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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2003

                         COMMISSION FILE NUMBER: 0-29302

                                 ---------------

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

           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

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. |X|

      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, 2003, the aggregate market value of the registrant's Common
Shares held by non-affiliates of the registrant was approximately $301.3
million.

      As of March 12, 2004, there were 67,382,000 shares of the registrant's
Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

      Definitive Proxy Statement for the Company's 2004 annual shareholders
meeting (incorporated in Part III to the extent provided in Items 10, 11, 12 and
13).

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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
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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 "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. During 2002, the
Company 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 May
31, 2002 and "transitional period 2002" shall mean the seven months ended
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.

                                     PART I

ITEM 1. BUSINESS

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 eye doctors to help them provide high quality
patient care in the eye care segment. The majority of the Company's revenues
come from 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. In
addition to refractive surgery, the Company is diversified into other eye care
businesses. Through its Midwest Surgical Services, Inc. ("MSS") subsidiary, the
Company furnishes hospitals and independent surgeons with mobile or fixed site
access to cataract surgery equipment and services. Through its OR Partners,
Aspen Healthcare and Michigan subsidiaries, TLC Vision develops, manages and has
equity participation in single-specialty eye care ambulatory surgery centers and
multi-specialty ambulatory surgery centers. The Company also owns a 51% majority
interest in Vision Source, which provides franchise opportunities to independent
optometrists. In 2002, the Company formed a joint venture with Vascular Sciences
Corporation 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 accordance with an Agreement and Plan of Merger with Laser Vision
Centers, Inc. ("LaserVision"), the Company completed a business combination with
LaserVision on May 15, 2002. 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
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 continues to focus on maximizing revenues, controlling costs
and helping eye doctors provide quality eye care and clinical results. In
addition, the Company continues to pursue additional growth opportunities.
Financial information about each of TLC's business segments is contained in Note
16 "Segment Information" to TLC's consolidated financial statements.

REFRACTIVE DISORDERS

The eye is a complex organ composed of many parts, and normal vision requires
these parts to work well together. When a person looks at an object, light rays
are reflected from the object to the cornea. In response, the cornea and lens
refract and focus the light rays directly on the retina. At the retina, the
light rays are converted to electrical impulses that are transmitted through the
optic nerve to the brain, where the image is translated and perceived.

Any deviation from normal vision is called a refractive error. Myopia,
hyperopia, astigmatism and presbyopia are different types of refractive errors.

      -     Myopia (nearsightedness) means the eye is longer than normal
            resulting in difficulty seeing distant objects as clearly as near
            objects.


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      -     Hyperopia (farsightedness) means the eye is shorter than normal
            resulting in difficulty seeing near objects as clearly as distant
            objects.

      -     Astigmatism means the cornea is oval-shaped resulting in blurred
            vision.

      -     Presbyopia is the loss of lens and eye muscle flexibility due to the
            natural aging process that causes difficulty in focusing on near
            objects and usually requires people age 40 and older to wear
            bifocals or reading glasses. Because vision correction surgery
            cannot reverse the aging process, presbyopia cannot be corrected
            surgically; however, there are surgical and non-surgical techniques
            available that can effectively manage presbyopia.

TREATMENT FOR REFRACTIVE DISORDERS

      Eyeglasses. Eyeglasses remain the most common method of correcting
      refractive errors because they are safe and relatively inexpensive.
      Eyeglasses correct nearsightedness and farsightedness by using appropriate
      lenses to diverge or converge light rays and focus them directly on the
      retina. The drawbacks of eyeglasses are possible dissatisfaction with
      personal appearance, inability to participate in certain sports or work
      activities and possible distortion in visual images when eyeglasses are
      used to correct large refractive errors.

      Contact Lenses. Contact lenses correct nearsightedness, farsightedness and
      astigmatism similarly to eyeglasses. If fitted and used as directed,
      contact lenses are an effective and safe way to correct refractive errors.
      However, daily use of contact lenses can result in the increased risk of
      corneal infections, hypersensitivity reactions and other problems.

      Surgical Procedures. Vision correction surgery is an elective procedure
      available to correct refractive errors. Vision correction surgery alters
      the shape of the cornea to allow light rays to be focused directly on the
      retina and is designed to eliminate or dramatically reduce the need for
      eyeglasses or contact lenses. Vision correction surgery is not for
      everyone and is associated with potential risks and complications.
      Prospective patients should carefully consider the vision correction
      surgeries available and the benefits and risks associated with each of
      them. Vision correction surgeries available at TLC include:

      -     LASIK (Laser In Situ Keratomileusis). LASIK corrects
            nearsightedness, farsightedness and astigmatism by using an excimer
            laser to reshape the cornea. Because LASIK creates a corneal flap to
            reshape the cornea and does not disrupt the front surface of the
            cornea, it generally is less painful, has a quicker recovery period
            and shorter post-operative need for steroid eye drops than other
            surgical procedures. LASIK is currently the most common vision
            correction surgery and may be the treatment of choice for patients
            desiring a more rapid visual recovery.

      -     CustomLASIK, widely introduced in 2003, is a technologically
            supported advancement to LASIK. CustomLASIK involves increased
            pre-operative diagnostic capabilities that measure the eye from
            front to back with what's called "wavefront" technology. Wavefront
            technology creates a three dimensional corneal map and the
            information from that map guides the laser in customizing the laser
            ablation to an individuals visual irregularities, beyond myopia,
            hyperopia and astimgatism. CustomLASIK using wavefront technology
            has the potential to improve not only how much a person can see, in
            terms of visual acuity measured by the standard 20/20 eye chart, but
            also how well an individual can see in terms of contrast sensitivity
            and fine detail. This translates to a reduced occurrence of night
            vision disturbances post-LASIK.

      -     PRK (Photorefractive Keratectomy). PRK corrects nearsightedness,
            farsightedness and astigmatism by using an excimer laser to reshape
            the cornea without cutting the cornea. PRK removes the protective
            surface layer of the cornea to reshape the cornea. The risk of pain,
            infection and corneal scarring is higher with PRK than with LASIK;
            however, the intraoperative risks are lessened with PRK because no
            corneal flap is created.

      -     LASEK (Laser Assisted Sub-Epithelial Keratectomy). LASEK corrects
            nearsightedness, farsightedness and astigmatism by using an excimer
            laser to reshape the cornea. Unlike LASIK that creates a corneal
            flap, LASEK loosens and folds the protective outer layer of the
            cornea (the epithelium) during the procedure and, as a result,
            combines the advantages of LASIK with the safety of PRK. The risk of
            pain, infection and corneal scarring is higher with LASEK than with
            LASIK; however, the intraoperative risks are lessened with LASEK
            because the flap which is created is only in the epithelium. The
            United States Food and Drug Administration has not yet approved use
            of the excimer laser for LASEK.

      -     AK (Astigmatic Keratotomy). AK corrects astigmatism by making
            microscopic incisions in the cornea to change the shape of the
            cornea.


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      -     INTACS. INTACS corrects very low levels of nearsightedness (-1.00
            diopters to -3.00 diopters) by implanting corneal rings in the eye
            to reshape the cornea rather than surgically altering the cornea.
            INTACS may also be used to correct irregularities in the shape of
            the cornea.

      -     CK (Conductive Keratoplasty). For patients age 40 and older, CK is
            designed for the temporary reduction of farsightedness (+.75 to
            +3.25 diopters) and uses radio frequency instead of a laser to
            reshape the cornea.

      -     PTK (Phototherapeutic Keratectomy). PTK treats abrasions, scars or
            other abnormalities of the cornea caused by injury or surgery. PTK
            uses an excimer laser to remove superficial opacities and
            irregularities of the cornea to improve vision or reduce symptoms of
            pain or discomfort due to an underlying eye condition.

      -     Monovision. For patients age 40 and older who have difficulty
            reading due to the natural aging process (presbyopia) monovision is
            an option. Monovision is a technique in which one eye is corrected
            for distance vision while the other eye is corrected for near or
            intermediate vision. Monovision provides a viable option for active
            people who require both distance vision and near vision in their
            daily activities. Because monovision is a compromise, reading
            glasses may still be needed for fine print and distance vision may
            not be as crisp for night driving and certain sporting activities
            such as golf and tennis. Depth perception may also be effected. The
            recommended method to achieve monovision is contact lenses, but
            eyeglasses and certain surgical procedures can also be used.

LASER CORRECTION PROCEDURES

      Excimer laser technology was developed by International Business Machines
Corporation in 1976 and has been used in the computer industry for many years to
etch sophisticated computer chips. Excimer lasers have the desirable qualities
of producing very precise ablation (removal of tissue) without affecting the
area outside of the target zone. In 1981, it was shown that the excimer laser
could ablate corneal tissue. Each pulse of the excimer laser can remove 0.25
microns of tissue in 12 billionths of a second. The first laser experiment on
human eyes was performed in 1985 and the first human eye was treated with the
excimer laser in the United States in 1988.

      Excimer laser procedures are designed to reshape the outer layers of the
cornea to treat vision disorders by changing the curvature of the cornea. Prior
to the procedure being performed, the doctor develops a treatment plan taking
into consideration the exact correction required utilizing the results of each
individual patient's eye examination and diagnostic tests performed, such as
topography and wavefront analysis. The treatment plan is entered into the laser
and the software of the excimer laser then calculates the optimal number of
pulses needed to achieve the intended corneal correction using a specially
developed algorithm. These procedures are performed on an outpatient basis using
only topical anesthetic eye drops that promote patient comfort during the
procedure. Patients are reclined in a chair, an eyelid holder is inserted to
prevent blinking, and the surgeon positions the patient in direct alignment with
the fixation target of the excimer laser. The surgeon uses a foot switch to
apply the excimer beam that emits a rapid succession of excimer laser pulses.
The typical procedure takes 10 to 15 minutes from set-up to completion, with the
length of time of the actual excimer laser treatment lasting between 15 to 90
seconds, depending on the amount of correction required.

      In order to market an excimer laser for commercial sale in the United
States, the manufacturer must obtain pre-market approval ("PMA") from the United
States Food and Drug Administration ("FDA"). An FDA PMA is specific for each
laser manufacturer and model and sets out a range of approved indications.
However, the FDA is not authorized to regulate the practice of medicine.
Therefore, in the same way that doctors often prescribe drugs for "off-label"
uses (i.e., uses for which the FDA did not originally approve the drug), a
doctor may use a device such as the excimer laser for a procedure or an
indication not specifically approved by the FDA, if that doctor determines that
it is in the best interest of the patient. The initial FDA PMA approval for the
sale of an excimer laser for refractive procedures was granted in 1995 for the
laser of Summit Technologies, Inc. (now Alcon Laboratories, Inc., a division of
Nestle, S.A.) ("Alcon"). That first approval was for the treatment of myopia. To
date, the FDA has approved for sale excimer lasers from approximately seven
different manufacturers for LASIK and from approximately eight different
manufacturers for PRK, including VISX, Inc. the market leader and the provider
of most of the Company's excimer lasers. In Canada and Europe, neither the sale
nor the use of excimer lasers to perform refractive surgery is currently subject
to regulatory approval, and excimer lasers have been used to treat myopia since
1990 and to treat hyperopia since 1996. The Company expects that future sales of
any new excimer laser models in Canada may require the approval of the Health
Protection Branch of Health Canada.

THE REFRACTIVE MARKET

      While estimates of market size should not be taken as projections of
revenues or of the Company's ability to penetrate that market, Market Scope's
2003 U.S. LASIK Patient Profile Report estimates that approximately 58% of the
U.S. population or 165.3 million


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people suffer from some form of refractive disorder requiring vision correction,
including myopia (nearsightedness), hyperopia (farsightedness) and astigmatism.
To date, based on Market Scope's estimate of the number of people who have had
procedures, only an estimated 2% to 3% of this target population has had laser
vision correction.

      Estimates by Market Scope indicate that 480,000 laser vision correction
procedures were performed in the U.S. in 1998, 948,000 were performed in 1999,
1.4 million were performed in 2000, 1.3 million were performed in 2001, 1.1
million were performed in 2002, 1.1 million were performed in 2003, and an
estimated 1.2 to 1.3 million will be performed in 2004. The Company believes
that the profitability and growth of its refractive business will depend upon
continued increasing acceptance of laser vision correction in the United States
and, to a lesser extent, Canada, and upon consumer confidence and the condition
of the U.S. economy.

      There can be no assurance that laser vision correction will be more widely
accepted by eye care doctors or the general population as an alternative to
existing methods of treating refractive disorders. The acceptance of laser
vision correction may be affected adversely by its cost (particularly since
laser vision correction is typically not covered fully or at all by government
insurers or other third party payors and, therefore, must be paid for primarily
by the individual receiving treatment), concerns relating to its safety and
effectiveness, general resistance to surgery, the effectiveness of alternative
methods of correcting refractive vision disorders, the lack of long-term
follow-up data and the possibility of unknown side effects. There can be no
assurance that long-term follow-up data will not reveal complications that may
have a material adverse effect on the acceptance of laser vision correction.
Many consumers may choose not to have laser vision correction due to the
availability and promotion of effective and less expensive nonsurgical methods
for vision correction. Any future reported adverse events or other unfavorable
publicity involving patient outcomes from laser vision correction procedures
also could adversely affect its acceptance whether or not the procedures are
performed at TLC Vision eye care centers. Market acceptance also could be
affected by regulatory developments. The failure of laser vision correction to
achieve continued increased market acceptance would have a material adverse
effect on the Company's business, financial condition and results of operations.

MARKET FOR CATARACT SURGERY

      According to the American Academy of Ophthalmology, cataract surgery
currently is the most frequently performed surgical procedure in the United
States, with more than 2.6 million people having cataract surgery each year.
Medicare pays approximately $3.4 billion per year for 1.7 million patients
having cataract surgery each year. According to the American Academy of
Ophthalmology, individuals between the ages of 52 and 64 have a 50% chance of
having a cataract. By age 75, almost everyone has a cataract. Fifty percent of
the people between the ages of 75 and 85 with cataracts have lost some vision as
a result. The National Eye Institutes of Health Cataracts indicates that
cataracts are the leading cause of blindness in the world, and cataracts affect
more than 20 million Americans aged 65 and older. U.S. Census Bureau data
indicates that there are approximately 35 million Americans who are age 65 or
older.


TLC VISION CORPORATION

      TLC Vision was originally incorporated by articles of incorporation under
the Business Corporations Act (Ontario) on May 28, 1993. By articles of
amendment dated October 1, 1993, the name of the Company was changed to TLC The
Laser Center Inc., and by articles of amendment dated March 22, 1995, certain
changes were effected in the issued and authorized capital of the Company with
the effect that the authorized capital of the Company became an unlimited number
of Common Shares. On September 1, 1998, TLC The Laser Center, Inc. amalgamated
under the laws of Ontario with certain wholly owned subsidiaries. By articles of
amendment filed November 5, 1999, the Company changed its name to TLC Laser Eye
Centers Inc. On May 13, 2002, the Company filed articles of continuance with the
province of New Brunswick and changed its name to TLC Vision Corporation. On May
15, 2002, the Company completed its business combination with LaserVision, a
leading U.S. provider of access to excimer lasers, microkeratomes, cataract
equipment and related support services.

BUSINESS STRATEGY

      TLC Vision's strategy is to be a diversified eye care services provider by
leveraging relationships with ophthalmologists and optometrists throughout North
America. The Company's diversification strategy is composed of the following
four principal components: (1) increase diversification through pursuing new
growth opportunities in eye care by leveraging relationships with eye care
doctors; (2) continue expansion of surgeon relationships to work within the TLC
Vision branded center model or laser access model; (3) increase surgical volume
through developing programs to support eye doctors in patient education and
clinical support; and (4) continue to implement initiatives designed to improve
operational effectiveness, including standardizing operations to minimize


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operating costs and increase efficiencies without compromising the Company's
commitment to assist its affiliated doctors in providing the highest levels of
patient care and clinical results.

      DIVERSIFICATION BEYOND REFRACTIVE LASER BUSINESSES

      The first component of TLC Vision's diversification strategy is to expand
into a broader eye care services company through internal business development
and complementary acquisitions. The Company believes it can continue to leverage
its relationships with a large number of ophthalmologists and optometrists to
create new business opportunities. The primary focus of the Company's
diversification strategy is in the United States, where the Company continues to
position itself to benefit from the growing market for eye care services.

      TLC Vision plans to further diversify its business in four ways:

            -     continuing to expand the Company's existing cataract service
                  business through focused growth strategies and acquisitions of
                  existing mobile cataract businesses;

            -     continuing to develop the Company's optometric practice
                  franchising organization, Vision Source, through increasing
                  the number of affiliated practice franchises;

            -     continuing to develop, acquire or gain management service
                  agreements with a focus on ophthalmic ambulatory surgery
                  centers as well as multispecialty ambulatory surgery centers
                  through the Company's OR Partners and Aspen subsidiaries; and

            -     developing new eye care related businesses that evolve from
                  strategic technology investments, such as Rheo Clinics, a
                  rheopheresis joint venture for treating dry age-related
                  macular degeneration.

      EXPANSION OF SURGEON RELATIONSHIPS

      TLC Vision believes that its existing relationships with a large number of
eye doctors represent an important competitive strength. TLC Vision's business
model will continue to focus on implementing new services and business
opportunities, designed to result in increased revenue.

      INCREASE SURGICAL VOLUME

      The primary tactic in increasing surgical volume will be through
supporting refractive growth initiatives with ophthalmologists and optometrists.
To accomplish this, TLC Vision will focus on:

            -     commitment to a co-management model, which allows primary care
                  doctors to provide the best clinical outcomes for their
                  patients while retaining them in their practice;

            -     continuing clinical education to ophthalmologists and
                  optometrists;

            -     quality patient outcomes support through the TLC Vision
                  quality assurance and improvement system;

            -     practice development education and tools focused on educating
                  the staff of the ophthalmologists and optometrists;

            -     cooperative marketing programs to build awareness for the
                  procedure; and

            -     access to custom LASIK technology through the availability of
                  required equipment, both fixed and transportable, and
                  training.

      CONTROLLING COSTS

      TLC Vision has reviewed and continues to review, its cost structure with a
view to significantly increase efficiencies and leveraging economies of scale
without compromising the delivery of quality services to doctors and their
patients. Through this


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review, TLC Vision seeks to achieve a comprehensive approach to reducing
corporate and centers costs on a day-to-day operations level and refine the
Company's operating models.

DESCRIPTION OF BRANDED TLC VISION LASER EYE CENTERS

      The Company currently owns and manages 70 TLC Vision branded laser eye
centers in the United States, 5 centers in Canada and 1 in Europe. Each TLC
Vision branded laser eye center has a minimum of one excimer laser with many of
the centers having two or more lasers. The majority of the Company's excimer
lasers are manufactured by VISX Incorporated ("VISX").

      A typical TLC Vision branded laser eye center has between 3,000 and 5,000
square feet of space and is located in a medical or general office building.
Although the legal and payment structures can vary from state to state depending
upon state law and market conditions, the Company generally receives revenues in
the form of management and facility fees paid by doctors who use the TLC Vision
branded laser eye center to perform laser vision correction procedures and
administrative fees for billing and collection services from doctors who
co-manage patients treated at the centers. Most TLC Vision branded laser eye
centers have a clinical director, who is an optometrist and oversees the
clinical aspects of the center and builds and supports the network of affiliated
eye care doctors. Most centers also have a business manager, a receptionist,
ophthalmic technicians and patient consultants. The number of staff depends on
the activity level of the center. One senior staff person, who is designated as
the executive director of the center, assists in preparation of the annual
business plan and supervises the day-to-day operations of the center.

      TLC Vision has developed proprietary management and administrative
software and systems that are designed to assist eye care professionals to
provide high levels of patient care. The software permits TLC Vision branded
laser eye centers to provide a potential candidate with current information on
affiliated doctors throughout North America, to help them locate the closest TLC
Vision branded laser eye center, to permit tracking of calls and procedures, to
coordinate patient and doctor scheduling and to produce financial and surgical
outcome reporting and analysis. The software has been installed in all TLC
Vision branded laser eye centers. TLC Vision also has introduced a new on line
consumer consultation site on TLC Vision's Web site (www.tlcvision.com). This
consumer consultation site allows consumers to book their consultation with the
Company online. TLC Vision also maintains a call center (1-800-CALL TLC VISION),
which is staffed seven days a week.

      The Company's "Lifetime Commitment" program, established in 1997 and
offered through TLC Vision branded laser eye centers, entitles patients within a
certain range of vision correction to have certain enhancement procedures for
further correction at no cost at any time during their lifetime, if necessary.
To remain eligible for the program, patients are required to have an annual eye
exam, at the patient's expense, with a TLC Vision affiliated doctor. The purpose
of the program is to respond to a patient's concern that the patient's sight
might regress over time, requiring an enhancement procedure. In addition, the
program responds to the doctors' concern that patients may not return for their
annual eye examination once their eyes are treated. The Company believes that
this program has been well received by both patients and doctors.

      PRICING

      At TLC Vision branded laser eye centers in the United States, patients are
typically charged between $1,500 and $2,500 per eye for LASIK (or on average
approximately $1,800 per eye). The Company typically charges an additional $350
to $500 per eye for custom ablation. At TLC Vision branded laser eye centers in
Canada, patients are typically charged approximately C$1,700 per eye for LASIK.
The primary care eye doctor also charges patients an average of $400 for pre-
and post-operative care, though the total procedure costs to the patients are
often included in a single invoice. See "Item 1 - Business - Risk Factors -
Procedure Fees." Although competitors in certain markets continue to charge less
for these procedures, the Company believes that important factors affecting
competition in the laser vision correction market, other than price, are quality
of service, reputation and skill of surgeon, customer service reputation, and
relationships with affiliated doctors. See "Item 1 - Business - Risk Factors -
Competition."

      The cost of laser vision correction procedures is not covered by
provincial health care plans in Canada or reimbursable under Medicare or
Medicaid in the United States. However, the Company believes it has positioned
itself well in the private insurance and employer market through its Corporate
Advantage program, which offers discounts to participants and is now available
to more than 90 million individuals.

      CO-MANAGEMENT MODEL


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      The Company has developed and implemented a co-management model under
which it not only establishes, manages and operates TLC Vision branded laser eye
care centers and provides an array of related support services, but also
coordinates the activities of primary care doctors (usually optometrists), who
co-manage patients, and refractive surgeons (ophthalmologists), who perform
laser vision correction procedures in affiliation with the local TLC Vision
branded laser eye care center. The primary care doctors assess whether patients
are candidates for laser vision correction and provide pre- and post-operative
care, including an initial eye examination and follow-up visits. The
co-management model permits the surgeon to focus on providing laser vision
correction surgery while the primary care doctor provides pre- and
post-operative care. In addition, most TLC Vision branded laser eye care centers
have an optometrist on staff who works to support and expand the local network
of affiliated doctors. The staff optometrist provides a range of clinical
training and consultation services to affiliated primary care doctors to support
these doctors' individual practices and to assist them in providing quality
patient care. See "Item 1 - Business - Government Regulation - Regulation of
Optometrists and Ophthalmologists."

      TLC Vision believes that its strong relationships with its affiliated eye
care doctors, though non exclusive, represent an important competitive advantage
for the TLC Vision branded laser eye care centers.

      The Company believes that primary care doctors' relationships with TLC
Vision and the doctors' acceptance of laser vision correction enhances the
doctors' practices. The affiliated eye doctors (usually optometrists) charge
fees to assess candidates for laser vision correction and provide pre- and
post-operative care, including an initial eye examination and follow-up visits.
The primary care doctor's potential revenue loss from sales of contact lenses
and eyeglasses may be offset by professional fees earned from both laser vision
correction pre- and post-operative care and examinations required under the
Company's "Lifetime Commitment" program.

      SALES AND MARKETING

      The Company also seeks to increase its procedure volume and its market
penetration through other innovative marketing programs for the TLC Vision
branded laser eye care centers, particularly in developing stronger
relationships with optometrists.

      While TLC Vision believes that many myopic and hyperopic people are
potential candidates for laser vision correction, these procedures must compete
with corrective eyewear and surgical and non-surgical treatments for myopia and
hyperopia. The decision to have laser vision correction largely represents a
choice dictated by an individual's desire to reduce or eliminate their reliance
on eyeglasses or contact lenses.

      The Company markets to doctors, corporations and directly to the public. A
large part of the Company's marketing resources are devoted to joint marketing
programs with affiliated doctors. The Company provides doctors with brochures,
videos, posters and other materials that help them educate their patients about
laser vision correction. Those doctors who wish to market directly to their
patients or the public may receive support from the Company in the development
of marketing programs.

      The Company believes that the most effective way to market to doctors is
to be perceived as a leader in the eye care industry. To this end, the Company
strives to be affiliated with clinical leaders, educate doctors on laser vision
and refractive correction and remain current with new procedures, technology and
techniques. See "Item 1 - Business - Ancillary Businesses and Support Programs."
The Company also promotes its services to doctors in Canada and the United
States through conferences, advertisements in journals, direct marketing, its
web sites and newsletters.

      The Company believes that as market acceptance for laser vision correction
increases, competition among surgical providers will continue to grow and many
candidates for laser vision correction will increasingly select a provider based
on factors other than solely price.

      TLC Vision has also developed marketing programs directed primarily at
large employers and third party providers to provide laser vision correction to
their employees and participants through a TLC Vision branded laser eye center.
Participating employers may partially subsidize the cost of an employee's laser
vision correction at a TLC Vision branded laser eye care center and the
procedure may be provided at a discounted price. The Company has more than 1,500
participating employers. In addition, more than 90 million individuals qualify
for the program through arrangements between TLC Vision and third party
providers. See "Item 1 - Business - Risk Factors - Inability to Execute
Strategy; Management of Growth."

      Tiger Woods, world-famous golfer and TLC Laser Eye Centers patient, serves
as spokesperson for the Company in all marketing efforts, including those aimed
directly to the public. The Company uses a variety of traditionally accepted
advertising, direct marketing and public relations efforts to reach potential
patients. Most recently, the Company launched an Internet strategy with the


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goal of having a leading refractive presence on the Internet, through TLC-owned
Web sites and partnerships and sponsorships with other Web sites.

