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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2004

                         COMMISSION FILE NUMBER: 0-29302

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

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

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<S>                                                      <C>
       5280 SOLAR DRIVE, SUITE 300                         L4W 5M8
          MISSISSAUGA, ONTARIO                           (Zip Code)
(Address of principal executive offices)
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           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. [ ]

     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, 2004, the aggregate market value of the registrant's Common
Shares held by non-affiliates of the registrant was approximately $746.1
million.

     As of March 11, 2005, there were 70,174,000 shares of the registrant's
Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

     Definitive Proxy Statement for the Company's 2005 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 the Securities Exchange Act of 1934, which
statements may 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 "TLCVision" 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.) is a
diversified eye care services company dedicated to improving lives through
better vision by providing eye doctors with the tools and technologies they need
to deliver high quality patient care. 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, TLCVision 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. The Company is also a 51% majority owner of OccuLogix, Inc.
(formerly Vascular Sciences Corporation), a public company 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 merger enabled the combined companies to provide a
broader array of services to eye care professionals to support these individuals
in providing 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 focuses on three main strategic initiatives: (1) continue to
leverage our core refractive business, through same store growth in centers,
expand into new markets through shared equity relationships, and continue to
protect our access base; (2) grow our non-refractive businesses MSS, OR Partners
and Vision Source; and (3) expand into new eye care segments. Financial
information about the Company's business segments is contained in Note 17
"Segment Information" to the 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.


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

     -    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 way light rays are focused directly on the retina 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 TLCVision
     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 using
          "wavefront" technology to create a three dimensional corneal map. The
          information from that map guides the laser in customizing the laser
          ablation to an individual's 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 making a flap. 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
          intra-operative 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 intra-operative 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 relax and 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 rings in the cornea to
          reshape it 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.

     -    Refractive IOL Procedures. Intraocular lenses (IOL's) are permanent or
          semi-permanent, plastic lenses that are implanted to replace or
          supplement the eye's natural crystalline lens. While not a common
          procedure for correcting refractive errors, the placement of a
          refractive IOL can help patients who are not candidates for LASIK.
          IOL's have been used in the United States since the late 1960's to
          restore visual function to cataract patients, and more recently are
          being used in refractive surgery procedures. There are several types
          of refractive IOL's: phakic IOL's, multi-focal IOL's and accommodating
          IOL's. Patient suitability and quality of visual outcome for each of
          these lens options varies.

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.). 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
October 2004 Comprehensive Report on the Refractive Market estimates that the
2005 refractive market potential is 37% of the U.S. population or 110.5 million
people. To date, based on Market Scope's estimate of the number of people who
have had procedures, only an estimated 7% of this target population has had
laser vision correction.


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     Estimates by Market Scope indicate that 1.2 million laser vision correction
procedures were performed in the U.S. in 2002, 1.1 million were performed in
2003, 1.3 million were performed in 2004, and an estimated 1.4 million will be
performed in 2005. 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 TLCVision 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 non-elective surgical procedure in
the United States, with more than 2.6 million people having cataract surgery
each year. Medicare pays approximately $3.4 billion annually for 1.7 million
patients having cataract surgery. 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

     TLCVision 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

     TLCVision's business strategy is to be a diversified eye care services
company, leveraging its relationships with over 13,000 ophthalmologists and
optometrists throughout North America to 1) grow the core refractive business
while 2) continuing to expand the non-refractive business segment.

     GROWING THE CORE REFRACTIVE BUSINESS

     The company will focus on growing the core refractive business through
increasing surgical volume through existing TLC branded centers, expanding the
TLC branded center model to new markets and supporting our access customer base.
The primary tactic in increasing surgical volume will be through various
initiatives with ophthalmologists and optometrists.


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     To accomplish this, TLCVision 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 TLCVision quality
               assurance and improvement system;

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

          -    cooperative marketing/advertising programs to build awareness for
               the procedure;

          -    access to emerging technologies, and

          -    selected expansion into new and existing markets.

     DIVERSIFICATION BEYOND REFRACTIVE LASER BUSINESSES

     TLCVision'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.

     TLCVision plans to further diversify its business in four ways:

          -    continuing to expand the Company's existing cataract service
               business, MSS, 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 or acquire ophthalmic ambulatory surgery
               centers through the Company's OR Partners subsidiary; and

          -    developing new eye care related businesses that evolve from
               strategic technology investments, such as OccuLogix, Inc., a
               company focused on the treatment of a specific eye disease known
               as dry age-related macular degeneration which completed its
               initial public offering in December 2004.

DESCRIPTION OF BRANDED TLCVISION LASER EYE CENTERS

     The Company currently owns and manages 73 TLCVision branded laser eye
centers in the United States, five centers in Canada and one in Europe. Each
TLCVision 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 TLCVision 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 (1) amounts charged patients for procedures performed at laser
centers, (2) management and facility fees paid by doctors who use the TLCVision
branded laser eye center to perform laser vision correction procedures and (3)
administrative fees for billing and collection services from doctors who
co-manage patients treated at the centers. Most TLCVision 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 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.


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     TLCVision has developed proprietary management and administrative software
and systems designed to assist eye care professionals in providing high levels
of patient care. The software permits TLCVision branded laser eye centers to
provide a potential candidate with current information on affiliated doctors
throughout North America, to help them locate the closest TLCVision 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 TLCVision branded
laser eye centers. TLCVision also has an on line consumer consultation site on
its website (www.tlcvision.com). This consumer consultation site allows
consumers to book their consultation with the Company online. TLCVision 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 TLCVision 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 TLCVision 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 TLCVision 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 $2,000 per eye). The Company typically charges an additional $350
to $500 per eye for custom ablation. At TLCVision 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 or 20% of
the patient fee 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

     The Company has developed and implemented a medical co-management model
under which it not only establishes, manages and operates TLCVision 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 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 TLCVision 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."

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

     The Company believes that primary care doctors' relationships with
TLCVision 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.


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     SALES AND MARKETING

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

     While TLCVision 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.

     TLCVision 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 TLCVision branded laser eye center.
Participating employers may partially subsidize the cost of an employee's laser
vision correction at a TLCVision 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 TLCVision 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 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. The Company maintains a comprehensive Internet strategy with the goal
of having a leading refractive presence on the Internet, through TLCVision-owned
websites and partnerships and sponsorships with other websites. To date, the
Company continues to rank in the top placement for various LASIK-related search
terms through the major search engines.

     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 TLCVision manages on behalf
of doctors or that have access to a TLCVision 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
TLCVision branded laser eye center owned, managed or operated by the Company do
so under one of three types of standard agreements (as 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,


                                       8

<PAGE>

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 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, TLCVision'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 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, 2004,
LaserVision was utilizing approximately 81 excimer lasers and 160 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


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<PAGE>

          -    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, 2004, LaserVision
had 32 Roll-On/Roll-Off systems in operation, all but one of which were located
in the United States.

     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, 2004,
LaserVision had approximately 43 U.S. fixed sites and two 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:

          -    Technical Support and Equipment Maintenance - As of December 31,
               2004, LaserVision employed 37 certified laser engineers and 25
               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 - TLCVision 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, TLCVision conducts clinical
               advisory meetings at major industry conferences each year. The
               clinical advisors also make themselves available to consult with
               eye surgeon customers in addition to regularly scheduled
               conference calls and meetings.


                                       10

<PAGE>

          -    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 customer.

     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
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 MOBILE CATARACT BUSINESS

     Through its Midwest Surgical Services, Inc. subsidiary ("MSS"), TLCVision
provides mobile and fixed site cataract equipment and related services in 40
states. As of December 31, 2004, MSS employed 56 cataract equipment technicians
and operated 54 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. Technicians are also certified to scrub for cataract cases as
requested by the surgeon and facility. A typical service offering will include
cataract equipment (a phaco emulsifier, a surgical microscope) the IOL, surgical
instruments and supplies. Related services, including YAG capsulotomies and SLT
lasers treatments, are also offered.

     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


                                       11

<PAGE>

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, TLCVision 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, 2004, TLCVision has an
ownership position in five ASCs and anticipates that more ASCs will be opened
during 2005.

     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.

DESCRIPTION OF OPTOMETRIC FRANCHISING BUSINESS

     Vision Source is a majority-owned subsidiary that provides marketing,
practice development and purchasing power to independently-owned and operated
optometric practices in the United States. As of December 31 2004, Vision Source
had 1,182 practices under franchise agreements across the United States, and in
exchange for providing services to its franchisees, it received franchise fees
equal to a predetermined percentage of gross practice billings. This business
supports the development of independent practices and complements the Company's
co-management model.

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 TLCVision. 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.
TLCVision's branded eye care centers in Canada are state-of-the-art facilities
that are used to examine and evaluate new technologies for TLCVision. 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.


                                       12

<PAGE>

     WEBSITE

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

     TLCVision makes available free of charge on or through its website
(http://www.tlcvision.com) 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 website as soon as
reasonably practicable after the material is electronically filed with or
furnished to the Commission. All of TLCVision's filings may be read or copied at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington D.C.
20549. Information on the operation of the Public Reference Room can be obtained
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website
(http://www.sec.gov) that contains reports, proxy and information statements
regarding issuers that file electronically.

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.

     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 may 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, 2004,
independent surgeon-owned centers accounted for the largest percentage of total
procedure volume in the industry with a 63% market share. Corporate-owned
centers accounted for 26% of total procedures performed. The remaining 11% of
laser vision correction procedures were performed at institution-owned centers,
such as hospitals or universities.


                                       13

<PAGE>

     Although many 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 2004, the laser vision correction industry experienced a strong
rebound after experiencing several years of lower demand. Additionally, average
LASIK pricing continued to increase from the dramatically reduced pricing
experienced from late 2000 until mid-2003, as a number of providers dramatically
reduced price in an effort to gain market share. During this period, TLCVision
maintained its premium-pricing model emphasizing 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.

     TLCVision 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

     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 TLCVision eye care centers,
may perform the LASIK procedure, using lasers with a PMA for PRK only (off-label
use) in an exercise of professional judgment 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-


                                       14

<PAGE>

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

     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 TLCVision 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
11 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.


                                       15

<PAGE>

     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 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 was


                                       16

<PAGE>

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 had until April 14, 2004 to comply with the Privacy
Regulations. The Company's plan sponsor has taken 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.

     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


                                       17

<PAGE>

     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 TLCVision 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 TLCVision 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, TLCVision does not allow optometrists to perform the procedure at
TLCVision 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.

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

     NASDAQ QUORUM EXEMPTION

     The Company has received an exemption from the Nasdaq Stock Market with
respect to compliance with Rule 4350(f) of the Nasdaq corporate governance rules
which require that a quorum for any meeting of shareholders shall be not less
than 33 1/3% of the outstanding shares of voting common stock. As permitted
under the laws of New Brunswick, Canada, the Company's Bylaws provide that a
quorum for a meeting of shareholders consists of at least two persons present in
person and each entitled to vote at the meeting and holding at least 20% of the
outstanding TLCVision common shares.

     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, TLCVision expects that
affiliated doctors will comply with such laws in all material


                                       18

<PAGE>

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," "TLCVision," and slogans "See the Best,"
"Feel the Difference. See the Results" are registered U.S. service marks of
TLCVision and registered trademarks in Canada. TLCVision has registered "TLC
Laser Eye Centers" with the TLCVision eye design as a trademark in the United
States and Canada. "Laser Vision," "Laser Vision Centers and Design," and "Laser
Vision Centers" 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, TLCVision 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. Although the Company currently leases or purchases excimer lasers and
other technology from the manufacturers, 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.

EMPLOYEES

     Including part-time employees, the Company had 1,138 employees as of
December 31, 2004. 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

     TLCVISION HAS REPORTED ACCUMULATED DEFICITS; FUTURE PROFITABILITY UNCERTAIN

     TLCVision reported net losses of $9.4 million, $43.3 million and $161.8
million for the year ended December 31, 2003, the transitional period ended
December 31, 2002 and fiscal 2002, respectively. As of December 31, 2004,
TLCVision reported an accumulated deficit of $251.0 million. Even though
TLCVision reported net income of $43.7 million for the year ended December 31,
2004, that amount included a gain of $25.8 million attributable to the initial
public offering of its OccuLogix, Inc. subsidiary, and the Company may not be
able to sustain its profitability. TLCVision's profitability will depend on a
number of factors, including:

          -    demand for the Company's services;

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


                                       19

<PAGE>

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

     In addition, OccuLogix, Inc. expects to report significant net losses at
least through 2006 and possibly beyond. The Company will continue to report
OccuLogix, Inc. on a consolidated basis for the foreseeable future.

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

     CHANGES IN GENERAL ECONOMIC CONDITIONS MAY CAUSE FLUCTUATIONS IN
     TLCVISION'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 TLCVision 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
TLCVision. For example, the downturn in the North American economy contributed
to a 17% decline in the number of paid procedures at TLCVision'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 TLCVision's customers, who
experience financial distress or declare bankruptcy, which may negatively impact
TLCVision'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
TLCVision. TLCVision 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. TLCVision's
principal corporate competitors 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. TLCVision 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 TLCVision'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 TLCVision 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 TLCVision's
eye care centers or in the number of procedures performed at its centers could
cause TLCVision'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 lenses and surgery with different types of lasers.
TLCVision's management, operations and marketing plans may not be successful in
meeting this competition. Certain competitive 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 TLCVision's laser access services by making it economically
more attractive for eye surgeons to buy excimer lasers rather than utilize
TLCVision's services.

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


                                       20

<PAGE>

     THE MARKET ACCEPTANCE OF LASER VISION CORRECTION IS UNCERTAIN.

     TLCVision believes that the profitability and growth of TLCVision will
depend upon broad acceptance of laser vision correction in the United States
and, to a lesser extent, Canada. TLCVision may have difficulty generating
revenue and growing its business if laser vision correction does not become more
widely accepted by 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 TLCVISION 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 TLCVision. 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, TLCVision 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,

          -    regression, and

          -    corneal flap or corneal healing complications.

     TLCVision 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.

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


                                       21

<PAGE>

     TLCVision 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 TLCVision from practicing medicine,
employing doctors to practice medicine on its behalf or employing optometrists
to render optometric services on its behalf. In most states TLCVision 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 TLCVision and are expected to provide a significant source of
patients for TLCVision. Accordingly, the success of TLCVision'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 it owns
or manages.

     QUARTERLY FLUCTUATIONS IN OPERATING RESULTS MAKE FINANCIAL FORECASTING
     DIFFICULT.

     TLCVision may experience future quarterly losses, which may exceed prior
quarterly losses. TLCVision's expense levels will be based, in part, on its
expectations as to future revenues. If actual revenue levels were below
expectations, TLCVision's operating results would deteriorate. Historically, the
quarterly results of operations of TLCVision have varied, and future results may
continue to fluctuate significantly from quarter to quarter. Accordingly,
quarter-to-quarter comparisons of TLCVision'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 the Company's geographic
markets, market acceptance of its services, seasonal factors and other factors
described in this Form 10-K.

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

     Historically, the market price of TLCVision's common shares has been
volatile. For example, the market price of TLCVision'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 $13.13 by April 2004. TLCVision'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 impact of OccuLogix, Inc. on results of operations;

          -    perception of the potential for rheopheresis for dry AMD

          -    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

     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 TLCVision.

     TLCVISION MAY BE UNABLE TO EXECUTE ITS BUSINESS STRATEGY.


                                       22

<PAGE>

     TLCVision's business strategy is to be a diversified eye care services
company, leveraging its relationships with over 13,000 ophthalmologists and
optometrists throughout North America to 1) grow the core refractive business
while 2) continuing to expand the non-refractive business segment.

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

     TLCVISION MAY MAKE INVESTMENTS THAT MAY NOT BE PROFITABLE.

     TLCVision has made investments that were intended to support its strategic
business purposes, such as TLCVision's investment in LaserSight Inc. These
investments were generally made in companies in the laser vision correction
business or that owned emerging technologies that TLCVision believed would
support the Company's refractive business. TLCVision 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 when
LaserSight declared bankruptcy. TLCVision may make similar investments in the
future, some of which may be material or may become material over time. If
TLCVision 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 TLCVISION DEPENDS ON ITS ABILITY TO MAKE
     ACQUISITIONS OR ENTER INTO AFFILIATION ARRANGEMENTS.

     The success of TLCVision'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.

     TLCVision'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

          -    the effect of existing and emerging competition on operations.

     TLCVision 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. TLCVision's past
and possible future acquisitions may not achieve adequate levels of revenue,
profitability or productivity or may not otherwise perform as expected.

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

     The success of TLCVision 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, TLCVision has grown rapidly in the
United States. TLCVision's future growth and expansion will increase its
management's responsibilities and demands on operating information technologies
and


                                       23

<PAGE>

financial systems and resources. TLCVision'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 TLCVision'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;

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

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

     TLCVision's success and growth depends in part on the active participation
of key medical and management personnel, including Mr. Elias Vamvakas, Chairman
of the Board of Directors, and Mr. James Wachtman, Chief Executive Officer.
TLCVision 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 TLCVision's business operations.

     TLCVision 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 TLCVision or the employee.

     TLCVISION 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 TLCVision's centers entails an
inherent risk of potential malpractice and other similar claims. Beginning
October 1, 2002, all of TLCVision's U.S. professional malpractice insurance had
a $250,000 deductible per claim. For the period from June 1, 2003 through May
31, 2004, the Company was self-insured for Canadian claims. Patients at
TLCVision's centers execute informed consent statements prior to any procedure
performed by doctors at TLCVision's centers, but these consents may not provide
adequate liability protection. Although TLCVision 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 TLCVision's centers may be
asserted against TLCVision 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.

     TLCVision currently maintains malpractice insurance coverage and accruals
that it believes is adequate both as to risks and amounts covered. In addition,
TLCVision 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 TLCVision against certain malpractice and other
claims. TLCVision's insurance coverage, however, may not be adequate to satisfy
claims, insurance maintained by the doctors may not protect TLCVision and such
indemnification may not be enforceable or, if enforced, may not be sufficient.
TLCVision's inability to obtain adequate insurance or an increase in the future
cost of insurance to TLCVision 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. TLCVision may not have adequate insurance for
any liabilities arising from injuries caused by the excimer laser system or
hazardous gases. While TLCVision believes that any claims alleging defects in
TLCVision's excimer laser systems would usually be covered by the manufacturers'
product liability insurance, the manufacturers of TLCVision's excimer laser
systems may not continue to carry adequate product liability insurance.

     TLCVISION MAY FACE CLAIMS FOR FEDERAL, STATE AND LOCAL TAXES.

