~~Table~~ UNITED ~~of Contents~~STATES

~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~WASHINGTON, ~~AND~~D.C. ~~EXCHANGE COMMISSION~~ 20549

~~WASHINGTON,~~FORM ~~D.C. 20549~~ 10-K

~~FORM 10-K~~☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013

x☐ ~~ANNUAL~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to

~~For~~Commission ~~the~~file ~~fiscal~~number ~~year ended December 31, 2012~~ 0-27610

¨LCA-Vision ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~Inc.

~~For the Transition Period From to~~ _________________________________________________________________

~~Commission~~(Exact ~~file~~name ~~number~~of ~~0-27610~~registrant as specified in charter)

LCA-Vision Inc.

Delaware		11-2882328
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7840 Montgomery Road, Cincinnati, OH		45236
(Address of principal executive offices)		(Zip Code)

~~(Exact~~Registrant’s ~~name~~telephone ofnumber, ~~registrant~~including asarea ~~specified~~code: ~~in charter~~(513) 792-9292

Delaware		11-2882328
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
7840 Montgomery Road, Cincinnati, OH		45236
(Address of principal executive offices)		(Zip Code)

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

Registrant’s telephone number, including area code: (513) 792-9292

Title of each class		Name of each exchange on which registered
Common Stock, $.001 par value		The NASDAQ Stock Market

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

Title of each class		Name of each exchange on which registered
Common Stock, $.001 par value		The NASDAQ Stock Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

~~Securities~~Yes No ~~registered pursuant to Section 12(g) of the Act: None~~ X

Indicate by check mark if the registrant is anot ~~well-known~~required ~~seasoned~~to ~~issuer,~~file asreports ~~defined~~pursuant into ~~Rule~~Section ~~405~~13 or Section 15(d) of the ~~Securities~~Act.

~~Act.~~ Yes ¨ No x X

Indicate by check mark ifwhether the registrant is(1) ~~not~~has filed all reports required to ~~file~~be ~~reports pursuant~~filed toby Section 13 or ~~Section~~ 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

~~Act.~~ Yes ¨ X No x _____

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all reports~~electronically and posted on its corporate Website, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Section 13~~posted orpursuant ~~15(d)~~to ofRule ~~the~~405 ~~Securities~~of ~~Exchange~~Regulation ~~Act~~S-T (§232.405 of ~~1934~~this chapter) during the preceding 12 months, ~~and~~ (~~2) has~~or ~~been~~for ~~subject to~~ such ~~filing~~shorter ~~requirements~~period ~~for~~that the ~~past~~registrant 90was ~~days. Yes x No ¨~~required to submit and post such files).

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x X No ¨ ____

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Act).~~ Yes ¨ No x X

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 30, ~~2012~~2013, the last business day of the registrant’s most recently completed second quarter, was approximately $8158.81 million based on the closing price as reported on The NASDAQ Stock Market.

The number of shares outstanding of the registrant’'s Common Stock as of February 15 25, ~~2013~~2014 was 19,~~050~~254,~~504~~175.

~~DOCUMENTS INCORPORATED BY REFERENCE~~ 1

~~Portions~~LCA-VISION ~~of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held May 21, 2013 are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Report~~INC.

~~Table~~FISCAL ofYEAR ~~Contents~~2013 FORM 10-K ANNUAL REPORT

~~LCA-VISION~~TABLE ~~INC.~~OF CONTENTS

FISCAL YEAR 2012 FORM 10-K ANNUAL REPORT

		Page
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	17

Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	18
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 8.	Financial Statements and Supplementary Data	27
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	48
Item 9A.	Controls and Procedures	48
Item 9B.	Other Information	51

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	51
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	67
Item 14.	Principal Accountant Fees and Services	68

Part IV
Item 15.	Exhibits, Financial Statement Schedules	68
	Signatures	71

~~TABLE OF CONTENTS~~ 2

		Page
Part I
Item 1.	Business		3
Item 1A.	Risk Factors		11
Item 1B.	Unresolved Staff Comments		16
Item 2.	Properties		16
Item 3.	Legal Proceedings		17
Item 4.	Mine Safety Disclosures		17
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		17
Item 6.	Selected Financial Data		18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 8.	Financial Statements and Supplementary Data		27
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		48
Item 9A.	Controls and Procedures		48
Item 9B.	Other Information		50
Part III
Item 10.	Directors, Executive Officers and Corporate Governance		50
Item 11.	Executive Compensation		50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		50
Item 13.	Certain Relationships and Related Transactions, and Director Independence		50
Item 14.	Principal Accountant Fees and Services		50
Part IV
Item 15.	Exhibits, Financial Statement Schedules		51
	Signatures		53

PART I

2SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

~~Table~~Certain statements contained in this Annual Report on Form 10-K, including information with respect to our future business plans, constitute "forward-looking statements" within the meaning of ~~Contents~~Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by our forward-looking statements. These factors include those set forth in “Item 1A - Risk Factors.”

~~PART~~Item I1. Business

~~SPECIAL~~Background ~~NOTE~~and ~~REGARDING~~History ~~FORWARD-LOOKING~~of ~~INFORMATION~~ Company

~~Certain~~We ~~statements~~are ~~contained~~a inprovider ~~this~~of ~~Annual Report on Form 10~~fixed-K,site ~~including~~laser ~~information~~vision ~~with~~correction ~~respect~~services toat our ~~future~~LasikPlus® ~~business~~vision ~~plans,~~centers. ~~constitute~~Our ~~“forward-looking~~vision ~~statements”~~centers ~~within~~provide the ~~meaning~~staff, ~~of Section 27A~~facilities, ofequipment ~~the~~and ~~Securities~~support ~~Act~~services offor ~~1933~~performing ~~and~~laser ~~Section 21E~~vision ofcorrection ~~the~~that ~~Securities~~employ ~~Exchange~~advanced ~~Act~~laser oftechnologies ~~1934.~~to ~~For~~help ~~this~~correct ~~purpose~~nearsightedness, ~~any~~farsightedness ~~statements~~and ~~that~~astigmatism. Our vision centers are ~~not~~supported ~~statements~~by ofindependent ~~historical~~ophthalmologists ~~fact~~and ~~may~~credentialed beoptometrists, ~~deemed~~as towell beas ~~forward-looking~~other ~~statements~~healthcare professionals. ~~Without~~The ~~limiting the~~ophthalmologists ~~foregoing,~~perform the ~~words~~laser ~~“believes,”~~vision ~~“may,”~~correction ~~“will,”~~procedures ~~“estimates,”~~in ~~“continues,”~~our ~~“anticipates,”~~vision ~~“intends~~centers,” ~~“plans,”~~and ~~“expects”~~the ~~and~~ophthalmologists ~~similar~~or ~~expressions~~optometrists ~~are~~conduct ~~intended to~~pre-procedure ~~identify~~evaluations ~~forward~~and post-~~looking~~operative ~~statements~~follow-up care in-center. ~~There~~Most ~~are~~of our patients currently receive a ~~number~~procedure ofcalled ~~important~~laser-assisted ~~factors~~in ~~that~~situ ~~could~~keratomileusis ~~cause~~(“LASIK”), ~~our~~which ~~results~~we tobegan ~~differ~~performing ~~materially~~in ~~from~~the ~~those~~United ~~indicated~~States byin ~~our~~1996. ~~forward-looking~~We ~~statements~~have performed over 1.3 ~~These~~million ~~factors~~laser ~~include~~vision ~~those~~correction ~~set~~procedures ~~forth~~in our vision centers in ~~“Item 1A—Risk~~the ~~Factors~~United States and Canada since 1995.”

~~Item 1~~As of December 31, 2013, we operated 61 LasikPlus® fixed-site laser vision correction centers generally located in metropolitan markets in the United States: 52 full-service LasikPlus® fixed site laser vision correction centers and nine pre- and post-operative LasikPlus® satellite vision centers. ~~Business~~Included in the 52 full-service vision centers are five vision centers owned and operated by ophthalmologists who license our trademarks. Beginning in 2011, we began offering refractive lens and cataract services in certain of our existing markets. We expect this diversification, if successful, to lessen the impact of economic downturns over the long-term.

~~Background~~We derive substantially all of our revenues from the delivery of laser vision correction procedures performed in our vision centers. Financial information concerning revenues, profit and ~~History~~loss and total assets are contained in “Item 8. Financial Statements and Supplementary Data” under “Consolidated Balance Sheets” and “Consolidated Statements of ~~Company~~Operations and Comprehensive Loss.” See Note 1 of the “Notes to Consolidated Financial Statements” for financial information by geographic area.

WeProcedure ~~are~~volume aand ~~provider~~revenues ofin ~~fixed-site laser vision correction services at~~ our ~~LasikPlus®~~ ~~vision~~industry ~~centers.~~historically ~~Our~~have ~~vision~~been ~~centers~~highly ~~provide~~correlated with the ~~staff,~~Consumer ~~facilities,~~Confidence ~~equipment~~Index and ~~support services~~have ~~for~~been ~~performing~~severely ~~laser~~affected ~~vision correction that employ advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. Our vision centers are supported~~ by ~~independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. The ophthalmologists perform~~ the ~~laser~~general ~~vision~~economic ~~correction~~slowdown ~~procedures~~ in ~~our vision centers, and~~ the ~~ophthalmologists~~United orStates. ~~optometrists~~In ~~conduct~~general, ~~pre-procedure~~industry ~~evaluations~~demand ~~and~~peaked ~~post-operative~~during ~~follow-up~~2007 ~~care in-center.~~when ~~Most~~there ofwas ~~our~~strong ~~patients~~consumer ~~currently~~confidence, ~~receive~~declined athrough ~~procedure~~2010 ~~called~~with ~~laser-assisted~~declining inconsumer ~~situ keratomileusis (“LASIK”)~~confidence, ~~which~~improved weslightly ~~began performing~~ in ~~the~~2011 ~~United~~and ~~States~~2012, inbut ~~1996.~~declined Weagain ~~have performed over 1.2 million laser vision correction procedures~~ in ~~our vision centers in the United States and Canada since 1996~~2013.

AsOn ofFebruary ~~December 31~~13, ~~2012~~2014, we ~~operated 54~~entered ~~LasikPlus®~~into ~~fixed-site~~an ~~laser~~Agreement ~~vision~~and ~~correction~~Plan ~~centers~~of ~~generally~~Merger ~~located~~(the in“Merger ~~metropolitan~~Agreement”) ~~markets~~with ~~in the United States~~PhotoMedex, ~~including~~Inc. ~~two~~(“PhotoMedex”) ~~vision~~pursuant ~~centers~~to ~~licensed~~which toPhotoMedex ~~ophthalmologists~~will ~~who~~acquire ~~operate~~all ~~using~~of our ~~trademarks~~common ~~and~~stock ~~four~~for ~~satellite~~$5.37 ~~vision~~per ~~centers~~share ~~which~~in ~~perform~~cash, ~~preoperative~~or ~~and~~approximately ~~postoperative~~$106.4 ~~care~~million, ~~for~~resulting ~~patients~~in ~~living~~our ~~considerable~~becoming ~~distances~~a ~~from~~subsidiary ~~our~~of ~~full service~~PhotoMedex ~~vision~~(the ~~centers~~“Merger”). ~~Beginning~~The inMerger ~~2011,~~is wesubject ~~began~~to ~~offering~~customary ~~standard~~closing ~~cataract,~~conditions ~~premium~~including ~~intraocular~~receipt ~~lens~~of ~~(“IOL”)~~the ~~and~~approval ~~implantable~~of ~~Collamer~~our ~~lens~~stockholders ~~(“ICL”)~~and ~~services~~regulatory inapprovals, ~~certain~~and ofis ~~our~~subject ~~existing~~to ~~markets~~a ~~under~~30-day ~~our~~“go ~~new~~shop” ~~Visium~~period. ~~Eye~~Our ~~Institute®~~Board ~~brand.~~of InDirectors ~~2012~~has wevoted ~~expanded~~unanimously ~~these~~in ~~initiatives~~favor toof ~~ten~~the ~~total~~transaction, ~~markets~~which ~~utilizing~~is ~~the~~expected ~~existing~~to ~~infrastructure~~close in ~~our~~the ~~laser vision~~second ~~correction~~quarter ~~centers~~of 2014. WeThere ~~expect~~are ~~this~~no ~~diversification,~~assurances ifthat ~~successful, to lessen~~ the ~~impact~~merger ofwill ~~economic~~be ~~downturns over the long-term~~consummated.

~~We derive~~Laser ~~substantially~~Vision ~~all~~Correction of our revenues from the delivery of laser vision correction procedures performed in our vision centers. Financial information concerning revenues, profit and loss and total assets are contained in “Item 8. Financial Statements and Supplementary Data” under “Consolidated Balance Sheets” and “Consolidated Statements of Operations and Comprehensive Loss.” See Note 1 of the “Notes to Consolidated Financial Statements” for financial information by geographic area. Procedures

~~Procedure~~Laser ~~volume~~vision ~~and~~correction ~~revenues~~procedures inreshape ~~our~~the ~~industry~~cornea iswith ~~highly~~an ~~correlated~~excimer ~~with~~laser to correct refractive vision errors by changing the ~~Consumer~~curvature ~~Confidence Index~~of the cornea. These procedures may reduce the need for wearing corrective lenses such as glasses and ~~has~~contact ~~been~~lenses. ~~severely~~Our ~~affected~~doctors bymake an assessment of a patient’s candidacy for laser vision correction and determine the ~~general~~correction ~~economic~~required ~~slowdown~~to inprogram the ~~United~~excimer ~~States~~laser. InThe ~~general,~~software ~~industry~~of ~~demand~~the ~~peaked~~excimer ~~during~~laser ~~2007~~then ~~when~~calculates ~~there~~the ~~was~~number ~~strong~~and ~~consumer~~pattern ~~confidence,~~of ~~declined~~pulses ~~through~~needed ~~2010~~to ~~with~~achieve ~~declining~~the ~~consumer~~intended ~~confidence~~correction ~~and~~using ~~began~~ a specially developed algorithm. The typical laser vision correction procedure takes approximately 15 – 20 minutes to ~~improve~~complete. inThe ~~2011~~eye is anesthetized using topical eye drops. The patient reclines under the laser, a lid speculum holds the eyelids open, and ~~2012~~the patient focuses on a blinking fixation light while the excimer laser pulses are applied. ~~However~~The excimer laser is a high-energy ultraviolet “cold” laser, ~~industry~~meaning ~~reports~~that ~~anticipate~~no ~~demand~~heat ~~for~~is generated. This non-thermal ablation permits precise reshaping of the cornea. The amount of tissue ablated and the ablation pattern depend upon the refractive error being corrected. Shortly after the procedure, the patient leaves the laser vision ~~correction~~center ~~procedures~~with instructions to ~~remain~~rest ~~soft~~the inremainder ~~2013~~of the day. Follow-up visits with an optometrist or ophthalmologist are typically scheduled for one day, one week and one to three months post-procedure.

~~Laser Vision Correction Procedures~~ 3

~~Laser~~We ~~vision~~currently ~~correction~~use ~~procedures~~two ~~reshape~~suppliers ~~the cornea with an excimer laser to correct refractive vision errors by changing the curvature of the cornea. These procedures may reduce the need~~ for ~~wearing~~our ~~corrective~~fixed-site ~~lenses such as glasses and contact lenses. Our doctors make an assessment of a patient’s candidacy for laser vision correction and determine the correction required to program the~~ excimer ~~laser.~~lasers: ~~The~~Abbott ~~software~~Medical ofOptics ~~the~~(“AMO”) ~~excimer laser then calculates the number~~ and ~~pattern~~Alcon ~~of pulses needed to achieve the intended correction using a specially developed algorithm~~Inc. The typical laser vision correction procedure takes approximately 15 – 20 minutes to complete. The eye is anesthetized using topical eye drops. The patient reclines under the laser, a lid speculum holds the eyelids open, and the patient focuses on a blinking fixation light while the excimer laser pulses are applied. The excimer laser is a high-energy ultraviolet (“~~cold~~Alcon” ~~laser, meaning that no heat is generated~~). This non-thermal ablation permits precise reshaping of the cornea. The amount of tissue ablated and the ablation pattern depend upon the refractive error being corrected. Shortly after the procedure, the patient leaves the laser vision center with instructions to rest the remainder of the day. Follow-up visits with an optometrist or ophthalmologist are typically scheduled for one day, one week and one to three months post-procedure.

We ~~currently~~provide ~~use~~primarily two ~~suppliers~~types ~~for~~of ~~our~~procedures ~~fixed-site~~in ~~excimer~~our ~~lasers:~~vision ~~Abbott Medical Optics (“AMO”) and Alcon Inc. (“Alcon”).~~ centers:

3 LASIK

~~Table~~In 1995, we began performing laser vision correction, including LASIK which continues to account for the majority of ~~Contents~~the laser vision correction procedures performed in the United States. In LASIK procedures, our surgeons use a femtosecond laser to create a thin flap in the cornea, which remains hinged to the eye. The surgeon then lays back this corneal flap and applies excimer laser pulses to the exposed surface of the cornea to treat the eye according to the patient’s prescription. The surgeon then folds the corneal flap back to its original position and inspects it to ensure that it remains secured in position by the natural suction of the cornea. Because the surface layer of the cornea remains intact with LASIK, a bandage contact lens is normally not required and the patient typically experiences little discomfort. LASIK often has the advantage of more rapid recovery than Photorefractive Keratectomy (“PRK”), with most patients seeing well enough to drive a car the next day. The LASIK procedure generally allows an ophthalmologist to treat both eyes of a patient during the same visit.

~~We provide primarily two types of procedures in our vision centers:~~ PRK

~~LASIK~~In PRK procedures, the ophthalmologist removes the thin layer of cells covering the outer surface of the cornea (the epithelium) in order to apply the excimer laser pulses directly to the surface of the cornea. Following the PRK procedure, the ophthalmologist places a bandage contact lens on the eye to protect it. The patient may experience discomfort and blurred vision until the epithelium heals, which can take several days. The doctor generally will prescribe certain topical pharmaceuticals for use by the patient post-procedure to assist in alleviating discomfort, minimizing infection and helping to promote corneal healing. Although a patient generally experiences substantial improvement in clarity of vision within a few days following the procedure, it can take several months for the full benefits of the PRK procedure to be realized. Some patients elect to have one eye treated in one visit and the second eye treated at a later date.

~~In 1996, we began performing~~ LASIK, ~~which~~and ~~continues~~PRK ~~to account for the majority of the laser vision correction~~ procedures are performed inusing the ~~United~~same ~~States.~~excimer Inlasers ~~LASIK procedures, our surgeons use a femtosecond laser to create a thin flap in the cornea, which remains hinged to the eye. The surgeon then lays back this corneal flap~~ and ~~applies~~offer ~~excimer laser pulses to~~ the ~~exposed~~same ~~surface~~results ofafter ~~the~~healing ~~cornea to treat the eye according to the patient’s prescription~~occurs. ~~The~~Each ~~surgeon~~has ~~then folds the corneal flap back to~~ its ~~original position and inspects it to ensure that it remains secured in position by the natural suction of the cornea~~advantages. ~~Because~~Based ~~the~~on ~~surface layer of~~ the ~~cornea~~pre-procedure ~~remains~~examination ~~intact with LASIK, a bandage contact lens is normally not required~~ and ~~the patient typically experiences little discomfort. LASIK often has the advantage of more rapid recovery than Photorefractive Keratectomy (“PRK”)~~assessment, ~~with~~our ~~most~~doctors ~~patients~~determine ~~seeing~~which ~~well~~laser ~~enough~~correction ~~to drive a car the next day. The LASIK~~ procedure ~~generally~~is ~~allows~~best ~~an ophthalmologist~~for toeach ~~treat both eyes of a~~ patient ~~during the same visit~~.

~~PRK~~The ~~and~~Laser ~~Surface~~Vision ~~Ablation~~Correction Market

InMore ~~PRK~~than ~~procedures,~~192 ~~the~~million ~~ophthalmologist~~Americans, ~~removes~~or ~~the~~approximately ~~thin~~60% ~~layer~~ of ~~cells covering~~ the ~~outer surface of the cornea (the epithelium) in order to apply the excimer laser pulses directly to the surface of the cornea~~U.S. ~~Following the PRK procedure~~population, ~~the~~require ~~ophthalmologist~~eyeglasses ~~places~~or ~~a bandage~~ contact ~~lens~~lenses onto ~~the~~correct ~~eye~~common tovision ~~protect it~~problems. ~~The~~Most ~~patient~~people ~~may~~seeking ~~experience discomfort and blurred~~ vision ~~until~~correction ~~the~~suffer ~~epithelium~~from ~~heals, which~~one ~~can~~or ~~take~~more ~~several~~refractive ~~days.~~vision ~~The~~disorders, ~~doctor~~which ~~generally~~often ~~will~~result ~~prescribe~~from ~~certain~~improper ~~topical~~curvature ~~pharmaceuticals~~of ~~for use by~~ the ~~patient~~cornea ~~post-procedure~~as related to ~~assist~~the insize ~~alleviating discomfort, minimizing infection~~ and ~~helping~~shape toof ~~promote~~the ~~corneal healing~~eye. ~~Although~~If ~~a patient~~the ~~generally~~cornea’s ~~experiences~~curvature ~~substantial~~is ~~improvement~~not inprecisely ~~clarity of vision within a few days following the procedure~~correct, it ~~can~~cannot ~~take~~properly ~~several~~focus ~~months~~the ~~for~~light ~~the~~passing ~~full~~through ~~benefits~~it ofonto the ~~PRK~~retina, ~~procedure~~resulting ~~to be realized. Some patients elect to have one eye treated~~ in ~~one~~a ~~visit~~blurred ~~and~~image. ~~the~~Three ~~second~~common ~~eye~~refractive ~~treated~~vision atdisorders aare: ~~later date.~~

~~LASIK~~● ~~and~~Myopia ~~PRK~~(nearsightedness)—images ~~procedures~~ are ~~performed~~focused ~~using~~in ~~the~~front ~~same~~of ~~excimer lasers and offer~~ the ~~same~~ ~~results~~retina, ~~after~~resulting ~~healing~~in ~~occurs. Each has its advantages. Based on~~ the ~~pre-procedure~~blurred ~~examination~~perception ~~and~~of ~~assessment,~~distant ~~our doctors determine which laser correction procedure is best for each patient.~~ objects

~~The~~● ~~Laser~~Hyperopia ~~Vision~~(farsightedness)—images ~~Correction~~are ~~Market~~focused behind the retina, resulting in the blurred perception of near objects

~~More than~~● ~~190 million~~Astigmatism—images ~~Americans,~~are ornot ~~approximately~~focused ~~60%~~on ofany ~~the~~point ~~U.S.~~due ~~population, require eyeglasses or contact lenses~~ to ~~correct~~the ~~common~~varying ~~vision problems. Most people seeking vision correction suffer from one or more refractive vision disorders, which often result from improper~~ curvature of the ~~cornea as related to the size and shape of the~~ eye. Ifalong ~~the~~different ~~cornea’s curvature is not precisely correct, it cannot properly focus the light passing through it onto the retina, resulting in a blurred image. Three common refractive vision disorders are:~~ axes

•Since ~~Myopia~~the U.S. Food and Drug Administration (~~nearsightedness~~“FDA”)~~—images~~ ~~are~~approved ~~focused~~the first laser to perform laser vision correction procedures in ~~front~~the United States in 1995, industry sources estimate that approximately 16.6 million eyes have been treated. Laser vision correction is currently one of the ~~retina~~most widely performed elective surgical procedures in the United States, ~~resulting~~with an estimated 592,000 laser vision correction procedures performed in 2013, a decrease of approximately 5% from 2012. An industry report on the ~~blurred~~U.S. ~~perception~~refractive market forecasts that the number of ~~distant~~2014 ~~objects~~laser vision correction procedures will increase by less than 1% compared to 2013, and the potential market for laser vision correction procedures in the United States is approximately 152 million procedures. Laser vision correction is typically a private pay procedure performed on an outpatient basis.

~~• Hyperopia (farsightedness)—images are focused behind the retina, resulting in the blurred perception of near objects~~4

•Estimated ~~Astigmatism—images~~Number ~~are~~of ~~not~~Laser ~~focused~~Vision onCorrection ~~any~~Procedures ~~point~~in ~~due~~North toAmerica ~~the~~per ~~varying~~Year ~~curvature of the eye along different axes~~

~~Since~~Source: ~~the~~Market ~~U.S. Food and Drug Administration (“FDA”) approved the first laser to perform laser vision correction procedures in the United States in 1995~~Scope, ~~industry~~February sources estimate that approximately 15.8 million eyes have been treated. Laser vision correction is currently one of the most widely performed elective surgical procedures in the United States, with an estimated 625,000 laser vision correction procedures performed in 2012, an increase of less than 1% from 2011. An industry report on the U.S. refractive market estimates that 2013 laser vision correction procedures are forecasted to increase 7% over 2012 and the potential market for laser vision correction procedures in the United States is approximately 146 million procedures. Laser vision correction is typically a private pay procedure performed on an outpatient basis. 2014

4(f) = 2014 data forecasted by Market Scope, February 2014

~~Table~~(a) of= ~~Contents~~Market Scope recast 2011 and 2012 estimated laser vision correction volume, but did not recast years 2010 and prior.

~~Estimated~~Our ~~Number~~Business ~~of Laser Vision Correction Procedures in North America per Year~~ Strategy

~~Source:~~Our ~~Market~~business ~~Scope~~strategy is to transform lives by providing quality vision correction services at an affordable price. We generally operate our vision centers as closed-access facilities, ~~February~~where ~~2013~~we are responsible for marketing and patient acquisition and contract with independent ophthalmologists for their medical services.

~~(f)~~We =intend ~~2013~~to ~~data~~grow ~~forecasted~~our bybusiness ~~Market~~through ~~Scope~~increased penetration in our current markets and, ~~February~~after ~~2013~~the economy and our cash flow improve, expansion into new markets. Key elements of our business strategy include:

~~(a)~~● =Recruiting ~~Market Scope recast 2011~~ and ~~2012 estimated~~retaining ~~laser vision correction volume~~independent, ~~but~~board ~~did~~certified ~~not~~ophthalmologists ~~recast years 2010~~ and ~~prior.~~credentialed optometrists

~~Our~~● ~~Business~~Providing ~~Strategy~~patients with continuity of care under our “LasikPlus Advantage Plan®”

~~Our~~● ~~business~~Providing ~~strategy~~attractive is to transform lives by providing quality laser vision correction services at an affordable price. We generally operate our vision centers as closed-access facilities, where we are responsible for marketing and patient ~~acquisition~~financing ~~and contract with independent ophthalmologists for their medical services.~~ alternatives

We● ~~intend~~Nurturing torelationships ~~grow~~with ~~our~~leading ~~business~~managed ~~through~~care ~~increased~~providers ~~penetration~~ in ~~our~~the ~~current~~United ~~markets~~States and, ~~after~~partnership ~~the~~programs ~~economy~~to ~~and~~source ~~our~~additional ~~cash flow improve, expansion into new markets. Key elements of our business strategy include:~~ patients

•● ~~Recruiting~~Developing and ~~retaining~~implementing ~~independent,~~innovative ~~board~~direct-to-consumer ~~certified~~marketing ~~ophthalmologists and credentialed optometrists~~campaigns

•● ~~Providing~~Establishing ~~patients~~and ~~with~~maintaining ~~continuity~~a ofpartner ~~care~~network ~~under~~of ~~our~~independent ~~“LasikPlus~~optometrists ~~Advantage~~to ~~Plan®”~~share patients

•● ~~Providing~~Adding ~~attractive~~complementary ~~patient~~products ~~financing~~and ~~alternatives~~services

•Recruiting ~~Nurturing~~and ~~relationships~~retaining ~~with~~independent, ~~leading~~board ~~managed~~certified ~~care~~ophthalmologists ~~providers in the United States~~ and ~~partnership~~credentialed ~~programs~~optometrists. ~~to source additional patients~~

•We ~~Developing~~generally focus our recruiting efforts on leading independent ophthalmologists and ~~implementing~~optometrists ~~innovative~~who ~~direct~~have a reputation for providing quality eye care within their respective markets and who have experience in laser vision correction procedures. Our ophthalmologists have completed extensive FDA-~~to-consumer~~mandated ~~marketing~~training ~~campaigns~~and also have met our qualification criteria, which includes a review of state licensure, board certification, malpractice insurance and surgical experience.

•Providing ~~Establishing~~patients ~~and~~with ~~maintaining~~continuity ~~a partner network~~ of ~~independent~~care ~~optometrists~~under toour ~~share~~“LasikPlus ~~patients~~Advantage Plan®”.

•We ~~Adding~~strive ~~complementary~~to ~~products~~achieve high patient satisfaction and ~~services~~have established the “LasikPlus Advantage Plan®,” the goal of which is to achieve the level of visual correction agreed to by the patient and physician. A patient’s care begins with our initial contact with the prospective patient. We train our patient communication center personnel to answer questions regarding procedures and we provide potential patients access to an optometrist or ophthalmologist to address more difficult inquiries. In the vision center, we provide potential patients a free vision evaluation with the local vision center’s optometrist or independent ophthalmologist as well as a consultation focused on educating the patient on vision correction procedures and how the procedure may help correct the patient’s specific refractive vision disorder. The ophthalmologist will determine whether the patient is a candidate and review the risks associated with the procedure and what results the patient may expect after the procedure. Additionally, we design our vision centers to create a patient-friendly environment to reduce any anxiety associated with having laser vision correction. We schedule post-surgical follow-up appointments with patients who have received the procedure to monitor results and, when medically appropriate, provide enhancements to those patients who did not receive the desired correction in the initial procedure. The vast majority of our treated patients who respond to our patient satisfaction surveys indicate that they are satisfied with the care that they received in our vision centers.

~~Recruiting and retaining independent, board certified ophthalmologists and credentialed optometrists.~~ 5

WeProviding ~~generally~~attractive ~~focus~~patient ~~our~~financing recruiting efforts on leading independent ophthalmologists and optometrists who have a reputation for providing quality eye care within their respective markets and who have experience in laser vision correction proceduresalternatives. Our ophthalmologists have completed extensive FDA-mandated training and also have met our qualification criteria, which includes a review of state licensure, board certification, malpractice insurance and surgical experience.

~~Providing~~Because laser vision correction procedures are elective and generally not reimbursable by third party payers, including governmental programs such as Medicare and Medicaid, we currently offer patients ~~with~~several ~~continuity~~financing alternatives. A significant percentage of ~~care~~ our patients finance some or all of the cost of their procedure. We work closely with an unaffiliated third-party finance company that offers multiple payment plans to qualifying patients. These payment plans provide for payments over a 6-month to 60-month period. We bear no credit risk for loans made under this third-party program. For patients not qualifying for these plans, we offer our ~~“LasikPlus~~own ~~Advantage~~direct ~~Plan®”~~financing in which we charge an up-front down payment, with the remaining balance paid by the patients in installments over a period of 12 to 36 months. We bear the credit risk of our own direct financing programs.

WeNurturing ~~strive~~relationships towith ~~achieve~~leading ~~high~~managed ~~patient satisfaction and have established the “LasikPlus Advantage Plan®,” the goal of which is to achieve the level of visual correction agreed to by the patient and physician. A patient’s~~ care ~~begins~~providers ~~with~~in ~~our initial contact with~~ the ~~prospective~~United ~~patient.~~States ~~We train our call center personnel to answer questions regarding procedures~~ and ~~generally~~partnership weprograms ~~provide potential patients access both~~ to asource ~~physician~~additional ~~to address more difficult inquiries and to past~~ patients ~~who can relate procedure experience~~. In the vision center, we provide potential patients a free eye evaluation with the local vision center’s optometrist or independent ophthalmologist as well as a consultation focused on educating the patient on vision correction procedures and how the procedure may help correct the patient’s specific refractive vision disorder. The ophthalmologist will determine whether the patient is a candidate and review the risks associated with the procedure and what results the patient may expect after the procedure. Additionally, we design our vision centers to create a patient-friendly environment to reduce any anxiety associated with having laser vision correction. We schedule post-surgical follow-up appointments with patients who have received the procedure to monitor results and provide enhancements to those patients who did not receive the desired correction in the initial procedure. The vast majority of our treated patients who respond to our patient satisfaction surveys indicate that they are satisfied with the care that they received in our vision centers.

5With a large number of employers offering vision services in their employee benefit packages, we continue to nurture, develop and grow relationships with managed care organizations, through which we offer discounted rates to plan participants. In general, the plan participant, and not the managed care organization, is responsible for the payment of our fees under these arrangements. We currently have agreements with most of the largest health and vision plans. In addition to the discounted programs, a small number of plans offer a funded, insured LASIK product that covers a portion of the procedure cost.

