SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


(Mark One)
(X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the fiscal year ended December 31, 2003
   
                                       OR

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

                         Commission file number 0-19671

                             LASERSIGHT INCORPORATED
                             -----------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                            65-0273162
--------------------------                                   ----------
(State of Incorporation)                       (IRS Employer Identification No.)

             6848 Stapoint Court, Winter Park, Florida        32792
            -------------------------------------------------------
           (Address of principal executive offices)       (Zip Code)

       Registrant's telephone number, including area code: (407) 678-9900
                                                           --------------

Securities Registered Pursuant to Section 12(b) of the Act:
 Title of Each Class                   Name of Each Exchange on Which Registered
 -------------------                   -----------------------------------------
        None                                              N/A

           Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, par value $.001

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_____ No__X__  

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing sale price on June 30, 2004 was
approximately $279,871. Shares of common stock held by each officer and director
and by each person who has voting power of 10% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.

         Number of shares of common stock  outstanding  as of December 31, 2003:
27,841,941.  Due  to  cancellation  of  old  common  stock,  per  the  confirmed
bankruptcy re-organization plan, as of June 30, 2004 there are 9,997,195 shares
of common stock outstanding.



                                      -1-





                                               LASERSIGHT INCORPORATED
                                                 TABLE OF CONTENTS

                                                       PART I

                                                                                                   
Item 1.  Business.....................................................................................  3

Item 2.  Properties................................................................................... 25

Item 3.  Legal Proceedings............................................................................ 25

Item 4.  Submission of Matters to a Vote of Security Holders.......................................... 27

                                                       PART II

Item 5.  Market for Company's Common Equity and Related Stockholder Matters........................... 28

Item 6.  Selected Consolidated Financial Data......................................................... 30

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations........ 31

Item 7A. Quantitative and Qualitative Disclosures about Market Risk................................... 60

Item 8.  Financial Statements and Supplemental Data................................................... 60

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 60

Item 9A. Controls and Procedures...................................................................... 61


                                                      PART III

Item 10.  Directors and Executive Officers............................................................ 61

Item 11.  Executive Compensation...................................................................... 62

Item 12.  Security Ownership of Certain Beneficial Owners and Management.............................. 66

Item 13.  Certain Relations and Related Transactions.................................................. 67

Item 14.  Principal Accounting Fees and Services...................................................... 68

                                                       PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 69





                                      -2-


         The information in this Annual Report on Form 10-K contains forward
looking-statements, as indicated by words such as "anticipates," "expects,"
"believes," "estimates," "intends," "projects," and "likely," by statements of
the Company's plans, intentions and objectives, or by any statements as to
future economic performance. Forward-looking statements involve risks and
uncertainties that could cause the Company's actual results to differ materially
from those described in such forward-looking statements. See "Risk Factors and
Uncertainties--Financial and Liquidity Risks--We have experienced significant
losses and operating cash flow deficits.." We can not be certain that we will be
able to achieve or sustain profitability or positive operating cash flow in the
future. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in Item 7 under the caption "Risk Factors
and Uncertainties" as well as those discussed elsewhere in this Report. All
references to "LaserSight(R)" "we," "our" and "us" in this Report refer to
LaserSight Incorporated and its subsidiaries unless the context otherwise
requires.


                                     PART I

ITEM 1.  BUSINESS
PRESENT SITUATION - CHINA TRANSACTION AND LIQUIDITY ISSUES

         On September 5, 2003 LaserSight and two of its subsidiaries filed for
Chapter 11 bankruptcy protection and reorganization in the United States
Bankruptcy Court, Middle District of Florida, Orlando Division. The cases filed
were LaserSight Incorporated, ("LSI") Case No. 6-03-bk-10371-ABB; LaserSight
Technologies, Inc., ("LST") Case No. 6-03-bk-10370-ABB; and LaserSight Patents,
Inc., Case No. 6-03-bk-10369-ABB. Under Chapter 11, certain claims against the
Company in existence prior to the filing of the petitions for relief under the
federal bankruptcy laws are stayed while the Company continued business
operations as Debtor-in-possession. These claims are reflected in the December
31, 2003 balance sheet as "liabilities subject to compromise." Claims secured
against the Company's assets ("secured claims") also are stayed, although the
holders of such claims have the right to move the court for relief from the
stay. The majority of secured claims are held by Heller Healthcare Finance, Inc
("Heller") and GE Healthcare Financial Services, Inc., as successor-in-interest
to Heller (collectively "GE"). $110,000 of bankruptcy related professional fees
for legal services were paid for in 2003.

         The company operated as a debtor-in-possession from September 5, 2003
through June 10, 2004 when a final bankruptcy order was obtained. As a result of
the bankruptcy re-structuring, the company expects to record credits for debt
forgiveness of approximately $15.6 during the three months ended June 30, 2004.
The credits are for accounts payable, accrued expenses, accrued warranty, and
deposits. On April 28, 2004, the Plan was confirmed by the Bankruptcy Court. The
effective date of the Plan was June 30, 2004.

         On June 30, 2004, the Company cancelled all outstanding stock, options
and warrants and issued 9,997,195 new shares of common stock. The shares were
distributed as follows:

     Creditors of LSI                       1,116,000
     Creditors of LST                       1,134,000 (1)
     Old Preferred Stockholders               360,000
     Old common stockholders                  539,997 (2)
     Cancel treasury stock                     (2,802)    
     Conversion of $1 million DIP
     Financing                              6,850,000
                                             ---------
                                            9,997,195

(1) These shares were issued upon the resolution of a creditor objection to
claim in January 2005.


                                      -3-


(2) The old common stock was converted at a 51.828 to 1 ratio.

         On August 30, 2004,  the Company  signed a three year amended note with
GE for  $2,149,249.  The note was effective June 30, 2004 and bears 9% interest.
In the amendment,  GE provided a waiver of the Company's  failure to comply with
all covenants.  In exchange for the amendment and waiver, the Company will pay a
$50,000  commitment fee, a $100,000  termination fee,  attorney fees of $126,078
and an audit  fee of  $8,151.  All fees  were  added to the  principal  balance.
Revised  covenants became effective that adjusted the minimum level of net worth
to $750,000,  minimum  tangible net worth to $1.0 million and minimum  quarterly
net revenue to $1.0 million.  GE was issued warrants to purchase  100,000 common
shares,  at $0.25 per share,  or $0.40 per share if the  remaining $1 million of
DIP financing is converted.

         The New Industries  Investment  Consultants  (HK), Ltd.  ("NIIC" or the
"China  Group")  provided $2 million of DIP  financing,  of which  $750,000  was
funded at  December  31,  2003.  On June 30,  2004,  $1 million of the total was
converted  to  6,850,000  common  shares.  The  remaining  $1 million note bears
interest of 9%, with  interest  only  payments due  monthly.  It is a three year
balloon  note.  The  China  Group  has the  option  to  convert  the  note to an
additional  2,500,000  common  shares.  This note is  subject to any GE liens on
Company assets.

In June of 2004, as of the effective date of the re-organization plan, the
following liabilities were relieved:

     Accounts Payable                        2,905,814
     Accrued TLC license fee                   825,500
     Accrued salaried/severance                235,367
     Accrued warranty                        6,125,730
     Accrued Ruiz license fees               3,471,613
     Deposits/service contracts                720,399
     Other accrued expenses                  1,331,711
                                            ----------
                                            15,616,134

In June 2004, $8.4 million of accounts and notes receivable were written off
against the allowance for doubtful accounts.



         The Company has incurred  significant  losses and  negative  cash flows
from operations in each of the years in the three-year period ended December 31,
2003 and has an accumulated  deficit of  approximately  $123 million at December
31,  2003.  The  substantial  portion  of these  losses  is  attributable  to an
inability  to sell  certain  products in the U.S. due to delays in Food and Drug
Administration  (FDA)  approvals for the treatment of various  procedures on the
Company's excimer laser system in the U.S. and the continued development efforts
to expand clinical approvals of the Company's excimer laser and other products.

         Outlined below are some of the additional factors that led up to the
Chapter 11 filing.

         As previously announced, the Company had been in continuous
negotiations with New Industries Investment Consultants (HK), Ltd. ("NIIC")or
the "China Group" to secure immediate cash payments for purchase of Company
products, to further define the terms of a long-term strategy for the Company in
China, and to


                                      -4-


outline a framework for additional product purchases. The Company reached an
agreement with NIIC on June 20, 2003. That agreement called for NIIC to proceed
with further purchases in order to meet the $10,000,000 purchase requirement
from the August 2002 agreement and purchase additional product above and beyond
the original purchase requirement if the Company was making substantial progress
with regard to it's restructured business plan. While the Company sold products
to NIIC during the second and third quarters of 2003, and NIIC made advance
payments on those purchases, sales levels were well below those contemplated in
the original agreements.

         On June 20, 2003 the Company announced that it had been advised by GE
that its loans were in default due to an adverse material change in the
financial condition and business operations of the Company. The Company was
negotiating with GE for a modification and restructuring of its defaulted loans,
and these negotiations had progressed to the "term sheet" stage by early August
of 2003.

         As previously announced, in August of 2002, the Company and Shenzhen
New Industries Medical Development Co. ("NIMD") entered into a strategic
relationship, including the purchase of at least $10 million worth of the
Company's products during a twelve-month period ending in August of 2003, to
distribute the Company's products in mainland China, Hong Kong, Macao and
Taiwan, and a $2 million equity investment in the Company by NIIC, an affiliate
of NIMD. NIIC's was in the form of the purchase of Convertible Preferred Stock,
the Series H Stock that, subject to certain restrictions, was convertible into
approximately 40% of the Company's Common Stock.

         At the beginning of 2003, the Company did not have cash available to
construct machines under the strategic relationship and requested a modification
of the arrangement that would include prepayment by NIMD. NIMD purchased through
prepayment some additional product, but resisted further purchases by prepayment
without certain cost reductions and changes in operations. Prior to the
execution of the agreement, NIMD had purchased approximately $4.5 million worth
of the Company's products. Thereafter NIMD prepaid for $2.2 million worth of
product, for a total of $6.7 million of the original $10 million envisioned in
the strategic relationship.

         The Company also announced that Francis E. O'Donnell, Jr., M.D., and
David Peroni resigned from their positions as members of LSI's Board of
Directors and that Dr. O'Donnell had resigned as Chairman of the Board of
Directors. Xianding Weng was elected Chairman of the Board. Mr. Weng had been a
director since October 2002 and founded NIIC in Shenzhen, China in 1993, serving
as its President and Chief Executive Officer.
         On August 22, 2003 the Company announced that Mr. Michael R. Farris
would no longer serve as Chief Executive Officer and President and as a
Director. Danghui ("David") Liu, Ph. D., Vice President of Product Development
and Technical Marketing, was named Interim CEO. In May 2004 Mr. Liu was named
President and CEO.
         In September 2003 the Company announced that it had failed to timely
file its second quarter SEC Form 10-Q due on August 14, 2003. The Company did
file a Form 12b-25 on August 14, 2003 advising that it was still working to put
together the necessary data to file the quarterly report.

         As a late filer, the Company had a fifth character "E" added to its
security trading symbol to denote securities delinquent in their required
filings. Securities so denoted are removed from the OTCBB after the applicable
30-day grace period expires. Since the Company was removed from OTCBB, it has
been traded in the over-the-counter (OTC) market via the "Pink Sheets". See
"Recent Developments - NASDAQ Stock Market Listing."


                                      -5-


         The Company had entered into new discussions related to the payment
terms of its License and Royalty Agreement covering its keratome products. The
licensors issued a third notice of default to the Company on May 6, 2003 and
served legal action against the Company on August 12, 2003 for the entire
balance of approximately $3.3 million under the License Agreement. The Company
continued its discussions, but the lack of resolution of these issues made
things difficult to continue to operate without the protection a bankruptcy
petition would provide.

         The Company has  significant  liquidity  and  capital  resource  issues
relative to the timing of our accounts receivable  collection and the successful
completion of new sales compared to our ongoing payment obligations.

          Even with the Chapter 11 protection, the Company's ability to continue
as a going concern is uncertain and dependent upon continuing to achieve
improved operating results and cash flows or obtaining additional equity capital
and/or debt financing. Consolidated financial statements filed with this report
include substantial  charges recorded during the second of 2003
necessary to reflect the diminution of asset carrying values due to Chapter
11-related filing and the Company's re-focus of its products to
core product lines.


OVERVIEW

         We develop, manufacture and market quality product technologies for
laser refractive surgery and other areas of vision correction. Our products
include precision microspot scanning excimer laser systems used to perform
procedures that correct common refractive vision disorders such as
nearsightedness (myopia), farsightedness (hyperopia) and astigmatism, software
for custom ablation planning and programming, diagnostic products for precision
measurements of the eye, and other products for use in refractive vision
correction procedures. We believe that our precision microspot scanning lasers
have significant technological advantages and produce smoother and more precise
ablation areas than older, broad-beam laser systems and other scanning systems
offered by many of our competitors.

         We have over nine years of experience in the manufacture, sale and
service of precision microspot scanning laser systems for refractive vision
correction procedures. Since 1994, we have sold our scanning laser systems
commercially in over 30 countries worldwide with an installed base of
approximately 400 scanning laser systems, including over 200 of our most
advanced laser systems, the LaserScan LSX(R) and the AstraScan. In November
1999, the Food and Drug Administration (FDA) approved our LaserScan LSX scanning
laser system for commercial sale in the U.S. for the treatment of
nearsightedness of up to -6.0 diopters using photorefractive keratectomy (PRK).
In September 2001, the FDA approved our LaserScan LSX precision microspot
scanning system for the laser in-situ keratomileusis ("LASIK") treatment of
myopia with and without astigmatism up to a manifest refraction spherical
equivalent ("MRSE") of -6.0 diopters with maximum refractive astigmatism
approved for up to 4.5 diopters. Currently, all of our laser systems delivered
into the U.S. and international markets operate at a pulse repetition rate of
200 Hz, or pulses per second, and in December 2002 we received FDA approval to
advance our laser pulse repetition rate to 200 Hz, which we believe is the
fastest pulse repetition rate available in our industry. Our AstraScan laser
system incorporates the same precision microspot scanning features of our
LaserScan LSX along with an advanced eye tracking system, improved lighting and
a redesigned "delivery arm" on the laser to make the microscope and joystick
more functional. Available now as an upgrade in many international markets, the



                                      -6-


AstraScan features will need FDA approval before they can be sold in the U.S. In
the U.S. market we are not currently pursuing FDA approval.

         Our family of products for custom refractive treatments (often referred
to as custom ablations) includes the AstraMax(R) diagnostic workstation designed
to provide precise diagnostic measurements of the eye for many refractive
purposes, including generating data needed to plan custom ablation procedures,
our AstraPro(R) custom ablation planning software that utilizes advanced levels
of diagnostic measurements from our AstraMax diagnostic workstation to complete
the planning of custom ablation treatments, and Corneal Interactive Programmed
Topographic Ablation ("CIPTA"). The AstraMax integrated diagnostic workstation
was first shown in October 2000 at the Annual Meeting of the American Academy of
Ophthalmology and was commercially launched during the second quarter of 2002.
We completed international product performance testing of our AstraPro custom
ablation planning software in early 2003 and have released it for international
distribution. Our AstraPro custom ablation planning software is currently the
subject of litigation. See "Item 3. Legal Proceedings--Italian Distributor."

         Operating Segments. We have operated in the following operating
segments: refractive products, patent services and health care services. In late
2001, we decided to discontinue the health care services operations and in 2003
we decided to discontinue our keratomes product line, part of the refractive
product segment, historically the revenue was not significant in keratomes, and
re-focus our marketing sales efforts to the international market, mainly China.
Our principal wholly owned subsidiaries during 2003 included: LaserSight
Technologies, Inc. ("LST") and LaserSight Patents, Inc. ("LaserSight Patents").
Both of these units were part of the Chapter 11 petition described earlier.

         Our refractive products segment, primarily including our laser vision
correction products and services of LaserSight Technologies, develops,
manufactures and markets ophthalmic lasers with a galvanometric scanning system
for use in performing refractive surgery. We recently introduced for sale the
AstraScan laser system, both as a new laser product and as an upgrade to our
LaserScan LSX laser system. The AstraScan uses a 0.6 millimeter precision
microspot scanning laser beam to ablate microscopic layers of corneal tissue to
reshape the cornea and to correct the eye's point of focus in persons with
nearsightedness, farsightedness and astigmatism. Our patent services segment,
consisting primarily of patents licensed by us, included a patent related to the
use of excimer lasers to ablate biological tissue until the patent was sold in
March 2001 and a license to a patent related to the use of scanning lasers. The
health care services segment consisted of The Farris Group ("TFG") until we
decided in late 2001 to discontinue its operations. TFG's financial results were
accounted for as a discontinued operation for the year ended December 31, 2001.
TFG provided health care and vision care consulting services to hospitals,
managed care companies and physicians. For information regarding our export
sales and operating revenues, operating profit (loss) and identifiable assets by
industry segment, see Note 15 of the Notes to Consolidated Financial Statements.

         Organization and History. LaserSight was incorporated in Delaware in
1987, but was inactive until 1991. In April 1993, we acquired LaserSight Centers
Incorporated in a stock-for-stock exchange, with additional shares issued in
March 1997 pursuant to an amended purchase agreement. In February 1994, we
acquired TFG. In July 1994, LaserSight was reorganized as a holding company. In
October 1995, we acquired MEC Health Care, Inc. ("MEC"). In July 1996, our LSI
Acquisition, Inc. ("LSIA") subsidiary acquired the assets of the Northern New
Jersey Eye Institute, P.A. On December 30, 1997, we sold MEC and LSIA in
connection with a transaction that was effective as of December 1, 1997. Late in
2000, we abandoned the LaserSight Centers mobile laser strategy due to industry
conditions and our increased focus on development and commercialization of our
refractive products. In December 2001, we decided to discontinue the operations



                                      -7-


of TFG as described in Note 3 of the Notes to Consolidated Financial Statements.
In September 2003 we filed a Chapter 11 bankruptcy petition, discontinued our
keratomes and cosmetic product lines due to cash flow problems, these items
never generated significant revenues, and re-focused our marketing and sales
efforts to the international market, mainly China. Our principal offices and
mailing address are 6848 Stapoint Court, Winter Park, Florida 32792, our
telephone number is (407) 678-9900 and our address on the World Wide Web is
www.lase.com. .

INDUSTRY OVERVIEW

     REFRACTIVE VISION CORRECTION

         Laser vision correction is a surgical procedure for correcting vision
disorders such as nearsightedness, farsightedness and astigmatism using an
excimer laser. This procedure uses ultraviolet laser energy to ablate, or
remove, tissue from the cornea and sculpt the cornea into a predetermined shape.
Because the excimer laser is a cold laser, it is possible to ablate precise
amounts of corneal tissue without causing thermal damage to surrounding tissue.
The goal of laser vision correction is to achieve patient vision levels that
eliminate or significantly reduce a person's reliance on corrective eyewear. The
first laser vision correction procedure on a human eye was conducted in 1985 and
the first human eye was treated with the excimer laser in the U.S. in 1987.

         There are currently two principal methods for performing laser vision
correction with excimer laser systems: PRK and LASIK.

         Photorefractive Keratectomy (PRK)

         In PRK, the refractive surgeon prepares the eye by gently removing the
surface layer of the cornea called the epithelium. The surgeon then applies the
excimer laser beam, reshaping the curvature of the cornea. Following PRK, a
patient typically experiences blurred vision and discomfort until the epithelium
heals. It generally takes one month, but may take up to six months, for the full
benefit of PRK to be realized. PRK has been used commercially since 1988.

         Laser in-situ Keratomileusis (LASIK)

         LASIK was commercially adopted internationally in 1994 and in the U.S.
in 1996. Immediately prior to a LASIK procedure, the refractive surgeon uses a
surgical instrument called a keratome to create a thin, hinged flap of corneal
tissue. Patients do not feel or see the cutting of the corneal flap, which takes
only a few seconds. The flap is folded back, the laser beam is directed to the
exposed corneal surface, the flap is placed back and the flap and interface are
rinsed with buffered saline solution. Once the procedure is completed, surgeons
generally wait two to three minutes to ensure the corneal flap has fully
re-adhered. At this point, patients can blink normally and the corneal flap
remains secured in position by the natural suction within the cornea. Since the
surface layer of the cornea remains intact during LASIK, the patient experiences
virtually no discomfort. The LASIK procedure often results in a higher degree of
patient satisfaction due to an immediate improvement in visual acuity and
generally involves less post-operative discomfort than PRK.

         Laser Epithelial Keratomileusis (LASEK)

         Laser refractive surgical procedures have undergone a transition from
PRK to the LASIK procedure that has become the procedure of choice for most
patients and surgeons. With the anticipated transition to custom ablations,



                                      -8-


refractive surgeons have expressed concern over the possibility of induced
refractive error related to the LASIK flap. A newly developed technique, LASEK,
is now being considered as an alternative to LASIK when performing custom
ablations. During the LASEK procedure a thin epithelial flap is formed using
alcohol, the flap is lifted up and repositioned after photorefractive ablation.
The LASEK procedure is said to result in less pain and discomfort than the PRK
procedure. Healing and recovery of vision is slower than LASIK, but not as long
as PRK.

         Custom Ablation

         Most laser system manufacturers are attempting to offer a custom
ablation solution. Custom ablation is believed to offer higher quality clinical
outcomes for patients due to the fact that a specific ablation profile is
planned for each eye. Higher quality outcomes are expected to be a significant
selling point with surgeons. Custom procedures typically involve gathering
diagnostic data from the surfaces of the eye, converting the data into an
individualized laser ablation plan based on the specific diagnostic data of each
eye, and performing the refractive surgery based on the ablation plan. We
believe small spot, high repetition rate scanning lasers are the best suited to
perform custom ablation procedures.

     REFRACTIVE VISION CORRECTION MARKET

         The worldwide market for products and services to correct common
refractive vision disorders such as nearsightedness, farsightedness and
astigmatism is large and growing. Industry sources estimate that 50% of the U.S.
population, or approximately 140 million people, presently wear eyeglasses or
contact lenses. There are approximately 14,000 practicing ophthalmologists in
the U.S., of whom approximately 4,000 reportedly perform refractive laser vision
correction procedures on a regular basis.

         Many, but not all, manufacturers of excimer laser systems seek to share
in the  anticipated  growth  in  procedure  volume by  receiving  a fee for each
procedure performed by a refractive surgeon using laser systems  manufactured by
them.  The  per  procedure  fees  charged  by  these   manufacturers  vary.  See
"Business-Competition."

DEVELOPMENT OF EXCIMER LASER SYSTEM, DIAGNOSTIC AND KERATOME TECHNOLOGY

         Excimer Laser Systems

         The excimer laser systems utilized for laser vision correction have
evolved over time with
improvements in laser and beam delivery technology and the recent introduction
of custom ablation. Until recently, broad beam laser systems, which were
initially developed during the late 1980's, were the only systems approved by
the FDA for commercial use in the U.S. As a result, broad beam laser systems
were reported to represent over 90% of the installed laser systems in the U.S.
in 1999. This market penetration has declined through 2003 where current reports
represent that about 59% of the installed laser systems in the U.S. are broad
beam laser systems. This downward trend appears to be continuing as the newer
scanning laser systems obtain the broader range of treatment approvals
originally held by the older broad beam systems.

         Improvements in excimer laser technology during the early 1990's have
made it possible to develop refractive excimer laser systems that have
significantly narrower laser beams (less than one millimeter in diameter) that
use reduced amounts of laser energy (10 mj) at higher pulse repetition rates (up
to 300 Hz) to achieve corneal ablations. LaserSight was the leader in the
development of precision microspot scanning technology and the first company to
commercialize it. This new generation of narrow beam scanning excimer laser



                                      -9-


systems incorporated scanning mirrors and computer control to shape the ablation
profile, making it unnecessary to utilize mechanical elements to size and shape
the laser beam to attain the desired results. Techniques incorporated into
scanning laser technology, such as purposeful overlapping of laser pulses and
random scanning patterns, can lead to overall improved clinical results as
evidenced by smoother ablations, the elimination of corneal ridges and central
islands, and the reduction in the incidence of glare, halos, loss or reduction
of night vision and contrast sensitivity. Narrow beam scanning excimer laser
systems are currently the most flexible laser vision correction platforms
available as they can be adapted to expansions in treatment modalities and the
incorporation of new technologies such as higher laser pulse repetition rate,
active eye tracking and custom ablation through software and minor hardware
upgrades.

         Diagnostic and Custom Ablation Products

         One of the most important tools ophthalmologists have at their disposal
is corneal topography. With a corneal topographer the ophthalmologist can
literally see the refractive problems that might be present in the cornea.
Corneal topography is used not only for screening all patients before refractive
surgery like LASIK, but also for fitting contacts, adjusting post-surgical
corneal transplants, and diagnosing refractive disorders and diseases.

         Of currently available technology, corneal topography provides the most
detailed information about the curvature of the cornea. This information is
useful to evaluate and correct astigmatism, monitor corneal disease, and detect
irregularities in the corneal shape. This diagnostic procedure is essential for
patients being considered for refractive vision correction procedures (such as
LASIK) and may even be necessary in the follow-up of some patients who have
undergone refractive surgical procedures.

         Topography instruments have undergone significant changes in technology
and functionality since they were first introduced. The technology has
progressed from stationary placido-based topography in early generation
topographers to scanning slit technology and now to the multi-camera-based
technology in our AstraMax.


         We believe our AstraMax diagnostic workstation is the next-generation
topography instrument. The AstraMax uses a unique, patented three-video camera
imaging system to achieve high-precision elevation measurements of the cornea.
Utilizing a patented checkered polar grid and other proprietary features, the
AstraMax obtains, in a single examination, a series of critical measurements of
the cornea and eye including posterior and anterior corneal topography
(elevation), thickness of the cornea (pachymetry) and the diameter of the pupil
under conditions of both low lighting (scotopic) and normal lighting (photopic).
The precision elevation measurements result in elevation maps of the highest
available quality.

         The custom treatments using our excimer laser system demonstrate
efficacy, safety, predictability and stability, and such results have been
published in peer-reviewed journals and presented at major ophthalmology venues
throughout the world.

         Keratomes

         Keratomes used to cut the thin corneal flap during the LASIK procedure
are similar in design to those used to perform earlier non-laser surgical
refractive techniques such as automated lamellar keratoplasty ("ALK"). Over the
last few years there have been numerous entrants into the keratome market,
including most excimer laser manufacturing companies.


                                      -10-


         Advances in laser technology have made it possible to create the LASIK
flap by utilizing a laser rather than the conventional keratome. In this
technique, an infrared laser and special software are utilized to focally
photodisrupt the cornea at a pre-programmed depth and position. The laser
photodisrupts the corneal tissue at the predetermined depth forming plasma
bubbles of water and carbon dioxide at that plane. These bubbles coalesce to
create a separation that will become the stromal bed and flap interface.
Finally, the laser cuts the edge of the flap circumferentially in a vertical
direction from the depth of the interface up through the epithelium, leaving a
hinge. We do not make or sell this technology. The Company terminated its
keratomes product line in September of 2003.

RECENT DEVELOPMENTS

         NASDAQ STOCK MARKET LISTING

         Our common stock was listed on The NASDAQ National Market. Because of
the lengthy period during which our common stock traded below $1.00 per share,
it no longer met the listing requirements for the National Market, and on August
15, 2002, NASDAQ approved our application to transfer our listing to the Small
Cap Market via an exception from the minimum bid price requirement. While we
failed to meet this requirement as of February 10, 2003, we were granted a
temporary exception from this standard subject to meeting certain conditions.
The exception required that on or before April 15, 2003, we were to file a
definitive proxy statement with the Securities and Exchange Commission
evidencing our intent to seek shareholder approval for the implementation of a
reverse stock split. Other requirements included that, on or before May 30,
2003, we demonstrated a closing bid price of at least $1.00 per share and,
immediately thereafter, a closing bid price of at least $1.00 per share for a
minimum of ten consecutive trading days. In addition, we must have been able to
demonstrate compliance with the following maintenance requirements for continued
listing on the Small Cap Market:

         o  stockholders' equity of $2.5 million;
         o  at least  500,000  shares of common  stock  publicly  held;
         o  market value of publicly held shares of at least $1.0 million;
         o  shareholders (round lot holders) of at least 300; and
         o  at least two registered and active market makers.

         We asked for an extension to May 1, 2003 to file the definitive proxy
statement. On April 25, 2003, we asked for a further extension, but because we
did not timely meet the requirements, our request for an extension was denied.
As a result, Listing Qualification Panel determined that our securities would be
delisted from Small Cap Market effective April 30, 2003. Our common stock was
then listed in the OTC Bulletin Board ("OTCBB"). The Company failed to file its
second quarter SEC Form 10-Q due on August 14, 2003. The Company did file a Form
12b-25 on August 14, 2003 advising that the Company would not file the quarterly
report timely. The Company plans on filing all past due SEC filings in March
2005.

         LSI traded on the NASDAQ Small Cap Market through April 29, 2003 as
LASE and LASEC (March 5, 2003 - April 29, 2003). On April 30, 2003, it commenced
trading on OTCBB as LASE. The OTCBB symbol was changed on August 27, 2003 to
LASEE due to the late filing status of the company. The Company commenced
trading on the "Pink Sheets" on September 27, 2003 with the symbol LASEQ (Q
indicates bankruptcy). This is a conditional listing due to the bankruptcy
filing by the company. As mentioned above, the existing common and preferred
shares, including options and warrants, were cancelled on June 30, 2004,
pursuant to our re-organization plan. New common shares of 9,997,195 were
issued on June 30, 2004 and commenced trading via the "Pink Sheets" under the
symbol LRST.


                                      -11-


         The delisting of our common stock from the Nasdaq Small Cap Market will
result in decreased liquidity of our outstanding shares of common stock (and a
resulting inability of our stockholders to sell our common stock or obtain
accurate quotations as to their market value), and, consequently, will reduce
the price at which our shares trade. The delisting of our common stock may also
deter broker-dealers from making a market in or otherwise generating interest in
our common stock and may adversely affect our ability to attract investors in
our common stock. Furthermore, our ability to raise additional capital may be
severely impaired. As a result of these factors, the value of our common stock
may decline significantly, and our stockholders may lose some or all of their
investment in our common stock.

         CHINA BACKGROUND

         We have been in a continuous partnership with New Industries Investment
Group ("NII"). Further background on China, and NII follows:

         Shenzhen New Industries Medical Development Co., Ltd. ("NIMD")
(previously defined on page 4) was founded and incorporated by the Medical
Investment Department of its parent company, NII in the People's Republic of
China in 1995. It specializes in marketing and distribution of LASIK surgery
devices and equipment, as well as in investment and operation of LASIK clinical
centers in the Chinese market.


         NIMD became the exclusive distributor in China for LaserSight in
September of 2002. NIMD purchased more than $7.5 million of LaserSight's
products and services after it was engaged in the exclusive distributorship with
LaserSight and before LaserSight went into Chapter 11. In the past decade, NIMD
invested and operated more than 50 PRK/LASIK refractive surgery centers in joint
ventures with the most prestigious hospitals and medical institutes in China as
its strategic partners. NIMD is now the largest business in Mainland China in
terms of its investment in refractive surgery centers.

         New Industries Investment Consultants (H.K.) Ltd ("NIIC") specializes
in hi-tech business investment and consulting services. It is registered in Hong
Kong. It was incorporated in 1994 by its principal investor, Mr. Xianding Weng
(a major shareholder of NIIC, and NIIC's CEO). NIMD, with NIIC, is a pioneer in
laser refractive surgery industry in China.

         NII, NIMD and NIIC are collectively referred to as the China Group.

         Product-Related Developments

         Our LaserScan LSX and AstraScan excimer laser systems are based on
patented precision microspot scanning technology rather than broad beam
technology. Subject to satisfactorily addressing our serious liquidity and
financing needs, we believe we are well-positioned to become a significant
provider of excimer laser systems, diagnostic products and other related
products as a result of our technology and the following recent developments:

         o  Reissuance of Scanning Patent. In January 2002, the U.S.
            Patent and Trademark Office reissued LaserSight's scanning
            patent U.S. Patent No. 5,520,679, (the "679 Scanning Patent")
            as U.S. Patent No. RE 37,504 (the "504 Scanning Patent"),
            thereby completing the reissue process. See "--Intellectual
            Property." See "License of Scanning Patent" below.




                                      -12-


         o  License of Scanning Patent. During 2002, we licensed the `504
            Scanning Patent on a non-exclusive basis to two other parties
            for total payments of $2.6 million in cash. One such
            agreement, with Alcon, also provides that LaserSight and Alcon
            will cooperate in the future enforcement of the patent and
            share in the funds generated by such future enforcement. See
            "Reissuance of Scanning Patent" above.

         o  Custom Ablation We commercially launched the AstraMax product
            during 2002. The AstraMax can be utilized as a stand-alone
            diagnostic unit or as part of our CustomEyes approach to
            custom ablation planning. We believe that the AstraMax
            integrated diagnostic workstation is the first product to
            integrate precision diagnostic measurements such as anterior
            corneal elevation, corneal thickness, and measurements of
            photopic and scotopic pupil size into a single instrument. The
            precision measurements from the AstraMax integrated
            workstation will be utilized in our AstraPro software for
            planning custom ablations. International clinical testing of
            our internally developed AstraPro planning software has been
            completed for previously untreated eyes, and the product was
            released for international distribution in early 2003. Any
            custom ablation software will require both clinical trials and
            FDA approval prior to sale in the U.S. Currently, we do not
            have any on-going efforts pursuing US trials or approvals.