      OWNERSHIP OF BRANDED EYE CARE CENTERS

      The Company's branded laser eye centers are typically owned and operated
by subsidiaries of the Company. The Company has no ownership interest in the
doctors' practices or professional corporations that TLC Vision manages on
behalf of doctors or that have access to a TLC Vision branded laser eye center
to perform laser vision correction services.

      CONTRACTS WITH EYE DOCTORS

      In each market where the Company operates a branded laser eye center, the
Company works with a network of eye care doctors (mostly optometrists) who
perform the pre-operative and post-operative care for patients who have had
laser vision correction. Those doctors then "co-manage" their patients with
affiliated surgeons in that the surgeon performs the laser vision correction
procedure itself, while the optometrist performs the pre-operative screening and
post-operative care. In most states, co-management doctors have the option of
charging the patient directly for their services or having the Company collect
the fees on their behalf.

      Most surgeons performing laser vision correction procedures through a TLC
Vision branded laser eye center owned, managed or operated by the Company do so
under one of three types of standard agreements (which have been modified for
use in the various U.S. states as required by state law). Each agreement
typically prohibits surgeons from disclosing confidential information relating
to the center, soliciting patients or employees of the center, or participating
in any other eye care center within a specified area. However, although certain
affiliated surgeons performing laser vision correction at the Company's branded
laser eye centers have agreed to certain restrictions on competing with, or
soliciting patients or employees associated with the Company, there can be no
assurance that such agreements will be enforceable. See "Item 1 - Business -
Risk Factors - Dependence on Affiliated Doctors."

      Surgeons must meet the credentialing requirements of the state or province
in which they practice and must receive training approved by the manufacturer of
the laser on which they perform procedures. Surgeons are responsible for
maintaining appropriate malpractice insurance and most agree to indemnify the
Company and its affiliates for any losses incurred as a result of the surgeon's
negligence or malpractice. See "Item 1 - Business - Risk Factors - Potential
Liability and Insurance."

      Most states prohibit the Company from practicing medicine, employing
physicians to practice medicine on the Company's behalf or employing
optometrists to render optometric services on the Company's behalf. Because the
Company does not practice medicine or optometry, its activities are limited to
owning and managing eye care centers and affiliating with other health care
providers. Affiliated doctors provide a significant source of patients for laser
vision correction at the Company's centers. Accordingly, the success of the
Company's operations depends upon its ability to enter into agreements on
acceptable terms with a sufficient number of health care providers, including
institutions and eye care doctors, to render surgical and other professional
services at facilities owned or managed by the Company. There can be no
assurance that the Company will be able to enter into or maintain agreements
with doctors or other health care providers on satisfactory terms or that such
agreements will be profitable to the Company. Failure to enter into or maintain
such agreements with a sufficient number of qualified doctors will have a
material adverse effect on the Company's business, financial condition and
results of operations.

DESCRIPTION OF SECONDARY EYE CARE CENTERS

      The Company has an investment in three secondary eye care centers in the
United States. A secondary eye care center is equipped for doctors to provide
advanced levels of eye care, which may include eye surgery for the treatment of
disorders such as glaucoma, cataracts and retinal disorders. Generally, a
secondary care center does not provide primary eye care, such as eye
examinations, or dispense eyewear or contact lenses. Sources of revenue for
secondary care centers are direct payments by patients as well as reimbursement
or payment by third party payors, including Medicare and Medicaid.

DESCRIPTION OF LASER ACCESS BUSINESS

      OVERVIEW

      LaserVision, TLC Vision's wholly owned subsidiary, provides access to
excimer laser platforms, microkeratomes, other equipment and value-added support
services such as training, technical support and equipment maintenance to eye
surgeons for the treatment of nearsightedness, farsightedness and astigmatism
primarily in the United States. LaserVision's delivery system utilizes both
mobile


                                       9
<PAGE>
equipment, which is routinely moved from site to site in response to market
demand, and fixed site locations. LaserVision believes that its flexible
delivery system enlarges the pool of potential locations, eye surgeons and
patients that it can serve, and allows it to effectively respond to changing
market demands. LaserVision also provides a broad range of support services to
the eye surgeons who use its equipment, including arranging for training of
physicians and staff, technical support and equipment maintenance, industry
updates and marketing advice, clinical advisory support, patient financing,
partnership opportunities and practice satelliting. As of December 31, 2003,
LaserVision was utilizing approximately 87 excimer lasers and 161 microkeratomes
in connection with its laser access businesses.

      Eye surgeons pay LaserVision a fee for each procedure the surgeon performs
using LaserVision's equipment and services. LaserVision typically provides each
piece of equipment to many different eye surgeons, which allows LaserVision to
more efficiently use the equipment and offer it at an affordable price.
LaserVision refers to its practice of providing equipment to multiple eye
surgeons as shared access.

      LaserVision's shared access and flexible delivery system benefits eye
surgeons in a variety of ways, including the ability to:

            -     avoid a large capital investment;

            -     reduce the risks associated with buying high-technology
                  equipment that may become obsolete;

            -     obtain technical support provided by LaserVision's laser
                  engineers and microkeratome technicians;

            -     use the equipment without responsibility of maintenance or
                  repair;

            -     cost-effectively serve small to medium-sized markets and
                  remote locations; and

            -     serve satellite locations even in large markets.

      FLEXIBLE DELIVERY SYSTEM

      LaserVision seeks to maximize the number of locations, eye surgeons and
patients that can utilize its access and related services and respond quickly to
changing market demand by utilizing a flexible delivery system that features
both mobile and fixed site locations.

      LaserVision's mobile access systems are typically used by eye surgeons who
perform fewer than 30 procedures per month or are in markets where they are able
to offer consolidated surgery days to patients. A certified laser technician
accompanies each excimer laser from location to location. If an eye surgeon uses
LaserVision's microkeratomes, LaserVision generally supplies one microkeratome,
one accessory kit and a second LaserVision employee, who is certified by the
microkeratome manufacturer and acts as a surgical technician.

      Mobile laser equipment is provided by means of a proprietary
"Roll-On/Roll-Off" laser system. The Roll-On/Roll-Off laser system, elements of
which have been patented, consists of an excimer laser mounted on a motorized
air suspension platform. The Roll-On/Roll-Off laser system is transported
between locations in a specifically modified truck and allows an excimer laser
to be easily moved upon reaching its destination. Due to the design of the
Roll-On/Roll-Off system, the laser usually requires only minor adjustments and
minimal set up time at each destination. As of December 31, 2003, LaserVision
had 33 Roll-On/Roll-Off systems in operation, all but 2 of which were located
in the U.S.

      LaserVision's fixed site lasers are dedicated to single locations where
eye surgeons typically perform more than 40 cases per month over several surgery
days to maintain a competitive offering for patients. As of December 31, 2003,
LaserVision had approximately 53 U.S. fixed sites and 2 European fixed sites.
Some fixed sites exclusively serve single practice groups and others are located
in ambulatory surgery centers where they can be used by any qualified eye
surgeon.

      VALUE-ADDED SERVICES

      LaserVision provides eye surgeons value-added support services that
distinguish it from its competitors, enhance the Company's ability to compete
for business and enable it to grow with its customers by offering them various
service and support arrangements. The following value-added services help
LaserVision's eye surgeon customers to expand their practices, thereby
increasing the use of LaserVision's equipment and services:


                                       10
<PAGE>
            -     Technical Support and Equipment Maintenance - As of December
                  31, 2003, LaserVision employed 38 certified laser engineers
                  and 20 microkeratome technicians. The laser engineers perform
                  most required laser maintenance and help ensure rapid response
                  to most laser repair or maintenance needs.

            -     Staff Training and Development - Through both field and
                  corporate based practice development support, LaserVision
                  provides its eye surgeon customers with a comprehensive menu
                  of options to enhance patient education, staff knowledge, and
                  patient recruitment. Start up services include centralized
                  refractive coordinator training programs and access to patient
                  financing program. These centralized training programs and
                  field-based support provide eye surgeon staff an opportunity
                  to learn best practices with respect to patient conversion,
                  patient flow and marketing programs. Extended services, such
                  as corporate programs, database management and networking
                  techniques, enable eye surgeon customers to experience
                  continued growth in their practice.

            -     Building Relationships - LaserVision works to form
                  relationships between eye surgeons and optometrists. These
                  optometric networks are valuable in referring patients to eye
                  surgeons who use LaserVision's equipment and services.
                  LaserVision helps to form these referral networks by training
                  optometrists, who are then able to provide pre-operative
                  screenings as well as post-surgical follow-up to their
                  patients. LaserVision also provides eye surgeon customers with
                  marketing advice designed to foster these referrals and
                  generate new patients.

            -     Clinical Advisors - TLC Vision maintains a Clinical Advisory
                  Group which conducts regular conference calls with
                  LaserVision's eye surgeon customers. Our clinical advisors,
                  who are eye surgeons and optometrists with extensive clinical
                  experience, chair these conference calls. In addition, TLC
                  Vision conducts clinical advisory meetings at major industry
                  conferences each year. TLC Vision's clinical advisors also
                  make themselves available to consult with eye surgeon
                  customers in addition to regularly scheduled conference calls
                  and meetings.

            -     Practice Satelliting - LaserVision assists eye surgeons with
                  high-volume practices who desire to serve smaller markets
                  through satellite surgical locations. This program allows eye
                  surgeon customers to leverage their time performing eye
                  surgery.

      SALES AND MARKETING

      LaserVision's business development personnel develop sales leads, which
come from sources such as customer contact through trade shows and professional
organizations. After identifying a prospective eye surgeon customer, the
regional manager guides the eye surgeon through the contract process. Once an
eye surgeon is prepared to initiate surgeries using our services and equipment,
LaserVision's operations department and business development personnel assume
primary responsibility for the ongoing relationship.

      MOBILE AND FIXED ACCESS AGREEMENTS

      Under LaserVision's standard refractive mobile access agreements with
surgeons, LaserVision provides some or all of the following: laser platform
and microkeratome equipment, certain related supplies for the equipment (such as
laser gases, per procedure cards and microkeratome blades), laser operator,
microkeratome technician, maintenance and certain technology upgrades. In
addition, LaserVision may provide marketing assistance, coordination of surgeon
training and other support services. This access is provided on agreed upon
dates at either the surgeons' offices or a third party's facility. In return,
the surgeons pay a per procedure fee for LaserVision's services and generally
agree to exclusively use LaserVision's equipment for refractive surgery.
LaserVision does not provide medical services to the patients or any
administrative services to the access surgeon customer.

      Under LaserVision's standard refractive fixed access agreements with
surgeons, LaserVision generally provides the following: a fixed-base laser
platform and microkeratome equipment, certain related supplies for the equipment
(such as laser gases, per procedure cards and microkeratome blades), periodic
maintenance and certain technology upgrades. In return, the surgeons pay either
a per procedure fee and guarantee a minimum number of procedures per month, or a
flat monthly fee plus the cost of per procedure cards and blades. In addition,
the surgeons generally agree to use exclusively LaserVision's equipment for
refractive surgery. LaserVision does not provide a laser operator, microkeratome
technician, medical services or any administrative services to the access
surgeon customers.

      Under LaserVision's joint venture arrangements, LaserVision directly or
indirectly provides either mobile or fixed-base laser access and the following:
microkeratome equipment, certain related supplies for the equipment (such as
laser gases, per procedure cards and microkeratome blades), laser operator,
microkeratome technician, maintenance and certain technology upgrades, the laser


                                       11
<PAGE>
facility, management services which include administrative services such as
billing and collections, staffing for the refractive practice, marketing
assistance and funds and other support services. LaserVision receives an access
fee and management services fees in addition to being reimbursed for the direct
costs paid by LaserVision for the laser facility operations. In return, the
surgeons generally agree to exclusively use LaserVision's equipment for
refractive surgery and/or not to compete with LaserVision within a certain area.
Neither LaserVision nor the joint ventures provide medical services to the
patients.

DESCRIPTION OF CATARACT BUSINESS

      Through its Midwest Surgical Services, Inc. subsidiary ("MSS"), TLC Vision
provides mobile and fixed site cataract equipment and related services in 40
states. As of December 31, 2003, MSS employed 53 cataract equipment technicians
and operated 53 mobile cataract systems. An MSS certified surgical technician
transports the mobile equipment from one surgery location to the next and
prepares the equipment at each stop so that the operating room is ready for
cataract surgery.

      Cataract patients, the majority of whom are elderly, typically prefer to
receive treatment near their homes. MSS focuses on developing relationships
between local hospitals, referring optometrists and eye surgeons in small to
medium-sized markets where MSS's shared-access approach and mobile systems make
it economically feasible for optometrists and surgeons to provide cataract
surgical services which are "close to home."

      The MSS sales staff focuses on identifying small to medium sized markets,
which usually do not have convenient access to the services of a cataract eye
surgeon. After identifying such a market, MSS's sales staff will contact the
local hospital and local optometrists to develop interest in "close to home"
cataract surgery services. When there is sufficient interest, the sales staff
brings the hospital and optometrists in contact with an eye surgeon who is
willing to provide services to that local market. By bringing these various
parties into contact, MSS seeks to increase demand for its mobile cataract
services and increase convenience for cataract patients.

DESCRIPTION OF AMBULATORY SURGICAL CENTER BUSINESS

      As a natural extension of its existing eye care businesses, TLC Vision has
organized OR Partners, Inc. as a wholly-owned subsidiary to develop, acquire
and manage single specialty ophthalmology ambulatory surgery centers (ASCs) in
partnership with ophthalmic surgeons. As of December 31, 2003, TLC Vision
operated two ASCs and anticipates that more ASCs will be opened during 2004.

      ASCs provide outpatient surgery services in a less institutional, more
productive and cost-efficient setting than traditional surgical hospitals. The
two primary procedures performed in the ASCs are cataract extraction with IOL
implantation and YAG capsulotomies. However, the ASCs have the capability to
accommodate additional ophthalmic surgical procedures as well as additional
procedures from compatible surgical specialties.

      In addition to OR Partners, Aspen Healthcare Inc. ("Aspen"), a subsidiary
of TLC Vision, is a health care consulting, development and management firm
specializing in ambulatory surgery center joint-venture development and
management. Aspen offers experienced management services to both surgery centers
and hospitals. Aspen also consults, plans, designs, develops, implements and
operates ambulatory surgery centers nationwide.

ANCILLARY BUSINESSES AND SUPPORT PROGRAMS

      TLC Vision has made investments in other businesses with the primary
objective of diversification with other vision care businesses and the secondary
objective of capitalizing on its management and marketing skills and
relationships with eye care providers.

      OTHER BUSINESSES

      Vision Source is a majority-owned subsidiary that provides marketing,
management and buying power to independently owned and operated optometric
practices in the United States. This business supports the development of
independent practices and complements the Company's co-management model.

      The Company continues to work to maximize its return on investments in
other healthcare services businesses and focuses on ensuring that other
healthcare services businesses are both profitable and growing.


                                       12
<PAGE>
      SUPPORT PROGRAMS

      CLINICAL ADVISORY GROUP

      The Company's Clinical Advisory Group is comprised of refractive surgeons
and optometrists selected based upon clinical experience and previous
involvement with TLC Vision. The Clinical Advisory Group acts as both a clinical
and business resource to the Company by providing an eye care professional's
perspective on market competition, proposed policies and operational strategies.
Additionally, the Clinical Advisory Group acts as a resource to the Company's
employees and affiliated doctors. The Clinical Advisory Group holds scheduled
meetings throughout the year and meets as necessary to consider clinical issues
as they arise.

      EMERGING TECHNOLOGIES

      The Company considers itself a leader in the provision of vision
correction technology. The Company's medical directors continually evaluate new
vision correction technologies and procedures to seek to ensure that affiliated
doctors have access to state of the art technology to provide the highest level
of care. TLC Vision's branded eye care centers in Ontario are state of the art
facilities that are used to examine and evaluate new technologies for TLC
Vision. The Company's Clinical Advisory Group monitors emerging technologies and
procedures being developed by third party equipment and device manufacturers to
address whether these technologies may complement or improve our service
offerings.

      EDUCATION

      The Company believes that ophthalmologists, optometrists and other eye
care professionals who endorse laser vision correction are a valuable resource
in increasing general awareness and acceptance of the procedures among potential
candidates and in promoting the Company as a service provider. The Company seeks
to be perceived by eye care professionals as the clinical leader in the field of
laser vision correction. One way in which it hopes to achieve this objective is
by participating in the education and training of eye care doctors in Canada and
the United States.

      The Company provides educational programs to doctors in all aspects of
clinical study, including programs in conjunction with several of the major
optometry schools in the United States. In addition, the Company has an
education and training relationship with the University of Waterloo, the only
English language optometry school in Canada.

      WEB SITE

      TLC Vision has linked its branded eye care centers, network doctors and
potential patients through its Web site, www.tlcvision.com, which provides a
directory of TLC Vision affiliated eye care providers and contains questions and
answers about laser vision correction. TLC Vision's Web site also contains other
useful information for shareholders and investors.

      TLC Vision makes available free of charge on or through its Web site its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The material is
made available through the Company's Web site as soon as reasonably practicable
after the material is electronically filed with or furnished to the Commission.

EQUIPMENT AND CAPITAL FINANCING

      The Company primarily utilizes the VISX, Alcon and Bausch & Lomb excimer
lasers for refractive surgery. See "Industry Background - Laser Vision
Correction."

      Although there can be no assurance, the Company believes that based on the
number of existing manufacturers, the current inventory levels of those
manufacturers and the number of suitable, previously owned and, in the case of
U.S. centers, FDA-approved lasers available for sale in the market, the supply
of excimer lasers is more than adequate for the Company's future operations.

      A new excimer laser costs up to $300,000. However, the industry trend in
the sale of excimer lasers is moving away from a flat purchase price to the
alternative of charging the purchaser a per procedure fee.


                                       13
<PAGE>
      As available technology improves and the FDA approves additional
procedures, the Company expects to upgrade the capabilities of its lasers. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

COMPETITION

      CONSUMER MARKET FOR VISION CORRECTION

      Within the consumer market, excimer laser procedures performed at the
Company's centers compete with other surgical and non-surgical treatments for
refractive disorders, including eyeglasses, contact lenses, other types of
refractive surgery and technologies currently under development such as corneal
rings, intraocular lenses and surgery with different types of lasers. Although
the Company believes that eyeglass and contact lens use will continue to be the
most popular form of vision correction in the foreseeable future, as market
acceptance for laser vision correction continues to increase, competition within
this market will grow. There can be no assurance that the Company's management,
operations and marketing plans are or will be successful in meeting this variety
of competition. Further, there can be no assurance that the Company's
competitors' access to capital, financing or other resources or their market
presence will not give these competitors an advantage against the Company. In
addition, other surgical and non surgical techniques to treat vision disorders
are currently in use and under development and may prove to be more attractive
to consumers than laser vision correction.

      MARKET FOR LASER VISION CORRECTION

      Within the consumer market for laser vision correction, the Company
continues to face increasing competition from other service providers. As market
acceptance for laser vision correction continues to increase, competition within
this market will grow. Laser vision correction providers are divided into three
major segments: corporate-owned centers; independent surgeon-owned centers; and
institution-owned centers. According to Market Scope, as of October 31, 2003,
independent surgeon-owned centers accounted for the largest percentage of total
procedure volume in the industry with a 62% market share. Corporate-owned
centers accounted for 31% of total procedures performed. The remaining 7% of
laser vision correction procedures were performed at institution-owned centers,
such as hospitals or universities.

      Although many or most competitors continue to charge less for laser vision
correction than the Company's branded eye care center and its affiliated
doctors, the Company believes that the important factors affecting competition
in the laser vision correction market are quality of service, surgeon skill and
reputation and price and that its competitiveness is enhanced by a strong
network of affiliated doctors. Suppliers of conventional vision correction
(eyeglasses and contact lenses), such as optometric chains, also compete with
the Company either by marketing alternatives to laser vision correction or by
purchasing excimer lasers and offering refractive surgery to their customers.
These service providers may have greater marketing and financial resources and
experience than the Company and may be able to offer laser vision correction at
lower rates. Competition has also increased in part due to the greater
availability and lower costs of excimer lasers.

      During the past several years, the laser vision correction industry
experienced financial stress due to the number of providers who employed
dramatically reduced pricing in an effort to gain market share. TLC Vision
refused to participate in the price war and maintained its premium pricing model
with superior quality of care and outcomes. In April 2001, LasikVision
Corporation and Lasik Vision Canada Inc., subsidiaries of ICON Laser Eye
Centers, Inc., made assignments in bankruptcy. In June 2001, ICON Laser Eye
Centers, Inc. was placed in receivership and Vision America also declared
bankruptcy during fiscal 2002. The Company believes that these filings, together
with related media reports, had a negative impact on procedure volumes by
generating a great deal of short-term concern and confusion among prospective
patients. A series of negative news stories focusing on patients with
unfavorable outcomes from procedures performed at competing centers further
adversely affected procedure volumes. In addition, being an elective procedure,
laser eye surgery volumes were also depressed by weak economic conditions in
North America during 2001 and 2002.

      TLC Vision competes in fragmented geographic markets. The Company's
principal corporate competitors include LCA-Vision Inc. and Lasik Vision
Institute, Inc. See "Item 1 - Business - Overview."

GOVERNMENT REGULATION

EXCIMER LASER REGULATION


                                       14
<PAGE>
      UNITED STATES

      Medical devices, such as the excimer lasers used in the Company's U.S.
centers, are subject to stringent regulation by the FDA and cannot be marketed
for commercial use in the United States until the FDA grants pre-market approval
("PMA") for the device. To obtain a PMA for a medical device, excimer laser
manufacturers must file a PMA application that includes clinical data and the
results of pre-clinical and other testing sufficient to show that there is a
reasonable assurance of safety and effectiveness of their excimer lasers. Human
clinical trials must be conducted pursuant to Investigational Device Exemptions
issued by the FDA in order to generate data necessary to support a PMA. See
"Item 1 - Business - Industry Background - Laser Vision Correction."

      The FDA is not authorized to regulate the practice of medicine, and
ophthalmologists, including those affiliated with TLC Vision eye care centers,
may perform the LASIK procedure, using lasers with a PMA for PRK only (off-label
use) in an exercise of professional judgement in connection with the practice of
medicine.

      The use of an excimer laser to treat both eyes on the same day (bilateral
treatment) has not been approved by the FDA. The FDA has stated that it
considers the use of the excimer laser for bilateral treatment to be a practice
of medicine decision, which the FDA is not authorized to regulate.
Ophthalmologists, including those affiliated with the Company's branded eye care
centers, widely perform bilateral treatment in an exercise of professional
judgment in connection with the practice of medicine. There can be no assurance
that the FDA will not seek to challenge this practice in the future.

      Any excimer laser manufacturer which obtains PMA approval for use of its
excimer lasers will continue to be subject to regulation by the FDA. Although
the FDA does not specifically regulate surgeons' use of excimer lasers, the FDA
actively enforces regulations prohibiting marketing of products for non-approved
uses and conducts periodic inspections of manufacturers to determine compliance
with Quality System Regulations.

      Failure to comply with applicable FDA requirements could subject the
Company, its affiliated doctors or laser manufacturers to enforcement action,
including product seizure, recalls, withdrawal of approvals and civil and
criminal penalties, any one or more of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Further, failure to comply with regulatory requirements or any adverse
regulatory action, including a reversal of the FDA's current position that the
"off-label" use of excimer lasers by doctors outside the FDA-approved guidelines
is a practice of medicine decision, which the FDA is not authorized to regulate,
could result in a limitation on or prohibition of the Company's use of excimer
lasers, which in turn could have a material adverse effect on the Company's
business, financial condition and results of operations.

      The marketing and promotion of laser vision correction in the United
States are subject to regulation by the FDA and the Federal Trade Commission
("FTC"). The FDA and FTC have released a joint communique on the requirements
for marketing laser vision correction in compliance with the laws administered
by both agencies. The FTC staff also issued more detailed staff guidance on the
marketing and promotion of laser vision correction and has been monitoring
marketing activities in this area through a non public inquiry to identify areas
that may require further FTC attention.

      CANADA

      The use of excimer lasers in Canada to perform refractive surgery is not
subject to regulatory approval, and excimer lasers have been used to treat
myopia since 1990 and hyperopia since 1996. The Health Protection Branch of
Health Canada ("HPB") regulates the sale of devices, including excimer lasers
used to perform procedures at the Company's Canadian eye care centers. Pursuant
to the regulations prescribed under the Canadian Food and Drugs Act, the HPB may
permit manufacturers or importers to sell a certain number of devices to perform
procedures provided the devices are used in compliance with specified
requirements for investigational testing. Permission to sell the device may be
suspended or cancelled where the HPB determines that its use endangers the
health of patients or users or where the regulations have been violated. Devices
may also be sold for use on a non-investigational basis where evidence available
in Canada to the manufacturer or importer substantiates the benefits and
performance characteristics claimed for the device. The Company believes that
the sale of the excimer lasers to its eye care centers, as well as their use at
the centers, complies with HPB requirements. There can be no assurance that
Canadian regulatory authorities will not impose restrictions, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

      REGULATION OF OPTOMETRISTS AND OPHTHALMOLOGISTS

      UNITED STATES


                                       15
<PAGE>
      The health care industry in the United States is highly regulated. The
Company and its operations are subject to extensive federal, state and local
laws, rules and regulations, including those prohibiting corporations from
practicing medicine and optometry, prohibiting unlawful rebates and division of
fees, anti-kickback laws, fee-splitting laws, self-referral laws, laws limiting
the manner in which prospective patients may be solicited and professional
licensing rules. Approximately 42 states in which the Company currently does
business limit or prohibit corporations from practicing medicine and employing
or engaging physicians to practice medicine.

      The Company has reviewed these laws and regulations with its health care
counsel, and although there can be no assurance, the Company believes that its
operations currently comply with applicable laws in all material respects. Also,
the Company expects that doctors affiliated with TLC Vision will comply with
such laws in all material respects, although it cannot ensure such compliance by
doctors.