~~Table~~We continue to participate in partnership programs that have proven to be successful. These programs allow for their members to obtain reward points or discounts for attending a pre-operative appointment and for having the laser vision correction procedure performed. We will continue to evaluate expansions or terminations of ~~Contents~~these programs as well as explore opportunities for more partnership programs in 2014 and beyond.

~~Providing~~We ~~attractive~~also ~~patient~~partnered ~~financing~~with ~~alternatives~~the Wounded Warrior Project and Fisher House Foundation beginning in 2010 to provide laser vision correction at no cost to wounded U.S. military veterans and their primary caregivers. Our surgeons offer their services at no cost and our vendors support us in this cause.

~~Because~~Developing ~~laser vision correction procedures are elective~~ and ~~generally~~implementing ~~not~~innovative reimbursable by third party payers, including governmental programs such as Medicare and Medicaid, we currently offer patients several financing alternatives. A significant percentage of our patients finance some or all of the cost of their procedure. We work closely with an unaffiliated thirddirect-~~party finance company that offers multiple payment plans~~ to ~~qualifying patients. These payment plans typically provide for payments over a 12~~-~~month~~consumer tomarketing ~~60-month period~~campaigns. We bear no credit risk for loans made under this third-party program. For patients not qualifying for these plans, we offer our own direct financing in which we charge an up-front fee, with the remaining balance paid by the patients in installments over a period of 12 to 36 months. We bear the credit risk of our own direct financing programs.

~~Nurturing~~Our ~~relationships~~marketing ~~with~~programs ~~leading~~seek ~~managed~~to ~~care~~reinforce ~~providers~~the LasikPlus® brand name in addition to raising awareness concerning laser vision correction and promoting our vision centers and the ~~United~~experience ~~States~~of our independent ophthalmologists. In each market, we target a specific demographic group of potential patients through the use of traditional and ~~partnership~~online ~~programs~~radio, internet, social media, mobile, print media and/or direct mail campaigns, among other strategies. In most advertisements, we provide prospective patients a website address and a toll-free number to ~~source~~contact ~~additional~~us. Our patient communication center representatives answer initial questions that potential patients may have, and attempt to schedule eye evaluation appointments with a local vision center to determine whether the prospective patient is a candidate for laser vision correction. With the support of advertising agencies, we continue to refine our branding to differentiate LasikPlus® from our competitors and to continually develop more compelling messages.

~~With~~Establishing ~~a large number of employers offering vision services in their employee benefit packages, we continue to nurture, develop~~ and ~~grow relationships~~maintaining ~~with~~a ~~managed~~partner ~~care~~network ~~organizations, through which we offer discounted rates to plan participants. In general, the plan participant, and not the managed care organization, is responsible for the payment~~ of ~~our~~independent ~~fees~~optometrists ~~under these arrangements. We currently have agreements with most of the largest health and vision plans. In addition~~ to ~~the~~share ~~discounted programs, a small number of plans offer a funded, insured LASIK product that covers a portion of the procedure cost~~patients.

We ~~continue~~have todeveloped ~~participate~~a inpartner ~~partnership~~network ~~programs~~with ~~that~~independent ~~have~~optometrists ~~proven~~and toother beeye ~~successful~~health care providers. ~~These~~We ~~programs~~see ~~allow~~a ~~for~~partner ~~their~~network ~~members~~as toan ~~obtain~~opportunity ~~reward points~~to ormake ~~discounts~~ourselves ~~for~~known ~~attending~~to apatients ~~pre-operative~~of ~~appointment~~optometrists and ~~for~~other ~~having~~eye ~~the~~health ~~laser~~providers ~~vision~~and ~~correction procedure performed. We will continue~~ to ~~evaluate~~share ~~expansions~~in orthe ~~terminations~~care of ~~these~~those ~~programs~~patients, asfor ~~well~~either aslaser ~~explore~~vision ~~opportunities~~correction ~~for~~or ~~more partnership~~refractive ~~programs~~lens ~~in 2013~~ and ~~beyond.~~cataract services.

WeAdding ~~also~~complementary ~~partnered~~products ~~with the Wounded Warrior Project~~ and ~~Fisher House Foundation beginning in 2010 to provide laser vision correction at no cost to wounded U.S. military veterans and their primary caregivers. Our surgeons offer their~~ services ~~at no cost and our vendors support us in this cause~~.

~~Developing~~We began expanding our patient care model in 2011 to include other medical and ~~implementing~~surgical ~~innovative~~eye ~~consumer~~services ~~marketing~~and ~~campaigns~~products. We desire to diversify to leverage our capabilities and resources, drive more revenue through our existing vision centers, capitalize on our past patients and high patient satisfaction rate, and lessen the impact of future economic downturns. Our focus is on programs that require minimal up-front investment and that we can roll out in a modular approach, allowing for phased introductions.

~~Our~~During ~~marketing~~the ~~programs~~third ~~seek~~quarter toof ~~reinforce~~2011 ~~the~~we began offering standard cataract and premium intraocular lens (“IOL”) services in two of our LasikPlus® ~~brand~~ ~~name~~markets. inAs ~~addition~~of toDecember ~~raising~~31, ~~awareness~~2013, ~~concerning~~we ~~laser~~offered ~~vision~~a ~~correction~~full ~~and~~range ~~promoting~~of ~~our~~refractive ~~vision~~services ~~centers~~in nine markets. Expansion into refractive lens and ~~the~~cataract ~~experience~~services ofcapitalizes on our ~~independent~~current ~~ophthalmologists.~~multi-site Inoperation ~~each~~and ~~market~~clinical skills, wewhile ~~target~~exposing us to a ~~specific~~growing ~~demographic~~potential ~~group~~patient population of ~~potential~~“Baby ~~patients through~~Boomers” ~~the~~as ~~use~~they ofbegin ~~traditional~~to ~~and~~experience ~~online~~vision ~~radio,~~problems ~~internet,~~related ~~social~~to ~~media,~~their ~~mobile,~~natural ~~print~~lens. ~~media~~Industry ~~and/or~~analysts ~~direct~~estimate ~~mail~~the ~~campaigns,~~cataract ~~among~~market ~~other~~is ~~strategies.~~currently Infive ~~most~~times ~~advertisements,~~as welarge ~~provide~~as ~~prospective~~the ~~patients~~laser avision ~~website~~correction ~~address~~market. This expansion into refractive lens and cataract services is a ~~toll-free~~change ~~number~~from ~~to contact~~our ~~us.~~model ~~Our~~of ~~call~~operating ~~center~~solely ~~representatives~~in ~~answer~~a ~~initial~~self-pay ~~questions~~environment ~~that~~and ~~potential~~into ~~patients~~services ~~may~~partially ~~have~~paid by third-party payers, including federal and ~~attempt~~state toagencies ~~schedule~~(under ~~eye~~the ~~evaluation~~Medicare ~~appointments~~and ~~with~~Medicaid ~~the~~programs), ~~local~~managed ~~vision~~care ~~center~~health toplans, ~~determine~~commercial ~~whether~~insurance companies and employers. Additionally, while the ~~prospective~~pre-operative ~~patient~~and ispost-operative aexams ~~candidate~~are ~~for laser~~performed in our vision ~~correction.~~centers, Wethe surgeries are ~~also~~performed ~~reaching~~at ~~new~~independent ~~prospective~~ambulatory ~~patients~~surgery ~~through~~centers. ~~innovative~~Our ~~programs~~revenue ~~such~~from asrefractive ~~partnerships~~lens ~~with~~and ~~other~~cataract ~~companies~~services ~~that~~was ~~provide~~not ~~their~~significant ~~members~~in ~~with~~2013 ~~options~~and ~~such~~we asdo ~~reduced~~not ~~out-of-pocket~~anticipate ~~procedure~~it ~~costs~~to orrepresent ~~other~~a ~~incentives. With~~significant ~~the~~portion ~~support~~ of ~~advertising~~our ~~agencies,~~operations wein ~~continue~~2014. toAttracting ~~refine~~new ~~our~~patients ~~branding~~remains tothe ~~differentiate~~most ~~LasikPlus® from~~significant ~~our~~challenge ~~competitors~~with ~~and~~growing toour ~~continually~~refractive ~~develop~~lens ~~more~~and ~~compelling~~cataract ~~messages~~business.

~~Adding complementary products and services.~~ 6

We ~~began~~are ~~expanding~~also ~~our~~offering ~~patient~~implantable ~~care~~collamer ~~model~~lens in(“ICL”) ~~2011~~surgery toin include other medical and surgical eye services and products. We desire to diversify into related eye-health businesses to leverage our capabilities and resources, drive more revenue through our existing vision centers, capitalize on our past patients and high patient satisfaction rate, and lessen the ~~impact~~nine ofmarkets ~~future economic downturns. Our focus is on programs~~ that ~~require~~offer ~~minimal~~refractive ~~up-front~~lens ~~investment~~ and ~~that~~cataract ~~we can roll out in a modular approach, allowing for phased introductions~~services. WeThis ~~are~~procedure ~~also~~is ~~developing~~not acovered ~~partner~~by ~~network~~Medicare ~~with~~or ~~optometrists and~~ other ~~eye~~third-party ~~health~~payers, ~~care~~but ~~providers.~~it Weis ~~see~~appropriate ~~a partner~~for ~~network~~some ~~as an opportunity to make ourselves known to~~ patients ofwho ~~optometrists~~are ~~and~~not ~~other~~candidates ~~eye~~for ~~health~~LASIK ~~providers~~due ~~and~~ to ~~share~~conditions insuch ~~the~~as ~~care~~extreme ~~of those patients~~nearsightedness, ~~whether~~uncertain ~~for~~corneal ~~laser~~topography ~~vision correction~~ or ~~cataract~~insufficient ~~services.~~corneal thickness.

During the third quarter of 2011 we began offering standard cataract and premium IOL services in two of our LasikPlus® markets under our new Visium Eye Institute® brand. As of December 31, 2012, we had 10 Visium Eye Institute® centers. Expansion into cataract services capitalizes on our current multi-site operation and clinical skills, while exposing us to a growing potential patient population of “Baby Boomers” as they begin to approach 70 years of age. Industry analysts estimate the cataract market is currently four times as large as the laser vision correction market. This expansion into cataract and premium IOL services is an expansion from our current model of operating solely in a self-pay environment and into services generally paid by third-party payers, including federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Additionally, while the pre-operative and post-operative exams are performed in our vision centers, the surgeries are performed at independent ambulatory surgery centers. Our revenue from cataract services was not significant in 2012 and we do not anticipate it to represent a significant portion of our operations in 2013. Attracting new patients remains the most significant challenge with growing our Visium Eye Institute® business. We are also offering ICL surgery in our Visium Eye Institute® markets. This procedure is not covered by Medicare or other third-party payers, but it is appropriate for some patients who are not candidates for LASIK due to conditions such as extreme nearsightedness, uncertain corneal topography or insufficient corneal thickness. Competition

6Laser vision correction, whether performed at one of our vision centers or elsewhere, is an alternative to other surgical as well as non-surgical treatments to correct refractive vision disorders. These non-surgical treatments include eyeglasses and contact lenses. Other refractive surgery procedures include refractive lens exchange and ICL. In the future, other surgical procedures such as corneal inlays, currently under FDA trial, may prove to be an option as well.

~~Table~~We face competition from other providers of ~~Contents~~laser vision correction. A fragmented system of local providers, including individual or small groups of opticians, optometrists and ophthalmologists, and chains of retail optical stores and multi-site eye care vision centers deliver eye care services in the United States. Industry sources estimate that local ophthalmologists and hospitals service approximately 70% of the laser vision correction market. Corporate laser vision correction providers, such as LasikPlus®, are a specialized type of provider, operating multi-site eye care centers that provide primarily laser vision correction. In many of our markets, we also compete with other corporate laser vision correction center chains.

~~Competition~~We currently face competitors offering discounted prices in some geographic markets where we conduct business. It is possible that our business could be materially adversely affected in the future by discounting practices of competitors, including from both a price and volume perspective. Laser vision correction procedure volume has historically correlated with the Consumer Confidence Index. In individual markets, our challenge is to leverage the national strengths of our company and enhance local efforts in order to grow market share.

Laser vision correction, whether performed at one of our vision centers or elsewhere, is an alternative to other surgical as well as non-surgical treatments to correct refractive vision disorders. These non-surgical treatments include eyeglasses and contact lenses. Other refractive surgery procedures include refractive lens exchange and ICL. In the future, other surgical procedures such as corneal inlays, currently under FDA trial, may prove to be an option as well. Employees

WeAs ~~face competition from other providers~~ of ~~laser~~December ~~vision~~31, ~~correction. A fragmented system of local providers~~2013, ~~including~~we ~~individual~~had orapproximately ~~small~~363 ~~groups of opticians~~employees, ~~optometrists~~305 ~~and ophthalmologists, and chains~~ of ~~retail~~whom ~~optical~~were ~~stores and multi~~full-~~site~~time. ~~eye~~The ~~care~~number ~~vision~~of ~~centers~~employees ~~deliver~~included ~~eye~~87 ~~care~~optometrists ~~services~~and inindependent ~~the United States. Industry sources estimate that local~~ ophthalmologists ~~and~~employed ~~hospitals~~by ~~represent~~professional ~~approximately~~corporations ~~70%~~with ofwhich ~~the~~we ~~laser~~have ~~vision~~management ~~correction market~~contracts. ~~Corporate~~None ~~laser~~of ~~vision~~our ~~correction~~employees ~~providers,~~are ~~such~~subject asto ~~LasikPlus®, are~~ a ~~specialized~~collective ~~type~~bargaining ofagreement ~~provider,~~nor ~~operating~~have ~~multi-site~~we ~~eye~~experienced ~~care~~any ~~centers~~work ~~that provide primarily laser vision correction~~stoppages. InWe ~~many~~believe ofthat our ~~markets,~~relations ~~we also compete~~ with ~~other~~our ~~corporate~~employees ~~laser~~are ~~vision correction center chains~~good.

WeTrademarks currently face competitors offering discounted prices in some geographic markets where we conduct business. It is possible that our business could be materially adversely affected in the future by discounting practices of competitors, including from both a price and volume perspective. Laser vision correction procedure volume correlates with the Consumer Confidence Index. In individual markets, our challenge is to leverage the national strengths of our company and enhance local efforts in order to grow market share.

~~Employees~~We have several registered trademarks in the United States, including the name LasikPlus®. We have not registered all of the names that we use for our products and services with the United States Patent and Trademark Office. Where we use the “TM” (trademark) symbol, we intend to claim trademark rights on those names under common law. The duration of such trademarks under common law is the length of time that we continue to use them.

AsSuppliers of December 31, 2012, we had approximately 381 employees, 335 of whom were full-time. The number of employees included 87 optometrists and independent ophthalmologists employed by professional corporations with which we have contracts. None of our employees are subject to a collective bargaining agreement nor have we experienced any work stoppages. We believe our relations with our employees are good. Equipment

~~Trademarks~~We are not involved in the research, development or manufacture of ophthalmic laser systems or diagnostic equipment. Several companies, including AMO and Alcon, our two current laser suppliers, offer excimer and femtosecond laser systems which have been approved by the FDA for commercial sale in the United States. We currently rely primarily on AMO to provide us with patient interface kits and McKesson Corporation (“McKesson”) to provide other disposable items required in LASIK procedures. If our relationship with any of these suppliers ceased, we believe that we would be able to enter into alternative supplier arrangements.

WeGovernment have several registered trademarks in the United States, including the name LasikPlus®. We have not registered all of the names that we use for our products and services with the United States Patent and Trademark Office. Where we use the “TM” (trademark) symbol, we intend to claim trademark rights on those names under common law. The duration of such trademarks under common law is the length of time that we continue to use them. Regulation

~~Suppliers~~Extensive federal, state and local laws, rules and regulations affecting the healthcare industry and the delivery of ~~Equipment~~healthcare apply to our operations. Some of these include laws and regulations, which vary significantly from state to state, prohibiting unlawful rebates and division of fees, and limiting the manner in which we may solicit prospective patients. Furthermore, state and federal laws, some of which may be applicable to our business operations, extensively regulate contractual arrangements with surgery centers, ophthalmologists and optometrists.

WeThe ~~are~~following ~~not~~is ~~involved~~a inmore ~~the~~detailed ~~research,~~description ~~development or manufacture~~ of ~~ophthalmic~~certain ~~laser~~laws ~~systems or diagnostic equipment. Several companies, including AMO~~ and ~~Alcon,~~ ~~our~~regulations ~~two~~that ~~current~~affect suppliers, offer excimer and femtosecond laser systems which have been approved by the FDA for commercial sale in the United States. We currently rely primarily on AMO to provide us with patient interface kits and McKesson Corporation (“McKesson”) to provide other disposable items required in LASIK procedures. If our ~~relationship with any of these suppliers ceased, we believe we would be able to enter into alternative supplier arrangements~~operations.

~~Government~~Restrictions ~~Regulation~~on medical devices

~~Extensive federal,~~In ~~state~~the ~~and~~United ~~local laws~~States, ~~rules and regulations affecting~~ the ~~healthcare~~FDA ~~industry~~regulates ~~and~~ the ~~delivery~~use, ofmanufacturing, ~~healthcare~~labeling, ~~apply~~distribution toand ~~our~~marketing ~~operations. Some~~ of ~~these~~medical ~~include laws and regulations~~devices, ~~which~~including ~~vary~~excimer ~~significantly from state to state, prohibiting unlawful rebates~~ and ~~division~~femtosecond oflasers ~~fees,~~ and ~~limiting~~certain ~~the~~other ~~manner~~equipment inthat ~~which~~ we ~~may~~use ~~solicit~~in ~~prospective~~laser ~~patients.~~vision ~~Furthermore,~~correction ~~state and federal laws, some of which may be applicable to our business operations, extensively regulate contractual arrangements with~~ surgery ~~centers, ophthalmologists and optometrists~~.

~~The following is a more detailed description of certain laws and regulations that affect our operations.~~ 7

~~Restrictions~~Once onmedical device manufacturers obtain FDA approval, medical device manufacturers are subject to continuing FDA obligations. For example, the FDA requires that medical devices be manufactured in accordance with its Quality System Regulations. In essence, this means that medical devices must be manufactured and records must be maintained in a prescribed manner with respect to production, testing and control activities. In addition, the FDA imposes restrictions and requirements regarding the labeling and promotion of medical devices with which we must comply.

InIf ~~the~~we ~~United~~or ~~States~~our excimer or femtosecond laser manufacturers fail to comply with applicable FDA requirements, the FDA ~~regulates~~could ~~the~~take ~~use~~enforcement action, ~~manufacturing~~including product seizures, ~~labeling~~recalls, ~~distribution~~withdrawal of approvals and ~~marketing~~imposition of ~~medical~~civil ~~devices~~and criminal penalties, ~~including~~any ~~excimer~~one ~~and~~or ~~femtosecond~~more ~~lasers~~of which could have a material adverse effect on our business, financial condition and ~~certain~~results ~~other~~of ~~equipment~~operations. ~~that~~In addition, the FDA could withdraw clearance or approvals in some circumstances. If we or our principal suppliers fail to comply with regulatory requirements or any adverse regulatory action, we could be named as a party in ensuing litigation or incur a limitation on or prohibition of our use of excimer lasers, financing programs, or other necessary services to our business, which in ~~laser~~ ~~vision~~turn ~~correction~~would ~~surgery~~have a material adverse effect on our business, financial condition or results of operations. Discovery of problems, violations of current laws or future legislation or administrative action in the United States or elsewhere may adversely affect the ability of our suppliers to obtain or maintain appropriate regulatory approval.

~~Once~~The FDA requires that some medical ~~device~~facilities ~~manufacturers~~report ~~obtain~~serious ~~FDA~~injuries ~~approval,~~involving medical devices to device manufacturers ~~are~~and ~~subject~~deaths involving medical devices to ~~continuing~~ the FDA. The FDA requires that subject medical facilities have specific written procedures regarding such reporting obligations. ~~For~~Those ~~example,~~of ~~the~~our ~~FDA~~vision ~~requires~~centers that ~~medical~~meet ~~devices~~the beFDA’s ~~manufactured~~definition inof ~~accordance~~user ~~with~~facilities ~~its~~are ~~Quality~~subject ~~System~~to ~~Regulations~~these requirements. InAlthough ~~essence~~we believe that our procedures meet regulatory requirements, ~~this~~if ~~means~~the FDA determines that ~~medical~~our ~~devices~~procedures ~~must~~or beour ~~manufactured~~reporting ~~and~~practices ~~records~~are ~~must~~not adequate, we could be ~~maintained~~subject into ~~a prescribed~~FDA ~~manner~~enforcement ~~with~~action. ~~respect~~FDA toenforcement ~~production~~action could discourage potential patients from having laser vision correction, ~~testing~~or ~~and~~could ~~control~~limit ~~activities.~~our Inability ~~addition~~to use medical devices, ~~the~~potentially ~~FDA~~having ~~imposes~~a ~~restrictions~~material ~~and~~adverse ~~requirements~~effect ~~regarding~~on ~~the~~our ~~labeling~~business, financial condition and ~~promotion~~results of ~~medical~~operations ~~devices~~by ~~with~~decreasing ~~which~~the wetotal ~~must~~number ~~comply.~~of procedures that we perform.

7Regulations require manufacturers to obtain a supplemental FDA authorization for new uses of existing medical devices. Obtaining these authorizations is time consuming and expensive, and we cannot be sure that manufacturers of the devices that we use will be able to obtain any such additional FDA authorizations. Further, later discovery of problems with the medical devices that we use may result in restrictions on use of the devices or enforcement action against the manufacturers, including withdrawal of devices from the market. Changes in legislation or regulation could affect whether and how we can use our medical devices. These and other regulatory actions could limit the supply of devices that we use or our ability to use them, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

~~Table~~FDA ofLASIK ~~Contents~~Review

IfThe ~~we or our excimer or femtosecond laser manufacturers fail to comply with applicable~~ FDA’s ~~requirements,~~advisory ~~the FDA~~board ~~could~~on ~~take~~ophthalmic ~~enforcement~~devices ~~action,~~began ~~including~~reviewing ~~product~~concerns ~~seizures,~~about ~~recalls,~~post-LASIK ~~withdrawal~~surgery ofquality ~~approvals and imposition~~ of ~~civil~~life ~~and~~matters ~~criminal~~in ~~penalties~~2010, ~~any~~and ~~one~~the orFDA ~~more~~has ofcommenced ~~which could have~~ a ~~material~~major ~~adverse~~study ~~effect~~ on ~~our~~LASIK ~~business,~~outcomes ~~financial condition~~ and ~~results~~ quality of ~~operations~~life. InThe ~~addition, the~~ FDA ~~could withdraw clearance~~ or ~~approvals~~another inagency ~~some~~could ~~circumstances.~~take Iflegal we or ~~our principal suppliers fail to comply with~~ regulatory ~~requirements or any adverse regulatory~~ action, weagainst ~~could~~us ~~be named as a party in ensuing litigation~~ or ~~incur~~others ~~a limitation on or prohibition of our use of excimer lasers, financing programs, or other necessary services to our business, which~~ in ~~turn~~the ~~would~~laser ~~have~~vision acorrection ~~material adverse effect on our business, financial condition or results of operations~~industry. ~~Discovery~~The ofoutcome ~~problems, violations~~ of ~~current~~this ~~laws~~review or ~~future~~legal ~~legislation~~ or ~~administrative~~regulatory action inpotentially ~~the~~could ~~United~~impact ~~States~~negatively ~~or elsewhere may adversely affect~~ the ~~ability~~acceptance of ~~our suppliers to obtain or maintain appropriate regulatory approval~~LASIK.

~~The~~Federal ~~FDA requires that some medical facilities report serious injuries involving medical devices to device manufacturers~~ and ~~deaths involving~~state ~~medical~~laws devices to the FDA. The FDA requires that subject medical facilities have specific written procedures regarding such reporting obligations. Those of our vision centers that meet the FDA’s definition of user facilities are subject to these requirements. Although we believe that our procedures meet regulatory requirements, if the FDA determines that our procedures or our reporting practices are not adequate, we could be subject to FDA enforcement action. FDA enforcement action could discourage potential patients from having laser vision correction, or could limit our ability to use medical devices, potentially having a material adverse effect on ~~our business, financial condition and results of operations by decreasing the total number of procedures that we perform.~~ “kickbacks”

~~Regulations~~Section ~~require~~1128B(b) ~~manufacturers~~of tothe ~~obtain~~Social aSecurity ~~supplemental~~Act ~~FDA authorization~~(42 ~~for~~U.S.C. ~~new~~§ ~~uses~~3120a-7b(b)) ofprohibits ~~existing~~knowingly ~~medical~~and ~~devices.~~willfully ~~Obtaining~~soliciting ~~these~~or ~~authorizations~~receiving, isoffering ~~time~~or ~~consuming~~paying ~~and~~remuneration ~~expensive~~directly or indirectly, ~~and~~in wecash ~~cannot~~or bein ~~sure~~kind, ~~that~~in ~~manufacturers~~order ofto induce the ~~devices~~referral ~~that~~of weindividuals ~~use~~for ~~will~~care bereimbursable ~~able~~under toMedicare, ~~obtain~~Medicaid and other federal health care programs, or in return for recommending, arranging, purchasing, leasing or ordering any ~~such~~goods ~~additional~~or ~~FDA authorizations.~~services ~~Further~~reimbursable under Medicare, ~~later~~Medicaid ~~discovery~~and ofother ~~problems~~federal ~~with~~health care programs (the ~~medical~~“Anti-Kickback ~~devices~~Statute”). ~~that~~This weprovision ~~use~~is ~~may~~extremely ~~result~~broad. inThe ~~restrictions~~offense onis ~~use~~classified ofas ~~the~~a ~~devices~~felony orand ~~enforcement~~is ~~action~~punishable ~~against~~by ~~the~~fines ~~manufacturers~~of up to $25,000 ~~including~~and ~~withdrawal~~imprisonment offor ~~devices~~up ~~from~~to ~~the~~5 ~~market~~years. ~~Changes~~Violations of the Anti-Kickback Statute also may result in ~~legislation~~ orthe ~~regulation~~imposition ~~could~~of ~~affect~~a ~~whether~~civil ~~and~~money ~~how~~penalty we(“CMP”) ~~can~~under ~~use~~Section ~~our~~1128A(a)(7) ~~medical~~of ~~devices~~the Social Security Act (42 U.S.C. ~~These~~1320a-7a(a)(7)) or exclusion from participation in Medicare and ~~other~~State ~~regulatory~~health ~~actions~~care ~~could~~programs ~~limit~~under ~~the~~Section ~~supply~~1128 of ~~devices~~the ~~that~~Social weSecurity ~~use~~Act or(42 ~~our~~U.S.C. ~~ability~~1320a-7). The Balanced Budget Act of 1997 amended the CMP provisions to ~~use~~allow ~~them,~~the ~~which~~government ~~could~~to ~~have~~recover atreble ~~material~~damages ~~adverse~~in ~~effect~~addition onto ~~our business~~$50,000 ~~financial~~for ~~condition,~~each ~~results~~violation of ~~operations~~the ~~and~~Anti-Kickback ~~cash flows~~Statute.

~~FDA~~Courts ~~LASIK~~have ~~Review~~interpreted the Anti-Kickback Statute to require proof of a knowing and willful intent to induce or arrange for referrals or for other business that is reimbursable under the Federal health care programs. Thus, the extent to which conduct is motivated by inducing or arranging for referrals will, in large part, determine liability under the statute. To prove a violation of the Anti-Kickback Statute, it must be shown that the remuneration between two parties was intended to induce the referral of business payable under the federal health care programs. The U.S. Health and Human Services Office of Inspector General (the “OIG”) has defined a narrow set of circumstances that create “safe harbors” from prosecution and enforcement under the Anti-Kickback Statute. The safe harbors have specific defined elements that must be met to give protection to a particular transaction. The OIG has stated that if a person participates in an arrangement that fully complies with a given safe harbor, he or she will be assured of not being prosecuted criminally or civilly for the arrangement that is the subject of that safe harbor.

The FDA’s advisory board on ophthalmic devices began reviewing concerns about post-LASIK surgery quality of life matters in 2010, and the FDA has commenced a major new study on LASIK outcomes and quality of life. The FDA or another agency could take legal or regulatory action against us or others in the laser vision correction industry. The outcome of this review or legal or regulatory action potentially could impact negatively the acceptance of LASIK. 8

~~Federal~~Because laser vision correction procedures currently are not reimbursable by Medicare, Medicaid or other governmental health programs, we do not believe that the Anti-Kickback Statute applies to our laser vision correction business. Any changes in the reimbursement and ~~state~~coverage rules for these governmental health programs may cause such business to be subject to such federal laws. onAlthough ~~“kickbacks”~~we do not anticipate such changes in the near future, we cannot predict this with any degree of certainty.

~~Section 1128B(b)~~Cataract ofservices ~~the~~are ~~Social~~reimbursable ~~Security~~under ~~Act~~Medicare, ~~(42~~and ~~U.S.C.~~thus §the ~~3120a~~Anti-~~7b(b))~~Kickback ~~prohibits~~Statute ~~knowingly~~may apply to our refractive lens and ~~willfully~~cataract ~~soliciting~~services orbusiness. ~~receiving,~~Our ~~offering~~arrangements ~~or paying~~with ~~remuneration~~ophthalmologists ~~directly~~and oroptometrists ~~indirectly,~~providing incataract ~~cash~~services ormay innot ~~kind,~~fit inwithin ~~order~~a safe harbor to ~~induce~~the Anti-Kickback Statute. However, the ~~referral~~OIG ofhas ~~individuals~~stated ~~for~~that ~~care~~the ~~reimbursable~~optional ~~under~~regulatory ~~Medicare,~~safe ~~Medicaid~~harbors ~~and~~do ~~other~~not ~~federal~~purport ~~health~~to ~~care~~define ~~programs,~~the orfull inrange ~~return~~of ~~for~~lawful ~~recommending~~activity, ~~arranging, purchasing,~~and ~~leasing~~payment orpractices ~~ordering~~that ~~any~~do ~~goods~~not orfully ~~services~~comply ~~reimbursable~~with ~~under~~a ~~Medicare,~~safe ~~Medicaid~~harbor ~~and~~may ~~other~~still ~~federal~~be ~~health~~lawful ~~care~~if ~~programs~~no ~~(the~~purpose ~~“Anti-Kickback~~of ~~Statute”).~~the ~~This~~payment ~~provision~~practice is ~~extremely~~to ~~broad.~~induce ~~The~~referrals ~~offense~~of isFederal ~~classified~~health ascare aprogram ~~felony~~business. ~~and is~~We ~~punishable~~believe bythat ~~fines~~our ofarrangements upwith toophthalmologists ~~$25,000~~ and ~~imprisonment~~optometrists ~~for~~providing upcataract toservices 5comply ~~years.~~with ~~Violations of~~ the Anti-Kickback Statute. ~~also~~However, ~~may~~if ~~result in~~ the ~~imposition~~OIG ofwere ato ~~civil~~challenge ~~money~~successfully ~~penalty~~our ~~(“CMP”)~~arrangements ~~under~~with ~~Section 1128A(a)(7)~~ophthalmologists ofand ~~the~~optometrists ~~Social~~providing ~~Security Act~~cataract ~~(42~~services, ~~U.S.C.~~we ~~1320a-7a(a)(7))~~may orbe ~~exclusion~~required ~~from~~to ~~participation~~restructure insuch ~~Medicare~~arrangements and/or ~~State~~be ~~health~~subject ~~care~~to ~~programs~~civil ~~under~~or ~~Section 1128~~criminal offines ~~the~~and ~~Social~~penalties, ~~Security~~including ~~Act~~the ~~(42~~exclusion ~~U.S.C.~~of ~~1320a-7).~~our ~~The~~company ~~Balanced~~and ~~Budget~~the ~~Act~~ophthalmologists ofand ~~1997~~optometrists ~~amended~~from the ~~CMP~~Medicare ~~provisions~~and toMedicaid ~~allow~~programs, ~~the government~~any toof ~~recover~~which ~~treble~~events ~~damages~~could inhave ~~addition~~a tomaterial ~~$50~~adverse effect on our business,~~000~~ ~~for~~financial ~~each~~condition, ~~violation~~results of ~~the~~operations ~~Anti-Kickback~~and ~~Statute~~cash flows.