Products

         Excimer Lasers

         LaserSight was the first company to develop an advanced precision
microspot scanning excimer laser system. The LaserScan LSX and AstraScan (for
international use) excimer laser systems have evolved from the patented optical
scanning system incorporated in the Compak-200 Mini-Excimer laser system,
introduced internationally in 1994. Since the introduction of the Compak-200
laser system, we have offered several generations of our scanning laser, each
incorporating enhancements and new features. We have sold our precision
microspot scanning excimer laser systems in over 30 countries with an installed
base of approximately 400 scanning laser systems. The AstraScan model
incorporates the same precision microspot scanning features along with an
advanced eye tracking system, improved lighting and a redesigned "delivery arm"
on the laser to make the microscope and joystick more functional and allow for
keratome placement. The AstraScan features will need FDA approval before they
can be sold in the U.S. Currently, we do not have any on-going efforts pursuing
US trials or approvals. Throughout the evolution of our precision microspot
scanning excimer laser systems, the core concept of utilizing our proprietary
precision microspot scanning software to ablate corneal tissue with a low
energy, microspot laser beam at a rapid pulse repetition rate has remained the
underlying basis for our technology platform.

         In November 1999, the LaserScan LSX was approved by the FDA for sale in
the U.S., and we began commercial shipments to U.S. customers in March 2000. In
September 2001, our PMA Supplement for the LASIK treatment of myopia and myopia
with astigmatism was approved by the FDA, thereby increasing the range of
indications that can be treated in the U.S. using the LaserScan LSX. We believe
that the "SFR" technology, described below, incorporated into our LaserScan LSX
offers advantages over competitive scanning laser systems. We believe that the
incorporation of the smallest spot size (S), the lowest laser fluence (F) and
highest repetition rate (R), together with techniques like the patented
purposeful overlapping of laser pulses and random scanning patterns used by our
patented precision microspot scanning technology, can lead to smoother
ablations, the elimination of surgical anomalies associated with broad beam
laser systems such as rings, ridges and central islands, and reductions in the



                                      -13-


incidence of glare, halos and loss of night vision. We also believe that our
patented SFR technology is capable of providing the highest resolution and
accuracy in corneal ablations needed for custom ablation treatments. The key
benefits of our laser systems include the following:

         o  PRECISION MICROSPOT SCANNING LASER. The AstraScan uses
            patented precision microspot scanning to deliver a high
            resolution, 0.6 millimeter low-energy "flying spot," in a
            proprietary, randomized pattern. They are true
            precision-scanning software-controlled lasers that use a pair
            of galvanometer controlled mirrors to reflect and scan the
            laser beam directly onto the corneal surface, without the
            mechanical elements used by broad beam excimer laser systems.

         o  LOWER FLUENCE. The accuracy and resolution of ablations
            produced by a refractive laser system is directly related to
            its laser fluence. When low laser fluence is delivered in a
            smaller laser spot, the ability of a laser system to
            accurately produce a predetermined laser ablation pattern is
            increased. Our lasers operate with a fluence of 89 mj/cm2 and
            have a beam size of 0.6 to 0.8 mm. Many competitive laser
            systems operate with fluences up to 200 mj/ cm2 and have
            larger laser spots.

         o  HIGHER PULSE REPETITION RATE. Our lasers currently operate at
            a pulse repetition rate of 200 Hz. Many competitive laser
            systems currently operate at lower pulse repetitions, often 50
            Hz or less.

         o  EYE TRACKING. Proper alignment of the refractive correction is
            important in all laser vision correction procedures, and is
            essential in order to perform custom ablations. Our advanced
            adaptive eye tracking system maintains alignment of the
            refractive correction relative to the visual axis of the eye.
            The LaserSight advanced adaptive eye tracker is a high speed,
            synchronous, "active" system that is capable of following even
            small, involuntary eye movements. Our advanced adaptive eye
            tracking system is currently available only on international
            versions of the AstraScan.

         o  FLEXIBLE PLATFORM. Custom ablations have resulted in increased
            patient satisfaction in international clinical use, and we
            believe the ability to perform custom ablations will generally
            result in improved visual quality, more predictable results
            and less post-operative regression relative to other
            refractive surgery techniques. We also believe that custom
            ablation will be the technique most preferred by refractive
            surgeons for correction of irregular astigmatism, decentered
            ablations and other surgically induced corneal irregularities.
            When programmed by custom ablation software tools like
            AstraPro, our laser is able to perform custom ablations.

         o  ADVANCED DESIGN AND ERGONOMICS. Our laser's relatively light
            weight and compact design allows it to fit into small spaces,
            and its wheels enable it to be easily moved around in a
            multi-surgeon practice.





                                      -14-



         DIAGNOSTIC AND CUSTOM ABLATION PRODUCTS

         Our CustomEyes family of diagnostic instruments and custom ablation
planning tools includes the AstraMax integrated diagnostic workstation and CIPTA
and AstraPro custom ablation planning software.

         ASTRAMAX. The AstraMax is an integrated diagnostic workstation that
obtains precision diagnostic measurements such as corneal elevation, corneal
thickness, and measurements of photopic and scotopic pupil size. Prior to the
AstraMax these measurements would have to be taken utilizing two or more
instruments. In addition to its value as a stand-alone system, the precision
diagnostic measurements provided by the AstraMax integrated workstation will be
utilized in our AstraPro software for planning custom ablations.

         We believe the primary benefits of the AstraMax system include:

         o  Multiple Cameras - The AstraMax has three cameras allowing for
            the truest rendering of corneal data to date. Three cameras
            capture corneal data with greater precision and accuracy. In
            laser vision correction, height and depth data are essential
            to perform an accurate laser surgery with reliable accurate
            results..

         o  Scotopic and Photopic Pupilometry - The AstraMax is the only
            topographer that offers a full range of measurements including
            scotopic and photopic pupil size. We believe the quality of
            the patient's vision is partly dependent on the size of the
            ablation zone equaling or exceeding the size of the scotopic
            pupil, something no other topographer measures.


         The technology incorporated into our AstraMax integrated workstation is
covered by six U.S. patents assigned to LaserSight, licenses to related
technologies and a number of patent applications currently undergoing
examination in the U.S. and internationally.

         ASTRAPRO. We have completed the international product performance
testing of our AstraPro custom ablation planning software, and it became
commercially available in early 2003. We believe our CustomEyes approach to
custom ablations will represent a new standard of eye care that goes beyond
conventional laser vision correction by individualizing the laser treatment
utilizing a patient-specific set of diagnostic criteria intended to correct both
refractive error and optical aberrations.

         For custom ablation treatments, the diagnostic data from the AstraMax
will be exported to our AstraPro custom ablation planning software where the
data will be used initially to plan custom ablation profiles intended to correct
visual anomalies that may have been induced by prior refractive procedures and
improve the overall quality of a patient's vision. LaserSight's approach to
custom ablation is somewhat different from other competitors in that our focus
has been on developing diagnostic and planning tools and techniques that improve
the qualitative aspect of visual performance. Because wavefront devices have
tended to focus on detecting and correcting for spherical aberrations that may
be present in a patient's eye, correction of such visual defects addresses only
visual acuity, or the quantitative aspect, of visual performance. Such
treatments do not address the qualitative aspect of visual performance, or how
well a patient is seeing under a variety of conditions.

         Our approach to custom ablation treatment uses precise measurements of
corneal elevation, corneal thickness and pupil size to plan a custom ablation
intended to improve visual performance by post-operatively retaining the natural
prolate shape of the patient's cornea.


                                      -15-


         KERATOME PRODUCTS

         Our MicroShape family of keratome products was discontinued in
September of 2003.

GROWTH STRATEGY

         Our goal, subject to our ability to obtain adequate financing, is to
become a significant provider of excimer laser systems, diagnostic and custom
ablation products and other products for the refractive vision correction
industry, focusing on China. We believe that our more than nine years of
experience in the manufacture, sales and service of excimer laser systems, our
significant penetration of international markets and the advanced technology of
our laser systems diagnostic instruments, ablation planning software provide us
with a strong platform for future growth as we continue to penetrate the
international markets for refractive surgical lasers and instruments.

         The following are the key elements of our growth strategy:

         o  EXPAND MARKET SHARE IN INTERNATIONAL EXCIMER LASER MARKET,
            MAINLY IN CHINA. We believe that our AstraScan precision
            microspot scanning excimer laser systems represent a
            significant technological advancement over the other scanning
            laser systems currently being marketed internationally, as our
            precision microspot scanning lasers can provide more precise
            corneal ablations, reduced visual side effects, enhanced
            visual acuity and shorter procedure times. . We also believe
            that the availability of AstraPro and AstraMax provides a
            custom ablation solution internationally that will improve our
            sales opportunities.

         o  ESTABLISH STRONG POSITION IN CUSTOM ABLATION MARKET. By
            combining the capabilities of our laser system with the
            AstraMax and AstraPro, we believe we will be in a position to
            benefit from a viable custom ablation package in the
            international market in the near future.

SALES AND MARKETING

         We sell our excimer laser systems, diagnostic products, and related
products through independent sales representatives and distributors. Since 1994,
we have marketed our laser systems commercially in over 30 countries worldwide
and currently have an installed base of approximately 400 scanning lasers,
including over 200 of our LaserScan LSX laser systems.

         EXCIMER LASER SYSTEMS

         Following receipt of FDA approval of the LaserScan LSX in November
1999, we began to commercially market our excimer laser systems in the U.S.
During 2002, we stopped laser sales efforts in the U.S. pending further FDA
approvals.

         Laser system sales in international markets are generally to hospitals,
corporate centers or established and licensed ophthalmologists. Internationally
we marketed our excimer laser systems in Canada, Europe, Asia, South and Central
America, and the Middle East, with particular focus in China. We currently
employ a sales manager who is responsible for sales in international markets,
both directly and through our independent distributors and representatives
within their respective territories.



                                      -16-


         All of our distributors and representatives were selected based on
their experience and knowledge of their respective ophthalmic equipment market.
In addition, the selection of international distributors and representatives was
also based on their ability to offer technical support. Distributor and
representative agreements provided for either exclusive territories, with
continuing exclusivity dependent upon achievement of mutually agreed levels of
annual sales, or non-exclusive agreements without sales minimums. Our new China
distributor was responsible for generating sales representing 86% of our
consolidated revenues in 2003. We have a concentration of credit risk, with the
majority of our sales to one customer.

         In conjunction with our sales activities, we participate in a limited
number of foreign ophthalmology meetings, exhibits and seminars.


         DIAGNOSTIC AND CUSTOM ABLATION PRODUCTS
         We currently employ one person responsible for the sales of our
AstraMax products, in addition to our laser system China distributor. We plan to
offer bundled packages including, for example, a laser system with an AstraMax.


         KERATOME PRODUCTS

         In 2001, all marketing and manufacturing arrangements with Becton
Dickinson were ended. See "Risk Factors and Uncertainties--Industry and
Competitive Risks--We cannot assure you that our keratome product will achieve
market acceptance." Accordingly, we discontinued our keratomes product line in
September of 2003.

MANUFACTURING

         EXCIMER LASER SYSTEMS

         Manufacturing Facilities. Our manufacturing operations primarily
consist of assembly, inspection and testing of parts and system components to
assure performance and quality. We acquire components of our laser system and
assemble them into a complete unit from components that include both
"off-the-shelf" materials and assemblies and key components that are produced by
others to our design and specifications. We conduct a series of final system
integration and acceptance tests prior to shipping a completed system. The
proprietary computer software that operates the scanning system in our laser
systems was developed internally.

         During 2002, we consolidated all excimer laser system manufacturing
operations in Winter Park, Florida and closed our manufacturing facility in San
Jose, Costa Rica. In October 1996, we received certification under ISO 9002, an
international system of quality assurance, for our manufacturing and quality
assurance activities in Florida facility. Since that time we have maintained our
ISO 9002 certification through a series of periodic surveillance audits and have
also been certified at our facility to ISO 9001 quality system standards.

         Availability of Components. We purchase the vast majority of components
for our laser systems from commercial suppliers. These include both standard,
"off-the-shelf" items, as well as components produced to our designs and
specifications. While most components are acquired from single sources, we
believe that in many cases there are multiple sources available to us in the




                                      -17-


event a supplier is unable or unwilling to perform. Since we need an
uninterrupted supply of components to produce our laser systems, we are
dependent upon these suppliers to provide us with a continuous supply of
integral components and sub-assemblies. Our current production is focused on
products for the China group. See "--Present Situation--China Transaction and
Liquidity Issues."

         We contracted with TUI Lasertechnik und Laserintegration GmbH, Munich,
Germany, in 1996 to develop an improved performance laser head based on their
innovative technology and our performance specification and laser lifetime
requirements. We began to incorporate this new laser head into our products,
notably the LaserScan LSX, in the fourth quarter of 1997. Currently, TUI is a
single source for the laser heads used in the LaserScan LSX. Currently,
SensoMotoric Instruments GmbH, Teltow, Germany, is a single source for the eye
tracker boards used in the both the LaserScan LSX and the AstraScan. See
"Concentration of Supplier Issues".

         DIAGNOSTIC AND CUSTOM ABLATION PRODUCTS

         Our AstraMax integrated diagnostic workstation is being manufactured in
our Winter Park, Florida, manufacturing facility. These manufacturing operations
also primarily consist of assembly, inspection and testing of parts and system
components to assure performance and quality. We acquire components of the
AstraMax and assemble them into a complete unit from components that include
both "off-the-shelf" materials and assemblies and components that are produced
by others to our design and specifications. We conduct a series of final system
integration and acceptance tests prior to shipping a completed system. The
proprietary computer software that operates the diagnostic workstation was
developed and is maintained internally.

         The AstraPro software was distributed from Winter Park, Florida
beginning in early 2003. The CIPTA software that is being distributed under an
agreement with Ligi Technologie Medicali, Taranto, Italy, was developed by that
company. Any custom ablation software will require clinical trials and FDA
approval prior to sale in the U.S.

COMPETITION

         EXCIMER LASER SYSTEMS

         The vision correction industry is subject to intense, increasing
competition. We operate in this highly competitive environment that has numerous
well-established U.S. and foreign companies with substantial market shares, as
well as smaller companies. Many of our competitors are substantially larger,
better financed, better known, and have existing products and distribution
systems in the U.S. marketplace.

         We believe competition in the excimer laser system market is primarily
based on product reliability, safety and effectiveness, technology, price,
regulatory approvals, operating costs, warranty coverage and customer service
capabilities. We believe that safety and effectiveness, technology, price,
dependability, warranty coverage and customer service capabilities are among the
most significant competitive factors, and we believe that we compete favorably
with respect to these factors.

         Currently, six manufacturers, VISX, Alcon, Nidek, Bausch & Lomb,
WaveLight and LaserSight, have excimer laser systems with the required FDA
approval to commercially sell the systems in the U.S. At present, the laser
systems manufactured by our competitors in the U.S. market have FDA approval to
perform a wider range of treatments than our laser system, including higher
degrees of nearsightedness and in the case of VISX and Alcon, farsightedness.
While regulatory approvals play a significant role with respect to the U.S.




                                      -18-


market, competition from new entrants may be prevalent in other countries where
regulatory barriers are lower.


         In addition to conventional vision correction treatments such as
eyeglasses and contact lenses, we also compete against other surgical
alternatives for correcting refractive vision disorders such as surgically
implantable rings, which have received FDA approval, as well as implantable
intraocular lenses, a holmium laser system and a conductive keratoplasty system
(using radio frequency waves), both developed for the treatment of
farsightedness, which have also been approved by the FDA.

         DIAGNOSTIC AND CUSTOM ABLATION PRODUCTS

         The topography market is segmented into higher priced (Bausch & Lomb's
Orbscan) and lower priced markets (manufactured by Humphrey, Tomey and others).
We are primarily competing against the Orbscan. Our AstraMax instrument also
competes against another class of instruments based on wavefront technology for
use in planning custom ablation treatments. The target market for higher-priced
topographers is refractive surgeons, general ophthalmologists and optometrists.
Sales for the AstraMax have been targeted mostly to refractive surgeons. The
market has shown acceptance of new technology, and is being fueled by the need
to obtain more accurate corneal height data in an effort to provide consistent
and accurate results in LASIK surgery as well as screen out poor candidates for
the procedure.

         We believe the AstraMax competes well against the features offered by
the Orbscan and provides the additional benefits described earlier that should
position the AstraMax as the next generation in corneal topography.

         KERATOME PRODUCTS

         The Company discontinued its keratomes product line in September of
2003.

INTELLECTUAL PROPERTY

         There are a number of U.S. and foreign patents or patent rights
relating to the broad categories of laser devices, use of laser devices in
refractive surgical procedures, and delivery systems for using laser devices in
refractive surgical procedures. We maintain a portfolio of what we believe to be
strategically important patents, patent applications, and licenses. Our patents,
patent applications and licenses generally relate to the following areas of
technology: UV and infrared-wavelength laser ablation for refractive surgery,
our precision microspot laser scanning system, harmonic conversion techniques
for solid state lasers, calibration of refractive lasers, eye tracking,
treatment of glaucoma and other retinal abnormalities, keratometer design,
enhanced techniques for corneal topography, techniques for treatment of
nearsightedness and farsightedness, techniques to optimize clinical outcomes of
refractive procedures, and keratome design. We monitor intellectual property
rights in our industry on an ongoing basis and take action, as we deem
appropriate, including protecting our intellectual property rights and securing
additional patent or license rights.

         Among the more significant of our intellectual properties are our `504
Scanning Patent, solid-state laser-related, and keratometer patents. In May
1996, we were granted the original '679 Scanning Patent relating to an
ophthalmic surgery method utilizing a non-contact scanning laser. In 1998 we
petitioned the U.S. Patent and Trademark Office for reissue of this patent, and
in January 2002 the U.S. Patent and Trademark Office reissued the `679 Scanning




                                      -19-


Patent as the `504 Scanning Patent. Prior to reissue, the original '679 Scanning
Patent included one independent claim and 23 total claims. The reissue
application added nine new independent claims, and a total of 67 additional
claims to better encompass the breadth of technology to which we are entitled.
The 23 original claims remain essentially unchanged. The fundamental teachings
of the original '679 Scanning Patent cover a refractive laser system using an
excimer laser with low energy and a high laser pulse repetition rate to ablate
corneal tissue with small pulses delivered to the corneal surface in an
overlapping pattern. Through the reissue process, we were able to broaden
several elements of the `679 Scanning Patent's original claims by removing
certain restrictive elements. In 2001 and 2002, we received a total of $7.6
million in licensing fees for the `504 Scanning Patent; no monies were received
in 2003.

         Our U.S. Patent No. 5,144,630 relates to a solid-state laser operating
at multi-wavelengths using harmonic frequency conversion techniques. This is the
technology incorporated into our developmental solid-state system that can
produce both infrared and ultraviolet wavelengths.

         Two of our U.S. patents, No. 5,847,804 and No. 5,953,100, cover a
multi-camera corneal analysis system that is the underlying technology for our
AstraMax diagnostic workstation. This state-of-the-art multi-camera (stereo)
technology provides the precise corneal height measurements that will be
critical for the planning of custom ablation treatments when these treatments
are commercially available.

         In January 2003, we received U.S. Patent No. 6,505,936, our first U.S.
Patent related to the AstraPro custom ablation planning and programming
software.

         A number of our competitors, including VISX and Alcon, have asserted
broad intellectual property rights in technology related to excimer laser
systems and related products, and intellectual property lawsuits are sometimes a
competitive factor in our industry. We believe that we own or have a license to
all intellectual property necessary for commercialization of our products.

         Patent Segment. Prior to 2001, we generated royalty income pursuant to
license agreements with respect to certain of our intellectual property rights,
primarily the Blum Patent and related license agreements we acquired from
International Business Machines Corporation (IBM) in August 1997. These patents
(IBM Patents), the Blum Patent and U.S. Patent No. 4,925,523 (Braren Patent)
relate to the use of ultraviolet light for the removal of organic tissue and may
be used in laser vision correction, as well as for non-ophthalmic applications,
and are the fundamental blocking patents that underlie the technology of
ultraviolet laser refractive surgery. Under the license agreements with VISX and
Alcon that we acquired from IBM, VISX and Alcon were each obligated to pay a
royalty to us on all excimer laser systems they manufacture, sell or lease in
the U.S., excluding those systems manufactured in the U.S. and sold into a
country where a foreign counterpart to the IBM Patents exists.

         We purchased the Blum and Braren patents from IBM in August 1997 for
$14.9 million. Shortly thereafter, we granted an exclusive paid-up license in
the cardiovascular field in exchange for a payment of $4.0 million. In February
1998, we entered into an agreement with Nidek pursuant to which we retained all
of the IBM Patent rights within the U.S. and sold to Nidek, for $7.5 million,
the foreign counterparts to those patents. We also granted Nidek a non-exclusive
license to utilize the IBM Patents in the U.S. In addition, Nidek granted us an
exclusive license to the foreign counterparts to the IBM Patents in the
non-ophthalmic, non-vascular and non-cardiovascular fields. From our 1997
purchase of the IBM Patents until March 2001,we realized over $5.0 million in
royalty revenues from licenses to the patent.



                                      -20-


         In March 2001, we entered into a business arrangement with Alcon
regarding the Blum Patent. As part of the arrangement, we sold the Blum Patent
to Alcon for $6.5 million and assigned to Alcon certain licenses to the Blum
Patent. We retained a non-exclusive royalty free license under the Blum Patent
and at the time retained the license to the Blum Patent that was granted to
VISX. LaserSight and Alcon will share in royalties received from any future
licenses of the Blum Patent and we will also receive a portion of any recovery
from parties found to be infringing the Blum Patent. Including the transaction
with Alcon, we will have received a total of approximately $24.0 million from
the Blum Patent and will continue to benefit from a royalty free license in the
U.S.

         In May 2001 as part of our Settlement and License Agreement with VISX
we sold them a fully paid-up license to the Blum Patent.

         Other Intellectual Property. We believe that our other intellectual
property rights are valuable assets of our business. For example, our U.S.
Patent Nos. 5,841,511 and 6,213,605 cover the checkered polar grid utilized in
our AstraMax diagnostic workstation, and our U.S. Patent Nos. 6,234,631 and
6,428,168 cover the combination of advanced corneal topography and wavefront
aberration measurement into a single instrument and relate to future plans for
our AstraMax diagnostic workstation. We entered into an agreement with a
subsidiary of TLC in October 1998 that grants us an exclusive license under U.S.
Patent No. 5,630,810 (TLC Patent) relating to a treatment method for preventing
the formation of central islands during laser surgery. Central islands are a
problem generally associated with laser refractive surgery performed with broad
beam laser systems used to ablate corneal tissue. We have agreed to pay TLC for
the term of the exclusive license 20% of the aggregate net royalties we receive
in the future from licensing the TLC patent and other patents currently owned by
us. We owe TLC 20% of the net proceeds of this license, or approximately $0.8
million. The amount was offset against a laser receivable owed to us by TLC. The
TLC exclusive license was eliminated in bankruptcy in 2004.

         THE EXTENT OF PROTECTION THAT MAY BE AFFORDED TO US BY OUR PATENTS, OR
WHETHER ANY CLAIM EMBODIED IN OUR PATENTS WILL BE CHALLENGED OR FOUND TO BE
INVALID OR UNENFORCEABLE, CANNOT BE DETERMINED AT THIS TIME. OUR PATENTS AND
OTHER PENDING APPLICATIONS MAY NOT AFFORD A SIGNIFICANT ADVANTAGE OR PRODUCT
PROTECTION TO US.

         We maintain an internal program that encourages development of
patentable ideas. As of December 31, 2003, we have approximately five U.S.
patent applications undergoing prosecution at the U.S. Patent and Trademark
Office and a number of counterparts to these applications filed internationally.
Our patent applications generally relate to the use of laser devices in
refractive surgical procedures, delivery systems and other technology related to
the use of laser devices in refractive surgical procedures, diagnostic devices
for eye measurements.

         In the U.S., our trademarks include LaserSight(R), LaserSight
Technologies, Inc.(R), LSX(R), LaserScan LSX(R), MicroShape(R), UltraShaper(R),
UltraEdge(R), UniShaper(R) AstraPro(R), AstraMax(R) and AccuTrack(R).

REGULATION

     MEDICAL DEVICE REGULATION

         The FDA regulates the manufacture, use and distribution of medical
devices in the U.S. Our products are regulated as medical devices by the FDA
under the Federal Food, Drug, and Cosmetic Act. In order to sell such medical
devices in the U.S., a company must file a 510(k) premarket notice or obtain




                                      -21-


premarket approval after filing a PMA application. Noncompliance with applicable
FDA regulatory requirements can result in one or more of the following:

         o  fines;
         o  injunctions;
         o  civil penalties;
         o  recall or seizure of products;
         o  total or partial suspension of production;
         o  denial or withdrawal of premarket clearance or approval of
            devices;
         o  exclusion from government contracts; and
         o  criminal prosecution.

         Medical devices are classified by the FDA as Class I, Class II or Class
III based upon the level of risk presented by the device and whether the device
is substantially equivalent to an already legally marketed Class I or II device.
Class III devices are subject to the most stringent regulatory review and cannot
be marketed in the U.S. until the FDA approves a PMA for the device.

         Class III Devices. A PMA application must be filed if a proposed device
is not substantially equivalent to a legally marketed Class I or Class II
device, or if it is a Class III device for which the FDA requires PMAs. The
process of obtaining approval of a PMA application is lengthy, expensive and
uncertain. It may require the submission of extensive clinical data and
supporting information to the FDA. Human clinical studies may be conducted only
under an FDA-approved protocol and must be conducted in accordance with FDA
regulations. In addition to the results of clinical trials, the PMA application
includes other information relevant to the safety and efficacy of the device; a
description of the facilities and controls used in the manufacturing of the
device, and proposed labeling. After the FDA accepts a PMA application for
filing and reviews the application, a public meeting may be held before an FDA
advisory panel comprised of experts in the field.

         After the PMA is reviewed and discussed, the panel issues a favorable
or unfavorable recommendation to the FDA. Although the FDA is not bound by the
panel's recommendations, it historically has given them significant weight. If
the FDA's evaluation of the PMA application is favorable, the FDA typically
issues an "approvable letter" requiring the applicant's agreement to comply with
specific conditions (such as specific labeling language) or to supply specific
additional data (such as post-approval patient follow-up data) or other
information in order to secure final approval. Once the approvable letter is
satisfied, the FDA will issue approval for certain indications that may be more
limited than those originally sought by the manufacturer. The PMA approval can
include post-approval conditions that the FDA believes necessary to ensure the
safety and effectiveness of the device including, among other things,
restrictions on labeling, promotion, sale and distribution. Failure to comply
with the conditions of approval can result in enforcement action, including
withdrawal of the approval. Products manufactured and distributed pursuant to a
PMA will be subject to extensive, ongoing regulation by the FDA. The FDA review
of a PMA application generally takes one to two years from the date such
application is accepted for filing but may take significantly longer. The review
time is often significantly extended by FDA requests for additional information,
including additional clinical trials or clarification of information previously
provided.

         Modifications to a device subject to a PMA generally require approval
by the FDA of PMA supplements or new PMAs. We believe that our excimer laser
systems require a PMA or a PMA supplement for each of the surgical procedures
that they are intended to perform. The FDA may grant a PMA with respect to a




                                      -22-


particular  procedure  only when it is satisfied  that the use of the device for
that particular procedure is safe and effective.  In granting a PMA, the FDA may
restrict the types of patients who may be treated and the ranges of treatment.

         FDA  regulations  authorize  any  interested  person  to  petition  for
administrative  review  of the FDA's  decision  to  approve  a PMA  application.
Challenges  to an FDA  approval  have  been  rare.  We are not  aware  that  any
challenge  has been asserted  against us and do not believe any PMA  application
has ever been revoked by the agency based on such a challenge.

         The  QSR/GMP  ("Quality  System   Regulations",   "Good   Manufacturing
Processes") regulations impose certain procedural and documentation requirements
upon us with respect to our manufacturing, design controls and quality assurance
activities.  Our facilities  will be subject to ongoing  inspections by the FDA,
and compliance with QSR/GMP regulations is required for us to continue marketing
our laser  products  in the U.S.  In  addition,  our  suppliers  of  significant
components or  sub-assemblies  must meet quality  requirements  established  and
monitored by LaserSight, and some may also be subject to FDA regulation.

         During 1994,  we began the clinical  studies  required for approval and
commercialization  of our laser  scanning  system in the U.S. In April 1998,  we
filed a PMA application for PRK treatment of nearsightedness  using our scanning
laser system.  We received  notification  from the FDA that our laser system had
received PMA approval for PRK  treatment of low to moderate  nearsightedness  in
November 1999.

         We also began a clinical  trial of our scanning  laser system for LASIK
treatment of nearsightedness and  nearsightedness  astigmatism in Canada in late
1998 and received  Device  License  Approval from the Canadian  Medical  Devices
Bureau in mid-1999.

         In September  2001, we received FDA approval for the LASIK treatment of
myopia  with and  without  astigmatism  for  correction  of  manifest  spherical
equivalent  refractive  error of up to -6 diopters  with up to -4.5  diopters of
astigmatism.  We also  received FDA approval to increase our laser pulse rate to
200 Hz.

         In December  2002, we received FDA approval to increase our laser pulse
rate from 200 Hz to 300 Hz.

         Class I or II Devices.  Devices deemed to pose relatively less risk are
placed in either Class I or II,  which  requires  the  manufacturer  to submit a
510(k)  premarket  notification,  unless an  exemption  applies.  The  premarket
notification  must  demonstrate  that  the  proposed  device  is  "substantially
equivalent"  to a  "predicate  device"  that is either in Class I or II, or is a
"pre-amendment" Class III device that was in commercial  distribution before May
28,  1976,  for  which  the FDA does not  require  PMA  approval.  Our  AstraMax
diagnostic  workstation was classified by the FDA as Class I exempt,  which does
not require FDA market clearance.

         After the FDA has issued a  determination  of equivalency for a device,
any modification that could significantly affect its safety or effectiveness, or
that would constitute a major change in its intended use,  requires a new 510(k)
notice.  The FDA requires each  manufacturer to make this  determination  in the
first instance,  but the FDA can review any such decision.  If the FDA disagrees
with a  manufacturer's  decision  not to submit a new  510(k),  the  agency  may
retroactively require the manufacturer to submit a premarket  notification.  The
FDA also can require  the  manufacturer  to cease  marketing  and/or  recall the




                                      -23-


modified device until receipt of the necessary 510(k).

         Other Regulatory Requirements.  Labeling and promotional activities are
subject to scrutiny by the FDA and by the Federal Trade Commission.  Current FDA
enforcement policy prohibits  manufacturers from marketing and advertising their
approved  medical  devices for  unapproved or off-label  uses. The scope of this
prohibition  has been the subject of litigation.  The only materials  related to
unapproved  devices  that may be  disseminated  by companies  are  peer-reviewed
articles.  Our lasers are also subject to the  Radiation  Control for Health and
Safety Act administered by the Center for Devices and Radiological Health of the
FDA. The law requires laser manufacturers to file new product and annual reports
and to maintain quality control, product testing and sales records. In addition,
laser manufacturers must incorporate  specified design and operating features in
lasers  sold  to  end-users   and  comply  with   labeling   and   certification
requirements.  Various  warning labels must be affixed to the laser depending on
the class of the product under the performance standard.  The manufacture,  sale
and use of our  products is also  subject to numerous  federal,  state and local
government  laws  and  regulations  relating  to such  matters  as safe  working
conditions,  manufacturing  practices,  environmental  protection,  fire  hazard
control and disposal of hazardous or potentially hazardous substances.

         International Regulatory Requirements. The manufacture, sale and use of
our  products are also subject to  regulation  in countries  other than the U.S.
During November 1996 we completed all requirements necessary to obtain authority
to apply the CE Mark to our  LaserScan  2000 System,  an earlier  generation  of
excimer laser system we sold in  international  markets.  In September  1998, we
received similar certification to apply the CE Mark to our LaserScan LSX excimer
laser system. In June 2002, the AstraMax was CE Marked. The CE Mark,  certifying
that the LaserScan Models 2000, LaserScan LSX and AstraMax meet all requirements
of the European  Community's  medical  directives,  provides  our products  with
marketing  access in all member  countries  of the EU. All  countries  in the EU
require the CE Mark  certification of compliance with the EU Medical  Directives
as the standard for regulatory approval for sale of excimer laser systems.

         The EU Medical Directives include  requirements under EU laws regarding
the placement of various  categories of medical  devices on the EU market.  This
includes a "directive"  that an approved  "Notified Body" will review  technical
and medical  requirements  for a  particular  device.  All  clinical  testing of
medical devices in the EU must be done under the Declaration of Helsinki,  which
means that companies must have ethics  committee  approval prior to commencement
of testing,  must obtain  informed  consent  from each patient  tested,  and the
studies must be monitored and audited. Patient records must be maintained for 15
years.  Companies must also comply with the Medical Device  Vigilance  reporting
requirements.  In  obtaining  the CE  Mark  for our  excimer  laser  system,  we
demonstrated   that  we  satisfied  all   engineering   and   electro-mechanical
requirements  of the EU by  having  our  manufacturing  processes  and  controls
evaluated by a Notified Body (Semko) for compliance  with EN46001,  ISO 9002 and
ISO 9001  requirements,  and conducted a clinical study in France to confirm the
safety and efficacy of the excimer laser system on patients.