     TLCVision 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. TLCVision endeavors to


                                       24

<PAGE>

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 have been interpreting laws
and regulations more aggressively to the detriment of taxpayers such as
TLCVision and its customers. TLCVision 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 TLCVision and issued
proposed sales tax adjustments in the aggregate amount of approximately $0.8
million for various periods through 2004 on the basis that certain of
TLCVision's business arrangements constitute at least a partially taxable
transaction rather than an exempt service. TLCVision's discussions with these
three states are ongoing. If it is determined that any sales tax is owed,
TLCVision believes that, under applicable laws and TLCVision's contracts with
its customers, each customer is ultimately responsible for the payment of any
applicable sales and use taxes in respect of TLCVision's services. However,
TLCVision may be unable to collect any such amounts from its customers and in
such event would remain responsible for payment. TLCVision 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. TLCVision has
evaluated and implemented a comprehensive sales tax reporting system. TLCVision
believes that it has adequate provisions in its financial statements with
respect to these matters.

     COMPLIANCE WITH INDUSTRY REGULATIONS IS COSTLY AND ONEROUS.

     TLCVision's operations are subject to extensive federal, state and local
laws, rules and regulations. TLCVision'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 TLCVision. 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

     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 TLCVision's fees and its contractual
arrangements with hospitals, surgery centers, ophthalmologists and optometrists,
among others. Some states also impose licensing requirements. Although TLCVision
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, TLCVision 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, TLCVision 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. TLCVision 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, TLCVision 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 TLCVision's
co-management program did not comply with state licensing laws, TLCVision would
be required to revise the structure of its legal arrangements, and affiliated
doctors might terminate their relationships with TLCVision.

     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 TLCVision, 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. TLCVision 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 TLCVision believes that it has obtained the necessary licenses or
certificates of need in states where such licenses are required and that
TLCVision is not required to obtain any licenses in other states, some of the
state regulations governing the need for


                                       25

<PAGE>

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 TLCVision is operating a center inappropriately without a
required license or certificate of need, which could subject TLCVision to
significant fines or other penalties, result in TLCVision being required to
cease operations in a state or otherwise jeopardize its business and financial
results. If TLCVision expands to a new geographic market, TLCVision 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 TLCVision from practicing medicine or
optometry and from directly employing doctors or optometrists. TLCVision
believes that it is in material compliance with these requirements, but a review
of TLCVision'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 TLCVision to incur significant costs
to comply with laws and regulations in the future or require TLCVision 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 with respect to the use of the excimer laser could subject
TLCVision, TLCVision'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 TLCVision'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 TLCVision's
ability to use excimer lasers.

     Most of TLCVision'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. TLCVision 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 TLCVision, which could impede TLCVision's ability to maintain or
increase its volume of excimer laser surgeries. This could have a material
adverse effect on TLCVision's business and financial results. Similarly,
TLCVision 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
     TLCVISION'S BUSINESS.

     There has been substantial litigation in the United States and Canada
regarding the patents on ophthalmic lasers. Although the Company currently
leases or purchases excimer lasers and other technology from the manufacturers,
if the use of an excimer laser or other procedure performed at any of
TLCVision's centers is deemed to infringe a patent or other proprietary right,
TLCVision may be


                                       26

<PAGE>

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, TLCVision may be
required to seek the use of products which do not infringe the patent.

     TLCVision, through its subsidiary, LaserVision, has also secured patents
for portions of the equipment it uses to transport TLCVision's mobile lasers.
LaserVision's patents and other proprietary technology are important to
TLCVision's success. These patents could be challenged, invalidated or
circumvented in the future. Litigation regarding intellectual property is common
and TLCVision'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 the Company fails to
successfully defend its rights with respect to its intellectual property, it may
be required to pay damages and cease using its equipment to transport mobile
lasers, which may have a material adverse effect on its business.

     TLCVISION 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 TLCVision's centers. TLCVision 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.

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

     TLCVision has a shareholder rights plan which enables the Board of
Directors to delay a change in control of TLCVision. This could discourage a
third party from attempting to acquire control of TLCVision, even if an attempt
would be beneficial to the interests of the shareholders. In addition, since
TLCVision is a Canadian corporation, investments in TLCVision 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 TLCVision'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 TLCVision supported by
shareholders but opposed by TLCVision's Board of Directors.

     AS THE MAJORITY OWNER OF OCCULOGIX, INC., TLCVISION MAY BE REQUIRED TO FUND
     ADDITIONAL CAPITAL REQUIREMENTS

     OccuLogix, Inc., reported approximately $60.0 million of cash and
short-term investments as of December 31, 2004, largely as a result of its
initial public offering in December 2004. OccuLogix, Inc. anticipates that the
funding requirements for its activities will continue to increase substantially,
primarily due to its efforts to achieve FDA approval for and to commercialize
the RHEO(TM) System. OccuLogix, Inc. may need to seek additional funds in the
future, and TLCVision may be required to fund OccuLogix Inc.'s additional
capital requirements as the majority shareholder in order to avoid dilution of
the value of its ownership.

     TLCVISION'S STOCK PRICE MAY BE IMPACTED BY THE OPERATING RESULTS OF
     OCCULOGIX, INC., AND ITS SUCCESS IN COMMERCIALIZING THE RHEO(TM) SYSTEM.

     Because TLCVision is the majority shareholder of OccuLogix, Inc. the
results of operations of this entity are consolidated into the operating results
of TLCVision's other pre-existing businesses. OccuLogix, Inc. expects to
continue to report significant and increasing operating losses at least through
2006 and possibly beyond. Because of the numerous risks and uncertainties
associated with developing and commercializing new medical therapies, including
obtaining FDA approval, OccuLogix, Inc. is unable to predict the extent of any
future losses or when it will become profitable, if ever. Because TLCVision is a
significant shareholder of OccuLogix, Inc., its operating results and stock
price may be negatively impacted by the requirement that it report Occulogix,
Inc.'s results of operations on a consolidated basis. Additionally, there is no
guarantee that OccuLogix, Inc. will be successful in commercializing RHEO(TM)
System, and should such efforts fail, TLCVision will be required to write-off
its remaining investment in OccuLogix, Inc.


                                       27

<PAGE>

     As a significant shareholder of OccuLogix, Inc., TLCVision's stock price
may be affected by changes in the price of OccuLogix, Inc.'s common stock.
TLCVision is unable to predict how fluctuations in OccuLogix, Inc.'s stock price
will affect its own stock price.

ITEM 2. PROPERTIES

     The Company's 73 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.

     TLCVision's International Headquarters and the Rheo Clinic are located in
premises in Mississauga, Ontario, Canada. TLCVision'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. TLCVision 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 2005.

ITEM 3. LEGAL PROCEEDINGS

     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. In December 2004, the Company was advised by the office of the U.S.
Attorney in Cleveland that the U.S. Attorney no longer had a need for the
documents the Company supplied in compliance with the above-referenced
subpoenas. Although there can be no assurance, the Company believes that this
matter has been concluded.

     In January 2004, the Company was served with a lawsuit filed in the
Province of Ontario, Canada, by Omar Hakim, MD. The suit sought damages based on
plaintiff's allegations of breach of contract, negligent misrepresentation and
detrimental reliance. On December 24, 2004, the Company paid $0.6 million to
Omar Hakim, MD to purchase the minority interest of two laser centers which were
75% owned by the Company and to settle legal disputes.

     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.


                                       28

<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 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    0.80
Fourth Quarter December 31, 2002............      3.39      1.28     2.20    0.79

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

Fiscal 2004
First Quarter March 31, 2004................   C$15.38   C$ 8.32   $11.75   $6.50
Second Quarter June 30, 2004................     17.50     13.42    12.82    9.81
Third Quarter September 30, 2004............     15.55     10.37    11.92    7.95
Fourth Quarter December 31, 2004............     14.90     10.36    12.24    8.48
</TABLE>

RECORD HOLDERS

     As of March 11, 2005, there were approximately 829 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. In addition, the Company's ability to pay dividends is currently
restricted pursuant to the line of credit facility.

SHARE REPURCHASE PLAN

     On December 20, 2004, TLCVision announced that it intended to purchase up
to 2,000,000 shares of its outstanding common shares. Upon approval of the
buy-back from the Toronto Stock Exchange, the purchases may take place from time
to time, depending on market conditions, through the facilities of the NASDAQ
National Market and the Toronto Stock Exchange. The prices which TLCVision will
pay for any common shares will be the market price of the shares at the time of
acquisition. As of December 31, no shares had been repurchased pursuant to this
plan.


                                       29

<PAGE>

     EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information as of December 31, 2004, regarding
compensation plans under which equity securities of TLCVision are authorized for
issuance.

<TABLE>
<CAPTION>
                                                                                         Number of securities
                                                                                       remaining available for
                                            Number of securities    Weighted-average    future issuances under
                                              to be issued upon    exercise price of     equity compensation
                                                 exercise of          outstanding         plans (excluding
                                            outstanding options,   options, warrants   securities reflected in
                                             warrants and rights       and rights            column (a))
Plan category                                        (a)                  (b)                    (c)
-------------                               --------------------   -----------------   -----------------------
<S>                                         <C>                    <C>                 <C>
Equity compensation plans approved
   by security holders...................           4,203               $5.08(1)                1,076
Equity compensation plans not approved
   by security holders...................              --                  --                      --
                                                    -----               -----                   -----
Total....................................           4,203               $5.08(1)                1,076
                                                    =====               =====                   =====
</TABLE>

(1)  Represents the weighted-average exercise price of outstanding options,
     warrants and rights denominated in U.S. dollars. The weighted-average
     exercise price of outstanding options, warrants and rights denominated in
     Canadian dollars was $5.04.

See Note 14 to the audited consolidated financial statements for more
information regarding the material features of the Company's outstanding
options, warrants and rights.

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.

     The following tables set forth selected historical consolidated financial
data of TLCVision for the years ended December 31, 2004 and 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 and 2000, 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           YEAR ENDED
                                                                                 PERIOD ENDED   MONTHS ENDED       DECEMBER 31,
                                                                                 DECEMBER 31,   DECEMBER 31,   -------------------
                                                 2000      2001(2)     2002(3)      2002(4)        2002(5)      2003(6)    2004(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................................   $201,223   $174,006   $ 134,751     $100,154       $ 164,605    $195,680   $242,195
Cost of revenues............................    129,234    110,016      97,789       80,825         125,163     143,305    165,686
   Gross margin.............................     71,989     63,990      36,962       19,329          39,442      52,375     76,509
General and administrative..................     44,341     44,464      36,382       25,567          39,158      31,204     33,128
Income (loss) before cumulative effect of
   accounting change........................     (5,918)   (37,773)   (146,675)     (43,343)       (144,731)     (9,399)    43,708
Income (loss) per share before cumulative
   effect of accounting change, diluted.....   $  (0.16)  $  (1.00)  $   (3.74)    $  (0.68)      $   (2.68)   $  (0.15)  $   0.61
Weighted average number of Common
   Shares outstanding, diluted..............     37,778     37,779      39,215       63,407          54,077      64,413     71,088
</TABLE>


                                       30

<PAGE>

<TABLE>
<CAPTION>
                                                                                   SEVEN-MONTH      TWELVE          YEAR ENDED
                                                                                  PERIOD ENDED   MONTHS ENDED      DECEMBER 31,
                                                                                  DECEMBER 31,   DECEMBER 31,   -----------------
                                                      2000    2001(2)   2002(3)      2002(4)        2002(5)     2003(6)   2004(7)
                                                    -------   -------   -------   ------------   ------------   -------   -------
<S>                                                 <C>       <C>       <C>       <C>            <C>            <C>       <C>
OPERATING DATA (unaudited)
Number of eye care centers at end of period .....        62        59        80           84             84          76        73
Number of access service sites(1)
   Refractive ...................................        --        --       336          304            304         270       327
   Cataract .....................................        --        --       280          274            274         359       371
Number of laser vision correction procedures:
   Centers ......................................   134,000   122,800    95,000       49,700         95,000     100,500   115,700
   Access .......................................        --        --        --       43,200         47,000      75,600    80,700
   Cataract .....................................        --        --        --       23,300         24,800      40,700    43,700
Total procedures ................................   134,000   122,800    95,000      116,200        166,800     216,800   240,100
</TABLE>

<TABLE>
<CAPTION>
                                                     MAY 31,    MAY 31,    MAY 31,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                      2000       2001        2002         2002           2003           2004
                                                    --------   --------   ---------   ------------   ------------   ------------
<S>                                                 <C>        <C>        <C>         <C>            <C>            <C>
BALANCE SHEET DATA
Cash and cash equivalents .......................   $ 78,531   $ 47,987   $  45,074    $  34,231      $  21,580      $  33,435
Working capital .................................     59,481     42,366      23,378       12,523         10,868        131,195
Total assets ....................................    289,364    238,438     245,515      196,056        190,748        305,241
Long-term debt, excluding current portion .......      6,728      8,313      14,643       15,760         19,242          9,991
SHAREHOLDERS' EQUITY
Common stock ....................................    269,953    276,277     387,701      388,769        397,878        458,959
Warrants and options ............................        532        532      11,755       11,035          8,143          2,872
Accumulated deficit .............................    (42,388)   (80,161)   (242,010)    (285,353)      (294,752)      (251,044)
Accumulated other comprehensive income (loss) ...     (4,451)    (9,542)         --           --             --             --
Total shareholders' equity ......................    223,646    187,106     155,014      111,828        111,269        210,787
</TABLE>

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

(2)  In fiscal 2001, the selected financial data of the Company included a
     restructuring charge of $19.1 million.

(3)  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.

(4)  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.

(5)  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 a 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.

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

(7)  In fiscal 2004, the selected financial data of the Company included:


                                       31

<PAGE>

     (a)  an adjustment to the fair value of investments and long-term
          receivables of $1.2 million;

     (b)  other income of $25.8 from the gain on sale of OccuLogix, Inc. stock;
          and

     (c)  a severance charge of $2.6 million and a restructuring charge of $0.2
          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.

OVERVIEW

     TLC Vision Corporation and its subsidiaries is a diversified eye care
services company dedicated to improving lives through better vision by providing
eye doctors with the tools and technologies they need to deliver high quality
patient care. 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, TLCVision 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. The Company is also a 51% majority owner of OccuLogix, Inc., a
public company focused on the treatment of a specific 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 TLCVision. Accordingly, LaserVision's results are
included in the Company's statement of operations beginning on the date of
acquisition. LaserVision is a leading access service provider of excimer lasers,
microkeratomes and other equipment and value and support services to eye
surgeons. The combined companies provide a broader array of services to eye care
professionals to ensure these individuals 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 continually assesses 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 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 TLCVision, the Company's management fee and
the fee charged by the surgeon are both discounted in proportion to the discount
afforded to these organizations. While the Company does not direct the manner in
which the surgeons practice medicine, the Company does direct the day-to-day
non- clinical operations of the centers. The management service agreements
typically are for an extended period of time, ranging from five to 15 years.
Management fees are equal to the net revenue of the physician practice, less
amounts retained by the physician groups.

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


                                       32

<PAGE>

     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 laser centers and fees paid to
optometrists for pre- and post-operative care.

     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.

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

     The Company serves surgeons who performed approximately 240,100 refractive
and cataract procedures at the Company's centers or used the Company's laser
access services during the year ended December 31, 2004. In the twelve months
ended December 31, 2004, the Company's refractive procedure volume increased to
196,400 compared to 176,100 in the twelve months ended December 31, 2003, an
increase of 20,300 procedures or 12%. The Company believes that the increase in
procedure volume was indicative of the growth in the laser vision correction
industry as a whole as well as an effective execution of its business strategy.
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.

DEVELOPMENTS DURING FISCAL 2004

     ACQUISITIONS AND DIVESTITURES

     On January 1, 2004, the Company settled a lawsuit brought by Thomas S.
Tooma, M.D. and TST Acquisitions, LLC ("TST") in October 2002. Under the terms
of the settlement, the Company sold approximately 24% of Laser Eye Care of
California ("LECC") and 30% of its California access business to TST for $2.3
million. The Company continues to hold a 30% ownership in LECC and a 70%
ownership in the California access business. The Company recorded a $1.1 million
gain on the sale of these business interests which is included in "general and
administrative" in the accompanying statements of operations. Effective January
1, 2004, the Company deconsolidated LECC and began reporting its interest in
LECC under the equity method of accounting because it no longer owned a
controlling interest in the entity.

     On March 1, 2004, OR Partners, Inc. ("OR Partners"), a subsidiary of
TLCVision, entered into a purchase agreement to acquire 70% of an ambulatory
surgery center ("ASC") in Texas, which provides access to surgical and
diagnostic equipment to perform cataract surgery in hospitals and ambulatory
surgery centers. The Company paid $3.8 million in cash and assumed debt of $0.4
million. The purchase price allocation included $4.1 million of goodwill. The
results of operations have been included in the consolidated statements of
operations of the Company since the acquisition date.

     On August 1, 2004, the Company paid $0.7 million in cash to acquire an
additional 5% interest in an ASC in Mississippi which specializes in cataract
surgery, raising its ownership interest to 65%. 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 two years.

     On December 1, 2004, OR Partners entered into a purchase agreement to
acquire 25% of an ASC in Texas. The Company paid $4.5 million in cash and has
reported its interest in the ASC under the equity method of accounting since the
date of acquisition.

     On December 8, 2004, the Company exchanged its 50% interest in Occulogix
L.P. for a 50% interest in OccuLogix, Inc. (formerly Vascular Sciences
Corporation). After the exchange, the Company owned 65.8% of the outstanding
common shares of OccuLogix, Inc. (OccuLogix). As a result of the exchange,
Occulogix L.P. became a wholly-owned subsidiary of OccuLogix. The Company
accounted for the exchange at historical cost. Immediately after the exchange,
OccuLogix completed an initial public offering (IPO) whereby OccuLogix sold
5,600,000 shares of its common stock at $12 per share. Because the IPO price
exceeded the per share carrying amount of the Company's investment in OccuLogix,
the Company's equity ownership in OccuLogix after the IPO exceeded its equity
ownership before the IPO by $30.1 million. In accordance with Staff Accounting
Bulletin No. 84, the Company accounted for the excess as an equity transaction.
In connection with the IPO, TLCVision sold 2,330,184 shares of its OccuLogix
common stock at $12 per share and recorded a gain of $25.8 million. At December
31, 2004, the Company owns 21,475,064 shares or 51.4% of OccuLogix common stock.
The Company has included the results of operations of OccuLogix in its
consolidated statement of operations since December 8, 2004.


                                       33

<PAGE>

     On December 24, 2004, the Company paid $0.6 million to Omar Hakim, MD to
purchase the minority interest of two laser centers which were 75% owned by the
Company and to settle legal disputes.

