cash flows provided by operating activities
during the seven months ended December 31, 2002 are primarily due to the
reductions in net operating assets of $6.4 million as the net loss of $43.3
million in the period was offset by non-cash items including depreciation and
amortization of $13.8 million, impairment of goodwill of $22.1 million, loss on
sale of fixed assets of $1.8 million, the non-cash write off of investments and
research and development arrangements of $4.1 million, and $2.2 million of
non-cash write-offs related to restructuring charges. The reduction in net
operating assets related to a $7.2 million decrease in prepaid expenses as the
cash received from the LaserVision portion of the antitrust settlement was
partially offset by higher prepaid insurance balances and a $3.8 million
decrease in accounts receivable due primarily to lower procedure volume and
timing differences related to collection of accounts receivable from
professional corporations, offset by a $4.6 million decrease in accounts payable
and accrued liabilities due to timing differences of paying certain obligations,
lower business volume from May 31, 2002 and a settlement of disputed invoices
with a major vendor.



                                       16
<PAGE>
CASH USED FOR INVESTING ACTIVITIES

    Net cash used for investing activities was $13.8 million for the seven
months ended December 31, 2002. Cash used in investing during the seven-month
period ended December 31, 2002 included $9.7 million for business acquisitions,
$3.6 million for the acquisition of equipment and $2.0 million for an investment
in a research and development arrangement, offset by $0.7 million from the sale
of capital assets, $0.5 million from the sale of short-term investments, and
$0.3 million from the sale of investments and subsidiaries.

CASH USED FOR FINANCING ACTIVITIES

    Net cash used for financing activities was $4.0 million for the seven months
ended December 31, 2002. Net cash used for financing activities during the seven
months ended December 31, 2002 was primarily utilized during the period for
repayment of certain notes payable and capitalized lease obligations of $5.1
million, distribution to minority interests of $1.6 million, offset by
restrictions removed from cash balances of $1.0 million, and proceeds from
equipment lease financing of $1.8 million.

NEW ACCOUNTING PRONOUNCEMENTS

    For a discussion on recent pronouncements, see Note 1, "Summary of
Significant Accounting Policies" in the accompanying audited consolidated
financial statements and notes thereto set forth in Item 8 of this Report.

SUBSEQUENT EVENTS

    On March 3, 2003, Midwest Surgical Services, Inc. a subsidiary of TLC
Vision, entered into a purchase agreement to acquire 100% of American Eye
Instruments, Inc., which provides access to surgical and diagnostic equipment to
perform cataract surgery in hospitals and ambulatory surgery centers. The
Company paid $2.0 million in cash and 100,000 common shares of TLC Vision. The
Company also agreed to make additional cash payments over a three-year period up
to $1.9 million, if certain financial targets are achieved.

QUARTERLY FINANCIAL DATA (UNAUDITED)

                           (Thousands of U.S. dollars
                            except per share amounts)

<Table>
<Caption>
                                                     THREE MONTHS ENDED             THREE MONTHS ENDED
                                                          MARCH 31,              JUNE 30, (AS RESTATED)(4)
                                                 --------------------------     --------------------------
                                                    2002            2001          2002(3)          2001
                                                 ----------      ----------     ----------      ----------
<S>                                              <C>             <C>            <C>             <C>

Revenues                                         $   36,942      $   49,099     $   43,107      $   38,361
Gross Margin                                         12,256          20,896         12,080          13,959

Income (loss) before cumulative effect of
  accounting change                                  (3,689)          4,254        (98,783)         (8,448)
Cumulative effect of accounting change                   --              --             --         (15,174)
Net income (loss)                                    (3,689)          4,254        (98,783)        (23,622)
Basic and diluted income (loss) per share
  before cumulative effect of accounting
  change                                              (0.10)           0.11          (1.93)          (0.22)
Basic and diluted income (loss) per share
  cumulative effect of accounting change                 --              --             --           (0.40)
Basic and diluted income (loss) per
  share                                               (0.10)           0.11          (1.93)          (0.62)

<Caption>
                                                    THREE MONTHS ENDED              THREE MONTHS ENDED
                                                       SEPTEMBER 30,                    DECEMBER 31,
                                                 --------------------------      --------------------------
                                                    2002            2001           2002(2)         2001(1)
                                                 ----------      ----------      ----------      ----------
<S>                                              <C>             <C>             <C>             <C>

Revenues                                         $   43,802      $   30,575      $   44,754      $   27,064
Gross Margin                                          9,307           8,159           6,151           3,998

Income (loss) before cumulative effect of
  accounting change                                  (2,532)         (8,394)        (39,727)        (35,321)
Cumulative effect of accounting change                   --              --              --              --
Net income (loss)                                    (2,532)         (8,394)        (39,727)        (35,321)
Basic and diluted loss per share before
  cumulative effect of accounting change              (0.04)          (0.22)          (0.63)          (0.93)
Basic and diluted loss per share
  cumulative effect of accounting change                 --              --              --              --
Basic and diluted loss per common share               (0.04)          (0.22)          (0.63)          (0.93)
</Table>

        (1) In the three months ended December 31, 2001, the selected financial
            data of the Company included:

            (a) a write down in the fair value of investments and long-term
                receivables of $21.1 million; and

            (b) a restructuring charge of $1.8 million.

        (2) In the three months ended December 31, 2002, the selected financial
            data of the Company included:

            (a) an impairment of intangibles charge of $22.1 million;

            (b) a write down in the fair value of investments and long-term
                receivables of $2.1 million; and



                                       17
<PAGE>

            (c) a restructuring charge of $3.6 million.

        (3) In the three months ended June 2002, the selected financial data of
            the Company included:

            (a) an impairment of intangibles charge of $81.7 million;

            (b) a write down in the fair value of investments and long-term
                receivables of $4.5 million;

            (c) a restructuring charge of $8.8 million; and

            (d) a reduction in the carrying value of fixed assets of $2.6
                million.

        (4) On June 1, 2001, the Company early adopted Statement of Financial
            Accounting Standards No. 142, "Goodwill and Intangible Assets,"
            (SFAS No. 142). SFAS No. 142 required step 1 of the transitional
            impairment test be completed within six months of the date of
            adoption and step 2 of the transitional impairment test, if
            necessary, be completed by the end of the year of adoption. The
            Company completed step 1 of the transitional impairment test by the
            end of the second quarter and determined that step 2 was required.
            The Company completed step 2 of the transitional impairment test in
            the fourth quarter and determined that its goodwill was impaired by
            $15.2 million at June 1, 2001. The Company recorded the transitional
            goodwill impairment in the fourth quarter of the year ended May 31,
            2002. However, SFAS No. 142 required the transitional goodwill
            impairment be recorded as a cumulative effect of a change in
            accounting in the Company's first interim period financial
            statements after adoption, regardless of the interim period in which
            the measurement of the loss is completed.

            We restated the previously reported three-month earnings as June 30,
            2002 and three-month earnings as of June 30, 2001 to recognize the
            $15.2 million cumulative effect of a change in accounting in the
            quarter ended June 30, 2001. This restatement had no impact on the
            Company's previously reported audited statement of financial
            position as of December 31, 2002 or May 31, 2002 or its results of
            operations or cash flows for the seven-month period ended December
            31, 2002 or the year ended May 31, 2002.

            The restatement had the following financial statement impact:

<Table>
<Caption>
                                        Three months ended                Three months ended
                                           June 30, 2002                    June 30, 2001
                                  -----------------------------   -----------------------------
                                  As previously                    As previously
                                     reported       As restated      reported       As restated
                                  -------------    ------------   -------------    ------------
<S>                               <C>              <C>            <C>              <C>
Loss before cumulative
   effect of  accounting
   change                          $    (98,783)   $    (98,783)   $     (8,448)   $     (8,448)

Cumulative effect of
   accounting change                    (15,174)             --              --         (15,174)
                                   ------------    ------------    ------------    ------------
Net loss                           $   (113,957)   $    (98,783)   $     (8,448)   $    (23,622)
                                   ============    ============    ============    ============

Loss before cumulative
   effect of accounting
   change per share - basic
   and diluted                     $      (1.93)   $      (1.93)   $      (0.22)   $      (0.22)

Cumulative effect of
   accounting change per share -
   basic and diluted                      (0.29)             --              --           (0.40)
                                   ------------    ------------    ------------    ------------
Net loss per share - basic
   and diluted                     $      (2.22)   $      (1.93)   $      (0.22)   $      (0.62)
                                   ============    ============    ============    ============
</Table>



                                       18
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    In the ordinary course of business, the Company is exposed to interest rate
risks and foreign currency risks, which the Company does not currently consider
to be material. These interest rate exposures primarily relate to having
short-term investments earning short-term interest rates and to having fixed
rate debt. The Company views its investment in foreign subsidiaries as long-term
commitments, and does not hedge any translation exposure.





                                       19
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RESPONSIBILITY FOR FINANCIAL STATEMENTS

    The accompanying consolidated financial statements of TLC Vision Corporation
have been prepared by management in conformity with accounting principles
generally accepted in the United States. The significant accounting policies
have been set out in Note 1 to the financial statements. These statements are
presented on the accrual basis of accounting. Accordingly, a precise
determination of many assets and liabilities is dependent upon future events.
Therefore, estimates and approximations have been made using careful judgment.
Recognizing that the Company is responsible for both the integrity and
objectivity of the financial statements, management is satisfied that these
financial statements have been prepared within reasonable limits of materiality
under United States generally accepted accounting principles.

    During the transitional period ended December 31, 2002, the Board of
Directors had an Audit Committee consisting of four non-management directors.
The committee met with management and the auditors to review any significant
accounting, internal control and auditing matters, to review and finalize the
annual financial statements of the Company along with the independent auditors'
report prior to the submission of the financial statements to the Board of
Directors for final approval.

    The financial information throughout the text of this annual report is
consistent with the information presented in the financial statements.

    The Company's accounting procedures and related systems of internal control
are designed to provide reasonable assurance that its assets are safeguarded and
its financial records are reliable.




                                       20
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders of TLC Vision Corporation

We have audited the consolidated balance sheets of TLC Vision Corporation
(formerly TLC Laser Eye Centers Inc.) as of December 31, 2002, May 31, 2002, and
May 31, 2001 and the consolidated statements of operations, cash flows, and
stockholders' equity for the seven-month period ended December 31, 2002 and for
each of the years in the three-year period ended May 31, 2002. Our audits also
included the financial statement schedule listed in the index at Item 15. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an 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 our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of TLC
Vision Corporation as of December 31, 2002, May 31, 2002, and May 31, 2001 and
the results of its operations and its cash flows for the seven-month period
ended December 31, 2002 and for each of the years in the three-year period ended
May 31, 2002 in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, on June 1,
2001, the Company changed its method of accounting for goodwill.

St. Louis Missouri                                    /s/ ERNST & YOUNG LLP
March 25, 2003                                       ----------------------



                                       21
<PAGE>

TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share amounts)

<Table>
<Caption>
                                                                 SEVEN-MONTH
                                                                 PERIOD ENDED                     YEAR ENDED MAY 31,
                                                                 DECEMBER 31,      ------------------------------------------------
                                                                     2002              2002              2001              2000
                                                                 ------------      ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>               <C>

Revenues:
     Refractive:
          Owned centers ....................................     $     29,834      $     50,252      $     78,470      $     97,608
          Managed centers ..................................           24,959            62,657            82,749            92,625
          Access fees ......................................           21,495             2,999                --                --
     Other healthcare services .............................           23,866            18,843            12,787            10,990
                                                                 ------------      ------------      ------------      ------------
Total revenues (Note 16) ...................................          100,154           134,751           174,006           201,223
                                                                 ------------      ------------      ------------      ------------

Cost of revenues:
     Refractive:
          Owned centers ....................................           27,001            38,877            55,226            68,439
          Managed centers ..................................           22,223            43,034            44,684            51,549
          Access fees ......................................           15,356             1,826                --                --
          Impairment of fixed assets (Note 10) .............               --             2,553                --                --
     Other healthcare services .............................           16,245            11,499            10,106             9,246
                                                                 ------------      ------------      ------------      ------------
Total cost of revenues .....................................           80,825            97,789           110,016           129,234
                                                                 ------------      ------------      ------------      ------------
     Gross margin ..........................................           19,329            36,962            63,990            71,989
                                                                 ------------      ------------      ------------      ------------
General and administrative .................................           24,567            36,382            44,464            44,341
Marketing ..................................................            8,321            15,296            25,600            24.202
Amortization of intangibles ................................            4,074            10,227            12,543             7,396
Impairment of goodwill and other intangible assets
   (Note 8 and 9) ..........................................           22,138            81,720                --                --
Research and development (Note 7) ..........................            2,000             2,000                --                --
Write-down in the fair value of investments and
   long-term receivables (Note 7) ..........................            2,095            26,082                --                --
Restructuring and other charges (Note 18) ..................            4,227             8,750            19,075                --
                                                                 ------------      ------------      ------------      ------------
                                                                       67,422           180,457           101,682            75,939
                                                                 ------------      ------------      ------------      ------------
Operating loss .............................................          (48,093)         (143,495)          (37,692)           (3,950)
Other income and (expense):
   Other income, net (Note 12) .............................            6,996                --                --                --
   Interest (expense) income and other .....................             (243)             (761)            2,543             4,492
   Minority interest .......................................           (1,152)             (635)             (385)           (3,006)
                                                                 ------------      ------------      ------------      ------------
Loss before income taxes and cumulative
   effect of accounting change .............................          (42,492)         (144,891)          (35,534)           (2,464)
Income tax expense (Note 14) ...............................             (851)           (1,784)           (2,239)           (3,454)
                                                                 ------------      ------------      ------------      ------------
Loss before cumulative effect of
   accounting change .......................................          (43,343)         (146,675)          (37,773)           (5,918)
Cumulative effect of accounting change (Note 2) ............               --           (15,174)               --                --
                                                                 ------------      ------------      ------------      ------------
Net loss ...................................................     $    (43,343)     $   (161,849)     $    (37,773)     $     (5,918)
                                                                 ============      ============      ============      ============

Loss before cumulative effect of accounting
   change per share  - basic and diluted ...................     $      (0.68)     $      (3.74)     $      (1.00)     $      (0.16)
Cumulative effect of accounting change per share -
   basic and diluted .......................................               --             (0.39)               --                --
                                                                 ------------      ------------      ------------      ------------
Net loss per share  - basic and diluted ....................     $      (0.68)     $      (4.13)     $      (1.00)     $      (0.16)
                                                                 ============      ============      ============      ============

Weighted-average number of common shares outstanding -
   basic and diluted .......................................           63,407            39,215            37,779            37,778
                                                                 ============      ============      ============      ============
</Table>

See notes to consolidated financial statements.