Courts have interpreted the Anti-Kickback Statute to require proof of a knowing and willful intent to induce or arrange for referrals or for other business reimbursable under the Federal health care programs. Thus, the extent to which conduct is motivated by inducing or arranging for referrals will, in large part, determine liability under the statute. To prove a violation of the Anti-Kickback Statute, it must be shown that the remuneration between two parties was intended to induce the referral of business payable under the federal health care programs. The U.S. Health and Human Services Office of Inspector General (“~~OIG~~Stark”) ~~has~~Law ~~defined~~Prohibition aon ~~narrow~~Physician set of circumstances that create “safe harbors” from prosecution and enforcement under the Anti-Kickback Statute. The safe harbors have specific defined elements that must be met to give protection to a particular transaction. The OIG has stated that if a person participates in an arrangement that fully complies with a given safe harbor, he or she will be assured of not being prosecuted criminally or civilly for the arrangement that is the subject of that safe harbor. Referrals

~~Because laser~~The ~~vision~~Ethics ~~correction~~in ~~procedures~~Patient ~~currently~~Referral ~~are~~Act ~~not~~of ~~reimbursable by Medicare~~1989, ~~Medicaid~~as oramended ~~other~~(the ~~governmental~~“Stark ~~health programs~~Law”), weis doa ~~not~~civil ~~believe~~statute that ~~the~~generally ~~Anti-Kickback~~(i) ~~Statute~~prohibits ~~applies~~physicians tofrom ~~our~~making ~~laser~~referrals ~~vision~~for ~~correction~~designated ~~business.~~health ~~Any~~services ~~changes~~to entities in which the ~~reimbursement~~ ~~and~~physicians ~~coverage~~have ~~rules~~a ~~for~~direct ~~these~~or ~~governmental~~indirect ~~health~~financial ~~programs~~relationship ~~may~~and ~~cause~~(ii) ~~such~~prohibits ~~business~~entities from presenting or causing to be ~~subject~~presented claims or bills to ~~such~~any ~~federal~~individual, ~~laws~~third party payer, or other entity for designated health services furnished pursuant to a prohibited referral. ~~Although~~Under wethe doStark Law, a physician may not ~~anticipate~~refer ~~such~~patients ~~changes~~for incertain designated health services to entities with which the ~~near~~physician ~~future~~has a direct or indirect financial relationship, weunless ~~cannot~~allowed ~~predict~~under ~~this~~an ~~with~~enumerated ~~any~~exception. ~~degree~~Under ofthe ~~certainty~~Stark Law, there are numerous statutory and regulatory exceptions for certain otherwise prohibited financial relationships. A transaction must fall entirely within an exception to be lawful under the Stark Law.

8The Stark Law contains significant civil sanctions for violations, including denial of payment, refunds of amounts collected in violation of the Stark Law and exclusion from Medicare or Medicaid programs. In addition, the OIG may impose a penalty of not more than $15,000 for submitting an illegal claim or not refunding such a claim on a timely basis and a civil monetary penalty of up to $100,000 for each circumvention arrangement or scheme.

~~Table~~We believe that any referrals between or among the company, the ophthalmologists and optometrists providing cataract services, and the facilities at which cataract procedures are performed will be for services that are not designated health services under the Stark Law. For example, services for which payment is included in the ambulatory surgical center composite rate (e.g., IOLs used in cataract surgery) are not designated health services. If the ophthalmologists, optometrists or contracted surgical facilities make referrals between or among themselves for any designated health service, we will endeavor to structure their arrangements either to be exempt from the Stark Law or to meet a statutory or regulatory exception to the Stark Law prohibitions. If these arrangements are found to violate the Stark Law, we may be required to restructure such arrangements or be subject to civil or criminal fines and penalties, including the exclusion of ~~Contents~~our company, the ophthalmologists and optometrists, and the facilities from the Medicare and Medicaid programs, any of which events could have a material adverse effect on our business, financial condition and results of operations.

~~Cataract~~Some ~~services~~states ~~are~~have ~~reimbursable~~enacted ~~under Medicare~~statutes, ~~and~~similar ~~thus~~to the federal Anti-Kickback Statute ~~may~~ ~~apply to our Visium Eye Institute® cataract business. Our arrangements with ophthalmologists~~ and ~~optometrists~~ ~~providing cataract services may not fit within a safe harbor to~~ the ~~Anti-Kickback~~Stark ~~Statute. However~~Law, ~~the~~which ~~OIG~~are ~~has~~applicable ~~stated~~to ~~that~~our ~~the~~operations ~~optional~~because ~~regulatory~~they ~~safe~~cover ~~harbors~~all doreferrals ~~not purport to define the full range~~ of ~~lawful~~patients ~~activity,~~regardless ~~and payment practices that do not fully comply with a safe harbor may still be lawful if no purpose~~ of the ~~payment~~payer ~~practice~~or istype ~~to induce referrals~~ of ~~Federal~~healthcare ~~health~~service ~~care program business~~provided. WeThese ~~believe~~state ~~that~~laws ~~our~~vary ~~arrangements~~significantly ~~with~~in ~~ophthalmologists~~their scope and ~~optometrists providing~~penalties ~~cataract~~for ~~services comply with the Anti-Kickback Statute~~violations. ~~However,~~Although ifwe ~~the~~have ~~OIG~~endeavored ~~were~~ to ~~challenge~~structure ~~successfully~~ our ~~arrangements~~business ~~with~~operations ~~ophthalmologists and optometrists providing cataract services, we may be required~~ to ~~restructure such arrangements and/or~~ be ~~subject~~in tomaterial ~~civil~~compliance orwith ~~criminal~~such ~~fines~~state ~~and penalties~~laws, ~~including~~authorities ~~the~~in ~~exclusion~~those ofstates ~~our~~could ~~company~~determine ~~and~~that ~~the~~our ~~ophthalmologists~~business ~~and~~practices ~~optometrists~~are ~~from~~in ~~the~~violation ~~Medicare and Medicaid programs, any~~ of ~~which~~their ~~events~~laws. This could have a material adverse effect on our business, financial condition, and results of operations ~~and cash flows~~.

~~“Stark”~~Advertising ~~Law Prohibition on Physician Referrals~~ restrictions

~~The~~Our ~~Ethics~~business inis ~~Patient~~heavily ~~Referral~~dependent ~~Act~~on ~~of 1989~~advertising, aswhich ~~amended~~is ~~(the~~subject ~~“Stark~~to ~~Law”),~~regulation isby athe ~~civil~~Federal ~~statute~~Trade ~~that~~Commission ~~generally~~ (ithe “FTC”) ~~prohibits~~. ~~physicians~~In ~~from~~2002, ~~making~~the ~~referrals~~FTC ~~for~~conducted ~~designated~~an ~~health~~extensive ~~services~~review toof ~~entities~~our inadvertising ~~which~~practices. Following this review, the ~~physicians~~FTC ~~have~~concluded athat ~~direct~~certain orof ~~indirect~~our ~~financial~~past ~~relationship~~advertisements ~~and~~contained ~~(ii) prohibits~~claims ~~entities~~that ~~from~~were ~~presenting~~not orproperly ~~causing~~substantiated. We elected to besettle ~~presented claims~~voluntarily orwith ~~bills~~the toFTC. ~~any~~In ~~individual~~July 2003, ~~third~~the ~~party~~FTC ~~payer~~formally entered a Complaint and an Agreement Containing Consent Order in which we agreed, oramong other ~~entity~~things, ~~for~~that ~~designated~~we ~~health~~would ~~services~~not ~~furnished~~represent ~~pursuant~~in toour aadvertising ~~prohibited~~that ~~referral.~~our ~~Under~~LASIK ~~the~~surgery ~~Stark~~services ~~Law,~~eliminate athe ~~physician~~need ~~may~~for ~~not~~glasses ~~refer~~and ~~patients~~contacts for ~~certain~~life, ~~designated~~pose ~~health~~significantly ~~services~~less risk to ~~entities~~ ~~with~~patients’ ~~which~~eye ~~the~~health ~~physician~~than ~~has~~wearing aglasses ~~direct~~ or ~~indirect~~contacts ~~financial~~or ~~relationship,~~eliminate ~~unless~~the ~~allowed~~risk ~~under~~of anglare ~~enumerated~~and ~~exception.~~haloing, ~~Under~~unless, at the ~~Stark~~time ~~Law~~made, ~~there~~we ~~are~~possess ~~numerous~~and ~~statutory~~rely upon competent and ~~regulatory~~reliable ~~exceptions~~scientific ~~for~~evidence ~~certain~~that ~~otherwise~~substantiates ~~prohibited~~the ~~financial relationships~~representation. ANo ~~transaction~~monetary ~~must~~penalties ~~fall~~were ~~entirely~~imposed ~~within~~on anus. ~~exception~~Although we consented to this order in 2003, we cannot be ~~lawful~~certain ~~under~~that ~~the~~this ~~Stark~~order ~~Law.~~will not restrict our ability to effectively generate demand for our laser vision correction services.

The Stark Law contains significant civil sanctions for violations, including denial of payment, refunds of amounts collected in violation of the Stark Law and exclusion from Medicare or Medicaid programs. In addition, OIG may impose a penalty of not more than $15,000 for submitting an illegal claim or not refunding such a claim on a timely basis and a civil monetary penalty of up to $100,000 for each circumvention arrangement or scheme. 9

WeIn ~~believe~~2009 ~~that~~the ~~any~~FDA ~~referrals~~issued ~~between~~a orletter ~~among~~to ~~the~~eye ~~company,~~care ~~the~~professionals ~~ophthalmologists~~noting ~~and~~that ~~optometrists~~the ~~providing~~FDA’s ~~cataract~~Ophthalmic ~~services,~~Devices ~~and~~Panel ~~the~~had ~~facilities~~received atcomplaints ~~which~~that ~~cataract~~advertisements for LASIK procedures ~~are~~and ~~performed~~FDA-approved ~~will~~lasers beused for ~~services~~ ~~that~~LASIK ~~are~~procedures ~~not~~failed ~~designated~~to ~~health~~inform ~~services~~consumers ~~under~~of the ~~Stark~~indications, ~~Law. For example~~limitations, ~~services~~and ~~for~~risks ~~which~~associated ~~payment~~with isLASIK ~~included~~procedures inand the ~~ambulatory~~approved ~~surgical~~lasers ~~center~~used ~~composite~~for ~~rate~~the (eLASIK procedures.g. In this letter, ~~IOLs~~the ~~used~~FDA insaid ~~cataract~~that ~~surgery)~~an advertisement may be considered misleading if it fails to reveal facts that are ~~not~~material ~~designated~~to ~~health~~representations ~~services.~~made If in the ~~ophthalmologists~~advertisement. In September 2011, ~~optometrists~~the orFDA ~~contracted~~issued ~~surgical~~a ~~facilities~~second ~~make~~letter ~~referrals~~to ~~between~~eye orcare ~~among~~professionals ~~themselves~~emphasizing ~~for~~the ~~any~~importance ~~designated~~of ~~health~~providing ~~service,~~adequate werisk ~~will~~information ~~endeavor~~in toadvertisements ~~structure~~of ~~their~~FDA-approved ~~arrangements~~lasers ~~either~~used toin berefractive ~~exempt~~procedures. The September 2011 letter stated that eye care professionals had 90 days from the ~~Stark~~letter’s ~~Law~~date or to ~~meet~~correct ~~a statutory~~any ornon-compliant ~~regulatory~~advertisements ~~exception~~and topromotional materials and that the ~~Stark~~FDA ~~Law~~may ~~prohibitions.~~take Ifregulatory ~~these~~action ~~arrangements~~against ~~are~~eye ~~found~~care toprofessionals whose advertisements and promotional materials violate ~~the~~FDA ~~Stark~~regulations. ~~Law~~In 2012, wethe ~~may~~FDA beissued ~~required~~warning letters to ~~restructure~~five ~~such~~eye ~~arrangements~~care orprofessionals beto ~~subject~~stop tomisleading ~~civil~~advertising orand ~~criminal~~promotion ~~fines~~of ~~and~~refractive ~~penalties,~~lasers. ~~including~~We ~~the exclusion~~believe ofthat we have structured our ~~company,~~advertising ~~the~~practices ~~ophthalmologists~~to ~~and~~be ~~optometrists,~~in ~~and~~material ~~the~~compliance ~~facilities~~with ~~from~~FDA ~~the~~and ~~Medicare~~FTC regulations and ~~Medicaid~~guidance. ~~programs~~However, ~~any~~we ofcannot ~~which~~be ~~events~~certain ~~could~~that ~~have~~the aFDA ~~material~~or ~~adverse~~the ~~effect~~FTC onwill not determine that our ~~business,~~advertising ~~financial~~practices ~~condition~~are ~~and~~in ~~results~~violation of ~~operations~~such laws and guidance.

~~Some~~In ~~states~~addition, ~~have~~the ~~enacted~~laws ~~statutes,~~of ~~similar~~many tostates ~~the~~restrict ~~federal~~certain ~~Anti-Kickback~~advertising ~~Statute~~practices by and ~~Stark~~on ~~Law,~~behalf ~~which~~of ~~are~~physicians ~~applicable~~and tooptometrists. ~~our~~Many ~~operations~~states ~~because they~~do ~~cover~~not ~~all~~offer ~~referrals~~clear ofguidance ~~patients~~on ~~regardless~~the bounds of ~~the~~acceptable ~~payer~~advertising practices or ~~type~~on ofthe ~~healthcare~~limits ~~service~~of advertising provided. ~~These~~by ~~state~~management ~~laws~~companies ~~vary~~on ~~significantly~~behalf inof ~~their~~physicians ~~scope~~ and ~~penalties for violations~~optometrists. Although we have endeavored to structure our ~~business~~advertising ~~operations~~practices to be in material compliance with such state laws, authorities in those states could determine that our ~~business~~advertising practices are in violation of ~~their~~those laws. ~~This could have a material adverse effect on our business, financial condition and results of operations.~~

~~Advertising restrictions~~ Fee-splitting

~~Our~~Many ~~business~~states isprohibit ~~heavily~~professionals ~~dependent~~(including onophthalmologists ~~advertising,~~and ~~which~~optometrists) isfrom ~~subject~~paying toa ~~regulation~~portion byof ~~the~~a ~~Federal~~professional ~~Trade~~fee ~~Commission~~to ~~(“FTC”).~~another Inindividual ~~2002,~~unless ~~the~~that ~~FTC~~individual ~~conducted~~is an ~~extensive~~employee ~~review~~or ofpartner ~~our~~in ~~advertising practices. Following this review,~~ the ~~FTC~~same ~~concluded~~professional ~~that~~practice. ~~certain~~If ofwe ~~our~~violate ~~past~~a ~~advertisements~~state’s ~~contained~~fee-splitting ~~claims~~prohibition, ~~that~~we ~~were~~may ~~not~~be ~~properly~~subject ~~substantiated. We elected~~ to ~~settle~~civil ~~voluntarily~~or ~~with~~criminal ~~the FTC. In July 2003~~fines, and the ~~FTC~~physician ~~formally~~participating ~~entered~~in asuch ~~Complaint~~arrangements ~~and an~~may ~~Agreement~~lose ~~Containing~~his ~~Consent~~or ~~Order~~her inlicensing ~~which~~privileges. weMany ~~agreed,~~states ~~among~~do ~~other things, that we would~~ not ~~represent~~offer inclear ~~our~~guidance ~~advertising~~on ~~that~~what ~~our~~relationships ~~LASIK~~constitute ~~surgery~~fee-splitting, ~~services~~particularly ~~eliminate~~in the ~~need~~context ~~for~~of ~~glasses~~providing ~~and~~management ~~contacts~~services for ~~life,~~doctors. ~~pose~~Although ~~significantly~~we ~~less~~have ~~risk~~endeavored to ~~patients’~~ ~~eye~~structure ~~health~~our ~~than~~business ~~wearing~~operations ~~glasses~~in ormaterial ~~contacts~~compliance orwith ~~eliminate~~these ~~the risk of glare and haloing~~laws, ~~unless,~~state atauthorities ~~the~~could ~~time~~find ~~made,~~that wefee-splitting ~~possess~~prohibitions ~~and~~apply ~~rely~~to ~~upon~~our ~~competent~~business ~~and~~practices ~~reliable~~in ~~scientific~~their ~~evidence~~states. ~~that~~If ~~substantiates~~any ~~the~~aspect ~~representation.~~of Noour ~~monetary penalties~~operations were ~~imposed~~found onto ~~us.~~violate ~~Although~~fee-splitting welaws ~~consented~~or toregulations, this ~~order~~could inhave ~~2003,~~a wematerial ~~cannot~~adverse beeffect ~~certain~~on ~~that this order will not restrict~~ our ~~ability~~business, tofinancial ~~effectively~~condition, ~~generate~~results ~~demand~~of ~~for~~operations ~~our~~and ~~laser~~cash ~~vision correction services~~flows.

InCorporate ~~2009~~practice the FDA issued a letter to eye care professionals noting that the FDA’s Ophthalmic Devices Panel had received complaints that advertisements for LASIK procedures and FDA-approved lasers used for LASIK procedures failed to inform consumers of ~~the~~medicine ~~indications, limitations,~~ and risks associated with LASIK procedures and the approved lasers used for the LASIK procedures. In this letter, the FDA said that an advertisement may be considered misleading if it fails to reveal facts that are material to representations made in the advertisement. In September 2011, the FDA issued a second letter to eye care professionals emphasizing the importance of providing adequate risk information in advertisements of FDA-approved lasers used in refractive procedures. The September 2011 letter stated that eye care professionals had 90 days from the letter’s date to correct any non-compliant advertisements and promotional materials and that the FDA may take regulatory action against eye care professionals whose advertisements and promotional materials violate FDA regulations. In 2012, the FDA issued optometry

9The laws of many states prohibit business corporations, such as us, from practicing medicine and employing or engaging physicians to practice medicine. Some states prohibit business corporations from practicing optometry or employing or engaging optometrists to practice optometry. Such laws preclude companies that are not owned entirely by eye care professionals from:

~~Table~~● ofEmploying ~~Contents~~eye care professionals

~~warning~~● ~~letters~~Controlling toclinical ~~five~~decision eye care professionals to stop misleading advertising and promotion of refractive lasers. We believe that we have structured our advertising practices to be in material compliance with FDA and FTC regulations and guidance. However, we cannot be certain that the FDA or the FTC will not determine that our advertising practices are in violation of such laws and guidance. making

In● ~~addition,~~Engaging ~~the~~in ~~laws~~other ofactivities ~~many~~that ~~states~~are ~~restrict~~deemed ~~certain~~to ~~advertising~~constitute ~~practices by and on behalf of physicians and optometrists. Many states do not offer clear guidance on~~ the ~~bounds~~practice of ~~acceptable~~optometry ~~advertising practices~~ or on the limits of advertising provided by management companies on behalf of physicians and optometrists. Although we have endeavored to structure our advertising practices to be in material compliance with such state laws, authorities in those states could determine that our advertising practices are in violation of those laws. ophthalmology

~~Fee-splitting~~This prohibition is generally referred to as the prohibition against the corporate practice of medicine or optometry. Violation of this prohibition may result in civil or criminal fines, as well as sanctions imposed against the professional through licensing proceedings. Although we have endeavored to structure our contractual relationships to be in material compliance with these laws, if any aspect of our operations were found to violate state corporate practice of medicine or optometry prohibitions, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

~~Many~~Facility ~~states~~licensure ~~prohibit professionals (including ophthalmologists~~ and ~~optometrists)~~certificates ~~from paying a portion~~ of a professional fee to another individual unless that individual is an employee or partner in the same professional practice. If we violate a state’s fee-splitting prohibition, we may be subject to civil or criminal fines, and the physician participating in such arrangements may lose his or her licensing privileges. Many states do not offer clear guidance on what relationships constitute fee-splitting, particularly in the context of providing management services for doctors. Although we have endeavored to structure our business operations in material compliance with these laws, state authorities could find that fee-splitting prohibitions apply to our business practices in their states. If any aspect of our operations were found to violate fee-splitting laws or regulations, this could have a material adverse effect on our business, financial condition, results of operations and cash flows. need

~~Corporate~~State ~~practice~~Departments of ~~medicine~~Health may require us to obtain licenses in the various states in which we have laser vision correction centers or other business operations. We believe that we have obtained the necessary material licensure in states where licensure is required and ~~optometry~~that we are not required to obtain licenses in other states. However, not all of the regulations governing the need for licensure are clear and there is limited guidance available regarding certain interpretative issues. Therefore, it is possible that a state regulatory authority could determine that we are improperly conducting business operations without a license in that state. This could subject us to significant fines or penalties, result in our being required to cease operations in that state or otherwise have a material adverse effect on our business, financial condition and results of operations. Although we currently have no reason to believe that we will be unable to obtain the necessary licenses without unreasonable expense or delay, there can be no assurance that we will be able to obtain any required licensure.

~~The~~Some ~~laws~~states require permission by the State Department of ~~many~~Health in the form of a Certificate of Need (“CON”) prior to the construction or modification of an ambulatory care facility or the purchase of certain medical equipment in excess of a certain amount. We believe that we have obtained the necessary CONs in states ~~prohibit~~where ~~business~~a ~~corporations,~~CON ~~such~~is asrequired. usHowever, ~~from~~not ~~practicing~~all ~~medicine~~of the regulations governing the need for CONs are clear and ~~employing~~there oris ~~engaging~~little ~~physicians~~guidance toregarding ~~practice~~certain ~~medicine~~interpretive issues. ~~Some~~Therefore, ~~states~~it ~~prohibit~~is possible that a state regulatory authority could determine that we are improperly conducting business ~~corporations~~operations ~~from practicing~~without ~~optometry~~a orCON ~~employing~~in orthat ~~engaging~~state. ~~optometrists~~There can be no assurance that we will be able to ~~practice~~acquire ~~optometry.~~a ~~Such~~CON ~~laws~~in ~~preclude~~all ~~companies~~states where it is required, or that ~~are~~our failure or inability to obtain a CON in markets into which we believe we could otherwise be successful expanding will not ~~owned~~have ~~entirely~~a bymaterial ~~eye~~adverse ~~care~~effect ~~professionals~~on ~~from:~~our business, financial condition and results of operations.

~~• Employing eye care professionals~~10

•Health ~~Controlling~~Insurance ~~clinical~~Portability ~~decision~~and ~~making~~Accountability Act

•In ~~Engaging~~December 2000, the U.S. Department of Health and Human Services (“DHHS”) released final health privacy regulations implementing portions of the Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). These final health privacy regulations were effective in ~~other~~April ~~activities~~2003, for providers that ~~are~~engage ~~deemed~~in certain electronic transactions, including the submission of claims for payment. Additionally, DHHS published final standards to ~~constitute~~protect the ~~practice~~security of ~~optometry~~health-related information in February 2003. Finally, in August 2009 DHHS published interim final breach notification regulations implementing section 13402 of the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. The HIPAA privacy and security regulations and the HITECH Act extensively regulate the use and disclosure of individually identifiable health-related information. The ophthalmologists and their professional corporations with which we contract are covered entities under HIPAA if those entities provide services that are reimbursable under Medicare or ~~ophthalmology~~other third-party payers (e.g., cataract services). Although the covered health care providers themselves are primarily liable for HIPAA compliance, as a “business associate” to these covered entities, we are bound indirectly to comply with the HIPAA privacy regulations, and we are directly bound to comply with certain of the HIPAA security regulations.

~~This~~Although ~~prohibition~~we ishave ~~generally~~endeavored ~~referred~~ to ascomply ~~the~~with ~~prohibition~~these ~~against~~regulations, ~~the~~a ~~corporate~~finding ~~practice~~ of ~~medicine~~lack orof ~~optometry.~~compliance ~~Violation~~with ofthese ~~this~~regulations ~~prohibition~~could ~~may result~~require inus ~~civil~~to orincur ~~criminal~~substantial ~~fines~~expenses, aswhich ~~well~~could ashave ~~sanctions~~a ~~imposed~~material ~~against~~adverse ~~the~~effect ~~professional~~on ~~through licensing proceedings. Although we have endeavored to structure~~ our ~~contractual~~business, ~~relationships~~financial tocondition beand inresults ~~material~~of ~~compliance~~operations. ~~with~~In ~~these laws~~addition, ifwe ~~any aspect~~will ofcontinue ~~our~~to ~~operations~~remain ~~were~~subject ~~found~~ to ~~violate~~any state ~~corporate~~laws ~~practice~~that ofare ~~medicine~~more orrestrictive ~~optometry~~than ~~prohibitions,~~the ~~this~~privacy ~~could~~regulations ~~have~~issued aunder ~~material~~the ~~adverse~~Administrative ~~effect~~Simplification ~~on our business, financial condition, results of operations and cash flows~~Provisions.

~~Facility~~Available ~~licensure and certificates of need~~ Information

~~State~~Our ~~Departments~~websites ofare ~~Health~~www.lasikplus.com ~~may~~and ~~require~~www.lca-vision.com. usThere towe ~~obtain~~make ~~licenses~~available, infree ~~the~~of ~~various~~charge, ~~states~~our inannual ~~which~~reports weon ~~have~~Form ~~laser~~10-K, ~~vision~~quarterly ~~correction~~reports ~~centers~~on orForm ~~other~~10-Q, ~~business~~current ~~operations.~~reports Weon ~~believe~~Form ~~that~~8-K weand ~~have~~any ~~obtained~~amendments ~~the necessary~~to ~~material~~those ~~licensure~~reports inas ~~states~~well ~~where~~as ~~licensure~~any isbeneficial ~~required~~ownership ~~and~~reports ~~that~~of weofficers ~~are~~and ~~not~~directors ~~required~~filed toon ~~obtain~~Forms ~~licenses~~3, in4 ~~other~~and ~~states~~5. ~~However,~~We ~~not~~will make all ofsuch ~~the~~reports ~~regulations~~available ~~governing~~as ~~the~~soon ~~need~~as ~~for~~reasonably ~~licensure~~practicable ~~are~~after ~~clear~~we ~~and~~file ~~there~~them iswith ~~limited~~or ~~guidance available~~furnish ~~regarding~~them ~~certain~~to ~~interpretative~~the ~~issues.~~Securities ~~Therefore,~~and itExchange isCommission ~~possible~~(the ~~that~~“SEC”). aOur ~~state~~committee ~~regulatory~~charters, ~~authority~~governance ~~could~~guidelines ~~determine~~and ~~that~~code weof ethics are ~~improperly~~also ~~conducting~~available ~~business~~on ~~operations~~our ~~without~~websites. aTo ~~license~~obtain ina ~~that~~copy ~~state.~~of ~~This~~any ~~could~~of ~~subject~~these usdocuments ~~to significant~~by ~~fines~~mail, orfree ~~penalties~~of charge, ~~result~~please insend ~~our~~a ~~being~~request ~~required~~ to ~~cease~~Investor ~~operations~~Relations inat ~~that~~LCA-Vision ~~state~~Inc., or7840 ~~otherwise~~Montgomery ~~have~~Road, aCincinnati, ~~material~~Ohio ~~adverse~~45236. ~~effect~~Information contained on our ~~business,~~websites ~~financial~~is ~~condition~~not part of this Annual Report on Form 10-K and ~~results~~is ofnot ~~operations~~incorporated by reference in this document. ~~Although~~The wepublic ~~currently~~may ~~have~~read noand ~~reason~~copy ~~to believe~~any ~~that~~materials we ~~will~~file bewith ~~unable~~the toSEC ~~obtain~~at the ~~necessary~~SEC’s ~~licenses~~Public ~~without~~Reference ~~unreasonable~~Room ~~expense~~at or100 ~~delay~~F Street, ~~there~~NE, ~~can~~Washington, beDC 20549. noThe ~~assurance~~public ~~that~~may weobtain ~~will~~information beon ~~able~~the tooperation ~~obtain~~of ~~any~~the ~~required~~Public ~~licensure~~Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

~~Some~~Item states require permission by the State Department of Health in the form of a Certificate of Need (“CON”) prior to the construction or modification of an ambulatory care facility or the purchase of certain medical equipment in excess of a certain amount1A. WeRisk believe that we have obtained the necessary CONs in states where a CON is required. However, not all of the regulations governing the need for CONs are clear and there is little guidance regarding certain interpretive issues. Therefore, it is possible that a state regulatory authority could determine that we are improperly conducting business operations without a CON in that state. There can be no assurance that we will be able to acquire a CON in all states where it is required, or that our failure or inability to obtain a CON in markets into which we believe we could otherwise be successful expanding will not have a material adverse effect on our business, financial condition and results of operations. Factors

In evaluating and understanding us and our business, you should carefully consider (1) all of the information set forth in this Annual Report on Form 10-K, including the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis, (2) information in our other filings with the SEC, including any future reports on Forms 10-Q and 8-K and (3) the risks described below. These are not the only risks we face. Additional risks not presently known or which we currently deem immaterial may also impact our business operations, and the risks identified below may adversely affect our business in ways we cannot currently anticipate. Our business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks.

~~Table~~We ofincurred ~~Contents~~losses in 2012 and 2013.

~~Health~~Our ~~Insurance~~procedure ~~Portability~~volume declined 9% in 2013 compared with 2012, and ~~Accountability~~we ~~Act~~incurred losses in both years due in large part to a weak overall economy, restructuring charges and investment in our refractive lens and cataract services expansion. We sustained losses in three calendar quarters in 2012 and two calendar quarters in 2013. These continued losses have reduced our working capital. At December 31, 2013 and 2012, we had approximately $28.7 million and $34.5 million, respectively, in cash and investments. We are uncertain as to how long the negative industry conditions will continue. There could be a number of other effects from these adverse economic conditions on our business, including reduced consumer demand for our services; insolvency of our patients, resulting in increased provisions for credit losses; insolvency of our key equipment suppliers; inability of consumers to obtain credit to finance some or all of the cost of their procedures; and decreased consumer confidence. If macroeconomic conditions do not improve, our business, financial condition, results of operations and cash flows could be materially adversely affected.

InOur ~~December~~proposed ~~2000,~~merger ~~the~~with ~~U.S.~~PhotoMedex ~~Department~~may ofcause ~~Health~~disruption ~~and~~in ~~Human~~our ~~Services~~business ~~(“DHHS”) released final health privacy regulations implementing portions of the Administrative Simplification Provisions of the Health Insurance Portability~~ and ~~Accountability Act of 1996 (“HIPAA”). These final health privacy regulations were effective in April 2003~~, ~~for~~if ~~providers that engage in certain electronic transactions, including~~ the ~~submission~~proposed ofmerger ~~claims~~does ~~for~~not ~~payment. Additionally~~occur, ~~DHHS~~we ~~published~~will ~~final~~have ~~standards~~incurred tosignificant ~~protect the security of health-related information in February 2003. Finally~~expenses, in August 2009 DHHS published interim final breach notification regulations implementing section 13402 of the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. The HIPAA privacy and security regulations and the HITECH Act extensively regulate the use and disclosure of individually identifiable health-related information. The ophthalmologists and their professional corporations with which we ~~contract~~may ~~are~~need ~~covered~~to ~~entities~~pay ~~under~~a ~~HIPAA~~termination iffee ~~those entities provide services that are reimbursable~~ under ~~Medicare~~ ~~or other third-party payers (e.g., cataract services). Although~~ the ~~covered~~merger ~~health~~agreement ~~care providers themselves are primarily liable for HIPAA compliance, as a “business associate” to these covered entities we are bound indirectly to comply with the HIPAA privacy regulations,~~ and weour ~~are~~stock ~~directly~~price ~~bound~~may ~~to comply with certain of the HIPAA security regulations~~decline.

~~Although~~As ~~we have~~previously ~~endeavored~~disclosed, toon ~~comply~~February ~~with~~13, ~~these regulations~~2014, awe ~~finding~~entered ofinto ~~lack~~a ofMerger ~~compliance~~Agreement with ~~these~~PhotoMedex ~~regulations~~pursuant ~~could require us~~ to ~~incur substantial expenses,~~ which ~~could~~PhotoMedex ~~have~~will aacquire ~~material~~all ~~adverse~~of ~~effect on~~ our ~~business,~~common ~~financial~~stock ~~condition~~for ~~and~~$5.37 ~~results~~per ~~of operations.~~share Inin ~~addition~~cash, weor ~~will~~approximately ~~continue~~$106.4 tomillion, ~~remain~~resulting ~~subject~~in tous ~~any~~becoming ~~state~~a ~~laws~~wholly ~~that~~owned ~~are~~subsidiary ~~more~~of ~~restrictive than the privacy regulations issued under the Administrative Simplification Provisions~~PhotoMedex.