     RESTRUCTURING, SEVERANCE AND OTHER CHARGES

     During the year ended December 31, 2004, the Company recorded a $2.6
million charge for severance payments to two officers under the terms of
employment contracts and a $0.2 million charge related to ongoing lease payment
obligations at previously closed centers. The remaining severance payments are
expected to be paid out within the next 12 months, while the lease costs will be
paid out over the remaining terms of the leases.

     RESEARCH AND DEVELOPMENT

     During fiscal 2002, the Company entered into a joint venture with OccuLogix
for the purpose of pursuing commercial applications of technologies owned or
licensed by OccuLogix applicable to the evaluation, diagnosis, monitoring and
treatment of dry age related macular degeneration. Prior to the reorganization
and initial public offering ("IPO") of OccuLogix, the Company accounted for its
investment as a research and development arrangement since the technology was in
the development stage and has not received FDA approval. 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
agreed to advance up to an additional $6.0 million to OccuLogix pursuant to a
secured convertible grid debenture. The first $3.5 million advanced pursuant to
such debenture is convertible into common shares of OccuLogix. OccuLogix 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 OccuLogix during the year. Of this amount, $1.3 million reduced the
value of the $6.0 million obligation to OccuLogix, and $0.3 million represented
an additional equity investment in Common Stock and therefore did not reduce the
amount of the remaining obligation. In fiscal 2004, the Company advanced $2.2
million to OccuLogix, satisfying the $3.5 million obligation that was converted
into shares of OccuLogix. Of this amount, the Company advanced $1.2 million to
OccuLogix in the first three quarters of 2004 and expensed it as research and
development. The remaining advance to OccuLogix of $1.0 million in the fourth
quarter of 2004 was recorded as an investment because it was not used by
OccuLogix for operating purposes, but rather was available at December 31, 2004
for future needs. Due to the IPO of OccuLogix, the Company was not required to
fund any additional amounts. For the year ended December 31, 2004, the $1.2
million research and development expense related to OccuLogix was offset by a
$0.4 million reimbursement of an unrelated research and development investment
that was previously expensed.

CRITICAL ACCOUNTING POLICIES

     IMPAIRMENT OF GOODWILL

     The Company accounts for its goodwill in accordance with SFAS 142, which
requires the Company to test goodwill for impairment annually and whenever
events occur or circumstances change that would more likely than not reduce the
fair value of the reporting unit below its carrying value. SFAS 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


                                       34

<PAGE>

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, 2004, the Company had valuation allowances of $132.1
million to offset net deferred tax assets of $132.1 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."

YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

     As a result of adopting Financial Accounting Standards Board Interpretation
46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51" (FIN 46), the Company began consolidating the physician practices that are
managed but not owned by the Company on January 1, 2004. The consolidation
resulted in the Company recording an additional $16.2 million in center revenue
and $16.0 million in center cost of revenue during 2004 as the revenue earned
and expenses paid (primarily doctors' compensation) by the physician practices
are now included in the Company's results. The consolidation had no impact on
net income.

     Prior to the adoption, doctors' compensation and related revenue were not
reflected in the Company's statement of operations for the managed centers, but
were reflected in the Company's statement of operations for the owned centers.
The Company previously presented the revenues and cost of revenues of managed
centers and owned centers separately in the statements of operations due to
different profit margins. Beginning with the first quarter of 2004, the Company
presents all centers, managed and owned, together because both types of centers
now include doctors' compensation and the related revenue.

     The increase in center revenue attributed to the adoption of FIN 46 was
partially offset by the deconsolidation of LECC in connection with the sale of a
portion of the Company's interest in LECC. The results of operations for 2003
included $14.8 million in center revenues related to LECC whereas the results of
operations for 2004 include no center revenue for LECC because LECC was
accounted for using the equity method of accounting beginning January 1, 2004.

     Total revenues for the year ended December 31, 2004 were $242.2 million,
an increase of $46.5 million, or 24% over revenues of $195.7 million for the
year ended December 31, 2003. Approximately 73% of total revenues for the year
ended December 31, 2004 were derived from refractive services compared to 75%
during the year ended December 31, 2003.

     Revenues from the refractive segment for the year ended December 31, 2004
were $177.4 million, an increase of $31.2 million or 21% over revenues of $146.2
million for the year ended December 31, 2003. The increase in refractive
revenues was due largely to an


                                       35

<PAGE>

increase in refractive procedures. Refractive procedures for the year ended
December 31, 2004 were approximately 196,400, an increase of 20,300 or 12% over
refractive procedures of 176,100 for the year ended December 31, 2003.
Procedures for LECC were included in both periods, and account for 16,700
procedures for the year ended December 31, 2004, an increase of 3,900 procedures
over the year ended December 31, 2003. Refractive revenues also increased as a
result of a higher mix of procedures performed at the Company's centers and
higher average pricing.

     Revenues from centers for the year ended December 31, 2004 were $136.7
million, an increase of $26.6 million or 24% over revenues of $110.1 million for
the year ended December 31, 2003. The increase in centers revenues was due, in
part, to a 15,300 or 15% increase in centers procedures. Centers revenues also
increased as a result of higher average pricing and additional revenue as a
result of adopting FIN 46 offset by decreased revenue from deconsolidating LECC.

     Revenues from access services for the year ended December 31, 2004 were
$40.7 million, an increase of $4.6 million or 13% over revenues of $36.1 million
for the year ended December 31, 2003. The increase in access revenues was
primarily due to an 5,100 or 7% increase in access procedures and an increase in
procedure mix to the higher priced transportable business.

     The cost of refractive revenues for the year ended December 31, 2004 was
$125.3 million, an increase of $13.8 million, or 12%, over the cost of
refractive revenues of $111.5 million for the year ended December 31, 2003. This
increase was primarily attributable to increased procedure volume and higher
costs associated with Custom LASIK. Primarily as a result of higher procedure
volumes at centers, gross margins for the refractive business as a whole
increased to 29% for the year ended December 31, 2004 from 24% for the year
ended December 31, 2003.

     The cost of revenues from centers for the year ended December 31, 2004 was
$96.4 million, an increase of $10.4 million or 12% over the cost of revenues of
$86.0 million from the year ended December 30, 2003. This increase primarily
resulted from $5.8 million of additional costs related to increased procedure
volume and higher costs associated with Custom LASIK, and $16.0 million of costs
resulting from the Company's adoption of FIN 46 effective January 1, 2004. These
increases were offset by $11.4 million in cost of revenues for LECC during the
year ended December 31, 2003 (as compared to none during the year ended December
31, 2004).

     Gross margins from centers increased to 30% for the year ended December 31,
2004 from 22% during the year ended December 31, 2003 as higher procedure
volumes led to strong incremental variable margin gains. This margin percentage
increase was diluted by the consolidation of the physician practices managed by
the Company due to the adoption of FIN 46. For comparison purposes, had the
Company consolidated the physician practices during 2003, the gross margin
percentage would have been 19% for the year ended December 31, 2003.

     The cost of revenues from access services for the year ended December 31,
2004 was $28.9 million, up $3.5 million or 14% over the cost of revenues of
$25.4 million for the year ended December 31, 2003. This increase primarily
resulted from higher procedure volume and higher costs associated with Custom
LASIK. Gross margins from access services decreased to 29% for the year ended
December 31, 2004 from 30% during the year ended December 31, 2003. This margin
percentage decrease was primarily due to pricing pressure from competitors and
higher costs associated with Custom LASIK.

     Revenues from other healthcare services for the year ended December 31,
2004 were $64.8 million, an increase of $15.3 million, or 31% over revenues of
$49.5 million for the year ended December 31, 2003. Approximately 27% of the
total revenues for the year ended December 31, 2004 were derived from other
healthcare services compared to 25% during the year ended December 31, 2003. The
increase in other healthcare services revenue primarily resulted from internal
growth of existing businesses and contributions from ASC businesses acquired
within the past year.

     The cost of revenues from other healthcare services for the year ended
December 31, 2004 was $40.4 million, an increase of $8.6 million or 27% over the
cost of revenues of $31.8 million for the year ended December 31, 2003. The
increase in cost of revenues was primarily related to incremental costs incurred
to generate the increased revenue of the other healthcare service business.
Gross margins increased to 38% from 36% due principally to volume growth.

     General and administrative expenses increased to $33.1 million for the year
ended December 31, 2004 from $31.2 million for the year ended December 31, 2003.
The $1.9 million or 6% increase relates to higher professional fees related to
Sarabanes-Oxley and increased costs associated with acquisitions during the
year. General and administrative expenses as a percentage of revenue decreased
to 14% from 16% compared to the prior year.

     Marketing expenses decreased to $13.4 million for the year ended December
31, 2004 from $14.1 million for the year ended


                                       36

<PAGE>

December 31, 2003. The $0.7 million or 5% decrease reflected the Company's
success in increasing revenue while controlling marketing expenses. Accordingly,
marketing expenses as a percentage of revenue decreased to 6% from 7% compared
to the prior year.

     Amortization expenses decreased to $4.1 million for the year ended December
31, 2004 from $6.7 million for the year ended December 31, 2003. This decrease
was largely due to the reduction in intangible assets (Practice Management
Agreements) resulting from the deconsolidation of LECC.

     Research and development expenses decreased to $0.8 million for the year
ended December 31, 2004 from $1.6 million for the year ended December 31, 2003.
For the year ended December 31, 2004 and 2003, the Company incurred research and
development expenses of $1.2 million and $1.6 million, respectively, relating to
investments made to fund research and development efforts by OccuLogix 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 FDA approval, the Company accounted for this investment as a research
and development arrangement whereby investments were expensed as amounts are
expended by OccuLogix. For the year ended December 31, 2004, the $1.2 million
research and development expense related to OccuLogix was offset by a $0.4
million reimbursement of an unrelated research and development investment that
was previously expensed.

     During the year ended December 31, 2004, the Company fully reversed a
reserve of $1.2 million related to a long-term receivable due to a consistent
payment history and continually improving financial strength of the debtor. In
the prior year, the Company had initially reduced the reserve by $0.7 million
due to a similar valuation analysis and wrote down the value of unrelated
investments by $0.5 million due to other than temporary declines in value.

     During the year ended December 31, 2004, the Company recorded a total
charge of $2.8 million consisting of a $2.6 million charge for severance
payments to two officers under the terms of employment contracts and a $0.2
million charge for ongoing lease payment obligations at closed centers. Of the
$0.2 million charge that related to closed centers, $13,000 related to a center
closing in 2004 while the remaining balance related to adjustments to accruals
for centers closed in previous years. The Company had recorded $2.0 million of
restructuring charges during the year ended December 31, 2003 primarily relating
to the closing of six unprofitable centers. Cash requirements attributable to
restructuring costs will be financed through the Company's cash and cash
equivalents on hand.

     The following table details restructuring charges recorded during the year
ended December 31, 2004:

<TABLE>
<CAPTION>
                                                             ACCRUAL BALANCE
                                                                  AS OF
                                  RESTRUCTURING     CASH       DECEMBER 31,
                                     CHARGES      PAYMENTS         2004
                                  -------------   --------   ---------------
<S>                               <C>             <C>        <C>
Severance .....................       $2,557      $(1,057)        $1,500
Lease commitments, net of
   sub-lease income ...........           13           --             13
                                      ------      -------         ------
Total restructuring charges ...       $2,570      $(1,057)        $1,513
                                      ======      =======         ======
</TABLE>

     Other income and expense of $26.4 million for the year ended December 31,
2004 primarily resulted from a $25.8 million gain on the sale of 2.3 million
shares of OccuLogix, Inc.'s common stock. During the year ended December 31,
2003, the Company recorded $0.2 million of other income related to additional
proceeds received from the settlement of an antitrust lawsuit in 2002.

     Interest expense, net decreased to $0.7 million for the year ended December
31, 2004 from $1.4 million for the year ended December 31, 2003. This decrease
was a result of less interest expense due to declining debt and lease
obligations coupled with more interest income related to rising cash balances.

     Minority interest expense increased to $7.0 million for the year ended
December 31, 2004 from $4.7 million for the year ended December 31, 2003. This
$2.3 million increase was a result of higher profits reported by the Company's
subsidiaries in which the Company has a shared interest with minority partners.

     Earnings from equity investments of $2.1 million for the year ended
December 31, 2004 resulted primarily from $1.3 million of earnings related to
the Company's minority ownership investment in LECC and $0.7 million of earnings
related to the Company's minority ownership investments in two separate
secondary care service providers.

     Income tax expense increased to $0.6 million for the year ended December
31, 2004 from $0.5 million for the year ended December 31, 2003. The $0.6
million tax expense primarily consisted of state taxes for certain states where
the Company expects to


                                       37

<PAGE>

pay income taxes. The current year federal income tax expense attributable to
the Company and subsidiaries was offset by the partial reversal of valuation
allowances as the Company utilized a portion of its net operating loss
carryforwards in 2004.

     Net income for the year ended December 31, 2004 was $43.7 million, or $0.61
per share, compared to a net loss of $9.4 million, or $0.15 per share, for the
year ended December 31, 2003. The significant improvement in net income
primarily resulted from significant growth in both the refractive and other
healthcare services businesses and a gain on the sale of OccuLogix, Inc.'s
common stock.

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 TLCVision 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.

     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 centers for the twelve months ended December 31, 2003 were
$110.1 million, an increase of $4.6 million or 4% from $105.5 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 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 TLCVision 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 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 centers for the twelve months ended December 31,
2003 was $86.0 million, an increase of $3.4 million or 4% from the cost of
revenues of $82.6 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 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.


                                       38

<PAGE>

     Fluctuations in cost of revenue were consistent with significant variable
cost changes to doctors' 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 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 $31.2 million for the
twelve months ended December 31, 2003 from $38.2 million for the twelve months
ended December 31, 2002. The $7.0 million or 18% 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 TLCVision and LaserVision was 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 24% compared to the prior year period.

     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.

     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 partnership with
Diamed Medizintechnik GmbH ("Diamed"), the Company elected to renew its
investment commitment to research and development efforts by OccuLogix. As a
result, the Company paid $1.6 million to OccuLogix 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 OccuLogix. During the twelve months ended
December 31, 2002, the Company made payments of $3.0 million to fund research by
OccuLogix 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.


                                       39

<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, 2002 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 consisted 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 was 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 are being 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                                 ACCRUAL
                                                                  NON-CASH       BALANCE                  NON-CASH       BALANCE
                                                                 REDUCTIONS       AS OF                 RECUCTIONS        AS OF
                                     RESTRUCTURING     CASH         AND       DECEMBER 31,     CASH         AND       DECEMBER 31,
                                        CHARGES      PAYMENTS   ADJUSTMENTS       2003       PAYMENTS   ADJUSTMENTS       2004
                                     -------------   --------   -----------   ------------   --------   -----------   ------------
<S>                                  <C>             <C>        <C>           <C>            <C>        <C>           <C>
Severance ........................       $  360       $(194)       $  --          $166        $(166)       $ --            $--
Lease commitments, net of
   sublease income ...............          864        (256)          --           608         (525)        (18)            65
Write-down of fixed assets .......          370          --         (370)           --           --          --             --
Prepaid expense and investment
   charges .......................          507        (200)        (307)           --           --          --             --
Laser commitments ................          180        (180)          --            --           --          --             --
                                         ------       -----        -----          ----        -----        ----            ---
Total restructuring charges ......       $2,281       $(830)       $(677)         $774        $(691)       $(18)           $65
                                         ======       =====        =====          ====        =====        ====            ===
</TABLE>

     Other income and expense of $0.2 million for the twelve months ended
December 31, 2003 resulted from additional proceeds from the settlement of an
antitrust lawsuit in 2002. During the twelve months ended December 31, 2002, the
Company recorded $8.0 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.

     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


                                       40

<PAGE>

additional interest expense related to new loans obtained to fund 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 decreased
as the Company 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 declined. Accordingly, interest expense, net increased
$0.6 million in 2003 from $0.8 million in the prior year.

     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 greater profits reported by the
Company's subsidiaries in which the Company has a shared interest with minority
partners, a greater 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, 2002. 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.

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

     As used herein, "existing TLCVision" refers to TLCVision 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 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 TLCVision 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 $15.0 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 TLCVision refractive revenue decreased by $15.7 million, or 26%.

     Revenues from centers for the seven months ended December 31, 2002 were
$54.8 million, a decrease of $6.5 million, or 11%, from revenues of $61.3
million for the seven months ended December 31, 2001. LaserVision accounted for
$9.2 million of such revenues, while the existing TLCVision revenue decreased by
$15.7 million, or 26%.

     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 TLCVision 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 TLCVision 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 experienced uncertainty resulting from a number of issues.
Being an elective procedure, laser vision correction volumes were 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.


                                       41

<PAGE>

     The cost of refractive revenues 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
TLCVision's cost of revenue decreased by $7.0 million, or 15%.

     The cost of revenues from centers for the seven months ended December 31,
2002 was $49.2 million, an increase of $1.6 million, or 3%, from the cost of
revenues of $47.6 million from the seven months ended December 31, 2001.
LaserVision cost of revenue for 2002 was $8.6 million while the existing
TLCVision cost of revenue decreased $7.0 million, or 15%.

     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 TLCVision 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 TLCVision 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
TLCVision cost of revenues increased by $2.2 million.

     General and administrative expenses increased to $25.6 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 TLCVision and
LaserVision was higher than TLCVision 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
OccuLogix. Since the technology was in the development stage and was not
available commercially and had not received FDA approval, the Company accounted
for this investment as a research and development arrangement whereby
investments were expensed as OccuLogix expends amounts.

     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, TLCVision 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. TLCVision wrote
down the investment to $0.5 million to reflect the estimated market value of the
investment.


                                       42

<PAGE>

     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 consisted 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
                                                                 NON-CASH       BALANCE                  NON-CASH       BALANCE
                                                                REDUCTIONS        AT                    REDUCTIONS        AT
                                    RESTRUCTURING     CASH         AND       DECEMBER 31,     CASH         AND       DECEMBER 31,
                                       CHARGES      PAYMENTS   ADJUSTMENTS       2003       PAYMENTS   ADJUSTMENTS       2004
                                    -------------   --------   -----------   ------------   --------   -----------   ------------
<S>                                 <C>             <C>        <C>           <C>            <C>        <C>           <C>
Severance .......................       $1,120      $(1,047)     $   (73)        $ --        $  --         $ --          $ --
Lease commitments, net of
   sublease income ..............          978         (420)        (221)         337         (240)         166           263
Write-down of fixed assets ......        2,266           --       (2,266)          --           --           --            --
Sale of center to third party ...          342           (7)        (335)          --           --           --            --
                                        ------      -------      -------         ----        -----         ----          ----
Total restructuring charges .....       $4,706      $(1,474)     $(2,895)        $337        $(240)        $166          $263
                                        ======      =======      =======         ====        =====         ====          ====
</TABLE>

     Other income and expense for the seven months ended December 31, 2002 of
$8.0 million primarily 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 TLCVision 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 TLCVision 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.