                                       22
<PAGE>

TLC VISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

<Table>
<Caption>
                                                                                               MAY 31,
                                                                 DECEMBER 31,      ------------------------------
                                                                     2002              2002              2001
                                                                 ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>

ASSETS
Current assets:
     Cash and cash equivalents .............................     $     36,081      $     45,074      $     47,987
     Short-term investments ................................            1,557             2,113             6,063
     Accounts receivable (Note 6) ..........................           14,155            17,991             9,950
     Prepaid expenses and other current assets .............            9,820            17,006             4,501
                                                                 ------------      ------------      ------------
     Total current assets ..................................           61,613            82,184            68,501
Restricted cash (Notes 5) ..................................            3,975             4,988             1,619
Investments and other assets (Note 7) ......................            2,442             4,505            23,171
Goodwill (Note 8) ..........................................           40,697            53,192            32,752
Other intangible assets  (Note 9) ..........................           29,326            32,513            60,050
Fixed assets (Note 10) .....................................           58,003            68,133            52,345
                                                                 ------------      ------------      ------------
Total assets ...............................................     $    196,056      $    245,515      $    238,438
                                                                 ============      ============      ============

LIABILITIES
Current liabilities:
     Accounts payable ......................................     $     13,857      $     17,625      $      3,849
     Accrued liabilities ...................................           28,911            31,748            15,517
     Current portion of long-term debt (Note 11) ...........            6,322             9,433             6,769
                                                                 ------------      ------------      ------------
     Total current liabilities .............................           49,090            58,806            26,135
Other long-term liabilities ................................            9,630             7,401             6,146
Long-term debt, less current maturities (Note 11) ..........           15,760            14,643             8,313
Minority interests .........................................            9,748             9,651            10,738

STOCKHOLDERS' EQUITY
Common stock, no par value; unlimited number authorized ....          388,769           387,701           276,277
Option and warrant equity ..................................           11,035            11,755               532
Treasury stock .............................................           (2,623)           (2,432)               --
Accumulated deficit ........................................         (285,353)         (242,010)          (80,161)
Accumulated other comprehensive loss .......................               --                --            (9,542)
                                                                 ------------      ------------      ------------
Total stockholders' equity .................................          111,828           155,014           187,106
                                                                 ------------      ------------      ------------
Total liabilities and stockholders' equity .................     $    196,056      $    245,515      $    238,438
                                                                 ============      ============      ============
</Table>

See notes to consolidated financial statements.

Approved on behalf of the Board:

/s/ ELIAS VAMVAKAS                               /s/ WARREN S. RUSTAND
-------------------------------                  ------------------------------
Elias Vamvakas, Director                         Warren S. Rustand, Director



                                       23
<PAGE>

TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<Table>
<Caption>
                                                                     SEVEN-MONTH
                                                                     PERIOD ENDED                  YEAR ENDED MAY 31,
                                                                     DECEMBER 31,      ------------------------------------------
                                                                         2002               2002            2001            2000
                                                                     ------------      ----------      ----------      ----------
<S>                                                                  <C>               <C>             <C>             <C>
OPERATING ACTIVITIES
Net loss .......................................................     $    (43,343)     $ (161,849)     $  (37,773)     $   (5,918)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
     Depreciation and amortization .............................           13,862          21,352          27,593          21,688
     Cumulative effect of accounting change ....................               --          15,174              --              --
     Impairment of goodwill and other intangibles assets .......           22,138          81,720              --             489
     Loss on sale of fixed assets ..............................            1,770           1,136           1,946           1,099
     Write-off of investment in research and
       development arrangement .................................            2,000           2,000              --              --
     Deferred income taxes .....................................               --              --              --           1,320
     Impairment of fixed assets and write down of investments ..            2,095          28,635              --              --
     Non-cash restructuring and other costs ....................            2,266           2,503          14,395              --
     Compensation expense ......................................              445             866              --              --
     Minority interest and other ...............................            1,152             107             677           3,786
     CHANGES IN OPERATING ASSETS AND LIABILITIES
          Accounts receivable ..................................            3,836           1,592           5,232             (15)
          Prepaid expenses and current other assets ............            7,168             417           1,891           1,047
          Accounts payable and accrued liabilities .............           (4,574)          6,321           1,042            (465)
                                                                     ------------      ----------      ----------      ----------
Cash provided by (used in) operating activities ................            8,815             (26)         15,003          23,031
                                                                     ------------      ----------      ----------      ----------
INVESTING ACTIVITIES
Restricted cash movement .......................................               --          (3,000)             --              --
Purchase of fixed assets .......................................           (3,668)         (2,297)        (10,656)        (26,153)
Proceeds from sale of fixed assets .............................              751              89           2,491             185
Proceeds from the sale of investments and subsidiaries .........              259             777           1,117             227
Investment in research and development arrangement .............           (2,000)         (2,000)             --              --
Acquisitions and investments ...................................           (9,695)         (5,424)        (17,345)        (56,496)
Cash acquired in Laser Vision Centers, Inc. acquisition ........               --           7,319              --              --
Short-term investments .........................................              556           6,058          (6,063)         26,212
Other ..........................................................              (32)             56             (68)            (24)
                                                                     ------------      ----------      ----------      ----------
Cash (used in) provided by investing activities ................          (13,829)          1,578         (30,524)        (56,049)
                                                                     ------------      ----------      ----------      ----------
FINANCING ACTIVITIES
Restricted cash movement .......................................            1,013            (369)            103               8
Proceeds from debt financing ...................................            1,750           5,788             226             826
Principal payments of  debt financing and capital leases .......           (5,140)         (7,098)         (7,097)         (7,698)
Payments of accrued purchase obligations .......................               --              --          (3,620)             --
Contributions from minority interest ...........................               --              --              --           2,365
Distributions to minority interests ............................           (1,532)         (3,092)         (4,865)         (1,569)
Purchase of treasury stock .....................................             (191)             --            (481)        (10,365)
Proceeds from issuance of common stock .........................              121             306             711           2,384
                                                                     ------------      ----------      ----------      ----------
Cash used in financing activities ..............................           (3,979)         (4,465)        (15,023)        (14,049)
                                                                     ------------      ----------      ----------      ----------
Net decrease in cash and cash equivalents during the period ....           (8,993)         (2,913)        (30,544)        (47,067)
Cash and cash equivalents, beginning of period .................           45,074          47,987          78,531         125,598
                                                                     ------------      ----------      ----------      ----------
Cash and cash equivalents, end of period .......................     $     36,081      $   45,074      $   47,987      $   78,531
                                                                     ============      ==========      ==========      ==========
</Table>

See notes to consolidated financial statements.



                                       24
<PAGE>

TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)

<Table>
<Caption>
                                                  COMMON STOCK                                TREASURY STOCK
                                            --------------------------                  --------------------------
                                                                            OPTION
                                                                              AND
                                                                            WARRANT
                                              SHARES         AMOUNT         EQUITY        SHARES         AMOUNT
                                            -----------    -----------    -----------   -----------    -----------
<S>                                         <C>            <C>            <C>           <C>            <C>

Balance, May 31, 1999 ...................        37,362    $   269,454    $        --            --    $        --
Warrants issued .........................                                         532
Shares issued for acquisition ...........           302            728
Value determined for shares
     issued contingent on meeting
     earnings criteria ..................            --          1,397
Shares purchased for cancellation .......          (710)        (5,162)
Exercise of stock options ...............            87          1,314
Shares issued as remuneration ...........            44            387
Shares issued as part of the
     employee share purchase plan .......            65          1,696
Reversal of IPO costs, over accrual .....            --            139
Comprehensive loss
     Net loss ...........................
     Other comprehensive loss
     Unrealized gains/losses on
        available for-sale securities ...
Total comprehensive loss ................
                                            -----------    -----------    -----------   -----------    -----------
Balance May 31, 2000 ....................        37,150        269,953            532            --             --
                                            -----------    -----------    -----------   -----------    -----------
Shares issued for acquisition ...........           832          6,059
Shares purchased for cancellation .......          (108)          (481)
Exercise of stock options ...............            40            125
Shares issued as remuneration ...........             5             35
Shares issued as part of the
     employee share purchase plan .......           112            586
Comprehensive loss
     Net loss ...........................
     Unrealized gains/losses on
       available for-sale securities ....
Total comprehensive loss ................

Balance May 31, 2001 ....................        38,031        276,277            532            --             --
Shares issued on acquisition of
     LaserVision ........................        26,617        111,058
Value determined for shares
     issued contingent on meeting
     earnings criteria ..................                           60
Options issued on acquisition ...........                                      11,001
Treasury stock arising from
     acquisition ........................                                                      (583)        (2,432)
Exercise of stock options ...............            10             26
Options issued on termination ...........                                         222
Shares issued as part of the
     employee share purchase plan .......            85            280
Comprehensive loss
     Net loss ...........................
     Unrealized gains/losses on
       available for-sale securities ....
Total comprehensive loss ................
                                            -----------    -----------    -----------   -----------    -----------
Balance May 31, 2002 ....................        64,743        387,701         11,755          (583)        (2,432)
Purchase of  treasury stock .............                                                      (196)          (191)
Shares issued as part of the
     employee share purchase plan .......            46            111
Exercise of stock options ...............             5             10
Options expired .........................                          720           (720)
Dilution gain on stock of subsidiary ....                          227
Net loss and comprehensive loss .........            --             --             --            --             --
                                            -----------    -----------    -----------   -----------    -----------
Balance December 31, 2002 ...............        64,794    $   388,769    $    11,035          (779)   $    (2,623)
                                            ===========    ===========    ===========   ===========    ===========

<Caption>


                                                              OTHER
                                                           ACCUMULATED
                                             ACCUMULATED  COMPREHENSIVE
                                               DEFICIT     INCOME (LOSS)     TOTAL
                                             -----------  --------------  -----------
<S>                                          <C>          <C>             <C>

Balance, May 31, 1999 ...................    $   (31,267)  $      5,936   $   244,123
Warrants issued .........................                                         532
Shares issued for acquisition ...........                                         728
Value determined for shares
     issued contingent on meeting
     earnings criteria ..................                                       1,397
Shares purchased for cancellation .......         (5,203)                     (10,365)
Exercise of stock options ...............                                       1,314
Shares issued as remuneration ...........                                         387
Shares issued as part of the
     employee share purchase plan .......                                       1,696
Reversal of IPO costs, over accrual .....                                         139
Comprehensive loss
     Net loss ...........................         (5,918)                      (5,918)
     Other comprehensive loss
     Unrealized gains/losses on
       available for-sale securities ....                       (10,387)      (10,387)
                                                                          -----------
Total comprehensive loss ................                                     (16,305)
                                             -----------    -----------   -----------
Balance May 31, 2000 ....................        (42,388)        (4,451)      223,646
                                             -----------    -----------   -----------
Shares issued for acquisition ...........                                       6,059
Shares purchased for cancellation .......                                        (481)
Exercise of stock options ...............                                         125
Shares issued as remuneration ...........                                          35
Shares issued as part of the
     employee share purchase plan .......                                         586
Comprehensive loss
     Net loss ...........................        (37,773)                     (37,773)
     Unrealized gains/losses on
       available for-sale securities ....                        (5,091)       (5,091)
                                                                          -----------
Total comprehensive loss ................                                     (42,864)
                                             -----------    -----------   -----------
Balance May 31, 2001 ....................        (80,161)        (9,542)      187,106
Shares issued on acquisition of
     LaserVision ........................                                     111,058
Value determined for shares
     issued contingent on meeting
     earnings criteria ..................                                          60
Options issued on acquisition ...........                                      11,001
Treasury stock arising from
     acquisition ........................                                      (2,432)
Exercise of stock options ...............                                          26
Options issued on termination ...........                                         222
Shares issued as part of the
     employee share purchase plan .......                                         280
Comprehensive income
     Net loss ...........................       (161,849)                    (161,849)
     Unrealized gains/losses on
       available for-sale securities ....                         9,542         9,542
                                                                          -----------
Total comprehensive loss ................                                    (152,307)
                                             -----------    -----------   -----------
Balance May 31, 2002 ....................       (242,010)            --       155,014
Purchase of  treasury stock .............                                        (191)
Shares issued as part of the
     employee share purchase plan .......                                         111
Exercise of stock options ...............                                          10
Options expired .........................                                          --
Dilution gain on stock of subsidiary ....                                         227
Net loss and comprehensive loss .........        (43,343)            --       (43,343)
                                             -----------    -----------   -----------
Balance December 31, 2002 ...............    $  (285,353)   $        --   $   111,828
                                             ===========    ===========   ===========
</Table>

    See notes to consolidated financial statements.



                                       25
<PAGE>

TLC VISION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except per share amounts)

1. NATURE OF OPERATIONS

TLC Vision Corporation (formerly TLC Laser Eye Centers Inc.) and its
subsidiaries (collectively "TLC Vision" or the "Company") is a diversified
healthcare service company focused on working with physicians to provide high
quality patient care primarily in the eye care segment. The Company's core
business revolves around refractive surgery, which involves using an excimer
laser to treat common refractive vision disorders such as myopia
(nearsightedness), hyperopia (farsightedness) and astigmatism. The Company's
business models include arrangements ranging from owning and operating fixed
site centers to providing access to lasers through fixed site and mobile service
relationships. The Company also furnishes independent surgeons with mobile or
fixed site access to cataract surgery equipment and services through its Midwest
Surgical Services, Inc. ("MSS") subsidiary. In addition, the Company owns a 51%
majority interest in Vision Source, which provides optometric franchise
opportunities to independent optometrists. Through its OR Partners and Aspen
Healthcare divisions, TLC Vision develops, manages and has equity participation
in single-specialty eye care ambulatory surgery centers and multi-specialty
ambulatory surgery centers. In 2002, the Company formed a joint venture with
Vascular Science to create OccuLogix, L.P., a partnership focused on the
treatment of a specific eye disease, known as dry age-related macular
degeneration, via rheopheresis, a process for filtering blood.

In 2002, the Company changed its fiscal year end from May 31 to December 31.
References in the consolidated financial statements and notes to the
consolidated financial statements to "transitional period 2002" shall mean the
seven-month period ended December 31, 2002, "fiscal 2002" shall mean the 12
months ended on May 31, 2002, "fiscal 2001" shall mean the 12 months ended May
31, 2001, and "fiscal 2000" shall mean the 12 months ended May 31, 2000. And


On May 15, 2002, the Company merged with Laser Vision Centers, Inc.
("LaserVision"), and the results of LaserVision's operations have been included
in the consolidated financial statements since that date. LaserVision provides
access to excimer lasers, microkeratomes, other equipment and value added
support services to eye surgeons for laser vision correction and the treatment
of cataracts.



                                       26
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

These consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

The Company does not have an ownership interest in, nor does it exercise control
over, the physician practices under its management. Accordingly, the Company
does not consolidate physician practices.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid short-term investments with
original maturities of 90 days or less.

Short-Term Investments

Short-term investments, which consist of corporate bonds and a bank certificate
of deposit, are classified as held-to-maturity securities and carried at
amortized cost.

Investments

The Company has certain investments in equity securities. Investments are
accounted for using the equity method if the Company has significant influence,
but not control, over an investee. All other equity investments, in which the
Company does not have the ability to exercise significant influence, are
accounted for under the cost method. Under the cost method of accounting,
investments that do not have a quoted market price (non-marketable equity
securities) are carried at cost and are adjusted only for other than temporary
declines in fair value and additional investment activity. For investments in
public companies (marketable equity securities), the Company classifies its
investments as available-for-sale and, accordingly, records these investments at
fair value with unrealized gain and losses included in accumulated other
comprehensive loss, unless a decline in fair value is determined to be other
than temporary in which case the unrealized loss is recognized in earnings.

Fixed Assets

Fixed assets are recorded at cost or the initial present value of future minimum
lease payments for assets under capital lease. Major renewals or betterments are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation is
provided at rates intended to amortize the assets over their productive lives as
follows:

<Table>
<S>                                                <C>
              Buildings                            - straight-line over 40 years
              Computer equipment and software      - straight-line over three years
              Furniture, fixtures and equipment    - 25% declining balance
              Laser equipment                      - 25% declining balance
              Leasehold improvements               - straight-line over the initial term of the lease
              Medical equipment                    - 25% declining balance
              Vehicles and other                   - 25% declining balance
</Table>

The Company's MSS subsidiary records depreciation on its equipment and vehicles
(with a net book value of $5.9 million at December 31, 2002) on a straight-line
basis over the estimated useful lives (three to ten years) of the equipment.