~~Available Information~~ 11

~~Our~~The ~~websites are www.lasikplus.com and www.lca-vision.com. There we make available~~merger, ~~free~~whether ofor ~~charge,~~not ~~our annual reports on Form 10-K~~consummated, ~~quarterly~~may ~~reports~~result onin ~~Form~~a ~~10-Q,~~loss ~~current~~of ~~reports~~key onpersonnel ~~Form 8-K~~ and ~~any~~may ~~amendments~~disrupt toour ~~those~~sales ~~reports~~and asmarketing ~~well~~or asother ~~any~~key ~~beneficial~~business ~~ownership~~activities, ~~reports~~which ~~of officers~~may ~~and~~have ~~directors~~an ~~filed~~adverse impact on ~~Forms~~our 3,financial ~~4 and 5~~performance. WeThe ~~will~~merger ~~make~~agreement ~~all~~in ~~such~~general ~~reports~~requires ~~available~~us asto ~~soon~~operate asour ~~reasonably~~business ~~practicable~~in ~~after~~the weordinary ~~file~~course ~~them~~pending ~~with~~consummation orof ~~furnish them to~~ the ~~Securities and Exchange Commission (“SEC”). Our committee charters~~merger, ~~governance~~ ~~guidelines~~but ~~and~~includes ~~code~~certain ofcontractual ~~ethics~~restrictions ~~are also available~~ on ~~our~~the ~~websites.~~conduct ~~To obtain a copy~~ of ~~any~~our ofbusiness ~~these~~that ~~documents~~may byaffect ~~mail,~~our ~~free~~ability ~~of charge, please send a request~~ to ~~Investor~~execute ~~Relations at LCA-Vision Inc., 7840 Montgomery Road, Cincinnati, Ohio 45236. Information contained~~ on our ~~websites~~business isstrategies ~~not~~and ~~part~~attain ofour ~~this~~financial ~~Annual~~goals. ~~Report~~Additionally, onthe ~~Form~~merger, ~~10-K~~whether ~~and~~or is not ~~incorporated~~consummated, ~~by reference in this document. The public~~ may ~~read~~impact ~~and~~our ~~copy~~relationships ~~any materials we file~~ with ~~the~~third ~~SEC~~parties, atincluding ~~the SEC’s Public Reference Room at 100 F Street~~suppliers, NEdistributors, ~~Washington,~~customers ~~DC 20549~~and others. ~~The~~We ~~public~~have ~~may~~incurred ~~obtain~~and ~~information~~will oncontinue ~~the~~to ~~operation~~incur ofsubstantial ~~the~~financial ~~Public~~advisory, ~~Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (www.sec.gov) that contains reports~~legal, ~~proxy~~ and ~~information statements and~~ other ~~information~~professional ~~regarding~~fees ~~issuers~~and ~~that~~expenses ~~file~~in ~~electronically~~connection with the ~~SEC~~merger.

~~Item 1A.~~As ~~Risk~~described ~~Factors~~in Note 12 to our consolidated financial statements and in the merger agreement, completion of the merger is subject to several conditions, including (i) the adoption of the merger agreement by the affirmative vote or written consent of the holders of at least a majority of the outstanding shares of our common stock at a special meeting to be held later in 2014; (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (iii) the clearance by the SEC of a proxy statement of the type contemplated by Rule 14a-2 promulgated under the Securities Exchange Act of 1934 related to the merger and merger agreement, which after clearance must be sent to stockholders of the Company at least 20 days prior to the special meeting of our stockholders; (iv) the absence of a material adverse change in our business or financial condition; and (v) other customary closing conditions.

InThe ~~evaluating~~merger ~~and~~agreement ~~understanding~~may be terminated by either us ~~and~~or ~~our~~PhotoMedex ~~business,~~if ~~you~~the ~~should~~merger ~~carefully~~has ~~consider~~not been consummated by May 14, 2014 (1subject to certain extensions) ~~all~~ ofor ~~the~~if ~~information~~a ~~set~~court ~~forth~~or inother ~~this~~governmental ~~Annual~~entity ~~Report~~of oncompetent ~~Form~~jurisdiction 10issues a final, non-Kappealable order permanently restraining, ~~including~~enjoining ~~the~~or ~~Consolidated~~otherwise ~~Financial Statements~~prohibiting ~~and~~the ~~notes~~merger. ~~thereto~~In ~~and~~addition, ~~Management’s~~among ~~Discussion~~other ~~and~~things, ~~Analysis~~PhotoMedex may, ~~(2) information~~but inis ~~our~~not ~~other~~required ~~filings~~to, ~~with~~terminate the ~~SEC~~merger agreement if we enter into, ~~including~~or ~~any~~publicly ~~future~~propose ~~reports~~to onenter ~~Forms~~into, ~~10-Q~~an ~~and~~agreement ~~8-K~~relating ~~and~~to ~~(3) the~~our ~~risks~~acquisition ~~described~~by ~~below.~~a ~~These~~third ~~are~~party ~~not~~or ~~the~~take ~~only risks~~other wespecified ~~face.~~actions ~~Additional~~which ~~risks~~are ~~not~~inconsistent ~~presently~~with ~~known~~supporting orthe ~~which~~merger. Similarly we ~~currently~~can ~~deem~~terminate ~~immaterial~~the ~~may~~merger ~~also~~agreement, ~~impact~~subject ~~our~~to ~~business~~certain ~~operations~~restrictions, ~~and~~if ~~the~~our ~~risks~~board ~~identified~~determines ~~below~~that ~~may~~it ~~adversely~~has ~~affect~~received ~~our~~a ~~business~~superior inacquisition ~~ways~~proposal wefrom ~~cannot~~a ~~currently~~third ~~anticipate~~party. ~~Our~~In ~~business, financial~~the ~~condition,~~event ~~results~~of a termination of ~~operations~~the ~~and~~nature ~~cash~~described ~~flows~~in ~~could~~the two preceding sentences, we would be ~~materially~~required ~~adversely~~to ~~affected~~pay bya ~~any~~break-up fee of ~~these~~$3.2 ~~risks~~million plus expenses incurred by PhotoMedex (not to exceed $1.0 million).

WeChanges ~~incurred losses~~ in ~~2010,~~general ~~2011~~economic ~~and~~conditions ~~2012,~~may ~~and~~cause ~~expect~~fluctuations toin ~~continue~~our torevenues ~~incur~~and ~~losses in 2013~~profitability.

~~Our~~The ~~procedure~~cost ~~volume~~of ~~remained~~laser ~~consistent~~vision incorrection ~~2012~~procedures ~~compared~~typically ~~with 2011,~~is ~~and~~not wereimbursed ~~incurred~~by ~~losses~~third-party inpayers ~~both~~such ~~years~~as ~~due~~health incare ~~large~~insurance ~~part~~companies toor ~~continued~~government ~~weak~~programs. ~~consumer confidence~~Accordingly, aas ~~weak~~we ~~overall~~are ~~economy,~~experiencing ~~high unemployment~~ and ~~investment~~have experienced in ~~our~~prior ~~cataract~~fiscal ~~services~~periods, ~~expansion.~~our Weoperating ~~sustained~~results ~~losses~~may invary ~~three~~based ~~quarters~~upon inthe ~~2011~~impact ~~and~~of ~~three quarters~~changes in ~~2012.~~the Wedisposable ~~anticipate~~income ~~that~~of inconsumers ~~2013~~interested wein ~~will~~laser ~~continue~~vision ~~generating~~correction, ~~losses~~among ~~and~~other ~~negative~~economic ~~cash flows~~factors. ~~These~~A ~~continued~~significant ~~losses~~decrease ~~have~~in ~~reduced~~consumer ~~our~~disposable ~~working~~income ~~capital.~~in Ata ~~December 31,~~weak ~~2012~~economy ~~and~~results ~~2011,~~in wea ~~had~~decrease ~~approximately~~in ~~$34.5~~the ~~million~~number ~~and~~of ~~$44.8 million,~~laser ~~respectively,~~vision incorrection ~~cash~~procedures performed and ~~investments.~~a Wedecline ~~are~~in ~~uncertain~~our asrevenues toand ~~how~~profitability. ~~long~~In ~~the~~addition, ~~negative~~weak economic ~~and industry~~ conditions ~~will~~may ~~continue.~~cause ~~There~~some ~~could be a number~~ of ~~other~~our ~~effects~~patients ~~from~~to ~~these~~experience ~~adverse~~financial ~~economic~~distress ~~conditions~~or ondeclare ~~our business~~bankruptcy, ~~including reduced~~which ~~consumer~~may ~~demand~~negatively ~~for~~impact our ~~services;~~accounts ~~insolvency~~receivable ofcollection ~~our~~experience. ~~patients,~~Weak ~~resulting~~economic inconditions ~~increased~~also ~~provisions~~may ~~for~~change ~~credit~~the ~~losses;~~risk ~~insolvency~~profile ofor ~~our~~volume ~~key equipment suppliers; inability~~ of ~~consumers~~business tothat ~~obtain~~our ~~credit~~unaffiliated to finance ~~some~~company orpartner ~~all~~is ofwilling ~~the~~to ~~cost~~underwrite, ofwhich ~~their procedures;~~could ~~and~~adversely ~~decreased~~affect ~~consumer confidence. If macroeconomic conditions do not improve,~~ our business, financial condition, results of operations and cash flows ~~could be materially adversely affected~~.

~~Changes~~Our inindustry ~~general~~has ~~economic~~historically ~~conditions~~been ~~may~~highly ~~cause~~correlated ~~fluctuations~~with consumer confidence. Declines or volatility in ~~our~~consumer ~~revenues~~confidence ~~and~~may ~~profitability.~~continue to negatively impact our business.

~~The~~Recessionary ~~cost~~economic ~~of laser vision correction procedures typically is not reimbursed by third-party payers such as health care insurance companies or government programs. Accordingly~~conditions, asuncertainty ~~we are experiencing and have experienced~~ in ~~prior~~the ~~fiscal~~credit ~~periods~~markets, ~~our~~a ~~operating~~period ~~results may vary based upon the impact~~ of ~~changes~~rising inenergy ~~the~~costs ~~disposable~~and ~~income~~depressed ofhousing ~~consumers~~prices ~~interested~~have inall ~~laser~~contributed ~~vision~~to ~~correction, among other economic factors. A significant decrease in consumer disposable income in~~ a ~~weak~~deterioration ~~economy results~~ in avolume ~~decrease in the number~~ of ~~laser vision correction~~ procedures performed ~~and a decline in our revenues and profitability. In addition~~, ~~weak~~especially ~~economic conditions~~for ~~may cause some of our~~ patients toat ~~experience~~middle- ~~financial~~and ~~distress~~lower-income orlevels. ~~declare~~Depressed ~~bankruptcy,~~consumer ~~which~~confidence ~~may~~ negatively ~~impact~~impacts our ~~accounts~~procedure ~~receivable~~volume ~~collection~~and ~~experience~~financial performance. ~~Weak~~The ~~economic~~current market conditions ~~also~~have ~~may~~created ~~change~~uncertainty ~~the~~and ~~risk~~caused ~~profile~~potential orpatients ~~volume of business that our unaffiliated finance company partner is willing~~ to ~~underwrite,~~be ~~which~~more ~~could~~cautious ~~adversely~~in ~~affect~~their ~~our~~purchasing ~~business, financial condition, results of operations and cash flows~~decisions.

11Our quarterly and annual operating results are subject to significant fluctuations.

~~Table~~Our ofrevenue ~~Contents~~and operating results have fluctuated and may continue to fluctuate significantly from quarter to quarter and from year to year depending on many factors, including but not limited to:

~~Our~~● ~~industry~~The isnumber ~~highly~~of ~~correlated~~laser ~~with~~vision ~~consumer~~correction ~~confidence.~~procedures ~~Declines~~we ~~or volatility in consumer confidence may continue to negatively impact our business.~~ perform

~~Recessionary~~● Fluctuating economic conditions, ~~uncertainty~~ in the ~~credit~~geographic ~~markets,~~areas ain ~~period~~which ofwe ~~rising energy~~operate, ~~costs~~which ~~and~~can ~~depressed~~result ~~housing~~in ~~prices~~changes ~~have all contributed to a deterioration~~ in ~~volume~~demand ~~of procedures performed, especially~~ for ~~patients at middle- and lower-income levels. Depressed consumer confidence negatively impacts~~ our ~~financial performance.~~laser ~~The~~vision ~~current~~correction ~~market conditions in the credit markets and high unemployment have created uncertainty and caused potential patients to be more cautious in their purchasing decisions.~~ services

~~Our~~● ~~quarterly~~The timing of advances by our suppliers and ~~annual~~the ~~operating~~purchase ~~results~~of ~~are~~such ~~subject~~advances toor ~~significant~~upgrades ~~fluctuations.~~of equipment by us or our competitors

~~Our~~● ~~revenue~~The ~~and~~impact ~~operating~~of ~~results~~competitors, ~~have~~including ~~fluctuated~~those ~~and~~who ~~may~~compete ~~continue~~by todeeply ~~fluctuate~~discounting ~~significantly~~the ~~from~~price ~~quarter~~of tolaser ~~quarter~~vision ~~and~~correction ~~from~~services, ~~year~~in tothe ~~year~~geographic ~~depending~~areas onin ~~many~~which ~~factors,~~we ~~including but not limited to:~~ operate

•● The ~~number~~opening, ofclosing ~~laser~~or ~~vision~~expansion ~~correction~~of ~~procedures~~vision ~~performed~~centers

•● ~~Fluctuating~~Our ~~economic~~ability ~~conditions~~to inmanage ~~the~~equipment ~~geographic~~and ~~areas~~operating ~~in which we operate, which can result in changes in demand for our laser vision correction services~~costs

•● ~~The~~Collection ~~timing~~rates ofon ~~advances~~self-financed ~~by our suppliers and the purchase of such advances or upgrades of equipment by us or our competitors~~procedures

•● The ~~impact~~availability of ~~competitors,~~third-party ~~including~~financing ~~those~~for ~~who~~our ~~compete by deeply discounting the price of laser vision correction services, in the geographic areas in which we operate~~patients

•● ~~The~~Regulatory ~~opening, closing or expansion of vision centers~~matters

~~• Our ability to manage equipment and operating costs~~12

•● ~~Collection rates on self-financed procedures~~Litigation

•● ~~The~~Acquisitions ~~availability~~and ofother ~~third-party financing for our patients~~transactions

•In ~~Regulatory~~addition, ~~matters~~our revenue and operating results are subject to seasonal factors. In terms of the number of procedures performed, our strongest quarter historically has been the first quarter of the year, and our business is generally weaker in the latter half of the year. We believe these fluctuations are due primarily to:

•● ~~Litigation~~The availability to potential patients of funds under typical employer medical flexible spending

•● ~~Acquisitions~~Time constraints imposed by the summer vacation and ~~other~~holiday ~~transactions~~seasons and a desire by some individuals not to schedule procedures at those times of year

~~In addition,~~Reductions ~~our~~in ~~revenue~~revenues ~~and~~or ~~operating~~net ~~results~~income ~~are~~between ~~subject~~quarters toor ~~seasonal~~our ~~factors.~~failure Into ~~terms~~achieve ofexpected ~~the~~quarterly ~~number~~earnings ofper ~~procedures~~share ~~performed, our strongest quarter historically~~ has ~~been~~in the ~~first~~past ~~quarter of the year,~~ and ~~our~~could ~~business~~in isthe ~~generally~~future ~~weaker~~result in ~~the latter~~a ~~half~~decrease ofin the ~~year.~~market Weprice ~~believe~~of ~~these~~our ~~fluctuations~~common ~~are due primarily to:~~ stock.

•Our ~~The~~business ~~availability~~relies toheavily ~~potential~~upon ~~patients~~direct-to-consumer ~~of funds under typical employer medical flexible spending plans and health savings plans~~marketing.

•The ~~Time~~effectiveness ~~constraints~~of ~~imposed~~our bymarketing programs and messages to consumers can have a significant impact on our financial performance. The effectiveness of marketing fluctuates, resulting in changes in the ~~summer~~cost ~~vacation~~of ~~and~~marketing ~~holiday~~per ~~seasons~~procedure, and avariations ~~desire~~in byour ~~some~~margins. ~~individuals~~Less ~~not~~effective tomarketing ~~schedule~~programs ~~procedures~~could atadversely ~~those~~affect ~~times~~our business, financial condition and results of ~~year~~operations.

~~Reductions~~We inderive ~~revenues~~substantially orall ~~net~~of ~~income between quarters or~~ our ~~failure~~revenue tofrom ~~achieve~~laser ~~expected~~vision ~~quarterly~~correction ~~earnings~~services. ~~per~~A ~~share~~decrease ~~has~~ in the ~~past~~provision ~~and~~of ~~could~~these inservices ~~the~~could ~~future~~ result in a significant decrease in ~~the market price of~~ our ~~common~~revenues ~~stock.~~and profitability.

~~Our~~We ~~business~~derive ~~relies~~substantially ~~heavily~~all ~~upon direct-~~of our revenues from laser vision correction services. If we are not able to~~-consumer~~ ~~marketing~~provide those services or the number of laser vision correction procedures we perform significantly decreases, our revenues and results of operations will decrease materially. We do not currently have other matured diversified revenue sources to offset a significant decrease in revenues from our provision of laser vision correction services.

~~The~~Our ~~effectiveness~~expansion ofinto ~~our~~new ~~marketing~~services ~~programs~~or ~~and~~products ~~messages~~beyond tolaser ~~consumers~~vision ~~can~~correction ~~have~~may anot ~~significant~~be ~~impact on our financial performance~~successful. The effectiveness of marketing fluctuates, resulting in changes in the cost of marketing per procedure, and variations in our margins. Less effective marketing programs could adversely affect our business, financial condition and results of operations.

WeBeginning ~~derive~~in ~~substantially~~2011, ~~all~~we began offering standard cataract, premium IOL and ICL services in certain of our ~~revenue~~existing markets. In 2012 we expanded some of these initiatives to nine total markets utilizing our existing infrastructure from our laser vision correction ~~services~~centers. AThis ~~decrease~~diversification inrequires ~~the~~us ~~provision of~~to incur start-up losses, and we have not received significant revenues from these services. ~~could~~Our ~~result~~diversification ininto arefractive ~~significant~~lens ~~decrease~~and incataract ~~our~~services ~~revenues~~may not be successful, and ~~profitability.~~we can give no assurance that we can develop these opportunities or that we will have adequate capital to do so.

~~We derive substantially all of our revenues from laser vision correction services.~~ If we are ~~not~~unable ~~able~~ to ~~provide~~attract ~~those~~and ~~services~~retain orqualified ~~the~~independent ~~number of laser vision correction procedures we perform significantly decreases~~ophthalmologists, our ~~revenues~~ability ~~and~~to ~~results~~maintain of operations ~~will~~at ~~decrease~~existing ~~materially.~~vision Wecenters, doto ~~not currently~~attract ~~have~~patients ~~other~~or ~~matured diversified revenue sources~~ to ~~offset~~open anew ~~significant~~vision ~~decrease~~centers incould ~~revenues~~be ~~from~~negatively ~~our provision of laser vision correction services~~affected.

~~Our~~We ~~expansion~~generate ~~into~~our revenues through independent ophthalmologists who work with us to perform surgeries. In states where the corporate practice of medicine is prohibited, we contract with professional corporations for ophthalmologists to perform surgeries at our vision centers. The retention of those ophthalmologists is a critical factor in the success of our existing vision centers, and the hiring of independent qualified ophthalmologists is a critical factor in our ability to launch a new ~~services~~vision center successfully. However, it is sometimes difficult for us to hire or ~~products~~retain ~~beyond~~qualified ~~laser~~ophthalmologists. If we are unable consistently to hire and retain qualified ophthalmologists, our ability to open new vision ~~correction~~centers, ~~may~~maintain ~~not~~operations at existing vision centers, and attract patients could be ~~successful~~negatively affected.

~~Beginning~~Throughout ~~in 2011~~2013, we ~~began~~continued ~~offering~~to ~~standard~~feature ~~cataract,~~our ~~premium~~ophthalmologists ~~IOL and ICL services~~ in ~~certain~~local ofmarketing ~~our existing markets under our new Visium Eye Institute® brand~~materials. InIf ~~2012~~ we ~~expanded~~are ~~these~~unable ~~initiatives~~ to ~~ten~~retain ~~total~~these ~~markets~~featured ~~utilizing~~ophthalmologists, our ~~existing infrastructure~~ability ~~from~~to ~~our~~maintain ~~laser~~operations ~~vision~~at ~~correction~~existing vision centers. ~~This diversification requires us to incur start-up losses,~~ and weattract ~~have~~patients ~~not~~could ~~received significant revenues from these services. Our diversification into cataract services may not~~ be ~~successful, and~~negatively ~~we can give no assurance that we can develop these opportunities or that we will have adequate capital to do so~~affected.

12If technological changes occur that render our equipment or services obsolete, or increase our cost structure, we may need to make significant capital expenditures or modify our business model, which could cause our revenues or results of operations to decline.

~~Table~~Industry, competitive or clinical factors, among others, may require us to introduce alternate ophthalmic laser technology or other surgical or non-surgical methods for correcting refractive vision disorders than those that we currently use in our laser vision correction centers. Such alternative technologies could include various intraocular lens technologies or other new technologies. Introducing such technology could require significant capital investment or force us to modify our business model in such a way as to make our revenues or results of ~~Contents~~operations decline. An increase in costs could reduce our ability to maintain our margins. An increase in prices could adversely affect our ability to attract new patients.

If we are unable to attract and retain qualified independent ophthalmologists, our ability to maintain operations at existing vision centers, to attract patients or to open new vision centers could be negatively affected. 13

WeIf generate our revenues through independent ophthalmologists who work with us to perform surgeries. In states where the corporate practice of medicine is prohibited, we contract with professional corporations for ophthalmologists to perform surgeries at our vision centers. The retention of those ophthalmologists is a ~~critical~~better-financed ~~factor~~or inlower-cost ~~the~~provider ~~success~~ of ~~our~~laser ~~existing~~ vision ~~centers,~~correction ~~and~~or ~~the hiring of independent qualified ophthalmologists is~~ a ~~critical~~competing ~~factor in our ability to launch a new~~ vision ~~center successfully.~~treatment ~~However,~~forces ~~it is sometimes difficult for~~ us to ~~retain~~lower orour ~~hire~~laser ~~qualified~~surgery ~~ophthalmologists.~~prices Ifin wea ~~are~~particular ~~unable~~geographic ~~consistently to hire and retain qualified ophthalmologists~~area, our ~~ability~~revenues toand ~~open~~results ~~new~~of ~~vision centers, maintain~~ operations ~~at existing vision centers, and attract patients~~ could ~~be negatively affected~~decline.

~~Throughout~~Laser ~~2012~~eye surgery competes with other surgical and non-surgical treatments for refractive vision disorders, weincluding ~~continued~~eyeglasses, tocontact ~~feature~~lenses, ~~our~~other ~~ophthalmologists~~types ~~in local~~of ~~marketing~~refractive ~~materials~~surgery, corneal implants and other technologies currently under development. IfAmong weproviders ~~are~~of ~~unable~~laser vision correction, competition comes from firms similar to ~~retain~~us ~~these~~and ~~featured~~from hospitals, hospital-affiliated group entities, physician group practices and private ophthalmologists, ~~our~~among ~~ability~~others tothat, ~~maintain~~in ~~operations~~order atto ~~existing~~offer laser vision ~~centers~~correction to patients, purchase or rent excimer lasers. Suppliers of conventional eyeglasses and ~~attract~~contact ~~patients~~lenses, ~~could~~such beas ~~negatively~~optometry ~~affected~~chains, also may compete with us by purchasing laser systems and offering laser vision correction to their customers.

IfSome ~~technological~~of ~~changes~~our ~~occur~~current competitors or other companies that ~~render~~may ~~our~~choose ~~equipment~~to orenter ~~services~~the ~~obsolete~~industry in the future, orincluding ~~increase~~laser ~~our~~manufacturers ~~cost~~themselves, ~~structure~~may have substantially greater financial, technical, managerial, marketing or other resources and experience than we do and may ~~need~~be able to ~~make~~compete ~~significant~~more ~~capital expenditures~~effectively. orSimilarly, ~~modify~~competition ~~our~~could ~~business~~increase ~~model~~if the market for laser vision correction does not experience growth, ~~which~~and ~~could~~existing ~~cause~~providers ~~our~~compete ~~revenues~~for market share. Additional competition may develop, particularly if the price to purchase or ~~results~~rent ofexcimer laser systems decreases. Our management, operations, tostrategy ~~decline~~and marketing plans may not be successful in meeting this competition.

~~Industry,~~If ~~competitive~~more ~~or clinical~~competitors ~~factors,~~offer ~~among~~laser ~~others,~~vision ~~may~~correction ~~require~~or usother tocompetitive ~~introduce~~types ~~alternate~~of ~~ophthalmic~~vision ~~laser~~treatments ~~technology~~in ora ~~other~~given ~~surgical~~geographic ormarket, ~~non-surgical~~we ~~methods~~might ~~for~~find ~~correcting~~it ~~refractive~~necessary ~~vision~~to ~~disorders~~reduce ~~than~~the ~~those~~prices ~~that~~ we ~~currently~~charge, ~~use~~particularly inif ~~our~~competitors ~~laser~~offer ~~vision~~the ~~correction centers.~~procedures ~~Such~~at ~~alternative~~lower ~~technologies~~prices ~~could~~than ~~include~~we ~~various~~do. ~~intraocular~~If ~~lens~~that ~~technologies~~were orto ~~other~~happen ~~new~~or ~~technologies.~~we ~~Introducing~~were ~~such~~not ~~technology~~successful ~~could~~in ~~require~~cost ~~significant~~effectively ~~capital~~acquiring ~~investment~~patients orfor ~~force us to modify~~ our ~~business~~procedures, ~~model~~we inmay ~~such~~not abe ~~way~~able as to make ~~our~~up ~~revenues~~for orthe ~~results~~reduced ofgross ~~operations~~profit ~~decline.~~margin Anby ~~increase~~increasing inthe ~~costs~~number ~~could~~of ~~reduce~~procedures ~~our~~that ~~ability~~we toperform, ~~maintain~~and our ~~margins.~~business, Anfinancial ~~increase~~condition inand ~~prices~~results from operations could be adversely ~~affect~~affected, ~~our~~as ~~ability~~we tohave ~~attract~~experienced ~~new~~in ~~patients.~~prior fiscal periods.

IfOur abusiness ~~better-financed~~has orbeen ~~lower-cost~~adversely ~~provider~~affected ofin ~~laser~~the ~~vision~~past ~~correction~~by ordeeply-discounted apricing ~~competing~~by ~~vision~~some ~~treatment~~competitors, ~~forces~~and usit tois ~~lower~~possible ~~our~~that ~~laser~~such ~~surgery~~competitive ~~prices~~practices ~~in a~~may ~~particular~~adversely ~~geographic~~affect ~~area,~~ our ~~revenues~~business ~~and~~in ~~results~~the ~~of operations could decline~~future.

~~Laser~~In ~~eye~~the ~~surgery~~past, ~~competes~~certain ~~with~~competitors ~~other~~have ~~surgical~~utilized ~~and non~~deeply-~~surgical~~discounted ~~treatments~~pricing ~~for~~in ~~refractive~~an ~~vision~~effort ~~disorders,~~to ~~including~~generate ~~eyeglasses,~~procedure ~~contact~~volume. ~~lenses,~~This ~~other~~practice ~~types~~has ofcaused ~~refractive~~periods ~~surgery,~~of ~~corneal~~intense ~~implants~~price ~~and~~competition ~~other~~in ~~technologies~~our ~~currently under development~~industry. ~~Among~~As ~~providers~~a ~~of laser vision correction~~result, ~~competition~~ ~~comes~~we ~~from~~have ~~firms~~lowered ~~similar~~our toprices usin ~~and~~the ~~from~~past ~~hospitals,~~in ~~hospital-affiliated~~order ~~group~~to ~~entities,~~remain ~~physician~~competitive. ~~group~~We ~~practices~~currently ~~and~~face ~~private~~competitors ~~ophthalmologists,~~offering ~~among~~discounted ~~others that~~prices, inincluding ~~order~~several toproviders ~~offer~~of laser vision correction ~~to patients~~procedures, ~~purchase~~in orsome ~~rent excimer~~geographic ~~lasers.~~markets ~~Suppliers~~where ofwe ~~conventional~~conduct ~~eyeglasses~~business. ~~and~~It ~~contact~~is ~~lenses~~possible that, ~~such~~in asthe ~~optometry~~future, ~~chains~~business, ~~also~~financial ~~may~~condition ~~compete~~and ~~with~~results usof byoperations ~~purchasing~~could ~~laser~~be ~~systems~~adversely ~~and~~affected, ~~offering~~as ~~laser~~a ~~vision~~result ~~correction~~of tothe ~~their~~discounting ~~customers.~~practices of competitors.

~~Some~~We ~~of our current competitors or other companies that may choose to enter the industry in the future, including laser manufacturers themselves, may~~ have ~~substantially~~credit ~~greater~~risk ~~financial,~~from ~~technical,~~accounts ~~managerial,~~receivable ~~marketing~~from orinternally ~~other~~financed ~~resources and experience than we do and may be able to compete more effectively~~patients. Similarly, competition could increase if the market for laser vision correction does not experience growth, and existing providers compete for market share. Additional competition may develop, particularly if the price to purchase or rent excimer laser systems decreases. Our management, operations, strategy and marketing plans may not be successful in meeting this competition.

IfA ~~more~~significant ~~competitors~~percentage ~~offer~~of ~~laser~~our ~~vision~~patients ~~correction~~finance some or ~~other~~all ~~competitive~~of ~~types~~the cost of ~~vision~~their ~~treatments in~~procedure. aWe ~~given~~provide ~~geographic~~certain ~~market~~of our patients, weincluding ~~might~~patients ~~find~~who itcould ~~necessary~~not otherwise obtain third-party financing, with the ability to ~~reduce~~pay for our procedures with direct financing. The terms of our direct financing typically require the ~~prices~~patient weto ~~charge~~pay a down payment, ~~particularly~~with ifthe ~~competitors~~remaining ~~offer~~balance paid by the ~~procedures~~patient atfrom ~~lower~~12 ~~prices~~to ~~than~~36 monthly installments. As of December 31, 2013, we doheld $5.4 Ifmillion ~~that~~in ~~were~~gross patient receivables, compared to ~~happen~~$5.5 ormillion weas ~~were~~of ~~not~~December ~~successful~~31, in2012. ~~cost~~We ~~effectively~~are ~~acquiring patients~~exposed ~~for~~to significant credit risk from our ~~procedures,~~direct wefinancing ~~may~~program, ~~not~~particularly begiven ~~able~~that topatients ~~make~~who upparticipate ~~for~~in the ~~reduced~~program ~~gross~~generally ~~profit~~have ~~margin~~not been deemed creditworthy by ~~increasing~~third-party financing companies with more experience in credit issues. If the ~~number~~uncollectible ofamounts ~~procedures~~exceed the amounts that we ~~perform~~have reserved, ~~and~~we could be required to write down our ~~business~~accounts receivable, ~~financial~~and ~~condition~~our cash flow and results ~~from~~of operations ~~could~~would be adversely affected~~, as we have experienced in prior fiscal periods~~.

~~Our~~Extensive ~~business~~state ~~has~~and ~~been~~federal ~~adversely~~laws ~~affected~~and inregulations, some of which may be applicable to our business operations, regulate the ~~past~~extension byof ~~deeply~~credit to patients. Non-~~discounted~~compliance ~~pricing~~could bysubject ~~some competitors~~us to litigation, ~~and~~enforcement itaction, isor ~~possible~~civil ~~that~~or criminal penalties. Any such ~~competitive~~action ~~practices~~could ~~may~~have ~~adversely~~a ~~affect~~material adverse effect on our business, infinancial ~~the~~condition, ~~future~~results of operations and cash flows.

InConcerns ~~the~~about ~~past,~~potential ~~certain competitors~~side ~~have~~effects ~~utilized~~and ~~deeply~~long-~~discounted~~term ~~pricing~~results inmay annegatively ~~effort~~impact tomarket ~~generate~~acceptance ~~procedure volume. This practice has caused periods~~ of intense price competition in our industry. As a result, we have lowered our prices in the past in order to remain competitive. We currently face competitors offering discounted prices, including several providers of laser vision correction ~~procedures~~, inresult ~~some geographic markets where we conduct business. It is possible that,~~ in ~~the~~potential ~~future,~~liability ~~business,~~for ~~financial condition~~us and ~~results~~prevent ofus ~~operations~~from ~~could~~growing beour ~~adversely affected, as a result of the discounting practices of competitors~~business.

WeSome people and publications have ~~credit risk~~raised ~~from~~concerns ~~accounts~~with ~~receivable~~respect to the predictability and stability of results and potential complications or side effects of laser vision correction. Physicians have provided laser vision correction in the United States since 1995. Any long-term complications or side effects of laser vision correction may call into question its safety and effectiveness, which in turn may negatively affect market acceptance of laser vision correction. Complications or side effects of laser vision correction could lead to professional liability, malpractice or other claims against us and product liability claims against the manufacturers of our lasers. Courts have awarded several significant verdicts against non-affiliated refractive surgeons in the past. Consequences of proceedings could include increased liability to us in connection with malpractice litigation, increased difficulty in hiring and retaining qualified independent ophthalmologists who may be wary of the increased liability associated with laser eye surgery, and decreased operational and financial yield from ~~internally~~pre-operative ~~financed~~examinations, ~~patients~~among other effects that would be adverse to our business, financial condition, and results of operations.