      Federal Law. A federal law (known as the "anti-kickback statute")
prohibits the offer, solicitation, payment or receipt of any remuneration which
is intended to induce or is in return for the referral of patients for or the
ordering of items or services reimbursable by Medicare or any other federally
financed health care program. This statute also prohibits remuneration intended
to induce the purchasing of or arranging for or recommending the purchase or
order of any item, good, facility or service for which payment may be made under
federal health care programs. This statute has been applied to otherwise
legitimate investment interests if one purpose of the offer to invest is to
induce referrals from the investor. Safe harbor regulations provide absolute
protection from prosecution for certain categories of relationships. In
addition, a recent law broadens the government's anti-fraud and abuse
enforcement responsibilities to include all health care delivery systems
regardless of payor.

      Subject to certain exceptions, federal law also prohibits referrals for
the provision of Medicare or Medicaid-covered "designated health services"
between a physician and another entity with which the physician (or an immediate
family member) has a financial relationship (which includes ownership and
compensation arrangements. This law, known as the "Stark Law", does not apply
outside of the Medicare and Medicaid programs or to items or services that are
not one of the eleven designated health services.

      Laser vision correction is not reimbursable by Medicare, Medicaid or other
federal programs. As a result, neither the anti-kickback statute nor the Stark
Law applies to the Company's laser vision correction business but the Company
may be subject to similar state laws.

      Doctors affiliated with the Company's ambulatory surgery company, OR
Partners, Inc., the Company's mobile cataract services business, MSS, or the
Company's secondary care centers provide services that are reimbursable under
Medicare and Medicaid. Further, ophthalmologists and optometrists co-manage
Medicare and Medicaid patients who receive services at the Company's secondary
care centers. The co-management model is based, in part, upon the referral by an
optometrist for surgical services performed by an ophthalmologist and the
provision of pre- and post-operative services by the referring optometrist. The
Office of the Inspector General for the Department of Health and Human Services,
the government agency responsible for enforcing the anti-kickback statute, has
stated publicly that to the extent there is an agreement between optometrists
and ophthalmologists to refer back to each other, such an agreement could
constitute a violation of the anti-kickback statute. The Company believes,
however, that its co-management program does not violate the anti-kickback
statute, as patients are given the choice whether to return to the referring
optometrist or to stay with the ophthalmologist for post-operative care.
Nevertheless, there can be no guarantee that the Office of the Inspector General
will agree with the Company's analysis of the law. If the Company's
co-management program were challenged as violating the anti-kickback statute and
the Company were not successful in defending against such a challenge, then the
result may be civil or criminal fines and penalties, including exclusion of the
Company, the ophthalmologists and the optometrists from the Medicare and
Medicaid programs or the requirement that the Company revise the structure of
its co-management program or curtail its activities, any of which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.

      The provision of services covered by the Medicare and Medicaid programs in
the Company's ambulatory surgery business, mobile cataract business and
secondary care centers also triggers potential application of the Stark Law. The
co-management model could establish a financial relationship, as defined in the
Stark Law, between the ophthalmologist and the optometrist. Similarly, to the
extent that the Company provides any designated health services, as defined in
the statute, the Stark Law could be triggered as a result of any of the several
financial relationships between the Company and ophthalmologists. Based on its
current interpretation of the Stark Law as set forth in the final rule published
in 2000, the Company believes that the referrals from ophthalmologists and
optometrists either will be for services which are not designated health care
services as defined in the statute or will be covered by an exception to the
Stark Law. There can be no assurance, however, that the government will agree
with the Company's position or that there will not be changes in the
government's interpretation of the Stark Law. In such case, the Company may be
subject to civil


                                       16
<PAGE>
penalties as well as administrative exclusion and would likely be required to
revise the structure of its legal arrangements or curtail its activities, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

      The Administrative Simplification provisions of the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") were enacted to (a) improve
the efficiency and effectiveness of the healthcare system by standardizing the
exchange of electronic information for certain administrative and financial
transactions and (b) protect the confidentiality and security of health
information. HIPAA directed the U.S. Department of Health and Human Services to
promulgate a set of interlocking regulations to implement the goals of HIPAA.
The regulations apply to "covered entities" which include health plans,
healthcare clearinghouses and healthcare providers who transmit patient health
information ("PHI") in electronic form in connection with certain administrative
and billing transactions. These regulations can be divided into the following:

      -     Privacy Regulations designed to protect and enhance the rights of
            patients by providing patient access to their PHI and controlling
            the use of their PHI;

      -     Security Regulations designed to protect electronic health
            information by mandating certain physical, technical and
            administrative safeguards;

      -     Electronic Transactions and Code Sets Regulations designed to
            standardize electronic data interchange in the health care industry;

      -     Standard Unique Employer Identifier Regulations designed to
            standardize employer identification numbers used in certain
            electronic transactions; and

      -     Standard Unique Health Identifier for Health Care Providers
            Regulations designed to standardize the identification of health
            care providers used in electronic transactions.

      While the regulations are all in final form, the compliance date for each
set of regulations varies. Compliance with the Privacy Regulations was required
by April 14, 2003 (except for "small" health plans) and compliance with the
Electronic Transaction and Code Sets Regulations was required by October 16,
2003. Compliance with the Standard Unique Employer Identifier Regulations is
required by July 30, 2004; April 21, 2005 for the Security Regulations; and May
23, 2005 for the Standard Unique Health Identifier for Health Care Providers
Regulations.

      The Company has instituted new policies and procedures designed to comply
with the Privacy Regulations at various centers throughout the Company. Because
the Company is self-insured and meets the definition of "small" health plan, the
Company's health plan has until April 14, 2004 to comply with the Privacy
Regulations. The Company's plan sponsor is taking steps to institute new
policies and procedures to comply with the Privacy Regulations. The Company is
implementing employee-training programs explaining how the regulations apply to
their job role. The Company intends to implement programs to ensure compliance
with the other HIPAA regulations by the applicable compliance date.

      State Law. In addition to the requirements described above, the regulatory
requirements that the Company must satisfy to conduct its business will vary
from state to state, and accordingly, the manner of operation by the Company and
the degree of control over the delivery of refractive surgery by the Company may
differ among the states.

      A number of states have enacted laws, which prohibit what is known as the
corporate practice of medicine. These laws are designed to prevent interference
in the medical decision-making process by anyone who is not a licensed
physician. Many states have similar restrictions in connection with the practice
of optometry. Application of the corporate practice of medicine prohibition
varies from state to state. Therefore, while some states may allow a business
corporation to exercise significant management responsibilities over the
day-to-day operation of a medical or optometric practice, other states may
restrict or prohibit such activities. The Company believes that it has
structured its relationship with eye care doctors in connection with the
operation of eye care centers as well as in connection with its secondary care
centers so that they conform to applicable corporate practice of medicine
restrictions in all material respects. Nevertheless, there can be no assurance
that, if challenged, those relationships may not be found to violate a
particular state corporate practice of medicine prohibition. Such a finding may
require the Company to revise the structure of its legal arrangements or curtail
its activities, and this may have a material adverse effect on the Company's
business, financial condition, and results of operations.


                                       17
<PAGE>
      Many states prohibit a physician from sharing or "splitting" fees with
persons or entities not authorized to practice medicine. The Company's
co-management model for refractive procedures presumes that a patient will make
a single global payment to the laser center, which is a management entity acting
on behalf of the ophthalmologist and optometrist to collect fees on their
behalf. In turn, the ophthalmologist and optometrist pay facility and management
fees to the laser center out of their patient fees collected. While the Company
believes that these arrangements do not violate any of the prohibitions in any
material respects, there can be no assurance that one or more states will not
interpret this structure as violating the state fee-splitting prohibition,
thereby requiring the Company to change its procedures in connection with
billing and collecting for services. Violation of state fee-splitting
prohibitions may subject the ophthalmologists and optometrists to sanctions, and
may result in the Company incurring legal fees, as well as being subjected to
fines or other costs, and this could have a material adverse effect on the
Company's business, financial condition and results of operations.

      Just as in the case of the federal anti-kickback statute, while the
Company believes that it is conforming to applicable state anti-kickback
statutes in all material respects, there can be no assurance that each state
will agree with the Company's position and would not challenge the Company. If
the Company were not successful in defending against such a challenge, the
result may be civil or criminal fines or penalties for the Company as well as
the ophthalmologists and optometrists. Such a result would require the Company
to revise the structure of its legal arrangements, and this could have a
material adverse effect on the Company's business, financial condition and
results of operations.

      Similarly, just as in the case of the federal Stark Law, while the Company
believes that it is operating in compliance with applicable state
anti-self-referral laws in all material respects, there can be no assurance that
each state will agree with the Company's position or that there will not be a
change in the state's interpretation or enforcement of its own law. In such
case, the Company may be subject to fines and penalties as well as other
administrative sanctions and would likely be required to revise the structure of
its legal arrangements. This could have a material adverse effect on the
Company's business, financial condition and results of operations

      CANADA

      Conflict of interest regulations in certain Canadian provinces prohibit
optometrists, ophthalmologists or corporations owned or controlled by them from
receiving benefits from suppliers of medical goods or services to whom the
optometrist or ophthalmologist refers his or her patients. In certain
circumstances, these regulations deem it a conflict of interest for an
ophthalmologist to order a diagnostic or therapeutic service to be performed by
a facility in which the ophthalmologist has any proprietary interest. This does
not include a proprietary interest in a publicly traded company. Certain of the
Company's eye care centers in Canada are owned and managed by a subsidiary in
which affiliated doctors own a minority interest. The Company expects that
ophthalmologists and optometrists affiliated with TLC Vision will comply with
the applicable regulations, although it cannot ensure such compliance by
doctors.

      The laws of certain Canadian provinces prohibit health care professionals
from splitting fees with non-health care professionals and prohibit non-licensed
entities (such as the Company) from practicing medicine or optometry and, in
certain circumstances, from employing physicians or optometrists directly. The
Company believes that its operations comply with such laws in all material
respects, and expects that doctors affiliated with TLC Vision centers will
comply with such laws, although it cannot ensure such compliance by doctors.

      Optometrists and ophthalmologists are subject to varying degrees and types
of provincial regulation governing professional misconduct, including
restrictions relating to advertising, and in the case of optometrists, a
prohibition against exceeding the lawful scope of practice. In Canada, laser
vision correction is not within the permitted scope of practice of optometrists.
Accordingly, TLC Vision does not allow optometrists to perform the procedure at
TLC Vision centers in Canada.

      FACILITY LICENSURE AND CERTIFICATE OF NEED

      The Company believes that it has all licenses necessary to operate its
business. The Company may be required to obtain licenses from the state
Departments of Health, or a division thereof, in the various states in which it
opens eye care centers. There can be no assurance that the Company will be able
to obtain facility licenses in all states which may require facility licensure.

      Some states require the permission of the Department of Health or a
division thereof, such as a Health Planning Commission, in the form of a
Certificate of Need ("CON") prior to the construction or modification of an
ambulatory care facility, such as a laser center, or the purchase of certain
medical equipment in excess of an amount set by the state. There can be no
assurance that the Company will be able to acquire a CON in all states where a
CON is required.


                                       18
<PAGE>
      The Company is not aware of any Canadian health regulations which impose
facility-licensing requirements on the operation of eye care centers.

      RISK OF NON COMPLIANCE

      Many of these laws and regulations governing the health care industry are
ambiguous in nature and have not been definitively interpreted by courts and
regulatory authorities. Moreover, state and local laws vary from jurisdiction to
jurisdiction. Accordingly, the Company may not always be able to predict clearly
how such laws and regulations will be interpreted or applied by courts and
regulatory authorities and some of the Company's activities could be challenged.
In addition, there can be no assurance that the regulatory environment in which
the Company operates will not change significantly in the future. Numerous
legislative proposals have been introduced in Congress and in various state
legislatures over the past several years that would, if enacted, effect major
reforms of the U.S. health care system. The Company cannot predict whether any
of these proposals will be adopted and, if adopted, what impact such legislation
would have on the Company's business. The Company has reviewed existing laws and
regulations with its health care counsel, and although there can be no
assurance, the Company believes that its operations currently comply with
applicable laws in all material respects. Also, TLC Vision expects that
affiliated doctors will comply with such laws in all material respects, although
it cannot assure such compliance by doctors. The Company could be required to
revise the structure of its legal arrangements or the structure of its fees,
incur substantial legal fees, fines or other costs, or curtail certain of its
business activities, reducing the potential profit to the Company of some of its
legal arrangements, any of which may have a material adverse effect on the
Company's business, financial condition and results of operations.

INTELLECTUAL PROPERTY

      The names "TLC The Laser Center," "TLC Vision," and slogan "See the Best"
are registered U.S. service marks of TLC Vision and registered trademarks in
Canada. TLC Vision has registered "TLC Laser Eye Centers" with the TLC Vision
eye design as a trademark in the United States and Canada. "Laser Vision,"
"Laser Vision Centers and Design," "Laser Vision Centers," "LVC," and "LVCI,"
are registered trademarks in the United States utilized by LaserVision.
LaserVision has secured a patent for certain aspects of its Roll-On/Roll-Off
system. In addition, TLC Vision owns a patent in the United States on the
treatment of a potential side effect of laser vision correction generally known
as "central islands." The patent expires in May 2014. The Company's service
marks, patents and other intellectual property may offer the Company a
competitive advantage in the marketplace and could be important to the success
of the Company. One or all of the registrations of the service marks may be
challenged, invalidated or circumvented in the future.

      The medical device industry, including the ophthalmic laser sector, has
been characterized by substantial litigation in the United States and Canada
regarding patents and proprietary rights. There are a number of patents
concerning methods and apparatus for performing corneal procedures with excimer
lasers. In the event that the use of an excimer laser or other procedure
performed at any of the Company's refractive or secondary care centers is deemed
to infringe a patent or other proprietary right, the Company may be prohibited
from using the equipment or performing the procedure that is the subject of the
patent dispute or may be required to obtain a royalty bearing license, which may
not be available on favorable terms, if at all. The costs associated with any
such licensing arrangements may be substantial and could include ongoing royalty
payments. In the event that a license is not available, the Company may be
required to seek the use of products, which do not infringe the patent. The
unavailability of such products may cause the Company to cease operations in the
United States or Canada or delay the Company's continued expansion in the United
States. If the Company is prohibited from performing laser vision correction at
any of its laser centers, the Company's business, financial condition and
results of operations will be materially adversely affected.

EMPLOYEES

      As of December 31, 2003, the Company had 854 employees. The Company's
progress to date has been highly dependent upon the skills of its key technical
and management personnel both in its corporate offices and in its eye care
centers, some of whom would be difficult to replace. There can be no assurance
that the Company can retain such personnel or that it can attract or retain
other highly qualified personnel in the future. No employee of the Company is
represented by a collective bargaining agreement, nor has the Company
experienced a work stoppage. The Company considers its relations with its
employees to be good. See "Item 1 - Business - Risk Factors - Dependence on Key
Personnel."

RISK FACTORS

      LOSSES FROM OPERATIONS; UNCERTAINTY OF FUTURE PROFITABILITY


                                       19
<PAGE>
      TLC Vision reported net losses of $9.4 million, $43.3 million, $161.9
million and $37.8 million for the year ended December 31, 2003, the transitional
period ended December 31, 2002, fiscal 2002 and fiscal 2001, respectively. As of
December 31, 2003, TLC Vision reported an accumulated deficit of $294.8 million.
TLC Vision may not become profitable and if it does become profitable, its
profitability may vary significantly from quarter to quarter. TLC Vision's
profitability will depend on a number of factors, including:

            -     the Company's ability to increase demand for its services and
                  control costs;

            -     the Company's ability to execute its strategy and effectively
                  integrate acquired businesses and assets;

            -     the Company's ability to obtain adequate insurance against
                  malpractice claims and reduce the number of claims;

            -     economic conditions in the Company's markets, including the
                  availability of discretionary income;

            -     concerns about the safety and effectiveness of laser vision
                  correction;

            -     competitive factors;

            -     regulatory developments;

            -     the Company's ability to achieve expected cost savings and
                  synergies;

            -     the Company's ability to retain and attract qualified
                  personnel; and

            -     Doctors' ability to obtain adequate insurance against
                  malpractice claims at reasonable rates.

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

      CHANGES IN GENERAL ECONOMIC CONDITIONS MAY CAUSE FLUCTUATIONS IN TLC
      VISION'S REVENUES AND PROFITABILITY.

      The cost of laser vision correction procedures is typically not reimbursed
by health care insurance companies or other third party payors. Accordingly, the
operating results of TLC Vision may vary based upon the impact of changes in
economic conditions on the disposable income of consumers interested in laser
vision correction. A significant decrease in consumer disposable income in a
weakening economy may result in decreased procedure levels and revenues for TLC
Vision. For example, the downturn in the North American economy contributed to a
17% decline in the number of paid procedures at TLC Vision's branded centers and
a 22% decline in total revenues for the seven months ended December 31, 2002
compared to the corresponding period in 2001. In addition, weakening economic
conditions may result in an increase in the number of TLC Vision's customers,
who experience financial distress or declare bankruptcy, which may negatively
impact TLC Vision's accounts receivable collection experience.

      THE MARKET FOR LASER VISION CORRECTION IS INTENSELY COMPETITIVE AND
      COMPETITION MAY INCREASE.

      Some of the Company's competitors or companies that may choose to enter
the industry in the future, including laser manufacturers themselves, may have
substantially greater financial, technical, managerial, marketing and/or other
resources and experience than the Company and may compete more effectively than
TLC Vision. TLC Vision competes with hospitals, individual ophthalmologists,
other corporate laser centers and manufacturers of excimer laser equipment in
offering laser vision correction services and access to excimer lasers. TLC
Vision's principal corporate competitors will include LCA-Vision Inc. and Lasik
Vision Institute, Inc.

      Competition in the market for laser vision correction could increase as
excimer laser surgery becomes more commonplace and the number of
ophthalmologists performing the procedure increases. In addition, competition
would increase if state laws were amended to permit optometrists, in addition to
ophthalmologists, to perform laser vision correction. TLC Vision will compete on
the basis of quality of service, surgeon skill and reputation and price. If more
providers offer laser vision correction in a given geographic market, the price
charged for such procedures may decrease. In recent years, competitors have
offered laser vision correction at prices considerably lower than TLC Vision's
prices. The laser vision correction industry has been significantly affected by
reductions in the price for laser vision correction, including the failure of
many businesses that provided laser vision correction. Market conditions may
compel TLC Vision to lower prices to remain competitive and any reduction in its
prices may not be offset by an increase in its procedure volume or decreases in
its costs. A decrease in either the fees or procedures performed at TLC Vision's
eye care centers or in the number of procedures performed at its centers could
cause TLC Vision's revenues to decline and its business and financial condition
to weaken.

      Laser vision correction competes with other surgical and non surgical
means of correcting refractive disorders, including eyeglasses, contact lenses,
other types of refractive surgery and other technologies currently under
development, such as intraocular


                                       20
<PAGE>
lenses and surgery with different types of lasers. TLC Vision's management,
operations and marketing plans may not be successful in meeting this
competition. Optometry chains and other suppliers of eyeglasses and contact
lenses may have substantially greater financial, technical, managerial,
marketing and other resources and experience than the Company and may promote
alternatives to laser vision correction or purchase laser systems and offer
laser vision correction to their customers.

      If the price of excimer laser systems decreases, additional competition
could develop. The price for excimer laser systems could decrease for a number
of reasons, including technological innovation and increased competition among
laser manufacturers. Further reductions in the price of excimer lasers could
reduce demand for TLC Vision's laser access services by making it economically
more attractive for eye surgeons to buy excimer lasers rather than utilize TLC
Vision's services.

      Most affiliated surgeons performing laser vision correction at TLC
Vision's eye care centers and significant employees of TLC Vision have agreed to
restrictions on competing with TLC Vision, or soliciting patients or employees
associated with their facilities; however, these non competition agreements may
not be enforceable.

      THE MARKET ACCEPTANCE OF LASER VISION CORRECTION IS UNCERTAIN.

      TLC Vision believes that the profitability and growth of TLC Vision will
depend upon broad acceptance of laser vision correction in the United States
and, to a lesser extent, Canada. TLC Vision may have difficulty generating
revenue and growing its business if laser vision correction does not become more
widely accepted by eye care doctors or the general population as an alternative
to existing methods of treating refractive vision disorders. Laser vision
correction may not become more widely accepted due to a number of factors,
including:

            -     its cost, particularly since laser vision correction typically
                  is not covered by government or private insurers;

            -     general resistance to surgery;

            -     effective and less expensive alternative methods of correcting
                  refractive vision disorders are widely available;

            -     the lack of long-term follow-up data;

            -     the possibility of unknown side effects; and

            -     reported adverse events or other unfavorable publicity
                  involving patient outcomes from laser vision correction.

      CONCERNS ABOUT POTENTIAL SIDE EFFECTS AND LONG-TERM RESULTS OF LASER
      VISION CORRECTION MAY NEGATIVELY IMPACT MARKET ACCEPTANCE OF LASER VISION
      CORRECTION AND PREVENT TLC VISION FROM GROWING ITS BUSINESS.

      Concerns have been raised with respect to the predictability and stability
of results and potential complications or side effects of laser vision
correction. Any complications or side effects of laser vision correction may
call into question the safety and effectiveness of laser vision correction,
which in turn may damage the likelihood of market acceptance of laser vision
correction. Complications or side effects of laser vision correction could lead
to product liability, malpractice or other claims against TLC Vision. Also,
complications or side effects could jeopardize the approval by the U.S. Food and
Drug Administration of the excimer laser for sale for laser vision correction.
Although results of a study showed that the majority of patients experienced no
serious side effects seven years after laser vision correction using the
Photorefractive Keratectomy procedure, known as PRK, complications may be
identified in further long-term follow-up studies of PRK. There are no long-term
studies on the side effects of Laser In-Situ Keratomileusis, known as LASIK, the
procedure more often performed in recent years.

      There is no independent industry source for data on side effects or
complications from laser vision correction. In addition, TLC Vision does not
track side effects. Some of the possible side effects of laser vision correction
are:

            -     foreign body sensation,

            -     pain or discomfort,

            -     sensitivity to bright lights,

            -     blurred vision,

            -     dryness or tearing,

            -     fluctuation in vision,

            -     night glare,

            -     poor or reduced visual quality,

            -     overcorrection or undercorrection,


                                       21
<PAGE>
            -     regression, and

            -     corneal flap or corneal healing complications.

      TLC Vision believes that the percentage of patients who experience serious
side effects as a result of laser vision correction at its centers is likely
less than 1%. However, there is no study to support this belief.

      Laser vision correction may also involve the removal of "Bowman's
membrane," an intermediate layer between the outer corneal layer and the middle
corneal layer of the eye. Although several studies have demonstrated no
significant adverse reactions to excimer laser removal of Bowman's membrane, the
long-term effect of the removal of Bowman's membrane on patients is unclear.

      TLC VISION MAY BE UNABLE TO ENTER INTO OR MAINTAIN AGREEMENTS WITH DOCTORS
OR OTHER HEALTH CARE PROVIDERS ON SATISFACTORY TERMS.

      TLC Vision will have difficulty generating revenue if it is unable to
enter into or maintain agreements with doctors or other health care providers on
satisfactory terms. Most states prohibit TLC Vision from practicing medicine,
employing doctors to practice medicine on TLC Vision's behalf or employing
optometrists to render optometric services on TLC Vision's behalf. In most
states TLC Vision may only own and manage centers and enter into affiliations
with doctors and other health care providers. Also, affiliated doctors have
provided a significant source of patients for TLC Vision and are expected to
provide a significant source of patients for TLC Vision. Accordingly, the
success of TLC Vision's business depends upon its ability to enter into
agreements on acceptable terms with a sufficient number of health care
providers, including institutions and eye care doctors to render or arrange
surgical and other professional services at facilities owned or managed by TLC
Vision.

      QUARTERLY FLUCTUATIONS IN OPERATING RESULTS MAKE FINANCIAL FORECASTING
DIFFICULT.

      TLC Vision may experience future quarterly losses, which may exceed prior
quarterly losses. TLC Vision's expense levels will be based, in part, on its
expectations as to future revenues. If actual revenue levels were below
expectations, TLC Vision's operating results would deteriorate. Historically,
the quarterly results of operations of TLC Vision have varied, and future
results may continue to fluctuate significantly from quarter to quarter.
Accordingly, quarter-to-quarter comparisons of TLC Vision's operating results
may not be meaningful and should not be relied upon as indications of its future
performance or annual operating results. Quarterly results will depend on
numerous factors, including economic conditions in TLC Vision's geographic
markets, market acceptance of its services, seasonal factors and other factors
described in this Form 10-K.

      THE MARKET PRICE OF TLC VISION'S COMMON SHARES MAY BE VOLATILE.

      Historically, the market price of TLC Vision's common shares has been
volatile. For example, the market price of TLC Vision's common shares decreased
from a high of $53.50 to a low of $0.79 between July 1999 and March 2003, then
increased to $10.84 by March 2004. TLC Vision's common shares will likely be
volatile in the future due to industry developments and business-specific
factors such as:

            -     the Company's ability to effectively penetrate the laser
                  vision correction market;

            -     the Company's ability to execute its business strategy;

            -     new technological innovations and products;

            -     changes in government regulations;

            -     adverse regulatory action;

            -     public concerns about the safety and effectiveness of laser
                  vision correction;

            -     loss of key management;

            -     announcements of non-routine events such as acquisitions or
                  litigation;

            -     variations in its financial results;

            -     fluctuations in competitors' stock prices;

            -     the issuance of new or changed stock market analyst reports
                  and recommendations concerning its common shares or
                  competitors' stock;

            -     changes in earnings estimates by securities analysts;

            -     the Company's ability to meet analysts' projections;

            -     changes in the market for medical services;

            -     general economic, political and market conditions; or


                                       22
<PAGE>
            -     perception of the potential for rheopheresis for dry AMD

      In addition, in recent years the prices and trading volumes of publicly
traded shares, particularly those of companies in health care related markets,
have been volatile. This volatility has substantially affected the market prices
of many companies' securities for reasons frequently unrelated or
disproportionate to their operating performance. Following the terrorist attacks
in the United States in September 2001, stock markets experienced volatility and
stock prices declined, in some cases substantially. Continued volatility may
reduce the market price of the common shares of TLC Vision.