On June 1, 2002, the Company changed its depreciation policy for furniture,
fixtures and equipment, laser equipment and medical equipment to 25% declining
balance from 20% declining balance. The Company believes this method better
reflects the depreciation over the productive life of the asset. As this is a
change in an accounting estimate it will be reflected


                                       27
<PAGE>

prospectively in the Company's financial statements. This change increased the
net loss by approximately $1.0 million in the transitional period.

Goodwill

Effective June 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," ("SFAS No.
142") which requires that goodwill not be amortized but instead be tested for
impairment at least annually and more frequently if circumstances indicate
possible impairment. In conjunction with its change in year-end, the Company
changed its annual impairment test date from May 31 to November 30.

Other Intangible Assets

Other intangible assets consist primarily of practice management agreements
("PMAs") and deferred contract rights. PMAs represent the cost of obtaining the
exclusive right to manage eye care centers and secondary care centers in
affiliation with the related physician group during the term of the respective
agreements. Deferred contract rights represent the value of contracts with
affiliated doctors to provide basic access and service. PMAs and deferred
contract rights are amortized using the straight-line method over the term of
the related contract.

Long-Lived Assets

Effective June 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." In accordance with SFAS No. 144,
the Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of the asset group may not be
recoverable. The adoption had no material impact on the Company's financial
statements.

Revenue Recognition

The Company recognizes refractive revenues when the procedure is performed.
Revenue from owned laser centers represents the amount charged to patients for a
laser vision correction procedure, net of discounts, contractual adjustments in
certain regions and amounts collected as an agent of co-managing doctors.
Revenue from access services represents the amount charged to the
customer/surgeon for access to equipment and technical support based on use.

Revenue from managed laser centers represents management fees for services
provided under management services agreements with professional corporations
("PCs") that provide laser vision correction procedures. The PCs are responsible
for billing the patient directly. Under the terms of the management service
agreements, the Company provides facilities, equipment, technical support and
management, marketing and administrative services to the PCs in return for a per
procedure management fee. Although TLC Vision is entitled to receive the full
per procedure management fee, the Company has made it a business practice to
reduce the management fee for a portion of any discount or contractual allowance
related to the underlying procedure. Net revenue is recognized when the PC
performs the procedure.

Contractual adjustments arise due to the terms of reimbursement and managed care
contracts in certain regions. Such adjustments represent the difference between
the charges at established rates and estimated recoverable amounts and are
recognized as a reduction of revenue in the period services are rendered. Any
differences between estimated contractual adjustments and actual final
settlements under reimbursement contracts are recognized as contractual
adjustments in the period final settlements are determined.

Approximately 24% of the Company's net revenue is from the Company's other
healthcare services and includes cataract equipment access and service fees on a
per procedure basis, management fees from cataract and secondary care practices
and network marketing and management services and fees for professional
healthcare facility management. Revenues from other healthcare services are
recognized as the service is rendered or procedure performed.

Cost of Revenues

Included in cost of revenues are the laser fees payable to laser manufacturers
for royalties, use and maintenance of the lasers, variable expenses for
consumables, financing costs, facility fees as well as center costs associated
with personnel, facilities amortization and impairment of center assets.



                                       28
<PAGE>

In Company-owned centers, the Company is responsible for engaging and paying the
surgeons who provide laser vision correction services, and such amounts also are
reported as a cost of revenue.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.
Deferred tax assets and liabilities are recorded based on the difference between
the income tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes at the applicable enacted statutory tax rates.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

Accounting for Stock-Based Compensation

The Company accounts for stock-based compensation under the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees," and its related interpretations. Accordingly, the Company records
expense over the vesting period in an amount equal to the intrinsic value of the
award on the grant date. The Company recorded $0.4 million and $0.8 million of
compensation expense during the transitional period 2002 and fiscal 2002,
respectively. The following table illustrates the pro forma net loss and net
loss per share as if the fair value-based method as set forth under SFAS No. 123
"Accounting for Stock Based Compensation," applied to all awards:

<Table>
<Caption>
                                                       SEVEN-MONTH                      YEAR ENDED MAY 31,
                                                       PERIOD ENDED      ------------------------------------------------
                                                     DECEMBER 31, 2002       2002              2001              2000
                                                     -----------------   ------------      ------------      ------------
<S>                                                  <C>                 <C>               <C>               <C>

Net loss, as reported ............................       $    (43,343)   $   (161,849)     $    (37,773)     $     (5,918)
Adjustments for SFAS No. 123 .....................               (628)         (1,564)           (1,847)           (2,806)
                                                         ------------    ------------      ------------      ------------

Pro forma net loss ...............................       $    (43,971)   $   (163,413)     $    (39,620)     $     (8,724)
                                                         ============    ============      ============      ============

Pro forma loss per share - basic and diluted .....       $      (0.69)   $      (4.17)     $      (1.05)     $      (0.23)
                                                         ============    ============      ============      ============
</Table>

Foreign Currency Exchange

The unit of measure of the Company is the U.S. dollar. The assets and
liabilities of the Company's Canadian operations are maintained in Canadian
dollars and translated into U.S. dollars at exchange rates prevailing at the
consolidated balance sheet date for monetary items and at exchange rates
prevailing at the transaction dates for nonmonetary items. Revenue and expenses
are translated into U.S. dollars at average exchange rates prevailing during the
year with the exception of depreciation and amortization, which are translated
at historical exchange rates. Exchange gains and losses included in net loss are
not material in any period presented.

Net Loss Per Share

The net loss per share was computed by dividing net loss by the weighted-average
number of common shares outstanding during the period. The calculations exclude
the dilutive effect of stock options and warrants since their inclusion in such
calculation is antidilutive. Average shares outstanding during the transitional
period were reduced by 712,500 shares to exclude the weighted-average effect of
outstanding shares in escrow related to a previous LaserVision acquisition.

Contingent Consideration

When the Company enters into agreements that provide for contingent
consideration based on the certain predefined targets being met, an analysis is
made to determine whether the contingent consideration will be reflected as an
additional purchase price obligation or deemed to be compensation expense. The
accounting treatment if the consideration is deemed to be an additional purchase
price payment is to increase the value assigned to PMAs and deferred contract
rights and amortize this additional amount over the remaining period of the
relevant agreement. Where the contingent consideration is deemed to be
compensation, the expense is reflected as an operating expense in the periods
that the service is rendered.


                                       29
<PAGE>

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates. These
estimates are reviewed periodically, and as adjustments become necessary, they
are reported in income in the period in which they become known.

Reclassifications

Certain amounts in prior periods have been reclassified to conform with the
report classifications of the transitional period.

Recent Pronouncements

In July 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities" was issued. SFAS 146 nullifies Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in Restructuring)." SFAS No. 146 requires that costs associated with an exit or
disposal activity be recognized when the liability is incurred, whereas EITF No.
94-3 required recognition of a liability when an entity committed to an exit
plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.

3. CHANGE IN FISCAL YEAR-END

The Company changed its fiscal year-end from May 31 to December 31 effective
June 1, 2002. Accordingly, the accompanying financial statements include the
results of operation and cash flows for the seven-month period ended December
31, 2002, the transitional period. The following unaudited financial information
for the seven-month period ended December 31, 2001 is presented for comparative
purposes only:

<Table>
<Caption>
                                                                          SEVEN-MONTH PERIOD ENDED
                                                                       ------------------------------
                                                                       DECEMBER 31,      DECEMBER 31,
                                                                           2002              2001
                                                                       ------------      ------------
                                                                                          (UNAUDITED)
                                                                                          (Restated)
<S>                                                                    <C>               <C>
Revenues:
     Refractive:
          Owned centers ..........................................     $     29,834      $     26,669
          Managed centers ........................................           24,959            34,636
          Access fees ............................................           21,495                --
     Other healthcare services ...................................           23,866             8,995
                                                                       ------------      ------------
Total revenues ...................................................          100,154            70,300
                                                                       ------------      ------------

Cost of revenues:
       Refractive:
            Owned centers ........................................           27,001            22,213
            Management, facility and access fees .................           22,223            25,396
            Access fees ..........................................           15,356                --
            Impairment of fixed assets ...........................               --             1,066
       Other healthcare services .................................           16,245             4,776
                                                                       ------------      ------------
Total cost of revenues ...........................................           80,825            53,451
                                                                       ------------      ------------
      Gross margin ...............................................           19,329            16,849
                                                                       ------------      ------------
General and administrative .......................................           24,567            22,791
Marketing ........................................................            8,321             9,215
Amortization of other intangibles ................................            4,074             5,950
Impairment of goodwill and other intangible assets ...............           22,138                --
Research and development .........................................            2,000                --
Write-down in the fair value of investments and long-term
   receivables ...................................................            2,095            21,079
</Table>


                                       30
<PAGE>

<Table>
<S>                                                                    <C>               <C>
Restructuring and other charges ..................................            4,227             1,759
                                                                       ------------      ------------
                                                                             67,422            60,794
                                                                       ------------      ------------
Operating loss ...................................................          (48,093)          (43,945)
Other income and (expense):
  Other income, net ..............................................            6,996                --
  Interest expense ...............................................             (243)             (252)
  Minority interest ..............................................           (1,152)             (586)
                                                                       ------------      ------------
Loss before cumulative effect of accounting change
  and income taxes ...............................................          (42,492)          (44,783)
Income tax expense ...............................................             (851)             (504)
                                                                       ------------      ------------
Loss before cumulative effect of accounting change ...............          (43,343)          (45,287)
Cumulative effect of accounting change ...........................               --           (15,174)
                                                                       ------------      ------------
Net loss .........................................................     $    (43,343)     $    (60,461)
                                                                       ============      ============
Loss before cumulative effect of accounting
  change per share - basic and diluted ...........................     $      (0.68)     $      (1.19)
Cumulative effect of accounting change per
  share - basic and diluted ......................................               --             (0.40)
                                                                       ------------      ------------
Net loss per share - basic and diluted ...........................     $      (0.68)     $      (1.59)
                                                                       ============      ============
Weighted-average number of common shares outstanding - basic
  and diluted (in thousands)- ....................................           63,407            38,064
                                                                       ============      ============
</Table>

On June 1, 2001, the Company early adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Intangible Assets," (SFAS No. 142). SFAS No.
142 required step 1 of the transitional impairment test be completed within six
months of the date of adoption and step 2 of the transitional impairment test,
if necessary, be completed by the end of the year of adoption. The Company
completed step 1 of the transitional impairment test by the end of the second
quarter and determined that step 2 was required. The Company completed step 2 of
the transitional impairment test in the fourth quarter and determined that its
goodwill was impaired by $15.2 million at June 1, 2001. The Company recorded the
transitional goodwill impairment in the fourth quarter of the year ended May 31,
2002. However, SFAS No. 142 required the transitional goodwill impairment be
recorded as a cumulative effect of a change in accounting in the Company's first
interim period financial statements after adoption, regardless of the interim
period in which the measurement of the loss is completed.

We restated the previously reported three-month unaudited earnings for the seven
months ended December 31, 2001 to recognize the $15.2 million cumulative effect
of a change in accounting in the month ended June 30, 2001. This restatement had
no impact on the Company's previously reported audited statement of financial
position as of December 31, 2002 or May 31, 2002 or its results of operations or
cash flows for the seven-month period ended December 31, 2002 or the year ended
May 31, 2002.

The restatement had the following financial statement impact:

<Table>
<Caption>

                                                           Seven months ended
                                                      December 31, 2001 (Unaudited)
                                                      -----------------------------
                                                      As previously
                                                        reported       As restated
                                                      -------------    ------------
<S>                                                 <C>                <C>
Loss before cumulative
   effect of  accounting
   change                                              $  (45,287)     $  (45,287)
Cumulative effect of
   accounting change                                           --         (15,174)
                                                       ----------      ----------
Net loss                                               $  (45,287)     $  (60,461)
                                                       ==========      ==========

Loss before cumulative
   effect of accounting
   change per share - basic
   and diluted                                         $    (1.19)     $    (1.19)

Cumulative effect of
   accounting change per share -
   basic and diluted                                           --           (0.40)
                                                       ----------      ----------
Net loss per share - basic
   and diluted                                         $    (1.19)     $    (1.59)
                                                       ==========      ==========
</Table>

4. ACQUISITIONS

On August 1, 2002, the Company acquired for $7.6 million in cash a 55% ownership
interest in an ambulatory surgery center (ASC) in Mississippi which specializes
in cataract surgery. The Company also has a contingent obligation to purchase an
additional 5% ownership interest per year for $0.7 million in cash during each
of the next four years. Net assets acquired were $7.6 million, which included
$7.4 million of goodwill and $0.2 million of other intangible assets. The
results of operations have been included in the consolidated statements of
operations of the Company since the acquisition date.

Laser Vision Centers, Inc.

On August 27, 2001, the Company announced that it had entered into an Agreement
and Plan of Merger ("Merger Agreement") with LaserVision. On May 15, 2002,
stockholder and regulatory approvals had been obtained, and the Company
completed the acquisition of 100% of the outstanding common shares of
LaserVision. The merger was effected as an all-stock combination at a fixed
exchange rate of 0.95 of a common share of the Company for each issued and
outstanding share of LaserVision common stock, which resulted in the issuance of
26.6 million common shares of the Company's common stock. The stock
consideration was valued using the average trading price of a TLC Vision share
for the two days prior and subsequent to the announcement date. In addition, the
Company assumed all the options and warrants to acquire stock of LaserVision
outstanding at May 15, 2002 and exchanged them for approximately 8.0 million
options to purchase common shares of the Company.

The results of operations of LaserVision have been included in the consolidated
statement of operations of the Company after May 15, 2002. The total purchase
price of the acquisition was $130.6 million consisting of $108.6 million of TLC
Vision shares issued to LaserVision shareholders; $9.8 million of costs incurred
related to the merger; $1.2 million in LaserVision shares (575,000 shares)
already owned by TLC Vision; and $11.0 million representing the fair value of
TLC Vision options to purchase common shares in exchange for all the outstanding
LaserVision options and warrants as of the effective date of the acquisition.
The purchase price allocation resulted in $87.2 million of acquired goodwill, of
which $65.8 million was assigned to the refractive segment and $21.4 million was
assigned to the cataract surgery segment. The entire $87.2 million of goodwill
is not deductible for tax purposes.

In July 2001, two excimer laser manufacturers reported settling class action
antitrust cases. In August 2002, LaserVision received approximately $8.0
million in cash from the settlement. The Company included the LaserVision
settlement, net of $0.2 million paid to the minority interests in the former
LaserVision subsidiaries, in the purchase price allocation as an other asset.



                                       31
<PAGE>

The Company finalized the allocation of the purchase price on December 31, 2002
as follows:

<Table>
<S>                                                                                         <C>          <C>
         Current assets (includes cash of $7,319).......................................                 $    33,061
         Fixed assets ..................................................................                      30,697
         Other non-current assets.......................................................                         462
         Intangible assets subject to amortization
                  Deferred contract rights (6.2-year weighted average useful life)......         13,658
                  Trade name and service marks (20-year weighted average useful life)...            400       14,058
                                                                                               --------
         Goodwill
                  Refractive............................................................         65,770
                  Other.................................................................         21,440       87,210
                                                                                               --------  -----------
         Total assets acquired..........................................................                     165,488
         Current liabilities............................................................                      29,311
         Long-term debt.................................................................                       2,916
         Capitalized lease obligation...................................................                       1,603
         Minority interest..............................................................                       1,008
                                                                                                         -----------
         Total liabilities assumed......................................................                      34,838
                                                                                                         -----------
         Net assets acquired............................................................                 $   130,650
                                                                                                         ===========
</Table>

If the merger agreement with LaserVision had been completed on June 1, 2000, the
unaudited pro forma effects on the consolidated statements of operations for the
years ended May 31, 2002 and 2001, would have been to increase revenues by $99.7
million and $122.7 million, respectively, and to increase the net loss for the
year, before and after the cumulative effect of an accounting change, by $27.9
million and decrease the net loss of $3.8 million, respectively. As a result,
the impact of the above changes to net loss, combined with the dilutive effect
by the increased number of shares, the loss per share for the years ended May
31, 2002 and 2001, would have been reduced by $1.02 and $0.45 per share,
respectively.