Research and Development

         We  continue,  on a limited  basis,  to research  and develop new laser
products,  laser systems,  product upgrades enhancements,  and ancillary product
lines.  In March  2000,  we  acquired  the  intellectual  property  that we have
developed into the AstraMax that was commercialized during the second quarter of
2002. We believe the AstraMax has assisted us in developing our custom  ablation
treatment plan capabilities.



                                      -24-


         While  the  risk  of  failure  of  these  specific  activities  may  be
significant,  we believe that if developed, these products could provide us with
a leading edge  technology  that would further  differentiate  our products from
other  companies  in the  industry.  There  is no  assurance  that  any of these
research and development efforts will be successful.

Employees

         As of December 31,  2003,  we had 23  full-time  employees.  All of the
employees  are located in Winter  Park,  Florida.  Eleven are in  manufacturing,
three are in  engineering,  four are in customer  service/sales  and five are in
administration. None of our employees is a member of a labor union or subject to
a collective bargaining  agreement.  LaserSight generally considers its employee
relations  to be good.  We plan on adding  field  service  staff during 2004 and
occasionally use independent contractors in this area.


Item 2.  Properties

         Our principal offices,  including executive offices and administrative,
marketing and laboratory facilities, and manufacturing facilities are located in
approximately  15,600  square feet of space that we have leased in Winter  Park,
Florida.  The lease expires January 31, 2006. Monthly lease payments are $15,116
and the Company is also responsible for taxes. In our opinion, the property used
in our  operations  is  generally  in good  condition  and is  adequate  for the
purposes for which we utilize them.

Item 3.  Legal Proceedings

         Jarstad.  In January  2002, a customer  filed a lawsuit in the Superior
Court of the State of Washington in and for the County of King.  The lawsuit was
subsequently   remanded  to  federal   court.   The  lawsuit  names   LaserSight
Technologies  and an  unaffiliated  finance  company as defendants.  The lawsuit
alleged  various  claims  related to  LaserSight  Technologies'  sale of a laser
system  to the  plaintiff  including  breach  of  contract,  breach  of  express
warranty,   breach  of  implied  warranty,   fraudulent  inducement,   negligent
misrepresentation,  unjust enrichment,  violation of the consumer protection act
and product liability.  Plaintiffs  requested damages to be determined at trial,
reimbursement  for  leasing  fees,   prejudgment  and  post-judgment   interest,
attorneys'  fees and  costs  and  other  equitable  relief.  In this  matter,  a
settlement agreement has been signed by the parties. The terms of the settlement
did not require us to make any cash payments. We agreed to service and calibrate
the plaintiff's laser as well as provide certain software and equipment upgrades
at either no cost to plaintiff or at prices that were  negotiated  in connection
with the settlement, if and when such upgrades are available in the U.S.

         Distributors. In October 2001, three entities that previously served as
distributors  for  LaserSight's  excimer  laser  system  in the  United  States,
Balance,  Inc. d/b/a Bal-Tech  Medical,  Sun Medical,  Inc. and Surgical Lasers,
Inc., filed a lawsuit in the Circuit Court of the Ninth Judicial Circuit, Orange
County, Florida. The lawsuit named LaserSight Technologies,  Mr. Michael Farris,
former Chief  Executive  Officer,  and James  Spivey,  LaserSight  Technologies'
former Vice  President of Sales,  as  defendants.  The lawsuit  alleged  various
claims  related  to  LaserSight  Technologies  termination  of the  distribution
arrangements  with the plaintiffs  including  breach of contract,  breach of the
covenant of good faith and fair  dealing,  tortuous  interference  with business
relationships,  fraudulent misrepresentation,  conversion and unjust enrichment.
Plaintiffs requested actual damages in excess of $5.0 million, punitive damages,
prejudgment  interest,  attorneys' fees and costs and other equitable relief. We
filed a motion  to  dismiss  that  was  denied.  We then  filed  an  answer  and
counterclaim.  The  plaintiffs  had answered the  counterclaim  and had moved to
strike some of our affirmative defenses,  and we had moved to strike portions of




                                      -25-


the plaintiff's answer. To date, limited discovery had occurred.  In March 2003,
one of the three  entities  agreed  to  dismiss  their  claims  with  prejudice.
Management  believed that LaserSight  Technologies had satisfied its obligations
under the distribution  agreements,  and that the allegations against LaserSight
Technologies,  Mr. Farris and Mr. Spivey were without merit.  As a result of the
September 2003 Chapter 11 petition, and subsequent  re-structuring,  claims such
as these have been resolved with the issuance of a portion of the 9,997,195 new
common shares.

         Italian Distributor. In February 2003, an Italian court issued an order
restraining  LaserSight  Technologies  from marketing our AstraPro software at a
trade  show in  Italy.  This  restraining  order  was  issued  in  favor of Ligi
Tecnologie  Medicali S.p.a (LIGI),  a distributor  of our products,  and alleged
that our AstraPro  software product  infringes certain European patents owned by
LIGI. We had retained Italian legal counsel to defend us in this litigation, and
we were informed that the Italian  court had revoked the  restraining  order and
ruled that LIGI must pay our attorney's  fees in connection  with our defense of
the restraining  order. In addition,  our Italian legal counsel informed us that
LIGI had filed a motion for a permanent injunction. We believe that our AstraPro
software  does not  infringe  the  European  patents  owned by LIGI,  but due to
limited cash flow the Company has not defended its position. Management believes
that the outcome of this litigation  will not have a material  adverse impact on
LaserSight's business, financial condition or results from operations. Since the
Chapter 11  petition  does not apply to  foreign  courts,  this  action is still
pending.

         VISX,  Incorporated.  On May 25,  2001,  LaserSight  settled the patent
infringement  action filed by VISX against  LaserSight  in November  1999 in the
United States  District Court for the District of Delaware.  In connection  with
the resolution of this litigation  LaserSight and VISX entered into a Settlement
and License Agreement pursuant to which LaserSight received a license to patents
held by VISX that related to refractive excimer lasers,  including United States
Patents Nos.  4,718,418  and B1  5,108,388  and agreed to pay a royalty for each
procedure performed in the United States using a LaserSight refractive laser. As
part of the agreement, VISX purchased a fully paid up license to U.S. Patent No.
4,784,135  (the Blum Patent).  The amount of the royalty that we are required to
pay VISX and the amount that VISX paid us for the fully  paid-up  license to the
Blum Patent are confidential. A copy of the Settlement and License Agreement has
been filed as Exhibit 10.62 to our Form 10-Q for the period ended June 30, 2001.
The parties filed a stipulated order dismissing the patent  infringement  action
on June 1, 2001.

         Former  Shareholder  of MRF (d/b/a TFG).  On May 14, 2001, a motion for
summary  judgment  was  granted  in favor of  Michael R.  Farris,  former  Chief
Executive  Officer,  in connection with a lawsuit that was filed on November 12,
1999 in the U.S.  District Court for the Eastern  District of Missouri on behalf
of a former  shareholder of TFG, a wholly owned  subsidiary of  LaserSight.  The
lawsuit named Mr. Farris,  LaserSight's  former chief executive officer,  as the
sole  defendant and alleged fraud and breach of fiduciary  duty by Mr. Farris in
connection with the redemption by TFG of the former shareholder's  capital stock
in TFG.  At the  time of the  redemption,  which  redemption  occurred  prior to
LaserSight's  acquisition  of TFG,  Mr.  Farris  was  the  president  and  chief
executive officer of TFG.  LaserSight's Board of Directors authorized LaserSight
to  retain  and,  to  the  fullest  extent  permitted  by the  Delaware  General
Corporation  Law,  pay  the  fees of  counsel  to  defend  Mr.  Farris,  TFG and
LaserSight  in the  litigation  so long as a court had not  determined  that Mr.
Farris  failed  to act in good  faith  and in a  manner  Mr.  Farris  reasonably
believed to be in the best  interest of TFG at the time of the  redemption.  The
plaintiff  appealed the U.S. District Court's order granting summary judgment in
favor of Mr.  Farris to the United  States Court of Appeals for the 8th Circuit.
The appeal was heard in January 2002; on March 13, 2002 the 8th Circuit reversed
the  District  Court  with  respect  to the  starting  date  of the  statute  of
limitations  related to an allegation of fraud committed by a fiduciary.  We had




                                      -26-


agreed  to the  terms of a  settlement  with  the  plaintiff.  The  terms of the
settlement  require  three  payments  totaling  $140,000.  The first  payment of
$50,000  was paid in  October  2002,  the second  payment of $45,000  was due in
September  2003,  and the third payment of $45,000 was due in March 2004. All of
the payments are to be made without  interest  unless there were to be a default
in payment in which event  interest would accrue at 9%. During 2002, we recorded
settlement expense of $140,000 related to this settlement. This creditor did not
file a proof of claim in the  bankruptcy  case and  accordingly  the  claim  was
discharged in bankruptcy.

         Lambda  Physik,  Inc. On January 20,  2000,  a lawsuit was filed in the
Circuit  Court of  Broward  County,  Florida  on behalf of Lambda  Physik,  Inc.
("Lambda") against LaserSight.  The action alleged that we breached an agreement
we entered  into with  Lambda for the  purchase of lasers  from  Lambda.  Lambda
requested  approximately  $1.9  million in  damages,  plus  interest,  costs and
attorney's fees. After no activity for over a year, the plaintiff filed a motion
in July 2002 to have the court set a trial  date,  which  they set for  December
2002. Subsequently, the plaintiff filed a motion for continuance of the trial to
allow the parties an  opportunity  to settle the dispute.  In October 2002,  the
court entered an order  continuing the trial and would  reschedule only upon the
filing  of a new  notice  for  trial  by  either  party.  We  believe  that  the
allegations made by the plaintiff are without merit. Management believes that we
have satisfied our obligations under the agreement and that this action will not
have  material  adverse  effect  on our  financial  condition  or  results  from
operations. This action was eliminated in bankruptcy confirmation.

         Kremer.  On November 16, 2000, a lawsuit was filed in the United States
District Court for the Eastern District of Pennsylvania on behalf of Frederic B.
Kremer, M.D. and Eyes of the Future, P.C. The action alleged that LaserSight was
in breach of certain  terms and  conditions of an agreement it entered into with
Dr. Kremer  relating to LaserSight's  purchase of a patent from Dr. Kremer.  Dr.
Kremer requested equitable relief in the form of a declaratory  judgment as well
as damages in excess of $1.6 million, plus interest,  costs and attorney's fees.
The  parties  reached a verbal  agreement  to have this case  dismissed  without
prejudice and agreed not to commence any proceedings for 180 days after entry of
the order of  dismissal  for any claim or cause of action that had been or could
have been asserted in this matter.  A stipulated order of dismissal was prepared
but was filed.  The parties agreed to postpone  discovery and attempted to agree
on the final form of a settlement.  The terms of the  settlement  agreement,  as
currently contemplated,  do not require us to make any cash payments. LaserSight
believes  that  the  allegations  made  by the  plaintiff  were  without  merit.
Management  believes that  LaserSight  has satisfied its  obligations  under the
agreement  and that this action  will not have  material  adverse  effect on our
financial  condition or results from  operations.  This action was eliminated in
bankruptcy.

         Routine  Matters.  In addition,  we are  involved  from time to time in
routine  litigation  and other legal  proceedings  incidental  to our  business.
Although no assurance can be given as to the outcome or expense  associated with
any of these  proceedings,  we  believe  that none of such  proceedings,  either
individually  or in the  aggregate,  will have a material  adverse effect on the
financial condition of LaserSight.

Item 4.  Submission of Matters to a Vote of Security Holders

                                      None



                                      -27-



                                     PART II

Item 5.  Market for Company's Common Equity and Related Stockholder Matters

         Our common stock traded on The NASDAQ Stock  Market(R) under the symbol
LASEC  until  April 29,  2003.  This was a  conditional  listing  on the  NASDAQ
SmallCap  Market  where the fifth  character  "C" was  appended to  LaserSight's
symbol. Effective with the open of business on March 5, 2003, the trading symbol
for  LaserSight's  securities was changed from LASE to LASEC.  On April 30, 2003
the common  stock was delisted by NASDAQ and  commenced  trading on OTC Bulletin
Board as LASE.  This OTCBB symbol was changed on August 27, 2003 to LASEE due to
the late filing  status of the  Company.  The Company was dropped from the OTCBB
and commenced trading on the "Pink Sheets" on September 27, 2003 with the symbol
LASEQ  ("Q"  indicates  bankruptcy).   As  mentioned  previously,  the  existing
outstanding  common and preferred shares,  including options and warrants,  were
cancelled  by action of the US  Bankruptcy  Court on June 30,  2004.  New common
shares of 9,997,195 were issued on June 30, 2004 and commenced  trading via the
"Pink Sheets" under the symbol LRST.  The  following  table sets forth,  for the
fiscal quarters indicated,  the high and low sale prices for our common stock on
the various markets indicated above.

            2002:                               High        Low
            ----                                ----        ---
            First Quarter ...................  $0.81      $0.45
            Second Quarter ..................   0.63       0.07
            Third Quarter ...................   0.44       0.04
            Fourth Quarter...................   0.33       0.16
            2003:
            ----
            First Quarter ...................   0.29       0.04
            Second Quarter ..................   0.29       0.07
            Third Quarter ...................   0.29       0.01
            Fourth Quarter...................   0.16      0.001

         On June 30,  2004,  the closing  sale price for our common stock on the
"Pink  Sheets"  was  $0.01  per  share.  As of June  30,  2004,  LaserSight  had
9,997,195  shares  of  common  stock  outstanding  held  by  approximately  500
stockholders  of  record  and,  to  our  knowledge,  approximately  3,000  total
stockholders,  including  stockholders  of record  and  stockholders  in "street
name." Of these 9,997,195 shares  approximately  1,134,000 shares  representing
approximately  350  creditors'  shares  were  yet  to be  issued  pending  final
bankruptcy court allocation.

         We have never  declared or paid any cash  dividends on our common stock
and  do  not  anticipate  paying  cash  dividends  on our  common  stock  in the
foreseeable  future. Our current policy is to retain all available funds and any
future  earnings  to  provide  funds  for the  operation  and  expansion  of our
business.  Any determination in the future to pay dividends will depend upon our
financial  condition,  capital  requirements,  results of  operations  and other
factors deemed relevant by our board of directors,  including any contractual or
statutory restrictions on our ability to pay dividends.




                                      -28-


Possible Dilutive Issuances of Common Stock

         Each of the following  issuances of common stock may depress the market
price of the common  stock.  See  "Management's  Discussion  and Analysis - Risk
Factors and Uncertainties - Common Stock Risks--The Significant Number of Shares
Eligible for Future Sale and Dilutive Stock  Issuances may Adversely  Affect Our
Stock Price." All warrants and options  outstanding  prior to filing  Chapter 11
were cancelled on June 30, 2004.

         GE Warrants.  In connection  with our March 2001 loan agreement with GE
Healthcare  Financial  Services,   Inc.,  as   successor-in-interest  to  Heller
Healthcare  Finance,  Inc. ("GE"),  we issued GE warrants to purchase a total of
243,750  shares of common  stock at an  exercise  price of $3.15 per share.  The
warrants  expired in March 2004. In connection our with August 2004 Amended loan
Agreement  with GE, we issued GE warrants to purchase a total of 100,000  shares
of common stock at an exercise price of $ 0.25 per share,  or $0.40 per share if
the  remaining $ 1 million of DIP  financing is converted to common  stock.  The
warrant expires June 30, 2008.


         China  Transaction.  In connection with our bankruptcy  re-structuring,
NIIC will initially  control  7,210,000 or 72% of the newly issued  9,997,195
common  shares.  Under certain  circumstances  their  control could  increase to
approximately  74% with the  conversion of $1 million DIP Financing to 2,500,000
common shares.
 



















                                      -29-


         Item 6.  Selected Consolidated Financial Data

         The following  selected  consolidated  financial data 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"  included elsewhere herein. The summary financial  information as of
and for each of the years in the  five-year  period  ended  December 31, 2003 is
derived from our consolidated financial statements for such years. 



                                   (In thousands, except for per share amounts)

                                                                            
                                            2003      2002       2001         2000       1999
                                            ----      ----       ----         ----       ----
Net sales                                  $6,437    $10,502    $17,419      $33,697    $21,374
Gross profit (loss)                          (715)     4,753     10,034       18,892     11,753
Loss from operations                      (23,530)   (13,258)   (22,761)     (21,922)   (14,390)
Loss from continuing operations
                                          (23,516)   (13,569)   (22,663)     (21,021)   (13,712)
Net loss                                  (23,516)   (13,569)   (26,190)     (21,430)   (14,424)
Conversion discount on
    preferred stock                        (1,582)      (354)        --           --          --
Dividends and accretion
    Of preferred stock                         --         --         --           --          --
Loss attributable to common
    stockholders                          (25,098)   (13,923)   (26,190)     (21,430)   (14,424)
Basic loss per common share                 (0.90)     (0.51)     (1.04)       (1.02)     (0.89)

Diluted loss per share                      (0.90)     (0.51)     (1.04)       (1.02)     (0.89)

Working capital                           (14,761)     2,940     13,864       20,680     21,648
Total assets                                4,975     23,108     36,310       51,876     49,379
Long-term obligations                         750         --      2,926          110        100
Stockholders' equity (deficit)            (19,582)     3,898     15,472       37,335     39,578



















                                      -30-



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

         The following discussion and analysis of LaserSight's consolidated
results of operations and consolidated financial position should be read in
conjunction with the Selected Consolidated Financial Data and LaserSight's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this report. We have significant liquidity and capital resource
issues relative to the timing of our accounts receivable collection and the
successful completion of new sales compared to our ongoing payment obligations
and our auditors have indicated that our recurring losses from operations and
net capital deficiency raises substantial doubt about our ability to continue as
a going concern. Our auditors' reports included an explanatory paragraph
regarding our ability to continue as a going concern because we have incurred
significant losses and negative cash flows from operations for several years and
our ability to raise or generate enough cash to survive is questionable. See
"Liquidity and Capital Resources" and "Risk Factors and Uncertainties-We have
experienced significant losses and operating cash flow deficits and we expect
that operating cash flow deficits will continue and absent further financing or
significant improvement in sales, potentially result in our inability to
continue operations."

         All  references  to years are to  LaserSight's  fiscal  years  ended
      December 31, 2003, 2002 and 2001, unless otherwise indicated.

Executive Summary

       On September 5, 2003  LaserSight  and two of its  subsidiaries  filed for
Chapter  11  bankruptcy  protection  and  reorganization  in the  United  States
Bankruptcy Court, Middle District of Florida,  Orlando Division. The cases filed
were LaserSight  Incorporated,  ("LSI") Case No.  6-03-bk-10371-ABB;  LaserSight
Technologies, Inc., ("LST") Case No. 6-03-bk-10370-ABB;  and LaserSight Patents,
Inc., Case No.  6-03-bk-10369-ABB.  Under Chapter 11, certain claims against the
Company in existence  prior to the filing of the  petitions for relief under the
federal  bankruptcy  laws  are  stayed  while  the  Company  continued  business
operations as  Debtor-in-possession.  These claims are reflected in the December
31, 2003 balance sheet as "liabilities  subject to  compromise."  Claims secured
against the Company's  assets ("secured  claims") also are stayed,  although the
holders  of such  claims  have the right to move the court for  relief  from the
stay. The majority of secured claims are held by Heller Healthcare Finance,  Inc
("Heller") and GE Healthcare Financial Services,  Inc., as successor-in-interest
to Heller ("GE").
         The company operated as a  debtor-in-possession  from September 5, 2003
through June 10, 2004 when a final bankruptcy order was obtained. As a result of
the bankruptcy re-structuring, the company expects to record credits for debt
forgiveness of approximately $15.6 million during the three months ended June
30, 2004. On April 28, 2004, the Plan was confirmed by the Bankruptcy Court. The
effective date of the Plan was June 30, 2004.

     On June 30, 2004, the Company cancelled all outstanding stock,  options and
warrants  and issued  9,997,195  new shares of common  stock.  The shares  were
distributed as follows:

     Creditors of LSI                       1,116,000
     Creditors of LST                       1,134,000 (1)
     Old Preferred Stockholders               360,000
     Old common stockholders                  539,997 (2)
     Cancel treasuy stock                      (2,802)
     Conversion of $1 million DIP
     Financing                              6,850,000
                                           ----------
                                            9,997,195




                                      -31-


(1) These shares will be issued upon the  resolution of a creditor  objection to
claim.

(2) The old common stock was converted at a 51.828 to 1 ratio.

         On August 30, 2004,  the Company  signed a three year amended note with
GE for  $2,149,249.  The note was effective June 30, 2004 and bears 9% interest.
In the amendment,  GE provided a waiver of the Company's  failure to comply with
all covenants.  In exchange for the amendment and waiver, the Company will pay a
$50,000  commitment fee, a $100,000  termination fee,  attorney fees of $126,078
and an audit  fee of  $8,151.  All fees  were  added to the  principal  balance.
Revised  covenants became effective that adjusted the minimum level of net worth
to $750,000,  minimum  tangible net worth to $1.0 million and minimum  quarterly
net revenue to $1.0 million.  GE was issued warrants to purchase  100,000 common
shares,  at $0.25 per share, or $0.40 per share if the China Group converts it's
remaining $1 million of DIP financing.

         The China Group provided $2 million of DIP financing, of which $750,000
was funded at December 31, 2003.  On June 30, 2004,  $1 million of the total was
converted  to  6,850,000  common  shares.  The  remaining  $1 million note bears
interest of 9%, with  interest  only  payments due  monthly.  It is a three year
balloon  note.  The  China  Group  has the  option  to  convert  the  note to an
additional  2,500,000  common  shares.  This note is  subject to any GE liens on
Company assets.

In June of 2004,  as of the  effective  date of the  re-organization  plan,  the
following liabilities were relieved:

     Accounts Payable                    2,905,814
     Accrued TLC license fee               825,500
     Accrued salaried/severance            235,367
     Accrued warranty                    6,125,730
     Accrued Ruiz license fees           3,471,613
     Deposits/service contracts            720,399
     Other accrued expenses              1,331,711
                                        ----------
                                        15,616,134

         In June 2004, $8.4 million of accounts and notes receivable were
written off against the allowance for doubtful accounts.



Overview

         LaserSight's  loss  attributable  to common  stockholders  for 2003 was
$25,098,059,  or $0.90 per  basic  and  diluted  common  share,  on net sales of
$6,437,177  while the net loss for 2002 was $13,922,580, or $0.51 per basic and
diluted common share, on net sales of $10,502,135.  The net losses are primarily
attributable  to a  decline  in sales of our  excimer  laser  systems,  warranty
charges  and  write  offs  of  inventory  and  accounts   receivable  and  notes
receivable.

         LaserSight  is  principally  engaged in the  manufacture  and supply of
microspot scanning excimer laser systems,  software for custom ablation planning
and programming,  diagnostic products for precision measurements of the eye, and
other related products used to perform procedures that correct common refractive
vision disorders such as nearsightedness,  farsightedness and astigmatism. Since
1994,  we have  marketed  our laser  systems  commercially  in over 30 countries
worldwide and currently  have an installed  base of  approximately  400 scanning
laser systems  outside the U.S.,  including  over 200 of our LaserScan LSX laser
systems.





                                      -32-



         China Transaction

         In July 2002, the Company signed a non-binding  letter of intent with a
company  based in the People's  Republic of China that  specializes  in advanced
medical  treatment  services,  medical device  distribution  and medical project
investment.  Definitive  agreements  relating  to  the  China  transaction  were
executed on August 15, 2002, establishing a strategic relationship that included
the  commitment to purchase at least $10.0 million worth of our products  during
the 12-month  period  ending  August 15, 2003,  distribution  of our products in
mainland China,  Hong Kong, Macao and Taiwan,  and a $2.0 million  investment in
LaserSight.  The  investment  was  completed  in October  2002 by  issuance,  in
exchange for the $2.0 million payment,  of Series H convertible  preferred stock
that, subject to certain restrictions, could be converted into 18,561,294 shares
of our common stock and result in the purchaser holding approximately 40% of our
common stock. The products purchased were paid by irrevocable letters of credit,
confirmed  by a U.S.  bank  and  payable  upon  our  shipment  of  products  and
presentation of shipping documents.  The Company started shipping products under
this agreement in August 2002.  Through  December 31, 2003,  approximately  $3.4
million worth of products were sold under these agreements.  Our current product
production  and shipments are focused on  satisfying  our delivery  requirements
with respect to the China group. Additional production will depend on the future
availability  of cash.  A new  agreement  was  signed  with the  China  group in
February 2004,  where they agreed to purchase $12 million of lasers and products
for  the  next  twelve  months.  The  new  agreement  allows  for  two  one-year
extensions.  The Series H convertible preferred stock was converted into 360,000
shares  of  common  stock  on  June  30,  2004.  See  Note  18 to the  Notes  to
Consolidated Financial Statements.

         For  information  regarding  our export sales and  operating  revenues,
operating profit (loss) and identifiable assets by industry segment, see Note 15
of the Notes to Consolidated Financial Statements.

Results of Operations

         The following table sets forth, for the periods indicated,  information
derived from our consolidated statements of operations expressed as a percentage
of net sales, and the percentage  change in such items from the comparable prior
year period.  Any trends  illustrated in the following table are not necessarily
indicative  of  future  results.  The  percentages  presented  below  have  been
reclassified  to  include  in results  from  operations  the gain on the sale of
patent and litigation settlement expenses.



                                                                              Percentage Increase (Decrease)
                                         As a Percentage of Net Sales             Over Prior Periods
                                            Year Ended December 31,             Year Ended December 31,
                                            -----------------------               -----------------------
                                                                               
                                             2003       2002       2001         2002 to 2003   2001 to 2002
                                             ----       ----       ----         ------------   ------------
Statements of Operations Data:
Net revenues:
  Refractive products................        85.4%       89.5%      75.1%          (41.5)%          (28.1)%
  Patent services....................        14.6        10.5        2.2           (14.8)           181.1
  Gain on sale of patent.............          --          --       22.7              --           (100.0)
                                            -----       -----      ----- 
    Net revenues.....................       100.0       100.0      100.0           (38.7)           (39.7)
Gross profit (1).....................       (11.1)       45.3       57.6          (115.0)           (52.6)
Research, development and
    regulatory expenses (2)                   5.5        12.6       18.8           (73.3)           (59.7)



                                      -33-


Other general and administrative
    Expenses                                138.6       122.0      136.4           (30.4)           (46.1)
Impairment of patents                        63.7         --         --              --               --
Selling-related expenses (3)                 70.8        31.2       26.8            39.0            (29.8)
Allowed warranty claims                      72.1         --         --              --               --
                                                         
Amortization of intangibles                   3.8         4.4        2.9           (46.4)            (8.5)
Litigation settlement expense                 --          1.3        3.4             --             (76.3)
                                            -----       -----      ----- 

Loss from operations.................      (365.6)     (126.2)    (130.7)           79.4            (41.7)

 
   1. As a  percentage  of net  revenues,  the gross  profit  for  refractive
      products only for each of the three years ended December 31, 2003, 2002
      and 2001 was (30)%, 39% and 44%, respectively.

   2. As a percentage of refractive product net revenues, research,  development
      and  regulatory  expenses  for each of the three years ended  December 31,
      2003, 2002 and 2001 was 6%, 14% and 25%, respectively.                   
      
   3. As a  percentage  of  refractive  product  net  revenues,  selling-related
      expenses for each of the three years ended  December  31,  2003,  2002 and
      2001 was 83%, 35% and 36%, respectively.                                 
      
      




















                                      -34-






Quarterly Results of Operations

The  following  table sets forth  selected  items from our  quarterly  financial
results (in thousands, except for per share amounts).

                                                 2002                                         2003
                                                 ----                                         ----
                                                                                          
                               1st Qtr    2nd Qtr    3rd Qtr    4th Qtr    1st Qtr    2nd Qtr     3rd Qtr     4th Qtr
                               -------    -------    -------    -------    -------    -------     -------     -------
Net sales                        1,973      1,896      2,750      3,883      2,321      1,830       1,851         435
Gross profit                       581        854      1,333      1,985        975     (2,709)      1,340        (321)
Loss from continuing
   operations                   (5,079)    (4,400)    (2,452)    (1,638)    (2,382)   (11,059)     (8,867)     (1,222)

Net loss                        (5,079)    (4,400)    (2,452)    (1,638)    (2,411)   (11,091)     (8,915)     (1,099)
Loss attributable to common
   shareholders                 (5,079)    (4,400)    (2,452)    (1,992)    (2,895)   (11,575)     (9,403)     (1,225)
Loss per common share-basic
   and diluted                   (0.19)     (0.16)     (0.09)     (0.07)     (0.10)     (0.42)      (0.34)      (0.04)
Weighted average shares
   outstanding                  26,488     27,003     27,842     27,842     27,988     27,842      27,842      27,842



         Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

         Revenues.  Net revenues for the year ended  December 31, 2003 decreased
by $4.1 million, or 39%, to $6.4 million from $10.5 million in 2002.

         During the year ended December 31, 2003,  refractive  products revenues
decreased $3.9 million,  or 42%, to $5.5 million from $9.4 million in 2002. This
revenue  decrease was  primarily  the result of  decreased  sales of our excimer
laser systems and parts.  During the year ended December 31, 2003, excimer laser
system sales accounted for  approximately  $3.4 million in revenues  compared to
$6.4 million in revenues in 2002.  During the year ended  December 31, 2003,  11
laser  systems were sold  compared to 28 laser systems sold during 2002. Of this
$2.3 million reduction in laser system sales, approximately $0.4 million was off
set by higher average selling prices,  which  increased  approximately  12% from
2002.

          Net revenues from patent services for the year ended December 31, 2003
decreased  by  approximately  $0.2  million,  or 15%, to $.9  million  from $1.1
million in 2002.

         Geographically,  China continued as our most significant  market during
2003, with $4.4 million in revenue.  U.S. revenues  continued to decline,  as we
awaited FDA approval for the treatment of hyperopia with or without  astigmatism
and reduced our focus on U.S. sales.

         Cost of Revenues;  Gross Profit.  For the year ended  December 31, 2003
and 2002,  gross  profit  margins  were (11%) and 45%,  respectively.  The gross
margin   decrease  during  the  year  ended  December  31,  2003  was  primarily
attributable  to a $3.6 million  inventory  obsolescence  reserve and  decreased
sales and higher  average  costs of the our  excimer  laser  system  components,
causing  direct  overhead  to be a higher  percentage  of sales.  The  Company's
reorganization  plan, as confirmed by the bankruptcy court, called for a refocus
of the Company's products lines and the reduction of keratome and other obsolete
inventory.




                                      -35-



         Research,  Development and Regulatory Expenses.  Research,  development
and  regulatory  expenses  for  the  year  ended  December  31,  2003  decreased
approximately  $1.0 million,  or 73%, to $0.4 million from $1.3 million in 2002.
While decreasing our expenses,  we continued to develop our AstraMax  diagnostic
workstation and excimer laser systems.  If we have  sufficient  funds, we expect
research and development  expenses in 2004 to be at levels similar to the latter
half of 2003. We expect regulatory  expenses will be lower than 2003 as a result
of our  decision  to delay  further  spending  in the  pursuit  of  various  FDA
approvals,   including  pre-market  approval   supplements,   and  the  possible
development of additional  pre-market approval  supplements and future protocols
for submission to the FDA. The FDA has recently  instituted a fee structure that
will increase the cost of pursuing new or supplemental approvals.

         Other General and Administrative Expenses. Other general and
administrative expenses for the year ended December 31, 2003 decreased $3.9
million, or 30%, to $8.9 million from $12.8 million in 2001. This decrease was
primarily due to cost reductions associated with the sales and marketing,
customer support and professional services departments of $2.6 million and a
$0.5 million in depreciation. Conversely, we incurred approximately $0.8 million
in severance costs during 2003 related to staffing reductions.

         Selling-Related Expenses including allowed warranty claims.
Selling-related expenses consist of those items directly related to sales
activities, including commissions on sales, royalty or license fees, warranty
expenses, and costs of shipping and installation. Commissions and royalties, in
particular, can vary significantly from sale to sale or period to period
depending on the location and terms of each sale. Selling-related expenses for
the year ended December 31, 2003 increased $6.3 million, or 190%, to $9.2
million from $3.3 million during 2002. This increase was primarily attributable
to a $3.5 million increase in license fees resulting from a default in our
keratome license agreement and an increase of $4.6 million of warranty expense
related to allowed claims filed in Chapter 11, offset by lower shipping charges
due to fewer units being sold.

         Amortization of  Intangibles.  During the year ended December 31, 2003,
costs relating to the amortization of intangible assets decreased  $214,000,  or
46%,  to  $247,000  from  $460,000  in  2002.  Items  directly  related  to  the
amortization of intangible assets are acquired technologies, patents and license
agreements.  The reduction is a result of impairment expenses on patents because
of our product re-focus in our re-organization plan.

         Impairment of patents. Impairment of patents for the year ended
December 31, 2003 was $4.1 million. The Company recorded an impairment loss of
approximately $4.1 million related to Keratome, acquired technology and
diagnostic patents. Management decided to write-off the assets due to a lack of
a potential market for its acquired technology.

         Loss From  Operations.  The operating  loss for the year ended December
31, 2003 was $23.5 million  compared to the  operating  loss of $13.1 million in
2002.  This increase in the loss from  operations  was primarily due to reserves
and impairment expenses attributable to our bankruptcy re-organization plan.