ASome ~~significant percentage~~ of ~~our patients finance some or all of~~ the ~~cost of~~possible ~~their~~side ~~procedure.~~effects ~~We provide certain~~ of ~~our~~laser ~~patients,~~vision ~~including~~correction ~~patients~~may who could not otherwise obtain third-party financing, with the ability to pay for our procedures with direct financing. The terms of our direct financing typically require the patient to pay a fee up-front, with the remaining balance paid by the patient in up to 36 monthly installments. As of December 31, 2012, we had $5.5 million in gross patient receivables, compared to $4.8 million as of December 31, 2011. We are exposed to significant credit risk from our direct financing program, particularly given that patients who participate in the program include:

13● Foreign body sensation

~~Table~~● ofPain ~~Contents~~or discomfort

~~generally~~● ~~have~~Sensitivity ~~not been deemed creditworthy by third-party financing companies with more experience in credit issues. If the uncollectible amounts exceed the amounts that we have reserved, we could be required~~ to ~~write~~bright ~~down our accounts receivable, and our cash flow and results of operations would be adversely affected.~~ lights

~~Extensive state~~● ~~and~~Blurred ~~federal~~vision ~~laws and regulations, some of which may be applicable to our business operations, regulate the extension of credit to patients. Non-compliance could subject us to litigation, enforcement action,~~ or ~~civil or criminal penalties. Any such action could have a material adverse effect on our business, financial condition, results of operations and cash flows.~~ haze

Concerns about potential side effects and long-term results may negatively impact market acceptance of laser vision correction, result in potential liability for us and prevent us from growing our business. 14

~~Some~~● ~~people~~Dryness ~~and publications have raised concerns with respect to the predictability and stability of results and potential complications~~ or side effects of laser vision correction. Physicians have provided laser vision correction in the United States since 1995. Any long-term complications or side effects of laser vision correction may call into question its safety and effectiveness, which in turn may negatively affect market acceptance of laser vision correction. Complications or side effects of laser vision correction could lead to professional liability, malpractice or other claims against us and product liability claims against the manufacturers of our lasers. Courts have awarded several significant verdicts against non-affiliated refractive surgeons in the past. Consequences of proceedings could include increased liability to us in connection with malpractice litigation, increased difficulty in hiring and retaining qualified independent ophthalmologists who may be wary of the increased liability associated with laser eye surgery, and decreased operational and financial yield from pre-operative examinations, among other effects that would be adverse to our business, financial condition, and results of operations. tearing

~~Some~~● ofFluctuation ~~the~~in ~~possible side effects of laser~~ vision ~~correction may include:~~

•● ~~Foreign~~Night ~~body~~glare ~~sensation~~and halos

•● ~~Pain~~Poor or ~~discomfort~~reduced visual quality

•● ~~Sensitivity~~Overcorrection toor ~~bright lights~~undercorrection

•● ~~Blurred vision or haze~~Regression

•● ~~Dryness~~Decreased orcorneal ~~tearing~~integrity

•● ~~Fluctuation~~Corneal inflap ~~vision~~or corneal healing complications

•● ~~Night~~Loss ~~glare~~of ~~and~~best ~~halos~~corrected visual acuity

•● ~~Poor~~Inflammation or ~~reduced~~infection ~~visual~~of ~~quality~~the eye

•● ~~Overcorrection~~Need for corrective lenses or ~~undercorrection~~reading glasses post-operatively

•● ~~Regression~~Need for further treatment

•● ~~Decreased corneal integrity~~Ectasia

•We ~~Corneal~~depend ~~flap~~on limited sources for the excimer lasers and diagnostic equipment we use and for the third-party financing made available to our patients. Shortages of these items or ~~corneal~~services ~~healing~~could ~~complications~~hinder our ability to increase our procedure volume.

•We ~~Loss~~use two suppliers, AMO and Alcon, for our excimer lasers. If either or both of ~~best~~these ~~corrected~~companies ~~visual~~became ~~acuity~~unwilling or unable to supply us with excimer lasers and diagnostic equipment or to repair or replace parts or to provide services, our ability to maintain or increase our capacity to perform laser vision correction services at existing vision centers or to open new vision centers could be restricted.

•We ~~Inflammation~~currently rely on AMO to provide us with femtosecond lasers and patient interface kits, the devices used to create the corneal flap in the LASIK procedure, and McKesson for other disposable items required for LASIK. If we were to require alternate or ~~infection~~additional suppliers, there can be no assurance that such items would be available in the quantities, at the costs or within the time frames that we require. Any shortages in our supplies of this equipment could limit our ability to maintain or increase the ~~eye~~volume of procedures that we perform, which could adversely affect our business, financial condition and results from operations.

•We ~~Need~~currently rely exclusively on one unaffiliated finance company for ~~corrective~~third-party ~~lenses~~financing made available to our patients. The percentage of our patients who choose to obtain financing from this unaffiliated finance company is significant. We cannot give assurance that financing services will be available on terms or ~~reading~~at ~~glasses~~interest ~~post-operatively~~rates or costs that we or our patients may require. Any reduction in available financing could limit our ability to maintain or increase the volume of procedures that we perform, which could adversely affect our business, financial condition and results from operations.

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

•As ~~Ectasia~~described under “Government Regulation” and below, we, excimer laser manufacturers and our other business partners, including managed care companies and third-party patient financing companies, among others, are subject to extensive federal, state and foreign laws, rules and regulations, including all or some of the following:

We● ~~depend~~Federal restrictions on ~~limited sources for~~ the ~~excimer~~approval, ~~lasers~~distribution and ~~diagnostic equipment we~~ use ~~and for the third-party financing made available to our patients. Shortages~~ of ~~these~~medical ~~items or services could hinder our ability to increase our procedure volume.~~ devices

We● ~~use~~Federal ~~two suppliers, AMO~~ and ~~Alcon,~~state ~~for~~anti-kickback our excimer lasers. If either or both of these companies became unwilling or unable to supply us with excimer lasers and diagnostic equipment or to repair or replace parts or to provide services, our ability to maintain or increase our capacity to perform laser vision correction services at existing vision centers or to open new vision centers could be restricted. laws

We● ~~currently~~Fee-splitting ~~rely~~laws ~~primarily on AMO to provide us with femtosecond lasers and patient interface kits, the devices used to create the corneal flap~~ in ~~the~~some LASIK procedure, and McKesson for other disposable items required for LASIK. If we were to require alternate or additional suppliers, there can be no assurance that such items would be available in the quantities, at the costs or within the time frames that we require. Any shortages in our supplies of this equipment could limit our ability to maintain or increase the volume of procedures that we perform, which could adversely affect our business, financial condition and results from operations. states

We● ~~currently~~Corporate ~~rely~~practice ~~exclusively on one unaffiliated finance company for third-party financing made available to our patients. The percentage~~ of ~~our~~medicine ~~patients~~restrictions who choose to obtain financing from this unaffiliated finance company is significant. We cannot give assurance that financing services will be available on terms or at interest rates or costs that we or our patients may require. Any reduction in ~~available~~some ~~financing could limit our ability to maintain or increase the volume of procedures that we perform, which could adversely affect our business, financial condition and results from operations.~~ states

14● Federal and state physician self-referral laws

~~Table~~● ofFederal ~~Contents~~and state information privacy and security laws

~~Our~~● ~~business~~Anti-fraud ~~may~~provisions bein ~~impaired~~some ~~due to government regulations which could restrict our equipment, services and relationships with ophthalmologists, optometrists and other healthcare providers.~~ states

As● ~~described~~Facility ~~under~~license ~~“Government~~requirements ~~Regulation”~~ and ~~below,~~certificates ~~we,~~of ~~excimer~~need ~~laser~~in manufacturers and our other business partners, including managed care companies and third-party patient financing companies, among others, are subject to extensive federal, state and foreign laws, rules and regulations, including all or some ~~of the following:~~ states

•● ~~Federal~~Conflict ~~restrictions~~of oninterest ~~the~~regulations ~~approval,~~in ~~distribution~~some ~~and use of medical devices~~states

•● ~~Federal~~FDA, FTC, and state ~~anti-kickback~~rules ~~laws~~and regulations regarding advertising and marketing practices

•● ~~Fee-splitting~~Credit ~~laws~~and infinancing ~~some states~~regulation

•Some ~~Corporate~~of ~~practice~~these oflaws ~~medicine~~and ~~restrictions~~regulations inare vague or ambiguous, and courts and regulatory authorities have not always provided clarification. Moreover, state and local law, including, but not limited to those on sales and use taxes, vary from jurisdiction to jurisdiction. As a result, some ~~states~~of our activities could be challenged, the success of which cannot be predicted.

•The ~~Federal~~failure of our suppliers to obtain regulatory approvals for any additional uses of excimer or femtosecond lasers or otherwise comply with regulatory requirements could limit the number of excimer or femtosecond lasers that we have available for use and, ~~state~~therefore, ~~physician~~limit ~~self-referral~~the ~~laws~~number of procedures that we can perform.

~~• Federal and state information privacy and security laws~~15

•Failure ~~Anti-fraud~~of ~~provisions~~the laser manufacturers to comply with applicable FDA requirements could subject us, the independent ophthalmologists who practice in ~~some~~our ~~states~~vision centers or those manufacturers to enforcement actions, including product seizure, recalls, withdrawal of approvals and civil and criminal penalties. Further, failure to comply with regulatory requirements, or any adverse regulatory action, could result in limitations or prohibitions on our use of excimer or femtosecond lasers. Any such actions or proceedings could result in negative publicity, which in turn could result in decreased demand for our services and decrease our capacity to perform laser vision correction services.

•Our ~~Facility~~business ~~license~~depends ~~requirements~~heavily on advertising, which is subject to regulation by the Federal Trade Commission (the “FTC”) and ~~certificates~~various state boards of medicine and optometry. We are subject to a 2003 FTC Consent Order in which it was agreed, among other things, that we would not represent in our advertising that our LASIK surgery services eliminate the need for glasses and contacts for life, pose significantly less risk to patients’ eye health than wearing glasses or contacts, or eliminate the risk of glare and haloing, unless, at the time that such a representation is made, we possess and rely upon competent and reliable scientific evidence that substantiates the representation. We cannot be certain that this order to which we agreed, or any future action by the FTC, will not restrict our laser vision correction services, or otherwise result in ~~some~~negative ~~states~~publicity and damage our reputation.

•Our ~~Conflict~~business ofmay ~~interest~~be ~~regulations~~adversely inimpacted ~~some~~by ~~states~~health care reform.

•The ~~FDA~~Patient Protection and Affordable Care Act (“PPACA”), ~~FTC~~as amended by the Health Care and Education Reconciliation Act (“HCERA,” and ~~state~~together ~~rules~~with PPACA the “Affordable Care Act”) was signed into law on March 23, 2010. The Affordable Care Act contains provisions affecting numerous aspects of the health care and ~~regulations~~insurance ~~regarding~~industries. ~~advertising~~Effective in 2013, the Affordable Care Act limits flexible spending account contributions to $2,500, which may continue to negatively impact our business because many of our customers use flexible spending accounts to pay for our procedures. These changes could have a material adverse effect on our business, financial condition, results of operations and ~~marketing~~cash ~~practices~~flows.

•The ~~Credit~~FDA is conducting a study to examine LASIK’s impact on quality of life, the results of which could adversely impact broader market acceptance, and ~~financing~~our ~~regulation~~profitability and growth.

~~Some~~The FDA has launched a collaborative study with the National Eye Institute and the U.S. Department of Defense to examine LASIK’s potential impact on quality of life. The goal of the LASIK Quality of Life Collaboration Project is to determine the percentage of patients with significant quality of life problems after LASIK surgery and to identify predictors of these ~~laws~~ problems. The results of the project will help identify factors that can affect quality of life following LASIK and ~~regulations~~potentially reduce the risk of adverse effects that can impact the surgical outcome. If any of these factors are ~~vague~~related to the safety or ~~ambiguous,~~effectiveness ~~and~~of ~~courts~~the ~~and~~lasers ~~regulatory~~used ~~authorities~~in ~~have~~LASIK ~~not~~surgery, ~~always~~the ~~provided~~FDA ~~clarification~~will evaluate whether any action is necessary. ~~Moreover,~~The ~~state~~project ~~and~~is ~~local~~part ~~law,~~of ~~including,~~the ~~but~~FDA’s ~~not~~ongoing ~~limited~~effort to ~~those~~better onmonitor ~~sales~~and improve the safety and ~~use~~effectiveness ~~taxes,~~of ~~vary~~the ~~from~~lasers ~~jurisdiction~~used ~~to jurisdiction.~~in AsLASIK asurgery. ~~result,~~The ~~some~~results of ~~our~~this ~~activities~~study could beadversely ~~challenged,~~impact ~~the~~broader ~~success~~market acceptance of LASIK, which ~~cannot~~could behave ~~predicted~~a direct impact on our profitability and growth. In addition, any new adverse regulatory actions by the FDA could result in limitations or prohibitions with respect to LASIK surgery.

~~The~~We ~~failure~~are ofsubject ~~our suppliers~~ to ~~obtain~~lawsuits ~~regulatory approvals~~ for ~~any~~patient ~~additional~~injuries, ~~uses~~which ~~of excimer or femtosecond lasers or otherwise comply with regulatory requirements~~ could ~~limit~~subject ~~the~~us ~~number~~to ofsignificant ~~excimer~~judgments ~~or femtosecond lasers that we have available for use~~ and, ~~therefore,~~damage ~~limit~~our ~~the number of procedures that we can perform~~reputation.

~~Failure~~The oflaser vision correction procedures performed in our vision centers involve the ~~laser~~risk ~~manufacturers~~of injury to ~~comply~~patients. ~~with~~Such ~~applicable~~risk ~~FDA~~could ~~requirements~~result ~~could~~in ~~subject~~professional liability, malpractice, or other claims brought against us, ~~the~~ or our independent ophthalmologists ~~who~~and ~~practice~~optometrists inbased ~~our~~upon ~~vision~~injuries ~~centers~~ or ~~those~~alleged ~~manufacturers~~injuries toassociated ~~enforcement~~with ~~actions,~~malpractice ~~including~~by ~~product~~an ~~seizure~~ophthalmologist, ~~recalls~~optometrist, ~~withdrawal~~technician ofor ~~approvals~~other ~~and~~healthcare ~~civil~~professional. ~~and~~Product ~~criminal~~liability ~~penalties~~claims could also be made against our manufacturers associated with defects in their products. ~~Further,~~Some ~~failure~~injuries or defects may not become evident for a number of years. Significant lawsuits against us could subject us to ~~comply~~significant ~~with~~judgments ~~regulatory requirements~~and damage our reputation. In addition, a partially or ~~any~~completely ~~adverse~~uninsured ~~regulatory~~claim ~~action,~~against us could ~~result~~have ina ~~limitations~~material oradverse ~~prohibitions~~effect on our ~~use~~business, offinancial ~~excimer~~condition orand ~~femtosecond~~results ~~lasers~~of operations. ~~Any~~We ~~such~~rely ~~actions~~primarily orand ~~proceedings~~intend ~~could~~to ~~result~~continue into ~~negative~~rely ~~publicity,~~primarily ~~which~~on inthe ~~turn~~independent ~~could~~ophthalmologists’ ~~result~~professional inliability ~~decreased demand~~insurance ~~for~~policies ~~our~~and ~~services~~the manufacturers’ product liability insurance policies, although we have limited umbrella general and ~~decrease~~professional liability insurance. We require the independent ophthalmologists who use our ~~capacity~~vision centers to ~~perform~~maintain ~~laser~~professional ~~vision~~liability ~~correction~~insurance, ~~services.~~though an inability of an ophthalmologist to procure insurance could disrupt business while a replacement ophthalmologist is being recruited.

~~Our~~The ~~business~~availability ~~depends~~of ~~heavily~~professional onliability ~~advertising, which~~insurance ishas ~~subject~~decreased ~~to regulation by the Federal Trade Commission (“FTC”)~~ and ~~various~~its ~~state~~cost ~~boards~~has ofincreased ~~medicine~~for ~~and optometry. We are subject to~~ a ~~2003~~variety ~~FTC~~of ~~Consent Order in which it was agreed~~reasons, ~~among~~including ~~other~~reasons ~~things,~~outside ~~that we would not represent in~~ our ~~advertising that our LASIK surgery services eliminate the need for glasses and contacts for life~~control, ~~pose~~particularly ~~significantly~~in ~~less~~certain ~~risk~~states. toA ~~patients’~~future ~~eye~~increase ~~health~~in ~~than~~cost ~~wearing~~could ~~glasses~~adversely oraffect ~~contacts, or eliminate~~ the ~~risk~~results of ~~glare~~operations ~~and~~of ~~haloing,~~our ~~unless~~business, at ~~the time made, we possess~~ and ~~rely~~a ~~upon~~future ~~competent~~lack ~~and~~of ~~reliable~~availability ~~scientific~~of ~~evidence~~coverage ~~that~~for ~~substantiates~~us ~~the~~or ~~representation.~~our Weindependent ~~cannot~~ophthalmologists becould ~~certain~~result ~~that~~in ~~this~~increased ~~order~~exposure to ~~which~~liability weand ~~agreed,~~potentially orlimit ~~any future action by the FTC, will not restrict~~ our ~~laser~~ability ~~vision correction~~to ~~services,~~expand ~~or otherwise result~~ in ~~negative~~certain ~~publicity and damage our reputation~~markets.

~~Our~~We ~~business~~own ~~may~~a becaptive ~~adversely~~insurance ~~impacted~~company byand ~~health care~~its ~~reform.~~payment of significant claims could affect our results of operations and financial condition.

~~The~~We ~~Patient~~maintain ~~Protection~~a ~~and~~captive ~~Affordable~~insurance ~~Care~~company ~~Act~~to ~~(“PPACA”),~~provide asprofessional ~~amended~~liability byinsurance ~~the~~coverage ~~Health~~for ~~Care~~claims brought against us and ~~Education Reconciliation~~our ~~Act~~optometrists ~~(“HCERA~~after December 17,” ~~and~~2002. ~~together~~In ~~with~~addition, ~~PPACA~~our ~~the~~captive ~~“Affordable~~insurance ~~Care~~company’s ~~Act”)~~charter ~~was~~allows ~~signed~~it ~~into~~to ~~law~~provide onprofessional ~~March 23,~~liability ~~2010.~~insurance ~~The~~for ~~Affordable~~our ~~Care~~ophthalmologists. ~~Act~~Our ~~contains~~captive ~~provisions~~insurance ~~affecting~~company ~~numerous~~is ~~aspects~~capitalized ofand ~~the~~funded ~~health~~by ~~care~~us ~~and~~based ~~insurance industries.~~on ~~Effective~~actuarial instudies ~~2013,~~performed ~~the~~by ~~Affordable~~an ~~Care~~independent ~~Act~~insurance ~~will~~consulting ~~limit~~and ~~flexible~~management ~~spending~~firm. ~~account~~We ~~contributions~~use tothe ~~$2,500,~~captive ~~which~~insurance ~~may~~company ~~negatively~~for ~~impact~~both ~~our~~the ~~business~~primary ~~because~~insurance ~~many~~and ofexcess ~~our~~liability ~~customers~~coverage. ~~use~~A ~~flexible~~number ~~spending~~of ~~accounts~~claims toare ~~pay~~now ~~for~~pending with our ~~procedures~~captive insurance company. ~~These~~ ~~changes~~The ~~could~~payment ~~have~~of asignificant ~~material~~claims ~~adverse~~by ~~effect~~our oncaptive insurance company could adversely affect our business, financial condition, and results of operations ~~and cash flows~~.

~~The FDA is conducting a study to examine LASIK’s impact on quality of life, the results of which could adversely impact broader market acceptance, and our profitability and growth.~~ 16

~~The~~Disputes ~~FDA has launched a collaborative study~~ with ~~the~~respect ~~National Eye Institute and the U.S. Department of Defense~~ to ~~examine~~intellectual ~~LASIK’s~~property ~~potential~~could ~~impact~~result on quality of life. The goal of the LASIK Quality of Life Collaboration Project is to determine the percentage of patients with significant quality of life problems after LASIK surgery and to identify predictors of these problems. The results of the project will help identify factors that can affect quality of life following LASIK and potentially reduce the risk of adverse affects that can impact the surgical outcome. If any of these factors are related to the safety or effectiveness of the lasers used in ~~LASIK~~a ~~surgery,~~decrease ~~the FDA will evaluate whether any action is necessary. The project is part of the FDA’s ongoing effort to better monitor and improve the safety and effectiveness of the lasers used~~ in ~~LASIK~~revenues ~~surgery. The results of this study could adversely impact broader market acceptance of LASIK, which could have a direct impact on our profitability~~ and ~~growth~~profitability. ~~In addition, any new adverse regulatory actions by the FDA could result in limitations or prohibitions with respect to LASIK surgery.~~

15We have not registered all of the names we use for our products and services with the United States Patent and Trademark Office. Some of our internal processes and systems do not have intellectual property protection. If a competitor were to attempt to use our names, processes or systems, we may not be able to prevent such use. The unauthorized use of our name could cause confusion among patients, and the misappropriation of internal processes or systems could reduce our competitive advantages, either of which could adversely affect our business, financial condition and results of operations.

~~Table~~The loss of ~~Contents~~the services of any members of our senior management team could impair our ability to execute our business strategy and as a result, reduce our sales and profitability.

We ~~are~~depend ~~subject~~on the continued services of our senior management team. The loss of key personnel could have a material adverse effect on our ability to ~~lawsuits~~execute our business strategy and on our business, financial condition and results of operations. We do not maintain key-person insurance for ~~patient~~members ~~injuries~~of our senior management team. See also Item 1a, ~~which~~“Risk ~~could~~Factors” ~~subject~~– us“Our toproposed merger with PhotoMedex may cause disruption in our business and, if the proposed merger does not occur, we will have incurred significant ~~judgments~~expenses, we may need to pay a termination fee under the merger agreement and ~~damage~~ our ~~reputation~~stock price may decline.”

~~The~~Item ~~laser vision correction procedures performed in our vision centers involve the risk of injury to patients~~1B. ~~Such risk~~Unresolved ~~could~~Staff result in professional liability, malpractice, or other claims brought against us, or our independent ophthalmologists and optometrists based upon injuries or alleged injuries associated with malpractice by an ophthalmologist, optometrist, technician or other healthcare professional. Product liability claims could also be made against our manufacturers associated with defects in their products. Some injuries or defects may not become evident for a number of years. Significant lawsuits against us could subject us to significant judgments and damage our reputation. In addition, a partially or completely uninsured claim against us could have a material adverse effect on our business, financial condition and results of operations. We rely primarily and intend to continue to rely primarily on the independent ophthalmologists’ professional liability insurance policies and the manufacturers’ product liability insurance policies, although we have limited umbrella general and professional liability insurance. We require the independent ophthalmologists who use our vision centers to maintain professional liability insurance, although an inability of an ophthalmologist to procure insurance could disrupt business while a replacement ophthalmologist is being recruited. Comments

~~The availability of professional liability insurance has decreased and its cost has increased for a variety of reasons, including reasons outside our control, particularly in certain states~~None. A future increase in cost could adversely affect the results of operations of our business, and a future lack of availability of coverage for us or our independent ophthalmologists could result in increased exposure to liability and potentially limit our ability to expand in certain markets.

WeItem ~~own a captive insurance company and its payment of significant claims could affect our results of operations and financial condition~~2. Properties

WeOur ~~maintain~~corporate aheadquarters ~~captive~~and ~~insurance~~one ~~company~~of toour ~~provide~~laser ~~professional~~vision ~~liability~~correction ~~insurance~~centers ~~coverage~~are ~~for~~located ~~claims~~in ~~brought~~an ~~against~~office usbuilding ~~and~~that ~~our~~we ~~optometrists~~own ~~after~~in ~~December 17~~Cincinnati, ~~2002. In addition~~Ohio, ~~our~~which ~~captive insurance~~contains ~~company’s~~approximately ~~charter~~30,000 ~~allows~~square itfeet. toOur ~~provide~~other ~~professional~~laser ~~liability~~vision ~~insurance~~correction ~~for~~centers and our ~~ophthalmologists.~~corporate ~~Our~~data ~~captive~~center ~~insurance~~are ~~company~~in isleased ~~capitalized~~locations. ~~and~~In ~~funded~~January by2013, uswe ~~based~~relocated onour ~~actuarial~~patient ~~studies~~communication ~~performed~~center byto anour ~~independent~~corporate ~~insurance consulting~~headquarters. ~~and~~The ~~management~~typical ~~firm.~~vision Wecenter ~~use~~location ~~the~~is ~~captive~~in ~~insurance~~a ~~company~~professional ~~for~~office ~~both~~building ~~the~~or ~~primary~~retail ~~insurance~~site and ~~excess~~includes ~~liability~~a ~~coverage.~~laser Asurgery ~~number~~room, ofprivate ~~claims~~examination ~~are~~rooms ~~now~~and ~~pending~~patient ~~with~~waiting ~~our captive insurance company~~areas. ~~The~~Vision ~~payment~~centers ofrange ~~significant~~in ~~claims~~size byfrom ~~our captive~~approximately ~~insurance~~2,400 ~~company~~to ~~could~~6,100 ~~adversely~~square ~~affect~~feet ~~our~~with ~~business,~~lease ~~financial~~expiration ~~condition~~dates ~~and~~through ~~results~~September of30, ~~operations~~2021.

~~Disputes~~Item ~~with respect to intellectual property could result in a decrease in revenues and profitability~~3. Legal Proceedings

WeOur ~~have~~business ~~not~~results ~~registered~~in ~~all~~a number of ~~the~~medical ~~names~~malpractice welawsuits. ~~use~~Claims ~~for~~reported ~~our products~~to ~~and~~us ~~services~~on ~~with~~or ~~the~~prior ~~United~~to ~~States~~December ~~Patent~~17, ~~and~~2002 ~~Trademark~~were ~~Office.~~generally ~~Some~~covered ofby ~~our~~external ~~internal~~insurance ~~processes~~policies and ~~systems~~to dodate have not ~~have~~had ~~intellectual~~a ~~property~~material ~~protection.~~financial Ifimpact aon ~~competitor~~our ~~were~~business toother ~~attempt~~than tothe ~~use~~cost of insurance and our ~~names,~~deductibles ~~processes~~under orthose ~~systems~~policies. In December 2002, we ~~may~~established ~~not~~a ~~be able~~captive insurance company to ~~prevent~~provide ~~such~~coverage ~~use.~~for ~~The~~claims ~~unauthorized~~brought against us after December 17, 2002. We use ofthe ~~our~~captive ~~name~~insurance ~~could~~company ~~cause~~for ~~confusion~~both ~~among~~primary ~~patients,~~insurance and ~~the~~excess ~~misappropriation~~liability ofcoverage. ~~internal~~A ~~processes~~number orof ~~systems~~claims ~~could~~are ~~reduce~~now pending with our ~~competitive~~captive ~~advantages~~insurance company. Since inception, ~~either~~the captive insurance company has disbursed total claims and expense payments of ~~which~~approximately ~~could~~$8.1 ~~adversely~~million. ~~affect~~At ~~our~~December ~~business~~31, ~~financial~~ ~~condition~~2013, ~~and~~we ~~results~~maintained insurance reserves of ~~operations~~$6.6 million.

~~The~~Four ~~loss~~putative ofclass action lawsuits challenging the ~~services~~proposed ofmerger ~~any~~with ~~members~~PhotoMedex have been filed on behalf of all LCA-Vision Inc. stockholders. The lawsuits allege that our ~~senior~~directors ~~management~~breached ~~team~~their ~~could~~fiduciary ~~impair~~duties to our ~~ability~~ stockholders by engaging in a flawed process for selling LCA-Vision Inc., by agreeing to ~~execute~~sell ~~our~~LCA-Vision ~~business~~Inc. ~~strategy~~for inadequate consideration pursuant to the merger agreement and asthat athe ~~result~~merger agreement contains improper deal protection terms. In addition, ~~reduce~~the ~~our~~lawsuits ~~sales~~allege that the corporate defendants aided and ~~profitability~~abetted these breaches of fiduciary duty. The lawsuits seek, among other things, an injunction barring the proposed transaction and seeking attorneys’ fees. We believe that the lawsuits are without merit.

WeIn ~~depend~~addition onto the ~~continued~~above, ~~services~~we ofare ~~our senior~~periodically ~~management~~subject ~~team.~~to ~~The~~various ~~loss~~other ofclaims ~~key~~and ~~personnel~~lawsuits. ~~could~~We ~~have~~believe athat ~~material~~none ~~adverse~~of ~~affect~~these onother ~~our~~claims ~~ability~~or lawsuits to ~~execute~~which ~~our~~we ~~business~~are ~~strategy~~currently ~~and~~subject, onindividually ~~our~~or ~~business,~~in ~~financial~~the ~~condition~~aggregate, ~~and~~will ~~results~~have ofa ~~operations.~~material Weadverse doeffect ~~not~~on ~~maintain~~our ~~key-person~~business, ~~insurance~~financial ~~for members~~condition, results of ~~our~~operations ~~senior~~or ~~management~~cash ~~team~~flows.

Item 1B 4. ~~Unresolved~~Mine ~~Staff~~Safety ~~Comments~~ Disclosures

~~None.~~Not applicable.

~~Item 2. Properties~~ 17

~~Our~~PART corporate headquarters and one of our laser vision correction centers are located in an office building that we own in Cincinnati, Ohio, which contains approximately 30,000 square feet. Our other laser vision correction centers and our Patient Call and Data Centers are in leased locations. In January 2013, we relocated our Patient Call Center to our corporate headquarters. The typical vision center location is in a professional office building or retail site and includes a laser surgery room, private examination rooms and patient waiting areas. Vision centers range in size from approximately 2,400 to 6,900 square feet with lease expiration dates through September 2021. II

16Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Table~~Our common stock is traded on the NASDAQ Global Select Market under the symbol "LCAV." There were approximately 8,421 record holders of ~~Contents~~our common stock as of February 19, 2014.

~~Item 3.~~The ~~Legal~~following ~~Proceedings~~table sets forth the range of high and low sales prices of the common stock as reported on the NASDAQ Global Select Market for the specific periods.

Our business results in a number of medical malpractice lawsuits. Claims reported to us on or prior to December 17, 2002 were generally covered by external insurance policies and to date have not had a material financial impact on our business other than the cost of insurance and our deductibles under those policies. In December 2002, we established a captive insurance company to provide coverage for claims brought against us after December 17, 2002. We use the captive insurance company for both primary insurance and excess liability coverage. A number of claims are now pending with our captive insurance company. Since the inception of the captive insurance company in 2002, it has disbursed total claims and expense payments of approximately $7.7 million. At December 31, 2012, we maintained insurance reserves of $6.6 million.

	2013				2012
	High		Low		High		Low
First Quarter	$	3.60	$	2.67	$	9.24	$	2.96
Second Quarter		3.63		3.00		7.50		4.00
Third Quarter		4.26		2.97		4.60		3.49
Fourth Quarter		4.04		3.11		4.32		2.80

InThe ~~addition~~merger toagreement ~~the~~entered ~~above,~~into weon ~~are~~February ~~periodically~~13, ~~subject~~2014 towith ~~various~~PhotoMedex prohibits ~~other~~us ~~claims~~from ~~and~~paying ~~lawsuits.~~any Wedividends ~~believe~~before ~~that~~the ~~none~~closing of ~~these~~the ~~other~~merger ~~claims~~ or ~~lawsuits~~the ~~to which~~termination weof ~~are~~the ~~currently~~merger ~~subject~~agreement. Otherwise, ~~individually or in~~ the ~~aggregate,~~Board ~~will~~of ~~have~~Directors amay ~~material~~declare ~~adverse~~dividends ~~affect~~in onits ~~our~~discretion. ~~business,~~We ~~financial~~did ~~condition,~~not ~~results~~pay ofdividends ~~operations~~in 2013 or ~~cash flows~~2012.

Item 4 6. Selected ~~Mine~~Financial ~~Safety Disclosures~~ Data

~~Not~~The ~~applicable~~data set forth below should be read in conjunction with the Consolidated Financial Statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations. " All amounts are in thousands of U.S. dollars, except procedure volume and per share data.