     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.


                                       43

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     During the year ended December 31, 2004, the Company continued to focus its
activities primarily on increasing procedure volumes at its centers, reducing
operating costs and expanding its other healthcare businesses through internal
growth and acquisitions. Cash and cash equivalents, short-term investments and
restricted cash were $145.4 million at December 31, 2004 compared to $31.7
million at December 31, 2003. Working capital at December 31, 2004 increased to
$131.2 million from $10.9 million at December 31, 2003.

     The Company's principal cash requirements have included normal operating
expenses, debt repayment, distributions to minority partners, capital
expenditures, purchases of short-term investments, investment in OccuLogix and
the purchases of two ambulatory surgery centers. 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, 2004, the Company invested $5.2 million
in fixed assets and received vendor financing for $2.6 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 excimer lasers during
the next 12 to 18 months, however, existing lasers and flap-making technology
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.

     OccuLogix, Inc. plans to use approximately $17.5 million to $18.8 million
of the proceeds from its IPO to build its organizational structure to prepare
for commercialization in the United States. OccuLogix, Inc. also plans to use
approximately $5.3 million to $6.6 million to complete clinical trials and
approximately $9.5 million to $10.5 million to purchase and accumulate an
inventory of components of the RHEO(TM) System to facilitate the rapid
commercialization of the RHEO(TM) System in the United States if and when it
receives FDA approval.

     As of December 31, 2004, the Company had contractual obligations relating
to long-term debt, capital lease obligations, operating leases for rental of
office space and equipment, marketing contracts, royalty obligations, filter
purchase obligations and the purchase of additional ownership interest in an ASC
requiring future minimum payments aggregating to $61.4 million. Future minimum
payments over the next five years are as follows:

<TABLE>
<CAPTION>
                                               PAYMENTS DUE BY PERIOD
                                             --------------------------
                                               LESS                        5 OR
                                               THAN      1-2       3-4     MORE
CONTRACTUAL OBLIGATIONS             TOTAL     1 YEAR    YEARS     YEARS    YEARS
-----------------------            -------   -------   -------   ------   ------
<S>                                <C>       <C>       <C>       <C>      <C>
Long-term debt                     $18,248   $ 7,867   $ 3,334   $2,377   $4,670
Capital lease obligations            2,460     1,490       955       15       --
Operating leases                    22,471     8,141     9,855    3,751      724
Marketing contracts                  2,391     2,204       187       --       --
Royalty obligations                  1,250       100       200      200      750
Filter purchase obligations         13,253     2,565    10,688       --       --
Purchase of additional ownership
   interest                          1,350       675       675       --       --
                                   -------   -------   -------   ------   ------
Total                              $61,423   $23,042   $25,894   $6,343   $6,144
                                   =======   =======   =======   ======   ======
</TABLE>

     On January 1, 2004, the Company settled a lawsuit brought by Thomas S.
Tooma, M.D. and TST Acquisitions, LLC ("TST") in October 2002. Under the terms
of the settlement, the Company sold approximately 24% of Laser Eye Care of
California ("LECC") and 30% of its California access business to TST for $2.3
million. The Company continues to hold a 30% ownership in LECC and a 70%
ownership in the California access business. The Company recorded a $1.1 million
gain on the sale of these business interests which is included in "general and
administrative" in the accompanying statements of operations. Effective January
1, 2004, the Company deconsolidated LECC and began reporting its interest in
LECC under the equity method of accounting because it no longer owns a
controlling interest in the entity.

     On March 1, 2004, OR Partners entered into a purchase agreement to acquire
70% of an ambulatory surgery center in Texas, which provides access to surgical
and diagnostic equipment to perform cataract surgery in hospitals and ambulatory
surgery centers. The Company paid $3.8 million in cash and assumed debt of $0.4
million. The purchase price allocation included $4.1 million of goodwill. The
results of operations have been included in the consolidated statements of
operations of the Company since the acquisition date.


                                       44

<PAGE>

     On August 1, 2004, OR Partners purchased an additional 5% ownership
interest in its ASC in Mississippi for $0.7 million of which substantially all
was allocated to 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 two years.

     On December 1, 2004, OR Partners entered into a purchase agreement to
acquire 25% of an ASC in Texas. The Company paid $4.5 million in cash and has
reported its interest in the ASC under the equity method of accounting since the
date of acquisition.

     On December 24, 2004, the Company paid $0.6 million to Omar Hakim, MD to
purchase the minority interest of two laser centers which were 75% owned by the
Company and to settle legal disputes.

     During 2004, the Company received $24.7 million in proceeds from the
exercise of non-qualified stock options to purchase 4.2 million common shares.

     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, 2004, the
Company did not have any borrowings drawn under the line of credit and had an
available unused line of $15 million.

     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, 2003, the Company reported $2.1 million of exit liabilities
primarily related to the closure of centers during 2002 and 2003. During the
year ended December 31, 2004, the Company recorded an additional charge of $2.8
million primarily related to severance payments to two officers under the terms
of employment contracts, made cash payments of $2.6 million and recorded $0.5
million of non-cash adjustments, resulting in a $2.8 million exit liability at
December 31, 2004.

CASH PROVIDED BY OPERATING ACTIVITIES

     Net cash provided by operating activities was $35.4 million for the year
ended December 31, 2004. The cash flows provided by operating activities during
the year ended December 31, 2004 were primarily due to net income of $43.7
million plus non-cash items including depreciation and amortization of $17.7
million, minority interest expense of $7.0 million, the write-off of investments
related to research and development arrangements of $0.8 million, and the loss
on sale of fixed assets of $0.8 million. These cash flows were offset by an
increase in net operating assets of $5.0 million, a gain on sale of subsidiary
stock of $25.8 million, earnings from equity investments of $2.1 million, and
adjustment to the fair value of investments and long-term receivables of $1.2
million and a gain on sale of interest in subsidiary of $1.1 million. The
increase in net operating assets consisted of a $1.5 million increase in
accounts receivable due primarily to higher revenues, a $1.8 million increase in
prepaid expenses and a $1.7 million decrease in accounts payable and accrued
liabilities.

CASH USED FOR INVESTING ACTIVITIES

     Net cash used for investing activities was $88.1 million for the year ended
December 31, 2004. Cash used in investing during the year ended December 31,
2004 included $111.1 million of purchases of short-term investments, $10.1
million for business acquisitions, $5.2 million for the acquisition of fixed
assets and $0.8 million for investments in research and development
arrangements. These cash outflows were offset by $25.8 million from TLVision's
sale of OccuLogix, Inc.'s common shares, $8.4 million in proceeds from
short-term investments, $2.5 million in cash distributions received from equity
investments, $0.7 million in net cash associated with the sale of a portion of
the Company's interest in LECC and $1.6 million from the sale of fixed assets.
In 2005, the Company plans to continue to invest in other business acquisitions
and invest in capital expenditures as necessary to further its business
objectives. During the next 12 months, the Company expects to invest at least
$0.7 million to increase its ownership in an ambulatory surgery center.

CASH PROVIDED BY FINANCING ACTIVITIES

     Net cash provided by financing activities was $64.6 million for the year
ended December 31, 2004. Net cash provided by financing activities during the
year ended December 31, 2004 was primarily due to $59.9 million of net proceeds
received by OccuLogix in conjunction with its IPO, $25.2 million in proceeds
from the exercise of employee stock options and employee stock purchase plans
and $0.4 million related to the removal of restrictions on


                                       45

<PAGE>

certain cash balances. These cash flows were offset by $13.7 million for the
repayment of certain notes payable and capitalized lease obligations and $7.2
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 2005.

NEW ACCOUNTING PRONOUNCEMENTS

     For a discussion on recent pronouncements, see Note 2, "Summary of
Significant Accounting Policies," in the accompanying audited consolidated
financial statements and notes thereto set forth in Item 8 of this Report.

SUBSEQUENT EVENT

     On March 1, 2005, the Company sold its interest in Aspen to National
Surgical Centers, Inc.

QUARTERLY FINANCIAL DATA (UNAUDITED)

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

<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED   THREE MONTHS ENDED    THREE MONTHS ENDED   THREE MONTHS ENDED
                                       MARCH 31,             JUNE 30,           SEPTEMBER 30,         DECEMBER 31,
                                  ------------------   -------------------   ------------------   -------------------
                                    2004    2003 (1)   2004 (5)   2003 (2)     2004    2003 (3)   2004 (6)   2003 (4)
                                  -------   --------   --------   --------   -------   --------   --------   --------
<S>                               <C>       <C>        <C>        <C>        <C>       <C>        <C>        <C>
Revenues                          $65,175    $53,590    $64,661   $47,532    $56,644   $46,014     $55,715   $48,544
Gross margin                       21,713     16,405     22,307    12,465     17,609    11,465      14,880    12,040
Net income (loss)                   8,052      1,070      6,239    (3,453)     3,322    (4,090)     26,095    (2,926)
Basic income (loss) per share        0.12       0.02       0.09     (0.05)      0.05     (0.06)       0.38     (0.04)
Diluted income (loss) per share      0.12       0.02       0.09     (0.05)      0.05     (0.06)       0.36     (0.04)
</TABLE>

(1)  In the three months ended March 31, 2003, the selected financial data of
     the Company included an adjustment to the fair value of investments and
     long-term receivables of $0.2 million

(2)  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, severance and other charge of $1.7 million

(3)  In the three months ended September 30, 2003, the selected financial data
     of the Company included an adjustment to the fair value of investments and
     long-term receivables of $0.2 million

(4)  In the three months ended December 31, 2003, the selected financial data of
     the Company included a restructuring, severance and other charge of $0.3
     million

(5)  In the three months ended June 30, 2004, the selected financial data of the
     Company included:

     (a)  an adjustment to the fair value of investments and long-term
          receivables of $1.2 million; and

     (b)  a restructuring, severance and other charge of $2.8 million

(6)  In the three months ended December 31, 2004, the selected financial data of
     the Company included a gain on sale of subsidiary stock of $25.8 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


                                       46

<PAGE>

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, 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, 2004, 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 report of independent registered public
accounting firm 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.


                                       47

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of TLC Vision Corporation

     We have audited the accompanying consolidated balance sheets of TLC Vision
Corporation as of December 31, 2004 and 2003, and the related consolidated
statements of operations, cash flows, and stockholders' equity for each of the
two years in the period ended December 31, 2004, the seven-month period ended
December 31, 2002, and the year 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TLC Vision
Corporation at December 31, 2004 and 2003, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2004, the seven-month period ended December 31, 2002, and the year
ended May 31, 2002 in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

     As discussed in Note 2 to the consolidated financial statements, on January
1, 2004, the Company adopted the provisions of FASB Interpretation No. 46.

     As discussed in Note 8 to the consolidated financial statements, on June 1,
2001, the Company changed its method of accounting for goodwill.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of TLC
Vision Corporation's internal control over financial reporting as of December
31, 2004, based on criteria established in Internal Control -- Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 11, 2005, expressed an unqualified
opinion thereon.


St. Louis Missouri                      /s/ ERNST & YOUNG LLP
March 11, 2005                          ----------------------------------------


                                       48

<PAGE>

TLC VISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                                         SEVEN-MONTH       YEAR
                                                                                                         PERIOD ENDED     ENDED
                                                                               YEAR ENDED DECEMBER 31,   DECEMBER 31,    MAY 31,
                                                                               -----------------------   ------------   ---------
                                                                                   2004       2003           2002          2002
                                                                                 --------   --------       --------     ---------
<S>                                                                            <C>          <C>          <C>            <C>
Revenues:
   Refractive:
      Centers ..............................................................     $136,730   $110,052       $ 54,793     $ 112,909
      Access ...............................................................       40,659     36,140         21,495         2,999
   Other healthcare services ...............................................       64,806     49,488         23,866        18,843
                                                                                 --------   --------       --------     ---------
Total revenues (Note 18) ...................................................      242,195    195,680        100,154       134,751
                                                                                 ========   ========       ========     =========
Cost of revenues:
   Refractive:
      Centers ..............................................................       96,388     86,045         49,224        81,911
      Access ...............................................................       28,863     25,424         15,356         1,826
      Impairment of fixed assets (Note 10) .................................           --         --             --         2,553
   Other healthcare services ...............................................       40,435     31,836         16,245        11,499
                                                                                 --------   --------       --------     ---------
Total cost of revenues .....................................................      165,686    143,305         80,825        97,789
                                                                                 --------   --------       --------     ---------
   Gross margin ............................................................       76,509     52,375         19,329        36,962
                                                                                 ========   ========       ========     =========

General and administrative .................................................       33,128     31,204         25,567        36,382
Marketing ..................................................................       13,385     14,094          8,321        15,296
Amortization of intangibles ................................................        4,098      6,685          4,074        10,227
Research and development (Note 7) ..........................................          849      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) ................................................................       (1,206)      (206)         2,095        26,082
Restructuring, severance and other charges (Note 20) .......................        2,755      2,040          4,227         8,750
                                                                                 --------   --------       --------     ---------
                                                                                   53,009     55,415         68,422       180,457
                                                                                 ========   ========       ========     =========

Operating income (loss) ....................................................       23,500     (3,040)       (49,093)     (143,495)
Other income and (expense):
   Other income, net (Note 13) .............................................       26,367        185          7,996            --
   Interest expense and other, net..........................................         (663)    (1,364)          (243)         (761)
   Minority interests ......................................................       (6,953)    (4,672)        (1,152)         (635)
   Earnings from equity investments ........................................        2,057         --             --            --
                                                                                 --------   --------       --------     ---------
Income (loss) before income taxes and cumulative effect of accounting
   change ..................................................................       44,308     (8,891)       (42,492)     (144,891)
Income tax expense (Note 16) ...............................................         (600)      (508)          (851)       (1,784)
                                                                                 --------   --------       --------     ---------
Income (loss) before cumulative effect of accounting change ................       43,708     (9,399)       (43,343)     (146,675)
Cumulative effect of accounting change (Note 8) ............................           --         --             --       (15,174)
                                                                                 --------   --------       --------     ---------
Net income (loss) ..........................................................     $ 43,708   $ (9,399)      $(43,343)    $(161,849)
                                                                                 ========   ========       ========     =========

Earnings (loss) before cumulative effect of accounting change per share -
   basic ...................................................................     $   0.64   $  (0.15)      $  (0.68)    $   (3.74)
Cumulative effect of accounting change per share - basic ...................           --         --             --         (0.39)
                                                                                 --------   --------       --------     ---------
Earnings (loss) per share - basic ..........................................     $   0.64   $  (0.15)      $  (0.68)    $   (4.13)
                                                                                 ========   ========       ========     =========
Weighted-average number of common shares outstanding - basic ...............       68,490     64,413         63,407        39,215
                                                                                 ========   ========       ========     =========

Earnings (loss) before cumulative effect of accounting change per share -
   diluted .................................................................     $   0.61   $  (0.15)      $  (0.68)    $   (3.74)
Cumulative effect of accounting change per share - diluted .................           --         --             --         (0.39)
                                                                                 --------   --------       --------     ---------
Earnings (loss) per share - diluted ........................................     $   0.61   $  (0.15)      $  (0.68)    $   (4.13)
                                                                                 ========   ========       ========     =========
Weighted-average number of common shares outstanding - diluted .............       71,088     64,413         63,407        39,215
                                                                                 ========   ========       ========     =========
</TABLE>

See notes to consolidated financial statements.


                                       49

<PAGE>

TLC VISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ---------------------
                                                                 2004        2003
                                                              ---------   ---------
<S>                                                           <C>         <C>
ASSETS
Current assets:
   Cash and cash equivalents ..............................   $  33,435   $  21,580
   Short-term investments .................................     111,015       8,748
   Accounts receivable (Note 6) ...........................      17,443      15,617
   Prepaid expenses, inventory and other ..................      13,821      11,646
                                                              ---------   ---------
   Total current assets ...................................     175,714      57,591

Restricted cash (Note 5) ..................................         932       1,376
Investments and other assets (Note 7) .....................      10,482       3,102
Goodwill (Note 8) .........................................      53,774      48,829
Other intangible assets (Note 9) ..........................      18,140      22,959
Fixed assets (Note 10) ....................................      46,199      56,891
                                                              ---------   ---------
Total assets ..............................................   $ 305,241   $ 190,748
                                                              =========   =========

LIABILITIES
Current liabilities:
   Accounts payable .......................................   $   8,716   $  10,627
   Accrued liabilities (Note 11) ..........................      27,139      25,811
   Current maturities of long-term debt (Note 12) .........       8,664      10,285
                                                              ---------   ---------
   Total current liabilities ..............................      44,519      46,723

Other long-term liabilities ...............................       2,722       2,607
Long-term debt, less current maturities (Note 12) .........       9,991      19,242
Minority interests ........................................      37,222      10,907

STOCKHOLDERS' EQUITY
Common stock, no par value; unlimited number authorized ...     458,959     397,878
Option and warrant equity .................................       2,872       8,143
Accumulated deficit .......................................    (251,044)   (294,752)
                                                              ---------   ---------
Total stockholders' equity ................................     210,787     111,269
                                                              ---------   ---------
Total liabilities and stockholders' equity ................   $ 305,241   $ 190,748
                                                              =========   =========
</TABLE>

See notes to consolidated financial statements.