         Other Income and Expenses. Interest and other income for the year ended
December 31, 2003 was $306,000,  similar to $276,000 million from 2002. Interest
and other income was earned from the investment of cash and cash equivalents and
the  collection  of  long-term  receivables  related to laser  system  sales and
receipt of  $253,000  proceeds of a  shareholder  derivative  lawsuit.  Interest
expense  for the year ended  December  31,  2003 was  $350,000,  a  decrease  of
$236,000 over 2002 as a result of reduced loan waiver and commitment fees in our
loan transaction with GE.




                                      -36-


         Income  Taxes.  For  the  years  ended  December  31,  2003  and  2002,
LaserSight  had no income  tax  expense.  In 2003 we  received  an IRS refund of
$58,000 for tax year 1995.

         Net Loss.  Net loss for the year ended  December  31,  2003,  was $23.5
million  compared to a net loss of $13.6  million in 2002.  The  increase in net
loss  for  the  year  ended  December  31,  2003  can  be  attributed  as of the
significant restructuring charges incurred as a result of the Chapter 11 filing.

         Loss Per Share.  The loss per basic and diluted share was $0.90 for the
year ended December 31, 2003 and $0.50 for in 2002.

         Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

         Revenues.  Net revenues for the year ended  December 31, 2002 decreased
by $6.9 million, or 40%, to $10.5 million from $17.4 million in 2001.

         During the year ended December 31, 2002,  refractive  products revenues
decreased by $3.7  million,  or 28%, to $9.4 million from $13.1 million in 2001.
This revenue decrease was primarily the result of decreased sales of our excimer
laser  systems.  During the year ended  December 31, 2002,  excimer laser system
sales  accounted for  approximately  $6.4 million in revenues  compared to $11.4
million in revenues in 2001.  During the year ended  December 31, 2002, 28 laser
systems were sold  compared to 46 laser  systems sold during 2001.  Of this $5.0
million  reduction in laser system sales,  approximately  $0.5 million  resulted
from lower average selling prices, which decreased approximately 8% from 2001.

         Net revenues from patent  services for the year ended December 31, 2002
increased by  approximately  $0.7  million,  or 181%,  to $1.1 million from $0.4
million in 2001, due to non-exclusive license agreements we entered into in late
2001 and early 2002.  Revenues in 2001 also included a one-time net gain,  after
expenses  associated with the sale, of $4.0 million from the sale of U.S. Patent
No.  4,784,135 (Blum Patent) in March 2001. The patent was sold for $6.5 million
and, prior to the sale, had a book value of approximately $2.4 million.

         Geographically,  China became our most significant  market during 2002,
with $4.7  million in revenue  ($2.7  million of which  resulted  from the China
transaction  beginning  in August  2002).  U.S.  revenues  continued to decline,
approximately  $2.8 million  lower than 2001 levels,  as we awaited FDA approval
for the treatment of hyperopia with or without astigmatism.

         Cost of Revenues;  Gross Profit.  For the years ended December 31, 2002
and 2001, gross profit margins were 45% and 58%, respectively.  The gross margin
decrease  during the year ended December 31, 2002 was primarily  attributable to
the gain on the sale of the Blum  Patent in 2001 and  decreased  sales and lower
average selling prices of the our excimer laser system, causing overhead to be a
higher percentage of sales.  Excluding the gain on the sale of patent, the gross
profit margin was 45% in 2001. The decreased number of laser sales resulted in a
decrease in general overhead expenses of $0.8 million from 2001.

         Research,  Development and Regulatory Expenses.  Research,  development
and  regulatory  expenses  for  the  year  ended  December  31,  2002  decreased
approximately  $2.0 million,  or 60%, to $1.3 million from $3.3 million in 2001.
While decreasing our expenses,  we continued to develop our AstraMax  diagnostic
workstation  and excimer laser systems and continued to pursue  protocols in our
effort to attain and expand our FDA approvals for our refractive products.




                                      -37-


         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses for the year ended  December 31, 2002  decreased  $10.9
million,  or 46%, to $12.8 million from $23.8 million in 2001. This decrease was
primarily  due to a decrease in expenses  incurred  at our  refractive  products
subsidiary of  approximately  $11.0  million that resulted from cost  reductions
associated  with the sales and  marketing,  customer  support  and  professional
services  departments of $4.7 million,  $1.9 million in cost reductions in other
departments,  $0.8  million  in  reduced  bad  debt  expense,  $0.7  million  of
reductions  in our European  operation  and a reduction of $2.9 million in legal
fees  related to patent  issues and  litigation.  The patent  litigation,  which
accounted  for a  significant  portion of those legal  fees,  was settled in May
2001,  and we have  experienced a significant  decrease in our legal expenses in
2002.  Conversely,  we incurred  approximately  $0.7 million in severance  costs
during 2002 related to staffing reductions.

         Selling-Related  Expenses.  Selling-related  expenses  consist of those
items  directly  related to sales  activities,  including  commissions on sales,
royalty  or  license  fees,  warranty  expenses,   and  costs  of  shipping  and
installation.  Commissions and royalties, in particular,  can vary significantly
from sale to sale or period to period  depending  on the  location  and terms of
each  sale.  Selling-related  expenses  for the year  ended  December  31,  2002
decreased  $1.4 million,  or 30%, to $3.3 million from $4.7 million during 2001.
This decrease was  primarily  attributable  to a $0.5 million  decrease in sales
commissions  resulting  from  lower  sales and a higher  percentage  of sales to
distributors  net of  commissions,  and a decrease  of $0.9  million of warranty
expense primarily related to decreased laser system sales and the terms on those
sales.

         Amortization of  Intangibles.  During the year ended December 31, 2002,
costs relating to the amortization of intangible  assets decreased  $43,000,  or
9%, to $460,000  from  $503,000 in 2001.  This decrease was due to the sale of a
patent in March 2001 that had an unamortized  book value of  approximately  $2.4
million.  Items directly  related to the  amortization of intangible  assets are
acquired technologies, patents and license agreements.

         Litigation Settlement Expense. During the year ended December 31, 2002,
litigation  settlement  expenses  include  $140,000 related to the settlement of
litigation with a former  shareholder of TFG, while 2001 includes  approximately
$0.6  million  in  payments  related  to  the  May  2001  settlement  of  patent
litigation.

         Loss From  Operations.  The operating  loss for the year ended December
31, 2002 was $13.3 million  compared to the  operating  loss of $22.8 million in
2001.  This decrease in the loss from operations was primarily due to reductions
in  operating  expenses  that more than offset the decrease in sales and related
margins of our excimer laser systems.

         Other Income and  Expenses.  Interest and dividend  income for the year
ended December 31, 2002 was $0.3 million,  a decrease of $0.3 million from 2001.
Interest and  dividend  income was earned from the  investment  of cash and cash
equivalents and the collection of long-term  receivables related to laser system
sales.  Interest  expense for the year ended December 31, 2002 was $0.6 million,
an increase of $0.1 million over 2001 as a result of our loan  transaction  with
GE in March 2001.

         Income Taxes. For the years ended December 31,2002 and 2001, LaserSight
had no income tax expense.

         Discontinued  Operations.  Costs related to the discontinued operations
of the health care  services  segment  were $3.5  million  during the year ended
December 31, 2001. There were no such costs during 2002.




                                      -38-


         Net Loss.  Net loss for the year ended  December  31,  2002,  was $13.6
million  compared to a net loss of $26.2  million in 2001.  The  decrease in net
loss for the year ended  December 31, 2002 can be attributed to the  significant
reductions in our operating  expenses  partially offset by the decrease in sales
of our  excimer  laser  systems and the gain  generated  by the sale of the Blum
Patent in March 2001.

         Loss Per Share.  The loss per basic and diluted share was $0.51 for the
year ended December 31, 2002 and $1.04 for in 2001. Since the beginning of 2001,
the weighted average shares of common stock outstanding  increased primarily due
to the  conversion  of  preferred  stock  during  May and  October  2002 and the
issuance of common stock related to our July 2001 financing.


Liquidity and Capital Resources

         On  September  5, 2003 the  company  filed for  Chapter  11  bankruptcy
protection  and  reorganization.  Under Chapter 11,  certain  claims against the
Company in existence  prior to the filing of the petitions for relief are stayed
while the Company continues  business  operations as  Debtor-in-possession.  The
Company  operated in this manner from  September  5, 2003 through June 10, 2004,
when a final  bankruptcy  release was  obtained.  As a result of the  bankruptcy
re-structuring,  the Company  expects to record credits for debt  forgiveness of
approximately  $15.6 during the three months ended June 30, 2004.  Additionally,
the Company  recognized  re-structuring  charges of  approximately  $7.6 million
during  2003 for patent  impairments  and  inventory  write  offs.  The  Company
cancelled all of its outstanding common and preferred stock,  including warrants
and  options,  and issued  9,997,195  new common  shares on June 30,  2004.  The
Company emerged from bankruptcy on June 30,2004 with  approximately $0.7 million
in unsecured liabilities, $2.1 million in secured debt to GE, approximately $5.4
million in deferred  revenue and  approximately  $1.0  million of DIP  financing
provided  by  NIIC.  NIIC  converted  $1.0  million  of the  DIP  financing  for
additional equity.

         With the new revenues being  generated from NIIC and projected sales to
other customers,  management  expects that LaserSight's cash and cash equivalent
balances and funds from  operations  (which are  principally the result of sales
and  collection  of  accounts   receivable)  will  be  sufficient  to  meet  its
anticipated  operating  cash  requirements  for the next  several  months.  This
expectation  is based  upon  assumptions  regarding  cash  flows and  results of
operations   over  the  next  several  months  and  is  subject  to  substantial
uncertainty and risks beyond our control.  If these assumptions prove incorrect,
the  duration  of  the  time  period  during  which  LaserSight  could  continue
operations  could be  materially  shorter.  We  continue to face  liquidity  and
capital  resource issues relative to the timing of the successful  completion of
new  sales  compared  to  our  ongoing  payment  obligations.  To  continue  our
operations, we will need to generate increased revenues, collect them and reduce
our expenditures relative to our recent history. While we are working to achieve
these  improved  results,  we cannot assure you that we will be able to generate
increased revenues and collections to offset required cash expenditures.

         The risks and  uncertainties  regarding  management's  expectations are
also described under the heading "Risk Factors and  Uncertainties--Financial and
Liquidity Risks."

         Our expectations  regarding future working capital requirements and our
ability to continue operations are based on various factors and assumptions that
are subject to  substantial  uncertainty  and risks beyond our  control,  and no
assurances  can be  given  that  these  expectations  will  prove  correct.  The
occurrence of adverse  developments  related to these risks and uncertainties or
others could result in LaserSight incurring unforeseen expenses, being unable to




                                      -39-


generate additional sales, to collect new and outstanding  accounts  receivable,
to control expected  expenses and overhead,  or to negotiate  payment terms with
creditors, and we would likely be unable to continue operations.

         We have actively sought  additional  funds through the possible sale of
certain  Company  assets which would provide  temporary  relief from our current
liquidity pressures.

         On March 12, 2001, the Company established a $3.0 million term loan and
$10.0 million  revolving credit facility with GE. We borrowed $3.0 million under
the term loan at an annual rate equal to two and one-half  percent  (2.5%) above
the prime  rate.  Interest is payable  monthly  and the loan was  required to be
repaid on March 12, 2003. As of December 31, 2003, the outstanding  principal on
our term loan is approximately $1.8 million.  Under our credit facility,  we had
the  option to borrow  amounts at an annual  rate  equal to one and  one-quarter
percent  (1.25%) above the prime rate for  short-term  working  capital needs or
such  other  purposes  as  approved  by GE.  Borrowings  were  limited to 85% of
eligible accounts receivable related to U.S. sales. Eligible accounts receivable
were to be  primarily  based on future U.S.  sales,  which did not increase as a
result of our  decision to not  actively  market our laser in the U.S.  until we
receive additional FDA approvals. See "Industry and Competitive Risks--We do not
intend to continue actively marketing our LaserScan LSX laser system in the U.S.
until we receive additional FDA approvals."

         Borrowings under the loans are  collateralized  by substantially all of
the  Company's  assets.  The term loan and  credit  facility  require us to meet
certain  covenants,  including the maintenance of a minimum net worth. The terms
of the loans originally extended to March 12, 2003. In addition to the costs and
fees  associated  with the  transaction,  we issued to GE a warrant to  purchase
243,750  shares of common  stock at an  exercise  price of $3.15 per share.  The
warrant  was to expire on March 12,  2004.  On August 15,  2002,  GE  provided a
waiver of our prior defaults under our loan agreement pending the funding of the
equity portion of the NIMD transaction. Upon receipt of the equity investment in
October 2002,  revised  covenants  became  effective that decreased the required
minimum level of net worth to $2.1 million, decreased minimum tangible net worth
to negative  $2.8 million and  decreased  required  minimum  quarterly  revenues
during the last two quarters of 2002 and the first  quarter of 2003. In exchange
for the waiver and revised covenants,  the Company paid $150,000 in principal to
GE upon the  receipt of the  equity  investment  in  October  2002 and agreed to
increase  other  monthly  principal  payments to $60,000 in October  2002 and to
$40,000  during each of November and December  2002 and January  2003,  with the
remaining principal due on March 12, 2003.

         On March 12, 2003,  our loan  agreement with GE was extended by 30 days
from March 12, 2003 to April 11,  2003.  On March 31, 2003,  our loan  agreement
with GE was amended again.  In addition to the amendment,  GE waived our failure
to comply  with the net  revenue  covenant  for the fourth  quarter of 2002.  In
exchange for the amendment and waiver, we paid  approximately  $9,250 in fees to
GE and agreed to increase our monthly principal payments to $45,000 beginning in
April 2003.  Revised covenants became effective on March 31, 2003 that decreased
the minimum  level of net worth to $1.0 million,  minimum  tangible net worth to
negative  $4.0  million and minimum  quarterly  net revenue  during 2003 to $2.0
million.  We agreed to work in good faith with GE to adjust  these  covenants by
May 31, 2003 based on our first quarter 2003  financial  results and our ongoing
efforts to obtain additional cash infusion. As discussed above, On June 20, 2003
LSI announced  that it had been advised by GE that its loans to the Company were
in default due to an adverse  material  change in the  financial  condition  and
business  operations of the Company.  The Company continued to negotiate with GE
during the June and July of 2003,  until a new  agreement was executed on August
28, 2003 providing for an extension of the loans through January 2005.



                                      -40-


         On August 30, 2004 the Company  signed a  three-year  note  expiring on
June 30, 2007. The note bears interest of 9%. Certain covenants were modified as
follows: net worth $750,000, tangible net worth $1,000,000 and minimum quarterly
revenues of  $1,000,000.  GE was issued a warrant to purchase  100,000 shares of
common stock at $0.25 per share,  or $0.40 per share if NIIC converts  their DIP
loan to equity. The warrant expires June 30, 2008.

         There  can  be  no  assurance  as  to  the  correctness  of  the  other
assumptions  underlying  our business  plan or our  expectations  regarding  our
working capital requirements or our ability to continue operations.

         Our ability to continue  operations  is based on factors  including the
success of our sales efforts in China and in other foreign  countries  where our
efforts will initially be primarily  focused,  increases in accounts  receivable
and inventory purchases when sales increase,  the uncertain impact of the market
introduction  of our  AstraMax  diagnostic  workstations,  and  the  absence  of
unanticipated  product  development and marketing  costs.  See "Risk Factors and
Uncertainties--Industry and Competitive Risks--"

Effect of Recent Accounting Pronouncements


         In June 2002, the Financial  Accounting  Standards  Board (FASB) issued
Statement  No.  146  "Accounting  for Costs  Associated  with  Exit or  Disposal
Activities."   This  statement   nullifies  EITF  Issue  No.  94-3,   "Liability
Recognition for Certain Employee Termination Benefits Restructuring."  Statement
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred rather than the date of an
entity's  commitment to an exit plan.  The Company will be required to implement
Statement No. 146 on January 1, 2003.  The adoption of Statement No. 146 did not
have a material effect on the Company's consolidated financial statements.

         In December 2002, the FASB issued  Statement No. 148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure - an amendment of FASB
Statement No. 123." Statement No. 148 amends Statement No. 123,  "Accounting for
Stock-Based  Compensation," to provide  alternative  methods of transition for a
voluntary  change to the fair value based method of  accounting  for  stock-base
employee  compensation.  In addition,  Statement  No. 148 amends the  disclosure
requirements  of  Statement  No. 123 to require  prominent  disclosures  in both
annual and interim financial statements. Certain of the disclosure modifications
are required for fiscal years ending after December 15, 2002 and are included in
the notes to these consolidated financial statements.

         In November  2002,  the EITF  reached a consensus  on Issue No.  00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance  on how to account  for  arrangements  that  involve  the  delivery  or
performance  of multiple  products,  services  and/or rights to use assets.  The
provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in
fiscal  periods  beginning  after June 15, 2003.  The adoption of EITF Issue No.
00-21 did not have a material  impact on our  financial  position  or results of
operations.

         In December  2003, the FASB revised  Interpretation  No. 46 ("FIN 46"),
"Consolidation of Variable Interest  Entities,  an Interpretation of ARB No. 51"
which it had  originally  issued in January  2003.  As revised,  FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary
of  the  entity  if  the  equity  investors  in  the  entity  do  not  have  the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties.  As revised,  application of


                                      -41-


FIN 46 is required for interests in special-purpose  entities for periods ending
after December 15, 2003.  Application for all other types of entities covered by
FIN 46 is required in financial  statements  for periods  ending after March 15,
2004.  The  adoption  of FIN 46 as revised,  is not  expected to have a material
impact on our financial position or results of operations.

         In  May  2003,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 150 (SFAS 150), "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity".  SFAS 150 requires that certain
financial  instruments,  which under  previous  guidance  were  accounted for as
equity,  must now be accounted for as  liabilities.  The  financial  instruments
affected include mandatory redeemable stock, certain financial  instruments that
require or may require the issuer to buy back some of its shares in exchange for
cash or other assets and certain  obligations that can be settled with shares of
stock.  SFAS 150 is  effective  for all  financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning  after June 15, 2003,  although  certain aspects
have been delayed pending further clarifications.  We do not expect the adoption
of SFAS 150 to have a material  impact on our  financial  position or results of
operations.

         In December 2003, the SEC issued Staff Accounting  Bulletin ("SAB") No.
104 "Revenue Recognition" which codifies,  revises and rescinds certain sections
of SAB No.  101,  "Revenue  Recognition",  in  order to make  this  interpretive
guidance consistent with current authoritative  accounting and auditing guidance
and SEC rules and  regulations.  The changes noted in SAB No. 104 did not have a
material effect on our financial position or results of operations.

Contractual Obligations

      Contractual  obligations represent future cash commitments and liabilities
 under agreements with third parties,  and exclude contingent  liabilities which
 we cannot reasonably predict future payment. The following chart represents our
 contractual obligations, aggregated by type, as of December 31, 2003:





                                                                                    

       Contractual obligations                                    Payments due by period
                                                   Less that 1                                  Over
                                      Total            year      2-3 years      3-5 years     5 years

GE Debt Obligations                 1,843,313       1,843,313            -              -           -
DIP Financing Obligation              750,000         750,000            -              -           -
Operating Lease Obligations           636,000         367,000      269,000              -           -
                                    ------------------------------------------------------------------
                                    3,229,313       2,960,313      269,000              0           0
                                    ==================================================================







                                      -42-


Off-Balance Sheet Arrangements

      We have no other  long-term  debt  commitments  and no  off-balance  sheet
financing vehicles.

Critical Accounting Policies and Estimates

         The preparation of our consolidated  financial statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires us to make estimates and assumptions  that affect the reported  amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting period.  Our estimates,  judgments and assumptions
are continually evaluated based on available information and experience. Because
of the use of estimates  inherent in the  financial  reporting  process,  actual
results could differ from those estimates.

         Certain of our accounting  policies  require higher degrees of judgment
than others in their application. These include revenue recognition,  estimating
product  warranty  reserves,  the  allowance  for doubtful  accounts,  inventory
obsolescence  reserves and impairment of long-lived assets. In addition,  Note 2
to the Consolidated  Financial  Statements  includes  further  discussion of our
significant accounting policies.

         Management believes the following critical accounting  policies,  among
others,  affect  its  more  significant  judgments  and  estimates  used  in the
preparation of its consolidated financial statements.

         Revenue Recognition

         We derive our revenue from primarily two sources:  (i) product  revenue
and (ii) royalty revenue.  The Company  recognizes  revenue on its products upon
shipment,  provided that the persuasive  evidence of an arrangement is in place,
the price is fixed or determinable,  collectibility is reasonably  assured,  and
title and risk of ownership have been transferred. Transfer of title and risk of
ownership  occurs when the product is shipped to the  customer,  as there are no
customer  acceptance  provisions  in our  sales  agreements.  Should  management
determine  that customer  acceptance  provisions are modified for certain future
transactions, revenue recognition in future reporting periods could be affected.
Royalty  revenue from the license of patents  owned is  recognized in the period
earned.  When we issue  paid-up  licenses,  the revenue is  recognized  over the
remaining  life of the patent  licensed on a  straight-line  basis.  Revenues in
multiple  element  arrangements  are  allocated to each  element  based upon the
relative  fair  values of each  element,  based upon  published  list  prices in
accordance with Emerging Issues Task Force (EITF) 00-21,  "Revenue  Arrangements
with Multiple  Deliverables."  We recognize revenue from sales of our topography
software in  accordance  with  Statement  of Position  ("SOP")  97-2,  "Software
Revenue  Recognition"  as  amended by SOP 98-9,  "Modification  of SOP 97-2 with
Respect to Certain  Transactions."  In addition to the  criteria  listed  above,
revenue  is  recognized  when  the  arrangement  does  not  require  significant
customization or modification of the software.

         Product Warranty Reserves

         We provide for the  estimated  costs of product  warranties at the time
revenue is recognized. Our estimate of costs to service the warranty obligations
is based on historical experience, including the types of service/parts required
to repair our products,  the frequency of warranty calls, and the component cost




                                      -43-


of the raw materials and overhead. Management believes that the warranty reserve
is appropriate;  however,  to the extent we experience  increased warranty claim
activity or increased costs associated with servicing those claims, revisions to
the estimated  warranty liability would be required.  All pre-petition  warranty
obligations were nullified in bankruptcy.

         Allowance for Doubtful Accounts

         We must make  estimates  of the  uncollectibility  of our  accounts and
notes  receivable  balances.  We estimate  losses based on the overall  economic
climate in the countries where our customers reside, customer credit-worthiness,
and an analysis of the circumstances associated with specific accounts which are
past due. Our accounts and notes  receivable  balance was $8.5  million,  net of
allowance for doubtful accounts of $8.4 million, as of December 31, 2003. If the
financial  condition  of our  customers  were to  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.  We  continually  evaluate the adequacy of our  allowance for doubtful
accounts.


         We sold  products  to  customers,  at times  extending  credit for such
sales.  Exposure  to losses on  receivables  is  principally  dependent  on each
customer's  financial  condition and their ability to generate  revenue from our
products.  We monitor our exposure for credit losses and maintain allowances for
anticipated losses.

         The increases in the  provision  for bad debts relates to  establishing
allowances for uncollectible  receivables from prior period sales. The increases
are the  result of events and  circumstances  that  could not  realistically  be
foreseen at the time sales were completed. In addition, during our recent period
of declining revenues, the relationship between the bad debts that resulted from
these  events  compared  to  lower  revenues  is  magnified.   Such  events  and
circumstances  include FDA  approvals  on our laser system that took longer than
anticipated, economic downturns in certain countries or regions of the world and
the terrorist attacks that affected personal  spending  decisions,  the business
levels of many of our customers and our filing of Chapter 11 in September  2003.
Some of these items are always possible,  and have been disclosed by the Company
in times past as risk factors.  Others could not be foreseen without the benefit
of hindsight.

         We  anticipate  collection  at the  time  of  shipment  of  each of our
products for two main reasons.  First,  our laser system is a  revenue-producing
product for our customers;  the more it's used, the more revenue  physicians can
generate.  Second, our laser system provides for periodic passwords to customers
who have payment plans.  Therefore, if a customer owes us money and wants to use
his system,  the  customer  will need to pay the amount owed in order to use the
laser  system  beyond  a  designated  period  of  time.  This  control  has been
successfully  used in many  cases to ensure  payment.  However,  in some  cases,
magnified by the economic other factors facing us and some of our customers over
the last  couple  of  years,  the  inability  to use the  laser  was not  enough
incentive to force payment.

         In response, we have implemented certain changes over the course of the
last year in  response  to the world  events  and in an  effort to  improve  the
collectibility of our sales, which are primarily in international  markets.  The
changes generally involve  significantly  higher down payments prior to shipping
and shorter  payment terms for the balance of the sales price of laser  systems.
Therefore,  the Company  expects its bad debt levels to be reduced in the future
while revenues are anticipated to increase. The increased revenues are resulting
from the NIMD  transaction.  The  payment  for  these  sales was  covered  under
irrevocable  letters of credit,  providing for payment upon the  presentation of
shipping documents.



                                      -44-


         Inventory Obsolescence Reserves

         We maintain reserves for our estimated obsolete inventory. The reserves
are equal to the  difference  between the cost of  inventory  and the  estimated
market value based upon assumptions  about future demand and market  conditions.
If actual  market  conditions  are less  favorable  than those  projected by us,
additional inventory write-downs may be required.

         Impairment of Long-Lived Assets

         We  review  long-lived   assets  and  certain   intangible  assets  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future  undiscounted net cash flows expected to be generated by the asset. If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured by the amount by which the  carrying  amount of the assets  exceeds the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.  Management  believes that
the  estimates  of future  cash  flows and fair value are  reasonable;  however,
changes  in  estimates  of such  cash  flows and fair  value  could  affect  the
evaluations.

         Seasonality, Backlog and Customer Payment Terms

         Based on our  historical  activity,  we do not  believe  that  seasonal
fluctuations have a material impact on our financial performance.

         To date,  we have been able to ship laser units as orders are received.
As a result, order backlog is not a meaningful factor in our business.

         Sales to the NIMD group are  secured  by letters of credit and  payable
upon  shipment  of  products  and   presentation  of  shipping   documents.   In
international  markets,  unless a letter of credit or other acceptable  security
has been obtained, we generally require a down payment or deposit from our laser
system customers.

Risk Factors and Uncertainties

         The  business,   results  of  operations  and  financial  condition  of
LaserSight and the market price of our common stock may be adversely affected by
a variety of factors, including the ones noted below:

Financial and Liquidity Risks

         We have experienced significant losses and operating cash flow deficits
and we expect that operating cash flow deficits will continue.

         We continue to be challenged by our  significant  liquidity and capital
resource issues relative to the timing of our accounts receivable collection and
the  successful  completion  of  new  sales  compared  to  our  ongoing  payment
obligations.  Although the Chapter 11  re-organization  in September of 2003 and
resultant  re-structuring  will relieve the Company of substantial debt, we need
to  increase  sales to NIMD and to other  customers,  and/or  decrease  expenses
further,  before we will reach  profitability  or positive cash flow. Our future
working capital requirements and our ability to continue operations are based on
various factors and  assumptions,  which are subject to substantial  uncertainty




                                      -45-


and  risks  beyond  our  control,  and no  assurances  can be given  that  these
expectations will prove correct.  The occurrence of adverse developments related
to these risks and  uncertainties  or others  could result in  LaserSight  being
unable to  generate  additional  sales or collect new and  outstanding  accounts
receivable.  Any such adverse  developments may also result in the incurrence of
unforeseen  expenses or LaserSight being unable to control expected expenses and
overhead.  If  we  fail  to  generate  additional  sales  and  collect  new  and
outstanding  accounts receivable or incur unforeseen expenses or fail to control
our expected expenses and overhead,  we will be unable to continue operations in
the absence of obtaining additional sources of capital.

         The timing of the  conversion  of our  current  assets into cash is not
totally  in our  control.  For  example,  we cannot  dictate  the  timing of the
collection of our accounts  receivable  with our  customers,  and converting our
inventory  into cash is  dependent on our ability to generate new sales with our
products and collect the sales price in a timely  manner.  While to date we have
been able to  negotiate  limited  payment  terms  with our  suppliers  and other
creditors, there is no assurance that we can continue to do so.

         We  experienced  significant  net losses and deficits in cash flow from
operations for the years ended December 31, 2003, 2002 and 2001, as set forth in
the  following  table.  We cannot be certain  that we will be able to achieve or
sustain profitability or positive operating cash flow in the future.
            
                                           Year Ended December 31,
                                    2001             2002           2003
                                    ----             ----           ----
Net loss                        $26.2 million   $13.6 million   $23.5 million
Deficit in cash flow from
operations                      $17.7 million    $2.7 million    $1.0 million

         In the longer term, our  expectations  are based on additional  factors
including:  the success of our sales  efforts in China,  where our efforts  will
initially be primarily focused,  increases in accounts  receivable and inventory
purchases when sales increase,  AstraMax  diagnostic  workstations  and AstroPro
diagnostic  software,  and the absence of unanticipated  product development and
marketing  costs.  These  factors and  assumptions  are  subject to  substantial
uncertainty  and risks beyond our control,  and no assurances  can be given that
these expectations will prove correct. These risks and uncertainties include:

         o  the willingness  of trade  creditors to continue to extend credit to
            LaserSight;
         o  reductions and cancellations in orders;
         o  our ability  to  fulfill  orders in light of our  current  financial
            condition;
         o  our ability to sell products and collect accounts  receivables at or
            above the level of management's expectations;
         o  the occurrence  of  unforeseen  expenses  and our ability to control
            expected expenses and overhead;
         o  the occurrence of property and casualty losses which are uninsured
            or that generate insurance proceeds that cannot be collected in a
            short time frame;
         o  our ability to improve pricing and terms of international sales;
         o  the loss of, or failure to obtain additional, customers; and
         o  changes in pricing by our competitors.

         With  respect  to  management's   expectations  regarding  LaserSight's
ability  to  continue  operations  for  the  future  period  and the  risks  and
uncertainties  relating to those expectations,  readers are encouraged to review
the discussions  under the captions "--If our uncollectible  receivables  exceed




                                      -46-


our  reserves  we  will  incur  additional  unanticipated  expenses,  and we may
experience difficulty collecting restructured  receivables with extended payment
terms," "--Industry and Competitive Risks--"  "--Additional Company and Business
Risks--Required  per procedure fees payable to VISX under our license  agreement
may exceed per  procedure  fees  collected by us," and "--Our  supply of certain
critical  components and systems may be interrupted because of our reliance on a
limited  number  of  suppliers."   These  risks  and  uncertainties  can  affect
LaserSight's ability to continue operations for the future period in the absence
of obtaining additional capital resources

         If we fail to meet the financial covenants in our loan with GE, we will
not have enough available cash to pay the amount owed.

         Under the original  terms of our term loan with GE, we were required to
pay GE approximately $2.1 million in March 2003. On March 12, 2003, the due date
was extended 30 days to April 11, 2003.  On March 31, 2003,  our loan  agreement
with GE was amended again.  In addition to the amendment,  GE waived our failure
to comply  with the net  revenue  covenant  for the fourth  quarter of 2002.  In
exchange for the amendment and waiver, we paid  approximately  $9,250 in fees to
GE, and we had agreed to  increase  our  monthly  principal  payments to $45,000
beginning in April 2003.  Revised  covenants became effective that decreased the
minimum  level of net  worth to $1.0  million,  minimum  tangible  net  worth to
negative  $4.0  million and minimum  quarterly  net revenue  during 2003 to $2.0
million.  On June 20, 2003, the Company had been advised by GE that its loans to
the Company were in default due to an adverse  material  change in the financial
condition  and business  operations of the Company.  The Company  executed a new
agreement  with GE on August 28, 2003  providing  for an  extension of its loans
through  January 2005. On August 30, 2004 the Company  signed a three-year  note
expiring  on June 30,  2007.  The note  bears  annual  interest  of 9%.  Certain
covenants  were  modified as follows:  net worth  $750,000,  tangible  net worth
$1,000,000 and minimum quarterly revenues of $1,000,000. GE was issued a warrant
to  purchase  100,000  shares of common  stock at $0.25 per share,  or $0.40 per
share if NIIC converts  their DIP loan to equity.  The warrant  expires June 30,
2008.

         If our  uncollectible  receivables  exceed our  reserves  we will incur
additional  unanticipated  expenses, and we may experience difficulty collecting
restructured receivables with extended payment terms.

         Although  we  monitor  the  status of our  receivables  and  maintain a
reserve  for  estimated  losses,  we cannot be  certain  that our  reserves  for
estimated losses,  which were  approximately  $8.4 million at December 31, 2003,
will be  sufficient to cover the amount of our actual  write-offs  over time. At
December  31,  2003,  our  net  trade  accounts  and  notes  receivable  totaled
approximately $8.5 million. Actual write-offs that exceed amounts reserved could
have a material  adverse  effect on our  consolidated  financial  condition  and
results of  operations.  The amount of any loss that we may have to recognize in
connection with our inability to collect receivables is principally dependent on
our customers' ongoing financial  condition,  their ability to generate revenues
from our laser  systems,  and our ability to obtain and enforce legal  judgments
against delinquent customers.  As a result of the Chapter 11 filing on September
5, 2003,  the Company lost the ability to vigorously  collect on these  accounts
receivable and accordingly  further  increased the reserves for estimated losses
as part of the re-structuring  costs recorded in the second quarter. The portion
of the  re-structuring  costs  attributable to our reserves for estimated losses
was  approximately  $3.5  million.  Additionally,  as a result of the Chapter 11
petition  and   resultant   re-structuring,   a   significant   portion  of  the
approximately  $1.6 million of accrued  commissions was eliminated.  The Company
hired a collection agency in 2004 with no success.