      TLC VISION MAY BE UNABLE TO EXECUTE ITS BUSINESS STRATEGY.

      TLC Vision's business strategy will be to focus on:

            -     maximizing revenues through a co-management model and
                  innovative marketing programs;

            -     controlling costs without compromising superior quality of
                  care or clinical outcomes; and

            -     pursuing additional growth opportunities outside of its laser
                  vision correction business.

      If TLC Vision does not successfully execute this strategy or if the
strategy is not effective, TLC Vision may be unable to maintain or grow its
revenues or achieve profitability.

      TLC VISION MAY MAKE INVESTMENTS THAT MAY NOT BE PROFITABLE.

      TLC Vision has made investments that were intended to support its
strategic business purposes, such as TLC Vision's investment in LaserSight Inc.
These investments were generally made in companies in the laser vision
correction business or that owned emerging technologies that TLC Vision believes
would support the Company's refractive business. TLC Vision recognized a charge
of approximately $26.1 million, $2.1 million and $0.4 million in the fiscal year
ended May 31, 2002, the seven-month period ended December 31, 2002 and the year
ended December 31, 2003, respectively, primarily as a result of the decline in
the value of its investments, including the investment in LaserSight. The
remaining value of the investment in LaserSight was written off in 2003 as
LaserSight declared bankruptcy during the year. TLC Vision may make similar
investments in the future, some of which may be material or may become material
over time. If TLC Vision is unable to successfully manage its current and future
investments, including ASC investments, or if these investments are not
profitable or do not generate the expected returns, then future operating
results may be adversely impacted.

      THE GROWTH STRATEGY OF TLC VISION DEPENDS ON ITS ABILITY TO MAKE
      ACQUISITIONS OR ENTER INTO AFFILIATION ARRANGEMENTS.

      The success of TLC Vision's growth strategy will be dependent on
increasing the number of procedures at its eye care centers and/or increasing
the number of eye care centers through internal development or acquisitions and
entering into affiliation arrangements with local eye care professionals in
markets not large enough to justify a corporate center.

      The addition of new centers will present challenges to management,
including the integration of new operations, technologies and personnel. The
addition of new centers also presents special risks, including:

            -     unanticipated liabilities and contingencies;

            -     diversion of management attention; and

            -     possible adverse effects on operating results resulting from:

                  -     possible future goodwill impairment;

                  -     increased interest costs;

                  -     the issuance of additional securities; and

                  -     increased costs resulting from difficulties related to
                        the integration of the acquired businesses.

      TLC Vision's ability to achieve growth through acquisitions will depend on
a number of factors, including:

            -     the availability of attractive acquisition opportunities;

            -     the availability of capital to complete acquisitions;

            -     the availability of working capital to fund the operations of
                  acquired businesses; and


                                       23
<PAGE>
            -     the effect of existing and emerging competition on operations.

      TLC Vision may not be able to successfully identify suitable acquisition
candidates, complete acquisitions on acceptable terms, if at all, or
successfully integrate acquired businesses into its operations. TLC Vision's
past and possible future acquisitions may not achieve adequate levels of
revenue, profitability or productivity or may not otherwise perform as expected.

      TLC VISION MAY HAVE SUBSTANTIAL FUTURE CAPITAL REQUIREMENTS, AND ITS
ABILITY TO OBTAIN ADDITIONAL FUNDING IS UNCERTAIN.

      TLC Vision is unable to predict with certainty the timing or the amount of
its future capital requirements. Continued operating losses or changes in TLC
Vision's operations, expansion plans or capital requirements may consume
available cash and other resources more rapidly than TLC Vision anticipates and
more funding may be required before TLC Vision becomes profitable. TLC Vision's
capital needs depend on many factors, including:

            -     the rate and cost of acquisitions of businesses, equipment,
                  equipment upgrades and other assets;

            -     the rate of opening new centers or expanding existing centers;

            -     market acceptance of laser vision correction; and

            -     actions by competitors.

      Although TLC Vision obtained a $15 million line of credit from General
Electric Capital Corporation during 2003, TLC Vision may not have adequate
resources to finance the planned growth in its businesses, and it may not be
able to obtain additional capital through subsequent equity or debt financings
on terms favorable to TLC Vision or at all. If TLC Vision does not have adequate
resources and cannot obtain additional capital, TLC Vision will not be able to
implement its expansion strategy successfully, TLC Vision's growth could be
limited, and its net income and financial condition could be adversely affected.

      TLC VISION MAY BE UNABLE TO SUCCESSFULLY IMPLEMENT AND INTEGRATE NEW
OPERATIONS AND FACILITIES.

      The success of TLC Vision depends on its ability to manage its existing
operations and facilities and to expand its businesses consistent with the
Company's business strategy. In the past, TLC Vision has grown rapidly in the
United States. TLC Vision's future growth and expansion will increase its
management's responsibilities and demands on operating information technologies
and financial systems and resources. TLC Vision's business and financial results
are dependent upon a number of factors, including its ability to:

            -     implement upgraded operations, information technologies and
                  financial systems, procedures and controls;

            -     hire and train new staff and managerial personnel;

            -     adapt or amend TLC Vision's business structure to comply with
                  present or future legal requirements affecting its
                  arrangements with doctors, including state prohibitions on
                  fee-splitting, corporate practice of optometry and medicine
                  and referrals to facilities in which doctors have a financial
                  interest; and

            -     obtain regulatory approvals, where necessary, and comply with
                  licensing requirements applicable to doctors and facilities
                  operated, and services offered, by doctors;

      TLC Vision's failure or inability to successfully implement these and
other factors may adversely affect the quality and profitability of its business
operations.

      TLC VISION DEPENDS ON KEY PERSONNEL WHOSE LOSS COULD ADVERSELY AFFECT ITS
BUSINESS.

      TLC Vision's success and growth depends in part on the active
participation of key medical and management personnel, including Mr. Vamvakas
and Mr. Wachtman. TLC Vision maintains key person insurance for each of Mr.
Vamvakas, Mr. Wachtman and several key ophthalmologists. Despite having this
insurance in place, the loss of any one of these key individuals could adversely
affect the quality, profitability and growth prospects of TLC Vision's business
operations.

      TLC Vision has employment or similar agreements with the above individuals
and other key personnel. The terms of these agreements include, in some cases,
entitlements to substantial severance payments in the event of termination of
employment by either TLC Vision or the employee.


                                       24
<PAGE>
      TLC VISION MAY BE SUBJECT TO MALPRACTICE AND OTHER SIMILAR CLAIMS AND MAY
      BE UNABLE TO OBTAIN OR MAINTAIN ADEQUATE INSURANCE AGAINST THESE CLAIMS.

      The provision of medical services at TLC Vision's centers entails an
inherent risk of potential malpractice and other similar claims. Beginning
October 1, 2002, all of TLC Vision's U.S. professional malpractice insurance had
a $250,000 deductible per claim. The Company has been self-insured for Canadian
claims since June 1, 2003. Patients at TLC Vision's centers execute informed
consent statements prior to any procedure performed by doctors at TLC Vision's
centers, but these consents may not provide adequate liability protection.
Although TLC Vision does not engage in the practice of medicine or have
responsibility for compliance with regulatory and other requirements directly
applicable to doctors and doctor groups, claims, suits or complaints relating to
services provided at TLC Vision's centers may be asserted against TLC Vision in
the future, and the assertion or outcome of these claims could result in higher
administrative and legal expenses, including settlement costs or litigation
damages.

      TLC Vision currently maintains malpractice insurance coverage and accruals
that it believes is adequate both as to risks and amounts covered. In addition,
TLC Vision requires the doctors who provide medical services at its centers to
maintain comprehensive professional liability insurance and most of these
doctors have agreed to indemnify TLC Vision against certain malpractice and
other claims. TLC Vision's insurance coverage, however, may not be adequate to
satisfy claims, insurance maintained by the doctors may not protect TLC Vision
and such indemnification may not be enforceable or, if enforced, may not be
sufficient. TLC Vision's inability to obtain adequate insurance or an increase
in the future cost of insurance to TLC Vision and the doctors who provide
medical services at the centers may have a material adverse effect on its
business and financial results.

      The excimer laser system uses hazardous gases which if not properly
contained could result in injury. TLC Vision may not have adequate insurance for
any liabilities arising from injuries caused by the excimer laser system or
hazardous gases. While TLC Vision believes that any claims alleging defects in
TLC Vision's excimer laser systems would usually be covered by the
manufacturers' product liability insurance, the manufacturers of TLC Vision's
excimer laser systems may not continue to carry adequate product liability
insurance.

      TLC VISION MAY FACE CLAIMS FOR FEDERAL, STATE AND LOCAL TAXES.

      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 who 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. TLC Vision believes that it has
adequate provisions and accruals in its financial statements for tax
liabilities, although it cannot predict the outcome of future tax assessments.

      Tax authorities in three states have contacted TLC Vision and issued
proposed sales tax adjustments in the aggregate amount of approximately $1.2
million for various periods through 2003 on the basis that certain of TLC
Vision's laser access arrangements constitute a taxable lease or rental rather
than an exempt service. TLC Vision's discussions with these three states are
ongoing. TLC Vision has resolved its sales tax liabilities in 15 other states.
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 customers and in such event would remain
responsible for payment. TLC Vision cannot predict the outcome of these
outstanding assessments or any other assessments or similar actions which may be
undertaken by other state tax authorities. TLC Vision has evaluated and
implemented a comprehensive sales tax reporting system. TLC Vision believes that
it has adequate provisions in its financial statements with respect to these
matters.

      COMPLIANCE WITH INDUSTRY REGULATIONS IS COSTLY AND ONEROUS.

      TLC Vision's operations are subject to extensive federal, state and local
laws, rules and regulations. TLC Vision's efforts to comply with these laws,
rules and regulations may impose significant costs, and failure to comply with
these laws, rules and regulations may result in fines or other charges being
imposed on TLC Vision. The Company has incurred significant costs, and expects
to incur additional costs in connection with compliance with the provisions of
the Sarbanes-Oxley Act of 2002. Failure by the Company to comply with the
provisions of Sarbanes-Oxley, including provision relating to internal financial
controls, could have a material adverse effect on the Company


                                       25
<PAGE>
      Many state laws limit or prohibit corporations from practicing medicine
and optometry, and many federal and state laws extensively regulate the
solicitation of prospective patients, the structure of TLC Vision's fees and its
contractual arrangements with hospitals, surgery centers, ophthalmologists and
optometrists, among others. Some states also impose licensing requirements.
Although TLC Vision has tried to structure its business and contractual
relationships in compliance with these laws in all material respects, if any
aspect of its operations were found to violate applicable laws, TLC Vision could
be subject to significant fines or other penalties, required to cease operations
in a particular state, prevented from commencing operations in a particular
state or otherwise be required to revise the structure of its business or legal
arrangements. Many of these laws and regulations are ambiguous, have not been
definitively interpreted by courts or regulatory authorities and vary from
jurisdiction to jurisdiction. Accordingly, TLC Vision may not be able to predict
how these laws and regulations will be interpreted or applied by courts and
regulatory authorities, and some of its activities could be challenged.

      Numerous legislative proposals to reform the U.S. health care system have
been introduced in Congress and in various state legislatures over the past
several years. TLC Vision cannot predict whether any of these proposals will be
adopted and, if adopted, what impact this legislation would have on its
business. To respond to any such changes, TLC Vision could be required to revise
the structure of its legal arrangements or the structure of its fees, incur
substantial legal fees, fines or other costs, or curtail some of its business
activities, reducing the potential profit of some of its arrangements.

      State medical boards and state boards of optometry generally set limits on
the activities of ophthalmologists and optometrists. In some instances, issues
have been raised as to whether participation in a co-management program violates
some of these limits. If a state authority were to find that TLC Vision's
co-management program did not comply with state licensing laws, TLC Vision would
be required to revise the structure of its legal arrangements, and affiliated
doctors might terminate their relationships with TLC Vision.

      Federal and state civil and criminal statutes impose penalties, including
substantial civil and criminal fines and imprisonment, on health care providers
and persons who provide services to health care providers, including management
businesses such as TLC Vision, for fraudulently or wrongfully billing government
or other insurers. In addition, the federal law prohibiting false
Medicare/Medicaid billings allows a private person to bring a civil action in
the name of the U.S. government for violations of its provisions and obtain a
portion of the damages if the action is successful. TLC Vision believes that it
is in material compliance with these billing laws, but its business could be
adversely affected if governmental authorities were to scrutinize or challenge
its activities or private parties were to assert a false claim or action against
us in the name of the U.S. government.

      Although TLC Vision believes that it has obtained the necessary licenses
or certificates of need in states where such licenses are required and that TLC
Vision is not required to obtain any licenses in other states, some of the state
regulations governing the need for such licenses are unclear, and there is no
applicable precedent or regulatory guidance to help resolve these issues. A
state regulatory authority could determine that TLC Vision is operating a center
inappropriately without a required license or certificate of need, which could
subject TLC Vision to significant fines or other penalties, result in TLC Vision
being required to cease operations in a state or otherwise jeopardize its
business and financial results. If TLC Vision expands to a new geographic
market, TLC Vision may be unable to obtain any new license required in that
jurisdiction.

      COMPLIANCE WITH ADDITIONAL HEALTH CARE REGULATIONS IN CANADA IS COSTLY AND
      BURDENSOME.

      Some Canadian provinces have adopted conflict of interest regulations that
prohibit optometrists, ophthalmologists or corporations they own or control from
receiving benefits from suppliers of medical goods or services to whom they
refer patients. The laws of some Canadian provinces also prohibit health care
professionals from splitting fees with non-health care professionals and
prohibit non-licensed entities such as TLC Vision from practicing medicine or
optometry and from directly employing doctors or optometrists. TLC Vision
believes that it is in material compliance with these requirements, but a review
of TLC Vision's operations by Canadian regulators or changes in the
interpretation or enforcement of existing Canadian legal requirements or the
adoption of new requirements could require TLC Vision to incur significant costs
to comply with laws and regulations in the future or require TLC Vision to
change the structure of its arrangements with doctors.

      COMPLIANCE WITH U.S. FOOD AND DRUG ADMINISTRATION REGULATIONS REGARDING
      THE USE OF EXCIMER LASER SYSTEMS FOR LASER VISION CORRECTION IS COSTLY AND
      BURDENSOME.

      To date, the FDA has approved excimer laser systems manufactured by some
manufacturers for sale for the treatment of nearsightedness, farsightedness and
astigmatism up to stated levels of correction. Failure to comply with applicable
FDA requirements


                                       26
<PAGE>
with respect to the use of the excimer laser could subject TLC Vision, TLC
Vision's affiliated doctors or laser manufacturers to enforcement action,
including product seizure, recalls, withdrawal of approvals and civil and
criminal penalties.

      The FDA has adopted guidelines in connection with the approval of excimer
laser systems for laser vision correction. The FDA, however, has also stated
that decisions by doctors and patients to proceed outside the FDA-approved
guidelines are a practice of medicine decision, which the FDA is not authorized
to regulate. Failure to comply with FDA requirements or any adverse FDA action,
including a reversal of its interpretation with respect to the practice of
medicine, could result in a limitation on or prohibition of TLC Vision's use of
excimer lasers.

      Discovery of problems, violations of current laws or future legislative or
administrative action in the United States or elsewhere may adversely affect the
laser manufacturers' ability to obtain regulatory approval of laser equipment.
Furthermore, the failure of other excimer laser manufacturers to comply with
applicable federal, state or foreign regulatory requirements, or any adverse
action against or involving such manufacturers, could limit the supply of
excimer lasers, substantially increase the cost of excimer lasers, limit the
number of patients that can be treated at its centers and limit TLC Vision's
ability to use excimer lasers.

      Most of TLC Vision's eye care centers in the United States use VISX and/or
Alcon Laboratories Inc. excimer lasers and most of LaserVision's lasers are VISX
excimer lasers. If VISX, Alcon or other excimer laser manufacturers fail to
comply with applicable federal, state or foreign regulatory requirements, or if
any adverse regulatory action is taken against or involves such manufacturers,
the supply of lasers could be limited and the cost of excimer lasers could
increase.

      The Roll-On/Roll-Off laser system consists of an excimer laser mounted on
a motorized, air suspension platform and transported in a specially modified
truck. TLC Vision believes that use of this transport system does not require
FDA approval; the FDA has taken no position in regard to such approval. The FDA
could, however, take the position that excimer lasers are not approved for use
in this transport system. Such a view by the FDA could lead to an enforcement
action against TLC Vision, which could impede TLC Vision's ability to maintain
or increase its volume of excimer laser surgeries. This could have a material
adverse effect on TLC Vision's business and financial results. Similarly, TLC
Vision believes that FDA approval is not required for its mobile use of
microkeratomes or the cataract equipment transported by its cataract operations.
The FDA, however, could take a contrary position that could result in an
enforcement action.

      DISPUTES WITH RESPECT TO INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT TLC
      VISION'S BUSINESS.

      There has been substantial litigation in the United States and Canada
regarding the patents on ophthalmic lasers. If the use of an excimer laser or
other procedure performed at any of TLC Vision's centers is deemed to infringe a
patent or other proprietary right, TLC Vision may be prohibited from using the
equipment or performing the procedure that is the subject of the patent dispute
or may be required to obtain a royalty bearing license, which may involve
substantial costs, including ongoing royalty payments. If a license is not
available on acceptable terms, TLC Vision may be required to seek the use of
products which do not infringe the patent. The unavailability of alternate
products could cause TLC Vision to cease operations in the United States or
Canada or delay TLC Vision's expansion. If TLC Vision is prohibited from
performing laser vision correction at any of its laser centers, TLC Vision's
ability to carry on its business will be jeopardized.

      TLC Vision, through its subsidiary, LaserVision, has also secured patents
for portions of the equipment it uses to transport TLC Vision's mobile lasers.
LaserVision's patents and other proprietary technology are important to TLC
Vision's success. TLC Vision's patents could be challenged, invalidated or
circumvented in the future. Litigation regarding intellectual property is common
and TLC Vision's patents may not adequately protect its intellectual property.
Defending and prosecuting intellectual property proceedings is costly and
involves substantial commitments of management time. If TLC Vision fails to
successfully defend its rights with respect to TLC Vision's intellectual
property, TLC Vision may be required to pay damages and cease using its
equipment to transport TLC Vision's mobile lasers, which may have a material
adverse effect on its business.

      TLC VISION MAY NOT HAVE THE CAPITAL RESOURCES NECESSARY IN ORDER TO KEEP
      UP WITH RAPID TECHNOLOGICAL CHANGES.

      Modern medical technology changes rapidly. New or enhanced technologies
and therapies may be developed with better performance or lower costs than the
laser vision correction currently provided at TLC Vision's centers. TLC Vision
may not have the capital resources to upgrade its excimer laser equipment,
acquire new or enhanced medical devices or adopt new or enhanced procedures at
the time that any advanced technology or therapy is introduced.


                                       27
<PAGE>
      THE REPRICING OF TLC VISION STOCK OPTIONS COULD HAVE A MATERIAL ADVERSE
      IMPACT ON TLC VISION'S REPORTED EARNINGS IN THE FUTURE AND COULD MAKE ITS
      REPORTED EARNINGS VOLATILE.

      As approved by the shareholders of TLC Vision at its 2002 annual meeting,
in 2002 TLC Vision allowed the holders of outstanding TLC Vision stock options
with an exercise price greater than $8.688 (C$13.69) to elect to reduce the
exercise price of their options to $8.688 (C$13.69), in some cases by
surrendering existing options for a greater number of shares than the number of
shares issuable on exercise of each repriced option. The recent trading price of
TLC Vision's common shares has been greater than the new exercise price of
$8.688 (C$13.69), such that the repricing of the options could have a material
adverse impact on TLC Vision's reported earnings and could make its reported
earnings more volatile. Under current U.S. generally accepted accounting
principles, the repriced options will be subject to variable accounting
treatment. Variable accounting requires that the difference between the price of
TLC Vision's common shares at the end of each financial quarter and the new
exercise price be charged to income as compensation over the remaining vesting
period of the outstanding options. This charge may be material to future
quarterly and annual results. TLC Vision is unable to estimate at this point the
total amount of compensation expense, if any, or the period to which the charge
to income will be made on the 168,000 repriced options outstanding as of
December 31, 2003.

      THE ABILITY OF TLC VISION'S SHAREHOLDERS TO EFFECT CHANGES IN CONTROL OF
TLC VISION IS LIMITED.

      TLC Vision has a shareholder rights plan which enables the Board of
Directors to delay a change in control of TLC Vision. This could discourage a
third party from attempting to acquire control of TLC Vision, even if an attempt
would be beneficial to the interests of the shareholders. In addition, since TLC
Vision is a Canadian corporation, investments in TLC Vision may be subject to
the provisions of the Investment Canada Act. In general, this act provides a
system for the notification to the Investment Canada agency of acquisitions of
Canadian businesses by non-Canadian investors and for the review by the
Investment Canada agency of acquisitions that meet thresholds specified in the
act. To the extent that a non-Canadian person or company attempted to acquire
33% or more of TLC Vision's outstanding common stock, the threshold for a
presumption of control, the transaction could be reviewable by the Investment
Canada agency. These factors and others could have the effect of delaying,
deferring or preventing a change of control of TLC Vision supported by
shareholders but opposed by TLC Vision's Board of Directors.

ITEM 2. PROPERTIES

      The Company's 76 branded centers are located in leased premises. The
leases are negotiated on market terms and typically have terms of five to ten
years. The Company also maintains investment interests in three secondary care
practices located in Michigan, Oklahoma and Ohio. The secondary care practice in
Michigan has five satellite locations and a majority ownership in an ambulatory
surgery center. The secondary care practice in Oklahoma has two satellite
locations and the secondary practice in Ohio has one location.

      TLC Vision's International Headquarters and the Rheo Clinic are located in
premises in Mississauga, Ontario, Canada. See "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a discussion
of the Company's sale and leaseback transaction involving that facility. TLC
Vision's U.S. Corporate Office is located in approximately 20,500 square feet of
leased office space in St. Louis, Missouri under a lease that will expire in
2006. TLC Vision also maintains approximately 7,000 square feet of
office/warehouse space in Bloomington, Minnesota for its cataract operations.
The Bloomington facility lease expires in 2009.

      The terms of the Company's leases provide for total aggregate monthly
lease obligations of approximately $0.7 million in 2004.

ITEM 3. LEGAL PROCEEDINGS

      In October 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. The lawsuit had sought 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. On January
1, 2004, the Company entered into an agreement to settle the lawsuit. Under the
terms of the settlement, the Plaintiffs paid the Company approximately $2.3
million to purchase an additional 23% of the joint venture with the Company and
30% of the Laser Vision Centers, Inc. California business.


                                       28
<PAGE>
      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 United States. 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 cooperated 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 believes
this matter will not have a material adverse effect on the Company.

      In January 2004, the Company was served with a lawsuit filed in the
Province of Ontario, Canada, by Omar Hakim, MD. The suit alleges damages for
breach of contract, negligent misrepresentation and detrimental reliance and
seeks damages of $7 million. The Company considers the suit to be without merit
and intends to vigorously defend it.

      The Company is involved in 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 cannot 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.

      Except as set forth above, there have been no other material legal
proceedings outstanding.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


                                       29
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

      The Common Shares are listed on the Toronto Stock Exchange under the
symbol "TLC" and on the Nasdaq National Market under the symbol "TLCV." The
following table sets forth, for the periods indicated, the high and low closing
prices per Common Share of the Common Shares on the Toronto Stock Exchange and
the Nasdaq National Market:

<TABLE>
<CAPTION>
                                                                THE
                                                               TORONTO                NASDAQ
                                                                STOCK                NATIONAL
                                                               EXCHANGE               MARKET
                                                          ------------------    --------------------
                                                            HIGH       LOW        HIGH         LOW
                                                          --------   -------    --------    --------
<S>                                                       <C>         <C>       <C>         <C>
     Fiscal 2001
     First Quarter August 31, 2000..................      C$12.20     C$7.70    $  8.313    $   5.00
     Second Quarter November 30, 2000...............         8.20       3.55        5.50        2.25
     Third Quarter February 28, 2001................        12.00       1.67       7.875       1.125
     Fourth Quarter May 31, 2001....................        14.20       7.11        9.25        4.64

     Fiscal 2002
     First Quarter August 31, 2001..................       C$8.48     C$5.76    $   5.54    $   3.72
     Second Quarter November 30, 2001...............         6.09       3.00        3.86        1.87
     Third Quarter February 28, 2002................         5.77       3.15        3.60        2.04
     Fourth Quarter May 31, 2002....................         5.95       3.50        3.72        2.13

     Transitional Period 2002
     Month ended June 30, 2002......................       C$5.20     C$3.47    $   3.25    $   2.30
     Third Quarter September 30, 2002...............         4.20       1.30        2.77         .80
     Fourth Quarter December 31, 2002...............         3.39       1.28        2.20         .79

     Fiscal 2003
     First Quarter March 31, 2003...................       C$2.15     C$1.32     $  1.41     $  0.91
     Second Quarter June 30, 2003...................         7.54       1.64        5.20        1.16
     Third Quarter September 30, 2003...............         9.43       5.83        6.87        4.35
     Fourth Quarter December 31, 2003...............        10.01       6.85        7.54        5.32
</TABLE>

RECORD HOLDERS

      As of March 4, 2004, there were approximately 1,048 record holders of the
Common Shares.

DIVIDENDS

      The Company has never declared or paid cash dividends on the Common
Shares. It is the current policy of the Board of Directors of the Company to
retain earnings to finance growth and development of its business, and
therefore, the Company does not anticipate paying cash dividends on its Common
Shares in the near future.

ITEM 6. SELECTED FINANCIAL DATA

      In May 2002, the Company completed the acquisition of LaserVision, a
leading laser access service provider and cataract services provider. The
transaction was effected as an all-stock merger in which each outstanding common
share of LaserVision was exchanged for 0.95 share of the Company, which resulted
in the issuance of 26.6 million Common Shares. In addition, in connection with
the transaction the Company assumed all of the outstanding options and warrants
of LaserVision and exchanged them for options to acquire approximately 8.0
million Common Shares. See Note 4 to the consolidated financial statements of
the Company included in Item 8 of this Report.