PART II

	Year Ended December 31,
	2013			2012			2011			2010			2009
Consolidated Statements of Operations Data:
Revenues	$	92,185		$	101,493		$	102,983		$	99,825		$	129,213
Operating loss		(2,383	)		(9,311	)		(6,538	)		(21,967	)		(36,100	)
Net loss		(1,368	)		(8,517	)		(6,198	)		(20,577	)		(33,244	)
Net loss per common share
Basic and Diluted	$	(0.07	)	$	(0.45	)	$	(0.33	)	$	(1.10	)	$	(1.79	)

Cash dividends per common share	$	-		$	-		$	-		$	-		$	-

Selected Operating Data:
Procedure volume		53,231			58,525			59,587			56,720			72,776

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

	At December 31,
	2013			2012			2011			2010			2009
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	28,673		$	34,457		$	43,879		$	51,297		$	52,983
Working capital		19,606			21,052			26,701			33,921			50,587
Total assets		42,915			48,968			66,433			80,481			112,598
Debt obligations maturing within one year		777			-			2,978			3,039			3,998
Long-term debt obligations (less current portion)		1,080			-			1,026			4,245			9,145
Accumulated deficit		(52,013	)		(49,053	)		(38,720	)		(31,134	)		(9,729	)
Total stockholders' investment		19,131			19,797			26,265			31,130			51,027

~~Our common stock is traded on the NASDAQ Global Select Market under the symbol “LCAV.” There were approximately 9,191 record holders of our common stock as of February 15, 2013.~~ 18

~~The~~Item ~~following~~7. ~~table~~Management’s ~~sets~~Discussion ~~forth~~and ~~the~~Analysis ~~range~~ of ~~high~~Financial Condition and ~~low~~Results ~~sales prices~~ of ~~the common stock as reported on the NASDAQ Global Select Market for the specific periods~~Operations.

	2012				2011
	High		Low		High		Low
First Quarter	$	9.24	$	2.96	$	7.79	$	5.66
Second Quarter		7.50		4.00		7.10		4.37
Third Quarter		4.60		3.49		5.52		2.06
Fourth Quarter		4.32		2.80		3.38		1.86

This discussion provides an understanding of our financial results and condition by focusing on changes in certain key measures from year to year. We have organized Management’s Discussion and Analysis in the following sections:

~~The~~● ~~Board of Directors may declare dividends in its discretion. We did not pay dividends in 2012 or 2011.~~ Overview

17● Summary of 2013 Results

~~Table~~● Results of ~~Contents~~Operations

~~Item 6.~~● ~~Selected~~Liquidity ~~Financial~~and ~~Data~~Capital Resources

~~The~~● ~~data~~Critical ~~set~~Accounting forth below should be read in conjunction with the Consolidated Financial Statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All amounts are in thousands of U.S. dollars, except procedure volume and per share data. Estimates

	Year Ended December 31,
	2012			2011			2010			2009			2008
Consolidated Statements of Operations Data:
Revenues	$	101,493		$	102,983		$	99,825		$	129,213		$	205,176
Operating loss		(9,311	)		(6,538	)		(21,967	)		(36,100	)		(8,212	)
Net loss		(8,517	)		(6,198	)		(20,577	)		(33,244	)		(6,635	)
Net loss per common share
Basic	$	(0.45	)	$	(0.33	)	$	(1.10	)	$	(1.79	)	$	(0.36	)
Diluted		(0.45	)		(0.33	)		(1.10	)		(1.79	)		(0.36	)
Cash dividends per common share	$	—		$	—		$	—		$	—		$	0.24
Selected Operating Data:
Procedure volume		58,525			59,587			56,720			72,776			115,153

You should read the following discussion and analysis in conjunction with ““Item 6. Selected Financial Data’’ above and with the financial statements and related notes included in “Item 8. Financial Statements and Supplemental Data” of this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could contribute to such differences include, but are not limited to, those discussed in “Item 1A. Risk Factors.”

	At December 31,
	2012			2011			2010			2009			2008
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	34,457		$	43,879		$	51,297		$	52,983		$	57,328
Working capital		21,052			26,701			33,921			50,587			55,404
Total assets		48,968			66,433			80,481			112,598			157,343
Debt obligations maturing within one year		—			2,978			3,039			3,998			6,985
Long-term debt obligations (less current portion)		—			1,026			4,245			9,145			14,120
Accumulated (deficit) earnings		(49,053	)		(38,720	)		(31,134	)		(9,729	)		23,515
Total stockholders’ investment		19,797			26,265			31,130			51,027			82,985

On February 13, 2014, we entered into a merger agreement with PhotoMedex pursuant to which a wholly owned subsidiary of PhotoMedex will merge with and into us, resulting in us becoming a wholly owned subsidiary of PhotoMedex. See Note 12 to our Consolidated Financial Statements contained within Item 8, "Financial Statements and Supplementary Data" for more information.

~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~ Overview

~~This~~We ~~discussion~~derive ~~provides~~substantially anall ~~understanding~~ of our ~~financial~~revenues ~~results~~from ~~and~~the ~~condition~~delivery byof ~~focusing~~vision oncorrection ~~changes~~procedures performed in ~~certain~~our ~~key measures~~U.S. ~~from~~vision ~~year~~centers. toOur ~~year.~~revenues Weand ~~have~~operating ~~organized~~results, ~~Management’s~~therefore, ~~Discussion~~depend on the number of procedures performed and ~~Analysis~~are inimpacted by a number of factors, including the following ~~sections~~:

•● ~~Overview~~General economic conditions, consumer confidence and discretionary spending levels,

•● ~~Summary~~Our ability to attract patients through our arrangements with managed care companies, direct-to-consumer advertising, word-of-mouth ~~2012~~referrals ~~Results~~and our partner network relationships,

•● ~~Results~~The availability of ~~Operations~~patient financing,

•● ~~Liquidity~~Our ability to manage equipment and ~~Capital~~operating ~~Resources~~costs,

•● ~~Critical~~The ~~Accounting~~impact ~~Estimates~~of competitors and discounting practices in our industry, and

~~You~~● ~~should~~Limits ~~read the~~instituted ~~following~~on ~~discussion and analysis in conjunction with ‘‘Item 6. Selected Financial Data~~consumers’’ ~~above~~flexible ~~and~~spending ~~with~~accounts under the ~~financial~~Affordable ~~statements~~Care ~~and related notes included in “Item 8~~Act. Financial Statements and Supplemental Data” of this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could contribute to such differences include, but are not limited to, those discussed in “Item 1A. Risk Factors.”

18Other factors that impact our revenues include:

~~Table~~● Deferred revenue from the sale, prior to June 15, 2007, of ~~Contents~~separately priced acuity programs, and

~~Overview~~● Our mix of procedures among the different types of laser technology.

WeBecause ~~derive~~our ~~substantially~~revenues ~~all~~are ofprimarily ~~our~~a ~~revenues~~function ~~from~~of the ~~delivery~~number of laser vision correction procedures performed inand the pricing for these services, and many of our ~~U.S.~~costs are fixed, our vision centers. ~~Our~~have ~~revenues~~a ~~and~~relatively high degree of operating ~~results,~~leverage. ~~therefore~~As a result, ~~depend~~changes in our level of procedure volume can have a significant impact on our level of financial performance. The following table details the number of total procedures performed ~~and~~at ~~are~~our ~~impacted~~vision bycenters aduring ~~number~~the oflast ~~factors~~three fiscal years. Total procedure volume includes laser vision correction, ~~including~~intraocular ~~the~~and ~~following:~~implantable collamer lens procedures.

• General economic conditions, consumer confidence and discretionary spending levels,

	2013		2012		2011
First Quarter		16,272		20,987		18,857
Second Quarter		12,994		14,415		14,081
Third Quarter		11,932		11,510		12,444
Fourth Quarter		12,033		11,613		14,205
Total Year Procedures		53,231		58,525		59,587

• Our ~~ability~~2013 toprocedure ~~generate~~volume ~~patients~~was ~~through~~negatively ~~our~~impacted ~~arrangements~~by ~~with~~the ~~managed~~Affordable ~~care~~Care ~~companies,~~Act ~~direct-~~which limited the maximum annual contribution to~~-consumer~~ ~~advertising~~flexible spending accounts to $2,500, ~~co-management~~which ~~and~~went ~~word-~~into effect at the beginning of~~-mouth~~ ~~referrals~~the year. Additionally, continued cautious consumer spending has negatively impacted the industry. We expect these trends to continue in 2014.

~~• The availability of patient financing,~~19

•We ~~Our~~opened ~~ability~~five satellite LasikPlus® vision centers during 2013 in Edison, NJ, Liberty, MO, Nashville, TN, Fairlawn, OH and Warren, MI to ~~manage~~leverage ~~equipment~~our marketing spending in those markets, as well as three full-service vision centers owned and ~~operating~~operated ~~costs~~by independent ophthalmologists who license our trademarks. The satellite centers will perform pre-operative and post-operative exams and care, providing added convenience for patients who live considerable distances from our full-service LasikPlus® vision centers in those markets. We have also established and continue to work on expanding a partner network of eye care professionals that share patients who have laser vision correction and other refractive surgeries.

•Operating ~~The~~Costs ~~impact of competitors~~ and ~~discounting practices in our industry.~~Expenses

~~Other~~Our ~~factors~~operating ~~that~~costs ~~impact~~and ~~our~~expenses ~~revenues~~ include:

•● ~~Deferred~~Medical ~~revenue~~professional ~~from~~and license fees, including fees for the ~~sale~~ophthalmologists performing laser vision correction and other services, ~~prior~~and per procedure license fees paid to ~~June~~certain ~~15,~~equipment ~~2007,~~suppliers of ~~separately~~our ~~priced~~excimer ~~acuity~~and ~~programs,~~femtosecond ~~and~~lasers,

•● ~~Our~~Direct ~~mix~~costs of ~~procedures~~services, ~~among~~including ~~the~~staff ~~different~~compensation ~~types~~and benefits, facility costs of operating laser ~~technology.~~vision correction centers, equipment lease and maintenance costs, medical malpractice insurance costs, surgical supplies, financing charges for third-party patient financing, and other costs related to revenues,

~~Because~~● ~~our~~General ~~revenues are primarily a function of the number of laser vision correction procedures performed~~ and ~~the~~administrative ~~pricing for these services, and many of our~~ costs ~~are fixed~~, ~~our~~including ~~vision~~corporate ~~centers~~headquarters ~~have~~and ~~a relatively~~patient ~~high~~communication ~~degree~~center ofstaff ~~operating~~expense leverage. As a result, changes in our level of procedure volume can have a significant impact on our level of financial performance. The following table details the number of total procedures performed at our vision centers during the last three fiscal years. Included within total procedure volume are laser vision correction, cataract and ~~implantable~~other ~~collamer~~overhead ~~lens procedures.~~ costs,

	2012		2011		2010
First Quarter		20,987		18,857		19,066
Second Quarter		14,415		14,081		15,266
Third Quarter		11,510		12,444		11,497
Fourth Quarter		11,613		14,205		10,891
Total Year Procedures		58,525		59,587		56,720

●

Marketing and advertising costs, and

~~Economic~~● ~~conditions~~Depreciation in the United States have resulted in cautious high-end discretionary spending for many consumers that has continued to impact our procedure volume and operating results. We have no immediate plans to open any new full service vision centers until we move closer to sustained profitability in our core laser vision correction business. We will open a satellite LasikPlus® vision center in northern New Jersey during the first quarter of ~~2013~~equipment ~~to leverage our marketing spending in that market. The satellite center will perform pre-operative~~ and ~~post-operative~~leasehold ~~exams, providing added convenience for patients who live considerable distances from our full-service LasikPlus® vision center in that market~~improvements. ~~In addition to the use of satellite vision centers we have begun to grow a network of optometrists and other health care providers to share in the care of those patients.~~

~~Operating~~Summary ~~Costs~~of ~~and Expenses~~2013 Results

~~Our~~Key ~~operating~~financial ~~costs~~highlights ~~and~~for ~~expenses~~the year ended December 31, 2013 include: (all comparisons are with 2012):

•● ~~Medical~~Revenues ~~professional~~were ~~and~~$92.2 ~~license~~million ~~fees,~~compared ~~including~~with ~~per~~$101.5 ~~procedure~~million; ~~fees~~adjusted ~~for~~revenues ~~the~~were ~~ophthalmologists~~$91.3 ~~performing~~million ~~laser~~compared ~~vision~~with ~~correction,~~$99.0 ~~and per procedure license fees paid to certain equipment suppliers of our excimer and femtosecond lasers,~~million.

•● ~~Direct~~Procedure ~~costs~~volume ofwas ~~services~~53,231 ~~including~~compared ~~staff~~with ~~salaries~~58, taxes and benefits, facility costs of operating laser vision correction centers, equipment lease and maintenance costs, medical malpractice insurance costs, surgical supplies, financing charges for third-party patient financing, and other costs related to revenues,525.

•● ~~General~~Medical professional and ~~administrative~~license ~~costs,~~fees ~~including~~decreased ~~corporate~~by ~~headquarters~~$3.6 ~~and~~million ~~call~~to ~~center~~$20.1 ~~staff~~million ~~expense~~from $23.7 million. The decrease resulted from lower procedure volume coupled with the impact of renegotiated license fees and ~~other~~lower ~~overhead~~enhancement costs,.

•● ~~Marketing~~Vision ~~and~~center ~~advertising~~direct costs decreased by $5.2 million to $39.1 million from $44.3 million. The decrease was a result of lower variable costs associated with procedure volume combined with other cost savings. These savings included primarily lower financing fees from renegotiated rates and a shift in portfolio mix, reductions in employee-related costs and lower insurance costs from favorable claims experience.

•● ~~Depreciation~~General and administrative expense decreased by $1.7 million to $11.7 million from $13.4 million, due primarily to reductions in employee-related costs and rent from the relocation of ~~equipment~~our patient communication center as a result of restructuring initiatives implemented in early 2013, and ~~leasehold~~reductions ~~improvements~~in travel and telecommunications expenses.

19● Marketing expense decreased by $1.5 million to $21.6 million from $23.1 million. Marketing cost per eye was $406 compared with $394.

~~Table~~● ofDepreciation ~~Contents~~expense decreased by $2.6 million to $2.1 million from $4.7 million, primarily due to lower capital expenditures in recent years.

~~Summary~~● Restructuring charges of ~~2012~~$214,000 ~~Results~~resulted primarily from the relocation of our patient communication center during the first quarter of 2013.

~~Key~~● ~~financial~~Operating ~~highlights~~loss ~~for~~was ~~the~~$2.4 ~~year~~million, ~~ended~~a ~~December 31~~$6.9 million improvement from an operating loss of $9.3 million; adjusted operating loss was $3.2 million, ~~2012~~an ~~include~~$8.4 ~~(all~~million ~~comparisons~~improvement ~~are~~from ~~with~~an ~~2011):~~adjusted operating loss of $11.6 million.

•● ~~Revenues~~Net ~~were~~loss was $~~101~~1.54 million, ~~compared~~or ~~with~~$0.07 per share, a $~~103~~7.01 million; ~~adjusted~~improvement ~~revenues~~from ~~increased~~a ~~slightly~~net toloss of $998.05 million, ~~from~~or $980.645 ~~million~~per share.

•● ~~Procedure~~Cash ~~volume~~and ~~was~~investments 58were $28.7 million as of December 31,~~525~~ ~~procedures~~2013, compared with 59$34.5 million as of December 31,~~587~~ ~~procedures~~2012. Cash used in operations included approximately $1.2 million of investment in expansion efforts related to the company’s refractive lens and cataract business, $1.8 million of restructuring payments related to previously announced actions, and additional working capital changes of $4.1 million primarily related to reductions in accounts payable and accrued liabilities related to timing of payments, and increased accounts receivable for self-financed patients, offset by positive earnings from the core LASIK business.

• Operating loss was $9.3 million compared with operating loss of $6.5 million; adjusted operating loss was $11.6 million compared with adjusted operating loss of $10.5 million. Operating loss and adjusted operating loss for 2012 included $1.7 million in restructuring and impairment charges, a $2.2 million loss from the start-up operation of the cataract services expansion, and a $239,000 gain on sale of assets, offset by a $1.0 million decline in depreciation expense. Operating loss and adjusted operating loss for 2011 included $140,000 in impairment and restructuring charges and a $618,000 gain on sale of assets.20

•We ~~Marketing~~have ~~cost~~provided ~~per~~both ~~eye~~adjusted ~~was~~revenues ~~$394~~and ~~compared~~operating losses as a means of measuring performance that adjusts for the non-cash impact of accounting for separately priced extended warranties. We believe that the adjusted information better reflects operating performance and therefore is more meaningful to investors. We provide below a reconciliation of revenues and operating losses reported in accordance with ~~$381~~U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) (dollars in thousands).

• Net loss was $8.5 million, or $0.45 per share, compared with a net loss of $6.2 million, or $0.33 per share.

	Twelve Months Ended December 31,
	2013			2012			2011
Revenues
Reported U.S. GAAP	$	92,185		$	101,493		$	102,983
Adjustments
Amortization of prior deferred revenue		(870	)		(2,516	)		(4,376	)
Adjusted revenues	$	91,315		$	98,977		$	98,607

Operating Loss
Reported U.S. GAAP	$	(2,383	)	$	(9,311	)	$	(6,538	)
Adjustments
Impact of prior deferred revenue		(870	)		(2,516	)		(4,376	)
Amortization of prior professional fees		87			252			438
Adjusted operating loss	$	(3,166	)	$	(11,575	)	$	(10,476	)

•Results ~~Cash and investments totaled $34.5 million as~~ of December 31, 2012, compared with $44.8 million as of December 31, 2011. The cash and investment balance for 2012 was impacted primarily by $4.0 million used to retire all outstanding debt prior to maturity, $2.8 million invested in developing the cataract services business, $2.1 million of changes in working capital, and $1.4 million of cash used in other LASIK-related activity.Operations

We have provided both adjusted revenues and operating losses as a means of measuring performance that adjusts for the non-cash impact of accounting for separately priced extended warranties. We believe that the adjusted information better reflects operating performance and therefore is more meaningful to investors. We provide below a reconciliation of revenues and operating losses reported in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) (dollars in thousands). Revenues

	Twelve Months Ended December 31,
	2012			2011			2010
Revenues
Reported U.S. GAAP	$	101,493		$	102,983		$	99,825
Adjustments
Amortization of prior deferred revenue		(2,516	)		(4,376	)		(6,151	)
Adjusted revenues	$	98,977		$	98,607		$	93,674
Operating Loss
Reported U.S. GAAP	$	(9,311	)	$	(6,538	)	$	(21,967	)
Adjustments
Impact of prior deferred revenue		(2,516	)		(4,376	)		(6,151	)
Amortization of prior professional fees		252			438			615
Adjusted operating loss	$	(11,575	)	$	(10,476	)	$	(27,503	)

In 2013, revenues decreased by $9.3 million, or 9.2%, to $92.2 million, from $101.5 million in 2012, compared to a decrease of $1.5 million, or 1.4% in 2012 compared with 2011. In 2013, adjusted revenues were $91.3 million compared with $99.0 million in 2012 and $98.6 million in 2011. Procedure volume decreased by approximately 9% in 2013 to 53,231, compared to 58,525 in 2012. The components of the revenue change include the following (dollars in thousands):

Results of Operations

	2013			2012			2011
(Decrease) increase in revenues from same-store procedure change	$	(8,953	)	$	(1,757	)	$	11,557
Decrease in revenue from closed vision centers		-			-			(6,822	)
Impact from increase in average selling prices, before revenue deferral		1,291			2,127			198
Change in deferred revenues		(1,646	)		(1,860	)		(1,775	)
(Decrease) increase in revenues	$	(9,308	)	$	(1,490	)	$	3,158

~~Revenues~~Our adjusted revenue per procedure, which excludes the impact of deferred revenue from the sale of separately priced acuity programs, increased to $1,715 in 2013 from $1,691 in 2012 and $1,655 in 2011.

InIndustry ~~2012,~~procedure ~~revenues~~volume in 2013 decreased by ~~$1.~~approximately 5% ~~million,~~compared orto ~~1.4%,~~both to2012 ~~$101~~and 2011.5 ~~million,~~Industry ~~from $103.0~~sources ~~million~~indicate inthat ~~2011~~economic uncertainty and other macroeconomic factors, ~~compared~~including tonew anfederal ~~increase~~regulations ofthat ~~$3.2~~limit ~~million,~~the ormaximum ~~3.2%~~allowable inflexible ~~2011.~~spending Inaccount ~~2012~~contribution, ~~adjusted~~continue ~~revenues~~to ~~were~~impact ~~$99~~negatively the entire laser vision correction industry.0 ~~million~~During ~~compared~~2013 we continued to experience challenges with ~~$98.6~~our ~~million~~direct-to-consumer inmarketing ~~2011~~model as we attempt to optimize our media buys and ~~$93.7~~identify ~~million~~messages inthat ~~2010.~~would ~~Procedure~~compete ~~volume~~more ~~decreased~~effectively bywith ~~approximately~~local 2ophthalmologists who control about 60% inof ~~2012~~the ~~to 58~~LASIK market. Despite these challenges,~~525,~~ ~~compared~~we again experienced strong operational metrics from efforts to ~~59,587~~improve inpatient ~~2011~~interactions and organizational effectiveness. ~~The~~Operational ~~components~~metrics ofin ~~the~~2013, ~~revenue~~including ~~change~~preoperative ~~include~~appointment ~~the~~show ~~following~~rate, ~~(dollars~~conversion inrate ~~thousands):~~and treatment show rate, remained consistent compared to 2012, which represented improvements over 2011.

	2012			2011			2010
(Decrease) increase in revenues from same-store procedure change	$	(1,757	)	$	11,557		$	(15,220	)
Decrease in revenue from closed vision centers		—			(6,822	)		(11,278	)
Impact from increase in average selling prices, before revenue deferral		2,127			198			66
Change in deferred revenues		(1,860	)		(1,775	)		(2,956	)
(Decrease) increase in revenues	$	(1,490	)	$	3,158		$	(29,388	)

Amortization of prior deferred revenues for 2013, 2012 and 2011 were $870,000, $2.5 million and $4.4 million, respectively.

20 21

~~Table~~Operating ~~of Contents~~Costs

~~The~~Our ~~adjusted~~operating ~~revenue~~costs ~~per~~correlate in part with revenues and procedure, ~~which~~volumes ~~excludes~~due to the ~~impact~~fact that some of ~~deferred~~our ~~revenue~~costs ~~from~~are ~~the~~variable ~~sale~~and ~~of separately~~some ~~priced~~are ~~acuity~~fixed. ~~programs,~~The ~~increased~~following totable ~~$1,691~~shows the change in ~~2012~~components ~~from~~of $1operating expenses between 2013,~~655~~ in2012 and 2011 in dollars and ~~$1,652~~as ina ~~2010.~~percentage of revenues for each period (dollars in thousands):

Although 2012 industry procedure volume increased compared to both 2011 and 2010, industry sources indicate that economic uncertainty and other macroeconomic factors continue to impact negatively the entire laser vision correction industry. During 2012 we experienced challenges with our direct-to-consumer marketing model as we attempt to optimize our media buys and identify messages that better compete with local ophthalmologists who control about 60% of the LASIK market. Despite these challenges we experienced improvements to our operational metrics from efforts to improve patient interactions and organizational effectiveness. We experienced an increase in preoperative appointment show rate in 2012 compared to 2011 and 2010 and conversion rates in 2012 compared to 2011 but were down to 2010 results. Treatment show rate remained stable in 2012 compared with 2011 and 2010.

									Decrease/						Decrease/
	2013				2012				(Increase)		2011				(Increase)
Medical professional and license fees	$	20,091	21.8	%	$	23,715	23.4	%	$	3,624	$	24,628	23.9	%	$	913
Direct costs of services		39,092	42.4	%		44,348	43.7	%		5,256		43,048	41.8	%		(1,300	)
General and administrative expenses		11,684	12.7	%		13,442	13.2	%		1,758		13,942	13.5	%		500
Marketing and advertising		21,635	23.5	%		23,055	22.7	%		1,420		22,678	22.0	%		(377	)
Depreciation		2,050	2.2	%		4,736	4.7	%		2,686		5,703	5.5	%		967
Impairment and restructuring charges		214	0.2	%		1,747	1.7	%		1,533		140	0.1	%		(1,607	)

~~Amortization~~Medical ~~of prior~~professional ~~deferred revenues for 2012, 2011~~ and ~~2010~~license ~~was $2.5 million, $4.4 million and $6.2 million, respectively.~~ fees

~~Operating~~Due ~~Costs~~ to lower procedure volume, medical professional and license fees in 2013 decreased $3.6 million, or 15.3%, from 2012. The decrease in expense, and the expense as a percentage of revenue, is also due to favorable procedure fee negotiations with our excimer laser vendors which decreased license fees by $1.5 million, and had a favorable impact on our enhancement costs of $295,000. Enhancement costs were also lower due to favorable trends in our enhancement rates. The amortization of the deferred medical professional fees associated with the sale of separately priced extended acuity programs also impacted medical professional and license fees. We amortized $87,000 of deferred medical professional fees attributable to prior years in 2013 compared to $252,000 in 2012.

~~Our~~Medical ~~operating~~professional ~~costs~~and ~~correlate~~license fees in ~~part~~2012 ~~with~~decreased ~~revenues~~$913,000, ~~and~~or ~~procedure~~3.7%, ~~volumes~~from ~~due~~2011. toLicense ~~the~~fees ~~fact~~decreased ~~that~~$941,000 ~~some~~as a result of ~~our~~decreased enhancement costs, ~~are~~partially ~~variable~~offset by lower volume rebates in 2012 and ~~some~~increased ~~are fixed~~costs from our cataract and refractive lens services business. The ~~following~~amortization ~~table~~of ~~shows~~ the ~~change~~deferred inmedical ~~components~~professional fees associated with the sale of ~~operating~~separately ~~expenses~~priced ~~between~~extended ~~2012,~~acuity ~~2011~~programs ~~and~~also ~~2010~~impacted inmedical ~~dollars~~professional and aslicense afees. ~~percentage~~We amortized deferred medical professional fees attributable to prior years of ~~revenues~~$252,000 ~~for~~in ~~each~~2012 ~~period~~compared ~~(dollars~~to $438,000 in ~~thousands):~~2011.

									Decrease/							Decrease/
	2012				2011				(Increase)			2010				(Increase)
Medical professional and license fees	$	23,715	23.4	%	$	24,628	23.9	%	$	913		$	24,161	24.2	%	$	(467	)
Direct costs of services		44,348	43.7	%		43,048	41.8	%		(1,300	)		46,631	46.7	%		3,583
General and administrative expenses		13,442	13.2	%		13,942	13.5	%		500			13,956	14.0	%		14
Marketing and advertising		23,055	22.7	%		22,678	22.0	%		(377	)		24,114	24.2	%		1,436
Depreciation		4,736	4.7	%		5,703	5.5	%		967			9,408	9.4	%		3,705
Impairment and restructuring charges		1,747	1.7	%		140	0.1	%		(1,607	)		5,484	5.5	%		5,344

Direct costs of services

~~Medical~~Direct costs of services in 2013 decreased $5.3 million, or 11.9%, from 2012. The decrease reflected lower variable costs as a result of lower procedure volume in combination with lower costs as a result of previously executed restructuring initiatives and other cost savings. Lower costs included a reduction in financing costs of $1.2 million due to lower procedure volume, renegotiation of rates for third-party financing plans including a special rate in the first four months of 2013, and a shift in our portfolio mix to shorter term plans which cost us less; employee costs of $1.4 million, comprised of stock compensation and other employee costs; insurance costs of $684,000 related to favorable actuarial valuation changes resulting from updated claims experience; bad debt expense of $498,000; rent costs of $384,000 due to vision center closures and lease renegotiations; state and local taxes of $376,000; contracted and professional services of $214,000; and ~~license~~travel ~~fees~~costs of $191,000.

~~Medical~~Direct ~~professional~~costs ~~and~~of ~~license~~services ~~fees~~ in 2012 ~~decreased~~increased by $~~913~~1.3 million,~~000,~~ or 3.70%, from 2011. ~~License~~The ~~fees~~increase ~~decreased~~was ~~$941,000~~due asprimarily ato ~~result~~salaries, ofbenefits, ~~decreased~~and ~~enhancement~~stock ~~costs,~~compensation ~~partially~~expense ~~offset~~of by$1.7 ~~lower~~million ~~volume~~related ~~rebates in~~to ~~2012~~filling open and ~~increased~~new ~~costs~~positions, ~~from~~including our ~~cataract~~business ~~services~~expansion ~~business.~~roles ~~The~~as ~~amortization~~well ofas ~~the~~merit ~~deferred~~increases ~~medical~~in ~~professional~~2012. ~~fees~~Additional ~~associated~~increases ~~with~~included ~~the~~insurance ~~sale~~costs of ~~separately~~$292,000 ~~priced~~due ~~extended~~to ~~acuity~~actuarial ~~programs~~adjustments ~~also~~based ~~impacted~~on ~~medical~~our ~~professional~~historical claim activity and ~~license~~bad ~~fees~~debt expense of $168,000 as a result of changes in financing plan mix. We ~~amortized~~Partially ~~deferred~~offsetting ~~medical~~the ~~professional~~increases ~~fees~~was ~~attributable~~a todecrease ~~prior~~in ~~years~~rent expense of $~~252~~337,000 infrom ~~2012~~recent ~~compared~~favorable tonegotiations of leases and state and local taxes of $~~438~~247,000 due to unfavorable audit assessments in 2011.

~~Medical professional~~General and license fees in 2011 increased $467,000, or 1.9%, from 2010. Medical professional fees increased $466,000, or 4.7%, due to increased costs and physician fees associated with increased procedure volumes and revenues. License fees increased slightly as a result of increased procedure volumes in 2011 offset by lower volume rebates on purchases and decreased enhancement costs. The amortization of the deferred medical professional fees associated with the sale of separately priced extended acuity programs also impacted medical professional and license fees. We amortized deferred medical professional fees attributable to prior years of $438,000 in 2011 compared to $615,000 in 2010. administrative

~~Direct~~General and administrative expenses decreased $1.8 million, or 13.1% from 2012, due primarily to reductions in employee costs of ~~services~~$1.2 million comprised of lower stock compensation and other employee costs in connection with previously executed restructuring initiatives, rent savings of $172,000 from the relocation of our patient communication center, as well as reduced travel expenses and telecommunication expenses. General and administrative expenses decreased 0.5% to 12.7% of revenues.

~~Direct~~General ~~costs of~~and ~~services~~administrative expenses in 2012 ~~increased~~decreased by $~~1.3 million~~500,000, or 3.06%, from 2011. The ~~increase~~decrease was due primarily to ~~salaries,~~reductions ~~benefits,~~in ~~and~~professional ~~stock~~services ~~compensation~~costs ~~expense~~from ofadditional ~~$1.7~~spending ~~million~~for ~~related~~growth toinitiatives ~~filling open and new positions, including our business expansion roles as well as merit increases~~ in ~~2012. Additional increases included insurance costs of $292~~2011,~~000~~ ~~due~~partially tooffset ~~actuarial~~by ~~adjustments based on our historical claim activity and bad debt expense of~~ $~~168~~404,000 ~~as a result of changes~~ in ~~financing~~increased ~~plan~~sales ~~mix. Partially~~tax ~~offsetting~~costs ~~the~~resulting ~~increases~~from ~~was~~ a ~~decrease~~favorable instate ~~rent~~sales ~~expense~~tax ofaudit ~~$337,000~~settlement ~~from~~in ~~recent~~2011. ~~favorable~~General ~~negotiations of leases~~ and ~~state~~administrative ~~and~~expenses ~~local~~decreased ~~taxes~~0.3% ~~of $247,000 due~~ to ~~unfavorable~~13.2% ~~audit~~of ~~assessments in the prior year~~revenues.

~~Direct~~Marketing ~~costs of services in 2011 decreased by $3.6 million, or 7.7%, from 2010. Our decision to close under-performing laser vision centers~~ and ~~other cost~~advertising reduction efforts in 2010 drove lower direct costs of services primarily in the areas of salaries and employee incentives of $1.3 million and rent and utilities costs of $1.4 million. We also benefited from a decline in financing fees, laser rent, bad debt expense, insurance, telecommunications, and state and local taxes. These decreases in direct costs of services were offset partially by increased stock-based compensation and travel costs. Direct costs as a percentage of revenues decreased to 41.8% in 2011 from 46.7% in 2010. expenses

21Marketing and advertising expenses in 2013 decreased $1.4 million, or 6.2%, from 2012. These expenses constituted 23.5% of revenues during 2013, up from 22.7% in 2012. Marketing cost per eye increased to $406 for 2013 from $394 in 2012. Adjusted marketing cost per eye, which excludes the impact of cataract and refractive lens services marketing spend of $406,000, increased to $402 per eye in 2013 compared with $387 in 2012. Marketing and advertising expenses in 2012 increased $377,000, or 1.7%, from 2011. These expenses constituted 23.5% of revenues during 2012, up from 22.0% in 2011. Marketing cost per eye increased to $394 for 2012 from $381 in 2011.