The above unaudited pro forma information is presented for information purposes
only and may not be indicative of the results of operations as they would have
been if the merger had occurred on June 1, 2000, nor is it necessarily
indicative of the results of operations which may occur in the future.
Anticipated efficiencies from the combination have been excluded from the
amounts included in the pro forma information.

On August 21, 2000, the Company purchased 100% of the membership interests in
Eye Care Management Associates, LLC ("Eye Care Mgmt. Assoc., LLC") in exchange
for $4.0 million in cash, 295,165 common shares of the Company with a value of
$1.9 million and amounts contingent upon future events. Contingent amounts are
determined based on fees received by the Company pursuant to the Membership
Purchase Agreement. Contingent amounts have been deemed to be compensation of
the physicians associated with Eye Care Mgmt. Assoc., LLC. In fiscal 2001 and
2002, no expense for contingent amounts has been reflected as the applicable
predetermined targets had not been achieved.

During fiscal 2001, an additional 536,764 common shares of the Company, valued
at $4.2 million, were issued to the sellers of The Vision Source, Inc. to
reflect the final payment of contingent consideration which was determined to be
payable during fiscal 2000 and which had been accrued for at May 31, 2000.

On March 2, 2001, the Company acquired certain assets and liabilities of a
Maryland Professional Corporation ("Maryland PC") for $10.0 million in cash and
notes payable of a further $10.0 million to be paid in four equal installments
of $2.5 million on the first four anniversary dates of the transaction. These
notes payable do not carry an interest rate and as such have been



                                       32
<PAGE>

discounted at a rate of 9% with the resulting $8.1 million being reported as
long-term debt for financial reporting purposes. The first installment was paid
in 2002.

The total consideration on acquisitions was allocated to net assets acquired on
the basis of their fair values as follows:

<Table>
<Caption>
                                                                 EYE CARE
                                                  MARYLAND        MGMT.
                                                     PC         ASSOC., LLC      OTHER            TOTAL
                                                 ----------     -----------    ----------      ----------
<S>                                              <C>            <C>            <C>             <C>

Current assets .............................     $       50     $       --     $      501      $      551
Fixed assets ...............................            150             --             --             150
Goodwill ...................................             --             --             77              77
Practice management agreements .............         18,149          5,964          1,440          25,553
Minority interest ..........................             --             --         (1,314)         (1,314)
                                                 ----------     ----------     ----------      ----------
                                                 $   18,349     $    5,964     $      704      $   25,017
                                                 ==========     ==========     ==========      ==========
Funded by:
Issuance of common shares ..................     $       --     $    1,860     $       --      $    1,860
Contribution of cash .......................         10,000          4,000            587          14,587
Notes payable ..............................          8,099             --             --           8,099
Acquisition costs ..........................            250            104            117             471
                                                 ----------     ----------     ----------      ----------
                                                 $   18,349     $    5,964     $      704      $   25,017
                                                 ==========     ==========     ==========      ==========
</Table>

On June 30, 1999, the Company made a capital contribution of $1.0 million
representing a 50.1% interest in TLC USA LLC, the operating company, for
activities of a strategic alliance with a subsidiary of Kaiser Permanente with
the intention to initially own and operate three eye care centers in California
and to eventually develop additional centers in markets in the United States
where Kaiser Permanente has a significant presence.

On July 8, 1999, the Company acquired 50.1% of the operating assets and
liabilities of Laser Eye Care of California, LLC with an investment of $11.2
million in cash and certain operating assets and liabilities of the Company's
two California eye care centers. Additional amounts were payable contingent upon
achieving certain levels of profit. At December 31, 1999, at the completion of
the earn-out period, the required levels of profit were met, and an additional
payment of $6.0 million was made to complete the transaction.

On August 18, 1999, the Company acquired the laser vision correction assets of
Laser Vision Consultants of Albany, P.L.L.C. in exchange for $1.0 million cash
and 30,000 common shares with a value of $0.7 million.

On December 17, 1999, eyeVantage.com, Inc., acquired the operating assets and
liabilities of Eye Care Consultants, Inc. in exchange for $0.7 million in cash,
the assumption of $0.3 million of liabilities and a commitment to issue shares
with a value of $3.0 million in eyeVantage.com, Inc. in the course of a public
offering of eyeVantage.com, Inc. shares. The value of $3.0 million of shares was
converted to non-interest-bearing payable as a result of the public offering not
being completed within the guidelines set by the acquisition agreement.

On December 31, 1999, the earn-out period relating to the 1997 acquisition of
100% of The Vision Source, Inc. was completed, and 210,902 shares of the Company
with a value of $1.4 million as determined by the acquisition agreement were
released from escrow to the sellers of The Vision Source, Inc.

On January 11, 2000, eyeVantage.com, Inc., an 83% subsidiary of the Company,
acquired the operating assets and liabilities of Optical Options, Inc. in
exchange for shares with a value of $6.0 million in eyeVantage.com, Inc. in the
course of a public offering of eyeVantage.com, Inc. shares. Since the public
offering was not completed within the guidelines set by the acquisition
agreement, the Company was required to issue two notes payable to the sellers
for $3.0 million each. During 2001, these amounts were renegotiated.

On February 15, 2000, the Company acquired the membership interests of New
Jersey Practice Management LLC for $2.8 million in cash and amounts contingent
upon future events. $0.6 million was being held in escrow for a period of one
year subject to an adjustment of the purchase price determined by completion of
the earn-out period and calculation of a contingent amount. In fiscal 2002,
approximately $0.3 million in cash was paid in settlement of this obligation,
relinquishing the Company from any further commitments. On March 31, 2000, the
Company acquired certain assets of a physician's practice located in the state
of New York ("New York Practice") in exchange for $11.9 million in cash and
common shares with a



                                       33
<PAGE>

value of up to $3.0 million contingent upon future events. Contingent amounts
are determined based on fees received by the Company pursuant to an
Administrative Services Agreement. In fiscal 2001, contingent amounts of $0.3
million have been reported as operating expenses, based on pre-determined
targets being achieved pursuant to the Administrative Services Agreement, and
are payable at a future date.

On May 8, 2000, the Company acquired an 80% membership interest in Laser Eye
Care of Torrance, LLC in exchange for $3.2 million in cash through Laser Eye
Care of California, LLC, a 50.1% subsidiary of the Company.

The total consideration on acquisitions was allocated to net assets acquired on
the basis of their fair values as follows:

<Table>
<Caption>
                                                  LASER EYE
                                                   CARE OF         NEW YORK
                                                 CALIFORNIA        PRACTICE          OTHER            TOTAL
                                                 -----------      -----------     -----------      -----------
<S>                                             <C>              <C>             <C>              <C>
Current assets (including cash of $1,137) ..     $       153      $        --     $     1,102      $     1,255
Fixed assets ...............................             284               --             564              848
Assets under lease .........................           1,807               --              --            1,807
Goodwill ...................................              --               --          15,588           15,588
Practice management agreements .............          16,852           12,006           7,802           36,660
Current liabilities ........................            (146)              --            (913)          (1,059)
Long-term debt .............................              --               --            (280)            (280)
Obligations under capital leases ...........          (1,607)              --              --           (1,607)
Non-controlling interest ...................            (868)              --          (1,078)          (1,946)
                                                 -----------      -----------     -----------      -----------
                                                 $    16,475      $    12,006     $    22,785      $    51,266
                                                 ===========      ===========     ===========      ===========
Funded by:
Issuance of common shares ..................     $        --      $        --     $     2,125      $     2,125
Contribution of cash .......................          16,000           11,860           7,445           35,305
Notes payable ..............................              --               --           9,000            9,000
Common shares to be issued .................              --               --           4,056            4,056
Acquisition costs ..........................             475              146             159              780
                                                 -----------      -----------     -----------      -----------
                                                 $    16,475      $    12,006     $    22,785      $    51,266
                                                 ===========      ===========     ===========      ===========
</Table>

5. RESTRICTED CASH

The Company has a banking facility of approximately $3.9 million available for
posting letters of guarantee, under terms whereby the Company must maintain a
similar minimum amount in its bank account as a collateral deposit. As of
December 31, 2002, $3.4 million of this facility has been utilized. The Company
has $4.0 million, $5.0 million and $1.6 million of restricted cash as of
December 31, 2002, May 31, 2002 and May 31, 2001, respectively.

6. ACCOUNTS RECEIVABLE

Accounts receivable, net of allowances, consist of the following:

<Table>
<Caption>
                                                                 DECEMBER 31,        MAY 31,          MAY 31,
                                                                     2002             2002             2001
                                                                 ------------     ------------     ------------
<S>                                                              <C>              <C>              <C>
Refractive
     Due from physician-owned companies and  physicians ....     $      8,186     $     11,535     $      5,225
     Due from patients and third parties ...................              952              197              557
Non-refractive .............................................            4,884            5,540            2,230
Other ......................................................              133              719            1,938
                                                                 ------------     ------------     ------------
                                                                 $     14,155     $     17,991     $      9,950
                                                                 ============     ============     ============
</Table>

Non-refractive accounts receivable primarily represent amounts due from a
professional corporation for secondary care management services, amounts due
from healthcare facilities for professional healthcare facility management fees
and outstanding fees for network marketing and management services.



                                       34
<PAGE>
Other accounts receivable include interest receivable, technical fees
receivable, and other receivables not directly applicable to the provision of
laser vision correction services at TLC Vision owned or managed centers.

The Company is exposed to credit risk on accounts receivable from its customers.
In order to reduce its credit risk, the Company has adopted credit policies,
which include the regular review of credit limits. As of December 31, 2002, the
Company had recorded an allowance for doubtful accounts of $2.4 million (May 31,
2002 - $2.5 million, May 31, 2001 - $1.1 million). The Company does not have a
significant exposure to any individual customer, except for amounts due from
those refractive and secondary eye practices, which it manages and which are
collateralized by the practice's patient receivables.

7. INVESTMENTS AND OTHER ASSETS

Investments and other assets consist of the following:

<Table>
<Caption>
                                              DECEMBER 31,       MAY 31,          MAY 31,
                                                  2002             2002             2001
                                              ------------     ------------     ------------
<S>                                           <C>              <C>              <C>
Equity method investments ...............     $        730     $        560     $        334
Marketable equity securities ............              555              608           13,965
Non-marketable equity securities ........              534            2,629            3,500
Long-term receivables and other .........              623              708            5,372
                                              ------------     ------------     ------------
                                              $      2,442     $      4,505     $     23,171
                                              ============     ============     ============
</Table>

At May 31, 2001, the carrying value of the Company's marketable equity
securities was reduced by $9.5 million reflecting the reduced fair value of
these investments. The unrealized loss on these investments was included in
accumulated other comprehensive income (loss). During fiscal 2002, the fair
value of these investments declined an additional $12.4 million. The Company
determined that the decline in fair value was other than temporary and as a
result recorded a charge to income of $21.9 million. Included in the $21.9
million write-down of marketable equity securities was $1.8 million related to
the Company's investment in LaserVision's common shares prior to the merger. The
carrying value of these shares of $1.2 million on May 15, 2002 was included as a
component of the cost of the acquisition.

During fiscal 2002, the Company determined that the decline in its
non-marketable equity securities was other than temporary and recorded a charge
of $0.9 million to reduce the investments to fair value. The Company estimates
fair value of non-marketable equity securities using available market and
financial information including recent stock transactions. During the
transitional period 2002, these investments were written down an additional $2.1
million due to additional other than temporary declines in fair value.

Long-term receivables and other include notes from and advances to service
providers and other companies and deposits. During fiscal 2002, the Company
recorded a $2.0 million reserve against a $2.3 million long-term receivable from
a secondary care service provider of which the Company owns approximately 25% of
the outstanding common shares. The Company determined that the ability of this
secondary care service provider to repay this note was in doubt due to the
deteriorating financial condition of the investee. The remaining balance of $0.3
million reflects the approximate amount due over the next 12 months. The Company
does not provide management services to this entity.

During fiscal 2002, the Company recorded a reserve of $0.3 million for amounts
due from investees and unrelated doctors groups. These receivables are past due.
These amounts bear interest at rates ranging from prime to 8.75%.

During fiscal 2000, the Company advanced $1.0 million to a refractive care
service provider, in which one of the Company's minority interest partners is a
significant shareholder, in exchange for a convertible subordinated term note
bearing interest at the current LIBOR rate and maturing on July 1, 2002. The
note is convertible into 37,500 membership units, which represents approximately
38% of the company. The Company does not provide management services to this
entity. The Company determined that the ability of this refractive service
provider to repay the note was in doubt and therefore recorded a provision
during fiscal 2002 for the full amount of the note of $1.0 million. During the
transitional period, the Company initiated litigation in an effort to receive
payment.

The Company entered into an agreement with Vascular Sciences Corporation
("Vascular Sciences") for the purpose of pursuing commercial applications of
technologies owned or licensed by Vascular Sciences applicable to the
evaluation, diagnosis, monitoring and treatment of age-related macular
degeneration. According to the terms of the agreement, the Company purchased
$3.0 million in preferred stock and has the obligation to purchase an additional
$7.0 million in preferred stock in Vascular Sciences if Vascular Sciences
attains certain milestones in the development and commercialization of the
product. If Vascular Science fails to achieve a milestone, TLC Vision shall have
no further obligations to purchase additional



                                       35
<PAGE>
shares. The consideration for the purchase of the $3.0 million in preferred
shares included the conversion of a $1 million promissory note owed to TLC
Vision by Vascular Sciences which was issued in April 2002. Since the technology
is in the development stage and has not received Food and Drug Administration
(FDA) approval, the Company will account for this investment as a research and
development arrangement whereby cost will be expensed as amounts are expended by
Vascular Sciences. If commercialization of the product occurrs or FDA
approval is obtained, the Company will reevaluate the accounting treatment of
the investment. The first $1.0 million of the investment was expensed during the
fiscal year ended May 31, 2002, and the remaining $2.0 million of the investment
has been expensed as research and development expense during the transitional
period ended December 31, 2002.

In fiscal 2002, the Company advanced $1.0 million to Tracey Technologies, LLC to
support the development of laser scanning technology. This advance will be used
to further develop this technology and accordingly was accounted for as research
and development costs and was expensed in fiscal 2002.

8. GOODWILL

Effective June 1, 2001, the Company early adopted SFAS No. 142, "Goodwill and
Intangible Assets." Under SFAS No. 142, goodwill and intangible assets
of indefinite life are no longer amortized but are subject to an annual
impairment review (or more frequently if deemed appropriate). On adoption, the
Company determined that it has no intangible assets of indefinite life.