                                       30
<PAGE>
      The following tables set forth selected historical consolidated financial
data of TLC Vision for the year ended December 31, 2003, twelve months ended
December 31, 2002, seven-month transitional period ended December 31, 2002 and
each of the fiscal years ended May 31, 2002, 2001, 2000 and, 1999, which have
been derived from the consolidated financial statements of the Company included
elsewhere in this Form 10-K and the consolidated financial statements of the
Company included in the Company's May 31, 2002, 2001 and 2000 Annual Reports on
Form 10-K, and the unaudited twelve-month period ended December 31, 2002. The
following table should be read in conjunction with the Company's financial
statements, the related notes thereto and the information contained in "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
                                                                                           SEVEN MONTH      TWELVE
                                                                                           PERIOD ENDED   MONTHS ENDED  YEAR ENDED
                                                                                           DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                           1999(2)    2000       2001(3)       2002(4)        2002(5)       2002(6)        2003(7)
                                          --------  --------     --------     --------    -------------   ------------  ------------
                                                                                                           UNAUDITED
<S>                                       <C>       <C>          <C>          <C>         <C>             <C>           <C>

(U.S. dollars, in thousands except per
share amounts, shares and operating data)
STATEMENT OF OPERATIONS DATA
Net revenues ...........................  $146,910  $201,223     $174,006     $134,751       $100,154       $164,605     $195,680
Cost of revenues .......................    92,383   129,234      110,016       97,789         80,825        125,163      143,375
    Gross margin .......................    54,527    71,989       63,990       36,962         19,329         39,442       52,375
General and administrative .............    29,126    44,341       44,464       36,382         24,567         38,158       31,688
Loss before cumulative effect of
  accounting change ....................    (4,556)   (5,918)     (37,773)     (146,675)      (43,343)       (144,731)     (9,399)
Loss per share before cumulative
  effect of accounting change ..........  $  (0.13) $  (0.16)    $  (1.00)    $  (3.74)      $  (0.68)      $  (2.68)    $  (0.15)
Weighted average number of Common
  Shares outstanding ...................    34,090    37,778       37,779       39,215         63,407         54,077       64,413
</TABLE>

<TABLE>
<CAPTION>
                                                                                           SEVEN MONTH      TWELVE
                                                                                           PERIOD ENDED   MONTHS ENDED  YEAR ENDED
                                                                                           DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                            1999(2)     2000      2001(3)       2002(4)       2002(5)       2002(6)        2003(7)
                                            --------  --------   --------      --------    -------------  ------------  ------------
<S>                                         <C>       <C>        <C>           <C>         <C>            <C>           <C>
OPERATING DATA (unaudited)
Number of eye care centers at end of
period:
Owned centers...........................         40         36         30            46            48            48            41
Managed centers ........................         15         26         29            34            36            36            35
Number of access service sites(1)
  Refractive ...........................         --         --         --           336           304           304           270
  Cataract .............................         --         --         --           280           274           274           359
Number of laser vision correction
 procedures:
  Owned centers ........................     52,506     62,000     55,600        37,600        26,100        48,200        52,600
  Managed centers ......................     38,094     72,000     67,200        57,400        23,600        46,800        47,900
  Access ...............................         --         --         --            --        43,200        47,000        75,600
Cataract ...............................         --         --         --            --        23,300        24,800        38,500
Total procedures .......................     90,600    134,000    122,800        95,000       116,200       166,800       214,600
</TABLE>

<TABLE>
<CAPTION>
                                            MAY 31,     MAY 31,     MAY 31,     MAY 31,    DECEMBER 31,   DECEMBER 31,
                                              1999        2000        2001        2002        2002            2003
                                           ---------   ---------   ---------   ---------   ------------   ------------
<S>                                        <C>         <C>         <C>         <C>         <C>             <C>
BALANCE SHEET DATA
Cash and cash equivalents ...............  $ 125,598   $  78,531   $  47,987   $  45,074   $  36,081       $  29,580
Working capital .........................    146,884      59,481      42,366      23,378      12,523          10,868
Total assets ............................    295,675     289,364     238,438     245,515     196,056         190,748
Long-term debt, excluding current portion     11,030       6,728       8,313      14,643      15,760          19,242
SHAREHOLDERS' EQUITY
Common stock ............................    269,454     269,953     276,277     387,701     388,769         397,878
Warrants and options ....................         --         532         532      11,755      11,035           8,143
Accumulated deficit .....................    (31,267)    (42,388)    (80,161)   (242,010)   (285,353)       (294,752)
Accumulated other comprehensive income
  (loss) ................................      5,936      (4,451)     (9,542)         --          --              --
Total shareholders' equity ..............    244,123     223,646     187,106     155,014     111,828         111,269
</TABLE>

(1)   An access service site has provided services in the preceding 90 days.

(2)   In fiscal 1999, the selected financial data of the Company included a
      restructuring charge of $12.9 million.


                                       31
<PAGE>
(3)   In fiscal 2001, the selected financial data of the Company included a
      restructuring charge of $19.1 million.

(4)   In fiscal 2002, the selected financial data of the Company included:

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

      (b)   a write down of $26.1 million in the fair value of investments and
            long-term receivables;

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

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

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

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

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

      (c)   other income of $6.8 million for settlement of a class action
            lawsuit with laser manufacturers;

      (d)   a restructuring charge of $4.7 million; and

      (e)   a reduction of $1.0 million in the carrying value of fixed assets.

(6)   In the twelve month period ended December 31, 2002, the selected financial
      data of the Company included:

      (a)   a charge of $103.9 million for impairment of intangibles;

      (b)   a write down of $7.1 million in the fair value of investments and
            long-term receivables;

      (c)   other income of $6.8 million for settlement of class action lawsuit
            with laser manufacturers;

      (d)   a restructuring charge of $11.2 million; and

      (e)   a reduction of $1.5 million in the carrying value of fixed assets.

(7)   In fiscal 2003, the selected financial data of the Company included a
      restructuring charge of $2.0 million.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      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 (including its subsidiaries) is a diversified
healthcare service company focused on working with eye doctors to help them
provide high-quality patient care in the eye care segment. The majority of the
Company's revenues come from 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 arrangements ranging from owning and operating fixed
site centers to providing access to lasers through fixed site and mobile service
relationships. In addition to refractive surgery, the Company is diversified
into other eyecare businesses. Through its Midwest Surgical Services, Inc.
("MSS") subsidiary, the Company furnishes hospitals and independent surgeons
with mobile or fixed site access to cataract surgery equipment and services.
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. The Company also
owns a 51% majority interest in Vision Source, which provides optometric
franchise opportunities to independent optometrists. 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
Centers, Inc. (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.


                                       32
<PAGE>
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 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 approximately 214,600 refractive
and cataract procedures at the Company's centers or using the Company's laser
access services during the year ended December 31, 2003.

      The Company is assessing patient, optometric and ophthalmic industry
trends and developing strategies to improve laser vision correction procedure
volumes and increase 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 5 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 that may be invoiced for 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 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 twelve months ended December 31, 2003, the Company's procedure
volume increased to 176,100 compared to 142,000 in the twelve months ended
December 31, 2002, an increase of 34,100 procedures or, 24%. Procedures for
fiscal 2003 include a full year of operations for LaserVision, while the prior
year period includes LaserVision only subsequent its acquisition in May 2002. In
addition to the higher procedures related to a full year of LaserVision
operations, the Company believes that the increase in procedure volume was
indicative of the stabilization of the laser vision correction industry as a
whole. The laser vision correction industry has experienced uncertainty
resulting from a number of issues over the past few years, but the industry
began improving during 2003 as the U.S. economy strengthened. Being an elective
procedure, laser vision correction volumes will fluctuate due to changes in
economic and stock market conditions, unemployment rates, consumer confidence
and political uncertainty. Demand for laser vision correction also is affected
by perceived 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.


                                       33
<PAGE>
DEVELOPMENTS DURING FISCAL 2003

      ACQUISITIONS

      On December 31, 2003, a majority-owned subsidiary of the Company became a
majority owner of an ambulatory surgery center ("ASC") in Michigan when that ASC
purchased some of its shares from one of its investors. After this change in
ownership interest, the Company's subsidiary owned 65% of this ASC. Therefore,
this ASC was included in the Consolidated Balance Sheet at December 31, 2003 and
included in the operating results of the Company using the equity accounting
method during the year. During 2004, this ASC's operating results will be
reported on a consolidated basis.

      On November 21, 2003, a majority-owned subsidiary of the Company acquired
50% of a medical practice in Ohio for $1.0 million, of which the Company paid
$0.5 million.

      On September 2, 2003, OR Partners, Inc., a subsidiary of TLC Vision,
acquired 58% of Phoenix Eye Surgical Center, LLC, which operates an ambulatory
surgery center in Arizona that primarily performs cataract surgery. The Company
paid $3.8 million in cash for its interest and received net assets with a book
value of $0.1 million. Accordingly, $3.7 million was recorded as intangible
assets, primarily goodwill.

      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 issued 100,000 common shares. 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. Of this amount, $0.3 million
was non-contingent and was recorded as a liability as of December 31, 2003.

      On August 1, 2002, the Company paid $7.6 million in cash to acquire a 55%
ownership interest in an ASC in Mississippi which specializes in cataract
surgery. In August 2003, the Company purchased an additional 5% ownership for
$0.7 million in cash, substantially all of which was recorded as goodwill. The
Company also has an obligation to purchase an additional 5% ownership interest
per year for $0.7 million in cash per year during each of the next three years.

      RESTRUCTURING

      During the year ended December 31, 2003, the Company recorded a $2.0
million restructuring charge primarily related to the closure of six centers.
Total restructuring expense for fiscal 2003 of $2.0 million consisted of $2.3
million offset by the reversal into income of $0.3 million of restructuring
charges related to prior year accruals that were no longer needed as of December
31, 2003. The Company will fund restructuring costs through the Company's cash
and cash equivalents on hand. A total of $0.5 million of this provision related
to non-cash costs of writing down fixed assets, $0.5 million related to non-cash
costs of writing off prepaid expenses, investments and laser commitments, $0.4
million related to severance and $0.5 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

      During fiscal 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 dry age-related macular degeneration. The Company
purchased $3.0 million in Series B preferred stock in 2002 and expensed it as a
research and development arrangement. During 2003, the Company agreed to advance
up to an additional $6.0 million to Vascular Sciences pursuant to a secured
convertible grid debenture. The first $3.5 million advanced pursuant to such
debenture is convertible into common shares of Vascular Sciences. Vascular
Sciences has also granted an option to the Company to acquire an amount of
common shares equal to the undrawn portion of the debenture at any point in
time. In fiscal 2003, the Company expensed $1.6 million to research and
development related to payments made to Vascular Sciences during the year. Of
this amount, $1.3 million reduced the value of the $6.0 million obligation to
Vascular Sciences, and $0.3 million represented an additional equity investment
in Common Stock and therefore did not reduce the amount of the remaining
obligation.

CRITICAL ACCOUNTING POLICIES

      IMPAIRMENT OF GOODWILL


                                       34
<PAGE>
      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 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 estimates and assumptions about future
conditions to estimate future cash flows. If these estimates or their related
assumptions change in the future, including general economic and competitive
conditions, the Company may be required to record impairment charges related to
these assets. 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 charges to
earnings in both periods.

      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 judgments 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 amortizable
intangible assets and certain of its fixed assets had occurred and recorded a
charge to earnings.

      RECOVERABILITY OF DEFERRED TAX ASSETS

      The Company has generated deferred tax assets and liabilities due to
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the income tax basis of such assets and
liabilities. Valuation allowances are recorded to reduce deferred tax assets to
the amount expected to be realized. In assessing the adequacy of the valuation
allowances, the Company considers the scheduled reversal of deferred tax
liabilities, future taxable income and prudent and feasible tax planning
strategies. At December 31, 2003, the Company had valuation allowances of $122.8
million to offset net deferred tax assets of $122.8 million. The valuation
allowance was based on the Company's assessment that recovery of the deferred
tax assets is not likely due to the Company's history of generating taxable
losses. In the event the Company determines it is likely to be able to use a
deferred tax asset in the future in excess of its net carrying value, the
valuation allowance would be reduced, thereby increasing net income in the
period such determination was made.

      ACCRUAL OF MEDICAL MALPRACTICE CLAIMS

      The nature of the Company's business is such that it is subject to medical
malpractice lawsuits. To mitigate a portion of this risk, the Company maintains
insurance in the U.S. for individual malpractice claims with a deductible of
$250,000 per claim and a total annual aggregate deductible of $15 million. The
Company is self-insured for its operations in Canada. Management and the
Company's insurance carrier review malpractice lawsuits for purposes of
establishing ultimate loss estimates. The Company has recorded reserves to cover
the estimated costs of the deductible for both reported and unreported medical
malpractice claims incurred. The estimates are based on the average monthly
claims expense and the estimated average time lag between the performance of a
procedure and notification of a claim. If the number of claims or the cost of
settle claims is higher than the Company's historical experience or if the
actual time lag varies from the estimated time lag, the Company may need to
record significant additional expense.

RISK FACTORS

      See "Item 1 - Business - Risk Factors."

TWELVE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THE TWELVE MONTHS ENDED
DECEMBER 31, 2002

      Results from the LaserVision business are only included for operations
subsequent to the date of acquisition in May 2002. This merger significantly
impacted the variances in results between the twelve months ended December 31,
2003 and 2002. Due to the completed integration of TLC Vision and LaserVision,
it is no longer practical to distinguish revenues or cost of revenues between
the two companies. Information for the twelve months ended December 31, 2002 was
not audited due to the change in fiscal years.


                                       35
<PAGE>
      Total revenues for the twelve months ended December 31, 2003 were $195.7
million, an increase of $31.1 million, or 19% increase over revenues of $164.6
million for the twelve months ended December 31, 2002. Approximately 75% of
total revenues for the twelve months ended December 31, 2003 were derived from
refractive services compared to 80% during the twelve months ended December 31,
2002.

      Revenues from the refractive segment for the twelve months ended December
31, 2003 were $146.2 million, an increase of $15.3 million or 12% over revenues
of $130.9 million from refractive activities for the twelve months ended
December 31, 2002. This increase was largely due to a full year of LaserVision
revenues in 2003 offset by the closure of owned, managed and access sites that
were underperforming.

      Revenues from owned centers for the twelve months ended December 31, 2003
were $55.7 million, an increase of $3.2 million or 6% from $52.5 million from
the prior year period. This increase resulted from increased volume largely due
to the LaserVision acquisition and higher revenues associated with Custom LASIK,
offset by lost revenue due to the closure of underperforming centers that were
operational during part of the twelve months ended December 31, 2002.

      Revenues from managed centers for the twelve months ended December 31,
2003 were $54.4 million, an increase of $1.4 million or 3% from the revenues of
$53.0 million for the twelve months ended December 31, 2002. Since LaserVision
did not have a managed service product, the LaserVision acquisition had no
effect on revenues for managed centers. This increase resulted from growth in
active centers and higher prices associated with Custom LASIK, offset by lost
revenue associated with the closure of managed centers that were operational
during part of the twelve months ended December 31, 2002.

      Revenues from laser access services for the twelve months ended December
31, 2003 were $36.1 million, an increase of $10.7 million from the revenues of
$25.4 million for the twelve months ended December 31, 2002. Because laser
access is a product offering of LaserVision only, the Company reported no access
revenue for the existing TLC Vision business prior to the merger in May 2002.
Therefore, the increase in revenue was substantially impacted by prior year
revenue only including revenue subsequent to the date of acquisition in May
2002.

      Approximately 176,100 refractive procedures were performed in the twelve
months ended December 31, 2003, compared to approximately 140,600 procedures for
the twelve months ended December 31, 2002. The increase in procedure volume of
35,500 or 25% was largely due to a full year of LaserVision procedures in 2003
and growth in owned and managed centers offset by procedures lost due to
underperforming centers that were closed since the LaserVision acquisition in
May 2002.

      The cost of refractive revenues for the twelve months ended December 31,
2003 was $111.5 million, an increase of $9.3 million, or 9%, over the cost of
refractive revenues of $102.2 million for the twelve months ended December 31,
2002. This increase was related to the increase in procedure volume and the
higher costs associated with Custom LASIK.

      The cost of revenues from owned centers for the twelve months ended
December 31, 2003 was $45.5 million, an increase of $2.8 million or 7% from the
cost of revenues of $42.7 million from the twelve months ended December 30,
2002. This increase was related to rising costs, specifically due to higher
royalty fees and doctor compensation resulting from the introduction of Custom
LASIK.

      The cost of revenues from managed centers for the twelve months ended
December 31, 2003 was $40.5 million, an increase of $0.6 million, or 1%, from
the cost of revenues of $39.9 million from the twelve months ended December 31,
2002, due to higher procedure volume. As LaserVision does not have a managed
service product, the LaserVision acquisition had no effect on the managed center
cost of revenue for the year.

      The cost of revenues from access services for the twelve months ended
December 31, 2003 was $25.4 million, up $7.3 million from $18.1 million
subsequent to the LaserVision merger in May 2002. Access services are a product
offering of LaserVision only and therefore were significantly impacted by the
inclusion of LaserVision only from the date of acquisition in May 2002.

      During the twelve months ended December 31, 2002, the Company recorded
$1.5 million in charges to reflect the reduction in the value of certain capital
assets. No adjustment was recorded in the twelve months ended December 31, 2003.

      Fluctuations in cost of revenue were consistent with significant variable
cost changes to doctor compensation, royalty fees on laser usage and personnel
and medical supplies that are highly dependent on procedural volume. The cost of
revenues for refractive centers include fixed cost components for infrastructure
of personnel, facilities and minimum equipment usage fees which can cause cost
of revenues


                                       36
<PAGE>
to increase at a slower rate than the percentage increase in the associated
revenues. In addition, most refractive equipment was depreciated using a 25%
declining balance method in 2003 compared to a 20% declining balance method
through May 2002. If the Company had used a 25% declining method in the prior
year, then the depreciation expense for the prior year would have been
approximately $0.8 million higher.

      Revenues from other healthcare services for the twelve months ended
December 31, 2003 were $49.5 million, an increase of $15.8 million, or 47%, from
revenues of $33.7 million for the twelve months ended December 31, 2002.
Approximately 25% of the total revenues for the twelve months ended December 31,
2003 were derived from other healthcare services compared to 20% during the
twelve months ended December 31, 2002. The increase in revenue reflected the
Company's stated diversification strategy to increase non-refractive eye care
services. Revenue increased due to two acquisitions in fiscal 2003, incremental
revenue resulting from a full year of business gained in conjunction with the
LaserVision acquisition as the prior year period only included LaserVision
revenue since the date of acquisition in May 2002, and growth in existing
businesses.

      The cost of revenues from other healthcare services for the twelve months
ended December 31, 2003 was $31.8 million, an increase of $8.8 million or 38%
from cost of revenues of $23.0 million for the twelve months ended December 31,
2002. The increase in cost of revenues was primarily related to incremental
costs incurred resulting from the increased revenue of the other healthcare
service business.

      General and administrative expenses decreased to $31.7 million for the
twelve months ended December 31, 2003 from $38.2 million for the twelve months
ended December 31, 2002. The $6.5 million or 17% decrease primarily was a result
of the Company's cost reduction initiatives and lower legal and accounting fees.
In addition, $0.9 million was recorded as a reduction in expense related to the
partial reversal of an accrual related to a settlement of a lawsuit during
fiscal 2003.

      Because the Company has reduced its overhead cost structure, the combined
infrastructure cost of TLC Vision and LaserVision continues to be lower than the
overhead cost of TLC prior to the LaserVision acquisition despite a 25% increase
in refractive procedure volume during the twelve months ended December 31, 2003.
As a result, general and administrative expenses as a percentage of revenue
decreased to 16% from 23% compared to the prior year period. The Company
anticipates that general and administrative expenses will continue to decrease
as a percentage of revenue in 2004 but at slower rates.

      Marketing expenses decreased to $14.1 million for the twelve months ended
December 31, 2003 from $14.4 million for the twelve months ended December 31,
2002. Marketing expenses decreased by $0.3 million, or 2%, despite a full year
of marketing expenses related to LaserVision, whereas the prior year period only
included expenses subsequent to the date of acquisition in May 2002. Marketing
expenses as a percentage of revenue decreased to 7% during fiscal 2003 compared
to 9% in the prior year period. The Company anticipates that marketing expenses
will remain stable or slightly decrease as a percentage of revenue in 2004.

      Amortization expenses decreased to $6.7 million for the twelve months
ended December 31, 2003 from $8.4 million for the twelve months ended December
31, 2002. The decrease in amortization expense of $1.7 million was largely a
result of the significant impairment charges in 2002 that reduced the fair value
of practice management agreements and the related ongoing amortization.

      Research and development expenses of $1.6 million for the twelve months
ended December 31, 2003 decreased by $2.4 million from $4.0 million for the
twelve months ended December 31, 2002. In conjunction with a recent partnership
with Diamed Medizintechnik GmbH ("Diamed"), the Company elected to renew its
investment commitment to research and development efforts by Vascular Sciences.
As a result, the Company paid $1.6 million to Vascular Sciences to further its
efforts to achieve FDA approval for medical treatments related to dry
age-related macular degeneration. Since the technology is in the development
stage and has not received Food and Drug Administration approval, the Company
accounted for this investment as a research and development arrangement whereby
investments were expensed as amounts are expended by Vascular Sciences. If the
product becomes commercially available and FDA approval is obtained, incremental
investments may be recorded as long-term assets. During the twelve months ended
December 31, 2002, the Company made payments of $3.0 million to fund research by
Vascular Sciences and paid $1.0 million to Tracey Technologies for custom
ablation-related research and development.

      The Company's operating results for the twelve months ended December 31,
2002 included a non cash pretax charge of $103.9 million to reduce the carrying
value of goodwill and other intangible assets. The Company recorded a $72.9
million charge to reduce the carrying value of goodwill for which the carrying
value exceeded the fair value, including $67.7 million related to the impairment
of goodwill associated with the acquisition of LaserVision and $5.2 million for
the impairment of goodwill from prior acquisitions.


                                       37
<PAGE>
      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 five 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. 144, 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 during
2002, current period operating or cash flow losses 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 $31.0 million during the twelve months
ended December 31, 2002. No impairment charge related to practice management
agreements was recorded during fiscal 2003.

      During the twelve months ended December 31, 2003, the Company recorded a
$0.2 million reduction in expenses related to the valuation of investments and
long-term notes receivable. The Company reduced a reserve by $0.6 million
related to a long-term receivable due to a consistent payment history and
continually improving financial strength of the debtor and wrote down its
investment in a marketable equity security by $0.4 million during the twelve
months ended December 31, 2003 due to an other than temporary decline in its
value. The Company also recorded a $7.1 million expense related to adjustments
to the value of investments and long-term receivables in the twelve months ended
December 31, 2002 using similar valuation analyses.

      The Company recorded $2.0 million of restructuring charges during the
twelve months ended December 31, 2003, primarily relating to the closing of six
unprofitable centers. These charges consist of total charges of $2.3 million
offset by the reversal into income of $0.3 million of restructuring charges
related to prior year accruals that were no longer needed as of December 31,
2003. Cash requirements attributable to restructuring costs will be financed
through the Company's cash and cash equivalents on hand. A total of $0.5 million
of this provision related to non cash costs of writing down fixed assets, $0.6
million related to non cash costs of writing off prepaid expenses, investments
and laser commitments, $0.4 million related to severance, and $0.5 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 Company recorded a restructuring charge of $11.2 million during the
twelve months ended December 31, 2002, primarily relating to costs associated
with closing several unprofitable centers and severance costs incurred in
conjunction with the Company's cost reduction initiatives plan.

      The following table details restructuring charges recorded during the year
ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                                    ACCRUAL BALANCE
                                                                                         AS OF
                                   RESTRUCTURING       CASH           NON-CASH       DECEMBER 31,
                                      CHARGES         PAYMENTS        REDUCTIONS         2003
                                   -------------   -------------   ---------------  ---------------
<S>                                <C>             <C>             <C>              <C>
Severance ...................          $  360          $ (194)          $   --           $  166
Lease commitments, net of
    Sub lease income ........             864            (256)              --              608
Intangible and investment
 write-offs .................             507            (200)            (307)              --
Laser commitments ...........             180            (180)              --               --
 Write-down of fixed assets .             370              --             (370)              --
                                       ------          ------           ------           ------
Total restructuring charges .          $2,281          $ (830)          $ (677)          $  774
                                       ======          ======           ======           ======
</TABLE>

      Other income and expense of $0.7 million for the twelve months ended
December 31, 2003 resulted from the gain on sale of assets from previously
closed centers and additional proceeds from the settlement of an antitrust
lawsuit in 2002. During the twelve months ended December 31, 2002, the Company
recorded $7.0 million in other revenue, primarily consisting of $6.8 million of
one-time income from the settlement of an antitrust lawsuit plus $0.8 million of
income from the termination of the agreement to purchase Aspen Health Care from
the Company, less $1.0 million of expense for the loss related to the
disposition of lasers.


                                       38
<PAGE>
      Interest expense, net of $1.4 million for the twelve months ended December
31, 2003 reflected interest expense from debt and lease obligations partially
offset by interest income from the Company's cash position. During fiscal 2003,
the Company incurred additional interest expense related to new loans obtained
to fund future acquisitions and loans associated with the purchase of a
significant amount of equipment related both to the introduction of Custom LASIK
in the United States and the expansion of the MSS cataract business. In
addition, interest income has decreased since the Company has reduced cash and
cash equivalent balances during the twelve months ended December 31, 2003
compared to the corresponding period in the prior year and interest rates have
declined. Accordingly, interest expense, net increased $0.6 million from $0.8
million in the prior year period.