~~Table of Contents~~22

~~General~~Depreciation ~~and administrative~~ expense

~~General~~Depreciation ~~and~~expense ~~administrative~~in ~~expenses~~2013 decreased by $~~500~~2.7 million,~~000,~~ or 356.67%, ~~from~~compared ~~2011~~to 2012. ~~The~~Depreciation ~~decrease~~expense ~~was~~in ~~due~~2012 ~~primarily~~decreased toby ~~reductions~~$967,000, inor ~~professional~~17.0%, ~~services~~compared ~~costs~~to ~~from~~2011. ~~additional~~The ~~spending~~decline ~~for growth initiatives~~ in ~~2011,~~ ~~partially~~depreciation ~~offset~~expense bycontinues ~~$404,000~~to inreflect ~~increased~~a ~~sales~~lower ~~tax~~depreciable ~~costs~~asset ~~resulting~~base ~~from~~as a ~~favorable~~result ~~state~~of ~~sales~~reduced ~~tax~~capital ~~audit~~expenditures ~~settlement~~since in2008 ~~2011. General~~ and ~~administrative~~the ~~expenses~~disposal ~~decreased~~of ~~0.3%~~certain toequipment ~~13.2%~~and asleasehold aimprovements ~~percentage~~from ofclosed ~~revenues~~vision centers.

~~General~~Impairment and ~~administrative~~restructuring expenses of $13.9 million in 2011 remained relatively flat compared to 2010. During the year we incurred approximately $528,000 in additional spending for growth initiatives offset by $433,000 in reduced sales tax costs resulting from a favorable state sales tax audit settlement. General and administrative expenses decreased 0.5% to 13.5% as a percentage of revenues due to an increase in revenues. charges

~~Marketing~~No impairment charges were incurred during 2013. The 2012 impairment resulted from our decision to close one under-performing vision center in December 2012, convert another center into a satellite vision center and ~~advertising~~consolidate ~~expenses~~our patient communication center into our primary corporate headquarters building during January 2013. The 2011 impairment charge reduced the carrying value of certain assets held for use in a laser vision correction center.

~~Marketing~~Restructuring ~~and~~charges ~~advertising expenses~~ in ~~2012~~2013 ~~increased~~of $~~377~~214,000, orresulted ~~1.7%,~~primarily from ~~2011.~~the ~~These~~relocation ~~expenses~~of ~~constituted~~our ~~22.7%~~patient ofcommunication ~~revenues~~center ~~during~~to ~~2012,~~our upcorporate ~~from~~headquarters ~~22.0%~~as inpart ~~2011.~~of ~~Marketing~~our ~~cost~~restructuring ~~per~~plan ~~eye~~announced ~~increased~~in tolate ~~$394 for~~ 2012. ~~from~~Restructuring ~~$381~~charges in ~~2011.~~2012 ~~Adjusted~~of ~~marketing~~$1.1 ~~cost~~million ~~per~~resulted ~~eye,~~from ~~which~~our ~~excludes~~decision ~~the~~to ~~impact~~close ofone ~~cataract~~under-performing ~~services~~vision ~~marketing spend of $491~~center,~~000,~~ ~~increased~~convert one to ~~$387~~a ~~compared~~satellite ~~with~~vision ~~$379~~center inand ~~2011.~~to ~~Marketing~~reduce ~~and~~our ~~advertising~~workforce ~~expenses~~ in ~~2011~~our ~~decreased~~continued ~~$1.4~~efforts ~~million, or~~to ~~6.0%,~~reduce ~~from~~costs ~~2010.~~and ~~These~~increase ~~expenses~~operational ~~constituted 22~~efficiencies.0% ofRestructuring ~~revenues~~charges ~~during~~in 2011, ~~down~~of ~~from~~$36,000 ~~24.2%~~were incomprised ~~2010.~~primarily ~~Marketing~~of ~~cost~~adjustments ~~per eye decreased~~ to ~~$381~~previous estimates for ~~2011~~contract ~~from~~termination ~~$425~~costs infor ~~2010,~~previously ~~due~~closed ~~primarily~~vision tocenters ~~more~~and ~~effective~~additional ~~spending~~severance ~~on media~~costs.

WeGain adjust our marketing spend levels continually in an attempt to align spending levels with consumer demand. We are continuing to work to develop more efficient marketing techniques and expand local initiatives as a means to attract patients. Our future operating profitability will depend in large part on ~~the~~sale ~~success~~ of ~~our efforts in this regard.~~ assets

~~Depreciation~~We ~~expense~~sold lasers and other assets held for sale for a gain of approximately $198,000 in 2013 compared with a gain of $239,000 in 2012 and $618,000 in 2011. We currently do not have any assets held for sale.

~~Depreciation expense~~Non-operating inincome 2012 decreased by $967,000, or 17.0%, compared to 2011. Depreciation expense in 2011 decreased by $3.7 million, or 39.4%, compared to 2010. The decline in depreciation expense continues to reflect a lower depreciable asset base as a result of reduced capital expenditures since 2008 and ~~the disposal of certain equipment and leasehold improvements from closed vision centers.~~ expenses

~~Impairment~~We ~~and~~recorded ~~restructuring~~net ~~charges~~investment income of $890,000 in 2013 compared with $656,000 in 2012. The increase was due primarily to lower interest expense reflecting our decision to repay third party debt in June 2012 prior to its maturity.

~~In 2012,~~We we recorded ~~impairment~~net ~~charges~~investment toincome ~~reduce the carrying amount~~ of ~~long-lived assets by approximately~~ $~~617~~656,000 ~~compared~~in to2012 ~~charges~~compared ofwith $~~104~~470,000 ~~and $1.7 million~~ in 2011 ~~and 2010, respectively~~. The ~~2012~~increase ~~impairment~~was ~~charge~~due ~~resulted~~primarily ~~from of our decision~~ to ~~close~~increases ~~one~~in ~~under-performing~~patient ~~vision~~financing ~~center~~interest inincome ~~December~~of ~~2012~~$199,000 ~~convert~~on ~~another~~higher ~~center~~average ~~into~~accounts areceivable ~~satellite vision center~~ and ~~consolidate~~a ~~our~~reduction ~~call~~in ~~center~~interest ~~into~~expense ~~the primary corporate headquarters during January~~ of ~~2013.~~$138,000 ~~The~~due ~~2011~~to ~~impairment charge reduced~~ the ~~carrying~~payoff ~~value~~ of ~~certain~~all ~~assets~~outstanding ~~held~~debt ~~for~~in ~~use~~2012, in aadvance ~~laser~~of ~~vision~~the ~~correction~~original ~~center~~maturity date. ~~The~~Partially ~~2010~~offsetting ~~impairment~~these ~~charge~~increases ~~resulted~~is ~~from~~a ~~our~~loss ~~decision~~on tosale ~~consolidate~~of ~~vision~~investment ~~center~~securities ~~operations~~related into ~~four~~the ~~markets~~disposal ~~and~~of ~~close~~our ~~vision~~auction ~~centers~~rate insecurities ~~six underperforming~~during ~~markets (including one licensed facility) in order to preserve cash~~2012.

~~Restructuring~~Income charges in 2012 of $1.1 million resulted primarily from our decision to close one under-performing vision center, convert one into a satellite vision center and to reduce our workforce in our continued efforts to reduce costs and increase operational efficiencies. Restructuring charges in 2011 were $36,000, comprised primarily of adjustments to previous estimates for contract termination costs for previously closed vision centers and additional severance costs. Restructuring charges in 2010 of $3.8 million resulted primarily from the consolidation of vision center operations, closure of underperforming vision centers, and workforce reductions in our continued efforts to reduce costs and increase operational efficiencies. taxes

~~Gain~~Our oneffective ~~sale~~income tax rate was (8.3%) during 2013 compared to (1.6%) during 2012 and 2.1% during 2011. Our effective tax rate was impacted significantly by a valuation allowance against all of our net deferred tax assets during these years. We maintain a full valuation allowance on our net deferred tax assets due to increased uncertainty with respect to our ability to realize the net deferred tax assets in future periods. The impact of the valuation allowance on our effective tax rate was 35.6%, 38.5% and 36.2%, respectively. Our provision for income taxes in 2013 and 2012 included a benefit of lapsed statutes related to uncertain tax positions and the interest previously recorded on these positions. The benefit was partially offset by interest on uncertain tax positions and state taxes in one jurisdiction. Our provision for income taxes in 2011 included interest on uncertain tax positions and state taxes in one jurisdiction.

WeLiquidity ~~sold lasers~~ and ~~other~~Capital assets held for sale for a gain of approximately $239,000 in 2012 compared to $618,000 in 2011 and $2.0 million in 2010. The decreases are due to limited vision center closures in 2011 and 2012, which resulted in a decline in assets held for sale. Resources

~~Non-~~The following table summarizes our cash flows from operating, ~~income~~investing and ~~expenses~~financing activities, as reflected in the Consolidated Statements of Cash Flows (in thousands).

We recorded net investment income of $656,000 in 2012 compared to $470,000 in 2011. The increase was due primarily to increases in patient financing interest income of $199,000 on higher average accounts receivable and a reduction in interest expense of $138,000 due to the payoff of all outstanding debt in 2012, in advance of the original maturity date. Partially offsetting these increases is a loss on sale of investment securities related to the disposal of our auction rate securities during 2012.

	Year ended December 31,
	2013			2012			2011
Cash (used in) provided by:
Operating activities	$	(4,288	)	$	(5,088	)	$	(3,501	)
Investing activities		360			22,372			6,353
Financing activities		(722	)		(4,304	)		(3,544	)
Net effect of exchange rate changes on cash and cash equivalents		(314	)		105			(90	)
Net increase (decrease) in cash and cash equivalents	$	(4,964	)	$	13,085		$	(782	)

We recorded net investment income of $470,000 in 2011 compared to $1.4 million in 2010. The decrease was due primarily to the gain on sale of equity investments of $993,000 that occurred in 2010 compared to a gain of $52,000 that was recognized on the redemption of various securities in 2011. Patient financing interest income declined $119,000 on lower average accounts receivable, and interest expense declined by $223,000 due to a favorable state sales tax audit settlement and lower borrowing levels in 2011 compared to 2010. 23

22Cash flows used in operating activities were $4.3 million in 2013 compared to $5.1 million in 2012 and $3.5 million in 2011. Cash used in operations included approximately $1.2 million of investment in expansion efforts related to the company’s refractive lens and cataract business, $1.8 million of restructuring payments related to previously executed actions, and additional working capital changes of $4.1 million primarily related to reductions in accounts payable related to timing of payments, increased accounts receivable for self-financed patients and reductions in accruals, offset by positive earnings from the core LASIK business. Our cash flow from operations depends primarily on procedure volume.

~~Table~~Cost control and cash conservation efforts have continued to provide significant savings in discretionary areas. We continue to manage closely working capital with particular focus on ensuring timely collection of ~~Contents~~outstanding patient receivables and management of our trade payable obligations. Working capital at December 31, 2013 amounted to $20.4 million compared to $21.1 million at the end of 2012 (excluding debt obligations due within one year). Liquid assets (cash and cash equivalents, short-term investments, and accounts receivable) amounted to 219.7% of current liabilities at December 31, 2013, compared to 188.8% at December 31, 2012. At December 31, 2013 and 2012, $4.4 million and $4.7 million, respectively, of cash and cash equivalents were held in accounts based in Canada and could be subject to additional tax upon repatriation to the U.S.

~~Income~~The ~~taxes~~average number of procedures company-wide necessary to reach breakeven cash flow from the core LASIK business, after capital expenditures and debt service, is approximately 54,000 per year compared to 58,000 per year at December 31, 2012. This cash flow estimate does not include restructuring payments, debt service or start-up losses and capital expenditures for the refractive lens and cataract business. The number of procedures that we will perform in 2014 or thereafter is uncertain.

~~Our~~We ~~effective~~continue ~~income~~to ~~tax~~offer ~~rate~~our ~~was~~own (1sponsored patient financing.~~6%) during~~ ~~2012~~As ~~compared~~of toDecember ~~2.1%~~31, ~~during~~2013, ~~2011~~we ~~and~~held 0$4.2% ~~during~~million ~~2010.~~in ~~Our~~patient ~~effective~~receivables, ~~tax~~net ~~rate~~of ~~was~~allowance ~~impacted~~for ~~significantly~~doubtful byaccounts, awhich ~~valuation~~was ~~allowance~~an ~~against~~increase ~~all~~ of ~~our net~~$343,000, ~~deferred~~or ~~tax~~8.9%, ~~assets~~from ~~during~~December ~~these~~31, ~~years~~2012. WeIn ~~maintain~~2013, athe ~~full~~amount ~~valuation~~of ~~allowance~~revenue oninternally ~~our~~financed ~~net~~remained ~~deferred~~consistent ~~tax assets due to increased uncertainty~~ with ~~respect to our ability to realize~~ the ~~net~~same ~~deferred~~period ~~tax assets~~ in ~~future~~2012 ~~periods.~~at ~~The~~approximately ~~impact~~6% of ~~the valuation~~gross ~~allowance on our effective tax rate was 38~~revenues.~~5%,~~ ~~36.2%~~We ~~and~~continually ~~37.4%,~~monitor ~~respectively.~~the ~~Our~~allowance ~~provision~~ for ~~income~~doubtful ~~taxes~~accounts inand ~~2012~~adjust ~~included~~our alending ~~benefit~~criteria ofor ~~lapsed~~require ~~statutes~~greater ~~related~~down topayments ~~uncertain~~if ~~tax~~our ~~positions~~experience ~~and~~indicates ~~the~~it ~~interest~~is ~~previously~~necessary. ~~recorded~~However, onour ~~these positions.~~ability ~~The~~to ~~benefit~~collect ~~was~~patient ~~partially~~accounts ~~offset~~depends, byin ~~interest~~part, on ~~uncertain~~overall ~~tax~~economic ~~positions~~conditions. ~~and~~Bad ~~state~~debt ~~taxes~~expense inwas ~~one~~less ~~jurisdiction.~~than ~~Our~~1% ~~provision~~of ~~for~~revenue ~~income taxes~~ in ~~2011~~2013 ~~included interest on uncertain tax positions~~ and ~~state taxes in one jurisdiction~~2012.

~~Liquidity~~In April 2013, we agreed to purchase for $2.3 million our excimer lasers previously leased from one of our vendors, subject to financing terms of 36 months at an interest rate of 3.5%. Our outstanding debt balance was $1.9 million at December 31, 2013. The loan agreement contains no financial covenants and ~~Capital~~is ~~Resources~~secured by the lasers purchased.

~~The~~During ~~following~~2013, ~~table~~we ~~summarizes~~purchased ~~our~~$2.0 ~~cash~~million ~~flows~~in ~~from~~certificates ~~operating,~~of ~~investing~~deposit and ~~financing~~received ~~activities,~~proceeds asfrom ~~reflected~~the insale of investment securities of $2.8 million. As of December 31, 2013, the ~~Consolidated~~majority ~~Statements~~of our cash and investment portfolio is comprised of ~~Cash~~cash ~~Flows~~and (cash equivalents due to the low investment yields in ~~thousands).~~the current market.

	Year ended December 31,
	2012			2011			2010
Cash (used in) provided by:
Operating activities	$	(5,088	)	$	(3,501	)	$	1,358
Investing activities		22,372			6,353			(709	)
Financing activities		(4,304	)		(3,544	)		(6,039	)
Net effect of exchange rate changes on cash and cash equivalents		105			(90	)		211
Net increase (decrease) in cash and cash equivalents	$	13,085		$	(782	)	$	(5,179	)

We opened three new licensed or franchised full-service vision centers, and five new satellite vision centers in 2013. We did not open any new full-service vision centers in 2012. Capital expenditures in 2013 were $700,000, which excludes the purchase of $2.3 million in previously leased excimer lasers as the purchase was financed through the vendor and had no initial cash outlay. Capital expenditures in 2012 were $1.2 million. The following is a list of the full-service and satellite vision centers that we opened and closed, indicated in parenthesis, in the last two fiscal years:

Cash flows used in operating activities were $5.1 million in 2012 compared to $3.5 million in 2011 and $1.4 million provided by operations in 2010. Our 2012 cash flow from operations includes a $2.0 million investment in developing our cataract business expansion, $2.1 million in changes to working capital and $1.4 million in cash uses from our LASIK operations. In 2010 cash from operations included a federal tax refund of $11.8 million. We did not receive a federal tax refund in 2011 or 2012 because we are in a net operating loss carryforward position. Our cash flow from operations depends primarily on procedure volume.

2013		2012
Edison, NJ		Annapolis, MD
Tacoma, WA		Naperville, IL
Liberty, MO		Tempe, AZ
Franklin, TN		Woodstock, GA
Nashville, TN		(Annapolis, MD)
Fairlawn, OH		(Chandler, AZ)
Northville, MI		(Seattle, WA)
Warren, MI
(Woodbridge, NJ)

Cost control and cash conservation efforts have continued to provide significant savings in discretionary areas. We continue to closely manage working capital with particular focus on ensuring timely collection of outstanding patient receivables and management of our trade payable obligations. Working capital at December 31, 2012 amounted to $21.1 million compared to $29.7 million at the end of 2011 (excluding debt obligations due within one year). Liquid assets (cash and cash equivalents, short-term investments, and accounts receivable) amounted to 188.8% of current liabilities at December 31, 2012, compared to 187.1% at December 31, 2011. 24

WeThe ~~believe~~following ~~that~~table ~~available~~aggregates ~~cash and short-term investments will provide sufficient cash reserves and liquidity to fund~~ our ~~working capital needs, capital expenditures and other~~ obligations ~~for at least the next 12 months. In the current challenging economic environment, we are seeking to balance cash conservation against our longer-term objective of managing to profitability~~ and ~~growth~~commitments ~~as the economy improves. The average number of procedures required company-wide~~ to ~~reach~~make ~~breakeven~~future ~~cash~~payments ~~flow,~~under ~~after~~existing ~~capital~~contracts ~~expenditures, is approximately 58,000 per year compared to 70,000 per year~~ at December 31, ~~2011.~~2013 ~~The~~(dollars ~~number of procedures that we will perform~~ in ~~2013 or thereafter is uncertain~~thousands).

We continue to offer our own sponsored patient financing. As of December 31, 2012, we held $3.9 million in patient receivables, net of allowance for doubtful accounts, which was an increase of $734,000, or 23.4%, from December 31, 2011, due primarily to continued investment in our “guaranteed financing” advertising program. We continually monitor the allowance for doubtful accounts and adjust our lending criteria or require greater down payments if our experience indicates it is necessary. However, our ability to collect patient accounts depends in part on overall economic conditions. Bad debt expense was approximately 1% of revenue in 2012, 2011 and 2010.

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Contractual Obligations (a)(b)
Operating lease obligations	$	23,465	$	6,463	$	10,319	$	5,664	$	1,019
Purchase commitments		1,267		641		626		-		-
Other obligations		140		140		-		-		-
Total	$	24,872	$	7,244	$	10,945	$	5,664	$	1,019

~~During~~(a) ~~2012,~~We wehave ~~purchased~~excluded ~~$39.7~~contractual ~~million~~obligations offor ~~investment~~which ~~securities and received proceeds from~~ the ~~sale~~ultimate ofsettlement ~~investment securities~~ of ~~$62.9~~quantities ~~million~~or asprices aare ~~result~~not offixed ~~maintaining~~and ~~greater cash liquidity in money market funds~~determinable. ~~Our investment portfolio at December 31, 2012 consists of certificates of deposit with initial maturities greater than 90 days.~~

~~During~~(b) ~~2012~~We wealso ~~redeemed~~excluded ~~our~~from ~~remaining~~the ~~auction~~table ~~rate securities with par value of~~ $~~1.1 million at 75% of par value. At December 31~~304,000 ~~2011, we held at par value $1.1 million,~~ of ~~various~~unrecognized ~~auction~~tax ~~rate~~benefits ~~securities.~~due ~~The~~to ~~assets underlying~~ the ~~auction~~uncertainty ~~rate~~regarding ~~instruments were primarily municipal bonds. In 2011, issuers called at par $25,000 of~~ the ~~related~~timing ~~securities, and we redeemed an additional $1.1 million at 81%~~ of ~~original~~future ~~par~~potential ~~value.~~cash ~~We no longer hold any auction rate securities~~flows.

23Critical Accounting Estimates

~~Table~~Note 1 to the Consolidated Financial Statements more fully describes our accounting policies. As disclosed in Note 1, the preparation of ~~Contents~~financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial position and results of operations and require management’s most difficult, subjective and complex judgments.

InRevenue ~~April 2008~~Recognition, wePatient ~~entered~~Receivables ~~into~~and aAllowance ~~five-year~~for ~~loan~~Doubtful agreement with PNC Equipment Finance, LLC to finance the majority of the femtosecond lasers which we purchased. In June 2012, we paid off all outstanding debt in advance of the original maturity date, reducing our total debt to zero. Our outstanding debt was $4.0 million as of December 31, 2011, of which $3.0 million was due within 12 months. Accounts

InWe ~~March~~recognize ~~and~~revenues ~~April~~as ~~2009,~~services weare ~~entered~~performed ~~into~~and ~~five-year~~persuasive ~~lease~~evidence ~~agreements~~of ~~with~~an ~~Alcon~~arrangement ~~and AMO, respectively,~~ for ~~new~~payment ~~excimer~~exists. ~~lasers~~Additionally, ~~which~~revenue ~~allowed~~is usrecognized towhen ~~standardize~~the ~~our~~price ~~excimer~~is ~~treatment~~fixed ~~platforms.~~and Asdeterminable ~~part~~and ofcollectability ~~the~~is ~~transactions,~~reasonably weassured. ~~disposed~~We ofdeferred ~~our~~revenues ~~Bausch &~~associated ~~Lomb~~with ~~lasers~~separately ~~and~~priced ~~related~~acuity ~~capital~~programs ~~lease~~and ~~obligations.~~recognize Wethem ~~received~~over ~~cash payments from~~ the ~~lessors~~period ~~and~~in ~~have~~which ~~deferred~~future ~~these~~costs ~~amounts~~of ~~and~~performing ~~are~~post-surgical ~~recognizing~~enhancement ~~them~~procedures ~~ratably~~are ~~over~~expected ~~the~~to ~~lease~~be ~~terms.~~incurred Webecause ~~include~~we ~~the~~have ~~unrecognized~~sufficient ~~portion~~experience into ~~“Accrued~~support ~~liabilities~~the ~~and~~costs ~~other”~~associated ~~for~~with ~~the~~future ~~current~~enhancements ~~portion~~that ~~and~~will inbe ~~“Deferred~~incurred ~~license~~on ~~fees”~~other ~~for the~~than ~~long~~a straight-~~term~~line ~~portion~~basis. inEffective ~~our~~June ~~Consolidated~~15, ~~Balance~~2007, ~~Sheets~~we atchanged ~~December 31,~~our ~~2012~~pricing model and ~~2011.~~no ~~The~~longer ~~AMO~~offer ~~laser~~separately ~~lease~~priced ~~qualified~~acuity asoptions. aWe ~~capital~~report ~~lease,~~all ~~and~~revenues ~~the~~net ~~Alcon~~of ~~laser~~tax ~~lease~~assessed ~~qualified~~by asapplicable angovernmental ~~operating lease~~authorities.

WeA ~~had~~significant ~~assets~~percentage ~~held~~of ~~for~~our ~~sale~~patients finance some or all of ~~$24,000~~the ~~and~~cost ~~$46,000~~of attheir ~~December 31,~~procedure. ~~2012~~We ~~and~~provide ~~2011,~~financing ~~respectively~~to some of our patients, ~~related~~including tothose ~~unused~~who ~~lasers~~could ~~and~~not ~~other~~otherwise ~~equipment~~obtain ~~from~~ third-party financing. We derive approximately 6% of our ~~closed~~revenues ~~vision~~from ~~centers.~~patients ~~During~~to ~~2012,~~whom we ~~sold~~have ~~some~~provided direct financing, after collection of down payments. The terms of our ~~assets~~direct ~~held~~financing ~~for~~require ~~sale~~the ~~with~~patient ato ~~combined~~pay ~~net~~an ~~book~~up-front ~~value~~fee which is intended to cover some or all of ~~$88~~our variable costs,~~000~~ ~~for~~and ~~total~~then ~~proceeds~~we deduct the remainder of ~~approximately~~the ~~$327~~amount due automatically from the patient’s bank account over a period of 12 to 36 months. Our direct financing program exposes us to significant credit risks,~~000,~~ ~~resulting~~particularly given that patients who participate in athe ~~gain~~program generally have not been deemed creditworthy by third-party financing companies. To ensure that collectability is reasonably assured at the time of ~~approximately~~the ~~$239~~service offering,~~000,~~ ~~before~~we ~~tax~~actively monitor our bad debt experience and adjust underwriting standards as necessary.

WeBased ~~did~~upon ~~not~~our ~~open~~own ~~any~~experience ~~new~~with ~~full~~patient ~~service~~financing, ~~vision~~we ~~centers~~have inestablished ~~2012~~an orallowance ~~2011.~~for ~~Capital~~doubtful ~~expenditures~~accounts as of December 31, 2013 of $1.21 million inagainst ~~2012~~patient ~~declined~~receivables ~~from~~of $5.4 million, compared to an allowance of $1.57 million inagainst ~~2011~~patient ~~as we~~receivables ~~curtailed~~of ~~vision~~$5.5 ~~center~~million ~~relocations~~at December 31, 2012. ~~The~~We ~~following~~reserve isfor aall ~~list~~patient ofreceivables that remain open past the ~~full~~financial ~~service~~maturity ~~vision~~date ~~centers~~and ~~that~~to weprovide ~~closed~~reserves for patient receivables prior to the maturity date so as to bring patient receivables, ~~indicated~~net inof ~~parenthesis~~reserves, down to the estimated net realizable value based on historical collectability rates, recent default activity and ~~satellite~~the ~~vision~~current ~~centers~~credit ~~which~~environment. weAny ~~opened~~excess in our actual allowance for doubtful account write-offs over our estimated bad debt reserve, would adversely impact our results of operations and cash flows. To the ~~last~~extent ~~two~~that ~~fiscal~~our ~~years:~~actual allowance for doubtful account write-offs are less than our estimated bad debt reserve, results of operations and cash flows would be favorably impacted. At December 31, 2013 no allowance against our other accounts receivables of $950,000 was deemed necessary. At December 31, 2012, there was an allowance for doubtful accounts of $340,000 against other accounts receivables of $783,000.

2012	2011
Annapolis, MD		(Naperville, IL	)
Naperville, IL
Tempe, AZ
Woodstock, GA
(Annapolis, MD)
(Chandler, AZ)
(Seattle, WA)

For patients whom we finance internally, we charge interest at market rates. Finance and interest charges on patient receivables were $851,000 in 2013, $820,000 in 2012 and $621,000 in 2011. We include these amounts in “Net investment income and other” within the Consolidated Statements of Operations and Comprehensive Loss.

~~The following table aggregates our obligations and commitments to make future payments under existing contracts at December 31, 2012 (dollars in thousands).~~25

Contractual Obligations (a)(b)	Total		Less than1 year		1 - 3 years		3 - 5 years		More than5 years
Operating lease obligations	$	23,766	$	8,097	$	8,926	$	5,482	$	1,261
Purchase commitments		1,039		397		642		—		—
Other obligations		365		225		140		—		—
Total	$	25,170	$	8,719	$	9,708	$	5,482	$	1,261

Insurance Reserves

(We maintain a) captive insurance company to provide professional liability insurance coverage for claims brought against us and our optometrists after December 17, 2002. In addition, our captive insurance company’s charter allows it to provide professional liability insurance for our ophthalmologists, none of whom are currently insured by the captive. We ~~have~~use ~~excluded~~the ~~contractual~~captive ~~obligations~~insurance company for ~~which~~both primary insurance and excess liability coverage. Our captive insurance company is subject to a number of pending claims. We consolidate the ~~ultimate~~financial ~~settlement~~statements of ~~quantities~~the orcaptive ~~prices~~insurance ~~are~~company with our financial statements because it is a wholly owned enterprise. As of both December 31, 2013 and 2012, we maintained insurance reserves of $6.6 million, which represent an actuarially determined estimate of future costs associated with claims filed as well as claims incurred but not ~~fixed~~yet reported. We recorded $867,000 and ~~determinable~~$871,000 of the total insurance reserve as a current liability in “Accrued liabilities and other” at December 31, 2013 and 2012, respectively. Since the inception of the captive insurance company in 2002, it has disbursed total claims and legal expenses of approximately $8.1 million.

~~(b)~~Our Weactuaries ~~also~~determine ~~excluded~~our ~~from~~loss ~~the~~reserves ~~table~~based ~~$508~~on our historical claim experience,~~000~~ comparable industry experience and recent trends that would impact the ultimate settlement of ~~unrecognized~~claims. ~~tax~~We ~~benefits~~believe that the recorded loss reserves are reasonable based on this analysis. However, due to the ~~uncertainty~~uncertainties ~~regarding~~inherent in the ~~timing~~determination of ~~future~~these ~~potential~~liabilities, ~~cash~~the ~~flows~~ultimate settlement of claims incurred through December 31, 2013 could differ from the amounts recorded. We will record any adjustment to these estimates in the period determined.

~~Critical~~Accrued ~~Accounting~~Enhancement ~~Estimates~~ Expense

~~Note~~We 1include toparticipation ~~the~~in ~~Consolidated~~our ~~Financial~~LasikPlus ~~Statements~~Advantage ~~more~~Plan® ~~fully~~(“acuity ~~describes~~program”) ~~our~~in ~~accounting~~the ~~policies.~~base Assurgical ~~disclosed~~price infor ~~Note~~substantially 1,all ~~the preparation~~ of ~~financial~~our ~~statements~~patients. inUnder ~~conformity~~the ~~with~~acuity ~~generally~~program, ~~accepted accounting~~if ~~principles~~determined ~~requires~~to ~~management~~be tomedically ~~make~~appropriate, ~~estimates~~we ~~and~~provide ~~assumptions~~post-surgical ~~about~~enhancements ~~future~~free ~~events~~of ~~that~~charge ~~affect~~should the ~~amounts~~patient ~~reported~~not inachieve the ~~financial~~desired ~~statements~~visual ~~and~~correction ~~accompanying~~during ~~notes~~the initial procedure. ~~Actual~~Under ~~results~~this ~~could~~pricing ~~differ~~structure, ~~significantly~~we ~~from~~account ~~those~~for ~~estimates~~the acuity program as a warranty obligation. ~~We believe~~Accordingly, ~~that~~we accrue the ~~following~~costs ~~discussion~~expected ~~addresses~~to ~~our~~be ~~most~~incurred ~~critical~~to ~~accounting~~satisfy ~~policies,~~the ~~which~~obligation ~~are~~as ~~those~~a ~~that~~liability ~~are~~and ~~most~~direct ~~important~~cost toof service at the ~~portrayal~~point of sale given our ~~financial~~ability ~~position~~to ~~and~~reasonably ~~results~~estimate ofsuch ~~operations~~costs based on historical trends and ~~require~~the ~~management’s~~satisfaction ~~most~~of ~~difficult, subjective~~all ~~and~~other ~~complex~~revenue ~~judgments~~recognition criteria.

~~Revenue~~We ~~Recognition~~record the post-surgical enhancement accrual based on our best estimate of the number and associated cost of the procedures to be performed. Each month, ~~Patient~~we ~~Receivables~~review the enhancement accrual and ~~Allowance~~consider ~~for~~factors ~~Doubtful~~such ~~Accounts~~as procedure cost and historical procedure volume when determining the appropriateness of the recorded balance.

WeA ~~recognize~~key ~~revenues~~assumption aswe ~~services~~use ~~are~~to ~~performed~~determine ~~and~~our ~~persuasive~~enhancement ~~evidence~~accrual ~~of an arrangement for payment exists. Additionally, revenue~~ is ~~recognized when~~ the ~~price~~ israte ~~fixed~~at ~~and~~which ~~determinable~~enhancements ~~and~~are ~~collectability~~likely isto ~~reasonably assured~~occur. We ~~deferred~~determine ~~revenues associated with separately priced acuity programs and recognize them over~~ the ~~period~~rate inbased ~~which~~on ~~future~~an ~~costs~~analysis of ~~performing~~historical ~~post-surgical~~enhancements ~~enhancement procedures~~performed ~~are~~compared ~~expected~~ to ~~be incurred because we have sufficient experience to support~~ the ~~costs~~original ~~associated~~procedure ~~with~~date. ~~future~~An ~~enhancements~~incremental ~~that will be incurred on other than a straight-line basis~~1.0% ~~Effective~~change ~~June 15,~~in ~~2007, we changed~~ our ~~pricing model~~enhancement ~~and~~rate nowould ~~longer~~have ~~offer~~resulted ~~separately~~in ~~priced~~an ~~acuity~~approximate ~~options.~~$759,000 Wechange ~~report~~to ~~all~~the ~~revenues~~enhancement ~~net~~accrual ofat ~~tax~~December ~~assessed~~31, ~~by applicable governmental authorities~~2013.

24Impairment of Property and Equipment

~~Table~~We assess the impairment of ~~Contents~~property and equipment whenever events or circumstances indicate that the carrying value might not be recoverable. We write down recorded values of property and equipment that are not expected to be recovered through undiscounted future net cash flows to fair value, which is generally determined from estimated discounted cash flows for assets held for use. In evaluating the recoverability of our recorded values and property and equipment, we analyzed the future undiscounted net cash flows for each of our laser vision correction centers, the lowest level for which there are identifiable cash flows. We assumed a cash flow period of three years to determine the cash flow forecasts, which corresponds to the remaining useful life of the primary assets within the laser vision correction centers.