The Company's net goodwill amount by reported segment is as follows:

<Table>
<Caption>
                                                                 REFRACTIVE       CATARACT         OTHER           TOTAL
                                                                 ----------      ----------      ----------      ----------
<S>                                                             <C>             <C>             <C>             <C>

     Goodwill, June 1, 2000 ................................     $   25,945      $       --      $   19,366      $   45,311
     Goodwill acquired during the period ...................             97                              20             117
     Amortization expense ..................................         (2,351)                         (1,433)         (3,784)
     Aggregate amount of impairment losses recognized ......             --              --          (8,892)         (8,892)
                                                                 ----------      ----------      ----------      ----------
     Goodwill, May 31, 2001 ................................         23,691              --           9,061          32,752
     Goodwill acquired during the period ...................         65,184          10,328          11,112          86,624
     Other .................................................             --              --            (330)           (330)
     Aggregate amount of impairment losses recognized ......        (53,333)             --         (12,521)        (65,854)
                                                                 ----------      ----------      ----------      ----------
     Goodwill, May 31, 2002 ................................         35,542          10,328           7,322          53,192
     Goodwill acquired during the period ...................            586           8,763             294           9,643
     Aggregate amount of impairment losses recognized ......        (22,138)             --              --         (22,138)
                                                                 ----------      ----------      ----------      ----------
     Goodwill, December 31, 2002 ...........................     $   13,990      $   19,091      $    7,616      $   40,697
                                                                 ==========      ==========      ==========      ==========
</Table>

The Company tests goodwill for impairment in the fourth quarter after the annual
forecasting process. Based on the trend of lower procedure volumes and
increasing pricing pressures in the refractive segment, the earning forecast for
the next five years was revised. The fair value of each reporting unit was
estimated using the present value of expected future cash flows. A goodwill
impairment charge of $22.1 million was recognized in the refractive segment
during transitional period 2002. The charge includes $21.8 million related to
the goodwill attributable to the reporting unit acquired in the LaserVison
acquisition.

The Company completed a transitional impairment test to identify if goodwill
was impaired as of June 1, 2001. The Company utilized the assistance of an
independent outside appraiser to determine the fair value of the Company's
reporting units. The independent appraiser used a fair value methodology based
on budget information to generate representative values of the future cash flows
attributable to each reporting unit. The Company determined that goodwill was
impaired at June 1, 2001 and recorded an impairment charge of $15.2 million,
which was recorded as a cumulative effect of a change in accounting principle.

The Company performed its annual impairment test in the fourth quarter of fiscal
2002 and determined that there was a further impairment of goodwill during 2002
of $50.7 million, which was recorded as a charge to income during the year. This



                                       36
<PAGE>

charge was comprised of $45.9 million which relates to the goodwill attributable
to reporting units acquired in the LaserVision acquisition and $4.8 million
relating to goodwill attributable to reporting units acquired in prior years.

A reconciliation of net income as if SFAS No. 142 has been adopted at the
beginning of the fiscal year is presented below for the year ended May 31, 2001.

<Table>
<S>                                          <C>
Reported net loss ......................     $    (37,773)
Add back goodwill amortization .........            3,784
                                             ------------
Adjusted net loss ......................     $    (33,989)
                                             ============
Basic and diluted  loss per share:
Reported net loss ......................     $      (1.00)
Add back goodwill amortization .........             0.10
                                             ------------
Adjusted net loss ......................     $      (0.90)
                                             ============
</Table>

9. OTHER INTANGIBLE ASSETS

The Company's other intangible assets consist of practice management agreements
(PMAs), deferred contract rights and other intangibles. The Company has no
indefinite lived intangible assets. Amortization expense was $3.8 million, $10.3
million, $8.8 million, and $7.4 million in the seven-month period ended December
31, 2002, year ended May 31, 2002, year ended May 31, 2001, and year ended May
31, 2000, respectively.

The weighted average amortization period for PMAs is 9.6 years, deferred
contract rights are 7.7 years, and other intangibles are 15.45 years as of
December 31, 2002.

Amortized intangible assets as of December 31, 2002 consist of:

<Table>
<Caption>
                                           Gross Carrying    Accumulated
                                                Cost         Amortization
                                           --------------    ------------
<S>                                        <C>              <C>
Practice management agreements               $    43,407     $    27,151
Deferred contract rights                          13,983           1,487
Other                                                600              26
                                             -----------     -----------
Total                                        $    57,990     $    28,664
                                             ===========     ===========
</Table>

The approximate estimated aggregate amortization expense for the next five years
as of December 31, 2002 is as follows:

<Table>
<S>                                                <C>
2003........................................       $6,500
2004........................................        5,300
2005........................................        3,500
2006........................................        2,800
2007........................................        2,800
Thereafter in total.........................        8,400
</Table>

Intangible assets arising from PMAs were reviewed for impairment in fiscal 2002,
using an undiscounted cash flow methodology based on budgets prepared for future
periods. The refractive industry had experienced reduced procedure volumes over
the last two years as a result of increased competition, customer confusion and
a weakening in the North American economy. This reduction in procedures has
occurred at practices the Company had purchased, and as a result revenues were
lower than anticipated when initial purchase prices and resulting intangible
values were determined. The result of an initial review indicated that on an
undiscounted basis, all of the refractive PMAs were impaired, and a further fair
value analysis based on the present value of future cash flows was completed to
determine the extent of the impairment. This further



                                       37
<PAGE>

review resulted in an impairment charge of $31.0 million, which was reported in
operating loss for the year ended May 31, 2002.

10. FIXED ASSETS

Fixed assets, including capital leased assets, consist of the following:

<Table>
<Caption>
                                           DECEMBER 31, 2002  MAY 31, 2002     MAY 31, 2001
                                           -----------------  ------------     ------------
<S>                                        <C>                <C>              <C>
Land and buildings .....................   $           9,589     $   9,459     $     10,809
Computer equipment and software ........              14,112        14,109           13,492
Furniture, fixtures and equipment ......               9,321        10,902            8,379
Laser equipment ........................              40,132        41,398           26,310
Leasehold improvements .................              20,873        23,252           25,637
Medical equipment ......................              22,746        22,742           17,563
Vehicles and other .....................               6,565         5,980              828
                                           -----------------  ------------     ------------
                                                     123,338       127,842          103,018
Less accumulated depreciation ..........              65,335        59,709           50,673
                                           -----------------  ------------     ------------
Net book value .........................   $          58,003  $     68,133     $     52,345
                                           =================  ============     ============
</Table>

Certain fixed assets are pledged as collateral for certain long-term debt and
capital lease obligations.

In the transitional period 2002, the Company recorded a reduction in the
carrying value of fixed assets of $1.0 million, within the refractive segment,
reflecting the disposal of certain of the Company's lasers. The amount is
included in other income and expense. These lasers were not needed after the
LaserVision acquisition, and the Company disposed of them below their carrying
cost.

During fiscal 2002, the Company determined that events and circumstances
indicated that the carrying value of certain of the Company's lasers may not be
recoverable. As a result, the Company evaluated the assets and concluded they
were impaired. In accordance with SFAS No. 121 "Accounting for Impairment of
Long-Lived Assets and Assets to be Disposed Of," the Company recorded an
impairment charge of $2.6 million within the refractive segment, to write the
assets down to their fair value.

In fiscal 2002, the Company completed a sale-leaseback transaction for its
Canadian corporate headquarters. Total consideration received for the sale was
$6.4 million, which was comprised of $5.4 million cash and a $1.0 million 8.0%
note receivable ("Note"). The Note has a seven-year term with the first of four
annual payments of $63,000 starting on the third anniversary of the sale and a
final payment of $0.7 million due on the seventh anniversary of the sale. The
lease term related to the leaseback covers a period of 15 years. For accounting
purposes, due to ongoing responsibility for tenant management and
administration, as well as receiving the Note as part of the consideration for
the sale, no sale was recognized. For purpose of financial reporting, the cash
proceeds of $5.4 million have been presented as additional debt. The four annual
payments and the final payment, upon receipt, will result in additional debt,
while lease payments will result in decreasing the debt and recognizing interest
expense. Until the Company meets the accounting qualifications for recognizing
the sale, the building associated with the sale-leaseback will continue to be
depreciated over its initial term of 40 years.

The Company is currently reviewing its space requirements with regard to this
facility. No restructuring charge has been made relating to this facility, as no
decision has been made with regard to the use or disposal of this facility. The
Company continues to use this facility for certain functions. Any costs
associated with exiting or renegotiating the lease on this facility, which could
be material, will be reflected in income in future periods.



                                       38
<PAGE>

11. LONG-TERM DEBT

Long-term debt consists of:

<Table>
<Caption>
                                                                            DECEMBER 31,        MAY 31,         MAY 31,
                                                                                2002             2002             2001
                                                                            ------------     ------------     ------------
<S>                                                                         <C>              <C>              <C>
Term loans
  Interest at 8%, due September 2001, payable to affiliated
    Physicians ........................................................     $         --     $         --     $         32
  Interest at 3.11%, due through June 2004, payable to vendor .........            4,587            6,061
  Interest imputed at 9.00%, due in three payments from March 2003
    through 2005, payable to affiliated doctor relating to
    practice acquisition ..............................................            6,328            5,806            8,099
  Interest imputed at 6.25%, due through October 2016,
    collateralized by building and payable in Canadian dollars
    of $8.6 million ...................................................            5,201            5,447               --
  Interest ranging from prime to 12%, due through March 2007,
    collateralized by equipment .......................................            2,441            1,119            2,727
  Other ...............................................................               --               62               --
  Capital lease obligations, payable through 2006, interest ranging
    from 4.8% to 14% ..................................................            3,525            5,581            4,224
                                                                            ------------     ------------     ------------

                                                                                  22,082           24,076           15,082
  Less current portion ................................................            6,322            9,433            6,769
                                                                            ------------     ------------     ------------
                                                                            $     15,760     $     14,643     $      8,313
                                                                            ============     ============     ============
</Table>

Aggregate debt repayments of principal for each of the next five years and
thereafter as of December 31, 2002 are as follows:

<Table>
<Caption>
                                     Long-term
                                       debt
                                   ------------
<S>                                <C>
2003 .........................     $      4,509
2004 .........................            4,705
2005 .........................            4,327
2006 .........................              393
2007 .........................              296
Thereafter ...................            4,327
                                   ------------
Total ........................     $     18,557
                                   ============
</Table>

Aggregate repayments for capital lease obligations for each of the next five
years and thereafter are as follows:

<Table>
<S>                       <C>
2003                     $1,892
2004                      1,169
2005                        660
2006                         48
2007                         --
Thereafter                   --
                         ------
Total                     3,769
Less interest portion       244
                         ------
                         $3,525
                         ======
</Table>


12. OTHER INCOME AND EXPENSE

Other income and expense for the seven months ended December 31, 2002 consists
of $6.8 million of income from the settlement of an antitrust lawsuit. In
August 2002, LaserVision received $8.0 million in cash from the settlement, and
TLC Vision received $7.1 million in cash from the settlement. The cash received
for the LaserVision portion reduced the receivable recorded in the purchase
price allocation. The cash received for the TLC Vision portion was recorded as a
gain of $6.8 million (net of $0.3 million for its obligations to be paid to the
minority interests).

During the transitional period, the Company recorded $0.9 million of income from
the termination of the Surgicare Inc. ("Surgicare") agreement to purchase Aspen
Healthcare ("Aspen") from the Company. On May 16, 2002, the Company agreed to
sell the capital stock of its Aspen subsidiary to SurgiCare for a purchase price
of $5.0 million in cash and warrants for 103,957 shares of common stock of
SurgiCare with an exercise price of $2.24 per share. On June 14, 2002, the
purchase agreement for the transaction was amended due to the failure of
Surgicare to meet its obligations under the agreement. The amendment established
a new closing date of September 14, 2002 and required SurgiCare to issue 38,000
shares of SurgiCare common stock and to pay $760,000 to the Company, prior to
closing, all of which was non-refundable. SurgiCare failed to perform under the
purchase agreement, and as a result, the purchase agreement was terminated and
the Company recorded the gain in other income and expense for the period.

During the transitional period 2002, the Company disposed of six excess lasers,
resulting in a loss of $1.0 million, which amount is included in other income
and expense (See Note 10).




                                       39
<PAGE>
13. STOCKHOLDERS' EQUITY AND OPTIONS

Option and Warrants

In January 2000, the Company issued 100,000 warrants with an exercise price of
$13.063 per share to an employee benefits company as consideration. These
warrants are not transferable, vest over periods up to three years and expire
after five years.

Using the Black-Scholes option-pricing model (assumptions - five year life,
volatility of .35, risk free rate of return 6.35%, no dividends), a $0.5 million
fair value was assigned to these warrants, which was amortized over the vesting
periods.

The 8,018,711 options issued in connection with the LaserVision merger had a
fair value of $11.0 million using the Black-Scholes options pricing model
(assumptions - 2 years to 5 year estimated lives, volatility of .74, risk free
rates of returns 3.34% to 3.72%, no dividends, market price of $4.1725 on the
date the merger was announced in August 2001, exercise prices ranging from
$1.713 to $8.688 per share).

During fiscal 2002, the Board of Directors voted to fully vest all outstanding
unexercised options of a consultant who was a former executive officer. As
required by SFAS No. 123, "Accounting for Stock-based Compensation," the $0.2
million fair value of these options was charged to earnings in fiscal 2002, the
year the options vested, and an equivalent amount was credited to option equity.
These options were granted during the period from December 1997 through December
2001 at exercise prices ranging from Cdn$4.04 to Cdn$29.90.

OPTIONS OUTSTANDING

As of December 31, 2002, the Company has issued stock options to employees,
directors and certain other individuals. Options granted have terms ranging from
five to ten years. Vesting provisions on options granted to date include options
that vest immediately, options that vest in equal amounts annually over the
first four years of the option term and options that vest entirely on the first
anniversary of the grant date.