      Minority interest expense increased to $4.7 million for the twelve months
ended December 31, 2003 from $1.7 million for the twelve months ended December
31, 2002. This $3.0 million increase represented higher profits reported by the
Company's subsidiaries in which the Company has a shared interest with minority
partners, a higher percentage of minority interest payable to partners related
to the divestiture of Vision Source in 2002, and new minority interest related
to the purchase of an ambulatory surgery center during 2003.

      Income tax expense of $0.5 million for the twelve month period ended
December 31, 2003 decreased $1.1 million from $1.6 million for the twelve months
ended December 31, 2002 due to the favorable change in the taxable status of two
subsidiaries. The $0.5 million tax expense consisted of federal and state taxes
for certain of the Company's subsidiaries where consolidated federal and state
tax returns cannot be filed.

      Net loss for the twelve months ended December 31, 2003 was $9.4 million,
or $0.15 per share, compared to a loss of $144.7 million or $2.68 per share, for
the twelve months ended December 31, 2003. The significant improvement in net
loss resulted from the contribution of the full year of the LaserVision business
in 2003, growth in both the refractive and other healthcare services businesses,
a significant reduction in general and administrative charges and a $113.0
million reduction in impairment of intangible assets and restructuring charges
in fiscal 2003 from the prior year period.

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. Information for the
seven months ended December 31, 2001 was not audited due to the change in
fiscal years.

      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 $76.3 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.

      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


                                       39
<PAGE>
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
experienced in North America which 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, 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.

      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


                                       40
<PAGE>
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                                    ACCRUAL
                                                                             BALANCE                                    BALANCE
                                                                               AT                                          AT
                                 RESTRUCTURING     CASH      NON-CASH     DECEMBER 31,       CASH         NON-CASH    DECEMBER 31,
                                    CHARGES      PAYMENTS   REDUCTIONS        2002         PAYMENTS      REDUCTIONS       2003
                                 -------------   --------   ----------    ------------    -----------   ------------  ------------
<S>                              <C>             <C>        <C>           <C>             <C>           <C>           <C>
Severance ...................        $1,120        $(466)     $    --         $  654        $  (581)        $ (73)        $ --
Lease commitments, net of
  sublease income ...........           978           --           --            978           (420)         (221)         337
Write-down of fixed assets ..         2,266           --       (2,266)            --             --            --           --
Sale of center to third party           342           --           --            342             (7)         (335)          --
                                     ------        -----      -------         ------        -------         -----         ----
Total restructuring charges .        $4,706        $(466)     $(2,266)        $1,974        $(1,008)        $(629)        $337
                                     ======        =====      =======         ======        =======         =====         ====
</TABLE>

      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
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 made the decision to dispose of
them below their carrying cost.

                                       41
<PAGE>
      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 decreased since the Company
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 were 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 for the seven months ended December 31, 2002 was $43.3 million or
$0.68 per share compared to a loss of $45.3 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 than in the prior
year period.

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
from $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 bankruptcies of a
number of deep discount laser vision correction companies, 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 were further depressed
by economic conditions 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 more than 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.

      Cost of revenues from other healthcare services was $11.5 million in
fiscal 2002, an increase of more than 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 Vision's
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 fiscal 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 did 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


                                       42
<PAGE>
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
in the carrying value of the Company's LaserSight lasers to $0 and two VISX
lasers to $75,000 each. These lasers did not represent the most current
technology available and the Company decided 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 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 doctors'
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 reflectsa 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 decreased throughout the
year as a result of the Company's declining cash position and decreasing
interest yields. 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 during fiscal
2001.

      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 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.

      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 five 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 Standards 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,


                                       43
<PAGE>
information indicates that an impairment might exist. Given the significant
decrease in the trading price of the Company's common stock during fiscal 2001,
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 was very
substantial relative to the original purchase price; the impairment had
persisted for more than nine months and sufficient time had passed to determine
that the market place did not react 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 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
underperforming centers and eliminate 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 have been 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 was 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.

(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      DECEMBER 31,     CASH        NON CASH     DECEMBER 31,
                                     CHARGES      PAYMENTS     REDUCTIONS         2002        PAYMENTS    REDUCTIONS        2003
                                  -------------  ----------    -----------   -------------   ----------   ----------    ------------
<S>                                <C>           <C>           <C>           <C>             <C>          <C>           <C>
Severance ...................        $2,907        $(2,454)      $  (434)        $   19        $   (19)      $  --         $  --
Lease commitments, net of
  sublease income ...........         2,765           (897)           85          1,953           (929)        (35)          989
Termination costs of doctors
 contracts ..................           146           (146)           --             --             --          --            --
Laser commitments ...........           652             --          (352)           300           (300)         --            --
</TABLE>


                                       44
<PAGE>
<TABLE>
<S>                                  <C>           <C>           <C>             <C>           <C>           <C>           <C>
Write-down of fixed assets ..         2,280             --        (2,280)            --             --          --            --
                                     ------        -------       -------         ------        -------       -----         -----
Total restructuring and other
charges .....................        $8,750        $(3,497)      $(2,981)        $2,272        $(1,248)      $ (35)        $ 989
                                     ======        =======       =======         ======        =======       =====         =====
</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, the
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 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 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.

LIQUIDITY AND CAPITAL RESOURCES

      During the year ended December 31, 2003, 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 $31.7 million at December 31, 2003 compared to $41.6
million at December 31, 2002. Working capital at December 31, 2003 decreased to
$10.9 million from $12.5 million at December 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 the AEI and
Phoenix cataract surgery businesses. Normal operating expenses include doctors'
compensation, procedure royalty fees, procedure medical supply expenses, travel
and entertainment, professional fees, insurance, rent, equipment maintenance,
wages, utilities and marketing.

      During the year ended December 31, 2003, the Company invested $4.4 million
in fixed assets and received vendor financing for $8.0 million of fixed assets,
primarily equipment upgrades for Custom LASIK and new equipment related to the
growth of the cataract business.

      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, 2003, the Company had employment contracts with
officers of TLC Vision or its subsidiaries to provide for base salaries, the
potential to pay certain bonuses, medical benefits and severance payments. Eight
officers have agreements providing for severance payments ranging from 12 to 24
months of base or total compensation under certain circumstances. Two officers
have


                                       45
<PAGE>
agreements providing for severance payments equal to 36 months of total
compensation and future medical benefits (totaling about $2.3 million) at their
option until November 2004, and 24-month agreements thereafter.

       As of December 31, 2003, the Company had contractual obligations relating
to long-term debt, capital lease obligations, operating leases for rental of
office space and equipment, marketing contracts, laser commitments and research
and development requiring future minimum payments aggregating to $70.1 million.
Future minimum payments over the next five years are as follows:

<TABLE>
<CAPTION>
                                                                      PAYMENTS DUE BY PERIOD
                                                                      ----------------------
                                                                LESS                                MORE
                                                                THAN          1-3        3-5        THAN
CONTRACTUAL OBLIGATIONS                            TOTAL       1 YEAR        YEARS      YEARS     5 YEARS
-----------------------                            -----       ------        -----      -----     -------
<S>                                             <C>          <C>          <C>         <C>         <C>
  Long-term debt                                $  31,296    $   9,898    $  10,336   $   4,666   $   6,396
  Capital lease obligations                         3,468        1,709        1,737          22          --
  Operating leases                                 24,869        8,570       11,228       3,801       1,270
  Marketing contracts                               3,750        1,750        2,000          --          --
  Laser commitments                                 2,000        2,000           --          --          --
  Research and development                          4,675        2,100        2,575          --          --
                                                ---------    ---------    ---------   ---------   ---------
Total                                           $  70,058    $  26,027    $  27,876   $   8,489   $   7,666
                                                =========    =========    =========   =========   =========
</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 $2.0
million at December 31, 2003.

      On December 31, 2003, a majority-owned subsidiary of the Company became a
majority owner of an ambulatory surgery center in Michigan when that ASC
purchased its own ownership interests from another investor. After this change
in ownership interest, the Company's subsidiary owned 65% of this ASC. This ASC
was included in the consolidated balance sheet at December 31, 2003 and included
in the operating results of the Company using the equity accounting method
during the year. During 2004, this ASC's operating results will be consolidated.

      On November 21, 2003, a majority-owned subsidiary of the Company acquired
50% of a medical practice in Ohio for $1.0 million, of which the Company paid
$0.5 million.

      On September 2, 2003, OR Partners, Inc., a subsidiary of TLC Vision,
acquired 58% of Phoenix Eye Surgical Center, LLC, which operates an ambulatory
surgery center in Arizona that primarily performs cataract surgery. The Company
paid $3.8 million in cash for its interest and received net assets with a book
value of $0.1 million. The $3.7 million balance was recorded as intangible
assets, primarily goodwill.

      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. Of this amount $0.3
million is not contingent and recorded as a liability as of December 31, 2003.

      On August 1, 2002, the Company paid $7.6 million in cash to acquire a 55%
ownership interest in an ambulatory surgery center ("ASC") in Mississippi which
specializes in cataract surgery. In August 2003, the Company purchased an
additional 5% ownership for $0.7 million in cash, substantially all of which was
recorded as goodwill. The Company also has an obligation to purchase an
additional 5% ownership interest per year for $0.7 million in cash per year
during each of the next three years.

      The Company entered into a joint venture with Vascular Sciences in 2002
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 $1.3 million in convertible notes
and $0.3 million in Common Stock in fiscal 2003 and recorded the payments as
research and development expense.

      In November 2003, the Company obtained a $15 million line of credit from
GE Healthcare Financial Services. This loan is secured by certain accounts
receivable and cash accounts in wholly-owned subsidiaries and Aspen Healthcare
and a general lien on most other U.S. assets. As of December 31, 2003, the
Company had drawn $2 million from the line of credit and had an available unused
line of $13 million.


                                       46
<PAGE>
      During 2003, the Company received $8.3 million in proceeds from the
exercise of non-qualified stock options to purchase 2.1 million common shares.
In addition, the Company received $6.1 million in proceeds from the exercise of
non-qualified stock options to purchase 1.7 million common shares between
January 1, 2004 and March 12, 2004.

      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.

      At December 31, 2002, the Company reported $4.2 million of exit
liabilities primarily related to costs associated with closing underperforming
centers subsequent to the LaserVision merger. During the year ended December 31,
2003 the Company recorded an additional charge of $2.3 million primarily related
to the closure of six centers and made cash payments of $3.1 million and
recorded $1.3 million of non-cash reductions, resulting in a $2.1 million exit
liability at December 31, 2003.

CASH PROVIDED BY OPERATING ACTIVITIES

      Net cash provided by operating activities was $4.3 million for the year
ended December 31, 2003. The cash flows provided by operating activities during
the year ended December 31, 2003 are primarily due to positive cash flow of the
Company's operations as the net loss of $9.4 million in the period was offset by
non cash items including depreciation and amortization of $22.6 million,
minority interest expense of $4.7 million, and the write-off of investments
related to research and development arrangements of $1.6 million, offset by an
increase in net operating assets of $15.3 million. The increase in net operating
assets primarily related to a $13.8 million decrease in accounts payable and
accrued liabilities as the Company paid its remaining obligation of $5.1 million
related to the LaserVision merger, reduced its contingent liability by settling
two lawsuits for $4.9 million, paid amounts to multiple state agencies to
resolve sales tax disputes for a total of $1.3 million and reduced its accounts
payable balances with vendors and other accruals by an aggregate of $2.0
million. In addition, a $1.0 million increase in prepaid expenses primarily due
to a contractual payment to a doctor and an increase in certain other prepaid
expenses and a $0.5 million increase in accounts receivable due primarily to
receivables associated with business acquisitions and higher revenue compared to
the prior year period was offset by improved collection activities.

CASH USED FOR INVESTING ACTIVITIES

      Net cash used for investing activities was $12.7 million for the year
ended December 31, 2003. Cash used in investing during the year ended December
31, 2003 included $8.0 million for business acquisitions, $4.4 million for the
acquisition of equipment and $1.6 million for an investment in a research and
development arrangement, offset by $0.6 million from the sale of capital assets
and $0.8 million from the sale of short-term investments. In 2004, the Company
plans to continue to invest in other business acquisitions, invest in capital
expenditures as necessary to further its business objectives and continue its
investment in the Vascular Sciences research and development arrangement to
further its efforts to achieve FDA approval for medical treatments related to
dry age-related macular degeneration. During the next 12 months, the Company
expects to invest $2.1 million in research and development and at least $0.7
million to increase its ownership in an ambulatory surgery center. The Company's
total future research and development obligation as of December 31, 2003 was
$4.7 million (including the $2.1 million expected to be invested during the next
12 months).

CASH PROVIDED BY FINANCING ACTIVITIES

      Net cash provided by financing activities was $1.9 million for the year
ended December 31, 2003. Net cash provided by financing activities during the
year ended December 31, 2003 was primarily due to $8.7 million in proceeds from
the exercise of employee stock options and employee stock purchase plans, $3.5
million related to the issuance of new debt and $2.6 million related to the
removal of restrictions on certain cash balances, offset by $8.0 million for the
repayment of certain notes payable and capitalized lease obligations and $4.9
million distributed to minority interests resulting from profits at certain of
the Company's business units. The Company anticipates that available financing
through the additional exercise of stock options and the availability to draw
upon the unused portion of the Company's $15 million line of credit, if
necessary, will be sufficient to fund additional financing needs in 2004.

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


                                       47
<PAGE>
      On January 1, 2004, the Company entered into an agreement to settle the
lawsuit brought by Thomas S. Tooma, MD, and TST Acquisitions, LLC, in October
2002. The lawsuit sought 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. Under the terms of the settlement, the Plaintiffs
paid the Company approximately $2.3 million to purchase an additional 23% of the
joint venture with the Company and 30% of the Laser Vision Centers, Inc.
California business.

      On March 10, 2004, the Company paid $4.5 million to acquire a 70%
ownership interest in a Texas ambulatory surgery center and a note receivable
from the ASC.

      From January 2 to March 12, 2004, the Company received $6.1 million in
proceeds from the exercise of non-qualified stock options to purchase 1.7
million common shares.

QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

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

                             THREE MONTHS ENDED         THREE MONTHS ENDED          THREE MONTHS ENDED         THREE MONTHS ENDED
                                  MARCH 31,                  JUNE 30,                  SEPTEMBER 30,              DECEMBER 31,
                            ---------------------     ----------------------     ----------------------     -----------------------
                              2003          2002         2003        2002(1)       2003         2002         2003(2)        2002(2)
                            -------       -------     --------      --------     --------      --------     ---------      --------
<S>                         <C>           <C>         <C>           <C>          <C>           <C>          <C>            <C>
Revenues                    $53,590       $36,942     $ 47,532      $ 43,107     $ 46,014      $ 43,802     $  48,544      $ 44,754
Gross margin                 16,405        12,256       12,465        12,080       11,465         9,307        12,040         6,151
Net income (loss)             1,070        (3,689)      (3,453)      (98,783)      (4,090)       (2,532)       (2,926)      (39,727)
Basic and diluted income
  (loss) per share             0.02         (0.10)       (0.05)        (1.93)       (0.06)        (0.04)        (0.04)        (0.63)
</TABLE>

(1)   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.

(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

      (c)   a restructuring charge of $3.6 million.

(3)   In the three months ended June 30, 2003, the selected financial data of
      the Company included:

      (a)   an adjustment to the fair value of investments and long-term
            receivables of $0.7 million; and

      (b)   a restructuring charge of $1.7 million

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.

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 2 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,


                                       48
<PAGE>
management is satisfied that these financial statements have been prepared
within reasonable limits of materiality under United States generally accepted
accounting principles.

      During the year ended December 31, 2003, 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 and 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.


                                       49
<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 as of
December 31, 2003 and 2002, and the related consolidated statements of
operations, cash flows, and stockholders' equity for the year ended December 31,
2003, the seven-month period ended December 31, 2002 and each of the two years
in the period ended May 31, 2002. Our audits also included the financial
statement schedule listed in the index at Item 15a. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TLC Vision
Corporation as of December 31, 2003 and 2002, and the results of its operations
and its cash flows for the year ended December 31, 2003, the seven-month period
ended December 31, 2002 and each of the two years in the 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 8 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 12, 2004                                          ------------------------


                                       50
<PAGE>
TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                    SEVEN MONTH
                                                                                       PERIOD
                                                                       YEAR ENDED      ENDED
                                                                      DECEMBER 31,  DECEMBER 31,      YEAR ENDED MAY 31,
                                                                           2003         2002           2002          2001
                                                                      ------------  ------------    ---------     ---------
<S>                                                                   <C>           <C>             <C>           <C>
Revenues:
   Refractive:
      Owned centers ................................................    $  55,663     $  29,834     $  50,252     $  78,470
      Managed centers ..............................................       54,389        24,959        62,657        82,749
      Access fees ..................................................       36,140        21,495         2,999            --
   Other healthcare services .......................................       49,488        23,866        18,843        12,787
                                                                        ---------     ---------     ---------     ---------
  Total revenues (Note 16) .........................................      195,680       100,154       134,751       174,006
                                                                        ---------     ---------     ---------     ---------
Cost of revenues:
   Refractive:
      Owned centers ................................................       45,516        27,001        38,877        55,226
      Managed centers ..............................................       40,529        22,223        43,034        44,684
      Access fees ..................................................       25,424        15,356         1,826            --
      Impairment of fixed assets (Note 10) .........................           --            --         2,553            --
   Other healthcare services .......................................       31,836        16,245        11,499        10,106
                                                                        ---------     ---------     ---------     ---------
Total cost of revenues .............................................      143,305        80,825        97,789       110,016
                                                                        ---------     ---------     ---------     ---------
   Gross margin ....................................................       52,375        19,329        36,962        63,990
                                                                        ---------     ---------     ---------     ---------

General and administrative .........................................       31,688        24,567        36,382        44,464
Marketing ..........................................................       14,094         8,321        15,296        25,600
Amortization of intangibles ........................................        6,685         4,074        10,227        12,543
Research and development (Note 7) ..................................        1,598         2,000         2,000            --
Impairment of goodwill and other intangible assets (Notes 8 and 9) .           --        22,138        81,720            --
Adjustment to the fair value of investments and long-term
  receivables (Note 7) .............................................         (206)        2,095        26,082            --
Restructuring and other charges (Note 18) ..........................        2,040         4,227         8,750        19,075
                                                                        ---------     ---------     ---------     ---------
                                                                           55,899        67,422       180,457       101,682
                                                                        ---------     ---------     ---------     ---------

Operating loss .....................................................       (3,524)      (48,093)     (143,495)      (37,692)
Other income and (expense):
  Other income, net (Note 12) ......................................          669         6,996            --            --
  Interest (expense) income and other, net .........................       (1,364)         (243)         (761)        2,543
  Minority interests ...............................................       (4,672)       (1,152)         (635)         (385)
                                                                        ---------     ---------     ---------     ---------
Loss before income taxes and cumulative effect of accounting change        (8,891)      (42,492)     (144,891)      (35,534)
Income tax expense (Note 14) .......................................         (508)         (851)       (1,784)       (2,239)
                                                                        ---------     ---------     ---------     ---------
Loss before cumulative effect of accounting change .................       (9,399)      (43,343)     (146,675)      (37,773)
Cumulative effect of accounting change (Note 8) ....................           --            --       (15,174)           --
                                                                        ---------     ---------     ---------     ---------
Net loss ...........................................................    $  (9,399)    $ (43,343)    $(161,849)    $ (37,773)
                                                                        =========     =========     =========     =========
Loss before cumulative effect of accounting change per share -
   basic and diluted ...............................................    $   (0.15)    $   (0.68)    $   (3.74)    $   (1.00)
Cumulative effect of accounting change per share - basic and diluted           --            --         (0.39)           --
                                                                        ---------     ---------     ---------     ---------
 Net loss per share - basic and diluted ............................    $   (0.15)    $   (0.68)    $   (4.13)    $   (1.00)
                                                                        =========     =========     =========     =========
Weighted-average number of common shares outstanding - basic and
  diluted ..........................................................       64,413        63,407        39,215        37,779
                                                                        =========     =========     =========     =========
</TABLE>

See notes to consolidated financial statements.


                                       51
<PAGE>
TLC VISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              2003          2002
                                                           ---------     ---------
<S>                                                        <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents ..........................    $  29,580     $  36,081
   Short-term investments .............................          748         1,557
   Accounts receivable (Note 6) .......................       15,617        14,155
   Prepaid expenses, inventory and other ..............       11,646         9,820
                                                           ---------     ---------
   Total current assets ...............................       57,591        61,613

Restricted cash (Notes 5) .............................        1,376         3,975
Investments and other assets (Note 7) .................        3,102         2,442
Goodwill (Note 8) .....................................       48,829        40,697
Other intangible assets (Note 9) ......................       22,959        29,326
Fixed assets (Note 10) ................................       56,891        58,003
                                                           ---------     ---------
Total assets ..........................................    $ 190,748     $ 196,056
                                                           =========     =========

LIABILITIES
Current liabilities:
   Accounts payable ...................................    $  10,627     $  13,857
   Accrued liabilities ................................       25,811        28,911
   Current maturities of long-term debt (Note 11) .....       10,285         6,322
                                                           ---------     ---------
   Total current liabilities ..........................       46,723        49,090

Other long-term liabilities ...........................        2,607         9,630
Long-term debt, less current maturities (Note 11) .....       19,242        15,760
Minority interests ....................................       10,907         9,748

STOCKHOLDERS' EQUITY
Common stock, no par value; unlimited number authorized      397,878       388,769
Option and warrant equity .............................        8,143        11,035
Treasury stock ........................................           --        (2,623)
Accumulated deficit ...................................     (294,752)     (285,353)
                                                           ---------     ---------
Total stockholders' equity ............................      111,269       111,828
                                                           ---------     ---------
Total liabilities and stockholders' equity ............    $ 190,748     $ 196,056
                                                           =========     =========
</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


                                       52
<PAGE>
TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
                                                                                         SEVEN MONTH
                                                                                           PERIOD
                                                                            YEAR ENDED      ENDED              YEAR ENDED
                                                                           DECEMBER 31,   DECEMBER 31,           MAY 31,
                                                                               2003          2002           2002          2001
                                                                           ------------  -------------   ---------      --------
<S>                                                                        <C>           <C>             <C>            <C>
OPERATING ACTIVITIES
Net loss ...............................................................     $ (9,399)     $(43,343)     $(161,849)     $(37,773)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
   Depreciation and amortization .......................................       22,593        13,862         21,352        27,593
   Write-off of investment in research and development arrangement .....        1,598         2,000          2,000            --
   Minority interest and other .........................................        4,672         1,152            107           677
   (Gain) loss on sale of fixed assets .................................         (484)        1,770          1,136         1,946
   Compensation expense ................................................          125           445            866            --
   Impairment of goodwill and other intangibles assets .................           --        22,138         81,720            --
   Adjustment to the fair value of investments and long-term receivables
     and impairment of fixed assets ....................................         (206)        2,095         28,635            --
   Non cash restructuring and other costs ..............................          677         2,266          2,503        14,395
   Cumulative effect of accounting change ..............................           --            --         15,174            --
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF ACQUISITIONS
   AND DISPOSITIONS
      Accounts receivable ..............................................         (489)        3,836          1,592         5,232
      Prepaid expenses, inventory and other current assets .............         (964)        7,168            417         1,891
      Accounts payable and accrued liabilities .........................      (13,831)       (4,574)         6,321         1,042
                                                                             --------      --------      ---------      --------
Cash provided by (used in) operating activities ........................        4,292         8,815            (26)       15,003
                                                                             --------      --------      ---------      --------

INVESTING ACTIVITIES
Purchase of fixed assets ...............................................       (4,433)       (3,668)        (2,297)      (10,656)
Proceeds from sale of fixed assets .....................................          578           751             89         2,491
Proceeds from the sale of investments and subsidiaries .................          221           259            777         1,117
Investment in research and development arrangements ....................       (1,598)       (2,000)        (2,000)           --
Acquisitions and investments ...........................................       (8,015)       (9,695)        (5,424)      (17,345)
Cash acquired in Laser Vision Centers, Inc. acquisition ................           --            --          7,319            --
Proceeds from sale of short-term investments ...........................          809           556          6,058        (6,063)
Other ..................................................................         (229)          (32)            56           (68)
                                                                             --------      --------      ---------      --------
Cash (used in) provided by investing activities ........................      (12,667)      (13,829)         4,578       (30,524)
                                                                             --------      --------      ---------      --------

FINANCING ACTIVITIES
Restricted cash movement ...............................................        2,599         1,013         (3,369)          103
Proceeds from debt financing ...........................................        3,450         1,750          5,788           226
Principal payments of debt financing and capital leases ................       (8,018)       (5,140)        (7,098)       (7,097)
Payments of accrued purchase obligations ...............................           --            --             --        (3,620)
Distributions to minority interests ....................................       (4,901)       (1,532)        (3,092)       (4,865)
Purchase of treasury stock .............................................           --          (191)            --          (481)
Proceeds from issuance of common stock .................................        8,744           121            306           711
                                                                             --------      --------      ---------      --------
Cash provided by (used in) financing activities ........................        1,874        (3,979)        (7,465)      (15,023)
                                                                             --------      --------      ---------      --------

Net decrease in cash and cash equivalents during the period ............       (6,501)       (8,993)        (2,913)      (30,544)
Cash and cash equivalents, beginning of period .........................       36,081        45,074         47,987        78,531
                                                                             --------      --------      ---------      --------
Cash and cash equivalents, end of period ...............................     $ 29,580      $ 36,081      $  45,074      $ 47,987
                                                                             ========      ========      =========      ========
</TABLE>

See notes to consolidated financial statements.