Approved on behalf of the Board:


/s/ JAMES C. WACHTMAN                   /s/ WARREN S. RUSTAND
-------------------------------------   ----------------------------------------
James C. Wachtman, Director             Warren S. Rustand, Director


                                       50

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                        SEVEN-MONTH       YEAR
                                                                              YEAR ENDED DECEMBER 31,   PERIOD ENDED     ENDED
                                                                              -----------------------   DECEMBER 31,    MAY 31,
                                                                                  2004       2003           2002          2002
                                                                               ---------   --------     ------------   ---------
<S>                                                                           <C>          <C>          <C>            <C>
OPERATING ACTIVITIES
Net income (loss)..........................................................    $  43,708   $ (9,399)      $(43,343)    $(161,849)
Adjustments to reconcile net income (loss) to net cash from operating
   activities:
   Depreciation and amortization ..........................................       17,681     22,593         13,862        21,352
   Write-off of investment in research and development arrangements .......          849      1,598          2,000         2,000
   Minority interests .....................................................        6,953      4,672          1,152           107
   Gain on sale of OccuLogix, Inc. stock ..................................      (25,792)        --             --            --
   Gain on sale of interest in LECC .......................................       (1,143)        --             --            --
   Earnings from equity investments .......................................       (2,057)        --             --            --
   Loss (gain) on sales and disposals of fixed assets .....................          839       (484)         1,770         1,136
   Non-cash compensation expense ..........................................          484        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 ......................................       (1,206)      (206)         2,095        28,635
   Non-cash restructuring and other costs .................................           --        677          2,266         2,503
   Cumulative effect of accounting change .................................           --         --             --        15,174
   Changes in operating assets and liabilities, net of acquisitions and
   dispositions
      Accounts receivable .................................................       (1,449)      (489)         3,836         1,592
      Prepaid expenses, inventory and other current assets ................       (1,801)      (964)         7,168           417
      Accounts payable and accrued liabilities ............................       (1,706)   (13,831)        (4,574)        6,321
                                                                               ---------   --------       --------     ---------
Cash from operating activities ............................................       35,360      4,292          8,815           (26)
                                                                               ---------   --------       --------     ---------

INVESTING ACTIVITIES
Purchases of fixed assets .................................................       (5,191)    (4,433)        (3,668)       (2,297)
Proceeds from sale of fixed assets ........................................        1,565        578            751            89
Proceeds from divestitures of investments and subsidiaries, net of cash ...          729        221            259           777
Proceeds from sale of OccuLogix, Inc. stock, net ..........................       25,792         --             --            --
Distributions and loan payments received from equity investments ..........        2,518         --             --            --
Investment in research and development arrangements .......................         (849)    (1,598)        (2,000)       (2,000)
Acquisitions and investments, net of cash acquired ........................      (10,067)    (8,015)        (9,695)       (5,424)
Cash acquired in Laser Vision Centers, Inc. acquisition ...................           --         --             --         7,319
Proceeds from short-term investments ......................................        8,353     15,709            556         6,058
Purchases of short-term investments .......................................     (111,055)   (21,050)        (1,850)           --
Other .....................................................................           60       (229)           (32)           56
                                                                               ---------   --------       --------     ---------
Cash from investing activities ............................................      (88,145)   (18,817)       (15,679)        4,578
                                                                               ---------   --------       --------     ---------

FINANCING ACTIVITIES
Restricted cash movement ..................................................          444      2,599          1,013        (3,369)
Proceeds from debt financing ..............................................           --      3,450          1,750         5,788
Principal payments of debt financing and capital leases ...................      (13,669)    (8,018)        (5,140)       (7,098)
Distributions to minority interests .......................................       (7,216)    (4,901)        (1,532)       (3,092)
Purchase of treasury stock ................................................           --         --           (191)           --
Proceeds from issuance of OccuLogix, Inc. stock, net and cash
   acquired upon consolidation ............................................       59,850         --             --            --
Proceeds from issuance of common stock ....................................       25,231      8,744            121           306
                                                                               ---------   --------       --------     ---------
Cash from financing activities ............................................       64,640      1,874         (3,979)       (7,465)
                                                                               ---------   --------       --------     ---------

Net increase (decrease) in cash and cash equivalents during the period ....       11,855    (12,651)       (10,843)       (2,913)
Cash and cash equivalents, beginning of period ............................       21,580     34,231         45,074        47,987
                                                                               ---------   --------       --------     ---------
Cash and cash equivalents, end of period...................................    $  33,435   $ 21,580       $ 34,231     $  45,074
                                                                               =========   ========       ========     =========
</TABLE>

See notes to consolidated financial statements.


                                       51

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

<TABLE>
<CAPTION>
                                                          OPTION                                            OTHER
                                       COMMON STOCK         AND      TREASURY STOCK                       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, 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
Exercise of stock options .......     2,102      8,330                                                                         414
Options expired or exercised ....                2,892     (2,892)                                                           8,330
Retirement of treasury stock ....      (583)    (2,432)               583      2,432                                            --
Shares issued as part of
   acquisition ..................       100         96                                                                          --
Escrow shares returned to
   the Company ..................      (713)                                                                                    96

Net loss and comprehensive
    loss ........................                                                               (9,399)                     (9,399)
                                    -------   --------   --------   -----    -------         ---------       -------      --------
Balance December 31, 2003 .......    65,756    397,878      8,143       0         --          (294,752)           --       111,269

Shares issued as part of the
   employee share purchase
   plan and 401(k) plan .........       131        532                                                                         532
Exercise of stock options .......     4,199     29,496     (4,797)                                                          24,699
Options expired or forfeited ....                  582       (582)                                                              --
Variable stock option expense ...                             108                                                              108
Value of shares issued upon
   meeting certain earnings
   criteria .....................                  389                                                                         389
Issuance of subsidiary stock ....               30,082                                                                      30,082
Net income ......................                                                               43,708                      43,708
                                    -------   --------   --------   -----    -------         ---------       -------      --------
Balance December 31, 2004 .......    70,086   $458,959   $  2,872       0    $    --         $(251,044)      $    --      $210,787
                                    =======   ========   ========   =====    =======         =========       =======      ========
</TABLE>

See notes to consolidated financial statements.


                                       52

<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 ("TLCVision" 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, TLCVision 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 OccuLogix, Inc.
(formerly 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 ("AMD"), via rheopheresis, a process for
filtering blood.

     On December 8, 2004, the Company exchanged its 50% interest in Occulogix
L.P. for a 50% interest in OccuLogix, Inc. In connection therewith, the Company
converted its Series B preferred stock and convertible grid debentures into
common shares of OccuLogix, Inc. After the exchange and conversion, the Company
owned 65.8% of the outstanding common shares of OccuLogix, Inc. (OccuLogix). As
a result of the exchange, Occulogix L.P. became a wholly-owned subsidiary of
OccuLogix. The Company accounted for the exchange at historical cost.
Immediately after the exchange, OccuLogix completed an initial public offering
(IPO) whereby OccuLogix sold 5,600,000 shares of its common stock at $12 per
share. Because the IPO price exceeded the per share carrying amount of the
Company's investment in OccuLogix, the Company's equity ownership in OccuLogix
after the IPO exceeded its equity ownership before the IPO by $30.1 million. In
accordance with Staff Accounting Bulletin No. 84, the Company accounted for the
excess as an equity transaction. In connection with the IPO, TLCVision sold
2,330,184 shares of its OccuLogix common stock at $12 per share and recorded a
gain of $25.8 million. At December 31, 2004, the Company owns 21,475,064 shares
or 51.4% of OccuLogix common stock. The Company has included the results of
operations of OccuLogix in its consolidated statement of operations since
December 8, 2004.

     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.

     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 2004" and "fiscal 2003" shall mean
the years ended December 31, 2004 and 2003, respectively, "transitional period
2002" shall mean the seven-month period ended December 31, 2002 and "fiscal
2002" shall mean the 12 months ended May 31, 2002.

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.

Cash and Cash Equivalents

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



                                       53

<PAGE>
Short-Term Investments

     As of December 31, 2004, short-term investments include $111.0 million of
auction rate securities, which are available to support the Company's current
operations. These investments are classified as available-for-sale securities
and are recorded at fair value with unrealized gains or losses reported in other
comprehensive income. Due to the short time period between the reset dates of
the interest rates, there are no unrealized gains or losses associated with
these securities. All of the auction rate securities have contractual maturities
of more than five years. The Company previously classified auction rate
securities as cash equivalents. In the current year, the Company reclassified
$8.0 million of auction rate securities reported as cash equivalents as of
December 31, 2003 to short-term investments. As of December 31, 2003, short-term
investments also included bank certificates of deposit, which are classified as
held-to-maturity securities and carried at amortized cost.

Investments

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

Fixed Assets

     Fixed assets are recorded at cost or the 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>
Buildings                           - straight-line over 40 years
Computer equipment and software     - straight-line over three 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 $5.3 million at December 31, 2004) 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.

Goodwill

     The Company tests for impairment at least annually and more frequently if
changes in circumstances or events indicate that it is more likely than not that
impairment has occurred. 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.

                                       54

<PAGE>
Long-Lived Assets

     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.

Revenue Recognition

     The Company recognizes refractive revenues when the procedure is performed.
Revenue from 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.

     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 27% of the Company's fiscal 2004 net revenue was from the
Company's other healthcare services and principally included 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.

     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). In December 2003, the FASB modified FIN
46 to make certain technical corrections and address certain implementation
issues that had arisen. FIN 46 provides a new framework for identifying VIEs and
determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of a VIE in its consolidated
financial statements. In general, a VIE is any legal structure used to conduct
activities or hold assets that either (1) has an insufficient amount of equity
to carry out its principal activities without additional subordinated financial
support, (2) has a group of equity owners that are unable to make significant
individual decisions about its activities, or (3) has a group of equity owners
that do not have the obligation to absorb losses or the right to receive returns
generated by its operations. FIN 46 requires a VIE to be consolidated if a party
with an ownership, contractual or other financial interest in the VIE (a
variable interest holder) is obligated to absorb a majority of the risk of loss
from the VIE's activities, is entitled to receive a majority of the VIE's
residual returns (if no party absorbs a majority of the VIE's losses), or both.
A variable interest holder that consolidates the VIE is called the primary
beneficiary. Upon consolidation, the primary beneficiary generally must
initially record all of the VIE's assets, liabilities and noncontrolling
interests at fair value and subsequently account for the VIE as if it were
consolidated based on majority voting interest.

     FIN 46 was effective immediately for VIEs created after January 31, 2003.
The provisions of FIN 46, as revised, were adopted as of January 1, 2004, for
the Company's interests in all VIEs. Prior to the adoption of FIN 46, the
Company did not consolidate physician practices that were managed but not owned
by the Company. These managed physician practices were determined to be variable
interest entities for which the Company is the primary beneficiary. As a result,
the physician practices have been consolidated as of January 1, 2004. The
adoption of FIN 46 resulted in an increase of total assets of $154,000 as of
December 31, 2004, and an increase in revenues and cost of revenues for the
managed refractive centers, however the adoption had no material impact on gross
margin or operating income and no impact on net income. Prior periods were not
restated. The following pro forma amounts reflect the effect of FIN 46 assuming
it was applied retroactively:

                                       55

<PAGE>
<TABLE>
<CAPTION>

                                        YEAR ENDED DECEMBER 31,        SEVEN-MONTH PERIOD
                                    -------------------------------    ENDED DECEMBER 31,     YEAR ENDED MAY 31,
                                      2004             2003                   2002                    2002
                                    --------   --------------------   --------------------   --------------------
                                     Actual     Actual    Pro forma    Actual    Pro forma    Actual    Pro forma
                                    --------   --------   ---------   --------   ---------   --------   ---------
<S>                                 <C>        <C>        <C>         <C>        <C>         <C>         <C>
Revenues:
   Refractive:
      Centers                       $136,730   $110,052   $126,498    $ 54,793   $ 63,262    $112,909    $131,286
      Access                          40,659     36,140     36,140      21,495     21,495       2,999       2,999
   Other healthcare services          64,806     49,488     49,488      23,866     23,866      18,843      18,843
                                    --------   --------   --------    --------   --------    --------    --------
Total revenues                       242,195    195,680    212,126     100,154    108,623     134,751     153,128
                                    ========   ========   ========    ========   ========    ========    ========
Cost of revenues:
   Refractive:
      Centers                         96,388     86,045    102,331      49,224     57,645       81,911     100,043
      Access                          28,863     25,424     25,424      15,356     15,356        1,826       1,826
      Impairment of fixed assets          --         --         --          --         --        2,553       2,553
   Other healthcare services          40,435     31,836     31,836      16,245     16,245       11,499      11,499
                                    --------   --------   --------    --------   --------    ---------   ---------
Total cost of revenues               165,686    143,305    159,591      80,825     89,246       97,789     115,921
                                    --------   --------   --------    --------   --------    ---------   ---------
Gross margin                        $ 76,509   $ 52,375   $ 52,535    $ 19,329   $ 19,377    $  36,962   $  37,207
                                    ========   ========   ========    ========   ========    =========   =========
General and administrative          $ 33,128   $ 31,204   $ 31,364    $ 25,567   $ 25,615    $  36,382   $  36,627
                                    ========   ========   ========    ========   ========    =========   =========
Net income (loss)                   $ 43,708   $ (9,399)  $ (9,399)   $(43,343)  $(43,343)   $(161,849)  $(161,849)
                                    ========   ========   ========    ========   ========    =========   =========
Basic earnings (loss) per share     $   0.64   $  (0.15)  $  (0.15)   $  (0.68)  $  (0.68)   $   (4.13)  $   (4.13)
                                    ========   ========   ========    ========   ========    =========   =========
Diluted earnings (loss) per share   $   0.61   $  (0.15)  $  (0.15)   $  (0.68)  $  (0.68)   $   (4.13)  $   (4.13)
                                    ========   ========   ========    ========   ========    =========   =========
</TABLE>

     As a result of the elimination of the distinction between owned and managed
centers upon the adoption of FIN 46, their revenue and costs are no longer
identified separately on the Company's consolidated statements of operations.

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.

Marketing

     Marketing costs are expensed as incurred.

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 $0.5 million, $0.1 million, $0.4
million and $0.9 million of compensation expense during fiscal 2004, fiscal
2003, the transitional period 2002 and fiscal 2002, respectively. The 2004 total
compensation expense of $0.5 million includes $0.1 million of variable stock
option expense for options repriced in 2002. The following table illustrates the
pro forma net income (loss) and earnings (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>
                                                    YEAR ENDED DECEMBER 31,      SEVEN-MONTH
                                                    -----------------------      PERIOD ENDED      YEAR ENDED
                                                        2004       2003       DECEMBER 31, 2002   MAY 31, 2002
                                                      --------   --------     -----------------   ------------
<S>                                                 <C>          <C>          <C>                 <C>
Net income (loss), as reported ..................       43,708   $ (9,399)        $(43,343)        $(161,849)
Add stock-based  employee  compensation cost
   included in reported net income (loss) .......          108         --               --                --
Less stock-based  employee  compensation
   cost determined  under fair value based
   method for all awards ........................       (1,245)    (1,121)            (628)           (1,564)
                                                      --------   --------         --------         ---------
Pro forma net income (loss) .....................     $ 42,571   $(10,520)        $(43,971)        $(163,413)
                                                      ========   ========         ========         =========
Pro forma earnings (loss) per share - basic .....     $   0.62   $  (0.16)        $  (0.69)        $   (4.17)
                                                      ========   ========         ========         =========
Pro forma earnings (loss) per share - diluted ...     $   0.60   $  (0.16)        $  (0.69)        $   (4.17)
                                                      ========   ========         ========         =========
</TABLE>


                                       56

<PAGE>

     For purposes of pro forma disclosures, the estimated fair value of
stock-based compensation cost is amortized using the attribution method under
FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option Award Plans."

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 translated at historical exchange rates. Exchange gains and losses are
included in net income (loss).

Earnings (Loss) Per Share

     Basic earnings (loss) per share is determined by dividing net income (loss)
available to common stockholders by the weighted average number of commons
shares outstanding during the period. Diluted earnings per share reflects the
potential dilution that could occur if options to issue common stock were
exercised. In periods in which the inclusion of such instruments is
anti-dilutive, the effect of such securities is not given consideration. 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 determined 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

     On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 123 (revised 2004), "Share-Based Payment" ("Statement
123(R)), which is a revision of FASB Statement No. 123, "Accounting for
Stock-Based Compensation." Statement 123(R) supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and amends FASB Statement No. 95,
"Statement of Cash Flows." Generally, the approach in Statement 123(R) is
similar to the approach described in Statement 123. However, Statement 123(R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer permitted.

     The effective date of Statement 123(R) is the first reporting period
beginning after June 15, 2005, which is third quarter 2005 for the Company,
although early adoption is allowed. Statement 123(R) permits companies to adopt
its requirements using either a


                                       57

<PAGE>

"modified prospective" method, or a "modified retrospective" method. Under the
"modified prospective" method, compensation cost is recognized in the financial
statements beginning with the effective date, based on the requirements of
Statement 123(R) for all share-based payments granted after that date, and based
on the requirements of Statement 123 for all unvested awards granted prior to
the effective date of Statement 123(R). Under the "modified retrospective"
method, the requirements are the same as under the "modified prospective"
method, but also permits entities to restate financial statements of previous
periods based on pro forma disclosures made in accordance with Statement 123.

     The Company currently utilizes the Black-Scholes option pricing model to
measure the fair value of stock options granted to employees. While Statement
123(R) permits entities to continue to use such a model, the standard also
permits the use of a "lattice" model. The Company has not yet determined which
model it will use to measure the fair value of employee stock options upon the
adoption of Statement 123(R).

     The Company currently expects to adopt Statement 123(R) effective July 1,
2005; however, the Company has not yet determined which of the aforementioned
adoption methods it will use. Subject to a complete review of the requirements
of Statement 123(R), based on stock options granted to employees through
December 31, 2004, the Company expects that the adoption of Statement 123(R) on
July 1, 2005, would reduce both third quarter 2005 and fourth quarter 2005 net
earnings by approximately $0.7 million each.