As of December 31, 2002, the issued and outstanding options denominated in
Canadian dollars were at the following prices and terms:

<Table>
<Caption>
                                   OUTSTANDING                                      EXERCISABLE
-----------------------------------------------------------------------     -----------------------------
                                             WEIGHTED        WEIGHTED                          WEIGHTED
                                             AVERAGE         AVERAGE                            AVERAGE
   PRICE RANGE             NUMBER OF       CONTRACTUAL       EXERCISE        NUMBER OF         EXERCISE
     (CDN $)                OPTIONS           LIFE            PRICE           OPTIONS            PRICE
--------------------     ------------     ------------     ------------     ------------     ------------
<S>                      <C>             <C>               <C>              <C>              <C>
$1.43 - $3.87 ......          184,000        3.5 years     $       1.43              250     $         --
$4.04 - $5.54 ......          523,376        3.0 years             4.05          299,226             4.09
$7.25 - $10.50 .....           52,812        3.3 years             8.61           16,406             8.43
$10.87 - $19.73 ....          310,592        0.8 years            12.53          295,172            13.70
$20.75 - $30.66 ....           13,261        1.5 years            26.18           11,623            28.91
$49.30 - $64.79 ....              669        2.0 years            47.06              669            56.11
                         ------------                                       ------------
                            1,084,710        2.4 years            10.76          623,346             9.28
                         ============                                       ============
</Table>

As of December 31, 2002, the issued and outstanding options denominated in U.S.
dollars were at the following prices and terms:

<Table>
<Caption>
                            OUTSTANDING                                              EXERCISABLE
-----------------------------------------------------------------------     -----------------------------
                                            WEIGHTED         WEIGHTED                          WEIGHTED
                                             AVERAGE         AVERAGE                           AVERAGE
   PRICE RANGE             NUMBER OF       CONTRACTUAL       EXERCISE        NUMBER OF         EXERCISE
     (U.S.$)                OPTIONS           LIFE            PRICE           OPTIONS           PRICE
--------------------     ------------     ------------     ------------     ------------     ------------
<S>                      <C>             <C>               <C>              <C>              <C>
$0.90 - $2.81 ......        1,949,747        5.2 years     $       2.26        1,585,943     $       2.19
$3.02 - $3.86 ......        1,009,864        7.4 years             3.23        1,006,489             3.23
$4.25 - $4.88 ......        1,739,284        2.5 years             4.65        1,596,990             4.63
$5.00 - $7.81 ......          692,899        1.8 years             5.70          549,144             5.55
$8.50 - $8.69 ......        2,181,121        1.6 years             8.68        2,145,568             8.68
$10.06 - $19.50 ....           22,761        1.5 years            18.02           18,635            18.40
                         ------------                                       ------------
                            7,595,676        3.5 years             5.14        6,902,769             5.24
                         ============                                       ============
</Table>

A total of 1,159,000 options have been authorized for issuance in the future but
were not issued and outstanding as of December 31, 2002. A summary of option
activity during the last three fiscal years and the transitional period follows:

                                       40
<PAGE>


<Table>
<Caption>
                                                                 WEIGHTED         WEIGHTED
                                                                 AVERAGE          AVERAGE
                                                OPTIONS       EXERCISE PRICE   EXERCISE PRICE
                                                (000'S)         PER SHARE        PER SHARE
                                             ------------     --------------   --------------
<S>                                         <C>              <C>              <C>
May 31, 1999 ...........................            2,692      Cdn$   11.12     US$     7.54
   Granted .............................              453             30.14            20.62
   Exercised ...........................              (88)            10.71             7.26
                                             ------------      ------------     ------------
May 31, 2000 ...........................            3,057      Cdn$   13.95     US$     9.49
   Granted .............................            1,338              5.63             3.74
   Exercised ...........................              (40)             4.73             3.24
   Forfeited ...........................           (1,502)             9.48             6.51
                                             ------------      ------------     ------------
May 31, 2001 ...........................            2,853      Cdn$   12.65     US$     8.46
   Granted .............................            1,221              4.45             2.81
   Exercised ...........................              (10)             4.06             2.67
   Forfeited ...........................             (610)            10.52             7.06
   Granted, LaserVision merger .........            7,519              7.79             5.08
                                             ------------      ------------     ------------
May 31, 2002 ...........................           10,973      Cdn$    8.50     US$     5.59
   Granted .............................               11              2.17             1.42
   Exercised ...........................               (5)             2.47             1.61
   Surrendered .........................             (618)            27.05            17.68
   Reissued ............................              610             13.69             8.69
   Forfeited ...........................             (824)             9.66             6.95
   Expired .............................           (1,467)             6.12             4.00
                                             ------------      ------------     ------------
December 31, 2002 ......................            8,680      Cdn$    7.80     US$     5.10
                                             ============      ============     ============
Exercisable at December 31, 2002 .......            7,526      Cdn$    8.12     US$     5.30
                                             ============      ============     ============
</Table>

Immediately prior to the effective time of the merger, LaserVision reduced the
exercise price of approximately 2.1 million outstanding stock options and
warrants of Laser Vision with an exercise price greater than $8.688 per share to
$8.688 per share. This reduction was part of the merger agreement approved by
LaserVision stockholders in April 2002. The vesting and expiration dates did not
change. Post-merger, these former LaserVision options became approximately 2.0
million options of the Company with an exercise price of $8.688. These options
are part of the 7,519,000 options granted in connection with the LaserVision
merger.

Pursuant to a plan approved by the Company's stockholders in April 2002, most
employees and officers with options at exercise prices greater than $8.688
elected to exchange them for options with an exercise price of $8.69
(Cdn$13.69). A total of 618,000 shares with an average exercise price of $17.68
(Cdn$27.05) were exchanged for 610,000 shares with exercise prices of $8.69
(Cdn$13.69). For every option with an exercise price of at least $40, the holder
surrendered 75% of the shares subject to such option; for every option with an
exercise price of at least $30 but less than $40, the holder surrendered 66.6%
of the shares subject to such option; for every option with an exercise price of
at least $20 but less than $30, the holder surrendered 50% of the shares subject
to such option; and for every option with an exercise price of at least $8.688
but less than $20, the holder did not surrender any of the shares subject to
such option. These repriced options will be subject to variable option
accounting and compensation expense will be necessary whenever
these options are outstanding and the market price of the Company's stock is
$8.69 or higher.

Pro forma information regarding net loss and loss per share is required by SFAS
No. 123 and has been included in Note 2 to the financial statements. The fair
value of the options granted was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rate of 2.5% for the transitional period 2002,
4.25% for fiscal 2002, 6.5% for fiscal 2001 and 7.5% for fiscal 2000; no
dividends; volatility factors of the expected market price of the Company's
common shares of 0.70 for the transitional period, 0.88 for fiscal 2002, 0.83
for fiscal 2001 and 0.71 for fiscal 2000; and a weighted average expected option
life of 2.5 years for the transitional period, 4.0 years for fiscal 2002, 4.0
years for fiscal 2001, and 3.5 years for fiscal 2000. The estimated value of the
options issued in connection with the LaserVision acquisition were recorded as
part of the cost of the acquisition. The fair market value of the options
granted during the transitional period ended December 31, 2002 was approximately
$12,000 (fiscal 2002 - $1.3 million; fiscal 2001 - $3.1 million; fiscal 2000 -
$5.8 million). The Black-Scholes option-pricing model was developed for use in
estimating fair value of traded options that have no vesting restrictions and
are fully transferable.

Because the Company's employee stock options have characteristics significantly
different from those of traded options (deferred/partial vesting and no trading
during four "black-out" periods each year) and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the above pro forma adjustments for SFAS No. 123 are not
necessarily a reliable single measure of the fair value of the Company's
employee stock options.



                                       41
<PAGE>

14. INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities are
as follows:

<Table>
<Caption>
                                                 DECEMBER 31,         MAY 31,           MAY 31,
                                                     2002              2002              2001
                                                 ------------      ------------      ------------
<S>                                              <C>               <C>               <C>
Deferred tax asset:
     Net operating loss carryforwards ......     $     55,293      $     49,408      $     20,947
     Fixed assets ..........................            3,693             3,399             1,362
     Intangibles ...........................           17,418            16,638             2,444
     Investments ...........................           12,343            15,806             5,580
     Other .................................           15,859             4,197             1,607
                                                 ------------      ------------      ------------
Total ......................................          104,606            89,448            32,322
     Valuation allowance ...................          (99,603)          (85,052)          (30,429)
                                                 ------------      ------------      ------------
                                                 $      5,003      $      4,396      $      1,702
                                                 ============      ============      ============
Deferred tax liabilities:
     Practice management agreements ........     $      1,495      $      1,571      $      1,702
     Intangibles ...........................            2,825             2,825                --
     Fixed assets ..........................              683                --                --
                                                 ------------      ------------      ------------
                                                 $      5,003      $      4,396      $      1,702
                                                 ============      ============      ============
</Table>

As of December 31, 2002, the Company has net operating losses available for
carryforward for income tax purposes of approximately $169.2 million, which are
available to reduce taxable income of future years.

The Canadian losses can only be utilized by the source company, whereas the
United States losses are utilized on a United States consolidated basis. The
Canadian losses of $24.3 million as of December 31, 2002 expire as follows:

<Table>
<Caption>
<S>                                                 <C>
        2003...................................      $   1,481
        2004...................................            821
        2005...................................            315
        2006...................................            580
        2007...................................          9,237
        2008...................................          8,206
        2009...................................          3,657
</Table>

The United States losses of $145.6 million expire between 2011 and 2022. The
Canadian and United States losses include amounts of $3.2 million and $67.8
million, respectively, relating to the acquisitions of 20/20, Beacon Eye and
LaserVision. The availability and timing of utilization of these losses may be
restricted.

The differences between the provision for income taxes and the amount computed
by applying the statutory Canadian income tax rate to loss before income taxes
and minority interest were as follows:

<Table>
<Caption>
                                                                      SEVEN-MONTH
                                                                      PERIOD ENDED                    YEAR ENDED MAY 31,
                                                                      DECEMBER 31,     --------------------------------------------
                                                                          2002              2002           2001            2000
                                                                      ------------     ------------     ------------   ------------
<S>                                                                   <C>              <C>              <C>            <C>
Income tax recovery based on the Canadian statutory
      income tax 40.3% (2001 - 43.2%; 2000 - 44.6%) ...............   $    (16,731)    $    (46,963)    $    (15,529)  $        241
Current year's losses not utilized ................................          5,824           10,025            8,474          1,950
Expenses not deductible for income tax purposes ...................         10,907           37,733            7,764          1,675
Adjustments of cash vs. accrual tax deductions for
      U.S. income tax purposes ....................................             --             (516)             117            363
Utilization of prior year's losses ................................             --               --             (118)        (1,675)
Corporate minimum tax, large corporations tax and foreign tax .....            851            1,221            1,255            879
Other .............................................................             --              284              276             21
                                                                      ------------     ------------     ------------   ------------
Provision for income taxes ........................................   $        851     $      1,784     $      2,239   $      3,454
                                                                      ============     ============     ============   ============
</Table>



                                       42
<PAGE>
The provision for income taxes is as follows:

<Table>
<Caption>
                                                 DECEMBER 31,     MAY 31,        MAY 31,
                                                    2002           2002           2001
                                                 -----------    ----------     ----------
<S>                                              <C>            <C>            <C>
Current:
         Canada ............................     $       67     $      112     $      111
         United States - federal ...........            325            924            929
         United States - state .............            135            280            645
         Other .............................            324            468            554
                                                 ----------     ----------     ----------
                                                 $      851     $    1,784     $    2,239
                                                 ==========     ==========     ==========
</Table>

15. COMMITMENTS AND CONTINGENCIES

Operating Commitments

As of December 31, 2002 the Company has commitments relating to non-cancellable
operating leases for rental of office space and equipment and long term
marketing contracts, which require future minimum payments aggregating to
approximately $34.7 million. Future minimum payments over the next five years
and thereafter are as follows:

<Table>
<S>                                                 <C>
2003.........................................       $ 9,690
2004.........................................         8,824
2005.........................................         7,731
2006.........................................         3,651
2007.........................................         2,761
Thereafter...................................         2,025
</Table>

As of December 31, 2002 the Company had a commitment with a major laser
manufacturer ending November 30, 2004 for the use of that manufacturer's lasers
which require future minimum lease payments aggregating $5.1 million. Future
minimum lease payments in aggregate and over the remaining two years are as
follows:

<Table>
<S>                                      <C>
2003..............................       $ 2,040
2004..............................         3,060
</Table>

Guarantees

One of the Company's subsidiaries, together with other investors, has jointly
and severally guaranteed the obligations of an equity investee. Total
liabilities of the equity investee under guarantee are approximately $2.1
million at December 31, 2002.

Legal Contingencies

On February 9, 2001, Joseph Dello Russo, M.D., filed a lawsuit against the
Company and certain physicians associated with the Company in the United States
District Court, Eastern District of New York, alleging false description, false
advertising and deceptive trade practices based upon certain advertisements of a
doctor with substantially the same name as the plaintiff. The complaint alleged
compensatory damages to be no less than $30 million plus punitive damages. This
lawsuit was settled on October 31, 2002, and no payment was made by any party to
any of the other parties.

In the fourth quarter fiscal 2001, an arbitration award was issued against TLC
Network Service Inc. for $2.1 million that has been fully accrued for in fiscal
2002. The arbitration award was extended to the Company. The Company has filed
an appeal but no hearing date has been set at this time. Payment of this
liability has been deferred until final resolution of the appeal and all other
legal alternatives have been explored.

In April 2002, Lesa K. Melchor, Richard D. and Lee Ann Dubois and Major Gary D.
Liebowitz filed a lawsuit in the U.S. District Court, Southern District of
Texas, Houston Division against LaserVision. This is a securities claim seeking
damages for losses incurred in trading in LaserVision stock and options in the
period from November 1999 to December 2001. In their Complaint, the plaintiffs
allege that LaserVision's director of investor relations gave them false and
misleading information. This lawsuit was settled on January 14, 2002; and while
admitting no liability, the Company paid $25,000 to the plaintiffs in full
settlement of all claims.

On October 21, 2002 the Company was served with a lawsuit filed by Thomas S.
Tooma, M.D. and TST Acquisitions, LLC in the Superior Court of the State of
California in Orange County, California. Dr. Tooma and certain entities
controlled



                                       43
<PAGE>

by him have entered into a joint business venture with TLC Vision in the State
of California since July 1999. The lawsuit seeks damages and injunctive relief
based on the plaintiffs' allegation that the Company's merger with Laser Vision
Centers, Inc. violated certain exclusivity provisions of its agreements with the
plaintiffs, thereby giving plaintiffs the right to exercise a call option to
purchase TLC Vision's interest in the joint venture. Since the lawsuit has only
recently been served, the Company is still evaluating its position.

In March 2003, the Company and its subsidiary OR Providers, Inc. were served
with subpoenas issued by the U.S. Attorney's Office in Cleveland, Ohio. The
subpoenas appear to relate to business practices of OR Providers prior to its
acquisition by LaserVision in December 2001. OR Providers is a provider of
mobile cataract services in the eastern part of the U.S. The Company is aware
that other entities and individuals have also been served with similar
subpoenas. The subpoenas seek documents related to certain business activities
and practices of OR Providers. The Company will cooperate fully to comply with
the subpoenas. Pursuant to the purchase agreement for the Company's purchase of
OR Providers, the selling shareholders of OR Providers agreed to indemnify the
Company with respect to the liability and accordingly the Company does not
believe this matter will have a material adverse effect on the Company.

The Company is subject to various claims and legal actions in the ordinary
course of its business, which may or may not be covered by insurance. These
matters include, without limitation, professional liability, employee-related
matters and inquiries and investigations by governmental agencies. While the
ultimate results of such matters can not be predicted with certainty, the
Company believes that the resolution of these matters will not have a material
adverse effect on its consolidated financial position or results of operations.

Regulatory Tax Contingencies

TLC Vision operates in 48 states and two Canadian provinces and is subject to
various federal, state and local income, payroll, unemployment, property,
franchise, capital, sales and use tax on its operations, payroll, assets and
services. TLC Vision endeavors to comply with all such applicable tax
regulations, many of which are subject to different interpretations, and has
hired outside tax advisors to assist in the process. Many states and other
taxing authorities are experiencing financial difficulties and have been
interpreting laws and regulations more aggressively to the detriment of
taxpayers such as TLC Vision and its customers. Although TLC Vision cannot
predict the outcome of all past and future tax assessments, it believes that it
has adequate provisions and accruals in its financial statements for tax
liabilities.

Tax authorities in four states have contacted TLC Vision and issued proposed
sales tax adjustments in the aggregate amount of approximately $2.2 million for
various periods through 2002 on the basis that certain of TLC Vision's laser
access arrangements constitute a taxable lease or rental rather than an exempt
service. If it is determined that any sales tax is owed, TLC Vision believes
that, under applicable laws and TLC Vision's contracts with its eye surgeon
customers, each customer is ultimately responsible for the payment of any
applicable sales and use taxes in respect of TLC Vision's services. However, TLC
Vision may be unable to collect any such amounts from its customer, and in such
event would remain responsible for payment. TLC Vision cannot yet predict the
outcome of these assessments, or any other assessments or similar actions which
may be undertaken by other state tax authorities. The Company is currently
conducting an evaluation of its sales tax reporting in various other states.
The Company believes that it has adequate provisions in its financial statements
with regard to these matters.