                                      -47-


         Our ability to evaluate the financial condition and  revenue-generating
ability of our prospective customers located outside of the U.S. and our ability
to obtain and enforce legal judgments  against  customers located outside of the
U.S. is generally  more limited than for our  customers  located in the U.S. Our
agreements with our international customers typically provide that the contracts
are  governed by Florida law. We have not  determined  whether or to what extent
courts or administrative agencies located in foreign countries would enforce our
right to collect such  receivables or to recover laser systems from customers in
the  event of a  customer's  payment  default.  When a  customer  is not  paying
according to established  terms,  we attempt to  communicate  and understand the
underlying  causes  and work with the  customer  to  resolve  any  issues we can
control or influence.  Since the September 5, 2003 bankruptcy petition,  we have
been  unable to resolve  some  customer's  issues and were unable to collect our
receivable,  either on the original  schedule or under  restructured  terms.  We
evaluate  our  legal  and  other   alternatives  based  on  existing  facts  and
circumstances.  In most cases,  we have  concluded  that the  account  should be
written off as uncollectible  based on the economic  condition in the region and
our understanding of the customer's business and related items. The reserves and
write-offs are generally the result of events and  circumstances  that could not
realistically be foreseen at the time sales were completed. In addition,  during
our recent period of declining revenues,  the relationship between the bad debts
that resulted from these events compared to lower revenues is magnified.  Events
and circumstances  that impact our bad debt expense include FDA approvals on our
laser  system  that  took  and are  taking  longer  than  anticipated,  economic
downturns in certain  countries or regions of the world,  including the U.S. and
South and Central  America,  and the terrorist  attacks that  affected  personal
spending  decisions of  consumers,  and thus the business  levels of many of our
customers. Accounts written off during the year ended December 31, 2003 and 2002
totaled approximately 92% and 22%, respectively,  of ending receivables for each
period.  International revenues represented 96% and 83% of total revenues during
the year ended December 31, 2003 and 2002.

         .
Industry and Competitive Risks

         The following  Industry and Competitive  Risks relate  primarily to the
longer term.

         We do not intend to continue actively marketing our LaserScan LSX laser
system in the U.S. until we receive additional FDA approvals.

         We received the FDA approval necessary for the commercial marketing and
sale of our  LaserScan  LSX  excimer  laser  system in the U.S. in late 1999 and
commercial  shipments to customers in the U.S. began in March 2000. To date, our
LaserScan  LSX laser  system  and per  procedure  fee  business  model  have not
achieved a level of market acceptance  sufficient to provide our cash flows from
operations to fund our business.  Our excimer laser system has not been approved
by the FDA for use in the U.S. for as wide a range of treatments as have many of
our competitors' lasers. Because of the limited treatment ranges many physicians
have resisted purchasing our excimer laser. As a result of our current liquidity
and capital resource issues, we have decided to focus on international  markets,
primarily  China,   with  our  LaserScan  LSX  laser  system  and  other  select
international  markets with a custom ablation  product line, and not to continue
actively marketing our laser system in the U.S.

         The  current  level of per  procedure  fees  payable to us by  existing
refractive  surgeon customers in the U.S. may not continue to be accepted by the
marketplace or may exceed those charged by our  competitors.  If our competitors
reduce or do not charge per procedure fees to users of their  systems,  we could
be forced to reduce or eliminate  the fees charged  under this  business  model,
which could significantly reduce our revenues. We are not aware of the existence




                                      -48-


of a current trend toward  reducing or  eliminating  per procedure  fees. In the
spring of 2000  industry  leader  VISX  reduced  the  per-procedure  fees it was
charging the users of its laser system, and shortly thereafter,  Alcon announced
that it too would be  reducing  its  licensing  fee.  Since  that  time,  to our
knowledge  there has been no trend to further  reduce or eliminate per procedure
fees. See also "--Additional Company and Business  Risks--Required per procedure
fees payable to VISX under our license  agreement may exceed per procedure  fees
collected by us."

         We have discontinued our keratome products marketing.

         Keratomes are surgical  devices used to create a corneal flap needed to
perform a laser vision correction procedure called Laser In-Situ Keratomileusis,
or LASIK.  Once the corneal  flapped is created,  it is then flipped  back,  the
excimer laser beam is directed to the exposed corneal  surface,  and the flap is
placed back and re-adhered to the surface of the eye.

          In  light  of our  lack  of  successful  commercially  introducing  or
achieving  broad market  acceptance of our UltraShaper  durable  keratome or our
other keratome products, the Company elected to discontinue this product line in
September of 2003 as part of the re-focus of the business to core products. As a
result the Company will record  substantial  additions to its inventory reserves
as part of its  re-structuring  costs.  As of June 30, 2003 the Company added an
additional  amount of  approximately  $3.6 million to such  inventory  reserves,
which are classified as cost of revenues.  See also  "--Additional  Company and
Business  Risks--Required  minimum payments under our keratome license agreement
may exceed our gross profits from sales of our keratome products."


         The vision correction  industry currently consists of a few established
providers with significant  market shares and we are  encountering  difficulties
competing in this highly competitive environment.

         The  vision  correction  industry  is subject  to  intense,  increasing
competition,  and we do not  know if we will  be  able to  compete  successfully
against  our  current  and  future  competitors.  Many of our  competitors  have
established products, distribution capabilities and customer service networks in
the  U.S.   marketplace,   are  substantially  larger  and  have  greater  brand
recognition  and greater  financial and other  resources  than we do. VISX,  the
historical  industry  leader for excimer  laser system  sales in the U.S.,  sold
laser  systems  that  performed  a  significant  majority  of the  laser  vision
correction  procedures performed in the U.S. from 1999 through 2003.  Similarly,
Bausch & Lomb sold a significant  majority of the  keratomes  used by refractive
surgeons  in the  U.S.  from  1999  through  2003.  Alcon,  one  of the  largest
ophthalmic companies in the world, and its narrow beam laser technology platform
also competes directly with our precision beam, scanning microspot LaserScan LSX
excimer laser system.  In addition,  Alcon,  as a result of its  acquisition  of
Summit  Autonomous  Inc.,  is able to sell its narrow beam laser systems under a
royalty-free  license to certain VISX patents without  incurring the expense and
uncertainty  associated with intellectual  property  litigation with VISX. Alcon
also has the ability to leverage  the sale of its laser  systems  with its other
ophthalmic  products,  and has placed a significant number of its lasers systems
in the U.S.  Competitors  are using our weak  financial  condition  to  dissuade
potential customers from purchasing our laser.


         Many of our competitors  received earlier regulatory  approvals and may
have a competitive  advantage over us due to the  subsequent  expansion of their
regulatory approvals and their substantial experience in the U.S. market.




                                      -49-


         We received the FDA approval  necessary for the commercial  sale of our
LaserScan LSX excimer laser system in the U.S. in November  1999, and commercial
shipments to customers in the U.S. began in March 2000.  Our direct  competitors
include  large  corporations  such as VISX and Alcon,  each of whom received FDA
approval of excimer  laser  systems  more than three years prior to our approval
and has  substantial  experience  manufacturing,  marketing and servicing  laser
systems in the U.S. In addition to VISX and Alcon, Nidek, WaveLight and Bausch &
Lomb have also received FDA approval for their laser systems.

         In the U.S., a manufacturer of excimer laser vision correction  systems
gains a  competitive  advantage by having its systems  approved by the FDA for a
wider  range  of  treatments  for  refractive  errors  such as  nearsightedness,
farsightedness or astigmatism.  A laser that has been approved for a wider range
of  treatments  is more  attractive  because  it  enlarges  the  pool  of  laser
correction  candidates  to whom laser  correction  procedures  can be  marketed.

         Our LaserScan LSX is currently approved in the U.S. for the LASIK
treatment of nearsightedness with and without astigmatism for a range of
treatment of refractive errors up to -6.0 diopters MRSE with or without a
refractive astigmatism up to 4.5 diopters and for the Photorefractive
Keratectomy, or PRK, treatment of low to moderate nearsightedness (up to -6.0
diopters) without astigmatism. Additionally, we have received FDA approval to
operate our laser systems at a repetition rate of 300 pulses per second, three
times the originally approved rate. We do not intend to sell our laser systems
in the U.S. until future cash flows permit us to file FDA supplements.
 
         Competitors' earlier receipt of LASIK and farsightedness-specific FDA
regulatory approvals have given them a significant competitive advantages that
have impeded our ability to successfully sell our LaserScan LSX system in the
U.S.


         We  depend  upon  our  ability  to  establish  and  maintain  strategic
relationships.

         We  believe  that our  ability  to  establish  and  maintain  strategic
relationships will have a significant impact on our ability to meet our business
objectives.  These  strategic  relationships  are critical to our future success
because we believe that these relationships will help us to:

         o  extend the reach of our products  to a larger  number of  refractive
            surgeons;
         o  develop and deploy new products;
         o  further enhance the LaserSight brand; and
         o  generate additional revenue.

         Entering into strategic  relationships  is complicated  because some of
our current and future strategic  partners may decide to compete with us in some
or  all  of  our  markets.  In  addition,  we  may  not  be  able  to  establish
relationships  with key participants in our industry if they have  relationships
with  our  competitors,  or if we have  relationships  with  their  competitors.
Moreover,  some potential strategic partners have resisted,  and may continue to
resist, working with us until our products and services have achieved widespread
market acceptance.  Once we have established  strategic  relationships,  we will
depend on our partners' ability to generate increased  acceptance and use of our
products and services.  To date, we have  established  only a limited  number of
strategic relationships, and many of these relationships are in the early stages




                                      -50-


of  development.  There  can  be  no  assurance  as  to  the  terms,  timing  or
consummation  of any  future  strategic  relationships.  If we lose any of these
strategic relationships or fail to establish additional relationships, or if our
strategic  relationships  fail to benefit us as expected,  we may not be able to
execute our business plan, and our business will suffer.

         Because the sale of our products is dependent on the  continued  market
acceptance of laser-based refractive eye surgery using the LASIK procedure,  the
lack of broad market acceptance would hurt our business.

         We  believe  that  whether  we achieve  profitability  and growth  will
depend, in part, upon the continued  acceptance of laser vision correction using
the LASIK procedure in China, the U.S. and in other  countries.  We believe that
if we achieve profitability and growth as a result of our focus in China, we can
increase  our level of activity in the U.S.  and other  countries.  We cannot be
certain that laser vision  correction will continue to be accepted by either the
refractive surgeons or the public at large as an alternative to existing methods
of  treating  refractive  vision  disorders.  The  acceptance  of  laser  vision
correction and, specifically, the LASIK procedure may be adversely affected by:

         o  possible  concerns  relating to safety and  efficacy,  including the
            predictability, stability and quality of results;
         o  the public's general resistance to surgery;
         o  the  effectiveness   and  lower  cost  of  alternative   methods  of
            correcting refractive vision disorders;
         o  the lack of long-term follow-up data;
         o  the possibility of unknown side effects;
         o  the lack of third-party reimbursement for the procedures;
         o  the cost of the procedure; and
         o  unfavorable  publicity  involving  patient  outcomes from the use of
            laser vision correction.

         Unfavorable side effects and potential complications that may result
from the use of laser vision correction systems manufactured by any manufacturer
may broadly affect market acceptance of laser-based vision correction surgery.
Any adverse consequences resulting from procedures performed with a competitor's
systems or an unapproved laser system could adversely affect consumer acceptance
of laser vision correction in general. In addition, because laser vision
correction is an elective procedure that is not typically covered by insurance
and involves more significant immediate expense than eyeglasses or contact
lenses, adverse changes in economy may cause consumers to reassess their
spending choices and to select lower-cost alternatives for their vision
correction needs. Any such shift in spending patterns could reduce the volume of
LASIK procedures performed that would, in turn, reduce the number of laser
systems sold and our revenues from per procedure fees.

         The failure of laser  vision  correction  to achieve  continued  market
acceptance  would limit our ability to market our  products  which in turn would
limit our ability to generate revenues from the sale of our products.  If we are
unable to generate revenue from the sale of our products,  we may not be able to
continue our business  operations,  even if laser vision correction achieves and
sustains market acceptance.

         New  products or  technologies  could erode  demand for our products or
make them obsolete, and our business could be harmed if we cannot keep pace with
advances in technology.

         In addition to competing with  eyeglasses and contact  lenses,  excimer
laser vision correction  competes or may compete with newer technologies such as
intraocular lenses,  intracorneal inlays,  corneal rings and surgical techniques
using  different or more advanced types of lasers.  Two products that may become
competitive  within the near term are  implantable  contact  lenses and  corneal




                                      -51-


rings,  which have been  approved  by the FDA.  Both of these  products  require
procedures with lens implants,  and their ultimate market  acceptance is unknown
at this time.  To the  extent  that any of these or other new  technologies  are
perceived  to be  clinically  superior  or  economically  more  attractive  than
currently  marketed  excimer laser vision  correction  procedures or techniques,
they could erode demand for our excimer laser,  and cause a reduction in selling
prices of such products or render such products obsolete. In addition, if one or
more competing  technologies achieves broader market acceptance or renders laser
vision correction procedures obsolete, our ability to generate revenues form the
sale of our products would be limited. If we are unable to generate revenue from
the  sale  of our  products,  we may  not  be  able  to  continue  our  business
operations.

         As is typical in the case of new and rapidly evolving industries, the
demand and market for recently introduced products and technologies is
uncertain, and we cannot be certain that our LaserScan LSX and AstraScan XL
laser systems or future new products and enhancements will be accepted in the
marketplace. In addition, announcements or the anticipation of announcements of
new products, whether for sale in the near future or at some later date, may
cause customers to defer purchasing our existing products.
 
         If we cannot  adapt to changing  technologies,  our products may become
obsolete,  and our business could suffer.  Our success will depend,  in part, on
our ability to continue to enhance our existing products, develop new technology
that addresses the increasingly  sophisticated  needs of our customers,  license
leading technologies and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. The development of
our proprietary  technology entails significant technical and business risks. We
may not be  successful  in using new  technologies  effectively  or adapting our
proprietary  technology to evolving  customer  requirements or emerging industry
standards.

Additional Company and Business Risks

         The following Additional Company and Business Risks relate primarily to
the longer term.

         The loss of key personnel could adversely affect our business.

         Our ability to maintain our competitive  position  depends in part upon
the continued contributions of our executive officers and other key employees. A
loss of one or more such officers or key  employees  would result in a diversion
of financial and human  resources in connection  with recruiting and retaining a
replacement  for such officers or key  employees.  Such a diversion of resources
could prevent us from successfully executing our business plan, and our business
will suffer.  We do not carry "key person" life  insurance on any officer or key
employee.

         During  2001  we  reduced  our  staff  by  59  positions   representing
approximately $2.5 million in annual salaries and wages. During 2002, we further
reduced our staff by an additional 46 positions representing  approximately $2.5
million  in annual  salaries  and wages.  During the summer of 2003 the  Company
further  reduced  our  staff  to 23  personnel.  The  resultant  departures  are
consistent with its overall  reductions in positions and are not material to its
present  operations.  Our staff  reductions  may have a  negative  impact on our
ability  to  attract  and retain  personnel.  If we fail to  attract  and retain
qualified  individuals  for  necessary  positions,  we could be  prevented  from
successfully executing our business plan, and our business will suffer.




                                      -52-


         We have moved all  international  manufacturing  operations  from Costa
Rica to the U.S. and must  continue to comply with  stringent  regulation of our
manufacturing operations.

         We moved the  manufacturing  location of our laser  systems for sale in
international  markets to our U.S. location from our  manufacturing  facility in
Costa Rica in 2002. We cannot assure you that we will not encounter difficulties
in  increasing  our  production  capacity  for our laser  systems at our Florida
facility,  including  problems involving  production delays,  quality control or
assurance,  component  supply  and lack of  qualified  personnel.  Any  products
manufactured  or  distributed  by us pursuant to FDA clearances or approvals are
subject  to  extensive   regulation   by  the  FDA,   including   record-keeping
requirements  and reporting of adverse  experience  with the use of the product.
Our  manufacturing  facilities  are subject to periodic  inspection  by the FDA,
certain state agencies and international  regulatory  agencies.  We require that
our key suppliers  comply with  recognized  standards as well as our own quality
standards,  and we regularly test the components and sub-assemblies  supplied to
us. Any  failure by us or our  suppliers  to comply with  applicable  regulatory
requirements,  including the FDA's quality systems/good  manufacturing  practice
(QSR/GMP)  regulations,  could cause production and distribution of our products
to be  delayed  or  prohibited,  either of which  could  impair  our  ability to
generate  revenues form the sale of our  products.  If we are unable to generate
revenues  from  the  sale of our  products  we may not be able to  continue  our
business operations.

         Required per procedure fees payable to VISX under our license agreement
may exceed per procedure fees collected by us.

         In addition to the risk that our refractive lasers will not be accepted
in the  marketplace,  we are  required to pay VISX a royalty for each  procedure
performed in the U.S.  using our refractive  lasers.  The required per procedure
fees we are  required  to pay to VISX may exceed the per  procedure  fees we are
able to charge and/or  collect from  refractive  surgeons.  If the per procedure
fees we are required to pay to VISX exceed the per procedure fees we are able to
charge and/or collect from  refractive  surgeons,  we would have to pay the VISX
per procedure fees out of our limited  available  cash reserves.  During each of
the years 2002 and 2003,  the per procedure fees we are required to pay VISX did
not exceed per procedure fees collected by us.

         Our failure to timely  obtain or expand  regulatory  approvals  for our
products and to comply with regulatory  requirements  could adversely affect our
business.

         Our excimer laser systems,  diagnostic and custom ablation products are
subject to strict governmental regulations that materially affect our ability to
manufacture and market these products and directly  impact our overall  business
prospects. FDA regulations impose design and performance standards, labeling and
reporting  requirements,  and submission  conditions in advance of marketing for
all medical  laser  products in the U.S.  New  product  introductions,  expanded
treatment  types and levels for approved  products,  and  significant  design or
manufacturing modifications require a premarket clearance or approval by the FDA
prior  to  commercialization  in the U.S.  The FDA  approval  process,  which is
lengthy and uncertain,  requires  supporting  clinical  studies and  substantial
commitments of financial and management resources. Failure to obtain or maintain
regulatory  approvals  and  clearances  in the  U.S.  and  other  countries,  or
significant delays in obtaining these approvals and clearances, could prevent us
from  marketing  our products  for either  approved or expanded  indications  or
treatments, which could substantially decrease our future revenues.




                                      -53-


         Additionally,   product  and  procedure   labeling  and  all  forms  of
promotional  activities  are subject to  examination by the FDA, and current FDA
enforcement  policy prohibits the marketing by manufacturers of approved medical
devices for unapproved uses. Noncompliance with these requirements may result in
warning letters, fines, injunctions,  recall or seizure of products,  suspension
of manufacturing,  denial or withdrawal of PMAs, and criminal prosecution. Laser
products marketed in foreign countries are often subject to local laws governing
health product  development  processes,  which may impose  additional  costs for
overseas product development. Future legislative or administrative requirements,
in the U.S. or elsewhere,  may adversely  affect our ability to obtain or retain
regulatory approval for our products. The failure to obtain approvals for new or
additional uses on a timely basis could prevent us from generating revenues from
the sale of our  products,  and if we are unable to generate  revenues  from the
sale of our  products we may not be able to continue  our  business  operations.
Accordingly,   the  Company  has   re-focused   its  marketing   effort  to  the
international market, primarily China.


         Our business depends on our intellectual property rights, and if we are
unable to protect them, our competitive position may be adversely affected.


         Our  business  plan  is  predicated  on  our  proprietary  systems  and
technology,  including our precision beam scanning  microspot  technology  laser
systems.  We protect our  proprietary  rights  through a combination  of patent,
trademark,  trade  secret and  copyright  law,  confidentiality  agreements  and
technical measures.  We generally enter into non-disclosure  agreements with our
employees and  consultants and limit access to our trade secrets and technology.
We cannot assure you that the steps we have taken will prevent  misappropriation
of our intellectual  property.  Misappropriation  of our  intellectual  property
would have a material adverse effect on our competitive  position.  In addition,
we may have to engage in litigation or other legal  proceedings in the future to
enforce or protect our intellectual  property rights or to defend against claims
of  invalidity.  These legal  proceedings  may consume  considerable  resources,
including  management  time and  attention,  which  would be  diverted  from the
operation  of our  business,  and the  outcome of any such legal  proceeding  is
inherently uncertain.

         We are aware that certain  competitors are developing products that may
potentially  infringe  patents owned or licensed  exclusively by us. In order to
protect  our rights in these  patents,  we may find it  necessary  to assert and
pursue   infringement   claims  against  such  third  parties.  We  could  incur
substantial  costs  and  diversion  of  management   resources  litigating  such
infringement  claims  and we cannot  assure  you that we will be  successful  in
resolving  such claims or that the  resolution  of any such  dispute  will be on
terms that are  favorable  to us. See  "--Patent  infringement  allegations  may
impair our ability to manufacture and market our products".


         Patent  infringement  allegations may impair our ability to manufacture
and market our products.

         There are a number of U.S.  and foreign  patents  covering  methods and
apparatus for performing corneal surgery that we do not own or have the right to
use. If we were found to infringe a patent in a  particular  market,  we and our
customers may be enjoined from manufacturing,  marketing,  selling and using the
infringing  product in the market  and may be liable  for  damages  for any past
infringement of such rights. In order to continue using such rights, we would be
required  to  obtain a  license,  which  may  require  us to make  royalty,  per
procedure  or other fee  payments.  We cannot be certain if we or our  customers




                                      -54-


will be successful in securing  licenses,  or that if we obtain  licenses,  such
licenses  will be  available on  acceptable  terms.  Alternatively,  we might be
required to redesign  the  infringing  aspects of these  products.  Any redesign
efforts  that we  undertake  could be  expensive  and might  require  regulatory
review.  Furthermore,  the redesign  efforts could delay the  reintroduction  of
these  products  into  certain  markets,  or  may  be  so  significant  as to be
impractical.  If redesign efforts were  impractical,  we could be prevented from
manufacturing  and selling the  infringing  products.  If we are prevented  from
selling the  infringing  products we may not be able to  continue  our  business
operations.

         Litigation involving patents is common in our industry. While we do not
believe our laser systems infringe on any valid and enforceable  patents that we
do not own or have a license  to, we cannot  assure  you that one or more of our
other  competitors  or other persons will not assert that our products  infringe
their  intellectual  property,  or that we will not in the  future  be deemed to
infringe one or more patents  owned by them or some other party.  We could incur
substantial   costs  and  diversion  of  management   resources   defending  any
infringement claims. Furthermore, a party making a claim against us could secure
a  judgment  awarding  substantial  damages,  as well  as  injunctive  or  other
equitable relief that could  effectively block our ability to market one or more
of our  products.  In  addition,  we cannot  assure  you that  licenses  for any
intellectual  property of third  parties that might be required for our products
will be available on commercially reasonable terms, or at all.

         In February of 2003, an Italian court issued an order  restraining  our
LaserSight  Technologies  subsidiary  from marketing our AstraPro  software at a
trade  show in  Italy.  This  restraining  order  was  issued  in  favor of Ligi
Tecnologie  Medicali S.p.a.  (LIGI), a distributor of our products,  and alleged
that our AstraPro  software product  infringes certain European patents owned by
LIGI. We retained Italian legal counsel to defend us in this litigation, and the
Italian  court  revoked the  restraining  order and ruled that LIGI must pay our
attorney's  fees in connection with our defense of the  restraining  order.  Our
Italian legal  counsel  informed us that LIGI had filed a motion for a permanent
injunction. We believe that our AstraPro software does not infringe the European
Patents  owned by LIGI.  Since the  Chapter 11 filing  does not apply to foreign
courts, this action is still pending.

         We are subject to certain risks associated with our international
sales.

         Our international sales accounted for 96% and 83% of our total revenues
during the years ended December 31, 2003 and 2002, respectively.  In the future,
we expect that international sales, especially to China, will represent a higher
percentage of our total sales.  We are  presently  focusing our sales efforts on
international sales in China.

         International sales of our products may be limited or disrupted by:

         o  the imposition of government controls;
         o  export license requirements;
         o  economic or political instability;
         o  trade restrictions;
         o  difficulties in obtaining or maintaining export licenses;
         o  health concerns in China and other areas;
         o  changes in tariffs; and
         o  difficulties in staffing and managing international operations.

         Our sales have  historically  been and are  expected  to continue to be
denominated  in U.S.  dollars.  The European  Economic  Union's  conversion to a
common  currency,  the euro,  is not  expected to have a material  impact on our




                                      -55-


business.  However,  due to our  significant  export  sales,  we are  subject to
exchange  rate  fluctuations  in the  U.S.  dollar,  which  could  increase  the
effective  price in local  currencies  of our  products.  This  could  result in
reduced  sales,  longer  payment  cycles and greater  difficulty  in  collecting
receivables relating to our international sales.

         Our  supply  of  certain   critical   components  and  systems  may  be
interrupted because of our reliance on a limited number of suppliers.

         We  currently  purchase  certain  components  used  in the  production,
operation  and  maintenance  of our  laser  systems  from a  limited  number  of
suppliers, and certain key components are provided by a single vendor. We do not
have long-term  contracts  with  providers of some key laser system  components,
including TUI  Lasertechnik  und  Laserintegration  GmbH,  which  currently is a
single  source  supplier for the laser heads used in our  LaserScan  LSX excimer
laser system.  Currently,  SensoMotoric  Instruments GmbH, Teltow, Germany, is a
single  source  supplier  for the eye tracker  boards used in our excimer  laser
systems.  If any of our key  suppliers  ceases  providing  us with  products  of
acceptable  quality and quantity at a competitive price and in a timely fashion,
we would have to locate and  contract  with a substitute  supplier  and, in some
cases,  such  substitute  supplier  would need to be  qualified  by the FDA.  If
substitute suppliers cannot be located and qualified in a timely manner or could
not provide required  products on commercially  reasonable terms, our ability to
manufacture, sell and generate revenues from our products would be impaired.


         Unlawful tampering of our system configurations could result in reduced
revenues and additional expenses.

         We include a  procedure  counting  mechanism  on  LaserScan  LSX lasers
manufactured  for sale and use in the U.S.  Users of our  LaserScan  LSX excimer
laser system could  tamper with the  software or hardware  configuration  of the
system  so as to  alter or  eliminate  the  procedure  counting  mechanism  that
facilitates  the collection of per procedure fees.  Unauthorized  tampering with
our procedure  counting  mechanism by users could result in us being required to
pay per procedure  fees to VISX that we were not able to collect from users.  If
we are unable to prevent such tampering,  our license  agreement with VISX could
be terminated after all applicable notice and cure periods have expired.


         Inadequacy or  unavailability of insurance may expose us to substantial
product liability claims.

         Our  business  exposes  us to  potential  product  liability  risks and
possible  adverse  publicity  that are  inherent  in the  development,  testing,
manufacture,  marketing and sale of medical  devices for human use.  These risks
increase  with respect to our  products  that  receive  regulatory  approval for
commercialization.  We have agreed in the past,  and we will likely agree in the
future, to indemnify certain medical  institutions and personnel who conduct and
participate  in our  clinical  studies.  While  we  maintain  product  liability
insurance,  we cannot be certain that any such  liability will be covered by our
insurance or that damages will not exceed the limits of our coverage.  Even if a
claim is covered  by  insurance,  the costs of  defending  a product  liability,
malpractice, negligence or other action, and the assessment of damages in excess
of  insurance  coverage  limits in the event of a successful  product  liability
claim,  may  exceed  the  amount of our  operating  reserves.  Further,  product
liability  insurance  may not  continue to be  available,  either at existing or
increased levels of coverage, on commercially reasonable terms.



                                      -56-


         Our  auditors'  reports for the year ended  December  31, 2002 and 2003
include an  explanatory  paragraph  regarding our ability to continue as a going
concern.

         Our auditors' reports included an explanatory  paragraph  regarding our
ability to  continue as a going  concern  because we have  incurred  significant
losses and negative cash flows from operations for several years and our ability
to raise or generate enough cash to survive is  questionable.  The going concern
opinion  has been used by  competitors  in an attempt to  negatively  impact our
sales and has resulted in shorter  payment  terms to meet the demands of some of
our vendors.


Common Stock Risks

         Variations in our sales and operating results may cause our stock price
to fluctuate.

         Our operating  results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors,  many of which are
outside of our control.  For example,  historically a significant portion of our
laser system orders for a particular quarter have been received and shipped near
the end of the quarter. As a result, our operating results for any quarter often
depend on the timing of the receipt of orders and the subsequent shipment of our
laser systems. Other factors that may cause our operating results or stock price
to fluctuate include:

         o  our significant liquidity and capital resource issues;
         o  the addition or loss of significant customers;
         o  reductions, cancellations or fulfillment of major orders;
         o  changes in pricing by us or our competitors;
         o  timing of regulatory approvals and the introduction or delays in
            shipment of new products;
         o  the relative mix of our business; and
         o  increased competition.

         As a result of these  fluctuations,  we believe  that  period-to-period
comparisons  of our  operating  results  cannot be relied upon as  indicators of
future  performance.  In some quarters our operating  results may fall below the
expectations  of  securities  analysts and  investors  due to any of the factors
described above or other uncertainties.  As a result of the Chapter 11 petition,
the Company  cancelled all  outstanding  common and preferred  stock,  including
options and warrants.  New common stock of 9,997,195  shares was issued on June
30, 2004.  The stock is presently  trading on the "Pink Sheets" under the symbol
LRST.


         We are no longer  listed on the NASDAQ Small Cap Market - now traded on
the  "Pink  Sheets";  the  market  price of our  common  stock may  continue  to
experience  extreme  fluctuations due to market conditions that are unrelated to
our operating performance.

         The stock  market,  and in  particular  the  securities  of  technology
companies  like us,  could  experience  extreme  price and  volume  fluctuations
unrelated to our operating  performance.  Our stock price has historically  been
volatile.  Factors such as  announcements  of  technological  innovations or new
products by us or our competitors,  changes in domestic or foreign  governmental
regulations or regulatory approval processes,  developments or disputes relating
to patent or proprietary rights, public concern as to the safety and efficacy of



                                      -57-


refractive   vision   correction   procedures,   and   changes  in  reports  and
recommendations  of  securities  analysts,  have  and  may  continue  to  have a
significant impact on the market price of our common stock.

         Because of the lengthy  period  during  which our common  stock  traded
below $1.00 per share, it no longer met the listing  requirements for the NASDAQ
National  Market and on August 15,  2002,  NASDAQ  approved our  application  to
transfer our listing to the NASDAQ  Small Cap Market via an  exception  from the
minimum bid price  requirement.  While we failed to meet this  requirement as of
February 10,  2003,  we were granted a temporary  exception  from this  standard
subject to meeting certain conditions.  The exception required that on or before
April 15, 2003, we were to file a definitive proxy statement with the Securities
and Exchange  Commission and NASDAQ  evidencing  our intent to seek  shareholder
approval for the  implementation  of a reverse stock split.  Other  requirements
included  that, on or before May 30, 2003, we demonstrate a closing bid price of
at least $1.00 per share and, immediately thereafter,  a closing bid of at least
$1.00 per share for a minimum of ten  consecutive  trading  days.  NASDAQ  could
require a minimum  closing bid price of at least $1.00 for more than 10 days. In
addition,  we must have been able to demonstrate  compliance  with the following
maintenance requirements for continued listing on the NASDAQ Small Cap Market:

         o  stockholders' equity of $2.5 million
         o  at least 500,000 shares of common stock publicly held
         o  market value of publicly held shares of at least $1.0 million
         o  shareholders (round lot holders) of at least 300, and
         o  at least two registered and active market makers

         We asked for an extension to May 1, 2003 to file the definitive  proxy.
On April 25, 2003,  we again asked for a further  extension.  But because we did
not timely meet the requirements,  our request for an extension was denied. As a
result,  NASDAQ's  Listing  Qualification  Panel  determined that our securities
would be delisted from NASDAQ's Small Cap Market  effective  April 30, 2003. Our
common stock was then listed in the OTC Bulletin  Board.  The Company  failed to
file its second  quarter SEC Form 10-Q due on August 14,  2003.  The Company did
file a Form 12b-25 on August 14, 2003  advising  that the Company would not file
the quarterly report timely.

         LSI traded on NASDAQ through April 29, 2003 as LASE and LASEC (March 5,
2003 - April 29, 2003).  On April 30, 2003 it commenced  trading on OTC Bulletin
Board as LASE.  The OTCBB  symbol was changed on August 27, 2003 to LASEE due to
the late filing  status of the  company.  The  Company was dropped  from the OTC
Bulletin  Board and commenced  trading on the "Pink Sheets" on Sep 27, 2003 with
the symbol LASEQ. (Q indicates  bankruptcy) This is a conditional listing due to
the bankruptcy  filing by the company.  As mentioned  above, the existing common
and preferred shares,  including options and warrants,  we cancelled pursuant to
the Company's  re-organization plan. New common shares of 9,997,195 were issued
on June 30, 2004 and  commenced  trading via the "Pink  Sheets" under the symbol
LRST.