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:

                                       58

<PAGE>
<TABLE>
<CAPTION>
                                                                   TWELVE-MONTH PERIOD ENDED       SEVEN-MONTH PERIOD ENDED
                                                                          DECEMBER 31,                   DECEMBER 31,
                                                               ---------------------------------   ------------------------
                                                                 2004       2003        2002          2002         2001
                                                               --------   --------   -----------    --------   -----------
                                                                                     (UNAUDITED)               (UNAUDITED)
<S>                                                            <C>         <C>       <C>            <C>        <C>
Revenues:
   Refractive:
      Centers ..............................................   $136,730   $110,052    $ 105,520     $ 54,793    $ 61,305
      Access ...............................................     40,659     36,140       25,371       21,495          --
   Other healthcare services ...............................     64,806     49,488       33,714       23,866       8,995
                                                               --------   --------    ---------     --------    --------
Total revenues .............................................    242,195    195,680      164,605      100,154      70,300
                                                               --------   --------    ---------     --------    --------
Cost of revenues:
   Refractive:
      Centers ..............................................     96,388     86,045       82,605       49,224      47,609
      Access ...............................................     28,863     25,424       18,103       15,356          --
      Impairment of fixed assets ...........................         --         --        1,487           --       1,066
   Other healthcare services ...............................     40,435     31,836       22,968       16,245       4,776
                                                               --------   --------    ---------     --------    --------
Total cost of revenues .....................................    165,686    143,305      125,163       80,825      53,451
                                                               --------   --------    ---------     --------    --------
   Gross margin ............................................     76,509     52,375       39,442       19,329      16,849
                                                               --------   --------    ---------     --------    --------
General and administrative .................................     33,128     31,204       39,158       25,567      22,791
Marketing ..................................................     13,385     14,094       14,402        8,321       9,215
Amortization of other intangibles ..........................      4,098      6,685        8,351        4,074       5,950
Research and development ...................................        849      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 ...................................     (1,206)      (206)       7,098        2,095      21,079
Restructuring, severance and other charges .................      2,755      2,040       11,218        4,227       1,759
                                                               --------   --------    ---------     --------    --------
                                                                 53,009     55,415      188,085       68,422      60,794
                                                               --------   --------    ---------     --------    --------
Operating income (loss) ....................................     23,500     (3,040)    (148,643)     (49,093)    (43,945)
Other income and (expense):
   Other income, net .......................................     26,367        185        7,996        7,996          --
   Interest expense, net ...................................       (663)    (1,364)        (752)        (243)       (252)
   Minority interest .......................................     (6,953)    (4,672)      (1,710)      (1,152)       (586)
   Earnings from equity investments ........................      2,057         --           --           --          --
                                                               --------   --------    ---------     --------    --------
Income (loss) before income taxes and
   cumulative effect of accounting change ..................    44,308    (8,891)    (143,109)     (42,492)    (44,783)
Income tax expense .........................................      (600)     (508)      (1,622)        (851)       (504)
                                                               -------   -------    ---------     --------    --------
Income (loss) before cumulative effect of
   accounting change .......................................    43,708    (9,399)    (144,731)     (43,343)    (45,287)
Cumulative effect of accounting change .....................        --        --           --           --     (15,174)
                                                               -------   -------    ---------     --------    --------
Net income (loss) ..........................................   $43,708   $(9,399)   $(144,731)    $(43,343)   $(60,461)
                                                               =======   =======    =========     ========    ========

Earnings (loss) before cumulative effect of
   accounting change per share - basic .....................   $  0.64   $ (0.15)   $   (2.68)    $  (0.68)   $  (1.19)
Cumulative effect of accounting change per
   share - basic ...........................................        --        --           --           --       (0.40)
                                                               -------   -------    ---------     --------    --------
Earnings (loss) per share - basic ..........................   $  0.64   $ (0.15)   $   (2.68)    $  (0.68)   $  (1.59)
                                                               =======   =======    =========     ========    ========
Weighted-average number of common shares
   outstanding - basic .....................................    68,490    64,413       54,077       63,407      38,064
                                                               =======   =======    =========     ========    ========

Earnings (loss) before cumulative effect of
   accounting change per share - diluted ...................   $  0.61   $ (0.15)   $   (2.68)    $  (0.68)   $  (1.19)
Cumulative effect of accounting change per share-diluted ...        --        --           --           --       (0 40)
                                                               -------   -------    ---------     --------    --------
Earnings (loss) per share - diluted ........................   $  0.61   $ (0.15)   $   (2.68)    $  (0.68)   $  (1.59)
                                                               =======   =======    =========     ========    ========
Weighted-average number of common shares
   outstanding - diluted ...................................    71,088    64,413       54,077       63,407      38,064
                                                               =======   =======    =========     ========    ========
</TABLE>

4. ACQUISITIONS

     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 December 24, 2004, the Company paid $0.6 million to Omar Hakim, MD to
purchase the minority interest of two laser centers which were 75% owned by the
Company and to settle legal disputes.

     On December 1, 2004, OR Partners entered into a purchase agreement to
acquire 25% of an ambulatory surgery center ("ASC") in Texas. The Company paid
$4.5 million in cash and has reported its interest in the ASC under the equity
method of accounting since the date of acquisition.

     On August 1, 2004, OR Partners purchased an additional 5% ownership
interest in its ASC in Mississippi for $0.7 million of which substantially all
was allocated to 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 two years.

     On March 1, 2004, OR Partners entered into a purchase agreement to acquire
70% of an ASC in Texas, which provides access to surgical and diagnostic
equipment to perform cataract surgery in hospitals and ASCs. The Company paid
$3.8 million in cash and assumed debt of $0.4 million. The purchase price
allocation included $4.1 million of goodwill.

     On January 1, 2004, the Company settled a lawsuit brought by Thomas S.
Tooma, M.D. and TST Acquisitions, LLC ("TST") in October 2002. Under the terms
of the settlement, the Company sold approximately 24% of Laser Eye Care of
California ("LECC") and 30% of its California access business to TST for $2.3
million. The Company continues to hold a 30% ownership in LECC, and a 70%
ownership in the California access business. The Company recorded a $1.1 million
gain on the sale of these business interests which is included in "general and
administrative" in the accompanying statements of operations. Effective January
1, 2004, the Company deconsolidated LECC and began reporting its interest in
LECC under the equity method of accounting because it no longer owns a
controlling interest in the entity.

     On December 31, 2003, a majority-owned subsidiary of the Company became a
majority owner of an 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


                                       59

<PAGE>

65% of this ASC. Therefore, the assets and liabilities of the ASC were included
in the consolidated balance sheet at December 31, 2004 and 2003. The operating
results of the ASC were consolidated into the Company's statement of operations
for 2004 and were recorded using the equity method of accounting for 2003.

     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 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. The purchase price allocation was finalized in 2004 and resulted
in $3.7 million of goodwill.

     On March 3, 2003, Midwest Surgical Services, Inc., a subsidiary of
TLCVision, 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, $0.4 million
has been paid to date.

     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. The purchase price allocation resulted in $7.4 million of goodwill. In
August 2003, the Company purchased an additional 5% ownership for $0.7 million
in cash, substantially all of which was recorded as goodwill.

     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 TLCVision 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 TLCVision 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 TLCVision; and $11.0 million representing the
fair value of TLCVision 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.

5. RESTRICTED CASH

     The Company had $0.9 million and $1.4 million of restricted cash as of
December 31, 2004 and 2003, 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,
                                                             -----------------
                                                               2004      2003
                                                             -------   -------
<S>                                                          <C>       <C>
Refractive ...............................................   $ 6,474   $ 7,266
Non-refractive ...........................................    10,699     8,303
Other ....................................................       270        48
                                                             -------   -------
                                                             $17,443   $15,617
                                                             =======   =======
</TABLE>

     Non-refractive accounts receivable primarily represent amounts due from
professional corporations 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.


                                       60

<PAGE>

     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,
2004 and 2003 the Company had reserves for doubtful accounts and contractual
allowances of $2.3 million and $2.6 million, respectively. The Company does not
have a significant exposure to any individual customer.

7. INVESTMENTS AND OTHER ASSETS

     Investments and other assets consist of the following:

<TABLE>
<CAPTION>
                                         DECEMBER 31,
                                       ----------------
                                         2004     2003
                                       -------   ------
<S>                                    <C>       <C>
Equity method investments ..........   $ 7,219   $1,196
Marketable equity securities .......         3        3
Non marketable equity securities ...       534      534
Long-term receivables and other ....     2,726    1,369
                                       -------   ------
                                       $10,482   $3,102
                                       =======   ======
</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 $1.9 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 had 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 the first six months
of 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 as of
June 30, 2003 and recorded an adjustment to the fair value of investments and
long-term receivables of $0.7 million to reverse a portion of the reserve.
Throughout 2003 and 2004, this secondary care provider has improved its
profitability and financial position and made all of its payments to the Company
when due. As a result, the Company reevaluated the collectibility of the note
again as of June 30, 2004 and recorded an adjustment to the fair value of
investments and long-term receivables to reverse the remaining reserve of $1.2
million.

     In December 2004, the Company loaned additional funds to the provider to
fund expansion of the business by retiring the $1.9 million balance of the
original loan and replacing it with a $2.8 million loan, payable over 5 years at
a 6% interest rate

     During fiscal 2002, the Company entered into a joint venture with OccuLogix
for the purpose of pursuing commercial applications of technologies owned or
licensed by OccuLogix applicable to the evaluation, diagnosis, monitoring and
treatment of dry age related macular degeneration. Prior to the reorganization
and IPO of OccuLogix (see Note 1), the Company accounted for its investment as a
research and development arrangement since the technology is in the development
stage and has not received FDA approval. 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 agreed to advance
up to an additional $6.0 million to OccuLogix pursuant to a secured convertible
grid debenture. The first $3.5 million advanced pursuant to such debenture is
convertible into common shares of OccuLogix. OccuLogix 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 2003, the Company expensed $1.6
million to research and development related to payments made to OccuLogix during
the year. Of this amount, $1.3 million reduced the value of the $6.0 million
obligation to OccuLogix, and $0.3 million represented an additional equity
investment in Common Stock and therefore did not reduce the amount of the
remaining obligation. In fiscal 2004, the Company advanced $2.2 million to
OccuLogix, satisfying the $3.5 million obligation that was converted into shares
of OccuLogix. Of this amount, the Company advanced $1.2 million to OccuLogix in
the first three quarters of 2004 and expensed it as research and


                                       61

<PAGE>

development. The remaining advance to OccuLogix of $1.0 million in the fourth
quarter of 2004 was recorded as an investment because it was not used by
OccuLogix for operating purposes, but rather was available at December 31, 2004
for future needs. Due to the IPO of OccuLogix, the Company was not required to
fund any additional amounts.

     In fiscal 2002, the Company advanced $1.0 million to Tracey Technologies,
LLC ("Tracey") to support the development of laser scanning technology. This
advance was used by Tracey to further develop the technology, and the Company
recorded the advance as research and development expense. In 2004, Tracey repaid
$0.4 million of the advance and agreed to repay the remaining $0.6 million in
exchange for the Company's release of its claims on certain potential royalties
should Tracey obtain FDA approval for its technology. The Company recorded the
$0.4 million repayment from Tracey as a reduction to research and development
expense for the year ended December 31, 2004 and will record the remaining $0.6
million when collection becomes probable.

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).

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

<TABLE>
<CAPTION>
                                                 REFRACTIVE   CATARACT    OTHER     TOTAL
                                                 ----------   --------   -------   -------
<S>                                              <C>          <C>        <C>       <C>
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
Deconsolidated due to partial sale of LECC ...       (467)          --        --      (467)
Acquired during the period ...................        181          306     4,925     5,412
                                                  -------      -------   -------   -------
December 31, 2004 ............................    $14,490      $21,790   $17,494   $53,774
                                                  =======      =======   =======   =======
</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 quarters of fiscal 2004 and 2003, the Company again
performed its annual impairment test. Based on the trend of stabilizing
procedure volumes and increased pricing related to Custom LASIK in the
refractive segment, the earning forecast for the next five years was
significantly improved from the prior year periods. 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 years ended December 31, 2004 and 2003.

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 $4.1
million, $6.7 million, $4.1 million and $10.2 million for the years ended
December 31, 2004 and 2003, the seven-month period ended December 31, 2002 and
the year ended May 31, 2002, respectively.


                                       62

<PAGE>

     The remaining weighted average amortization period for PMAs is 6.2 years,
for deferred contract rights is 6.0 years, and for other intangibles is 13.9
years as of December 31, 2004.

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

<TABLE>
<CAPTION>
                                                  2004                            2003
                                     -----------------------------   -----------------------------
                                     GROSS CARRYING    ACCUMULATED   GROSS CARRYING    ACCUMULATED
                                         AMOUNT       AMORTIZATION       AMOUNT       AMORTIZATION
                                     --------------   ------------   --------------   ------------
<S>                                  <C>              <C>            <C>              <C>
Practice management agreements ...       $33,329         $23,647         $43,644         $31,381
Deferred contract rights .........        13,854           6,024          13,861           3,753
Other ............................           786             158             670              82
                                         -------         -------         -------         -------
Total ............................       $47,969         $29,829         $58,175         $35,216
                                         =======         =======         =======         =======
</TABLE>

     The estimated amortization expense for the next five years as of December
31, 2004 is as follows:

<TABLE>
<S>                                 <C>
2005 .............................  $3,700
2006 .............................   3,000
2007 .............................   3,000
2008 .............................   2,300
2009 .............................   2,000
</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
PMAs 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,
                                        -------------------
                                          2004       2003
                                        --------   --------
<S>                                     <C>        <C>
Land and buildings ..................   $ 11,280   $ 11,643
Computer equipment and software .....     13,014     13,806
Furniture, fixtures and equipment ...      9,476     10,356
Laser equipment .....................     32,137     38,046
Leasehold improvements ..............     17,165     20,050
Medical equipment ...................     30,332     31,814
Vehicles and other ..................      8,599      8,633
                                        --------   --------
                                         122,003    134,348
Less accumulated depreciation .......     75,804     77,457
                                        --------   --------
Net book value ......................   $ 46,199   $ 56,891
                                        ========   ========
</TABLE>

     For the years ended December 31, 2004 and 2003, the transitional period
2002 and the year ended May 31, 2002, depreciation expense was $13.6 million,
$15.9 million, $9.8 million and $11.1 million, respectively. Depreciation
expense includes depreciation of assets reported under capital leases.

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

     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.


                                       63

<PAGE>

     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. The first payment of $63,000 was received in 2004. 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 life of 40 years.

11. ACCRUED LIABILITIES

     Accrued liabilities included $8.1 million and $5.8 million of accrued wages
and related expenses as of December 31, 2004 and 2003, respectively.

12. LONG-TERM DEBT

Long-term debt consists of:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                                -----------------
                                                                                  2004      2003
                                                                                -------   -------
<S>                                                                             <C>       <C>
Interest at 3.11%, due through October 2005, payable to vendor ..............   $ 1,264   $ 2,781
Interest imputed at 9%, due in four payments from March 2002 through 2005,
   payable to affiliated doctor relating to practice acquisition ............     2,294     4,398
Interest imputed at 6.25%, due through October 2016, collateralized by
   building (C$7.4 million at December 31, 2004) ............................     6,138     5,979
Interest imputed at 8%, due through December 2006, payable to vendors .......     3,224     5,743
Line of credit, interest at LIBOR plus 3% (5.42% at December 31, 2004),
   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 (5.25% at
   December 31, 2004), collateralized by equipment, paid off in 2004 ........        --     2,346
Interest at 3.75% to 5.75%, due through 2009, collateralized by real estate
   and equipment ............................................................     3,038     2,817
Capital lease obligations, payable through 2008, interest ranging from 7%
   to 8.5% ..................................................................     2,352     3,251
Other .......................................................................       345       212
                                                                                -------   -------
                                                                                 18,655    29,527
Less current portion ........................................................     8,664    10,285
                                                                                -------   -------
                                                                                $ 9,991   $19,242
                                                                                =======   =======
</TABLE>

     Principal maturities for each of the next five years and thereafter as of
December 31, 2004 are as follows:

<TABLE>
<S>                                  <C>
2005 .............................   $ 8,664
2006 .............................     2,543
2007 .............................     1,039
2008 .............................     1,275
2009 .............................       575
Thereafter .......................     4,559
                                     -------
Total ............................   $18,655
                                     =======
</TABLE>


                                       64

<PAGE>

     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, 2004, the Company did not have any
borrowings drawn under the line of credit and had an available unused line of
$15 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 were classified as
long-term at December 31, 2003.

     Under the Agreement, 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 greater than $2 million per year.

     Payments for capital lease obligations for each of the next five years as
of December 31, 2004 are as follows:

<TABLE>
<S>                                  <C>
2005 .............................    1,490
2006 .............................      739
2007 .............................      216
2008 .............................       15
2009 .............................       --
Thereafter .......................       --
                                     ------
Total ............................    2,460
Less interest portion ............      108
                                     ------
                                     $2,352
                                     ======
</TABLE>

13. OTHER INCOME AND EXPENSE

     Other income and expense for the year ended December 31, 2004 included a
$25.8 million gain on the sale of 2.3 million shares of OccuLogix, Inc., in
conjunction with OccuLogix, Inc.'s IPO in December 2004 (See Note 1).

     During the year ended December 31, 2003, the Company recorded $0.2 million
of other income related to 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
TLCVision 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 TLCVision 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.

14. EARNINGS (LOSS) PER SHARE

     Basic earnings (loss) per share were $0.64, $(0.15), $(0.68) and $(4.13) in
2004, 2003, the transitional period 2002 and fiscal 2002, respectively. The per
share amounts have been computed on the basis of the weighted average number of
shares outstanding.


                                       65

<PAGE>

     Because the Company incurred a net loss for 2003, the transitional period
2002 and fiscal 2002, the respective calculations of diluted loss per share
exclude the impact of all stock options and warrants. The calculation of diluted
earnings per share for 2004 excludes the impact of 0.9 million stock options and
warrants because to include them would have been anti-dilutive. Diluted earnings
(loss) per share have been computed as follows:

<TABLE>
<CAPTION>
                                                                           Seven-Month
                                                Year Ended December 31,   Period Ended   Year Ended
                                                -----------------------   December 31,     May 31,
                                                     2004      2003           2002          2002
                                                   -------   -------      ------------   ----------
<S>                                             <C>          <C>          <C>            <C>
Net income (loss)                                  $43,708   $(9,399)       $(43,343)     $(161,849)
Weighted-average shares outstanding - basic         68,490    64,413          63,407         39,215
Stock options and warrants                           2,598        --              --             --
                                                   -------   -------        --------      ---------
Weighted-average shares outstanding - diluted       71,088    64,413          63,407         39,215

Earnings (loss) per share - diluted                $  0.61   $ (0.15)       $  (0.68)     $   (4.13)
                                                   =======   =======        ========      =========
</TABLE>

15. 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 were not transferable and expired in December 2004. Using the
Black-Scholes option-pricing model (assumptions - five year life, volatility of
0.35, 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.

Options Outstanding

     As of December 31, 2004, 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, 2004, 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      312       2.4 years     C$ 3.01      111       C$ 3.49
$ 4.04 - $ 6.67      135       2.1 years        4.33       89          4.17
$ 7.70 - $ 8.98       56       3.5 years        7.96       19          7.91
$11.02 - $19.73       72       4.8 years       12.89        3         16.09
                     ---                     -------      ---       -------
                     575       2.7 years     C$ 5.04      222       C$ 4.31
                     ===                     =======      ===       =======
</TABLE>

     As of December 31, 2004, the issued and outstanding options denominated in
U.S. dollars were at the following prices and terms:


                                       66

<PAGE>

<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>
 $0.90-$ 2.80       1,451      3.1 years     $ 1.76        815      $ 2.19
 $3.02-$ 4.94         752      3.5 years       4.15        738        4.14
 $5.00-$ 7.81         494      3.8 years       6.13        180        6.11
 $8.69-$13.63         931      4.9 years      10.45          3       10.83
                    -----                    ------      -----      ------
                    3,628      3.7 years     $ 5.08      1,736      $ 3.44
                    =====                    ======      =====      ======
</TABLE>

     A total of 1,076,000 options have been authorized for issuance but was not
granted as of December 31, 2004. A summary of option activity during the last
three fiscal years and the transitional period follows:

<TABLE>
<CAPTION>
                                                   WEIGHTED         WEIGHTED
                                                    AVERAGE          AVERAGE
                                                EXERCISE PRICE   EXERCISE PRICE
                                      OPTIONS      PER SHARE        PER SHARE
                                      -------   --------------   --------------
<S>                                   <C>       <C>              <C>
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
   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
   Granted ........................     1,018          12.73           10.38
   Exercised ......................    (4,198)          7.49            5.90
   Forfeited ......................      (100)          3.89            6.16
   Expired ........................       (60)         16.35           10.84
                                       ------      ---------        --------
December 31, 2004 .................     4,203      Cdn$ 5.04        US$ 5.08
                                       ======      =========        ========
Exercisable at December 31, 2004 ..     1,958      Cdn$ 4.31        US$ 3.44
                                       ======      =========        ========
</TABLE>

     In addition to the above stock options, OccuLogix may grant stock options
of its common stock to employees, directors and consultants under the terms of
the OccuLogix 2002 Stock Option Plan. Up to 4.5 million shares of OccuLogix's
common stock may be issued under the OccuLogix plan. As of December 31, 2004,
OccuLogix employees, directors and consultants held options to purchase 2.7
million shares of OccuLogix's common stock.