                                       53
<PAGE>
TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)

<TABLE>
<CAPTION>
                                               COMMON STOCK                TREASURY STOCK
                                           ------------------              ----------------
                                                                 OPTION                                       OTHER
                                                                   AND                                      ACCUMULATED
                                                                 WARRANT                      ACCUMULATED  COMPREHENSIVE
                                           SHARES     AMOUNT     EQUITY    SHARES    AMOUNT     DEFICIT    INCOME (LOSS)    TOTAL
                                           ------     ------    --------   ------    ------   -----------  -------------   --------
<S>                                        <C>       <C>        <C>       <C>        <C>      <C>          <C>             <C>
Balance May 31, 2000 ..................    37,150    $269,953   $   532         --   $    --    $(42,388)    $(4,451)      $223,646


Shares issued for acquisition..........       832       6,059                                                                 6,059
Shares purchased for cancellation......      (108)       (481)                                                                 (481)
Exercise of stock options..............        40         125                                                                   125
Shares issued as remuneration..........         5          35                                                                    35
Shares issued as part of the employee
  share purchase plan..................       112         586                                                                   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 ..................    38,031     276,277       532         --        --     (80,161)     (9,542)       187,106

Shares issued on acquisition of
  LaserVision..........................    26,617     111,058                                                               111,058
Value determined for shares issued
  contingent on meeting earnings
  criteria.............................                    60                                                                    60
Options issued on acquisition..........                           11,001                                                     11,001
Treasury stock arising from acquisition                                       (583)   (2,432)                                (2,432)
Exercise of stock options..............        10          26                                                                    26
Options issued on termination..........                              222                                                        222
Shares issued as part of the employee
  share purchase plan..................        85         280                                                                   280
Comprehensive loss:
  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 ..................    64,743     387,701     11,755      (583)   (2,432)   (242,010)         --        155,014

Purchase of treasury stock.............                                       (196)     (191)                                  (191)
Shares issued as part of the employee
  share purchase plan..................        46         111                                                                   111
Exercise of stock options..............         5          10                                                                    10
Options expired........................                   720       (720)                                                        --
Dilution gain on stock of subsidiary...                   227                                                                   227
Net loss and comprehensive loss........                                                          (43,343)                   (43,343)
                                           ------    --------   --------  --------  --------   ---------   ---------       --------
Balance December 31, 2002..............    64,794     388,769     11,035      (779)   (2,623)   (285,353)         --        111,828

Shares issued as part of the employee
  share purchase plan..................        56         223                  196       191                                    414
Exercise of stock options..............     2,102       8,330                                                                 8,330
Options expired or exercised...........                 2,892     (2,892)                                                        --
Retirement of treasury stock...........      (583)     (2,432)                 583     2,432                                     --
Shares issued as part of acquisition...       100          96                                                                    96
Escrow shares returned to the Company..      (713)
Net loss and comprehensive loss........                                                           (9,399)                    (9,399)
                                           ------    --------   --------  --------  --------   ---------   ---------       --------
Balance December 31, 2003..............    65,756    $397,878   $  8,143         0  $     --   $(294,752)  $      --       $111,269
                                           ======    ========   ========  ========  ========   =========   =========       ========
</TABLE>

See notes to consolidated financial statements.


                                       54
<PAGE>
TLC VISION CORPORATION

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

1. NATURE OF OPERATIONS

      TLC Vision Corporation and its subsidiaries ("TLC Vision" or the
"Company") is a diversified healthcare service company focused on working with
eye doctors to help them provide high-quality patient care primarily in the eye
care segment. The majority of the Company's revenues come from 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. In addition to refractive surgery,
the Company is diversified into other eyecare businesses. Through its Midwest
Surgical Services, Inc. ("MSS") subsidiary, the Company furnishes hospitals and
independent surgeons with mobile or fixed site access to cataract surgery
equipment and services. Through its OR Partners, Aspen Healthcare and Michigan
subsidiaries, TLC Vision develops, manages and has equity participation in
single-specialty eye care ambulatory surgery centers and multi-specialty
ambulatory surgery centers. The Company also owns a 51% majority interest in
Vision Source, which provides franchise opportunities to independent
optometrists. In 2002, the Company formed a joint venture with Vascular Sciences
Corporation 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 "fiscal 2003" shall mean the twelve months
ended December 31, 2003, "transitional period 2002" shall mean the seven-month
period ended December 31, 2002, "fiscal 2002" shall mean the 12 months ended May
31, 2002 and "fiscal 2001" shall mean the 12 months ended May 31, 2001.

      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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

      The 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


                                       55
<PAGE>
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 represent the assets productive
lives as follows:

<TABLE>
<S>                                           <C>
         Building                             - straight-line over 40 years
         Computer equipment and software      - straight-line over three years to four 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 $6.4 million at December 31, 2003) 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 is reflected prospectively in the
Company's financial statements. This change increased the net loss by
approximately $1.0 million in the transitional period 2002 and by approximately
$1.7 million in fiscal 2003.

Goodwill

      Effective June 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets,"
which requires that goodwill not be amortized but instead be tested for
impairment at least annually and more frequently if circumstances indicate
possible impairment. The Company's annual impairment test date is 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.


                                       56
<PAGE>
      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 the Company is entitled to receive the full
per procedure management fee, it has 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 25% of the Company's fiscal 2003 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. 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 $0.1 million, $0.4 million, and
$0.9 million of compensation expense during fiscal 2003, 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         PERIOD ENDED             YEAR ENDED MAY  31,
                                                 DECEMBER 31, 2003   DECEMBER 31, 2002        2002               2001
                                                 -----------------   -----------------  ----------------   -----------------
<S>                                              <C>                 <C>                <C>                <C>
Net loss, as reported ......................          $ (9,399)          $(43,343)          $(161,849)          $(37,773)
Adjustments for SFAS No. 123 ...............            (1,121)              (628)             (1,564)            (1,847)
                                                      --------           --------           ---------           --------
Pro forma net loss .........................          $(10,520)          $(43,971)          $(163,413)          $(39,620)
                                                      ========           ========           =========           ========
Pro forma loss per share - basic and diluted          $  (0.16)          $  (0.69)          $   (4.17)          $  (1.05)
                                                      ========           ========           =========           ========
</TABLE>

Foreign Currency Exchange

      The functional currency of the Company's Canadian operations is the U.S.
dollar. The assets and liabilities of the Company's Canadian operations are
maintained in Canadian dollars and remeasured 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 remeasured into U.S. dollars at average exchange rates
prevailing during the year with the exception of depreciation and amortization,
which are remeasured at historical exchange rates. Exchange gains and losses
included in net loss are not material in any period presented.


                                       57
<PAGE>
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 fiscal
2003 and the transitional period 2002 were reduced by 712,500 shares to exclude
the 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 represents an additional
purchase price obligation or is 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.

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
current period classifications.

Recent Pronouncements

      In January 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation 46, "Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51" (FIN 46). FIN 46 provides a new framework for
identifying variable interest entities (VIEs) and determining when a company
should include the assets, liabilities and results of activities of a VIE in its
consolidated financial statements. FIN 46 was effective immediately for VIEs
created after January 31, 2003. In December 2003, the FASB revised and issued
Revised Interpretation 46 (FIN 46(r)). FIN 46(r) is effective for the Company in
the first quarter of 2004. The Company is currently assessing the impact of the
interpretation on the Company including whether the physician practices or
Vascular Sciences will be required to be reported on a consolidated basis.

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 operations and cash flows for the seven-month period
ended December 31, 2002. The following unaudited financial information for the
twelve-month period ended December 31, 2002 and the seven-month period ended
December 31,2001 is presented for comparative purposes only:

<TABLE>
<CAPTION>
                                                  TWELVE-MONTH PERIOD ENDED       SEVEN-MONTH PERIOD ENDED
                                                         DECEMBER 31,                    DECEMBER 31,
                                                    2003            2002            2002            2001
                                                  ---------       ---------       ---------       ---------
                                                                 (UNAUDITED)                     (UNAUDITED)
<S>                                               <C>            <C>              <C>            <C>
Revenues:
   Refractive:
      Owned centers ........................      $  55,663       $  52,540       $  29,834       $  26,669
      Managed centers ......................         54,389          52,980          24,959          34,636
      Access fees ..........................         36,140          25,371          21,495              --
   Other healthcare services ...............         49,488          33,714          23,866           8,995
                                                  ---------       ---------       ---------       ---------
Total revenues .............................        195,680         164,605         100,154          70,300
                                                  ---------       ---------       ---------       ---------
Cost of revenues:
</TABLE>


                                       58
<PAGE>
<TABLE>
<CAPTION>
                                                  TWELVE-MONTH PERIOD ENDED       SEVEN-MONTH PERIOD ENDED
                                                         DECEMBER 31,                    DECEMBER 31,
                                                    2003            2002            2002            2001
                                                  ---------       ---------       ---------       ---------
                                                                 (UNAUDITED)                     (UNAUDITED)
<S>                                               <C>            <C>              <C>            <C>
     Refractive:
        Owned centers ......................         45,516          42,744          27,001          22,213
        Managed centers ....................         40,529          39,861          22,223          25,396
        Access fees ........................         25,424          18,103          15,356              --
        Impairment of fixed assets .........             --           1,487              --           1,066
     Other healthcare services .............         31,836          22,968          16,245           4,776
                                                  ---------       ---------       ---------       ---------
Total cost of revenues .....................        143,305         125,163          80,825          53,451
                                                  ---------       ---------       ---------       ---------
    Gross margin ...........................         52,375          39,442          19,329          16,849
                                                  ---------       ---------       ---------       ---------
General and administrative .................         31,688          38,158          24,567          22,791
Marketing ..................................         14,094          14,402           8,321           9,215
Amortization of other intangibles ..........          6,685           8,351           4,074           5,950
Research and development ...................          1,598           4,000           2,000              --
Impairment of goodwill and other intangible
  assets ...................................             --         103,858          22,138              --
Adjustment to the fair value of investments
  and long-term receivables ................           (206)          7,098           2,095          21,079
Restructuring and other charges ............          2,040          11,218           4,227           1,759
                                                  ---------       ---------       ---------       ---------
                                                     55,899         187,085          67,422          60,794
                                                  ---------       ---------       ---------       ---------

Operating loss .............................         (3,524)       (147,643)        (48,093)        (43,945)
Other income and (expense):
  Other income, net ........................            669           6,996           6,996              --
  Interest expense, net ....................         (1,364)           (752)           (243)           (252)
  Minority interest ........................         (4,672)         (1,710)         (1,152)           (586)
                                                  ---------       ---------       ---------       ---------
Loss before cumulative effect of accounting
  change and income taxes ..................         (8,891)       (143,109)        (42,492)        (44,783)
Income tax expense .........................           (508)         (1,622)           (851)           (504)
                                                  ---------       ---------       ---------       ---------
Loss before cumulative effect of accounting
  change ...................................         (9,399)       (144,731)        (43,343)        (45,287)
Cumulative effect of accounting change .....             --              --              --         (15,174)
                                                  ---------       ---------       ---------       ---------
Net loss ...................................      $  (9,399)      $(144,731)      $ (43,343)      $ (60,461)
                                                  =========       =========       =========       =========
Loss before cumulative effect of accounting
  change - basic and diluted ...............      $   (0.15)      $   (2.68)      $   (0.68)      $   (1.19)
Cumulative effect of accounting
  change - basic and diluted ...............             --              --              --           (0.40)
                                                  ---------       ---------       ---------       ---------
Net loss per share - basic and diluted .....      $   (0.15)      $   (2.68)      $   (0.68)      $   (1.59)
                                                  =========       =========       =========       =========
Weighted average number of common shares
  outstanding - basic and diluted (in
  thousands) ...............................         64,413          54,077          63,407          38,064
                                                  =========       =========       =========       =========
</TABLE>

4. ACQUISITIONS

      On December 31, 2003, a majority-owned subsidiary of the Company became a
majority owner of an ambulatory surgery center ("ASC") in Michigan when that ASC
purchased some of its shares from one of its investors. After this change in
ownership interest, the Company's subsidiary owned 64% of this ASC. Therefore,
this ASC was included in the consolidated balance sheet at December 31, 2003 and
included in the operating results of the Company using the equity method of
accounting during the year. During 2004, this ASC's operating results will be
reported on a consolidated basis.

      On November 21, 2003, a majority owned subsidiary of the Company acquired
50% of a medical practice in Ohio for $1.0 million, of which the Company paid
$0.5 million. The Company has included the operating results of this practice
using the equity method of accounting since the acquisition date.

      For the following acquisitions made by the Company, the related results
of operations have been included in the consolidated statements of operations
since the acquisition date.

      On September 2, 2003, OR Partners, Inc., a subsidiary of TLC Vision,
acquired 58% of Phoenix Eye Surgical Center, LLC, which operates an ambulatory
surgery center in Arizona that primarily performs cataract surgery. The Company
paid $3.8 million in cash for its interest and received net assets with a book
value of $0.1 million. Accordingly, $3.7 million was recorded as intangible
assets, primarily goodwill.

      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 issued 100,000 common shares. 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. Of this amount, $0.3 million
was non contingent and was recorded as a liability as of December 31, 2003.

      On August 1, 2002, the Company paid $7.6 million in cash to acquire a 55%
ownership interest in an ambulatory surgery center ("ASC") in Mississippi which
specializes in cataract surgery. The purchase price allocation resulted in $7.4
million of goodwill. In August 2003, the Company purchased an additional 5%
ownership


                                       59
<PAGE>
for $0.7 million in cash, substantially all of which was recorded as goodwill.
The Company also has an obligation to purchase an additional 5% ownership
interest per year for $0.7 million in cash per year during each of the next
three years.

      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
(583,000 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.

      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 discounted at
a rate of 9% with the resulting $8.1 million being reported as long-term debt
for financial reporting purposes. Installments have been paid in 2002 and 2003.

      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 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. For
all reported periods herein, no expense for contingent amounts has been
reflected as the applicable predetermined targets had not been achieved.

5. RESTRICTED CASH

      The Company had $1.4 million and $4.0 million of restricted cash as of
December 31, 2003 and 2002, respectively, to guarantee outstanding bank letters
of credit for leases and litigation.

6. ACCOUNTS RECEIVABLE

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

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                               2003         2002
                                                             -------      -------
<S>                                                          <C>          <C>
Refractive:
     Due from physician-owned companies and  physicians      $ 6,667      $ 8,186
     Due from patients and third parties ..............          599          952
Non-refractive ........................................        8,303        4,884
Other .................................................           48          133
                                                             -------      -------
                                                             $15,617      $14,155
                                                             =======      =======
</TABLE>


                                       60
<PAGE>
      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.

      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,
2003 and 2002 the Company had reserves for doubtful accounts and contractual
allowances of $2.6 million and $2.4 million, respectively. 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,
                                                           2003        2002
                                                          ------      ------
<S>                                                       <C>         <C>
                Equity method investments ..........      $1,196      $  730
                Marketable equity securities .......           3         555
                Non marketable equity securities ...         534         534
                Long-term receivables and other ....       1,369         623
                                                          ------      ------
                                                          $3,102      $2,442
                                                          ======      ======
    </TABLE>

      During fiscal 2002, the Company determined that the decline in fair value
of its marketable equity securities 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. During fiscal 2003, the
secondary care provider was profitable, improved its financial strength and
consistently made all payments to the Company when due. As a result, the Company
reevaluated the collectibility of this note receivable and recorded an
adjustment to reduce the reserve by $0.6 million.

      During fiscal 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 dry age related macular degeneration. Since the
technology is in the development stage and has not received Food and Drug
Administration (FDA) approval, the Company accounts for its investment as a
research and development arrangement whereby investments are expensed as amounts
are committed by Vascular Sciences. If commercialization of the product and FDA
approval is obtained, the Company will reevaluate the accounting treatment of
the investment.

      The Company purchased $1.0 million and $2.0 million in Series B preferred
stock in the year ended May 31, 2002 and the transitional period ended December
31, 2002, respectively and expensed it as a research and development
arrangement. During 2003, the Company has agreed to advance up to an additional
$6.0 million to Vascular Sciences pursuant to a secured convertible grid
debenture. The first $3.5 million advanced pursuant to such debenture is
convertible into common shares of Vascular Sciences. Vascular Sciences has also
granted an option to the Company to acquire an amount of common shares equal to
the undrawn portion of the debenture at any point in time. In fiscal 2003, the
Company expensed $1.6 million to research and development related to payments
made to Vascular Sciences during the year. Of this amount, $1.3 million reduced
the value of the $6.0 million obligation to Vascular Sciences, and $0.3 million
represented an additional equity investment in Common Stock and therefore did
not reduce the amount of the remaining obligation.


                                       61
<PAGE>
      In fiscal 2002, the Company advanced $1.0 million to Tracey Technologies,
LLC to support the development of laser scanning technology. This advance was
used to further develop this technology and was accounted for as research and
development costs in fiscal 2002.

8. GOODWILL

      Effective June 1, 2001, the Company early adopted SFAS No. 142, "Goodwill
and Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets
with indefinite lives 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 had 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>
May 31, 2002 ...................      $ 35,542       $10,328      $ 7,322      $ 53,192
Acquired during the period .....           586         8,763          294         9,643
Impairment losses recognized ...       (22,138)           --           --       (22,138)
                                      --------       -------      -------      --------
December 31, 2002 ..............        13,990        19,091        7,616        40,697
Acquired during the period .....           786         2,393        4,953         8,132
                                      --------       -------      -------      --------
December 31, 2003 ..............      $ 14,776       $21,484      $12,569      $ 48,829
                                      ========       =======      =======      ========
</TABLE>

      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 tests goodwill for impairment in the fourth quarter after the
annual forecasting process. 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 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. During the transitional period 2002,
the Company recorded a goodwill impairment charge of $22.1 million in the
refractive segment. The charge includes $21.8 million related to the goodwill
attributable to the reporting unit acquired in the LaserVison acquisition and
$0.3 million attributable to reporting units acquired in prior years.

      During the fourth quarter of fiscal 2003, the Company again performed its
annual impairment test. Based on the trend of stabilizing procedure volumes and
increased pricing related to the introduction of Custom LASIK in the refractive
segment, the earning forecast for the next five years was significantly improved
from the prior year period. After estimating the fair value of each reporting
unit using the present value of expected future cash flows, the Company
determined that no goodwill impairment charges should be recorded during the
year ended December 31, 2003.

      A reconciliation of net income as if SFAS No. 142 had 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>


                                       62
<PAGE>
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 $6.7
million, $3.8 million, $10.3 million and $8.8 million for the year ended
December 31, 2003, the seven-month period ended December 31, 2002, the year
ended May 31, 2002, and the year ended May 31, 2001, respectively.

      The remaining weighted average amortization period for PMAs is 6.5 years,
for deferred contract rights is 8.4 years, and for other intangibles is 13.3
years as of December 31, 2003.

      Intangible assets subject to amortization consist of the following at
December 31,

<TABLE>
<CAPTION>
                                                               2003                             2002
                                                   -----------------------------    -----------------------------
                                                   GROSS CARRYING   ACCUMULATED     GROSS CARRYING   ACCUMULATED
                                                       AMOUNT       AMORTIZATION        AMOUNT       AMORTIZATION
                                                   --------------   ------------    --------------   ------------
<S>                                                <C>              <C>             <C>              <C>
           Practice management agreements ..          $43,644          $31,381         $43,407          $27,151
           Deferred contract rights ........           13,861            3,753          13,983            1,487
           Other ...........................              670               82             600               26
                                                      -------          -------         -------          -------
           Total ...........................          $58,175          $35,216         $57,990          $28,664
                                                      =======          =======         =======          =======
</TABLE>

      The estimated amortization expense for the next five years as of
December 31, 2003 is as follows:

<TABLE>
<S>                                             <C>
                 2004........................   $  5,300
                 2005........................      3,600
                 2006........................      2,900
                 2007........................      2,900
                 2008........................      2,300
</TABLE>

      Intangible assets arising from PMAs were reviewed for impairment in fiscal
2002 because impairment indicators were present. The refractive industry had
experienced reduced procedure volumes over the previous two years as a result of
increased competition, customer confusion and a weakening in the North American
economy. This reduction in procedures had 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 PMA' were impaired, and a further fair value analysis based on the
present value of estimated future cash flows was completed to determine the
extent of the impairment. This further review resulted in an impairment charge
of $31.0 million, which was included in the 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,
                                                    2003          2002
                                                  --------      --------
<S>                                               <C>           <C>
       Land and buildings ..................      $ 11,643      $  9,589
       Computer equipment and software .....        13,806        14,112
       Furniture, fixtures and equipment ...        10,356         9,321
       Laser equipment .....................        38,046        40,132
       Leasehold improvements ..............        20,050        20,873
       Medical equipment ...................        31,814        22,746
       Vehicles and other ..................         8,633         6,565
                                                  --------      --------
                                                   134,348       123,338
       Less accumulated depreciation .......        77,457        65,335
                                                  --------      --------
       Net book value ......................      $ 56,891      $ 58,003
                                                  ========      ========
</TABLE>

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


                                       63
<PAGE>
      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.

11. LONG-TERM DEBT

Long-term debt consists of:

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                                   2003         2002
                                                                                 -------      -------
<S>                                                                              <C>          <C>
Interest at 3.11%, due through June 2004, payable to vendor ...............      $ 2,781      $ 4,095
Interest imputed at 9%, due in four payments from March 2002 through 2005,
 payable to affiliated doctor relating to practice acquisition ............        4,398        6,328
Interest imputed at 6.25%, due through October 2016, collateralized by
 building (C$7.7 million at December 31, 2003) ............................        5,979        5,201
Interest ranging from prime to 12%, collateralized by equipment, paid off
  in 2003 .................................................................           --        2,441
Interest imputed at 8%, due through December 2006, payable to vendors .....        5,743          492
Line of credit, interest at LIBOR plus 3% (4.14% at December 31, 2003),
  due in November 2008, secured by certain current assets and investments .        2,000           --
Interest at variable rate not to exceed 1.25% over bank base rate (4% at
 December 31, 2003), due through January 2006, collateralized by equipment         2,346           --
Interest at 3.75% to 5.75%, due through 2009, collateralized by real estate
 and equipment ............................................................        2,817           --
Capital lease obligations, payable through 2008, interest ranging from 7%
 to 8.5% ..................................................................        3,251        3,525
Other .....................................................................          212           --
                                                                                 -------      -------
                                                                                  29,527       22,082
Less current portion ......................................................       10,285        6,322
                                                                                 -------      -------
                                                                                 $19,242      $15,760
                                                                                 =======      =======
</TABLE>

      Principal maturities for each of the next five years and thereafter as of
December 31, 2003 are as follows:

<TABLE>
<S>                                             <C>
                        2004.................   $   10,285
                        2005................         8,348
                        2006................         2,322
                        2007................           816
                        2008................         2,477
                        Thereafter..........         5,279
                                                ----------

</TABLE>


                                       64
<PAGE>
<TABLE>
<S>                                           <C>
                      Total...............    $   29,527
                                                ==========

</TABLE>

      In November 2003, the Company obtained a $15 million line of credit for
five years from GE Healthcare Financial Services (the "Agreement") for a $0.1
million commitment fee and $0.2 million in related legal and out-of-pocket
expenses. This loan is secured by certain accounts receivable and cash accounts
in wholly-owned subsidiaries and Aspen Healthcare and a general lien on most
other U.S. assets. As of December 31, 2003, the Company had drawn $2 million
from the Agreement and had an available unused line of $13 million.

      The Agreement includes a subjective acceleration clause and a requirement
to maintain a "springing" lock-box, whereby remittances from the Company's
customers are forwarded to the Company's bank account and do not reduce the
outstanding debt until and unless the lender exercises the subjective
acceleration clause. Consequently, outstanding borrowings have been classified
as long-term.

     The Company must maintain (1) consolidated cash of $12.5 million or more,
(2) a maximum total debt/EBITDA (Earnings Before Income Taxes, Depreciation and
Amortization) ratio no more than 1.5, (3) a fixed charge coverage ratio
(including option proceeds and excluding most non-cash charges) of at least 1.1
and (4) obtain GE's approval for certain ineligible acquisitions and unfunded
capital additions above $2 million per year.

      Payments for capital lease obligations for each of the next five years as
of December 31, 2003 are as follows:

<TABLE>
<S>                                               <C>
                        2004....................  $   1,709
                        2005....................      1,272
                        2006....................        465
                        2007....................         14
                        2008....................          8
                        Thereafter..............         --
                                                  ---------
                        Total...................      3,468
                        Less interest portion...        217
                                                  ---------
                                                  $   3,251
                                                  =========
</TABLE>

12. OTHER INCOME AND EXPENSE

      During the year ended December 31, 2003, the Company recorded $0.7 million
of other income related to the gain on sale of certain equipment and additional
proceeds from the settlement of an antitrust lawsuit in 2002.

      Other income and expense for the seven months ended December 31, 2002
included $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 is included in other income
and expense.

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 and expire in December 2004. 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 period.

      The 8,019,000 options issued in connection with the LaserVision merger had
a fair value of $11.0 million using the Black-Scholes option pricing model
(assumptions - 2 years to 5 years 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). The 8,019,000 total consists of 7,519,000 converted
Laser Vision options and 500,000 new Company options.



                                       65
<PAGE>
      Options Outstanding

      As of December 31, 2003, 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 two years or four years of the option term and options
that vest entirely on the first anniversary of the grant date.