ADuring ~~significant percentage of our patients finance some or all of the cost of their procedure. We provide financing to some of our patients~~2013, ~~including~~we ~~those~~did ~~who could~~ not ~~otherwise~~recognize ~~obtain~~any ~~third-party~~impairment ~~financing~~charges. WeBased ~~derive~~on ~~approximately~~current 6%estimates, ~~of our revenues from patients to whom~~ we ~~have~~believe ~~provided direct financing. The terms of our direct financing require~~ the ~~patient~~carrying toamount ~~pay~~for ~~an up-front fee, which is intended to cover some or all of~~ our ~~variable~~remaining ~~costs,~~property and ~~then~~equipment ~~generally~~is werecoverable ~~deduct~~through ~~the~~future ~~remainder~~undiscounted ~~automatically~~cash ~~from~~flows. ~~the~~Because ~~patient’s checking account over a period~~ of 12market ~~to 36 months. Our direct financing program exposes us to significant credit risks~~conditions, ~~particularly~~it ~~given that patients who participate in the program generally have not been deemed creditworthy by third-party financing companies. To ensure that collectability~~ is reasonably ~~assured~~ atpossible ~~the~~that ~~time of the service offering, we actively monitor~~ our ~~bad~~estimate ~~debt~~of ~~experience~~discounted ~~and~~cash ~~adjust~~flows ~~underwriting~~may ~~standards~~change ~~as necessary. In addition to increasing underwriting standards~~ in ~~2009,~~the ~~which~~near ~~included~~term anresulting ~~increase~~ in the ~~minimum~~need ~~down payment required, we took steps in 2011 and 2010~~ to ~~continue~~adjust toour ~~improve~~determination ~~collection results from internally financed patients through the use~~ of ~~credit~~fair ~~scores~~value toor ~~qualify patients for appropriate financing options~~recoverability.

~~Based~~Deferred ~~upon~~Tax ~~our~~Valuation own experience with patient financing, we have established an allowance for doubtful accounts as of December 31, 2012 of $1.7 million against patient receivables of $5.5 million, compared to an allowance of $1.7 million against patient receivables of $4.8 million at December 31, 2011. We reserve for all patient receivables that remain open past the financial maturity date and to provide reserves for patient receivables prior to the maturity date so as to bring patient receivables, net of reserves, down to the estimated net realizable value based on historical collectability rates, recent default activity and the current credit environment. Any excess in our actual allowance for doubtful account write-offs over our estimated bad debt reserve, would adversely impact our results of operations and cash flows. To the extent that our actual allowance for doubtful account write-offs are less than our estimated bad debt reserve, it would favorably impact our results of operations and cash flows. We have established an allowance for doubtful accounts as of December 31, 2012 of $340,000 against other accounts receivables of $783,000. At December 31, 2011, there was an allowance for doubtful accounts of $298,000 against other accounts receivables of $2.3 million. Allowance

~~For~~U.S. ~~patients~~GAAP ~~whom~~requires wea ~~internally~~company ~~finance,~~to weestablish ~~charge~~a ~~interest~~valuation atallowance ~~market~~for ~~rates.~~deferred ~~Finance~~tax ~~and~~assets ~~interest~~when ~~charges~~it onis ~~patient~~more-likely-than-not ~~receivables~~that ~~were~~the ~~$820,000~~deferred intax ~~2012,~~asset ~~$621,000~~will innot ~~2011~~be ~~and~~realized. ~~$740,000~~Deferred intax ~~2010.~~assets Wemay ~~include these~~be ~~amounts~~realized inthrough ~~“Net~~future ~~investment~~reversals of existing taxable temporary differences, future taxable income, ~~and~~taxable ~~other”~~income ~~within~~in ~~the~~prior ~~Consolidated~~carryback ~~Statements~~year(s) ofif ~~Operations~~carryback is permitted, and ~~Comprehensive~~tax ~~Loss.~~planning strategies.

~~Insurance~~We ~~Reserves~~considered all positive and negative evidence in determining whether or not the deferred tax assets are more-likely-than-not to be realized, including the current economic conditions. After considering all of the evidence, we believe that reliance on future projections of income is no longer sufficient to support realization of our deferred tax assets. Accordingly, we maintain a valuation allowance against our net deferred tax assets because we believe that it is not more-likely-than-not that our net deferred tax assets will be utilized. The valuation allowance was $26.5 million and $26.4 million at December 31, 2013 and 2012, respectively.

We maintain a captive insurance company to provide professional liability insurance coverage for claims brought against us and our optometrists after December 17, 2002. In addition, our captive insurance company’s charter allows it to provide professional liability insurance for our ophthalmologists, none of whom are currently insured by the captive. We use the captive insurance company for both primary insurance and excess liability coverage. Our captive insurance company is subject to a number of pending claims. We consolidate the financial statements of the captive insurance company with our financial statements because it is a wholly-owned enterprise. As of December 31, 2012 and 2011, we maintained insurance reserves of $6.6 million and $7.2 million, respectively, which represent primarily an actuarially determined estimate of future costs associated with claims filed as well as claims incurred but not yet reported. We recorded $871,000 and $951,000 of the total insurance reserve as a current liability in “Accrued liabilities and other” at December 31, 2012 and 2011, respectively. The $603,000 decrease in the overall reserve was driven principally by favorable claim experience and claim payments in 2012, partially offset by reserves for new claims. Our actuaries determine loss reserves by comparing our historical claim experience to comparable insurance industry experience. Since the inception of the captive insurance company in 2002, it has disbursed total claims and legal expenses of approximately $7.7 million. 26

~~Our~~Item ~~actuaries~~7A. Quantitative ~~determine our loss reserves based on our historical claim experience, comparable industry experience~~ and ~~recent~~Qualitative ~~trends~~Disclosures ~~that~~About ~~would~~Market impact the ultimate settlement of claims. We believe that the recorded loss reserves are reasonable based on this analysis. However, due to the uncertainties inherent in the determination of these liabilities, the ultimate settlement of claims incurred through December 31, 2012 could differ from the amounts recorded. We will record any adjustment to these estimates in the period determined. Risk

~~Accrued~~The ~~Enhancement~~carrying ~~Expense~~values of financial instruments including cash and cash equivalents, patient and other accounts receivable, and accounts payable approximate fair value because of the short maturity of these instruments. We record investments at fair value.

We ~~include~~record ~~participation~~short-term ininvestments ~~our~~at ~~LasikPlus~~market ~~Advantage~~value. ~~Plan® (“acuity~~Due ~~program”)~~to in the ~~base~~short-term ~~surgical~~nature ~~price for substantially all~~ of our ~~patients.~~investments ~~Under~~in ~~the~~certificates ~~acuity program, if determined to be medically appropriate, we provide post-surgical enhancements free~~ of ~~charge should the patient not achieve the desired visual correction during the initial procedure. Under this pricing structure~~deposit, we ~~account~~believe ~~for~~that ~~the~~there ~~acuity~~is ~~program~~little asrisk ~~a warranty obligation. Accordingly, we accrue the costs expected~~ to ~~be incurred to satisfy~~ the ~~obligation~~valuation ~~as a liability and direct cost~~ of ~~service~~investment ~~at the point of sale given our ability to reasonably estimate such costs based on historical trends and the satisfaction of all other revenue recognition criteria~~securities.

We ~~record~~have ~~the~~a ~~post-surgical~~low ~~enhancement~~exposure ~~accrual~~to ~~based~~changes onin ~~our~~foreign ~~best~~currency ~~estimate~~exchange ofrates ~~the number~~ and, ~~associated~~as ~~cost~~such, ofhave ~~the~~not ~~procedures~~used toderivative befinancial ~~performed.~~instruments ~~Each~~to ~~month,~~manage weforeign ~~review~~currency ~~the~~fluctuation ~~enhancement~~risk. ~~accrual~~In ~~and~~addition, ~~consider factors~~because ~~such~~our assecured ~~procedure~~indebtedness ~~cost~~bears ~~and~~interest ~~historical~~at ~~procedure~~a ~~volume~~fixed ~~when~~rate, ~~determining~~we ~~the~~have ~~appropriateness~~limited ofinterest-rate ~~the recorded balance~~risk.

25Item 8. Financial Statements and Supplementary Data

~~Table~~Index ofto ~~Contents~~Financial Statements

The key assumption we used to determine our enhancement accrual is the rate at which enhancements are likely to occur. We determine the rate based on an analysis of historical enhancements performed compared to the original procedure date. An incremental 1.0% change in our enhancement rate would have resulted in an approximate $769,000 change to the enhancement accrual at December 31, 2012.

	Page
Report of Independent Registered Public Accounting Firm	28
Consolidated Balance Sheets as of December 31, 2013 and 2012	29
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011	30
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	31
Consolidated Statements of Stockholders' Investment as of and for the years ended December 31, 2013, 2012 and 2011	32
Notes to Consolidated Financial Statements	33

~~Impairment of Property and Equipment~~ 27

WeReport ~~assess the impairment~~ of ~~property~~Independent ~~and~~Registered ~~equipment~~Public ~~whenever~~Accounting events or circumstances indicate that the carrying value might not be recoverable. We write down recorded values of property and equipment that are not expected to be recovered through undiscounted future net cash flows to fair value, which is generally determined from estimated discounted cash flows for assets held for use. In evaluating the recoverability of our recorded values and property and equipment, we analyzed the future undiscounted net cash flows for each of our laser vision correction centers, the lowest level for which there are identifiable cash flows. We assumed a cash flow period of three years to determine the cash flow forecasts, which corresponds to the remaining useful life of the primary assets within the laser vision correction centers. Firm

~~During~~The ~~2012,~~Board ~~we recognized $617,000 in impairment charges due to reducing the carrying amount~~ of ~~long-lived~~Directors ~~assets held for use because we relocated our patient communication center to our corporate headquarters~~ and ~~closed~~Stockholders ~~one~~of ~~under~~LCA-~~performing~~Vision ~~vision center~~Inc. Based on current estimates, we believe the carrying amount for our remaining property and equipment is recoverable through future undiscounted cash flows. Because of market conditions, it is reasonably possible that our estimate of discounted cash flows may change in the near term resulting in the need to adjust our determination of fair value or recoverability.

~~Deferred~~We ~~Tax~~have ~~Valuation~~audited ~~Allowance~~the accompanying consolidated balance sheets of LCA-Vision Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders' investment, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of LCA-Vision Inc.’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

~~U.S.~~We ~~GAAP~~conducted ~~requires~~our aaudits ~~company~~in toaccordance ~~establish~~with athe ~~valuation allowance~~standards ~~for~~of ~~deferred~~the ~~tax~~Public ~~assets~~Company ~~when~~Accounting itOversight isBoard ~~more-likely-than-not~~(United States). Those standards require that ~~the~~we ~~deferred~~plan ~~tax~~and ~~asset~~perform ~~will~~the ~~not~~audit beto ~~realized.~~obtain ~~Deferred~~reasonable ~~tax~~assurance ~~assets~~about ~~may~~whether bethe ~~realized~~financial ~~through~~statements ~~future~~are ~~reversals~~free of ~~existing~~material ~~taxable~~misstatement. ~~temporary~~An ~~differences~~audit includes examining, ~~future~~on ~~taxable~~a ~~income~~test basis, ~~taxable~~ ~~income~~evidence supporting the amounts and disclosures in ~~prior~~the ~~carryback~~financial ~~year(s)~~statements. ifAn ~~carryback~~audit isalso ~~permitted,~~includes assessing the accounting principles used and ~~tax~~significant ~~planning~~estimates ~~strategies~~made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

WeIn ~~considered~~our ~~all~~opinion, ~~positive~~the ~~and~~financial ~~negative evidence~~statements inreferred ~~determining~~to ~~whether~~above orpresent ~~not~~fairly, ~~the~~in ~~deferred~~all ~~tax~~material ~~assets~~respects, ~~are~~the ~~more-likely-than-not~~consolidated tofinancial beposition ~~realized,~~of ~~including~~LCA-Vision ~~the~~Inc. ~~current~~at ~~economic~~December ~~conditions.~~31, ~~After~~2013 ~~considering~~and ~~all~~2012, ofand the ~~evidence,~~consolidated weresults ~~believe~~of ~~that~~their ~~reliance~~operations onand ~~future~~their ~~projections~~cash offlows ~~income~~for iseach ~~no longer~~of ~~sufficient~~the tothree ~~support~~years ~~realization~~in ofthe ~~our~~period ~~deferred~~ended ~~tax~~December ~~assets.~~31, ~~Accordingly~~2013, wein ~~maintain~~conformity awith ~~valuation~~U.S. ~~allowance~~generally ~~against~~accepted ~~our~~accounting ~~net~~principles. ~~deferred~~Also, ~~tax~~in ~~assets~~our ~~because~~opinion, wethe ~~believe~~related ~~that~~financial itstatement isschedule, ~~not~~when ~~more-likely-than-not~~considered ~~that~~in ~~our~~relation ~~net~~to ~~deferred~~the ~~tax~~basic ~~assets~~financial ~~will~~statements ~~be utilized.~~taken ~~The~~as ~~valuation~~a ~~allowance~~whole, ~~was~~presents ~~$26.4~~fairly ~~million~~in ~~and~~all ~~$23.4~~material ~~million~~respects atthe ~~December 31,~~information ~~2012~~set ~~and~~forth ~~2011, respectively~~therein.

~~Item 7A~~We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LCA-Vision Inc.'s ~~Quantitative~~internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) and ~~Qualitative~~our ~~Disclosures~~report ~~About~~dated ~~Market~~March ~~Risk~~ 12, 2014 expressed an unqualified opinion thereon.

~~The~~/s/ ~~carrying~~Ernst ~~values~~& ofYoung financial instruments including cash and cash equivalents, patient and other accounts receivable, and accounts payable approximate fair value because of the short maturity of these instruments. We record investments at fair value. LLP

~~We record short-term investments at market value. Due to the short-term nature of our investments in certificates of deposit~~Cincinnati, ~~we believe that there is little risk to the valuation of investment securities.~~ Ohio

WeMarch ~~have a low exposure to changes in foreign currency exchange rates and~~12, as such, have not used derivative financial instruments to manage foreign currency fluctuation risk. In addition, because our secured indebtedness bears interest at a fixed rate, we have limited interest-rate risk. 2014

26 28

~~Table~~LCA-VISION ~~of Contents~~INC.

~~Item 8.~~CONSOLIDATED ~~Financial~~BALANCE ~~Statements and Supplementary Data~~ SHEETS

~~Index~~(Dollars toin ~~Financial Statements~~ thousands)

	Page
	At December 31,
Report of Independent Registered Public Accounting Firm		28
	2013			2012
Consolidated Balance Sheets as of December 31, 2012 and 2011		29
Assets
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2012, 2011 and 2010		30
Current assets
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010		31
Cash and cash equivalents	$	26,689		$	31,653
Consolidated Statements of Stockholders’ Investment as of and for the years ended December 31, 2012, 2011 and 2010		32
Investments		1,984			2,804
Notes to Consolidated Financial Statements		33
Patient receivables, net of allowances of $719 and $1,019		3,026			2,810
Other accounts receivable, net		950			443
Prepaid expenses and other		1,820			3,318
Total current assets		34,469			41,028
Property and equipment		67,594			64,964
Accumulated depreciation		(60,557	)		(58,584	)
Property and equipment, net		7,037			6,380
Patient receivables, net of allowances of $423 and $634		1,186			1,059
Other assets		223			501
Total assets	$	42,915		$	48,968
Liabilities and Stockholders' Investment
Current liabilities
Accounts payable	$	7,218		$	8,046
Accrued liabilities and other		6,868			11,930
Debt obligations maturing within one year		777			-
Total current liabilities		14,863			19,976
Long-term insurance reserves, less current portion		5,714			5,741
Other long-term liabilities		2,127			3,454
Long-term debt obligations, less current portion		1,080			-
Stockholders' investment
Common stock ($.001 par value; 25,291,637 shares issued and 19,254,175 and 19,050,504 shares outstanding, respectively)		25			25
Contributed capital		180,790			179,543
Common stock in treasury, at cost (6,037,462 shares and 6,241,133 shares, respectively		(110,034	)		(111,395	)
Accumulated deficit		(52,013	)		(49,053	)
Accumulated other comprehensive income		363			677
Total stockholders' investment		19,131			19,797
Total liabilities and stockholders' investment	$	42,915		$	48,968

27See Notes to Consolidated Financial Statements

~~Table of Contents~~29

~~Report~~LCA-VISION ~~of Independent Registered Public Accounting Firm~~ INC.

~~The~~CONSOLIDATED ~~Board~~STATEMENTS ofOF ~~Directors~~OPERATIONS ~~and~~AND ~~Stockholders~~COMPREHENSIVE ~~of LCA-Vision Inc.~~ LOSS

We(Amounts have audited the accompanying consolidated balance sheets of LCA-Vision Inc. as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive loss, stockholders’ investment, and cash flows for each of the three years in ~~the period ended December 31~~thousands, ~~2012.~~except ~~Our~~per ~~audits~~share ~~also included the financial statement schedule listed in the Index at Item 15(a~~data)(2). These financial statements and schedule are the responsibility of LCA-Vision Inc.’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.

	For the Years Ended December 31,
	2013			2012			2011

Revenues	$	92,185		$	101,493		$	102,983

Operating costs and expenses
Medical professional and license fees		20,091			23,715			24,628
Direct costs of services		39,092			44,348			43,048
General and administrative		11,684			13,442			13,942
Marketing and advertising		21,635			23,055			22,678
Depreciation		2,050			4,736			5,703
Impairment charges		-			617			104
Restructuring charges		214			1,130			36
		94,766			111,043			110,139
Gain on sale of assets		198			239			618

Operating loss		(2,383	)		(9,311	)		(6,538	)

Net investment income and other		890			656			470

Loss before income taxes		(1,493	)		(8,655	)		(6,068	)

Income tax (benefit) expense		(125	)		(138	)		130

Net loss	$	(1,368	)	$	(8,517	)	$	(6,198	)

Loss per common share
Basic and diluted	$	(0.07	)	$	(0.45	)	$	(0.33	)

Dividends declared per share	$	-		$	-		$	-

Weighted average shares outstanding
Basic and diluted		19,199			18,982			18,811

Other comprehensive (loss) income, net of tax:
Foreign currency translation	$	(314	)	$	105		$	(90	)
Unrealized investment (loss) gain		-			(11	)		11
Total other comprehensive (loss) income, net of tax	$	(314	)	$	94		$	(79	)

Comprehensive loss	$	(1,682	)	$	(8,423	)	$	(6,277	)

InSee ~~our~~Notes ~~opinion, the financial statements referred~~ to ~~above~~Consolidated ~~present~~Financial fairly, in all material respects, the consolidated financial position of LCA-Vision Inc. at December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Statements

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LCA-Vision Inc.’s internal control over financial reporting as of December 31, 2012, 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 13, 2013 expressed an unqualified opinion thereon. 30

~~/s/~~LCA-VISION ~~Ernst & Young LLP~~ INC.

~~Cincinnati,~~CONSOLIDATED ~~Ohio~~STATEMENTS OF CASH FLOWS

~~March 13,~~(Dollars ~~2013~~ in thousands)

	For the Years Ended December 31,
	2013			2012			2011

Cash flows from operating activities:
Net loss	$	(1,368	)	$	(8,517	)	$	(6,198	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,050			4,736			5,703
Provision for loss on doubtful accounts		416			914			746
Loss (gain) on investments		-			68			(42	)
Gain on sale of property and equipment		(198	)		(239	)		(618	)
Impairment charges		-			617			104
Stock-based compensation		1,247			2,060			1,676
Insurance reserves		(31	)		(604	)		(191	)
Changes in operating assets and liabilities:
Patient accounts receivable		(782	)		(1,610	)		(1,128	)
Other accounts receivable		(496	)		1,522			(397	)
Prepaid expenses and other		437			793			784
Accounts payable		(828	)		(57	)		(7	)
Deferred revenue, net of professional fees		(783	)		(2,264	)		(3,938	)
Accrued liabilities and other		(3,952	)		(2,507	)		5
Net cash used in operations		(4,288	)		(5,088	)		(3,501	)

Cash flows from investing activities:
Purchases of property and equipment		(700	)		(1,160	)		(1,509	)
Proceeds from sale of assets		240			305			1,400
Purchases of investment securities		(1,984	)		(39,656	)		(166,968	)
Proceeds from sale of investment securities		2,804			62,883			173,430
Net cash provided by investing activities		360			22,372			6,353

Cash flows from financing activities:
Principal payments on loan		(491	)		(4,004	)		(3,280	)
Shares repurchased for treasury stock		(231	)		(357	)		(288	)
Proceeds from exercise of stock options		-			57			24
Net cash used in financing activities		(722	)		(4,304	)		(3,544	)

Net effect of exchange rate changes on cash and cash equivalents		(314	)		105			(90	)

(Decrease) increase in cash and cash equivalents		(4,964	)		13,085			(782	)

Cash and cash equivalents at beginning of year		31,653			18,568			19,350

Cash and cash equivalents at end of year	$	26,689		$	31,653		$	18,568

Cash paid or received during the year for:
Interest paid	$	49		$	84		$	529
Income taxes refunded		119			79			499
Income taxes paid		144			64			64

~~Table~~See ofNotes ~~Contents~~to Consolidated Financial Statements

~~LCA-VISION INC.~~ 31

~~CONSOLIDATED~~LCA-VISION ~~BALANCE SHEETS~~ INC.

~~(Dollars~~CONSOLIDATED inSTATEMENTS ~~thousands)~~OF STOCKHOLDERS' INVESTMENT

	At December 31,
	2012			2011
Assets
Current assets
Cash and cash equivalents	$	31,653		$	18,568
Short-term investments		2,804			25,311
Patient receivables, net of allowances of $1,019 and $1,035		2,810			2,366
Other accounts receivable, net		443			1,974
Prepaid expenses and other		3,318			4,254
Total current assets		41,028			52,473
Property and equipment		64,964			70,760
Accumulated depreciation		(58,584	)		(60,123	)
Property and equipment, net		6,380			10,637
Long-term investments		—			902
Patient receivables, net of allowances of $634 and $634		1,059			769
Other assets		501			1,652
Total assets	$	48,968		$	66,433
Liabilities and Stockholders’ Investment
Current liabilities
Accounts payable	$	8,046		$	8,103
Accrued liabilities and other		11,060			12,175
Deferred revenue		870			2,516
Debt obligations maturing within one year		—			2,978
Total current liabilities		19,976			25,772
Other long-term liabilities		3,023			4,443
Long-term debt obligations, less current portion		—			1,026
Long-term insurance reserves, less current portion		5,741			6,264
Deferred license fee		341			1,703
Deferred revenue		90			960
Stockholders’ investment
Common stock ($.001 par value; 25,291,637 shares issued and 19,050,504 and 18,858,147 shares outstanding, respectively)		25			25
Contributed capital		179,543			177,287
Common stock in treasury, at cost (6,241,133 shares and 6,433,490 shares, respectively)		(111,395	)		(112,910	)
Accumulated deficit		(49,053	)		(38,720	)
Accumulated other comprehensive income		677			583
Total stockholders’ investment		19,797			26,265
Total liabilities and stockholders’ investment	$	48,968		$	66,433

(Dollars in thousands)

See Notes to Consolidated Financial Statements

	Years Ended December 31,
	2013						2012						2011
	Shares			Amount			Shares			Amount			Shares			Amount
Common Stock
Balance at beginning of year		25,291,637		$	25			25,291,637		$	25			25,291,637		$	25
Employee stock plans		-			-			-			-			-			-
Balance at end of year		25,291,637		$	25			25,291,637		$	25			25,291,637		$	25

Common Stock in Treasury, at cost
Balance at beginning of year		(6,241,133	)	$	(111,395	)		(6,433,490	)	$	(112,910	)		(6,580,272	)	$	(114,033	)
Shares repurchased		(71,334	)		(231	)		(57,661	)		(301	)		(34,817	)		(265	)
Employee stock plans		275,005			1,592			250,018			1,816			181,599			1,388
Balance at end of year		(6,037,462	)	$	(110,034	)		(6,241,133	)	$	(111,395	)		(6,433,490	)	$	(112,910	)

Contributed Capital
Balance at beginning of year				$	179,543					$	177,287					$	175,610
Employee stock plans					-						196						1
Stock-based compensation					1,247						2,060						1,676
Balance at end of year				$	180,790					$	179,543					$	177,287

Accumulated Deficit
Balance at beginning of year				$	(49,053	)				$	(38,720	)				$	(31,134	)
Net loss					(1,368	)					(8,517	)					(6,198	)
Employee stock plans					(1,592	)					(1,816	)					(1,388	)
Balance at end of year				$	(52,013	)				$	(49,053	)				$	(38,720	)

Accumulated Other Comprehensive Income
Balance at beginning of year				$	677					$	583					$	662
Foreign currency translation adjustments					(314	)					105						(90	)
Unrealized investment (loss) gain					-						(11	)					11
Balance at end of year				$	363					$	677					$	583

Total Stockholders' Investment				$	19,131					$	19,797					$	26,265

29See Notes to Consolidated Financial Statements

~~Table of Contents~~32

~~LCA-VISION~~NOTES ~~INC.~~TO CONSOLIDATED FINANCIAL STATEMENTS

~~CONSOLIDATED~~1. Description ~~STATEMENTS~~of OFBusiness ~~OPERATIONS~~and ~~AND~~Summary ~~COMPREHENSIVE~~of ~~LOSS~~Significant Accounting Policies

~~(Amounts in thousands, except per share data)~~ Business

	For the Years Ended December 31,
	2012			2011			2010
Revenues	$	101,493		$	102,983		$	99,825
Operating costs and expenses
Medical professional and license fees		23,715			24,628			24,161
Direct costs of services		44,348			43,048			46,631
General and administrative		13,442			13,942			13,956
Marketing and advertising		23,055			22,678			24,114
Depreciation		4,736			5,703			9,408
Impairment charges		617			104			1,694
Restructuring charges		1,130			36			3,790
		111,043			110,139			123,754
Gain on sale of assets		239			618			1,962
Operating loss		(9,311	)		(6,538	)		(21,967	)
Net investment income and other		656			470			1,433
Loss before income taxes		(8,655	)		(6,068	)		(20,534	)
Income tax (benefit) expense		(138	)		130			43
Net loss	$	(8,517	)	$	(6,198	)	$	(20,577	)
Loss per common share
Basic and diluted	$	(0.45	)	$	(0.33	)	$	(1.10	)
Dividends declared per share	$	—		$	—		$	—
Weighted average shares outstanding
Basic and diluted		18,982			18,811			18,680
Other comprehensive income (loss), net of tax:
Foreign currency translation	$	105		$	(90	)	$	214
Unrealized investment (loss) gain		(11	)		11			(626	)
Total other comprehensive income (loss), net of tax	$	94		$	(79	)	$	(412	)
Comprehensive loss	$	(8,423	)	$	(6,277	)	$	(20,989	)

We are a provider of fixed-site laser vision correction services at our LasikPlus^®vision centers. Our vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employ advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. We currently use two suppliers for lasers: Abbott Medical Optics (“AMO”) and Alcon Inc. (“Alcon”). Our vision centers are supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. The ophthalmologists perform the laser vision correction procedures in our vision centers, and either ophthalmologists or optometrists conduct pre-procedure evaluations and post-operative follow-up care in-center. Most of our patients receive a procedure called LASIK, which we began performing in the United States in 1995.

~~See~~As ~~Notes~~of December 31, 2013, we operated 61 LasikPlus® vision centers in the United States. Included in that number are five vision centers licensed to ~~Consolidated~~ophthalmologists ~~Financial~~to ~~Statements~~operate using our trademarks and nine pre- and post-operative satellite centers. Beginning in 2011, we began offering refractive lens and cataract services in certain of our existing markets. Our refractive lens and cataract services were not significant in 2013, and we do not anticipate our refractive lens services will represent a significant portion of our operations in 2014.

30Use of Estimates

~~Table~~The preparation of ~~Contents~~our Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include investment valuation, allowance for doubtful accounts against patient receivables, insurance reserves, income taxes and enhancement accruals. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

~~LCA-VISION~~Consolidation ~~INC.~~and Basis of Presentation

~~CONSOLIDATED~~The ~~STATEMENTS~~Consolidated OFFinancial ~~CASH~~Statements ~~FLOWS~~include all of the assets, liabilities, revenues, expenses and cash flows of entities in which we have a controlling interest. In addition, we consolidate the results of operations of professional corporations with which we contract to provide the services of ophthalmologists or optometrists at our vision centers. Investments in joint ventures and 20% to 50% owned affiliates where we have the ability to exert significant influence have been accounted for by the equity method. Intercompany transactions and balances have been eliminated upon consolidation.

~~(Dollars in thousands)~~ Reclassifications

	For the Years Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net loss	$	(8,517	)	$	(6,198	)	$	(20,577	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		4,736			5,703			9,408
Provision for loss on doubtful accounts		914			746			1,061
Loss (gain) on investments		68			(42	)		(943	)
Gain on sale of property and equipment		(239	)		(618	)		(1,962	)
Impairment charges		617			104			1,694
Deferred income taxes		—			—			393
Stock-based compensation		2,060			1,676			1,272
Insurance reserves		(604	)		(191	)		(1,748	)
Changes in operating assets and liabilities:
Patient accounts receivable		(1,610	)		(1,128	)		1,975
Other accounts receivable		1,522			(397	)		(106	)
Prepaid income taxes		45			432			11,563
Prepaid expenses and other		748			352			1,548
Accounts payable		(57	)		(7	)		1,643
Deferred revenue, net of professional fees		(2,264	)		(3,938	)		(5,536	)
Accrued liabilities and other		(2,507	)		5			1,673
Net cash (used in) provided by operations		(5,088	)		(3,501	)		1,358
Cash flows from investing activities:
Purchases of property and equipment		(1,160	)		(1,509	)		(878	)
Proceeds from sale of assets		305			1,400			2,829
Purchases of investment securities		(39,656	)		(166,968	)		(404,339	)
Proceeds from sale of investment securities		62,883			173,430			401,714
Other, net		—			—			(35	)
Net cash provided by (used in) investing activities		22,372			6,353			(709	)
Cash flows from financing activities:
Principal payments of capital lease obligations and loan		(4,004	)		(3,280	)		(5,859	)
Shares repurchased for treasury stock		(357	)		(288	)		(193	)
Proceeds from exercise of stock options		57			24			13
Net cash used in financing activities		(4,304	)		(3,544	)		(6,039	)
Net effect of exchange rate changes on cash and cash equivalents		105			(90	)		211
Increase (decrease) in cash and cash equivalents		13,085			(782	)		(5,179	)
Cash and cash equivalents at beginning of year		18,568			19,350			24,529
Cash and cash equivalents at end of year	$	31,653		$	18,568		$	19,350
Cash paid or received during the year for:
Interest paid	$	84		$	529		$	620
Income taxes refunded		79			499			12,086
Income taxes paid		64			64			125

We have reclassified certain prior-period amounts in the Consolidated Balance Sheets and Statements of Cash Flows to conform to current period presentation. The reclassifications were not material to the Consolidated Financial Statements.

~~See~~Cash ~~Notes~~and toCash ~~Consolidated Financial Statements~~ Equivalents

31We consider highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents.

~~Table of Contents~~Investments

~~LCA~~Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. Currently, we classify all securities as available-~~VISION~~for-sale. ~~INC~~We carry available-for-sale securities at fair value, with temporary unrealized gains and losses, net of tax, reported in accumulated other comprehensive income, a component of stockholders’ investment. The amortized cost of debt securities in this category reflects amortization of premiums and accretion of discounts to maturity computed under the effective interest method. We include this amortization in the caption “Net investment income and other” within the Consolidated Statements of Operations and Comprehensive Loss. We also include in net investment income realized gains and losses and declines in value determined to be other-than-temporary. We base the cost of securities sold upon the specific identification method. We include interest and dividends on securities classified as available-for-sale in net investment income.

~~CONSOLIDATED~~Fair ~~STATEMENTS~~Value ~~OF STOCKHOLDERS’ INVESTMENT~~ Measurements

~~(Dollars~~We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in ~~thousands)~~the financial statements. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk (including our own non-performance risk).

	Years Ended December 31,
	2012				2011				2010
	Shares		Amount		Shares		Amount		Shares		Amount
Common Stock
Balance at beginning of year		25,291,637	$	25		25,291,637	$	25		25,287,387	$	25
Employee stock plans		—		—		—		—		4,250		—
Balance at end of year		25,291,637	$	25		25,291,637	$	25		25,291,637	$	25
Common Stock in Treasury, at cost
Balance at beg

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