     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 are subject to variable option accounting,
and compensation expense is recorded


                                       67

<PAGE>

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, 2004, 1,000 U.S.
options were subject to variable option accounting. In 2004, the Company
recorded $0.1 million of expense related to these repriced options.

     Pro forma information regarding net income (loss) and earnings (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 2.84% for fiscal 2004,
2.35% for fiscal 2003, 2.5% for the transitional period 2002 and 4.25% for
fiscal 2002; no dividends; volatility factors of the expected market price of
the Company's common shares of 0.75 for fiscal 2004 and fiscal 2003, 0.70 for
the transitional period and 0.88 for fiscal 2002; and a weighted average
expected option life of 2.5 years for fiscal 2004, fiscal 2003 and the
transitional period, and 4.0 years for fiscal 2002. 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 fiscal 2004 was $4.9 million (fiscal 2003 - $2.2 million;
transitional period ended December 31, 2002 - $12,000; fiscal 2002 - $1.3
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.

16.  INCOME TAXES

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

<TABLE>
<CAPTION>
                                               DECEMBER 31,
                                          ---------------------
                                             2004        2003
                                          ---------   ---------
<S>                                       <C>         <C>
Deferred tax asset:
   Net operating loss carryforwards ...   $  89,444   $  81,670
   Fixed assets .......................       2,108         362
   Intangibles ........................      15,995      10,357
   Investments ........................      10,689      11,330
   Accruals and other reserves ........       5,889       6,718
   163J Adjustment ....................          --      12,676
   Stock options ......................       5,566          --
   Foreign tax credit .................          15          --
   Other ..............................       4,237       1,854
                                          ---------   ---------
Total .................................     133,943     124,967
   Valuation allowance ................    (132,111)   (122,831)
                                          ---------   ---------
                                          $   1,832   $   2,136
                                          =========   =========
Deferred tax liabilities:
   Practice management agreements .....   $   1,203   $   1,349
   Intangibles ........................         629         787
                                          ---------   ---------
                                          $   1,832   $   2,136
                                          =========   =========
</TABLE>

     As of December 31, 2004, the Company has net operating losses available for
carryforward for income tax purposes of approximately $235.4 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 $24.5 million expire between 2007 and 2013.

     The U.S. losses of $203.5 million expire between 2011 and 2024. The U.S.
losses include amounts of $116.2 million, relating to the acquisitions of 20/20,
Beacon Eye, LaserVision and OccuLogix, Inc. 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 income (loss)
before income taxes were as follows:


                                       68

<PAGE>

<TABLE>
<CAPTION>
                                                                            YEAR ENDED        SEVEN-MONTH     YEAR
                                                                           DECEMBER 31,      PERIOD ENDED     ENDED
                                                                        ------------------   DECEMBER 31,    MAY 31,
                                                                          2004       2003        2002         2002
                                                                        --------   -------   ------------   --------
<S>                                                                     <C>        <C>       <C>            <C>
Income tax expense (recovery) at the Canadian statutory rate of
   36.125% (fiscal 2003 - 35.1%; Transitional 2002 - 39.4%;
   fiscal 2002 - 40.3%) .............................................   $ 16,006   $(3,121)    $(16,731)    $(46,963)
Change in valuation allowance .......................................    (16,337)    1,929        5,824       10,025
Expenses not deductible for income tax purposes .....................        300       150       10,907       37,733
Change in Canadian tax rates ........................................         31     1,042           --           --
Corporate minimum tax, state tax and foreign tax ....................        600       508          851        1,221
Other ...............................................................         --        --           --         (232)
                                                                        --------   -------     --------     --------
                                                                        $    600   $   508     $    851     $  1,784
                                                                        ========   =======     ========     ========
</TABLE>

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                  YEAR ENDED     SEVEN-MONTH     YEAR
                                 DECEMBER 31,   PERIOD ENDED    ENDED
                                 ------------   DECEMBER 31,   MAY 31,
                                  2004   2003       2002         2002
                                  ----   ----   ------------   -------
<S>                              <C>     <C>    <C>            <C>
Current:
   Canada ....................    $150   $ 85       $ 67        $  112
   United States - federal ...      --     58        325           924
   United States - state .....     450    175        135           280
   Other .....................      --    190        324           468
                                  ----   ----       ----        ------
                                  $600   $508       $851        $1,784
                                  ====   ====       ====        ======
</TABLE>

17. COMMITMENTS AND CONTINGENCIES

Commitments

     The Company leases certain center facilities under operating leases with
terms generally of five to ten years. Certain leases contain rent escalation
clauses and free rent periods that are charged to rent expense on a
straight-line basis. The leases usually contain renewal clauses at the Company's
option at fair market value. As of December 31, 2004, the Company has
commitments relating to non-cancellable operating leases for rental of office
space and equipment, which require future minimum payments aggregating
approximately $22.5 million. Future minimum payments over the next five years
and thereafter are as follows:

<TABLE>
<S>                                <C>
2005............................   $ 8,141
2006............................     6,128
2007............................     3,728
2008............................     2,378
2009............................     1,372
Thereafter......................       724
                                   -------
                                   $22,471
                                   =======
</TABLE>

     As of December 31, 2004, the Company had commitments related to long-term
marketing contracts which require payments totaling $2.2 million in 2005 and
$0.2 million in 2006.

Commitments and Contingencies Related to OccuLogix

     OccuLogix entered into three separate agreements to obtain the exclusive
license to certain patents. OccuLogix is required to make royalty payments
totaling 3.0% of its product sales. In addition, OccuLogix is required to make
minimum advance royalty payments of $37,500 quarterly, which will be credited
against future royalty payments to be made in accordance with the agreements.


                                       69

<PAGE>
     Future minimum royalty payments under the OccuLogix agreements as at
December 31, 2004 are approximately as follows:

<TABLE>
<S>                                <C>
2005............................   $  150
2006............................      150
2007............................      150
2008............................      150
2009 and thereafter.............    1,275
                                   ------
                                   $1,875
                                   ======
</TABLE>

     In 2004, OccuLogix placed a purchase order for inventory representing a
total commitment of $2.7 million. As at December 31, 2004, $0.4 million has been
purchased against that purchase order.

     In addition, OccuLogix has committed to purchase minimum quantities of
inventory beginning six months after FDA approval of the RHEO(TM) System.
Minimum purchase orders for the fourth year shall be determined immediately
after the term of the first year by mutual consent but shall not be less than
that of the previous year. This same method shall be used in subsequent years to
determine future minimum purchase quantities such that minimum purchase
quantities are always fixed for three years. Future minimum annual commitments
after FDA approval are approximately as follows:

<TABLE>
<S>                                <C>
Year 1..........................   $2,565
Year 2..........................    4,275
Year 3..........................    6,413
</TABLE>

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 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. In December 2004, the Company was advised by the office of the U.S.
Attorney in Cleveland that the U.S. Attorney no longer had a need for the
documents the Company supplied in compliance with the above-referenced
subpoenas. Although there can be no assurance, the Company believes that this
matter has been concluded.

     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

     TLCVision 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. TLCVision 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 have been interpreting laws and regulations more


                                       70

<PAGE>

aggressively to the detriment of taxpayers such as TLCVision and its customers.
TLCVision 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 TLCVision and issued
proposed sales tax adjustments in the aggregate amount of approximately $0.8
million for various periods through 2004 on the basis that certain of
TLCVision's business arrangements constitute at least a partially taxable
transaction rather than an exempt service. TLCVision's discussions with these
three states are ongoing. If it is determined that any sales tax is owed,
TLCVision believes that, under applicable laws and TLCVision's contracts with
its customers, each customer is ultimately responsible for the payment of any
applicable sales and use taxes in respect of TLCVision's services. However,
TLCVision may be unable to collect any such amounts from its customers and in
such event would remain responsible for payment. TLCVision 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. TLCVision has
evaluated and implemented a comprehensive sales tax reporting system. TLCVision
believes that it has adequate provisions in its financial statements with
respect to these matters.

18. SEGMENT INFORMATION

     The Company has three reportable segments: refractive, mobile cataract and
AMD. 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 laser centers and
the fixed and mobile access business. The mobile cataract segment provides
surgery specifically for the treatment of cataracts. The Company acquired the
mobile cataract segment in the LaserVision acquisition; therefore, no amounts
are shown for that segment in periods prior to June 1, 2002. The AMD segment
includes OccuLogix, Inc., OccuLogix, LP, Rheo and investments in Vascular
Sciences. The AMD segment is pursuing commercial applications of treatments of
dry age related muscular degeneration. The Company entered into a joint venture
with OccuLogix in 2002. The Company first incurred expenses related to AMD
during the transitional period 2002; therefore, no amounts are shown for AMD 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.

     Inter-segment 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 laser
centers. Where the Company manages laser centers due to certain state law
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. Prior to
2004, the costs associated with arranging for these professional services were
reported as a cost of the professional corporation and not of the Company. In
2004, the costs associated with arranging for these professional services were
reported as a cost of the Company due to the adoption of FIN 46.

     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.

                                       71

<PAGE>

     The Company's business segments were as follows:

<TABLE>
<CAPTION>
                                                                  MOBILE
          YEAR ENDED DECEMBER 31, 2004              REFRACTIVE   CATARACT     AMD      OTHER      TOTAL
          ----------------------------              ----------   --------   -------   -------   --------
<S>                                                 <C>          <C>        <C>       <C>       <C>
Revenues.........................................    $177,389    $27,040    $   837   $36,929   $242,195
Expenses:
Doctors' compensation............................      28,156         --        147         7     28,310
Operating........................................     121,419     22,325      2,377    24,185    170,306
Depreciation expense.............................      10,488      2,197        104       794     13,583
Amortization of intangibles                             3,207        417         --       474      4,098
Research and development.........................          --         --      1,249      (400)       849
Adjustment to the fair value of investments......      (1,206)        --         --        --     (1,206)
Restructuring, severance and other charges.......       2,755         --                   --      2,755
                                                     --------    -------    -------   -------   --------
                                                      164,819     24,939      3,877    25,060    218,695
                                                     --------    -------    -------   -------   --------
Income (loss) from operations....................      12,570      2,101     (3,040)   11,869     23,500
Other income and interest expense, net...........       1,346       (114)    25,829    (1,357)    25,704
Minority interests...............................      (1,863)        --        411    (5,501)    (6,953)
Earnings from equity investments.................       1,575         --         --       482      2,057
Income taxes.....................................        (303)        (3)        --      (294)      (600)
                                                     --------    --------   -------   -------   --------
Net income.......................................    $ 13,325    $ 1,984    $23,200   $ 5,199   $ 43,708
                                                     ========    =======    =======   =======   ========
Total assets.....................................    $191,734    $15,716    $61,440   $36,351   $305,241
                                                     ========    =======    =======   =======   ========
Purchases of long-lived assets...................    $  4,071    $ 1,497    $   227   $ 7,386   $ 13,181
                                                     ========    =======    =======   =======   ========
</TABLE>

<TABLE>
<CAPTION>
                                                                  MOBILE
          YEAR ENDED DECEMBER 31, 2003              REFRACTIVE   CATARACT     AMD      OTHER      TOTAL
          ----------------------------              ----------   --------   -------   -------   --------
<S>                                                 <C>          <C>        <C>       <C>       <C>
Revenues.........................................    $146,192     $24,812   $   622   $24,054   $195,680
Expenses:
Doctors' compensation............................      10,475          --       139        20     10,634
Operating........................................     124,786      20,623       906    15,746    162,061
Depreciation expense.............................      12,936       2,368        47       557     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, severance and other charges.......       2,040          --        --        --      2,040
                                                     --------     -------   -------   -------   --------
                                                      155,889      23,388     2,690    16,753    198,720
                                                     --------     -------   -------   -------   --------
Income (loss) from operations....................      (9,697)      1,424    (2,068)    7,301     (3,040)
Other income and interest expense, net...........        (149)        (61)       (3)     (966)    (1,179)
Minority interests...............................      (1,709)         --        --    (2,963)    (4,672)
Income taxes.....................................         151          18        --      (677)      (508)
                                                     ---------    -------   -------   -------   --------
Net income (loss)................................    $(11,404)    $ 1,381   $(2,071)  $ 2,695   $ (9,399)
                                                     =========    =======   =======   =======   ========
Total assets.....................................    $140,796     $13,972   $   490   $35,490   $190,748
                                                     ========     =======   =======   =======   ========
Purchases of long-lived assets...................    $    707     $ 2,587   $   382   $ 4,642   $  8,318
                                                     ========     =======   =======   =======   ========
</TABLE>

<TABLE>
<CAPTION>
                                                                  MOBILE
   SEVEN-MONTH PERIOD ENDED DECEMBER 31, 2002       REFRACTIVE   CATARACT     AMD      OTHER      TOTAL
   ------------------------------------------       ----------   --------   -------   -------   --------
<S>                                                 <C>          <C>        <C>       <C>       <C>
Revenues.........................................    $ 76,288     $12,944   $    --   $10,922   $100,154
Expenses:
Doctors' compensation............................       6,523          --        --        --      6,523
Operating........................................      79,869      10,040        30     8,193     98,132
Research and development.........................          --          --     2,000        --      2,000
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, severance and other charges.......       4,227          --        --        --      4,227
                                                     --------     -------   -------   -------   --------
                                                      126,805      11,694     2,030     8,718    149,247
                                                     --------     -------   -------   -------   --------
Income (loss) from operations....................     (50,517)      1,250    (2,030)    2,204    (49,093)
Other income and interest expense, net...........       8,132         (73)       --      (306)     7,753
Minority interests...............................        (238)         --        --      (914)    (1,152)
Income taxes.....................................      (1,041)         (1)       --       191       (851)
                                                     --------     -------   -------   -------   --------
Net income (loss)................................    $(43,664)    $ 1,176   $(2,030)  $ 1,175   $(43,343)
                                                     ========     =======   =======   =======   ========
Total assets.....................................    $161,855     $13,323   $    30   $20,848   $196,056
                                                     ========     =======   =======   =======   ========
Purchases of long-lived assets...................    $  3,652     $ 1,390   $    30   $ 9,462   $ 14,534
                                                     ========     =======   =======   =======   ========
</TABLE>


                                       72

<PAGE>

<TABLE>
<CAPTION>
             YEAR ENDED MAY 31, 2002                  REFRACTIVE     OTHER      TOTAL
             -----------------------                  ----------   --------   ---------
<S>                                                   <C>          <C>        <C>
Revenues...........................................   $ 115,908    $ 18,843   $ 134,751
Expenses:
Doctors' compensation..............................      10,225          --      10,225
Operating..........................................     111,708      13,856     125,564
Depreciation expense...............................      10,143         860      11,003
Amortization of intangibles........................       9,897         452      10,349
Research and development...........................          --       2,000       2,000
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, severance and other charges.........       8,750          --       8,750
                                                      ---------    --------   ---------
                                                        262,221      31,199     293,420
                                                      ---------    --------   ---------
Loss from operations...............................    (146,313)    (12,356)   (158,669)
Other income and interest expense, net.............        (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
                                                      =========    ========   =========
Purchases of long-lived assets.....................   $   2,707    $    620   $   3,327
                                                      =========    ========   =========
</TABLE>

The Company's geographic segments are as follows:

<TABLE>
<CAPTION>
       YEAR ENDED DECEMBER 31, 2004           CANADA   UNITED STATES     TOTAL
       ----------------------------          -------   -------------   ---------
<S>                                          <C>       <C>             <C>
Revenues..................................   $12,596      $229,599      $242,195
Doctors' compensation.....................     1,948        26,362        28,310
                                             -------      --------      --------
Net revenue after doctors' compensation...   $10,648      $203,237      $213,885
                                             =======      ========      ========
Total fixed assets and intangibles........   $ 9,825      $108,288      $118,113
                                             =======      ========      ========
</TABLE>

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

<TABLE>
<CAPTION>
SEVEN-MONTH PERIOD ENDED DECEMBER 31, 2002    CANADA   UNITED STATES     TOTAL
------------------------------------------   -------   -------------   ---------
<S>                                          <C>          <C>           <C>
Revenues..................................   $ 5,588      $ 94,566      $100,154
Doctors' compensation.....................     1,424         5,099         6,523
                                             -------      --------      --------
Net revenue after doctors' compensation...   $ 4,164      $ 89,467      $ 93,631
                                             =======      ========      ========
Total fixed assets and intangibles........   $11,258      $116,768      $128,026
                                             =======      ========      ========
</TABLE>

<TABLE>
<CAPTION>
          YEAR ENDED MAY 31, 2002             CANADA   UNITED STATES     TOTAL
          -----------------------            -------   -------------   ---------
<S>                                          <C>          <C>           <C>
Revenues..................................   $13,208      $121,543      $134,751
Doctors' compensation.....................     1,260         8,965        10,225
                                             -------      --------      --------
Net revenue after doctors' compensation...   $11,948      $112,578      $124,526
                                             =======      ========      ========
Total fixed assets and intangibles........   $12,156      $141,682      $153,838
                                             =======      ========      ========
</TABLE>

19. FINANCIAL INSTRUMENTS

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

The fair value of the Company's auction rate securities equals cost due to the
short time period between the reset dates for the interest rates. The Company's
held-to-maturity short-term investments are bank certificates of deposit for
which cost approximates fair market value.

     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.