      As of December 31, 2003, 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          339,375      3.5 years      C$ 2.91        45,688      C$ 3.85
           $ 4.04 -  $ 6.88          191,301      2.9 years         4.35        77,160         4.20
           $ 7.25 -  $10.50           56,325      4.5 years         7.94         6,213         7.70
           $10.87 -  $19.73           63,129      0.9 years        14.09        62,373        13.99
           $20.75 -  $64.79            1,306      0.9 years        27.52         1,306        27.52
                                     -------                     -------       -------      -------
                                     651,436      3.1 years      C$ 4.90       192,740      C$ 7.56
                                     =======                     =======       =======      =======
</TABLE>

      As of December 31, 2003, 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         1,956,240     3.7 years         $   1.68       888,580    $   2.06
           $ 3.02 -  $ 3.86         1,280,364     6.2 years             3.18     1,273,302        3.18
           $ 4.25 -  $ 4.94           777,849     3.5 years             4.80       763,849        4.80
           $ 5.00 -  $ 7.81           854,824     2.9 years             5.83       376,272        5.47
           $ 8.50 -  $ 8.69         2,009,150     0.6 years             8.69     2,009,150        8.69
           $10.06 -  $19.50            13,662     1.0 years            17.57        13,362       17.66
                                    ---------                        -------     ---------      ------
                                    6,892,089     3.1 years          $  4.90     5,324,515      $ 5.50
                                    =========                        =======     =========      ======
</TABLE>

      A total of 12,000 options have been authorized for issuance in the future
but was not granted as of December 31, 2003. A summary of option activity during
the last three fiscal years and the transitional period follows:

<TABLE>
<CAPTION>
                                                             WEIGHTED       WEIGHTED
                                                              AVERAGE        AVERAGE
                                                OPTIONS   EXERCISE PRICE  EXERCISE PRICE
                                                (000'S)      PER SHARE      PER SHARE
                                               ---------  --------------  --------------
<S>                                            <C>        <C>             <C>
       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
</TABLE>


                                       66
<PAGE>
<TABLE>
<CAPTION>
                                                             WEIGHTED       WEIGHTED
                                                              AVERAGE        AVERAGE
                                                OPTIONS   EXERCISE PRICE  EXERCISE PRICE
                                                (000'S)      PER SHARE      PER SHARE
                                               ---------  --------------  --------------
<S>                                            <C>        <C>             <C>
           Granted..........................     1,721            3.30          2.82
           Exercised........................    (2,102)           4.38          4.11
           Forfeited........................      (313)           4.79          4.32
           Expired..........................      (443)          15.07          7.29
                                                -------      ---------       -------
       December 31, 2003....................     7,543        Cdn$4.90       US$4.90
                                                ======       =========       =======
       Exercisable at December 31, 2003.....     5,517        Cdn$7.56       US$5.50
                                                ======       =========       =======
</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 $8.688
(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 $8.688
(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 $8.688 (Cdn
$13.69) or higher. As of December 31, 2003, 122,000 U.S. options and 46,000
Canadian options were subject to variable options accounting.

      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 2.35% for 2003, 2.5% for the
transitional period 2002, 4.25% for fiscal 2002 and 6.5% for fiscal 2001; no
dividends; volatility factors of the expected market price of the Company's
common shares of 0.75 for 2003, 0.70 for the transitional period, 0.88 for
fiscal 2002 and 0.83 for fiscal 2001; and a weighted average expected option
life of 2.5 years for 2003 and the transitional period, and 4.0 years for fiscal
2002 and fiscal 2001. The estimated value of the options issued in connection
with the LaserVision acquisition was recorded as part of the cost of the
acquisition. The fair market value of the options granted during 2003 was $2.2
million (transitional period ended December 31, 2002 - $12,000 fiscal 2002 -
$1.3 million; fiscal 2001 - $3.1 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 previous 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.

14. INCOME TAXES

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

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                             2003            2002
                                           ---------       ---------
<S>                                        <C>             <C>
Deferred tax asset:
     Net operating loss carryforwards      $  81,670       $  66,370
     Fixed assets ...................            362           3,693
     Intangibles ....................         10,357          17,418
     Investments ....................         11,330          12,343
     Accruals and other reserves ....          6,718          15,859
     163J Adjustment ................         12,676          10,222
     Other ..........................          1,854              --
                                           ---------       ---------
</TABLE>


                                       67
<PAGE>
<TABLE>
<S>                                        <C>             <C>
Total ...............................        124,967         125,905
     Valuation allowance ............       (122,831)       (120,902)
                                           ---------       ---------
                                           $   2,136       $   5,003
                                           =========       =========
Deferred tax liabilities:
     Practice management agreements .      $   1,349       $   1,495
     Intangibles ....................            787           2,825
     Fixed assets ...................             --             683
                                           ---------       ---------
                                           $   2,136       $   5,003
                                           =========       =========
</TABLE>

      As of December 31, 2003, the Company has net operating losses available
for carryforward for income tax purposes of approximately $214.2 million, which
are available to reduce taxable income in 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 $36.1 million expire between 2004 and 2010.

      The United States losses of $171.2 million expire between 2011 and 2023.
The United States losses include amounts of $88.0 million, relating to the
acquisitions of 20/20, Beacon Eye and LaserVision. The availability and timing
of utilization of these losses are 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
                                                                          YEAR ENDED   PERIOD ENDED
                                                                         DECEMBER 31,  DECEMBER 31,       YEAR ENDED MAY 31,
                                                                            2003           2002           2002           2001
                                                                         ------------  -------------    --------       --------
<S>                                                                      <C>           <C>              <C>            <C>
Income tax recovery at the Canadian statutory rate of 35.1%
  (Transitional 2002 - 39.4%, 2001 - 43.2%) ........................      $ (3,121)      $(16,731)      $(46,963)      $(15,529)
Current year's losses not utilized .................................         1,929          5,824         10,025          8,474
Expenses not deductible for income tax purposes ....................           150         10,907         37,733          7,764
Change in Canadian tax rates .......................................         1,042             --             --             --
Corporate minimum tax, state tax and foreign tax ...................           508            851          1,221          1,255
Other ..............................................................            --             --           (232)           275
                                                                          --------       --------       --------       --------
                                                                          $    508       $    851       $  1,784       $  2,239
                                                                          ========       ========       ========       ========
</TABLE>

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                        SEVEN-MONTH
                                         YEAR ENDED     PERIOD ENDED        YEAR ENDED
                                        DECEMBER 31,    DECEMBER 31,          MAY 31,
                                            2003             2002         2002       2001
                                          -------          -------      --------    ------
<S>                                     <C>             <C>             <C>         <C>
        Current:
            Canada.................        $   85          $    67      $    112    $   111
            United States - federal            58              325           924        929
            United States - state..           175              135           280        645
            Other..................           190              324           468        554
                                           ------          -------      --------    -------
                                           $  508          $   851      $  1,784    $ 2,239
                                           ======          =======      ========    =======
</TABLE>

15. COMMITMENTS AND CONTINGENCIES

Operating Leases

      As of December 31, 2003, the Company has commitments relating to non
cancellable operating leases for rental of office space and equipment, which
require future minimum payments aggregating approximately $24.9 million. Future
minimum payments over the next five years and thereafter are as follows:

<TABLE>
<S>                                               <C>
                           2004................   $  8,570
                           2005................      6,589
</TABLE>


                                       68
<PAGE>
<TABLE>
<S>                                               <C>
                           2006................      4,639
                           2007................      2,462
                           2008................      1,339
                           Thereafter..........      1,270
                                                  --------
                                                  $ 24,869
                                                  ========
</TABLE>

      As of December 31, 2003, the Company had commitments related to a
long-term marketing contract which requires payments totaling $1.8 million in
2004 and $2.0 million in 2005.

      As of December 31, 2003, 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 $2.0 million.

      As of December 31, 2003, the Company had a commitment to fund research and
development efforts with Vascular Sciences which requires payments totaling
$2.1 million in 2004, $2.1 million in 2005 and $0.5 million in 2006.

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 $2.0
million at December 31, 2003.

Legal Contingencies

      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 Company cooperated 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 cannot 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 who 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. TLC Vision believes that it has
adequate provisions and accruals in its financial statements for tax
liabilities, although it cannot predict the outcome of future tax assessments.

      Tax authorities in three states have contacted TLC Vision and issued
proposed sales tax adjustments in the aggregate amount of approximately $1.2
million for various periods through 2003 on the basis that certain of TLC
Vision's laser access arrangements constitute a taxable lease or rental rather
than an exempt service. TLC Vision's discussions with these three states are
ongoing. TLC Vision has resolved its sales tax liabilities in 15 other states.
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 customers and in such event would remain
responsible for payment. TLC Vision cannot yet predict the outcome of these
outstanding assessments or any other assessments or similar actions which may be
undertaken by other state tax authorities. TLC Vision has evaluated and
implemented a comprehensive sales tax reporting system. TLC Vision believes that
it has adequate provisions in its financial statements with respect to these
matters.

Employment Contingencies


                                       69
<PAGE>
      As of December 31, 2003, the Company had employment contracts with
officers of TLC Vision or its subsidiaries to provide for base salaries, the
potential to pay certain bonuses, medical benefits and severance payments. Eight
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 $2.3 million)
at their option until November 2004 and 24-month agreements thereafter.

16. SEGMENT INFORMATION

      The Company has two reportable segments: refractive and cataract. The
refractive segment provides the majority of the Company's revenue 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, Company-managed laser centers and the fixed and mobile access
business of 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 represent the cost to the Company of engaging 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>
                YEAR ENDED DECEMBER 31, 2003              REFRACTIVE        CATARACT         OTHER           TOTAL
  ---------------------------------------------------     -----------      ---------       ---------       ---------
<S>                                                       <C>              <C>             <C>             <C>
  Revenues ..........................................      $ 146,192       $  24,812       $  24,676       $ 195,680
  Expenses:
  Doctor compensation ...............................         10,475              --             159          10,634
  Operating .........................................        125,270          20,623          16,652         162,545
  Depreciation expense ..............................         12,936           2,368             604          15,908
  Amortization of intangibles .......................          5,858             397             430           6,685
  Research and development ..........................             --              --           1,598           1,598
  Adjustment to the fair value of investments .......           (206)             --              --            (206)
  Restructuring and other charges ...................          2,040              --              --           2,040
                                                           ---------       ---------       ---------       ---------
                                                             156,373          23,388          19,443         199,204
                                                           ---------       ---------       ---------       ---------
  Income (loss) from operations .....................        (10,181)          1,424           5,233          (3,524)
  Other income and (expense) net ....................            639             108             (78)            669
  Interest expense, net and other ...................           (304)           (169)           (891)         (1,364)
  Minority interests ................................         (1,709)             --          (2,963)         (4,672)
  Income taxes ......................................            151              18            (677)           (508)
                                                           ---------       ---------       ---------       ---------
  Net income (loss) .................................      $ (11,404)      $   1,381       $     624       $  (9,399)
                                                           =========       =========       =========       =========
  Total assets ......................................      $ 140,796       $  13,972       $  35,980       $ 190,748
                                                           =========       =========       =========       =========
  Purchase of long-lived assets .....................      $     707       $   2,587       $   5,024       $   8,318
                                                           =========       =========       =========       =========
</TABLE>


                                       70
<PAGE>
<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 .........................................         78,869          10,040           6,223          95,132
  Research and development ..........................          1,000              --           3,000           4,000
  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 interests ................................           (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 interests .............................            (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 of long-lived assets ..................      $    2,707       $      620       $    3,327
                                                      ==========       ==========       ==========
</TABLE>

<TABLE>
<CAPTION>
              YEAR ENDED MAY 31, 2001                 REFRACTIVE         OTHER            TOTAL
------------------------------------------------      ----------       ----------       ----------
<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 interests .............................            (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>

The Company's geographic segments are as follows:


                                       71
<PAGE>
<TABLE>
<CAPTION>
           YEAR  ENDED DECEMBER 31, 2003                CANADA      UNITED STATES      TOTAL
-------------------------------------------------      ---------    --------------   ---------
<S>                                                    <C>            <C>            <C>
Revenues ........................................      $  10,109      $ 185,571      $ 195,680
Doctor compensation .............................          1,660          8,974         10,634
                                                       ---------      ---------      ---------
Net revenue after doctor compensation ...........      $   8,449      $ 176,597      $ 185,046
                                                       =========      =========      =========
Total fixed assets and intangibles ..............      $  10,765      $ 117,914      $ 128,679
                                                       =========      =========      =========

    SEVEN MONTH PERIOD ENDED DECEMBER 31, 2002
-------------------------------------------------
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
                                                       =========      =========      =========

          YEAR ENDED MAY 31, 2002
-------------------------------------------------
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
                                                       =========      =========      =========

          YEAR ENDED MAY 31, 2001
-------------------------------------------------
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>

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. As of December 31, 2003, 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 year
ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                                     ACCRUAL BALANCE
                                                                                           AS OF
                                     RESTRUCTURING       CASH           NON CASH       DECEMBER 31,
                                        CHARGES        PAYMENTS        REDUCTIONS          2003
                                     -------------     --------        ----------    ---------------
<S>                                    <C>             <C>              <C>              <C>
Severance .....................        $    360        $   (194)        $     --         $    166
Lease commitments, net of
  sub lease income ............             864            (256)              --              608
Prepaid expense and
  investment charges ..........             507            (200)            (307)              --
Laser commitments .............             180            (180)              --               --
 Write-down of fixed assets ...             370              --             (370)              --
                                       --------        --------         --------         --------
Total restructuring charges ...        $  2,281        $   (830)        $   (677)        $    774
                                       ========        ========         ========         ========
</TABLE>

      The Company recorded $2.0 million of net restructuring charges during the
year ended December 31, 2003 related to the closure of six centers and the
elimination of 29 full-time positions at those centers. The net charge consists
of $2.3 million primarily relating to the center closings offset by the reversal
into income of $0.3 million of restructuring charges related to prior year
accruals that were no longer needed as of December 31, 2003. All restructuring
costs will be financed through the Company's cash and cash equivalents. A total
of $0.7 million of this provision related to non cash costs associated with
writing off fixed assets, prepaid expenses and investments.


                                       72
<PAGE>
The lease costs will be paid out over the remaining term of the leases. The
majority of all other costs were paid as of December 31, 2003.

The following table details restructuring and other charges incurred for the
transitional period ended December 31, 2002:

<TABLE>
<CAPTION>
                                                                            ACCRUAL                                      ACCRUAL
                                                               NON-CASH     BALANCE                      NON-CASH        BALANCE
                                                              REDUCTIONS       AT                       REDUCTIONS          AT
                                 RESTRUCTURING     CASH           AND      DECEMBER 31,     CASH            AND        DECEMBER 31,
                                    CHARGES      PAYMENTS    ADJUSTMENTS      2002         PAYMENTS    ADJUSTMENTS         2003
                                 -------------  ----------   -----------  -------------   ----------   -----------    --------------
<S>                              <C>            <C>           <C>         <C>             <C>           <C>           <C>
Severance ...................       $ 1,120      $  (466)       $    --      $   654       $  (581)       $   (73)       $    --
Lease commitments, net of
  sublease income ...........           978           --             --          978          (420)          (221)           337
Write-down of fixed assets ..         2,266           --         (2,266)          --            --             --             --
Sale of center to third party           342           --             --          342            (7)          (335)            --
                                    -------      -------        -------      -------       -------        -------        -------
Total restructuring charges .       $ 4,706      $  (466)       $(2,266)     $ 1,974       $(1,008)       $  (629)       $   337
                                    =======      =======        =======      =======       =======        =======        =======
</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.

      The total net 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. All costs have been paid out as of December 31, 2003, except lease costs
which will be paid out over the remaining term of the leases.

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

<TABLE>
<CAPTION>
                                                                               ACCRUAL                                   ACCRUAL
                                                                NON-CASH       BALANCE                   NON-CASH        BALANCE
                                                               REDUCTIONS         AT                     REDUCTIONS         AT
                                 RESTRUCTURING     CASH           AND        DECEMBER 31,     CASH          AND        DECEMBER 31,
                                    CHARGES      PAYMENTS     ADJUSTMENTS        2002       PAYMENTS    ADJUSTMENTS        2003
                                 -------------   --------     -----------    ------------   --------    -----------    ------------
<S>                              <C>             <C>           <C>           <C>            <C>          <C>           <C>
Severance ...................       $ 2,907      $(2,454)       $  (434)       $    19       $   (19)     $    --        $    --
Lease commitments, net of
  sublease income ...........         2,765         (897)            85          1,953          (929)         (35)           989
Termination costs of doctors
  contracts .................           146         (146)            --             --            --           --             --
Laser commitments ...........           652           --           (352)           300          (300)          --             --
Write-down of fixed assets ..         2,280           --         (2,280)            --            --           --             --
                                    -------      -------        -------        -------       -------      -------        -------
Total restructuring and other
  charges ...................       $ 8,750      $(3,497)       $(2,981)       $ 2,272       $(1,248)     $   (35)       $   989
                                    =======      =======        =======        =======       =======      =======        =======
</TABLE>

      During fiscal 2002, the Company implemented a restructuring program to
reduce employee costs in line with current revenue levels, close certain
underperforming centers and eliminate duplicate functions caused by the merger
with LaserVision. This program eliminated 110 full-time equivalent positions and
closed 10 centers, resulting in a total cost of $8.8 million. The lease costs
will be paid out over the remaining term of the leases.



                                       73
<PAGE>
      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 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    PERIOD ENDED
                                                              DECEMBER 31,   DECEMBER 31,       YEAR ENDED MAY 31,
                                                                  2003           2002           2002           2001
                                                              ------------  -------------     --------       --------
<S>                                                           <C>           <C>               <C>            <C>
Debt relating to equipment purchases ....................       $  6,416       $    495       $     --       $     --
Capital lease obligations relating to equipment purchases          2,077            901             --             --
Option and warrant reduction ............................          2,892            720             --             --
Retirement of treasury stock ............................          2,432             --             --             --
Treasury stock arising from acquisition .................             --             --          2,432             --
Treasury stock to employee benefit plan .................            191             --             --             --
Issue of options/stock as remuneration ..................             --             --            222             35
Capital stock issued for acquisitions ...................             96             --        111,058          6,059
Issue of options arising from acquisition ...............             --             --         11,001             --
Accrued purchase obligations ............................             --             --             --          3,899
Long-term debt cancellation .............................             --             --             --            450
</TABLE>

Cash paid for the following:

<TABLE>
<CAPTION>
                                                       SEVEN-MONTH
                                    YEAR ENDED         PERIOD ENDED         YEAR ENDED
                                   DECEMBER 31,        DECEMBER 31,           MAY 31,
                                       2002                2002           2002       2001
                                  -------------       -------------    ---------  -------
<S>                               <C>                 <C>              <C>        <C>
     Interest...............       $    2,618          $      830      $   1,693  $  1,668
                                   ==========          ==========      =========  ========
     Income taxes...........       $      533          $      595      $   1,382  $    148
                                   ==========          ==========      =========  ========
</TABLE>

20. RELATED PARTY TRANSACTIONS

      On March 1, 2001, a limited liability company 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 was a director of TLC Vision from May 2002 to May 2003. At December 31,
2003 the remaining discounted amounts payable to Dr. Whitten of $4.4 million
($6.3 million at December 31, 2002) are included in long-term debt. (See Note
11, "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


                                       74
<PAGE>
will provide such companies with services in return for a fee. During the year
ended December 31, 2003, the seven month period ended December 31, 2002 and the
years ended May 2002 and 2001, the Company received revenue from these service
agreements of $0.7 million, $0.3 million, $0.8 million and $0.4 million,
respectively.

      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 received a revenue-based management fee from
the partnership. Subsequent to the acquisition of LaserVision, the Company
received $48,000 and $21,000 in management fees from the partnership for the
year ended December 31, 2003 and the transitional period ended December 31,
2002, respectively. Dr. Lindstrom also receives compensation from TLC Vision in
his capacity as medical director of TLC Vision and LaserVision and as a
consultant to MSS, a cataract service provider.

      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 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. Subsequent to the acquisition of LaserVision, the Company
received revenue of $1.2 million and $0.6 million as a result of the agreement
for the year ended December 31, 2003 and the transitional period ended December
31, 2002, respectively.

      During 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 a total of $125,000 under this agreement which was paid in
2002.

      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.

      Elias Vamvakas, an executive officer and director of the Company, and Dr.
William David Sullins, Jr., a director of the Company, also serve as directors
of Vascular Sciences Corporation. Mr. Vamvakas also serves as the Executive
Chairman of Vascular Sciences. The board of directors of Vascular Sciences has
granted Mr. Vamvakas stock options to purchase 4,583 shares of common stock at
an exercise price of $1.30 per share, which stock options are fully vested and
exercisable, and stock options to purchase 500,000 shares of common stock at an
exercise price of $0.99 per share, which stock options vest and become
exercisable over a three year period. In 2003, Dr. Sullins received $10,250 as
cash compensation for service as an outside director and member of the audit and
compensation committees of the board of directors of Vascular Sciences. In
addition, the board of directors of Vascular Sciences has granted Dr. Sullins
stock options to purchase 4,583 shares of common stock at an exercise price of
$1.30 per share, which stock options are fully vested and exercisable, and stock
options to purchase 25,000 shares of common stock at an exercise price of $0.99
per share, which stock options vest and become fully exercisable annually over a
three year period. All such stock options granted to Mr. Vamvakas and Dr.
Sullins expire ten years after the date of grant.

      During the year ended December 31, 2003, the seven month period ended
December 31, 2002, and the years ended May 31, 2002 and 2001, the law firm
Gourwitz and Barr, P.C., of which Mr. Gourwitz, a director of the Company until
May 2003, provided legal services to TLC Vision and was paid $87,000, $98,000,
$95,000 and $27,000 respectively.


21. SUBSEQUENT EVENTS

      On January 1, 2004, the Company entered into an agreement to settle the
lawsuit brought by Thomas S. Tooma, MD and TST Acquisitions, LLC, in October
2002. The lawsuit sought 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. Under the terms of the settlement, the plaintiffs
paid the Company approximately $2.3 million to purchase an additional 23% of the
joint venture with the Company and 30% of the Laser Vision Centers, Inc.
California business.

      On March 10, 2004, the Company acquired a 70% ownership interest in a
Texas ASC and a note receivable from the ASC for $4.5 million.

      From January 2 to March 12, 2004, the Company received $6.1 million in
proceeds from the exercise of non-qualified stock options to purchase 1.7
million common shares.


                                       75
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      None.

ITEM 9A. CONTROLS AND PROCEDURES

      The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

      As of the end of the period covered by the report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act). Based on that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective, in all material respects, to ensure that
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.

      There have been no significant changes in the Company's internal controls
over financial reporting that have materially affected, or are reasonably likely
to materially affect the Company's internal control over financial reporting.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information required by this Item 10 is incorporated by reference to
the Company's definitive proxy statement to be filed within 120 days after the
end of the Company's fiscal year ended December 31, 2003.

ITEM 11. EXECUTIVE COMPENSATION

      The information required by this Item 11 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed within 120
days after the end of the Company's fiscal year ended December 31, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
  RELATED STOCKHOLDER MATTERS

      The information required by this Item 12 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed within 120
days after the end of the Company's fiscal year ended December 31, 2003.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by this Item 13 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed within 120
days after the end of the Company's fiscal year ended December 31, 2003.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information required by this Item 14 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed within 120
days after the end of the Company's fiscal year ended December 31, 2003.


                                       76
<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 - Year Ended December 31, 2003,
      transitional period ended December 31, 2002 and Years Ended May 31, 2002
      and 2001.

      Consolidated Balance Sheets as of December 31, 2003 and December 31, 2002.

      Consolidated Statements of Cash Flows - Year Ended December 31, 2003,
      transitional period ended December 31, 2002 and Years Ended May 31, 2002
      and 2001.

      Consolidated Statements of Stockholders' Equity - Year Ended December 31,
      2003, transitional period ended December 31, 2002 and Years Ended May 31,
      2002 and 2001.

      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.

      One Form 8-K report was furnished during the last quarter of the year
      ended December 31, 2003. This report was filed on November 12, 2003, to
      disclose that a press release was issued announcing the Company's
      financial results for the quarter and nine months ended September 30,
      2003.

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

      See Exhibit Index.

(d)   None


                                       77
<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

      March 12, 2004

      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                 March 12, 2004
--------------------------------------------    Chairman of the Board of Directors
                Elias Vamvakas

            /s/ B. CHARLES BONO III             Chief Financial Officer, Treasurer          March 12, 2004
--------------------------------------------    and Principal Accounting Officer
              B. Charles Bono III

              /s/ JOHN J. KLOBNAK               Director                                    March 12, 2004
--------------------------------------------
                John J. Klobnak

      /s/ WILLIAM DAVID SULLINS, JR., OD        Director                                    March 12, 2004
--------------------------------------------
        William David Sullins, Jr., OD

            /s/ THOMAS N. DAVIDSON              Director                                    March 12, 2004
--------------------------------------------
              Thomas N. Davidson

             /s/ WARREN S. RUSTAND              Director                                    March 12, 2004
--------------------------------------------
               Warren S. Rustand

                                                Director                                    March 12, 2004
--------------------------------------------
          Richard L. Lindstrom, M.D.

               /s/ TOBY S. WILT                 Director                                    March 12, 2004
--------------------------------------------
                 Toby S. Wilt
</TABLE>


                                       78
<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
                                                -----------   ------------   -----------   ---------------  ---------------
                                                                                (IN THOUSANDS)
<S>                                             <C>           <C>            <C>           <C>              <C>
Fiscal 2001
Provision for contractual allowances and
  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
Provision for contractual allowances and
 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         44,562              --         106,351

Transitional Period 2002
Provision for contractual allowances and
 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            106,351         14,551             --              --         120,902

Fiscal 2003
Provision for contractual allowances and
 doubtful accounts receivable                    $  2,428       $    207       $     --        $    (52)       $  2,583
Provision against investments and other
  assets                                            4,123             46           (651)             --           3,518
Deferred tax asset valuation allowance            120,902          1,929             --              --         122,831
</TABLE>

Note (1): Additional provisions for contractual allowances and doubtful accounts
and deferred tax asset valuation allowances were acquired in the merger
transaction with LaserVision. During fiscal 2003, the Company adjusted a portion
of the provision for contractual allowances and doubtful accounts due to
improved financial strength of the borrower, a secondary care service provider
of which the Company owns approximately 25% of the outstanding shares, and a
consistent pattern of timely payments that the borrower has made related to the
note receivable held by the Company.


                                       79
<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 William Leonard (incorporated
                        by reference to Exhibit 10.1(n) to the Company's 10-K
                        filed with the Commission on August 29, 2000)

            10.8  *     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))

            10.9  *     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)

            10.10 *     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)

            10.11 *     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)

            10.12 *     Amendment to Employment Agreement with Robert W. May
                        dated September 30, 2003.

            10.13 *     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)

            10.14 *     Amendment to Employment Agreement with B. Charles Bono
                        dated September 30, 2003.

            10.15 *     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

            23          Consent of Independent Auditors

</TABLE>

* Management contract or compensatory plan or arrangment.

                                       80
<PAGE>
<TABLE>
<CAPTION>
         EXHIBIT
            NO.                                DESCRIPTION
         ---------                             -----------
<S>                     <C>
            31.1        CEO's Certification required by Rule 13A-14(a) of the
                        Securities Exchange Act of 1934.

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

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

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


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