Employment Contingencies

As of December 31, 2002, the Company had employment contracts with 11 officers
of TLC Vision or its subsidiaries to provide for base salaries, the potential to
pay certain bonuses, medical benefits and severance payments. Nine officers have
agreements providing for severance payments ranging from 12 to 24 months of base
or total compensation under certain circumstances. Two officers have agreements
providing for severance payments equal to 36 months of total compensation and
future medical benefits (totaling approximately $2.0 million) at their option
until November 2003 and 24-month agreements thereafter.

16. SEGMENT INFORMATION

The Company has two reportable segments: refractive and cataract. The refractive
segment is the core focus of the Company and is in the business of providing
corrective laser surgery specifically related to refractive disorders, such as
myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. This
segment is comprised of Company-owned laser centers and Company-managed laser
centers. The refractive segment also includes the access and mobile refractive
business of



                                       44
<PAGE>
LaserVision. The cataract segment provides surgery specifically for the
treatment of cataracts. The Company acquired the cataract segment in the
LaserVision acquisition, therefore no amounts are shown for that segment in
periods prior to June 1, 2002. Other includes an accumulation of other
healthcare business activities including the management of cataract and
secondary care centers that provide advanced levels of eye care, network
marketing and management and professional healthcare facility management. None
of these activities meet the quantitative criteria to be disclosed separately as
a reportable segment.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on operational components including paid procedures, net revenue after
doctors' fees, fixed costs, and income (loss) before income taxes.

Intersegment sales and transfers are minimal and are recorded as if the sales or
transfers were to third parties.

Doctors' compensation as presented in the segment information of the financial
statements represents the cost to the Company of engaging experienced and
knowledgeable ophthalmic professionals to perform laser vision correction
services at the Company's owned laser centers. Where the Company manages laser
centers due to certain state requirements it is the responsibility of the
professional corporations or physicians to whom the Company furnishes management
services to provide the required professional services and engage ophthalmic
professionals. In such cases, the costs associated with arranging for these
professionals to furnish professional services are reported as a cost of the
professional corporation and not of the Company.

The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. The Company's
business units were acquired or developed as a unit, and management at the time
of acquisition was retained.

The Company's business segments were as follows:

<Table>
<Caption>
   SEVEN-MONTH PERIOD ENDED DECEMBER 31,  2002             REFRACTIVE          CATARACT            OTHER               TOTAL
--------------------------------------------------        ------------       ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>                <C>

Revenues ...........................................      $     76,199       $     12,944       $     11,011       $    100,154
Expenses:
Doctor compensation ................................             6,523                 --                 --              6,523
Operating ..........................................            79,869             10,040              9,223             99,132
Depreciation expense ...............................             8,361              1,172                525             10,058
Amortization of intangibles ........................             3,592                482                 --              4,074
Impairment of intangibles ..........................            22,138                 --                 --             22,138
Write down in the fair value of investments ........             2,095                 --                 --              2,095
Restructuring and other charges ....................             4,227                 --                 --              4,227
                                                          ------------       ------------       ------------       ------------
                                                               126,805             11,694              9,748            148,247
                                                          ------------       ------------       ------------       ------------
Income (loss) from operations ......................           (50,606)             1,250              1,263            (48,093)
Other income and (expense) net .....................             6,996                 --                 --              6,996
Interest expense, net and other ....................               136                (73)              (306)              (243)
Minority interest ..................................              (238)                --               (914)            (1,152)
Income taxes .......................................            (1,041)                (1)               191               (851)
                                                          ------------       ------------       ------------       ------------
Net  income (loss) .................................      $    (44,753)      $      1,176       $        234       $    (43,343)
                                                          ============       ============       ============       ============
Total assets .......................................      $    161,855       $     13,323       $     20,878       $    196,056
                                                          ============       ============       ============       ============
Purchase of long-lived assets ......................      $      3,652       $      1,390       $      9,492       $     14,534
                                                          ============       ============       ============       ============
</Table>

<Table>
<Caption>
               YEAR ENDED MAY 31, 2002                     REFRACTIVE           OTHER               TOTAL
----------------------------------------------------      ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>

Revenues ...........................................      $    115,908       $     18,843       $    134,751
Expenses:
Doctor compensation ................................            10,225                 --             10,225
Operating ..........................................           111,708             15,856            127,564
Depreciation expense ...............................            10,143                860             11,003
Amortization of intangibles ........................             9,897                452             10,349
Impairment of Intangibles including transitional ...            84,879             12,015             96,894
Write down in the fair value of investments ........            24,066              2,016             26,082
Reduction in the carrying value of fixed assets ....             2,553                 --              2,553
Restructuring and other charges ....................             8,750                 --              8,750
                                                          ------------       ------------       ------------
                                                               262,221             31,199            293,420
                                                          ------------       ------------       ------------
Loss from operations ...............................          (146,313)           (12,356)          (158,669)
Interest expense, net and other ....................              (735)               (26)              (761)
Minority interest ..................................              (225)              (410)              (635)
Income taxes .......................................              (745)            (1,039)            (1,784)
                                                          ------------       ------------       ------------
Net loss ...........................................      $   (148,018)      $    (13,831)      $   (161,849)
                                                          ============       ============       ============
Total assets .......................................      $    223,472       $     22,043       $    245,515
                                                          ============       ============       ============
Purchase long-lived assets .........................      $      2,707       $        620       $      3,320
                                                          ============       ============       ============
</Table>


                                       45
<PAGE>


<Table>
<Caption>
               YEAR ENDED MAY 31, 2001
----------------------------------------------------
<S>                                                       <C>                <C>                <C>

Revenues ...........................................      $    161,219       $     12,787       $    174,006
Expenses:
Doctor compensation ................................            15,538                 --             15,538
Operating ..........................................           134,324             15,168            149,492
Depreciation expense ...............................            13,675              1,375             15,050
Amortization of intangibles ........................            10,703              1,840             12,543
Restructuring and other charges ....................             6,433             12,642             19,075
                                                          ------------       ------------       ------------
                                                               180,673             31,025            211,698
                                                          ------------       ------------       ------------
Loss from operations ...............................           (19,454)           (18,238)           (37,692)
Interest income, net and other .....................             2,385                158              2,543
Minority interest ..................................              (370)               (15)              (385)
Income taxes .......................................            (1,779)              (460)            (2,239)
                                                          ------------       ------------       ------------
Net loss ...........................................      $    (19,218)      $    (18,555)      $    (37,773)
                                                          ============       ============       ============
Total assets .......................................      $    216,494       $     21,944       $    238,438
                                                          ============       ============       ============
Purchase of long lived assets ......................      $     36,296       $        140       $     36,436
                                                          ============       ============       ============
</Table>


<Table>
<Caption>
              YEAR ENDED MAY 31, 2000                      REFRACTIVE            OTHER              TOTAL
----------------------------------------------------      ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>

Net revenues .......................................      $    190,233       $     10,990       $    201,223
Expenses:
Doctor compensation ................................            17,333                  2             17,335
Operating ..........................................           153,673             12,477            166,150
Depreciation expense ...............................            12,886              1,406             14,292
Amortization of intangibles ........................             6,363              1,033              7,396
                                                          ------------       ------------       ------------
                                                               190,255             14,918            205,173
                                                          ------------       ------------       ------------
Loss from operations ...............................               (22)            (3,928)            (3,950)
Interest income (expense), net and other ...........             4,574                (82)             4,492
Minority interest ..................................            (2,443)              (563)            (3,006)
Income taxes .......................................            (3,141)              (313)            (3,454)
                                                          ------------       ------------       ------------
Net  loss ..........................................      $     (1,032)      $     (4,886)      $     (5,918)
                                                          ============       ============       ============
Total assets .......................................      $    250,279       $     39,085       $    289,364
                                                          ============       ============       ============
Purchase of long-lived assets ......................      $     65,941       $      8,477       $     74,418
                                                          ============       ============       ============
</Table>

The Company's geographic segments are as follows:

<Table>
<Caption>
    SEVEN-MONTH PERIOD ENDED DECEMBER 31, 2002               CANADA        UNITED STATES         TOTAL
----------------------------------------------------      ------------     -------------      ------------
<S>                                                       <C>               <C>               <C>

Revenues ...........................................      $      5,588      $     94,566      $    100,154
Doctor compensation ................................             1,424             5,099             6,523
                                                          ------------      ------------      ------------
Net revenue after doctor compensation ..............      $      4,164      $     89,467      $     93,631
                                                          ============      ============      ============
Total fixed assets and intangibles .................      $     11,258      $    116,768      $    128,026
                                                          ============      ============      ============
</Table>

<Table>
<Caption>
            YEAR ENDED MAY 31, 2002
----------------------------------------------------

<S>                                                       <C>               <C>               <C>
Revenues ...........................................      $     13,208      $    121,543      $    134,751
Doctor compensation ................................             1,260             8,965            10,225
                                                          ------------      ------------      ------------
Net revenue after doctor compensation ..............      $     11,948      $    112,578      $    124,526
                                                          ============      ============      ============
Total fixed assets and intangibles .................      $     12,156      $    141,682      $    153,838
                                                          ============      ============      ============
</Table>


                                       46
<PAGE>


<Table>
<Caption>
               YEAR ENDED MAY 31, 2001
----------------------------------------------------
<S>                                                       <C>               <C>               <C>

Revenues ...........................................      $     18,114      $    155,892      $    174,006
Doctor compensation ................................             1,698            13,840            15,538
                                                          ------------      ------------      ------------
Net revenue after doctor compensation ..............      $     16,416      $    142,052      $    158,468
                                                          ============      ============      ============
Total fixed assets and intangibles .................      $     22,039      $    123,108      $    145,147
                                                          ============      ============      ============
</Table>

<Table>
<Caption>
                YEAR ENDED MAY 31, 2000
----------------------------------------------------
<S>                                                       <C>               <C>               <C>

Revenues and physician costs:
Net revenues .......................................      $     17,275      $    183,948      $    201,223
Doctor compensation ................................             2,876            14,459            17,335
                                                          ------------      ------------      ------------
Net revenue after doctor compensation ..............      $     14,399      $    169,489      $    183,888
                                                          ============      ============      ============
Total fixed assets and intangibles .................      $     22,195      $    131,255      $    153,450
                                                          ============      ============      ============
</Table>

17. FINANCIAL INSTRUMENTS

The carrying values of cash equivalents, accounts receivable, and accounts
payable and accrued liabilities, approximate their fair values because of the
short-term maturities of these instruments.

The Company's short-term investments are recorded at cost, which approximates
fair market value. In the seven months ended December 31, 2002, the Company's
short-term investment portfolio consisted of bank certificates of deposit that
have remaining terms to maturity not exceeding 12 months.

Given the large number of individual long-term debt instruments and capital
lease obligations held by the Company, it is not practicable to determine fair
value.

18. RESTRUCTURING AND OTHER CHARGES

The following table details restructuring charges recorded during the
transitional period ended December 31, 2002:

<Table>
<Caption>
                                                                                                  ACCRUAL BALANCE
                                           RESTRUCTURING          CASH             NON-CASH            AS OF
                                              CHARGES           PAYMENTS          REDUCTIONS     DECEMBER 31, 2002
                                           -------------      ------------       ------------    -----------------
<S>                                         <C>               <C>                <C>                <C>
   Severance .........................      $      1,120      $       (466)      $         --       $        654
   Lease commitments, net of
      sub-lease income ...............               978                --                 --                978
   Write-down of fixed assets ........             2,266                --             (2,266)                --
   Sale of center to third party .....               342                --                 --                342
                                            ------------      ------------       ------------       ------------
Total restructuring charges ..........      $      4,706      $       (466)      $     (2,266)      $      1,974
                                            ============      ============       ============       ============
</Table>

During the transitional period 2002, the Company recorded a $4.7 million
restructuring charge for the closure of 13 centers and the elimination of 36
full time equivalent positions primarily at the Company's Toronto headquarters.


                                       47
<PAGE>

The total restructuring charge for the transitional period 2002 is $4.2 million
which consists of the $4.7 million offset by the reversal into income of $0.5
million of restructuring charges related to prior year accruals that were no
longer needed as of December 31, 2002. All restructuring costs will be financed
through the Company's cash and cash equivalents. A total of $2.3 million of this
provision related to non-cash costs of writing down fixed assets. The severance
and center balances will be paid out in 2003 while the lease costs will be paid
out over the remaining term of the lease.


The following table details restructuring and other charges incurred for the
year ended May 31, 2002:

<Table>
<Caption>
                                                                                    ACCRUAL                              ACCRUAL
                                                                                  BALANCE AS                            BALANCE AS
                                                                                      AT                                   AT
                                          RESTRUCTURING     CASH       NON-CASH     MAY 31,     CASH       NON-CASH      DECEMBER
                                             CHARGES      PAYMENTS    REDUCTIONS     2002     PAYMENTS    REDUCTIONS     31, 2002
                                          -------------   --------    ----------  ----------  --------    ----------    ----------
<S>                                       <C>             <C>         <C>         <C>         <C>         <C>           <C>

   Severance ...........................   $    2,907     $ (2,219)   $     (222)   $   466   $   (235)   $     (212)   $       19
   Lease commitments, net of
     sublease income ...................        2,765           --            --      2,765       (897)           85         1,953
   Termination costs of doctors
     contracts .........................          146          (80)           --         66        (66)           --            --
   Laser commitments ...................          652           --            --        652         --          (352)          300
   Write-down of fixed assets ..........        2,280           --        (2,280)        --         --            --            --
                                           ----------     --------    ----------    -------   --------    ----------    ----------

   Total restructuring and other
     charges ...........................   $    8,750     $ (2,299)   $   (2,502)   $ 3,949   $ (1,198)   $     (564)   $    2,272
                                           ==========     ========    ==========    =======   ========    ==========    ==========
</Table>


During fiscal 2002, the Company implemented a restructuring program to reduce
employee costs in line with current revenue levels, close certain under
performing centers and eliminate duplicate functions caused by the merger with
LaserVision. This program resulted in total cost for severance and office
closures of $8.8 million of which $3.5 million has been paid out in cash as of
December 31, 2002. All restructuring costs will be financed through the
Company's cash and cash equivalents.

    The components of this fiscal 2002 restructuring charges are as follows:

(a) The Company continued its objective of reducing employee costs in line with
    revenues. This activity occurred in two stages with total charges of $2.9
    million. The first stage of reductions were identified in the second and
    third quarters of fiscal 2002 and resulted in restructuring charges of $2.2
    million all of which had been paid out in cash or options by the end of the
    fiscal year. This reduction impacted 89 employees of whom 35 were working in
    laser centers with the remaining 54 working within various corporate
    functions. The second stage of the cost reduction required the Company to
    identify the impact of its acquisition of LaserVision on May 15, 2002 and
    eliminate surplus positions resulting from the acquisition. The majority of
    these costs were paid out by December 31, 2002.

(b) As part of the Company restructuring subsequent to its acquisition of
    LaserVision in May 2002, six centers were identified for closure based on
    management's earnings criteria. These closures resulted in restructuring
    charges of $4.9 million, reflecting a write-down of fixed assets of $1.9
    million and cash costs of $3.0 million, which include net lease commitments
    (net of costs to sublet and sub-lease income) of $2.0 million, ongoing laser
    commitments of $0.7 million, termination costs of a doctor's contract of
    $0.1 million, and severance costs impacting 21 center employees of $0.1
    million. The lease costs will be paid out over the remaining term of the
    lease. The majority of the severance and termination costs were paid out by
    December 31, 2002.