20. RESTRUCTURING AND OTHER CHARGES

     The following table details restructuring charges recorded during the year
ended December 31, 2004:


                                       73

<PAGE>
<TABLE>
<CAPTION>
                                                            ACCRUAL BALANCE
                                                                 AS OF
                                 RESTRUCTURING     CASH       DECEMBER 31,
                                    CHARGES      PAYMENTS         2004
                                 -------------   --------   ---------------
<S>                              <C>             <C>        <C>
Severance.....................       $2,557      $(1,057)        $1,500
Lease commitments, net of
   sub lease income...........           13           --             13
                                     ------      -------         ------
Total restructuring charges...       $2,570      $(1,057)        $1,513
                                     ======      =======         ======
</TABLE>

     The Company recorded a total charge of $2.8 million during the year ended
December 31, 2004 consisting of a $2.6 million charge for severance payments to
two officers under the terms of employment contracts and a $0.2 million charge
related to ongoing lease payment obligations at closed centers. Of the $0.2
million charge that related to closed centers, $13,000 related to a center
closing in 2004 while the remaining balance related to adjustments to accruals
for centers closed in previous years. The remaining severance payments are
expected to be paid out within the next twelve months, while the lease costs
will be paid out over the remaining terms of the leases.

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

<TABLE>
<CAPTION>
                                                                             ACCRUAL                                   ACCRUAL
                                                                             BALANCE                                   BALANCE
                                                                              AS OF                                     AS OF
                                  RESTRUCTURING     CASH      NON-CASH     DECEMBER 31,       CASH       NON-CASH    DECEMBER 31,
                                     CHARGES      PAYMENTS   ADJUSTMENTS       2003         PAYMENTS   ADJUSTMENTS       2004
                                  -------------   --------   -----------   ------------     --------   -----------   ------------
<S>                                 <C>             <C>        <C>           <C>            <C>        <C>           <C>
Severance......................       $  360       $(194)       $  --          $166           $(166)       $ --            $--
Lease commitments,  net of
   sublease income.............          864        (256)          --           608            (525)        (18)            65
Write-down of fixed assets.....          370          --         (370)           --              --          --             --
Prepaid expense and
   investment charges..........          507        (200)        (307)           --              --          --             --
Laser commitments..............          180        (180)          --            --              --          --             --
                                      ------       -----        -----          ----           -----        ----            ---
Total restructuring charges....       $2,281       $(830)       $(677)         $774           $(691)       $(18)           $65
                                      ======       =====        =====          ====           =====        ====            ===
</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. All costs have been
paid out as of December 31, 2004, 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
transitional period ended December 31, 2002:

<TABLE>
<CAPTION>
                                                                             ACCRUAL                                   ACCRUAL
                                                                             BALANCE                                   BALANCE
                                                                              AS OF                                     AS OF
                                  RESTRUCTURING     CASH      NON-CASH     DECEMBER 31,       CASH       NON-CASH    DECEMBER 31,
                                     CHARGES      PAYMENTS   ADJUSTMENTS       2004         PAYMENTS   ADJUSTMENTS       2004
                                  -------------   --------   -----------   ------------     --------   -----------   ------------
<S>                                 <C>             <C>        <C>           <C>            <C>        <C>           <C>
Severance......................       $1,120      $(1,047)     $   (73)        $ --           $   --        $ --          $ --
Lease commitments, net of
    sublease income............          978         (420)        (221)         337             (240)        166           263
Write-down of fixed assets.....        2,266           --       (2,266)          --               --          --            --
Sale of center to third
    party......................          342           (7)        (335)          --               --          --            --
                                      ------      --------     --------        ----           ------        ----          ----
Total restructuring charges....       $4,706      $(1,474)     $(2,895)        $337           $ (240)       $166          $263
                                      ======      =======      =======         ====           ======        ====          ====
</TABLE>

     During the transitional period 2002, the Company recorded a $4.2 million of
net restructuring charges for the closure of 13 centers and the elimination of
36 full-time equivalent positions primarily at the Company's Toronto
headquarters. The net charge consists of $4.7 million primarily related to
center closings and the corporate reorganization, 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, 2004, 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:

                                       74
<PAGE>

<TABLE>
<CAPTION>
                                                                             ACCRUAL                                   ACCRUAL
                                                                             BALANCE                                   BALANCE
                                                                              AS OF                                     AS OF
                                  RESTRUCTURING     CASH      NON-CASH     DECEMBER 31,       CASH       NON-CASH    DECEMBER 31,
                                     CHARGES      PAYMENTS   ADJUSTMENTS       2003         PAYMENTS   ADJUSTMENTS       2004
                                  -------------   --------   -----------   ------------     --------   -----------   ------------
<S>                                 <C>             <C>        <C>           <C>            <C>        <C>           <C>
Severance......................       $2,907      $(2,473)     $  (434)        $ --           $  --         $ --          $ --
Lease commitments, net of
   sublease income.............        2,765       (1,826)          50          989            (569)         528           948
Termination costs of doctors
   contracts...................          146         (146)          --           --              --           --            --
Laser commitments..............          652         (300)        (352)          --              --           --            --
Write-down of fixed assets.....        2,280           --       (2,280)          --              --           --            --
                                      ------      -------      -------         ----           -----         ----          ----
Total restructuring and
   other charges...............       $8,750      $(4,745)     $(3,016)        $989           $(569)        $528          $948
                                      ======      =======      =======         ====           =====         ====          ====
</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.

21. SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash transactions:

<TABLE>
<CAPTION>
                                                                           YEAR ENDED      SEVEN-MONTH     YEAR
                                                                          DECEMBER 31,    PERIOD ENDED     ENDED
                                                                        ---------------   DECEMBER 31,    MAY 31,
                                                                         2004     2003        2002         2002
                                                                        ------   ------   ------------   --------
<S>                                                                     <C>      <C>      <C>            <C>
Debt and capital lease obligations relating to equipment purchases...
                                                                        $2,579   $8,493      $1,396      $     --
Option and warrant reduction.........................................    5,379    2,892         720            --
Issuance of stock upon meeting certain earnings criteria.............      389       --          --            60
Retirement of treasury stock.........................................       --    2,432          --            --
Treasury stock arising from acquisition..............................       --       --          --         2,432
Treasury stock to employee benefit plan..............................       --      191          --            --
Issuance of options/stock as remuneration............................       --       --          --           222
Capital stock issued for acquisitions................................       --       96          --       111,058
Issuance of options arising from acquisition.........................       --       --          --        11,001
</TABLE>

Cash paid for the following:

<TABLE>
<CAPTION>
                                     SEVEN-MONTH    YEAR
                     YEAR ENDED     PERIOD ENDED    ENDED
                    DECEMBER 31,    DECEMBER 31,   MAY 31,
                   2004     2003        2002         2002
                  ------   ------       ----       -------
<S>               <C>      <C>          <C>        <C>
Interest.......   $2,133   $2,618       $830       $1,693
                  ======   ======       ====       ======
Income taxes...   $  835   $  533       $595       $1,382
                  ======   ======       ====       ======
</TABLE>

22. RELATED PARTY TRANSACTIONS

     On March 1, 2001, a limited liability company wholly owned by TLCVision
acquired all of the non medical assets relating to the refractive practice of
Dr. Mark Whitten prior to Dr. Whitten becoming a director of TLCVision. 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 TLCVision from May 2002 to May 2003. At December 31,
2004 the remaining discounted amounts payable to Dr. Whitten of $2.3 million
($4.4 million at December 31, 2003) are reported as current maturities of
long-term debt. (See Note 11, "Long-Term Debt"). In addition, TLCVision has
entered into service agreements with companies that own Dr. Whitten's refractive
satellite operations located in Frederick, Maryland, and Charlottesville,
Virginia, under which TLCVision will provide such companies with services in
return for a fee. During the years ended December 31, 2004 and 2003, the
seven-month period ended December 31, 2002 and the year ended May 2002, the
Company received revenue from these service agreements of $0.9 million, $0.7
million, $0.3 million and $0.8 million, respectively.

     LaserVision, a subsidiary of TLCVision, had 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 TLCVision, 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


                                       75

<PAGE>

and owns 40% of the partnership. Under the terms of the partnership agreement,
LaserVision received a revenue-based management fee from the partnership until
this unit was retired in 2003. Subsequent to the acquisition of LaserVision, the
Company received $0, $48,000 and $21,000 in management fees from the partnership
for the years ended December 31, 2004 and 2003 and the transitional period ended
December 31, 2002, respectively. Dr. Lindstrom also receives compensation from
TLCVision in his capacity as medical director of TLCVision 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 $1.4 million, $1.2 million and $0.6 million as a result of
the agreement for the years ended December 31, 2004 and 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 TLCVision, 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 former director of the Company and the
former Chief Executive Officer of LaserVision, was paid $2.9 million and
received 500,000 TLCVision stock options in a severance arrangement in
connection with the LaserVision acquisition.

     Elias Vamvakas, Dr. Richard Lindstrom, and Thomas Davidson, all directors
of the Company, also serve as directors of Occulogix. Mr. Vamvakas also serves
as the Executive Chairman and Chief Executive Officer of Occulogix. The board of
directors of Occulogix granted Mr. Vamvakas stock options to purchase 4,583
shares of common stock at an exercise price of $1.30 per share. These stock
options are fully vested and exercisable. In addition, the board granted Mr.
Vamvakas stock options to purchase 500,000 shares of common stock at an exercise
price of $0.99 per share. These stock options were to vest and become
exercisable over a three year period but became fully vested upon the successful
completion of the Occulogix IPO in December 2004. Dr. Lindstrom and Mr. Davidson
each received options to purchase 25,000 shares of common stock at an exercise
price of $12.00 per share in 2004 in conjunction with the Occulogix IPO. The
options issued to Dr. Lindstrom and Mr. Davidson vest over three years and
expire ten years from the date of grant. Dr. Lindstrom and Mr. Davidson received
$9,000 and $16,000, respectively, for the year ended December 31, 2004 as cash
compensation for service as outside directors of Occulogix.

     Dr. William David Sullins, Jr., a former director of the Company, served as
an outside director of Occulogix until 2004. For the years ended December 31,
2004 and 2003, Dr. Sullins received $15,000 and $10,000 respectively as cash
compensation for service as an outside director. The board of directors of
Occulogix granted Dr. Sullins stock options to purchase 4,583 shares of common
stock at an exercise price of $1.30 per share. These stock options are fully
vested and exercisable. The board also granted Dr. Sullins stock options to
purchase 25,000 shares of common stock at an exercise price of $0.99 per share.
These stock options were to vest and become exercisable over a three year period
but became fully vested upon the successful completion of the Occulogix IPO.

     During the years ended December 31, 2004 and 2003, the seven-month period
ended December 31, 2002, and the year ended May 31, 2002, the law firm Gourwitz
and Barr, P.C., of which Mr. Gourwitz, a director of the Company until May 2003,
provided legal services to TLCVision and was paid $47,000, $87,000, $98,000 and
$95,000, respectively.

     Included in accrued liabilities as of December 31, 2004, is $100,000 due to
Apheresis Technologies, Inc. (ATI), a company controlled by certain stockholders
of OccuLogix. As a result of amending a distribution services agreement between
ATI and OccuLogix, OccuLogix agreed to pay ATI $100,000 so that it would have
the sole discretion as to when the agreement would terminate.

     On September 29, 2004, OccuLogix signed a product purchase agreement with
Rheo Therapeutics Inc. (an Ontario, Canada corporation) for the purchase from
OccuLogix of 8,004 treatment sets over the period from October 2004 to December
2005, a transaction valued at $6.0 million, after introductory rebates. Subject
to availability, the purchaser may order up to an additional 2,000 treatment
sets. Dr. Machat, who is an investor in and one of the directors of Rheo
Therapeutics Inc. was a co-founder and former director of TLCVision. As of
December 31, 2004, Rheo Therapeutics Inc. had purchased 660 treatment sets and 2
pumps. Included in amounts receivable as of December 31, 2004 is $0.3 million
due from Rheo Therapeutics Inc.



23. SUBSEQUENT EVENT

     On March 1, 2005, the Company sold its interest in Aspen to National
Surgical Centers, Inc.


                                       76

<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 occurred during the quarter ended December 31,
2004, that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

        MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Management of the Company is responsible for establishing and maintaining
effective internal control over financial reporting as defined in Rules
13a-15(f) under the Securities Exchange Act of 1934. The Company's internal
control over financial reporting is designed to provide reasonable assurance to
the Company's management and board of directors regarding the preparation and
fair presentation of published financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.

     Management assessed the effectiveness of the Company's internal control
over financial reporting as of December 31, 2004. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework. Based on our assessment, we believe that, as of December 31, 2004,
the Company's internal control over financial reporting is effective based on
those criteria. However, management did not assess the effectiveness of the
internal controls of OccuLogix, Inc., which is included in the Company's 2004
consolidated financial statements and constituted $62.2 million and $30.3
million of assets and net assets, respectively, as of December 31, 2004 and $0.2
million and $0.5 million of revenues and net loss, respectively, for the period
from December 8, 2004 through December 31, 2004. Management did not assess the
effectiveness of internal control over financial reporting at this entity
because the Company did not have control of the entity until December 8, 2004
and therefore did not have time, in practice, to assess those controls.

     Management's assessment of the effectiveness of internal control over
financial reporting as of December 31, 2004, has been audited by Ernst & Young,
LLP, an independent registered public accounting firm who also audited the
Company's consolidated financial statements. Ernst & Young's attestation report
on management's assessment of the Company's internal control over financial
reporting is included elsewhere herein.


                                       77

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of TLC Vision Corporation

     We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that TLC
Vision Corporation maintained effective internal control over financial
reporting as of December 31, 2004, based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). TLC Vision
Corporation's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     As indicated in the accompanying Management's Report on Internal Control
over Financial Reporting, management's assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of OccuLogix, Inc., which is included in the 2004 consolidated
financial statements of TLC Vision Corporation and constituted $62.2 million and
$30.3 million of assets and net assets, respectively, as of December 31, 2004
and $0.2 million and $0.5 million of revenues and net loss, respectively, for
the year then ended. Our audit of internal control over financial reporting of
TLC Vision Corporation also did not include an evaluation of the internal
control over financial reporting of OccuLogix, Inc.

     In our opinion, management's assessment that TLC Vision Corporation
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, TLC Vision Corporation maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2004, based on the COSO criteria.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets of TLC Vision Corporation as of December 31, 2004 and 2003, and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the two years in the period ended December 31, 2004, the
seven-month period ended December 31, 2002, and the year ended May 31, 2002 of
TLC Vision Corporation and our report dated March 11, 2005 expressed an
unqualified opinion thereon.


St. Louis Missouri                      /s/ ERNST & YOUNG LLP
March 11, 2005                          ----------------------------------------


                                       78

<PAGE>

                                    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, 2004.

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, 2004.

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, 2004.

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, 2004.

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, 2004.

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

     (1) Financial statements:

     Report of Independent Registered Public Accounting Firm.

     Consolidated Statements of Operations - Years Ended December 31, 2004 and
     2003, transitional period ended December 31, 2002 and Year Ended May 31,
     2002.

     Consolidated Balance Sheets as of December 31, 2004 and 2003.

     Consolidated Statements of Cash Flows - Years Ended December 31, 2004 and
     2003, transitional period ended December 31, 2002 and Year Ended May 31,
     2002.

     Consolidated Statements of Stockholders' Equity - Years Ended December 31,
     2004 and 2003, transitional period ended December 31, 2002 and Year Ended
     May 31, 2002.

     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


                                       79

<PAGE>

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

     See Exhibit Index.


                                       80

<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/ JAMES C. WACHTMAN
                                           -------------------------------------
                                           James C. Wachtman,
                                           Chief Executive Officer

March 11, 2005

     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/ JAMES C WACHTMAN          Chief Executive Officer and Director    March 11, 2005
--------------------------------
       James C. Wachtman


     /s/ STEVEN P. RASCHE          Chief Financial Officer and Treasurer   March 11, 2005
--------------------------------
       Steven P. Rasche


      /s/ ELIAS VAMVAKAS           Chairman of the Board of Directors      March 11, 2005
--------------------------------
        Elias Vamvakas


    /s/ THOMAS N. DAVIDSON         Director                                March 11, 2005
--------------------------------
      Thomas N. Davidson


     /s/ WARREN S. RUSTAND         Director                                March 11, 2005
--------------------------------
       Warren S. Rustand


/s/ RICHARD L. LINDSTROM, M.D.     Director                                March 11, 2005
--------------------------------
  Richard L. Lindstrom, M.D.


       /s/ TOBY S. WILT            Director                                March 11, 2005
--------------------------------
         Toby S. Wilt
</TABLE>


                                       81

<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)      AMOUNTS       OF PERIOD
                                           ----------   ---------   --------   -------------   ----------
                                                                   (IN THOUSANDS)
<S>                                        <C>          <C>         <C>        <C>             <C>
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

Fiscal 2004
Provision for contractual allowances and
   doubtful accounts receivable             $  2,583     $    124    $    --       $(380)       $  2,327
Provision against investments and other
   assets                                      3,518           --     (1,206)         --           2,312
Deferred tax asset valuation allowance       122,831      (16,337)    25,617          --         132,111
</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. The Company reversed the remainder of the
reserve in fiscal 2004 due to consistent payment history and continually
improving financial strength of the debtor. Additional deferred tax asset
valuation allowance of $16,094 related to acquisition of deferred tax assets of
OccuLogix for which there was a valuation allowance. Remaining $9,523 was the
effect of stock-based compensation and prior year return-to-provision
adjustments.


                                       82

<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 March 4, 2005 between the
          Company and CIBC Mellon Trust Company (incorporated by reference
          to Exhibit A to the Company's Registration Statement on Form 8-A
          filed with the Commission on March 14, 2005 (file no. 000-29302))

10.1*     TLC Vision Corporation Amended and Restated Share Option Plan
          (incorporated by reference to Exhibit 4.2 to the Company's
          Registration Statement on Form S-8 filed with the Commission on
          June 23, 2004 (file no. 333-116769))

10.2*     TLC Vision Corporation 2004 Employee Share Purchase Plan (incorporated
          by reference to Exhibit 4.1 to the Company's Registration Statement
          on Form S-8 filed with the Commission on June 23, 2004
          (file no. 333-116769))

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 (incorporated by reference to Exhibit 10.12 to the Company's
          10-K for the year ended December 31, 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 (incorporated by reference to Exhibit 10.14 to the Company's
          10-K for the year ended December 31, 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)

10.16*    Severance Agreement with Elias Vamvakas dated October 25, 2004
</TABLE>


                                       83

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                 DESCRIPTION
-------                               -----------
<S>       <C>
10.17*    Employment Agreement with Steve Rasche dated July 1, 2004

10.18*    Employment Agreement with Brian Andrew dated December 31, 2004

21        List of the Company's Subsidiaries

23        Consent of Independent Registered Public Accounting Firm

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.

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

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

99        Reconciliation between Canadian and United States Generally Accepted
          Accounting Principles
</TABLE>

-    Management contract or compensatory plan arrangement.


                                       84