         The  delisting  of our common  stock  from the  NASDAQ  Small Cap Stock
Market will result in decreased  liquidity of our  outstanding  shares of common
stock (and a resulting inability of our stockholders to sell our common stock or
obtain accurate  quotations as to their market value), and,  consequently,  will
reduce the price at which our shares  trade.  The  delisting of our common stock
may also deter  broker-dealers  from making a market in or otherwise  generating
interest  in our common  stock and may  adversely  affect our ability to attract
investors  in our common  stock.  Furthermore,  our ability to raise  additional
capital may be severely impaired. As a result of these factors, the value of our




                                      -58-


common stock may decline  significantly,  and our  stockholders may lose some or
all of their investment in our common stock.

         The significant  number of shares eligible for future sale and dilutive
stock issuances may adversely affect our stock price.

         Sales,  or the  possibility  of sales,  of  substantial  amounts of our
common stock in the public market could adversely affect the market price of our
common  stock.  Substantially  all of our  27,841,941  shares  of  common  stock
outstanding  at December 31, 2003 were freely  tradable  without  restriction or
further registration under the Securities Act of 1933, except to the extent such
shares  are held by  "affiliates"  as that term is defined in Rule 144 under the
Securities  Act or subject only to the  satisfaction  of a  prospectus  delivery
requirement. An additional 9,280,647 shares of preferred stock, convertible into
18,561,294  shares of common stock, were issued in October 2002 upon the funding
of the  equity  investment  portion of the China  Transaction.  We had agreed to
register the shares of common stock under the Securities Act of 1933,  and, once
registered, the shares would be available for sale.

         Other  shares  of  common  stock  that we may  issue in the  future  in
connection  with  financings or pursuant to  outstanding  warrants or agreements
would  also  adversely  affect the  market  price of our common  stock and cause
significant dilution in our earnings per share and net book value per share.

         As mentioned previously, as part of the Chapter 11 re-structuring,  all
of the above  mentioned  common and  preferred  shares,  including  options  and
warrants, were cancelled pursuant to the Company's re-organization.  On June 30,
2004 the company issued 9,997,195 new common shares.

         The terms of the NIIC  transaction  will in all probability  prevent or
discourage an acquisition or change of control of LaserSight.

         As a result of the Chapter 11 petition, and subsequent  re-structuring,
NIIC will initially  control  7,210,000 or 72% of the newly issued  9,997,195
common  shares.  Under certain  circumstances  their  control could  increase to
approximately 74%.


Risks Relating to Intangibles

         Amortization and charges relating to our significant  intangible assets
could adversely affect our stock price and reported net income or loss.

         Of our total assets at December 31, 2003,  approximately  $0.5 million,
or 15%, were intangible  assets.  Any reduction in net income or increase in net
loss resulting from the amortization of intangible  assets resulting from future
acquisitions  by us may have an  adverse  impact  upon the  market  price of our
common stock.  In addition,  in the event of a sale of LaserSight or our assets,
we  cannot  be  certain  that  the  value  of such  intangible  assets  would be
recovered.

         In accordance with FASB Statement No. 144, we review  intangible assets
for impairment whenever events or changes in circumstances,  including a history
of operating or cash flow losses,  indicate that the carrying amount of an asset
may not be recoverable.  If we determine that an intangible asset is impaired, a
non-cash  impairment  charge  would  be  recognized.  Accordingly,  the  Company
believes  the  Chapter 11 petition  has caused and  impairment  of the  carrying




                                      -59-


values of some of our intangibles.  In that regard, during the second quarter of
2003, the Company recorded  approximately $4.1 million of re-structuring  losses
attributable to impairment of intangibles.


Other Risks

         The following relates to risks on both a short and longer-term basis:

      The risks described above are not the only risks facing LaserSight.  There
may be additional risks and  uncertainties  not presently known to us or that we
have  deemed  immaterial,  which  could  also  negatively  impact  our  business
operations.  If any of the  foregoing  risks  actually  occur,  it could  have a
material  adverse  effect on our  business,  financial  condition and results of
operations.  In that event,  the trading price of our common stock could further
decline, and you may lose all or part of your investment.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

         The Company  believes  that its  exposure to market risk for changes in
interest and currency rates is not  significant.  The Company's  investments are
limited to highly liquid instruments - generally cash and cash equivalents.  All
of the Company's  transactions  with  international  customers and suppliers are
denominated in U.S. dollars.

Item 8.  Financial Statements and Supplemental Data

         Consolidated   financial   statements   prepared  in  accordance   with
Regulation S-X are listed in Item 15 of Part IV of this Report,  are attached to
this Report and incorporated in this Item 8 by reference.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

On May 12,  2004,  the Board of Directors  authorized  the  engagement  of Moore
Stephens  Lovelace,  P.A. to serve as  independent  public  accountants  for the
fiscal  year ended  December  31,  2003.  KPMG LLP  (KPMG)  had been  engaged as
independent  public  accountants for the Company for the most recent fiscal year
until their resignation on March 16, 2004. That  determination was a decision of
KPMG LLP and was not recommended or approved by the audit committee of the board
of directors of the Registrant.

KPMG LLP's most recent audit report was on the consolidated financial statements
of the  Registrant  as of and for the year ended  December 31,  2002.  The audit
reports of KPMG LLP on the consolidated  financial  statements of the Registrant
as of and for the years  ended  December  31,  2002 and 2001 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope, or accounting principles, except as follows:

KPMG LLP's reports on the consolidated financial statements of the registrant as
of and for the years  ended  December  31,  2002 and 2001,  contained a separate
paragraph stating, "The accompanying consolidated financial statements have been
prepared  assuming  that  the  Company  will  continue  as a going  concern.  As
discussed in Note 1 to the consolidated  financial  statements,  the Company has
suffered  recurring  losses from  operations  and has a significant  accumulated
deficit that raises  substantial  doubt about its ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 1. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty."

During the  Registrant's  two fiscal years ended December 31, 2002 and 2001, and
during the subsequent period preceding the date of KPMG LLP's resignation, there
were no  disagreements  with KPMG LLP on any matter of accounting  principles or




                                      -60-


practices, financial statement disclosure, or auditing scope or procedure, which
if not resolved to their satisfaction,  would have caused them to make reference
in connection  with their report to the subject matter of the  disagreement.  No
other event has occurred with respect to the  Registrant  and KPMG LLP for which
disclosure  would be required  pursuant to  paragraph  (a)(1)(v)  of Item 304 of
Regulation S-K.

KPMG LLP did not  issue an  audit  report  on the  financial  statements  of the
Registrant as of and for the year ended December 31, 2003, or for any subsequent
period preceding the date of KPMG LLP's  resignation,  as the Registrant has not
filed any financial statement  subsequent to March 31, 2003. KPMG LLP did review
the  Registrant's  financial  statements  included  in its  Form  10-Q  for  the
quarterly period ended March 31, 2003.

Item 9A. Controls and Procedures

         Based on their  evaluation  within 90 days prior to the filing  date of
this Annual Report on Form 10-K, the Company's Chief Executive Officer and Chief
Financial  Officer have  concluded  that the Company's  disclosure  controls and
procedures as defined in Rule  13a-14(c)  under the  Securities  Exchange Act of
1934, as amended,  are effective for  gathering,  analyzing,  and disclosing the
information we are required to disclose in our reports filed under the Act.

         There were no significant  changes in our internal controls or in other
factors that could  significantly  affect those  controls since the date of last
evaluation of those internal controls.


                                    PART III

Item 10.  Directors and Executive Officers

         The Company's executive officers and directors are set forth below. The
terms of all incumbent  directors expire at the next scheduled Annual Meeting of
the Company's stockholders (the "Annual Meeting") or at such later time as their
successors have been duly elected and qualified.



                                                                    
Name                         Age                  Title                     Director Since
----                         ---                  -----                     --------------


Danghui ("David") Liu        42     President and Chief Executive Officer         N/A
Guy W. Numann                72     Director                                      2000
Xian Ding Weng               42     Chairman of the Board                         2002
Stephen Shi                  48     Director                                      2002
Ying Zhi Gu                  55     Director                                      2002
Dorothy M. Cipolla           48     Chief Financial Officer                       N/A


         Mr. Liu has served as President and Chief Executive Officer of
LaserSight since August 2003. He was previously the Vice President of Technical
Marketing from September 2002 until 2003. He was Director R&D for Diagnostic
products from March 2000 until January 2002.

         Mr. Numann is retired from Harris Corporation where he served as
president of the company's Communication Sector from 1989 until his retirement
in 1997. From 1984 to 1989 Mr. Numann served as senior vice president and group
executive for the Communication Sector. Mr. Numann currently serves as a member
of Rensselaer Polytechnic Institute's School of Engineering Advisory Board.




                                      -61-


         Mr.  Weng  founded  New  Industries  Investment  Co.,  Ltd.,  (NIIC) in
Shenzhen,  China in 1993. He has been President and Chief  Executive  Officer of
NIIC for nine years. Mr. Weng has also been the Chairman of the Board of Venture
Capital Ltd.,  Medical  Development  Ltd. and Consultant  Ltd.,  subsidiaries of
NIIC.

         Mr.  Shi  has  served  as a  professional  manager  of  New  Industries
Investment  Co.,  Ltd.  since 1997.  In NII group,  Mr. Shi  currently  is Chief
Operating  Officer of Venture Capital Ltd. Mr. Shi has also been Chief Executive
Officer of Shenzhen New  Industries  Medical  Development  Co., Ltd. since March
2002.

         Ms. Gu has been President of Y.F.K.  Import and Export  Corporation,  a
privately held medical  equipment  distributor/consulting  firm  specializing in
ophthalmology and dermatology,  since 1986. She has also been the Vice President
of Finance in NBM Publishing,  Inc., a privately held publishing company,  since
1989.

         Ms.  Cipolla has served as Chief  Financial  Officer and  Secretary  of
LaserSight  since March  2004.  Prior to joining  LaserSight,  she has served in
various  financial  management  positions.  From  1994 to  1999,  she was  Chief
Financial   Officer  and  Treasurer  of  Network  Six,  Inc.,  a  NASDAQ  listed
professional  services firm. From 1999 to 2002, Mrs.  Cipolla was Vice President
of Finance with Goliath  Networks,  Inc.,  a privately  held network  consulting
company.  From 2002 to 2003, Ms.  Cipolla was  Department  Controller of Alliant
Energy Corporation, a regulated utility.

         Code of Ethics for Chief Executive Officer and Senior Financial
Officers

         The Company is developing a code of ethics for the CEO and Senior
Financial Officers (Code of Ethics) which is required to be signed by each such
officers, and is maintained on file by the Company.

Audit Committee and Audit Committee Financial Expert

         Two members of the Company's Board of Directors, Guy Numann and Ying
Gu, currently serve as the audit committee. The Audit Committee does not
currently have a member designated as the financial expert.

Compliance With Section 16(a) of the Exchange Act

         Section  16(a) of the  Securities  Exchange Act of 1934 (the  "Exchange
Act") requires  LaserSight's  officers and  directors,  and persons who own more
than 10% of the  outstanding  common  stock,  to file reports of  ownership  and
changes in ownership of such  securities with the SEC.  Officers,  directors and
over-10% beneficial owners are required to furnish LaserSight with copies of all
Section  16(a) forms they file.  Based solely upon a review of the copies of the
forms  furnished to  LaserSight,  and/or  written  representations  from certain
reporting persons that no other reports were required,  LaserSight believes that
all Section 16(a) filing requirements applicable to its officers,  directors and
over-10% beneficial owners during or with respect to the year ended December 31,
2003 were met.

Item 11.  Executive Compensation

         The  following  table sets forth  summary  information  concerning  the
compensation  paid  or  earned  for  services  rendered  to  LaserSight  in  all
capacities during 2001, 2002 and 2003 for LaserSight's  Chief Executive Officer,
each of LaserSight's other executive officers serving at December 31, 2003 whose
total annual  salary and bonus for 2003 exceeded  $100,000 and former  executive




                                      -62-


officers  for  which  disclosure  is  required.  No  restricted  stock  or stock
appreciation  rights were granted and no payouts under any  long-term  incentive
plan were made to any of the named executive  officers in 2001, 2002 or 2003. We
use  the  term  "named  executive  officers"  to  refer  collectively  to  these
individuals later in this Form 10-K.





                           Summary Compensation Table
                                                                                                Long Term
                                                                                               Compensation
                                                         Annual Compensation                      Awards
                                                         -------------------                      ------
                                                                            Other Annual        Securities
                                                                               Compen-          Underlying           All Other
Name and Principal Position         Year       Salary ($)      Bonus ($)       sation         Options/SARs (#)      Compensation
---------------------------         ----       ----------      ---------      -------         ----------------      ------------
                                                                                                   
Michael R. Farris                   2003         $216,814           --             --                 --              15,000 (6)
    Former President and CEO        2002          262,765           --         $25,000 (1)       100,000 (3)              --
                                    2001          278,553           --             --            200,000 (3)              --

Jack T. Holladay, M.D. Former       2003           83,333           --             --                 --                  --
    Medical Director                2002          200,000           --             --             75,000 (4)              --
                                    2001          200,000           --             --             25,000 (4)              --

Gregory L. Wilson       Former      2003          134,127           --             --                 --                  --
    Chief Financial Officer         2002          192,400           --           7,215 (2)        50,000 (5)              --
                                    2001          185,185           --             --            130,000 (5)              --

Danghui Liu                         2003          153,958         25,800           --                 --                  --
     Interim President and CEO,     2002          105,540           --             --                 --              6,184 (7)
    COO                             2001          110,040           166            --                 --                  --

Richard K. Davis                    2003          127,917           --             --                 --                  --
    Vice President, Engineering     2002          130,000           --             --                 --                  --
                                    2001          130,000           --             --                 --                  --


         (1) Consists of a one-time award approved by the board of directors in
             October 2002.

         (2) Consists of retroactive pay during 2002 to compensate for a
             voluntary pay reduction taken during 2001.

         (3) Mr. Farris resigned on August 22, 2003. All options were expired
             after 30 days.

         (4) Dr. Holladay resigned on September 4, 2003. All options expired
             after 30 days.

         (5) Mr. Wilson resigned on April 5, 2003. All options expired after 30
             days.

         (6) Forgiveness of $15,000 in personal debt on corporate credit card.

         (7) Consists of relocation reimbursement and travel allowance paid.




                                      -63-


         No Options / SARs were  granted  during  2003.  On June 30,  2004,  all
Outstanding Options were cancelled per the Company's re-organization plan.

         The following table sets forth certain information  relating to options
held by the named executive officers at December 31, 2003:




               Aggregated Option/SAR Exercises in Last Fiscal Year
                          and FY-End Option/SAR Values
                                                                    Number of Securities
                                                                   Underlying Unexercised
                                                                      Options/SARs at            Value of Unexercised
                                                                      Year-End (#)(1)            In-the-Money Options/
                                                                      ---------------
                                                                                              SARs at Year-End ($)(1)(2)
                                  Shares
                                Acquired on         Value               Exercisable/                 Exercisable/
Name                           Exercise (#)    Realized ($)(1)         Unexercisable                 Unexercisable
----                           ------------    ---------------         -------------                 -------------
                                                                                         

Michael R. Farris                   --                --                   -- (3)                         --
Jack T. Holladay, M.D.              --                --                   -- (4)                         --
Gregory L. Wilson                   --                --                   -- (5)                         --
Danghui Liu                         --                --                 35,000 / 0                      0 / 0
Richard K. Davis                    --                --              170,000 / 10,000                   0 / 0




         (1) No Options / SARs have been issued by LaserSight in 2003.

         (2) Based on the $0.01 closing price of the common stock on The NASDAQ
             Stock Market on December 31, 2003 when such price exceeds the
             exercise price for an option.

         (3) Mr. Farris resigned on August 22, 2003. All options expired after
             30 days.

         (4) Dr. Holladay resigned on September 4, 2003. All options expired
             after 30 days.

         (5) Mr. Wilson resigned on April 5, 2003. All options expired after 30
             days.

Compensation of Directors

         Each  non-employee  director  receives  a fee of $500 for each board or
committee  meeting attended.  Effective  October 25, 2002,  members of the Audit
Committee  receive  $1,000 per meeting and the  chairman of the Audit  Committee
receives  $1,500 per  meeting.  In  addition,  during  2002,  each  non-employee
director was granted an option under LaserSight's  Non-Employee  Directors Stock
Option  Plan to  purchase  15,000  shares  of common  stock  and each  committee
chairman and the Chairman of Board was granted an additional  option to purchase
5,000 shares.  Directors who are also full-time employees of LaserSight received
no additional cash compensation for services as directors.

Employment Agreements

         When the Company  filed for Chapter 11  protection on September 5, 2003
all  employment  agreements  in  effect  prior to that time  were  canceled.  At




                                      -64-


December 31, 2003 there were no employment contracts in effect.

Relocation Agreements

         When the Company  filed for Chapter 11  protection on September 5, 2003
all  relocation  agreements  in  effect  prior to that time  were  canceled.  At
December 31, 2003 there were no relocation agreements in effect.

Compensation Committee Interlocks and Insider Participation

         During 2003,  the role of the  Compensation  Committee was performed by
the board of directors as a whole.



















                                      -65-



Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information  regarding ownership
of LaserSight's voting securities, as of December 31, 2003:

o  each  person  known  to  LaserSight  to  own  beneficially  more  than  5% of
LaserSight's  outstanding voting securities; o each of LaserSight's directors; o
each of LaserSight's executive officers named in the summary compensation table;
and o all of LaserSight's directors and executive officers as a group.

         The beneficial ownership of LaserSight's voting securities set forth in
this table is  determined  in accordance  with the rules of the  Securities  and
Exchange  Commission.  Unless  otherwise  indicated in the footnotes  below, the
persons and entities named in the table have sole voting and investment power as
to all shares  beneficially  owned,  subject to  community  property  laws where
applicable.
                                                   Common
                                                   Stock         Series H
        Name and Address of Beneficial Owner      Ownership      Preferred
        ------------------------------------      ---------      ---------
                                                    (1)

Directors and Executive Officers:
   David Liu                                        44,998(2)

   Dorothy M. Cipolla                                     *
   Stephen Shi                                     172,300(4)
   Richard K. Davis                                170,000(2)
   Guy W. Numann                                   170,000(2)

   Ying Zhi Gu                                      97,660

   Xian Ding Weng                                         *

     Michael R. Farris                             276,000(3)
     Jack T. Holladay, M.D.
                                                     2,000
     Gregory L. Wilson                              15,000


   TLC Laser Eye Centers Inc.                    3,221,883(5)
   5280 Solar Drive                                    11.5%
   Suite 300
   Mississauga, Ontario
   Canada L4W 5M8

   New Industries Investment Consultants (H.K.)                  9,280,647   (6)
   Shenzhen, People's Republic of China                                     100%

*   Less than 1%.





                                      -66-


(1)      Each  number of shares of common  stock  shown as owned in this  column
         assumes the exercise of all currently-exercisable  options and warrants
         and all options and  warrants  that will become  exercisable  within 60
         days of March 28, 2004.  Each  percentage  shown in this column assumes
         the exercise of all such options and warrants by the applicable  person
         or group,  but assumes  that no options or  warrants  held by any other
         persons are exercised or converted.  The exercise  price of each of the
         options and warrants are significantly  above the current trading price
         of common stock.

(2)      Includes  options  (and 67,500  warrants in the case of Mr.  Numann) to
         acquire shares of common stock which are now exercisable or will become
         exercisable  within 60 days of March 28,  2004,  as  follows:  Mr.  Liu
         (35,000), Mr. Numann (102,500),  Mr. Davis (170,000); and all directors
         and executive officers as a group (307,500).

(3)      SunTrust Bank, was the holder of 412,200 shares of common stock pledged
         by Mr. Farris to secure a personal borrowing,  gave given notice of its
         intention  to sell those shares in  compliance  with Rule 144 (k) under
         the  Securities  Act of 1933 and to apply the net proceeds of the sales
         first to expenses and then to reduction of Mr. Farris' borrowing,  with
         any excess to be  remitted to Mr.  Farris.  Counsel to  LaserSight  has
         delivered  its opinion that the shares may be sold in  compliance  with
         Rule 144 (k) and counsel for the bank has been  authorized  to, and has
         undertaken to, provide notice of any sale in sufficient  time to permit
         Mr.  Farris to file a Form 4 in time to comply with the current two day
         filing  requirement of the Securities  and Exchange  Commission.  As of
         March 28, 2004, 140,000 shares had been sold.

(4)      Includes 172,300 shares of common stock owned by Mr. Shi's spouse.

(5)      Represents (a) 3,171,833  shares of common stock presently owned by TLC
         (based on information  supplied to LaserSight as of March 6, 2003), and
         (b) 50,000 shares of common stock  issuable to TLC upon exercise of all
         of its 50,000 warrants at a price of $5.125 per share.
(6)      The holders of each share of series H preferred stock shall be entitled
         to the  number  of votes  equal to the  number  of  shares  of series H
         preferred stock held by such stockholder at the Record Date.


Item 13.  Certain Relations and Related Transactions

         Indebtedness of Management.  In accordance with an arrangement that has
been in place since Mr. Farris first became  employed by LaserSight,  Mr. Farris
utilized a company credit card for both business and  non-business  expenses and
then reimbursed LaserSight for the non-business expenses, historically at a rate
of $1,000 per month.  Since the beginning of 2003 the aggregate  amount of these
non-business  expenses  has  not  exceeded  $67,000.  Mr.  Farris  continued  to
reimburse approximately $1,000 per month until he resigned in August of 2003. As
part of his  severance  agreement,  the board  agreed to bonus  Mr.  Farris  the
$15,000  balance.  Mr. Farris was not charged  interest in connection with these
loans.

         NIMD transaction. Through December 31, 2003, approximately $3.6 million
worth of products were sold to Shenzhen New Industries  Medical  Development Co.
Ltd. As a result of the Chapter 11 re-structuring, NIMD's affiliate, NIIC loaned
$2.0 million to the Company.  $1 million was converted  for 6,850,000  shares of
the 9,997,195  newly issued common stock.  NIIC's  preferred stock was converted
into 360,000  common  shares.  In addition,  NIIC can convert the remaining $1.0
million of that loan,  subject to certain  restrictions,  to 2,500,000 shares of
the Company's common stock and result in the purchaser holding approximately 76%
of the Company's common stock.



                                      -67-


Item 14.  Principal Accounting Fees and Services

                   During  2003 and 2002 the  Company was billed by KPMG for the
following services:

                                          2003              2002
                                          ----             ----
(a)      Audit fees:                    106,156           121,030
(b)      Audit-related fees             110,733           104,178
(c)      Tax fees                         1,250            31,500
(d)      All other fees                  37,375             9,050

                                        255,514           265,758

         All KPMG related work was approved in advance by the Audit Committee
Chairman, David Perioni. Subsequent to Mr. Perioni's resignation in 2003, all
work performed by auditors was approved by the remaining two members of the
audit committee, Ms. Gu and Mr. Numann.

         On March 23, 2004, the Company announced the resignation of KPMG. On
May 20, 2004 the Company announced the appointment of Moore Stephens Lovelace,
P.A., a Winter Park, Florida based CPA firm qualified to do SEC audit
engagements.






















                                      -68-






                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Financial Statements and Schedules.

(a)  (1) The following financial statements and related items commence on 
         page F-1:

             Independent Auditors' Reports

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

             Consolidated  Statements  of  Operations  for the years  ended
             December 31, 2003, 2002 and 2001.

             Consolidated  Statements of Stockholders' Equity (Deficit) for the
             years ended December 31, 2003, 2002 and 2001.

             Consolidated  Statements  of Cash  Flows for the  years  ended
             December 31, 2003, 2002 and 2001.

             Notes to Consolidated Financial Statements.

     (2) Financial Statement Schedules:

             None

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

            The  Exhibit  Index  set forth on page 79 of this Form 10-K is
            hereby incorporated herein by this reference.

b) Reports on Form 8-K
 
            On November 13, 2003, we filed a Current Report on Form 8-K
            describing our press release dated November 13, 2003 announcing that
            the Company would not timely file its third quarter Form 10-Q due on
            November 14, 2003. The Company did file a Form 12b-25 on November
            13, 2003 advising that the Company no longer had the financial
            resources or staff to file the quarterly reports on a timely basis.
            [As a late filer, the Company's securities are now traded in the
            over-the-counter (OTC) market via the "Pink Sheets."]


            On January 6, 2004, we filed a Current Report on Form 8-K describing
            our press release dated January 6, 2004 announcing the Company's
            receipt of the settlement proceeds from a shareholder derivative
            suit which had been pending in the United States District Court,
            Southern District of New York. The original action, in which
            LaserSight was a nominal defendant, was filed pursuant to Section 16
            of the Securities Exchange Act of 1934. The Company received, net of
            court ordered fees and costs, approximately $250,000 of the $400,000
            settlement. The report also disclosed that on January 5, 2004, the




                                      -69-


            Company filed its Reorganization Plan ("Plan") with the U.S.
            Bankruptcy Court. The Plan was a result of negotiations with the
            various parties involved and provides in part for Debtor in
            Possession ("DIP") financing to be provided by New Industries
            Investment Consultants (H.K.) LTD ("NII"). NII is the Hong Kong
            based affiliate of Shenzhen New Industries Medical Development Co.
            ("Shenzhen New Industries"), Shenzhen, and the People's Republic of
            China. The Company had already received the first two transfers of
            funds from NII as part of the $2.0 million of DIP loans.

            On March 5, 2004, we filed a Current Report on Form 8-K announcing
            that the Company had filed its monthly operating reports for the
            period September 5, 2003, through January 31, 2004 (the "Operating
            Reports"). The Operating Reports were filed with the U.S. Bankruptcy
            Court for the Middle District of Florida - Orlando Division. Copies
            of the Operating Reports were attached as an exhibit to this filing.


            On March 15, 2004, we filed a Current Report on Form 8-K announced
            that the Company had employed Dorothy M. Cipolla, CPA, as Chief
            Financial Officer and Corporate Secretary.

            On March 16, 2004, we filed a Current Report on Form 8-K announcing
            that KPMG had resigned as the auditor of the Registrant as of that
            date. That determination was a decision of KPMG LLP and was not
            recommended or approved by the audit committee of the board of
            directors of the Registrant.

            On March 23, 2004, we filed a Current Report on Form 8-K announcing
            that the Company had filed its monthly operating report for the
            period February 1, 2004, through February 29, 2004 (the "Operating
            Report"). The Operating Report was filed with the U.S. Bankruptcy
            Court for the Middle District of Florida - Orlando Division. A copy
            of the Operating Report was attached as an exhibit to this filing.

                                INDEX TO EXHIBITS

Exhibit
Number                           Description                                  
------      ------------------------------------------------------------------



      3.1   Certificate of Incorporation, as amended (filed as Exhibit 3.1 to
            the Company's Form 10-Q filed on November 14, 2002*).

      3.2   Bylaws, as amended (filed as Exhibit 3.2 to the Company's Form
            10-Q/A filed on November 21, 2002*).

      3.3         Rights Agreement, dated as of July 2, 1998, between LaserSight
                  Incorporated and American Stock Transfer & Trust Company, as
                  Rights Agent, which includes (I) as Exhibit A thereto the form
                  of Certificate of Designation of the Series E Junior
                  Participating Preferred Stock, (ii) as Exhibit B thereto the
                  form of Right Certificate (separate certificates for the
                  Rights will not be issued until after the Distribution Date)
                  and (iii) as Exhibit C thereto the Summary of Stockholder
 




                                      -70-



                  Rights Agreement (incorporated by reference to Exhibit 99.1 to
                  the Form 8-K filed by the Company on July 8, 1998*).


     10.1         Incorporated (filed as Exhibit 10.39 to the Company's Form
                  10-K filed on March 31, 1999

     10.2         Registration Rights Agreement dated March 12, 2001 among
                  LaserSight Incorporated and Heller Healthcare Finance, Inc.
                  (filed as Exhibit 10.60 to the Company's Form 10-K filed on
                  March 30, 2001*).

     10.3         Product Purchase Agreement dated August 15, 2002 between
                  LaserSight Technologies, Inc. and Shenzhen New Industries
                  Medical Development Co., Ltd. The Company undertakes to
                  provide to the Commission upon its request the schedules
                  omitted from this exhibit (filed as Exhibit 99.4 to the
                  Company's Form 8-K filed on August 30, 2002*)**.

     10.4         Distribution Agreement dated August 15, 2002 LaserSight
                  Technologies, Inc. and Shenzhen New Industries Medical
                  Development Co., Ltd. (filed as Exhibit 99.5 to the Company's
                  Form 8-K filed on August 30, 2002*)**.

     10.5         Chief Executive Officer and Chief Financial Officer
                  certifications pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  (filed under Item 9 to the Company's Form 8-K filed on August
                  14, 2002*).

     10.6         Amendment No. 2 to Loan and Security Agreement dated as of
                  August 15, 2002 among LaserSight Incorporated and subsidiaries
                  and Heller Healthcare Finance, Inc. (filed as Exhibit 10.1 to
                  the Company's Form 10-Q filed on November 14, 2002*).

     10.7         Extension to Loan and Security Agreement dated as of March 12,
                  2003 among LaserSight Incorporated and subsidiaries and Heller
                  Healthcare Finance, Inc. (filed as Exhibit 10.40 to
                  the Company's Form 10-K filed on March 31, 2003*).

     10.8         Amendment No. 3 to Loan and Security Agreement dated as of
                  March 31, 2003 among LaserSight Incorporated and subsidiaries
                  and Heller Healthcare Finance, Inc. (filed as Exhibit 10.41 to
                  the Company's Form 10-K filed on March 31, 2003*).

     Exhibit 11   Statement of Computation of Loss Per Share(Included in
                  Financial Statements in Item 1 hereof)


     Exhibit 21   Subsidiaries of the Registrant

     Exhibit 23   Consent of KPMG LLP
                  Consent of Moore Stephens Lovelace, P.A.
 
     31.1         Certification  of Chief Executive  Officer Pursuant to 
                  Rule 13a-14(a)
     31.2         Certification  of Chief Financial Officer Pursuant to
                  Rule  13a-14(a)
     32           Certifications of CEO and CFO Pursuant to Section 1350

----------------------
*Incorporated herein by reference.  File No. 0-19671.






                                      -71-



**Confidential  treatment  has been granted for portions of this  document.  The
redacted material has been filed separately with the commission.






















                                      -72-



                                   SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated:   March 22, 2005            LASERSIGHT INCORPORATED

                                        By:     /s/ Danghui ("David") Liu      
                                                --------------------------------
                                                Danghui ("David"), President and
                                                Chief Executive Officer

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ Danghui ("David") Liu                             Dated:   March 22, 2005
-------------------------------------------
Danghui ("David") Liu, President,
Chief Executive Officer and Director

/s/ Xing Ding Weng.                                   Dated::  March 22, 2005
-------------------------------------------
Xingding Weng,
Chairman of the Board, Director

/s/ Guy W. Numann                                     Dated::  March 22, 2005
-------------------------------------------
Guy W. Numann, Director

/s/ Ying Gu                                           Dated::  March 22, 2005
-------------------------------------------
Ying Gu, Director




/s/ Dorothy M. Cipolla                                Dated::  March 22, 2005
-------------------------------------------
Dorothy M. Cipolla, Chief Financial Officer
(Principal accounting officer)



                                     


             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


The Board of Directors and Stockholders
LaserSight Incorporated:

We have  audited  the  accompanying  consolidated  balance  sheet of  LaserSight
Incorporated  and  Subsidiaries  (the Company) as of December 31, 2003,  and the
related consolidated  statements of operations,  stockholders' equity (deficit),
and  cash  flows  for the year  ended  December  31,  2003.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether 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  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  LaserSight
Incorporated  and Subsidiaries as of December 31, 2003, and the results of their
operations  and their  cash  flows for the year  ended  December  31,  2003,  in
conformity with U.S. generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations  and  has  a  significant   accumulated   deficit  that  raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

                                               /s/ Moore Stephens Lovelace, P.A.