(c) The Company also identified four centers where management determined, that
    given the current and future expected procedures, the centers had excess
    leased capacity or the lease arrangements were not economical. The Company
    assessed these four centers to determine whether the excess space should be
    subleased or whether the centers should be relocated. The Company provided
    $1.0 million related to the costs associated with sub-leasing the excess or
    unoccupied facilities. A total of $0.3 million of this provision related to
    non-cash costs of writing down fixed assets and $0.7 million represented net
    future cash costs for lease commitments and costs to sublet available space
    offset by sub-lease income that is projected to be generated. The lease
    costs will be paid out over the remaining term of the lease.

In the year ended May 31, 2001, the Company recorded a restructuring and other
charge of $19.1 million. These charges consisted of cash payments of $4.7
million primarily for severance, lease costs, consulting services, and closure
costs, and $14.4 million in non-cash costs. Non-cash costs were primarily for
write-off of goodwill, fixed assets and current assets


                                       48
<PAGE>


resulting from the decision to exit from its e-commerce enterprise,
eyeVantage.com, Inc., the accrual for an arbitration award and provision for
portfolio investments.

19. SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash transactions:

<Table>
<Caption>
                                                                 SEVEN-MONTH               YEAR ENDED MAY 31,
                                                                PERIOD ENDED      -------------------------------------
                                                              DECEMBER 31, 2002      2002          2001         2000
                                                              -----------------   ----------    ----------   ----------
<S>                                                            <C>                <C>           <C>          <C>
Issue of warrants to be expensed over three years ..........   $       --         $       --    $       --   $      532
Issue of options as severance remuneration .................           --                222            --           --
Capital stock issued as remuneration .......................           --                 --            35          387
Capital stock issued for acquisitions ......................           --            111,058         6,059        2,125
Treasury stock arising from acquisition ....................           --             (2,432)           --           --
Issue of options arising from acquisition ..................           --             11,001            --           --
Reversal of accrual for costs of IPO .......................           --                 --            --          139
Accrued purchase obligations ...............................           --                 --         3,899       13,200
Capital lease obligations relating to equipment purchases ..          901                 --            --        1,366
Long-term debt cancellation ................................           --                 --           450           --
</Table>

Cash paid for the following:

<Table>
<Caption>
                              SEVEN-MONTH               YEAR ENDED MAY 31,
                             PERIOD ENDED      -------------------------------------
                           DECEMBER 31, 2002      2002          2001         2000
                           -----------------   ----------    ----------   ----------
<S>                         <C>                <C>           <C>          <C>
Interest ................      $      830      $    1,693    $    1,668   $    2,671
                               ==========      ==========    ==========   ==========
Income taxes ............      $      595      $    1,382    $      148   $    5,647
                               ==========      ==========    ==========   ==========
</Table>

20. RELATED PARTY TRANSACTIONS

During the fiscal 2002, J.L. Investments, Inc., of which Mr. Warren Rustand, a
director of TLC Vision, is a shareholder, and Mr. Warren Rustand entered into a
consulting agreement with the Company to oversee the development of the
Company's international business development project. J.L. Investments and Mr.
Rustand received $125,000 under this agreement.

On March 1, 2001, a limited liability company indirectly wholly owned by TLC
Vision acquired all of the non-medical assets relating to the refractive
practice of Dr. Mark Whitten prior to Dr. Whitten becoming a director of TLC
Vision. The cost of this acquisition was $20.0 million, with $10.0 million paid
in cash on March 1, 2001 and the remaining $10.0 million payable in four equal
non-interest bearing installments on each of the first four anniversary dates of
closing. Dr. Whitten became a director of TLC Vision in May 2002. At December
31, 2002 the remaining discounted amounts payable to Dr. Whitten of $6.3 million
is included in long-term debt. (See Note 12, Long-term debt). In addition, TLC
Vision has entered into service agreements with companies that own Dr. Whitten's
refractive satellite operations located in Frederick, Maryland, and
Charlottesville, Virginia, under which TLC Vision will provide such companies
with services in return for a fee. During fiscal 2002, TLC Vision received a
total of $761,000 in revenue as a result of the service agreements.

During the transitional period ended December 31, 2002, the law firm Gourwitz
and Barr, P.C., of which Mr. Gourwitz, a director of the Company, provided legal
services to TLC Vision and was paid $0.1 million.

LaserVision, a subsidiary of TLC Vision, has a limited partnership agreement
with Minnesota Eye Consultants for the operation of one of its roll-on/roll-off
mobile systems. Dr. Richard Lindstrom, a director of TLC Vision, is president of
Minnesota Eye Consultants. LaserVision is the general partner and owns 60% of
the partnership. Minnesota Eye Consultants, P.A. is a limited partner and owns
40% of the partnership. Under the terms of the partnership agreement,
LaserVision receives a revenue-based management fee from the partnership. During
the transitional period, LaserVision received a management fee in the amount of
$21,000 from the partnership. Dr. Lindstrom also receives compensation from TLC
Vision in his capacity as medical director of both TLC Vision and LaserVision.

In September 2000, LaserVision entered into a five-year agreement with Minnesota
Eye Consultants to provide laser access. LaserVision paid $6.2 million to
acquire five lasers and the exclusive right to provide laser access to Minnesota
Eye


                                       49
<PAGE>


Consultants. LaserVision also assumed leases on three of the five lasers
acquired. The transaction resulted in a $5.0 million intangible asset recorded
as deferred contract rights which will be amortized over the life of the
agreement. During the transitional period, LaserVision received a total of $0.5
million in revenue as a result of the agreement.

In May 2002, John J. Klobnak, a director of the Company and the former Chief
Executive Officer of LaserVision, was paid $2.9 million and received 500,000 TLC
Vision stock options in a severance arrangement in connection with the
LaserVision acquisition.

21. SUBSEQUENT EVENTS

On March 3, 2003, Midwest Surgical Services, Inc. a subsidiary of TLC Vision,
entered into a purchase agreement to acquire 100% of American Eye Instruments,
Inc., which provides access to surgical and diagnostic equipment to perform
cataract surgery in hospitals and ambulatory surgery centers. The Company paid
$2.0 million in cash and 100,000 common shares of TLC Vision. The Company also
agreed to make additional cash payments over a three-year period up to $1.9
million if certain financial targets are achieved.



                                       50
<PAGE>
                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of the report:

    (1) Financial statements:

    Report of Independent Auditors.

    Consolidated Statements of Operations - Transitional period ended December
    31, 2002 and Years Ended May 31, 2002, 2001, and 2000.

    Consolidated Balance Sheets as of December 31, 2002, May 31, 2002, and 2001.

    Consolidated Statements of Cash Flows - Transitional period ended December
    31, 2002, and Years Ended May 31, 2002, 2001, and 2000.

    Consolidated Statements of Changes in Stockholders' Equity - Transitional
    period ended December 31, 2002, and Years Ended May 31, 2002, 2001, and
    2000.

    Notes to Consolidated Financial Statements

    (2) Financial statement schedules required to be filed by Item 8 and Item
    15(d) of Form 10-K.

    Schedule II - Valuation and Qualifying Accounts and Reserves

    Except as provided below, all schedules for which provision is made in the
    applicable accounting regulations of the Commission either have been
    included in the Consolidated Financial Statements or are not required under
    the related instructions, or are inapplicable and therefore have been
    omitted.

    (3) Exhibits required by Item 601 of Regulation S-K and by Item 14(c).

    See Exhibit Index.

(b) Reports on Form 8-K.

        No reports on Form 8-K were filed during the last quarter of the
        transition period ended December 31, 2002.

(c) Exhibits required by Item 601 of Regulation S-K.

    See Exhibit Index.

(d) None


                                       51
<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 amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                    TLC VISION CORPORATION



                                    By /s/ ELIAS VAMVAKAS
                                       -----------------------------------------
                                       Elias Vamvakas, Chief Executive Officer

    November 17, 2003

    Pursuant to the requirements of the Securities 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 date indicated.

<Table>
<Caption>

          SIGNATURE                                      TITLE                            DATED
------------------------------------      -------------------------------------     -----------------
<S>                                       <C>                                       <C>

         /s/ ELIAS VAMVAKAS               Chief Executive Officer and               November 17, 2003
------------------------------------      Chairman of the Board of Directors
           Elias Vamvakas

      /s/ B. CHARLES BONO III             Chief Financial Officer, Treasurer        November 17, 2003
------------------------------------      and Principal Accounting Officer
        B. Charles Bono III

</Table>


                                       52
<PAGE>

SCHEDULE II

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<Table>
<Caption>
                                              BALANCE AT                                   DEDUCTIONS-     BALANCE AT
                                              BEGINNING       EXPENSE                     UNCOLLECTABLE        END
                                              OF PERIOD      PROVISION       OTHER(1)       A MOUNTS       OF PERIOD
                                             ------------   ------------   ------------   ------------    ------------
<S>                                          <C>            <C>            <C>            <C>             <C>

                                                                      (IN THOUSANDS)
Fiscal 2000
-----------
Doubtful accounts receivable                 $      2,527   $      2,553   $         --   $     (1,183)   $      3,897
Provision against investments and other
  assets                                               --             --             --             --
Deferred tax asset valuation allowance             17,345           (999)                                       16,346

Fiscal 2001
-----------
Doubtful accounts receivable                 $      2,849   $        646   $         --   $     (2,335)   $      1,160
Provision against investments and other
  assets                                               --          1,913             --             --           1,913
Deferred tax asset valuation allowance             16,346         14,083                                        30,429

Fiscal 2002
-----------
Doubtful accounts receivable                 $      1,160   $        521   $      1,742   $       (896)   $      2,527
Provision against investments and other
  assets                                            1,913          2,016             --             --           3,929
Deferred tax asset valuation allowance             30,429         31,360         23,263             --          85,052

Transitional Period 2002
------------------------
Doubtful accounts receivable                 $      2,527   $        213   $         --   $        312    $      2,428
Provisions against investments and other
  assets                                            3,929            194             --             --           4,123
Deferred tax asset valuation allowance             85,052         14,551             --             --          99,603
</Table>

Note (1): additional provision for doubtful accounts and the deferred tax asset
valuation allowance were acquired in the merger transaction with LaserVision



                                       53
<PAGE>


                                  EXHIBIT INDEX

<Table>
<Caption>
 EXHIBIT
   NO.                                   DESCRIPTION
--------       -----------------------------------------------------------------
<S>            <C>

   3.1  *      Articles of Incorporation (incorporated by reference to Exhibit
               3.1 to the Company's 10-K filed with the Commission on August 28,
               1998)

   3.2  *      Articles of Amendment (incorporated by reference to Exhibit 3.2
               to the Company's 10-K filed with the Commission on August 29,
               2000)

   3.3  *      Articles of Continuance (incorporated by reference to Exhibit 3.6
               to the Company's Registration Statement on Form S-4/A filed with
               the Commission on March 1, 2002 (file no. 333-71532))

   3.4  *      Articles of Amendment (incorporated by reference to Exhibit 4.2
               to the Company's Post Effective Amendment No. 1 on Form S-8 to
               the Company's Registration Statement on Form S-4 filed with the
               Commission on May 14, 2002 (file no. 333-71532))

   3.5  *      By-Laws of the Company (incorporated by reference to Exhibit 3.6
               to the Company's Registration Statement on Form S-4/A filed with
               the Commission on March 1, 2002 (file no. 333-71532))

   4.1  *      Shareholder Rights Plan Agreement dated as of September 21, 1999
               between the Company and CIBC Mellon Company (incorporated by
               reference to Exhibit 4.1 to the Company's Registration Statement
               on Form S-4 filed with the Commission on October 12, 2001)

  10.1  *      TLC Vision Amended and Restated Share Option Plan (incorporated
               by reference to Exhibit 4(a) to the Company's Registration
               Statement on Form S-8 filed with the Commission on December 31,
               1997 (file no. 333-8162))

  10.2  *      TLC Vision Share Purchase Plan (incorporated by reference to
               Exhibit 4(b) to the Company's Registration Statement on Form S-8
               filed with the Commission on December 31, 1997 (file no.
               333-8162))

  10.3  *      Employment Agreement with Elias Vamvakas (incorporated by
               reference to Exhibit 10.1(e) to the Company's 10-K filed with the
               Commission on August 28, 1998)

  10.4  *      Escrow Agreement with Elias Vamvakas and Jeffery J. Machat
               (incorporated by reference to Exhibit 10.1(f) to the Company's
               10-K filed with the Commission on August 28, 1998)

  10.5  *      Consulting Agreement with Excimer Management Corporation
               (incorporated by reference to Exhibit 10.1(g) to the Company's
               10-K filed with the Commission on August 28, 1998)

  10.6  *      Shareholder Agreement for Vision Corporation (incorporated by
               reference to Exhibit 10.1(l) to the Company's 10-K filed with the
               Commission on August 28, 1998)

  10.7  *      Employment Agreement with David Eldridge (incorporated by
               reference to Exhibit 10.1(m) to the Company's 10-K filed with the
               Commission on August 29, 2000)

  10.8  *      Employment Agreement with William Leonard (incorporated by
               reference to Exhibit 10.1(n) to the Company's 10-K filed with the
               Commission on August 29, 2000)

  10.9  *      Consulting Agreement with Warren Rustand (incorporated by
               Reference to Exhibit 10.10 to the Company's Amendment No. 2
               registration Statement on Form S-4/A filed with the Commission on
               January 18, 2002 (file no. 333-71532))

  10.10 *      Employment Agreement with Paul Frederick (incorporated by
               reference to Exhibit 10.10 to the Company's 10-K for the year
               ended May 31, 2002)
</Table>


                                       54
<PAGE>


<Table>
<Caption>
 EXHIBIT
   NO.                                   DESCRIPTION
--------       -----------------------------------------------------------------
<S>            <C>
 10.11 *       Employment Agreement with Lloyd Fiorini (incorporated by
               reference to Exhibit 10.11 to the Company's 10-K for the year
               ended May 31, 2002)

 10.12 *       Separation Agreement with Lloyd Fiorini (incorporated by
               reference to Exhibit 10.12 to the Company's 10-K for the year
               ended May 31, 2002)

 10.13 *       Employment Agreement with James C. Wachtman dated May 15, 2002
               (incorporated by reference to Exhibit 10.13 to the Company's 10-K
               for the year ended May 31, 2002)

 10.14 *       Employment Agreement with Robert W. May dated May 15, 2002
               (incorporated by reference to Exhibit 10.14 to the Company's 10-K
               for the year ended May 31, 2002)

 10.15 *       Employment Agreement with B. Charles Bono dated May 15, 2002
               (incorporated by reference to Exhibit 10.15 to the Company's 10-K
               for the year ended May 31, 2002)

 10.16 *       Supplemental Employment Agreement with John J. Klobnak dated May
               15, 2002 (incorporated by reference to Exhibit 10.16 to the
               Company's 10-K for the year ended May 31, 2002)

 21  *         List of the Company's Subsidiaries (incorporated by reference to
               Exhibit 21.1 to the Company's 10-K for the year ended May 31,
               2002)

 23  *         Consent of Independent Auditors

 31.1          CEO's Certification required by Rule 13a-14(a) of the Securities
               Exchange Act of 1934, as amended

 31.2          CFO's Certification required by Rule 13a-14(a) of the Securities
               Exchange Act of 1934, as amended

 32.1          CEO's Certification of periodic financial report pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section
               1350

 32.2          CFO's Certification of periodic financial report pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section
               1350
</Table>

*  Previously filed

                                       55