Orlando, Florida
November 30, 2004


                                       F-1






             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------



The Board of Directors and Stockholders
LaserSight Incorporated:

We have  audited  the  accompanying  consolidated  balance  sheet of  LaserSight
Incorporated  and  Subsidiaries  (the Company) as of December 31, 2002,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years in the  two-year  period  ended  December  31, 2002.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  LaserSight
Incorporated  and Subsidiaries as of December 31, 2002, and the results of their
operations  and their  cash flows for each of the years in the  two-year  period
ended December 31, 2002, in conformity with U.S. generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations  and  has  a  significant   accumulated   deficit  that  raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

                                                     /s/ KPMG LLP

St. Louis, Missouri
March 21, 2003


                                       F-2










                    LASERSIGHT INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                                                                 

                                                                                  December 31, 2003 and 2002
                           ASSETS                                                      2003           2002
                                                                                -------------    -------------
Current assets:
  Cash and cash equivalents .................................................   $     564,973    $   1,065,778
  Accounts receivable - trade, net ..........................................           7,626        3,811,065
  Notes receivable - current portion, net ...................................          72,765        1,763,106
  Inventories ...............................................................       3,361,985        8,928,099
  Deferred tax assets .......................................................               -           28,850
  Other current assets ......................................................         235,335          593,842
                                                                                -------------    -------------
                                      Total Current Assets ..................       4,242,684       16,190,740
Notes receivable, less current portion, net .................................               -        1,020,731
Property and equipment, net .................................................          65,529          444,049
Other assets, net ...........................................................         666,667        5,452,101
                                                                                -------------    -------------
                                                                                $   4,974,880    $  23,107,621
                                                                                =============    =============
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities not subject to compromise(2003) :
  Note payable, net of unamortized discount of zero and $12,246 at ..........   $   1,843,313    $   2,077,754
      December 31, 2003 and 2002, respectively
  Accounts payable ..........................................................          33,995        2,755,358
  Accrued expenses ..........................................................         385,295        1,993,993
  Accrued license fees ......................................................           9,853        1,504,400
  Accrued Warranty ..........................................................          76,000        1,667,656
  Accrued commissions .......................................................               -        1,594,634
  Deferred revenue ..........................................................       1,039,240        1,657,352
                                                                                -------------    -------------
                                      Total Current Liabilities .............       3,387,696       13,251,147
Liabilities subject to compromise (a) .......................................      15,616,134                -
Accrued expenses, less current portion ......................................               -          187,449
Note Payable Related party ..................................................         750,000                -
Deferred royalty revenue ....................................................       4,802,700        5,741,941
Deferred income taxes .......................................................               -           28,850
Commitments and contingencies
Stockholders' equity (deficit):
Convertible preferred stock, par value $.001 per share; authorized 10,000,000
shares: Series H - 9,280,647 issued and outstanding at December 31, 2003 and
2002.........................................................................           9,281            9,281

Common stock - par value $.001 per share; authorized 100,000,000 shares;
27,987,141 shares issued at December 31, 2003 and 2002.......................          27,987           27,987 
Additional paid-in capital ..................................................     103,801,064      103,796,812
Stock subscription receivable ...............................................               -          (32,336)
Accumulated deficit .........................................................    (122,877,335)     (99,360,863)             
Less treasury stock, at cost;  145,200 common shares at December 31, 2003
and 2002 ....................................................................        (542,647)        (542,647)
                                                                                -------------    -------------
                                      Total Stockholders Equity Deficit .....     (19,581,650)       3,898,234
                                                                                -------------    -------------
                                                                                $   4,974,880    $  23,107,621
                                                                                =============    =============
(a)    Liabilities subject to compromise consist of the following:
     Accounts Payable .......................................................       2,905,814
     Accrued expenses .......................................................       5,864,191
     Accrued Warranty .......................................................       6,125,730
     Other liabilities ......................................................         720,399
                                                                                -------------
                                                                                   15,616,314
                                                                                =============   


           See accompanying notes to consolidated financial statements


                                       F-3



                             LASERSIGHT INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years ended December 31, 2003, 2002 and 2001

                                                                                                        
                                                                             2003            2002            2001
                                                                          -----------    -----------     ----------- 
Revenues, net:
Products ..............................................................     5,497,937      9,400,316     13,076,039
Royalties .............................................................       939,240      1,101,819        392,000
Gain on sale of patent ................................................             -              -      3,950,836
                                                                          -----------    -----------    -----------
                                                                            6,437,177     10,502,135     17,418,875
Cost of revenues:
Product cost ..........................................................     7,152,206      5,748,989      7,385,303
                                                                          -----------    -----------    -----------
Gross profit (Loss) ...................................................      (715,029)      4,753,146     10,033,572

Research, development, and regulatory expenses ........................       351,779      1,318,808      3,271,724

Other general and administrative expenses .............................     8,919,075     12,812,954     23,753,773
Selling related expenses ..............................................     4,558,538      3,279,523      4,674,752
Allowed warranty claims ...............................................     4,640,319              -              -
Amortization of intangibles ...........................................       246,690        460,236        503,094
Impairment of Patents .................................................     4,098,607              -              -
Litigation settlement expense .........................................             -        140,000        591,289
                                                                          -----------    -----------    -----------
                                                                           22,463,229     16,692,713     29,522,908
                                                                          -----------    -----------    -----------
Loss from operations ..................................................   (23,530,037)   (13,258,375)   (22,761,060)
Other income and expenses:
Interest and other income .............................................       305,977        276,316        578,734
Interest expense ......................................................      (350,120)      (586,748)      (480,411)
                                                                          -----------    -----------    -----------
Loss from continuing operations before income tax expense .............   (23,574,180)   (13,568,807)   (22,662,737)
Income tax benefit ....................................................       (57,708)             -              -
                                                                          -----------    -----------    -----------
 Loss from continuing operations ......................................   (23,516,472)   (13,568,807)   (22,662,737)
 Discontinued operations:
 Loss from the operation of discontinued health care services business
                                                                                    -              -     (3,371,423)
 Loss on disposal of health care services business, including
 provision of $110,000 for operating losses during phase-out period ...             -              -       (155,532)
                                                                          -----------    -----------    -----------
                                                                                    -              -     (3,526,955)
                                                                          -----------    -----------    -----------
 Net loss .............................................................   (23,516,472)   (13,568,807)   (26,189,692)
 Conversion discount on preferred stock ...............................    (1,581,587)      (353,773)             - 
                                                                          -----------    -----------    -----------
 Loss attributable to common shareholders .............................   (25,098,059)   (13,922,580)   (26,189,692)
                                                                          ===========    ===========    ===========
 Loss per common share - basic and diluted ............................         (0.90)         (0.51)         (1.04)
                                                                          ===========    ===========    ===========
 Weighted average number of shares outstanding
 - basic and diluted ..................................................    27,842,000     27,299,000     25,131,000
 
           See accompanying notes to consolidated financial statements




                                       F-4





                    LASERSIGHT INCORPORATED AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Years ended December 31, 2003, 2002 and 2001


                                                   Preferred Stock                 Common Stock            Additional 
                                                   ---------------                 ------------             Paid-in  
                                               Shares          Amount          Shares         Amount        Capital    
                                               ------          ------         ------         ------         -------    
                                                                                                
Balances at December 31, 2000 ............. 2,000,000    $      2,000      22,920,278       $ 22,920   $ 98,594,665

 Issuance of shares from ESPP .............         -               -          56,327             56         66,669

 Issuance of shares in conjunction
 with license agreement ...................         -               -         730,552            731      1,117,927

 Issuance of shares in conjunction
 with professional services ...............         -               -          50,000             50         60,419

 Issuance of warrants in conjunctio
 with debt financing ......................         -               -               -              -        122,557

 Issuance of options in conjunction
 with consulting agreement ................         -               -               -              -         33,715

 Issuance of shares from financing,
 net of financing costs ................... 1,276,596           1,277         838,905            839      2,922,884

 Conversion of preferred stock ............(2,000,000)         (2,000)      2,000,000          2,000              -   

 Net loss .................................         -               -               -              -              -   
                                           ----------           -----      ----------         ------    -----------
Balances at December 31, 2001 ............. 1,276,596           1,277      26,596,062         26,596    102,918,836


 Issuance of shares from ESPP .............         -               -          11,177             11          1,129

 Issuance of shares in conjunction
 with professional services ...............         -               -         103,306            103         54,774

 Settlement of stock subscription
 receivable ...............................         -               -               -              -       (993,646)

 Issuance of shares from financing,
 net of financing costs ................... 9,280,647           9,281               -              -      1,815,719

 Conversion of preferred stock ............(1,276,596)         (1,277)      1,276,596          1,277              -   
 
 Net loss .................................         -               -               -              -              -   
                                           ----------           -----      ----------         ------    -----------
Balances at December 31, 2002 ............. 9,280,647           9,281      27,987,141         27,987    103,796,812

 Settlement of stock subscription
 receivable ...............................         -               -               -              -              -  

 Issuance of options to consultant ........         -               -               -              -          4,252

 Net loss .................................         -               -               -              -              - 
                                           ----------           -----      ----------         ------    -----------
Balances at December 31, 2003 ............. 9,280,647           9,281      27,987,141         27,987    103,801,064
                                           ==========           =====      ==========         ======    ===========






                    LASERSIGHT INCORPORATED AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Years ended December 31, 2003, 2002 and 2001


                                        Subscription     Accumulated        Treasury       Stockholders'
                                          Receivable         Deficit         Stock         Equity (Deficit)
                                          ----------         -------         ------        ---------------
                                                                                    
Balances at December 31, 2000 ........... (1,140,000)     (59,602,364)       (542,647)       37,334,574

 Issuance of shares from ESPP ...........           -               -               -            66,725

 Issuance of shares in conjunction 
 with license agreement .................           -               -               -         1,118,658

 Issuance of shares in conjunction
 with professional services .............           -               -               -            60,469

 Issuance of warrants in conjunctio
 with debt financing ....................           -               -               -           122,557

 Issuance of options in conjunction
 with consulting agreement ..............           -               -               -            33,715

 Issuance of shares from financing,
 net of financing costs .................           -               -               -         2,925,000

 Conversion of preferred stock ..........           -               -               -                -


 Net loss ...............................           -     (26,189,692)              -       (26,189,692)
                                          ----------     -----------         --------       -----------
Balances at December 31, 2001 ........... (1,140,000)     (85,792,056)       (542,647)       15,472,006

 Issuance of shares from ESPP ...........           -               -               -             1,140

 Issuance of shares in conjunction
 with professional services .............           -               -               -            54,877

 Settlement of stock subscription
 receivable .............................  1,107,664                -               -           114,018

 Issuance of shares from financing,
 net of financing costs .................           -               -               -         1,825,000

 Conversion of preferred stock ..........           -               -               -              --

 Net loss ...............................           -     (13,568,807)              -       (13,568,807)
                                          ----------     ------------         --------       -----------
Balances at December 31, 2002 ...........    (32,336)     (99,360,863)        (542,647)       3,898,234

 Settlement of stock subscription
 receivable .............................     32,336                -               -            32,336

 Issuance of options to consultant ......          -                -               -             4,252

 Net loss ...............................          -     (23,516,472)               -       (23,516,472)
                                          ----------     -----------         --------       -----------

Balances at December 31, 2003 ...........         0     (122,877,335)        (542,647)      (19,581,651)
                                          ==========    ============         ========       ===========

          See accompanying notes to consolidated financial statements.

 
                                                              F-4







                                               LASERSIGHT INCORPORATED AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             YEARS ENDED DECEMBER 31, 2003, 2002 and 2001
                                                                                                     
                                                                        2003            2002            2001
                                                                    ------------    ------------    ------------
Cash flows from operating activities
Net loss ........................................................   $(23,516,472)   $(13,568,807)   $(26,189,692)
 Adjustments to reconcile net loss to net cash used in operating
 activities:
Gain on sale of patent ..........................................              -               -      (3,950,836)
Depreciation and amortization ...................................        628,627       1,600,826       2,275,974
Loss on disposal of fixed assets ................................         22,725               -               -
Imparement on discontinued operation ............................              -               -       2,984,493
Write off of inventory ..........................................      3,588,040               -               -
Impairment of Patents ...........................................      4,098,607               -               -
Provision for uncollectable accounts ............................      3,028,304       1,413,947       2,258,252
Stock, options and warrants issued in conjunction with consulting
agreements, settlement and services .............................          4,251          54,877          94,184
Changes in assets and liabilities:
   Accounts and notes receivable, net ...........................      3,486,207       4,991,085         737,533
   Inventories ..................................................      1,978,074       3,142,847         118,769
   Accounts payable .............................................        184,451      (1,091,548)        (23,885)
   Accrued expenses and commissions .............................      5,615,224      (1,016,597)     (1,035,092)
   Deferred revenue .............................................       (939,240)      1,339,701       4,910,177
   Other, net ...................................................        798,644         429,762         151,396
                                                                    ------------    ------------    ------------
Net cash used in operating activities ...........................     (1,022,557)     (2,703,907)    (17,668,727)

Cash flows from investing activities
Purchases of property and equipment, net ........................        (13,897)        (22,535)       (296,592)
Net proceeds from sale of patent ................................              -               -       6,365,000
                                                                    ------------    ------------    ------------

Net cash provided by (used in) investing activities .............        (13,897)        (22,535)      6,068,408
Cash flows from financing activities
Payments on debt financing ......................................       (246,687)       (910,000)              -
Proceeds from DIP Financing .....................................        750,000
Proceeds from debt financing ....................................              -               -       2,776,798
Proceeds from issuance of preferred stock, net ..................              -       1,825,000       2,925,000
Proceeds from exercise of stock options, warrants and ESPP ......              -           1,140          66,725
Proceeds from stock subscription receivable .....................         32,336         114,018               -
                                                                    ------------    ------------    ------------

Net cash provided by financing activities .......................        535,649       1,030,158       5,768,523
                                                                    ------------    ------------    ------------

Decrease in cash and cash equivalents ...........................       (500,805)     (1,696,284)     (5,831,796)

Cash and cash equivalents, beginning of period ..................      1,065,778       2,762,062       8,593,858
                                                                    ------------    ------------    ------------

Cash and cash equivalents, end of period ........................   $    564,973    $  1,065,778    $  2,762,062
                                                                    ============    ============    ============
Non-cash investing and financing activity:
  Royalities prepaid by offset to existing accounts receivable ..  $           -    $    450,000             $ -
  Issuance of common stock as prepayment of keratome license ....  $           -   $           -    $  1,118,658
  Issuance of warrants in conjunction with debt financing .......  $           -   $           -    $    122,557





        See accompanying notes to the consolidated financial statements.


                                       F-5

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2003, 2002 AND 2001

NOTE 1 -- BUSINESS AND LIQUIDITY

LaserSight  Incorporated  (the  Company) is the parent  company of the following
major wholly-owned operating subsidiaries:  LaserSight Technologies, Inc., which
develops,   manufactures  and  sells  ophthalmic  lasers  and  related  products
primarily  for  use  in  laser  vision   correction,   including  laser  in-situ
keratomileusis  (LASIK) and  photorefractive  keratectomy  (PRK)  procedures and
currently  licenses  patents  related  to  refractive  surgical  equipment;  and
LaserSight Patents, Inc., which currently licenses patents related to refractive
surgical procedures.  During 2001, the wholly owned subsidiary,  MRF, Inc. d/b/a
The Farris Group, a consulting  firm  servicing  health care  providers,  ceased
operations  and is presented  as a  discontinued  operation in the  consolidated
statements of operations for the years ended December 31, 2001.

On September  5, 2003 the Company and two of its  subsidiaries  ("the  Debtors")
filed a voluntary  petition for relief in the United  States  Bankruptcy  Court,
Middle  District of Florida,  Orlando  Division,("the  Bankruptcy  Court") under
Chapter  11 of Title 11 of the U.S.  Bankruptcy  Code ("the  Bankruptcy  Code or
Chapter   11").   The  Debtors   continued  to  operate   their   businesses  as
debtors-in-possession  ("DIP")  through the close of business June 9, 2004.  The
Company filed a plan of  reorganization  (the Plan) with the Bankruptcy Court on
April 28, 2004, the  Bankruptcy  Court  confirmed the Plan. The Company  emerged
from Chapter 11 on June 10, 2004.

The  Company  has  incurred  significant  losses  and  negative  cash flows from
operations in each of the years in the three-year period ended December 31, 2003
and has an  accumulated  deficit  of  approximately  $108.3  million  and $122.9
million at June 30, 2004 and December 31, 2003,  respectively.  The  substantial
portion of the losses is attributable to delays in Food and Drug  Administration
(FDA) approvals for the treatment of various procedures on the Company's excimer
laser system in the U.S. (a key approval  for the  treatment of  nearsightedness
with or  without  astigmatism  was  received  in late  September  2001)  and the
continued  development  efforts to expand  clinical  approvals of the  Company's
excimer laser and other products.

The Company had  significant  liquidity and capital  resource issues relative to
the timing of accounts  receivable  collection and the successful  completion of
new sales  compared to ongoing  payment  obligations.  In July 2002, the Company
announced it had entered a letter of intent with  affiliated  companies based in
the People's Republic of (hereafter  referred to as the China Group or the China
Transaction). Definitive agreements relating to the transaction were executed in
August 2002 that included the China Group's commitment to purchase $10.0 million
of lasers and other products over a 12-month period ending in August 2003 and an
equity  investment in the Company of $2.0 million.  The Company started shipping
products  under  those  agreements  in  August  2002  and  received  the  equity
investment  in  October  2002.   The  China  Group   provided  $2.0  million  of
debtor-in-possession  financing,  with $750,000  received as of year-end 2003. A
new  agreement was signed with the China Group in February 2004 and the previous
agreement  was  cancelled,  under the new  agreement  the China Group  agreed to
purchase $12 million of lasers and products over the next twelve months. The new
agreement allows for two one-year  extensions.  As a result of the conversion of
$1 million of DIP financing,  the China Group became the controlling shareholder
of the Company in June of 2004.

Management  of the  Company  continues  undertaking  steps  as part of a plan to
attempt to continue to improve  liquidity and operating results with the goal of
sustaining  Company  operations.  These  steps  include  seeking (a) to increase
sales; and (b) to control overhead costs and operating expenses.

There can be no assurance the Company can  successfully  accomplish these steps.
Accordingly,  the Company's  ability to continue as a going concern is uncertain
and dependent upon  continuing to achieve  improved  operating  results and cash
flows or  obtaining  additional  equity  capital  and/or debt  financing.  These
consolidated  financial statements do not include any adjustments to the amounts
and  classification of assets and liabilities that might be necessary should the
Company be unable to continue in business.

NOTE 2 -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

BASIS OF PRESENTATION
The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries.  All significant  inter-company balances and transactions have
been eliminated in consolidation.

As discussed in note 3, the  Company's  health care  services  business has been
accounted for as discontinued  operations.  Unless otherwise noted,  disclosures
herein pertain to the Company's continuing operations.

USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make

                                      F-6

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements. Estimates also affect the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.

CASH AND CASH EQUIVALENTS
For financial  reporting  purposes,  the Company  considers  short-term,  highly
liquid  investments with original  maturities of three months or less to be cash
equivalents.

CREDIT RISK AND CONCENTRATIONS
Financial  instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts and notes receivable.

During  2003,  the  Company   received  the  vast  majority  of  its  revenue  (
approximately $ 4.2 million) from one customer,  the China  Group.There  were no
receivables  due from the China Group as of December 31, 2003.  The loss of this
customer  would have a significant  adverse  effect on the company's  ability to
continue as a going  concern.  The Company  formerly  sold products to customers
extending  credit  for  such  sales.  Exposure  to  losses  on  receivables  was
principally  dependent on each customer's  financial condition and their ability
to generate  revenue from the  Company's  products.  The Company  monitored  its
exposure for credit losses and maintained  allowances for anticipated losses. In
2003 a substantial portion of its accounts and notes receivable were reserved as
bad debt. Management believes the bankruptcy filing, the change in the Company's
management and the elimination of warranty obligations made collections on these
accounts highly unlikely.

The company  currently  has two sole  source  providers  for  certain  inventory
components.  The loss of either of these two  providers  could  have an  adverse
effect on the company's operations.


INCOME TAXES
The Company  recognizes  deferred  tax  liabilities  and assets for the expected
future tax  consequences  of events that have been included in the  consolidated
financial  statements or tax returns.  Deferred tax  liabilities  and assets are
determined based on the difference between the financial statement and tax bases
of assets  and  liabilities  using  enacted  tax rates in effect for the year in
which the differences are expected to reverse.

INVENTORIES
Inventories,  which consist primarily of laser systems parts and components, are
stated at the lower of cost or market.  Cost is  determined  using the  standard
cost method,  which  approximates  cost  determined on the  first-in,  first-out
method.  In 2003, with the bankruptcy  filing and the re-focus of the Company on
the  China  market,  an  inventory  obsolescence  reserve  of $3.5  million  was
recorded. See note 18.

PROPERTY AND EQUIPMENT
Property  and  equipment  are  stated  at  cost.  Furniture  and  equipment  are
depreciated  using the  straight-line  method over the estimated lives (three to
seven  years)  of  the  assets.   Leasehold  improvements  are  amortized  on  a
straight-line  basis over the shorter of the lease term or estimated useful life
of the asset.  Such  depreciation  and amortization is included in other general
and administrative expenses on the consolidated statements of operations.

PATENTS
Costs  associated  with  obtaining  patents are  capitalized as incurred and are
amortized over their remaining useful lives (generally 17 years or less).

GOODWILL AND ACQUIRED TECHNOLOGY
Goodwill  represented  the  excess  of cost  over the fair  value of net  assets
acquired and was amortized on a straight-line  basis over estimated useful lives
up to 20 years.  Management  evaluated  the  carrying  value of  goodwill  using
projected future undiscounted  operating cash flows of the acquired  businesses.
During  2001,  impairment  losses were  recorded  for the  unamortized  value of
goodwill related to certain acquisitions. See Note 8.

Acquired  technology is recorded as an intangible  asset and is amortized over a
period of 12 years  based on the  Company's  estimate  of the useful life of the
solid-state laser product and related patent acquired.  The Company assessed the
potential  market  for its  acquired  technology  and  elected to write off $4.1
million in 2003 which has been classified as reorganization expense.

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards  (Statement) No. 142,  "Goodwill and Other  Intangible  Assets." Under
Statement  No. 142,  intangible  assets with  definite  lives are required to be
amortized to expense over the estimated  useful life,  and tested for impairment
at least  annually,  or on an interim basis when a triggering  event occurs,  in
accordance  with  Statement No. 144,  "Accounting  for Impairment or Disposal of
Long-Lived  Assets." During the first quarter of 2002, the Company  performed an
evaluation  of its  intangibles  and  determined  that  the  fair  value  of its
intangibles was in excess of the book value.  During the second quarter of 2003,
the Company  performed an evaluation of its  intangibles and determined that the
fair value of its intangibles was impaired and booked a $4.1 million adjustment.
See note 8.

RESEARCH AND DEVELOPMENT
Research and  development  costs are charged to operations in the year incurred.
The cost of certain equipment used in research and development  activities which
have  alternative  uses is  capitalized as equipment and  depreciated  using the
straight-line  method  over the  estimated  lives  (five to seven  years) of the
assets.  Total  expenditures  on research  and  development  for the years ended
December  31,  2003,  2001 and 2000 were,  approximately  $3,000,  $851,000  and
$2,287,000, respectively.

                                      F-7

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

PRODUCT WARRANTY COSTS
Estimated  future  warranty  obligations  related  to  the  Company's  products,
typically for a period of one year, are provided by charges to operations in the
period in which the related revenue is recognized.  In 2003, all approved claims
received in bankruptcy,  which were greater than the accrued  warranty  balance,
were recorded at $4.6 million.  These warranty  claims would  typically not have
been recognized but future  warranty  reserves would have been adjusted based on
actual warranty costs.

The activity  related to the Company's  warranty reserve as of December 31, 2003
and 2002 is as follows:

         Balance, December 31, 2001   $ 2,521,924
         Warranty expense                 482,000
         Costs incurred                (1,336,268)
                                      -----------
         Balance, December 31, 2002     1,667,656
         Warranty expense               5,554,745
         Costs incurred                (1,020,671)
                                      -----------
         Balance, December 31, 2003   $ 6,201,730
                                      ===========

In June of 2004,  as of the  effective  date of the  reorganization  plan,  $6.1
million of the  warranty  reserves  were  relieved.  The  expense is included in
selling related expenses on the consolidated statement of operations.

EXTENDED SERVICE CONTRACTS
The Company sold product service  contracts  covering periods beyond the initial
warranty  period.  Revenues  from the sale of such  contracts  were deferred and
amortized  on a  straight-line  basis  over the term of the  contracts.  Service
contract  costs  were  charged  to  operations  as  incurred.  All open  service
contracts obligations were released in bankruptcy.

REVENUE RECOGNITION
The Company  recognizes revenue from the sale of its products in the period that
the products are shipped to the customers.  The Company  recognizes revenue from
the sale of authorized procedure passwords at the time non-refundable payment is
received and a password is provided to perform procedures.

Royalty  revenues from the license of patents owned are recognized in the period
earned. When the Company issues paid-up licenses, the revenue is recognized over
the remaining life of the patent licensed on a straight-line basis.

The  Company  recognizes  revenue  from  sales  of its  topography  software  in
accordance with Statement of Position (SOP) 97-2, "Software Revenue Recognition"
as  amended  by SOP 98-9,  "Modification  of SOP 97-2 with  Respect  to  Certain
Transactions."  Revenue is recognized when persuasive evidence of an arrangement
exits and delivery  has  occurred,  provided  the fee is fixed or  determinable,
collectibility  is probable  and the  arrangement  does not require  significant
customization or modification of the software.

Revenues in multiple  element  arrangements  are allocated to each element based
upon the relative fair values of each element,  based upon published list prices
in accordance with Emerging  Issues Task Force (EITF) Issue No. 00-21,  "Revenue
Arrangements with Multiple Deliverables."

COST OF REVENUES
Cost of revenues consist of product cost.  Product cost relates to the cost from
the sale of the  Company's  products in the period that the products are shipped
to the customers.

LOSS PER SHARE
Basic loss per common  share is computed  using the weighted  average  number of
common shares  outstanding.  Diluted loss per common share is computed using the
weighted   average  number  of  common  shares  and  common  share   equivalents
outstanding  during each  period.  Common  share  equivalents  include  options,
warrants to purchase  Common  Stock,  and  convertible  Preferred  Stock and are
included in the computation using the treasury stock method if they would have a
dilutive  effect.  Diluted loss per share for the years ended December 31, 2003,
2002 and 2001 is the same as basic loss per share.

Pursuant to EITF Nos. 98-5 and 00-27,  the value of the  conversion  discount on
the Series H  Convertible  Participating  Preferred  Stock  (Series H  Preferred
Stock)  issued  in  October  2002  was  reflected  as an  increase  to the  loss
attributable to common stockholders  through the period ending October 25, 2003.
The total conversion discount of $2,000,000 was limited by the proceeds from the
Series  H  Preferred  Stock.  Of this  total,  $1,935,350  was  accreted  to the
Company's loss attributable to common stockholders ratably over the twelve-month
period ending October 25, 2003 or earlier, should the Company have fulfilled the
purchase  order and received  payment  prior to October 25, 2003.  The remaining
$64,650  would  have  increased  the  Company's  loss   attributable  to  common
stockholders during the period that an effective  registration  statement was in
place for the Series H Preferred Stock. During 2003 and 2002, approximately $1.6
million and $400,000, respectively, of such conversion discount were included in
the Company's loss  attributable  to common  stockholders.  On June 30, 2004 the
preferred  stock was converted  into common stock in bankruptcy  pursuant to the
Company's re-organization plan. See note 19.

                                      F-8

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

The following is the  reconciliation  of the numerators and  denominators of the
basic and diluted EPS  computations  for the years ended December 31, 2003, 2002
and 2001:

                                     2003             2002             2001
                               -------------      -----------      ----------- 
Numerator, basic and diluted:
   Net loss ...................$ (23,516,472)     (13,568,807)     (26,189,692)
   Conversion discount on
     preferred stock ..........   (1,581,587)        (353,773)              --
                               -------------      -----------      ----------- 
   Loss attributable to
     common
     stockholders .............$ (25,098,059)     (13,922,580)     (26,189,692)
                               =============      ===========      =========== 

Denominator, basic and diluted:
     Weighted average shares
       outstanding ............   27,842,000       27,299,000       25,131,000
                               =============      ===========      =========== 

Basic and diluted loss per share:
   Loss from continuing
     operations ...............$       (0.84)           (0.50)           (0.90)
   Loss from
     discontinued
     operations ...............           --               --            (0.13)
   Loss from disposal
     of discontinued
     operations ...............           --               --            (0.01)
                               -------------      -----------      ----------- 
   Net loss ...................        (0.84)           (0.50)           (1.04)
   Conversion discount on
      Preferred stock .........        (0.06)            (.01)              --
                               -------------      -----------      ----------- 
   Loss attributable to
     common stockholders$              (0.90)           (0.51)           (1.04)
                               =============      ===========      =========== 

Common share equivalents,  including contingently issuable shares,  options, and
warrants and convertible preferred stock, are not included in the computation of
diluted loss per share because they had an antidilutive effect.

As a result of the September 5, 2003 Chapter 11 filing, all common and preferred
shares outstanding at and prior to June 30, 2004, including options and
warrants, were canceled as required by the approved bankruptcy plan, effective
June 30, 2004, the Company issued 9,997,195 new common shares (see Note 18). The
following  unaudited table presents earnings per share figures as if the
reorganization of the capital structure had taken place as of the beginning of
the first period presented.

                                                   2003        2002        2003
                                                   ----        ----        ---- 
Net income (loss) from continuing operations
per common share basic and diluted (unaudited)... ($2.35)     ($1.36)    ($2.62)

Weighted average number of
common shares outstanding - basic
and diluted (unaudited)....................... 9,997,195   9,997,195  9,997,195 

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Statement No. 144 provides a single accounting model for long-lived assets to be
disposed of.  Statement  No. 144 also changes the  criteria for  classifying  an
asset as held for sale;  and broadens the scope of  businesses to be disposed of
that qualify for reporting as discontinued  operations and changes the timing of
recognizing losses on such operations.  The Company adopted Statement No. 144 on
January 1, 2002.  The adoption of Statement No. 144 did not affect the Company's
consolidated financial statements.

In accordance with Statement No. 144, long-lived assets and certain identifiable
intangibles   are  reviewed  for  impairment   whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future  undiscounted  net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.  Assets to be
disposed of are reported at the lower of the carrying  amount or fair value less
costs to sell. Prior to the adoption of Statement No. 144, the Company accounted
for  long-lived  assets in accordance  with Statement No. 121,  "Accounting  for
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of."

SHIPPING AND HANDLING COSTS
The Company  includes  shipping and handling fees billed to customers in product
revenues.  Shipping and handling  costs  associated  with  outbound  freight are
included in selling related expenses and totaled $58,000,  $179,000 and $187,000
for the years ended December 31, 2003, 2002 and 2001, respectively.

ISSUANCES OF EQUITY INSTRUMENTS TO NON-EMPLOYEES
The Company  periodically  issues  common  stock,  stock  options or warrants to
non-employees  in  exchange  for  services  provided.  The  fair  value  of such
issuances are determined when the performance  commitment by the non-employee is
reached using the Black Scholes option-pricing model. The fair value is recorded
as operating expense in the period over which the service is provided.



STOCK OPTION ACCOUNTING
The Company applies the intrinsic value based method of accounting prescribed by
Accounting  Principles Board (APB) Opinion No. 25,  "Accounting for Stock Issued
to Employees," and related interpretations including FASB Interpretation No. 44,
"Accounting  for  Certain   Transactions   involving  Stock   Compensation,"  an
interpretation  of APB Opinion No. 25,  issued in March 2000, to account for its
fixed plan stock options. Under this method, compensation expense is recorded on
the date of grant  only if the  current  market  price of the  underlying  stock
exceeded the exercise  price.  Statement  No. 123,  "Accounting  for Stock Based
Compensation,"  established accounting and disclosure  requirements using a fair
value based method of accounting for stock based employee compensation plans. As
allowed by  Statement  No. 123, the Company has elected to continue to apply the
intrinsic value based method of accounting described above, and has adopted only
the  disclosure   requirements   of  Statement  No.  123.  The  following  table
illustrates  the effect on net income if the fair  value  based  method had been
applied to all outstanding and unvested awards in each period:

                                      F-9

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                               2003             2002            2001
                               ----             ----            ----
Net loss as reported: ..   $(25,098,059)    (13,568,808)    (26,189,692)
Less: Total compensation
expense determined under
fair value method,
net of tax .............       (762,108)     (2,011,405)     (2,508,780)
Pro forma net loss .....   $(25,860,167)    (15,580,213)    (28,698,472)

Basic and diluted EPS:
     As reported .......   $      (0.90)          (0.50)          (1.04)
     Pro forma .........          (0.93)          (0.57)          (1.14)

The per share  weighted-average  fair value of stock options  granted during the
years  ended  December  31,  2003,  2002 and 2001,  was $0.03,  $0.10 and $0.35,
respectively, on the dates of grant using the Black Scholes option-pricing model
with the following weighted-average assumptions:


                               2003             2002            2001
                               ----             ----            ----
Expected dividend yield          0%               0%              0%
Volatility                      50%              50%             50%
Risk-free interest rate        4.5%        4.12-5.32%      4.39-5.27%
Expected life (years)          1.69            3-10            5-10

NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial  Accounting  Standards Board (FASB) issued Statement
No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This
statement  nullifies  EITF Issue No. 94-3,  "Liability  Recognition  for Certain
Employee Termination Benefits Restructuring."  Statement No. 146 requires that a
liability for a cost associated with an exit or disposal  activity be recognized
when the liability is incurred rather than the date of an entity's commitment to
an exit plan. The Company has implemented  Statement No. 146 on January 1, 2003.
The  adoption  of  Statement  No.  146 did not  have a  material  effect  on the
Company's consolidated financial statements.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123."  Statement No. 148 amends  Statement No. 123,  "Accounting for Stock-Based
Compensation,"  to provide  alternative  methods of  transition  for a voluntary
change to the fair value based  method of  accounting  for  stock-base  employee
compensation.  In addition, Statement No. 148 amends the disclosure requirements
of Statement No. 123 to require prominent disclosures in both annual and interim
financial statements.  Certain of the disclosure  modifications are required for
fiscal  years  ending  after  December 15, 2002 and are included in the notes to
these consolidated financial statements.

In November  2002,  the EITF  reached a consensus on Issue No.  00-21,  "Revenue
Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance
on how to account for  arrangements  that involve the delivery or performance of
multiple products,  services and/or rights to use assets. The provisions of EITF
Issue No. 00-21 apply to revenue  arrangements  entered  into in fiscal  periods
beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 did not have
a material impact on our financial position or results of operations.

In  December  2003,  the  FASB  revised   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest  Entities,  an Interpretation of ARB No. 51"
which it had  originally  issued in January  2003.  As revised,  FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary
of  the  entity  if  the  equity  investors  in  the  entity  do  not  have  the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties.  As revised,  application of
FIN 46 is required for interests in special-purpose  entities for periods ending
after December 15, 2003.  Application for all other types of entities covered by
FIN 46 is required in financial  statements  for periods  ending after March 15,
2004.  The  adoption  of FIN 46 as revised,  is not  expected to have a material
impact on our financial position or results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150
(SFAS 150),  "Accounting for Certain Financial  Instruments with Characteristics
of Both  Liabilities  and  Equity".  SFAS 150 requires  that  certain  financial
instruments,  which under previous  guidance were accounted for as equity,  must
now be accounted for as liabilities.  The financial instruments affected include
mandatory  redeemable stock,  certain financial  instruments that require or may
require the issuer to buy back some of its shares in exchange  for cash or other
assets and certain  obligations  that can be settled with shares of stock.  SFAS
150 is effective for all financial  instruments  entered into or modified  after
May 31, 2003,  and  otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, although certain aspects have been delayed
pending  further  clarifications.  We do not expect the  adoption of SFAS 150 to
have a material impact on our financial position or results of operations.

In December  2003,  the SEC issued  Staff  Accounting  Bulletin  ("SAB") No. 104
"Revenue  Recognition" which codifies,  revises and rescinds certain sections of
SAB No. 101, "Revenue Recognition",  in order to make this interpretive guidance
consistent with current  authoritative  accounting and auditing guidance and SEC
rules and regulations.  The changes noted in SAB No. 104 did not have a material
effect on our financial position or results of operations.

                                      F-10

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

RECLASSIFICATIONS
Certain  reclassifications  were made to prior year financial data to conform to
current year presentation


NOTE 3 -- DISCONTINUED OPERATIONS

In November  2001,  the Company  decided to  discontinue  the  operations of its
health care services  business as a result of its increased  focus on refractive
product  development and  commercialization.  The health care services  business
continued  its  operations  through the end of 2001 and phased out its remaining
client projects in early 2002.

Results from discontinued  operations for the years ended December 31, 2001 were
as follows:

                                       2001
                                       ----
     Net revenues .............   $   897,457
     Operating loss:
     Loss from discontinued
        operations ............    (3,371,423)
     Loss from disposal of
        discontinued operations      (155,532)
                                  -----------
     Loss from discontinued
       operations .............   $(3,526,955)
                                  ===========

Losses from discontinued  operations included the results of operations from the
business  disposed of through December 31, 2001.  Losses related to the business
subsequent  to  2001  were  estimated  and  provided  for  in  the  loss  on the
disposition of the business.

The 2001 loss from discontinued operations,  $3,371,423,  included an impairment
loss of approximately $2,984,000 related to the goodwill of the Company's health
care services  subsidiary.  The Company's  increased focus on refractive product
development and commercialization resulted in management's decision in late 2001
to  phase  out the  health  care  services  business.  As a  result,  management
performed an evaluation of the  recoverability  of such goodwill,  and concluded
that a significant  impairment of intangible assets had occurred.  An impairment
charge was  required  because  the  carrying  value of the  assets  could not be
recovered through estimated future net cash flows.

The loss  from the  disposal  recorded  in 2001  totaled  $155,532.  The  losses
associated  with the  disposition  of the business  were based on an estimate of
results of  operations  for the business  from the date the decision was made to
dispose of the business  through the  phase-out  period.  Through the year ended
December 31, 2003,  actual  losses  subsequent to 2001  approximated  the losses
estimated.

NOTE 4 -- ACQUISITIONS

INTELLECTUAL PROPERTY
In March 2000,  the Company  acquired  all  intellectual  property  related to a
development  project  designed  to  provide  front-to-back  analysis  and  total
refractive  measurement of the eye from Premier Laser Systems, Inc. Of the total
consideration  of   approximately   $4.0  million  before   transaction   costs,
approximately  $2.8 million was paid at closing,  $0.5 million was paid in April
2000 and  approximately  $0.7  million  was paid in May 2000.  Assets  purchased
included  U.S.  and  foreign  patents  and pending  patent  applications  and an
exclusive  license to nine  patents  that are  intended  to be used to  complete
development of an integrated  refractive  diagnostic work station.  These assets
were adjusted by $4.1 million,  to their estimated net realizable  value in 2003
due to the re-focus of the Company in its re-organization plan in bankruptcy.

The remaining cost is included in other assets,  net and is being amortized over
the life of the patents, 17 years.



PHOTOMED, INC.
In July  1997,  the  Company  acquired  from  Photomed,  Inc.  the  rights  to a
Pre-Market  Approval (PMA) application filed with the FDA for a laser to perform
LASIK, a refractive surgery alternative to surface PRK. In addition, the Company
purchased from a stockholder of Photomed,  Inc. U.S. patent number 5,586,980 for
a keratome,  the instrument  necessary to create the corneal "flap" in the LASIK
procedure.  The Company issued a combination of 535,515  unregistered  shares of
Common Stock (valued at $3,416,700)  and $333,300 in cash as  consideration  for
the PMA application and the keratome patent. The seller is entitled to receive a
percentage of any licensing  fees or sale  proceeds  related to the patent.  The
total value was  capitalized as the cost of PMA  application  and patent and was
being  amortized  over 5 and 15 years,  respectively.  In  September  1998,  the
Company entered into an amendment with Photomed based on a FDA approval received
in July 1998,  and paid Photomed a total of  $1,740,000,  of which  $990,000 was
paid in cash and the  balance  paid  through the  issuance of 187,500  shares of
Common Stock.  As of December 31, 2001,  the  unamortized  carrying value of the
keratome  patent was included in other assets.  In December  2000, an impairment
loss was taken for the unamortized value of the PMA application.  See note 8. In
2003 an additional  impairment loss was taken on the keratome  patent.  Revenues
attributable to these patents were minimal. See note 19.

PATENTS
In August 1997, the Company finalized an agreement with  International  Business
Machines  Corporation  (IBM), in which the Company acquired certain patents (IBM
Patents)  relating to ultraviolet  light ophthalmic  products and procedures for
ultraviolet  ablation for $14.9 million. The total value was capitalized and was

                                      F-11

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

being  amortized  over  approximately  8 years  prior to its sale in March 2001.
Under the  agreement,  IBM  transferred to the Company all of IBM's rights under
its patent license agreements with certain licensees.  Amortized  royalties from
such assigned  patent  licenses  totaled  approximately  $288,000,  $288,000 and
$392,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

In February  1998, the Company sold certain rights in certain of the IBM Patents
to Nidek Co., Ltd. for $6.3 million in cash (of which  $200,000 was withheld for
the payment of Japanese  taxes).  The  Company  transferred  all rights in those
patents issued in countries outside of the U.S. but retained the exclusive right
to use and sublicense the non-U.S.  patents in all fields other than ophthalmic,
cardiovascular and vascular. The Company received a non-exclusive license to the
non-U.S. patents in the ophthalmic field. In addition, the Company has granted a
non-exclusive license to use those patents issued in the U.S., which resulted in
$1.2  million of deferred  royalties  that were  amortized  to income over three
years.  The  transaction did not result in any current gain or loss, but reduced
the Company's  amortization  expense over the remaining  useful life of the U.S.
patents.

On March 1, 2001,  the Company  completed the sale of the IBM Patents for a cash
payment of $6.5  million.  The Company  retained a  non-exclusive  royalty  free
license  under the patent.  The Company's net gain on the sale of the patent was
approximately  $4.0 million.  As of December 31, 2003, the unamortized  carrying
value of the IBM patents was zero.

KERATOME LICENSE
In September 1997, the Company  acquired  worldwide  distribution  rights to the
Ruiz-Lenchig  keratome  for the  LASIK  procedure  and  entered  into a  limited
exclusive  license  agreement for intellectual  property related to the keratome
products.  The  agreement  called for the Company to share the  product's  gross
profit with the licensors with defined minimum quarterly  royalties.  In January
2001,  the  Company  entered  into an amended and  restated  license and royalty
agreement  related to the Company's  keratome  products.  Under the terms of the
amendment,  730,552 shares of Common Stock were issued,  valued at approximately
$1.1 million,  in prepayment for royalties  during the term of the license.  The
term was extended until July 31, 2005.

In June 2002, the agreement was further  amended to revise the payment  schedule
and provide  that the number of notice and cure periods  relating to  delinquent
payments  would be limited to three.  After the last  notice and cure  period is
used, if the Company fails to make a timely  payment  under the  agreement,  the
licensors  have the right to  immediately  declare  the  Company in default  and
accelerate the balance of the remaining unpaid payments.
See  notes 17 and 19.  The  royalty  rate was  reduced  from 50% to 10% of gross
profits.  The value of the Common Stock issued and the minimum royalty  payments
was being expensed on a  straight-line  basis through July 31, 2005 at a rate of
approximately  $1.6  million  annually,  and was  included  in  selling  related
expenses.  As of December 31,  2002,  the prepaid  royalties  under the keratome
license were included in other current assets.  In May 2003 the Company received
a default notice and the remaining balance of $3,471,613 was expensed to selling
related expenses.

NOTE 5 -- ACCOUNTS AND NOTES
RECEIVABLE

Accounts  and  notes  receivable  at  December  31,  2003 and  2002  were net of
allowance  for   uncollectibles  of  approximately   $8,410,192  and  $5,464,000
respectively.  During 2003 and 2002,  approximately  $1,156,000 and  $1,471,000,
respectively,  in accounts and notes receivable,  net of associated  commissions
and bad debt recoveries,  were written off as  uncollectible.  The Company wrote
off $8.4 million of gross accounts and notes receivable in 2004. See note 18.

The Company formerly provided internal  financing for sale of its laser systems.
Sales for which there is no stated  interest  rate are  discounted  at a rate of
eight  percent,  an estimate of the prevailing  market rate for such  purchases.
Note receivable payments due within one year are classified as current. Maturity
dates  of  long-term   notes   receivable   balances,   less  an  allowance  for
uncollectibles, at December 31, 2003 are as follows:

       Due in 2004                     $ 72,765

NOTE 6 -- INVENTORIES

The components of  inventories,  net of reserves,  at December 31, 2003 and 2002
are summarized as follows:
                              2003         2002
                              ----         ----
  Raw materials ..............  $2,750,137    5,994,564
  Work in process ............     611,997      245,195
  Finished goods .............           -    2,057,672
  Test equipment-clinical
      trials .................           -      630,668
                                ----------   ----------
                                $3,361,985    8,928,099
                                ==========   ==========
                                      F-12

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

As of December  31, 2003 and 2002,  the Company had zero and one laser  systems,
respectively, being used under arrangements for clinical trials

NOTE 7 -- PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2003 and 2002 are as follows:

                                     2003          2002
                                  ----------   ----------
Leasehold improvement ............$  305,014      646,431
Furniture and equipment ..........   822,605    1,312,293
Laboratory equipment ............. 1,711,695    2,333,352
                                  ----------   ----------
                                   2,839,314    4,292,076
Less accumulated
    Depreciation  and ............ 2,773,785    3,848,027
amortization                      ----------   ----------
                                  $   65,529      444,049
                                  ==========   ==========
Obsolete assets, which were fully depreciated, were written off in 2003 

NOTE 8 -- OTHER ASSETS

Patents, acquired intangibles and other assets at December 31, 2003 and 2002 are
as follows:
                                                   2003         2002
                                               ----------   ----------
Acquired technology, net
      of accumulated amorti-
      zation  $0 in 2003
     and $1,085,628 in 2002 ................  $         -      666,372
Diagnostic patents, net of
     accumulated amortization
     of $16,572 since impairment in 2003 and
     $665,445 in 2002  .....................      483,428    3,448,220
Keratome patents and license,
     net of accumulated
     amortization of $0
     in 2003 and $380,667
     in 2002 ...............................            -      714,133
Deposits ...................................      183,239      584,744
Deferred financing costs, net ..............            -       38,632
                                               ----------   ----------
                                               $  666,667    5,452,101
                                               ==========   ==========

During 2003,  the Company  recorded an  impairment  loss of  approximately  $4.1
million  related  to  Keratome,  acquired  technology  and  diagnostic  patents.
Management  decided to write-off the assets due to a lack of a potential  market
for  its  acquired   technology.   The  $4.1  million  has  been  classified  as
impairment of patents in the consolidated statement of operations. See note 18.

In late 2001,  the Company  recorded an impairment  loss of  approximately  $3.0
million related to goodwill of its MRF, Inc.  subsidiary.  Management decided to
discontinue  the operations of its health care services  business as a result of
its increased focus on refractive product development and commercialization. See
note 3.

ACQUIRED INTANGIBLE ASSETS
As of December 31, 2003 and 2002,  acquired  intangible assets were comprised of
the following:

                                 GROSS
DECEMBER 31, 2003              CARRYING       ACCUMULATED
                                AMOUNT        AMORTIZATION
                                ------        ------------
Diagnostic Patents            $ 500,000           (16,572)



Aggregate amortization expense for
   the year ended December 31, 2003                $ 246,690
                                                   =========

Estimated amortization expense for
   the five years  subsequent  to
   December   31,

                   2004                               33,144
                   2005                               33,144
                   2006                               33,144
                   2007                               33,144
                   2008                               33,144

                             GROSS
DECEMBER 31, 2002          CARRYING       ACCUMULATED
                            AMOUNT        AMORTIZATION
                            ------        ------------
Acquired technology         1,752,000       (1,085,628)
Diagnostic patents          4,113,665         (665,445)
Keratome patent             1,094,800         (380,667)
                          -----------       ---------- 
Totals                    $ 6,960,465       (2,131,740)
                          ===========       ========== 


Aggregate amortization expense for
   the year ended December 31, 2002                $ 460,236
                                                   =========

NOTE 9 -- EMPLOYEE BENEFIT PLANS

401(K) PLAN
The  Company  has a 401(k)  plan for the  benefit  of  substantially  all of its
full-time   employees.    The   plan   provides,   among   other   things,   for
employer-matching  contributions  to be made at the  discretion  of the Board of
Directors.  Employer-matching  contributions  vest  over  a  seven-year  period.
Administrative expenses of the plan are paid by the Company. For the years ended
December 31, 2003, 2002 and 2001,  expense  incurred related to the 401(k) plan,
including  employer-matching  contributions,  if any, was approximately  $6,000,
$9,000 and $9,000 respectively.

EMPLOYEE STOCK PURCHASE PLAN
The Company has a qualified  Employee Stock  Purchase Plan (ESPP),  the terms of
which allow for qualified  employees (as defined) to participate in the purchase

                                      F-13

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

of designated shares of the Company's Common Stock at a price equal to the lower
of 85% of the closing  price at the beginning or end of each  semi-annual  stock
purchase period.  The Company issued 0, 11,177 and 56,327 shares of Common Stock
during 2003,  2002 and 2001,  respectively,  pursuant to this plan at an average
price per share of $0.0, $0.10 and $1.18, respectively.

NOTE 10 -- NOTES PAYABLE

On March 12, 2001, the Company entered into a loan agreement with GE, for a $3.0
million  term  loan at an annual  interest  rate of prime  plus  2.5%  (6.62% at
December  31,  2003) and a revolving  loan in an amount of up to 85% of eligible
receivables related to U.S. sales, but not more than $10.0 million, at an annual
interest  rate of prime plus  1.25%  (5.37% at  December  31,  2003).  Including
amortization  of financing  costs,  discount on note payable and other fees, the
effective  interest rate on the term loan was 13%, 23% and 19% during 2003, 2002
and 2001,  respectively.  In  connection  with the loans,  the  Company  paid an
origination  fee of $130,000 and issued  warrants to purchase  243,750 shares of
Common Stock.  The warrants were recorded as a discount to note payable based on
their fair value on the date of  issuance,  approximately  $123,000,  determined
using the Black  Scholes  option-pricing  model,  and are  amortized to interest
expense over the original term of the loan. At the  termination  of the loan, an
additional  fee of $148,125 will be payable to GE. This was  amortized  over the
life of the note. The warrants were  exercisable at any time from March 12, 2001
through March 12, 2004 at an exercise price per share of $3.15. Borrowings under
the loan  agreement are  collateralized  by  substantially  all of the Company's
assets.  The  original  loan  agreement  required  the  Company to meet  certain
covenants, including the maintenance of a minimum level of net worth.

Effective February 15, 2002, the Company's covenants on the term note payable to
GE were  amended  to  decrease  the  required  minimum  level of net  worth  and
establish a minimum level of tangible net worth and minimum  quarterly  revenues
during  2002.  In  addition,  monthly  principal  payments  of $10,000  began in
February 2002, increasing to $20,000 monthly in June 2002 and $30,000 monthly in
October 2002.

On August 15, 2002,  the Company's  loan  agreement with GE was amended a second
time.  GE  provided a waiver of the  Company's  failure to comply  with  certain
financial  covenants under the loan agreement  pending the funding of the equity
portion  of the China  Transaction  (see note 12).  Upon  receipt  of the equity
investment in October 2002,  revised  covenants  became effective that decreased
the  required  minimum  level of net worth to $2.1  million,  decreased  minimum
tangible net worth to negative  $2.8  million and  decreased  minimum  quarterly
revenues during the third quarter of 2002 to $2.5 million, the fourth quarter of
2002 to $4.2 million and the first quarter of 2003 to $5.3 million.  In exchange
for the waiver and revised covenants,  the Company paid $150,000 in principal to
GE upon the  receipt of the  equity  investment  in  October  2002 and agreed to
increase other monthly principal payments to $60,000 in October 2002 and $40,000
during each of  November  and  December  2002 and January  2003.  The  remaining
principal balance was originally due on March 12, 2003. See note 18. The Company
was never able to borrow  under its  revolving  credit  facility due to eligible
receivables  related to U.S.  sales.  The term loan was in  default at  December
31,2003.

On August 30, 2004 the Company signed a three-year amended note expiring on June
30, 2007.  The note bears  interest of 9%.  Certain  covenants  were modified as
follows:  net worth  $750,000,  tangible  net  worth  $1,000,000  and  quarterly
revenues of  $1,000,000.  GE was issued a warrant to purchase  100,000 shares of
common stock at $0.25 per share,  or $0.40 per share if the China Group converts
their DIP loan to equity. The warrant expires June 30, 2008.

The China Group  provided $2 million of DIP  financing,  of which  $750,000  was
funded at  December  31,  2003.  On June 30,  2004,  $1 million of the total was
converted  to  6,850,000  common  shares.  The  remaining  $1 million note bears
interest of 9%, with  interest  only  payments due  monthly.  It is a three year
balloon  note.  The  China  Group  has the  option  to  convert  the  note to an
additional  2,500,000  common  shares.  This note is  subject to any GE liens on
Company assets.

Interest paid during 2003,  2002 and 2001  approximated  $350,000,  $335,000 and
$525,000, respectively.

NOTE 11 -- DEFERRED REVENUE

Deferred revenue at December 31, 2003 and 2002 is as follows:

                                2003         2002
                                ----         ----
 Service contracts and
   deposits .............      820,399      718,112

 Deferred royalty revenue    5,021,541    6,681,181
                            ----------    ---------
                             5,841,940    7,399,293
 Less long-term portion .    4,802,700    5,741,941
                            ----------    ---------
                            $1,039,240    1,657,352
                            ==========    =========

During 2001, the Company received a total of $6.5 million in cash from two third
parties for a non-exclusive  license  agreement to its U.S. Patent No. RE 37,504
(`504  Scanning  Patent)  and another  patent.  Of the total,  $0.8  million was
recorded  as a payable to TLC Laser Eye  Centers  Inc.  under a license  sharing
agreement.  This obligation was settled in bankruptcy.  In May 2002, the Company

                                      F-14


                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED



received  a  total  of  $2.6  million  in  cash  from  two  third   parties  for
non-exclusive  license  agreements to its `504 Scanning  Patent.  These receipts
were recorded as deferred  revenue and revenue is being  amortized over the life
of the patent, approximately 10 years.

NOTE 12 -- STOCKHOLDERS' EQUITY

On August 15, 2002, the Company  executed  definitive  agreements with the China
Group that specializes in advanced medical  treatment  services,  medical device
distribution  and medical  project  investment.  The  transaction  established a
strategic  relationship  that includes the commitment to purchase at least $10.0
million  worth of Company  products  during the 12-month  period  following  the
signing  of the  definitive  agreements,  distribution  of Company  products  in
mainland China,  Hong Kong, Macao and Taiwan,  and a $2.0 million  investment in
the Company. Under the terms of the agreements, the products purchased are being
paid by irrevocable letters of credit, confirmed by a U.S. bank and payable upon
presentation of shipping documents. See note 16. In October 2002, the investment
called for under the agreements with the China Group was completed.  In exchange
for its $2.0 million  investment,  the Company issued the China Group  9,280,647
shares  of  Series H  Convertible  Preferred  Stock  that,  subject  to  certain
restrictions,  could be converted into 18,561,294 shares of the Company's Common
Stock and result in the  purchaser  holding  approximately  40% of the Company's
Common  Stock.  Of the  9,280,647  shares of Series H Preferred  Stock that were
issued,  8,980,647  shares may not be converted  until the first to occur of (i)
the one-year  anniversary  of the date the Series H Preferred  Stock was issued,
(ii) the Company's  failure to deliver  products in accordance with the delivery
schedule set forth under the terms of the  agreements  with the China Group,  or
(iii) the Company has received  payment for at least $10.0  million worth of its
products  to be sold  pursuant  to the  terms of the  agreements  with the China
Group.  The remaining  300,000 shares were held by Benchmark  Capital & Finance,
Inc. and were purchased by the China Group in 2003. After October 25, 2004, each
share of Series H  Preferred  Stock then  outstanding  would have  automatically
converted into two shares of common stock. A conversion discount on the Series H
Preferred Stock of $2.0 million was accreted to the Company's loss over a period
of one year from the October 25, 2002  issuance  date.  See note 2. These shares
were cancelled in bankruptcy, see note 19.

In April 2002, the Company settled  litigation related to its stock subscription
receivable and, during 2002,  received  approximately  $82,000 with a commitment
for an additional  total of  approximately  $64,000 to be paid in four quarterly
installments  beginning in July 2002. Two installments were received in July and
October  2002.  The  remaining  installments  were received in January and April
2003.

On July 6, 2001,  the Company  closed a  transaction  for the sale of  1,276,596
shares of Series F Preferred  Stock to a total of two  investors in exchange for
the Company  receiving  $3.0 million in cash.  The Series F Preferred  Stock was
convertible into Common Stock on a share for share basis. All Series F Preferred
Stock was converted  into Common Stock during 2002.  In addition,  the investors
received  a total of  838,905  shares of Common  Stock  under  price  protection
provisions of the Company's September 2000 private placement.

During the years ended  December 31, 2003,  2002 and 2001,  LaserSight  received
approximately $0, $1,000 and $67,000, respectively, in cash from the exercise of
warrants,  stock options and the Employee Stock Purchase Plan,  resulting in the
issuance of 0, 11,177 and 56,327 shares respectively, of Common Stock.

Stock warrant activity during the periods indicated is as follows:

                                            Weighted
                                Shares      Average
                                 Under      Exercise
                                Warrants      Price
                                --------      -----
Balance at December 31, 2000    1,647,428    $   3.56
  Granted ..................      243,750        3.15
  Anti-dilution issuances ..       21,590       --
                                ---------        
Balance at December 31, 2001    1,912,768        3.43
     Terminated ............     (821,518)       2.88

Balance at December 31, 2002    1,091,250        3.84
  Terminated ...............     (600,000)       3.60
                                ---------        

Balance at December 31, 2003      491,250        4.13
                                =========  

In June 2004 all outstanding  warrants were cancelled  pursuant to the Company's
re-organization plan. See note 19.

On March 23, 1999,  the Company  closed a transaction  for the sale of 2,250,000
shares of Common Stock to a total of six  investors,  including  Pequot  Capital
Management,  Inc.  (Pequot) and TLC, in exchange for the Company  receiving $9.0
million in cash. In addition, the investors received a total of 225,000 warrants
to purchase Common Stock at $5.125 each, the Common Stock closing price on March
22, 1999. At December 31, 2002, 180,000 such warrants were outstanding.

The Board of Directors of the Company  declared a dividend  distribution  of one
preferred  stock  purchase  right (the "Rights") for each share of the Company's
Common  Stock  owned as of July 2,  1998,  and for each  share of the  Company's
Common  Stock  issued  until the Rights  become  exercisable.  Each Right,  when

                                      F-15

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

exercisable,  will entitle the  registered  holder to purchase  from the Company
one-thousandth  of a  share  of the  Company's  Series  E  Junior  Participating
Preferred Stock,  $.001 par value (the Series E Preferred  Stock), at a price of
$20 per  one-thousandth  of a share.  The  Rights  are not  exercisable  and are
transferable  only with the Company's  Common Stock until the earlier of 10 days
following a public  announcement that a person has acquired  ownership of 15% or
more  of  the  Company's  outstanding  Common  Stock,  or  the  commencement  or
announcement  of a tender offer or exchange  offer,  the  consummation  of which
would  result  in the  ownership  by a  person  of 15% or more of the  Company's
outstanding Common Stock. The Series E Preferred Stock will be nonredeemable and
junior to any other series of preferred  stock that the Company may issue in the
future.  Each share of Series E  Preferred  Stock,  upon  issuance,  will have a
quarterly  preferential  dividend in an amount equal to the greater of $1.00 per
share or 1,000 times the  dividend  declared per share of the  Company's  Common
Stock.  In the event of the  liquidation of the Company,  the Series E Preferred
Stock will  receive a  preferred  liquidation  payment  equal to the  greater of
$1,000 per share or 1,000 times the payment made on each share of the  Company's
Common  Stock.  Each  one-thousandth  of a share  of  Series E  Preferred  Stock
outstanding  will have one vote on all matters  submitted to the stockholders of
the  Company  and will  vote  together  as one  class  with the  holders  of the
Company's Common Stock.

In the event that a person acquires  beneficial  ownership  (except as otherwise
permitted  by the Board of  Directors)  of 15% or more of the  Company's  Common
Stock,  holders  of Rights  (other  than the  acquiring  person  or  group)  may
purchase,  at the Rights' then current  purchase price,  shares of the Company's
Common Stock having a value at that time equal to twice such exercise  price. In
the event that the Company merges into or otherwise transfers 50% or more of its
assets or  earnings  power to any person  after the Rights  become  exercisable,
holders of Rights  (other than the acquiring  person or group) may purchase,  at
the then current  exercise price,  common stock of the acquiring entity having a
value at that time equal to twice such exercise price.


NOTE 13 -- STOCK OPTION PLANS

Options are currently  issuable by the Board of Directors  under the 1996 Equity
Incentive  Employee Plan (1996 Incentive  Plan) and the LaserSight  Incorporated
Non-employee  Directors Stock Option Plan (Directors  Plan),  both of which were
approved by the Company's stockholders in June 1996, and which were last amended
in July 2001 and June 1999, respectively.

Under the 1996 Incentive Plan, as amended, employees of the Company are eligible
to receive options, although no employee may receive options to purchase greater
than 750,000  shares of Common  Stock during any one year.  Pursuant to terms of
the 1996  Incentive  Plan, as amended,  5,250,000  shares of Common Stock may be
issued at exercise  prices of no less than 100% of the fair market value at date
of grant, and options generally become  exercisable in four annual  installments
on the anniversary dates of the grant.

The  Directors  Plan,  as amended,  provides  for the  issuance of up to 500,000
shares of Common  Stock to  directors  of the  Company  who are not  officers or
employees.  Grants to  individual  directors  are based on a fixed  formula that
establishes  the timing,  size, and exercise price of each option grant.  At the
date of each annual  stockholders'  meeting,  15,000  options will be granted to
each  outside  director,  and 5,000  options  will be  granted  to each  outside
director  that chairs a standing  committee,  at exercise  prices of 100% of the
fair market value as of that date, with the options  becoming fully  exercisable
on the first anniversary date of the grant. The options will expire in ten years
or three years after an outside director ceases to be a director of the Company.

Stock option activity for all plans during the periods is as follows:

                                    Shares     Wtd. Avg.
                                    Under      Exercise
                                    Option       Price

Balance at December 31, 2000    3,508,544    $   7.76
  Granted ..................    2,057,500        1.64

  Terminated ...............     (707,361)       6.90
                               ----------         
Balance at December 31, 2001    4,858,683        5.30
     Granted ...............    1,152,500        0.27
  Terminated ...............   (1,293,099)       4.74
                               ----------         
Balance at December 31, 2002    4,718,084        4.22
      Granted ..............      150,000        0.10
  Terminated ...............   (3,789,196)       4.46
                               ----------         

Balance at December 31, 2003    1,078,888        2.82
                               ==========         

All  outstanding  options were cancelled June 30, 2004 pursuant to the Company's
re-organization   plan.  See  note  18.  The  following  table   summarizes  the
information  about stock options  outstanding  and  exercisable  at December 31,
2003:

                                       Range of Exercise Prices
                                       ------------------------
                               $0.10-$3.03   $3.75-$8.13    $9.72-$16.63
                               -----------   -----------    ------------
Options outstanding:
   Number outstanding at
      December 31, 2003            788,667       168,221         122,000
   Weighted average
      remaining contractual
      life                      5.05 years    2.56 years      2.03 years
   Weighted average
      exercise price                $ 0.79          4.96           13.53
 
Options exercisable:
   Number exercisable at
      December 31, 2003            764,668       169,221         124,000
   Weighted average
      exercise price                $ 0.81          4.93           13.31

                                      F-16


                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 14 -- INCOME TAXES

There was no federal or state  income tax  expense  for each of the years  ended
December  31,  2003,  2002 and 2001.  In 2003 a federal tax refund from tax year
1995 was received of $57,708.

Deferred tax assets and  liabilities  consist of the following  components as of
December 31, 2003 and 2002:

                                          2003            2002
                                          ----            ----
Deferred tax liabilities:
      Acquired technology ........             --         239,656
                                     ------------    ------------
                                               --         239,656
Deferred tax assets:
    Acquired technology ..........      1,265,000              --
    Inventory ....................      2,825,000       1,445,596
    Receivable allowance .........      3,165,000       2,072,216
    License fees .................      3,466,000       2,454,944
    Commissions ..................             --          68,877
    Warranty accruals ............      2,304,000         583,394
    Property and equipment .......        214,000         388,759
    NOL carry forward ............     33,644,000      30,974,149
    Other tax credits ............        397,000         256,173
    Other ........................         89,000          69,722
                                     ------------    ------------
                                       47,369,000      38,313,830
Valuation allowance ..............    (47,369,000)    (38,074,174)
                                     ------------    ------------
Net deferred tax asset (liability)    $        --              --
                                     ============    ============

Realization  of deferred  tax assets is  dependent  upon  generating  sufficient
taxable income prior to their  expiration.  Management  believes that there is a
significant  risk  that  these  deferred  tax  assets  may  expire  unused  and,
accordingly, has established a valuation allowance against them.

There were no payments  for income  taxes  during the years ended  December  31,
2003, 2002 or 2001.

At December 31, 2003, the Company has net operating loss carry forwards for
federal income tax purposes of approximately $90 million which maybe available
to offset future federal taxable income and begin to expire in the year 2018.
The utilization of the Company's net operating losses and credit carry forwards
are severely limited under Section 382 of the Internal Revenue Code due to
changes in the ownership of the company. In addition, the Company has other tax
credit carry forwards of approximately $256,000 that begin to expire in the year
2007.

For the years ended December 31, 2003, 2002 and 2001, the difference between the
Company's  effective  income tax provision  and the  "expected"  tax  provision,
computed  by  applying  the  federal  statutory  income tax rate to loss  before
provision for income taxes, is reconciled below:

                           2003          2002         2001
                           ----          ----         ----
"Expected" tax
    benefit
                        $(7,995,601)   (4,613,364)  (8,904,440)
State  income   taxes,
 net of federal  income    
 tax  benefit              (646,703)     (370,809)    (669,053)
Intangible amortization          --            --     (433,325)
Nondeductible 
    expenses                 13,168        28,808      115,244
Tax deduction from
    exercise of options
    and warrants                 --            --           --
      
Valuation allowance       8,629,136     4,955,355    9,877,607
                        -----------    ----------   ---------- 
Other items, net                 --            --       13,697
                        -----------    ----------   ---------- 
  Income tax expense     $       --            --           --
                        ===========    ==========   ========== 
                                              

At December 31, 2003, of the approximately $90 million net operating loss carry
forward, approximately $19.5 million is associated with the exercise of
nonqualified stock options, disqualifying dispositions of incentive stock
options and warrants. This tax benefit would have been recorded as an increase
to additional paid-in capital if recognized. However, all of the stock options
and warrants were cancelled in 2004 pursuant to the Company's re-organization
plan in bankruptcy. See note 19.

NOTE 15 -- SEGMENT INFORMATION

At December 31, 2003, the Company's  continuing  operations  principally include
refractive products and patents. Refractive product operations primarily involve
the development,  manufacture, and sale of ophthalmic lasers and related devices
for use in vision  correction  procedures.  Patent services involve the revenues
and expenses  generated from the ownership of certain refractive laser procedure
patents.  Health  care  services  provided  health  and vision  care  consulting
services to hospitals,  managed care companies and physicians,  and is reflected
as a discontinued operation. See note 3.

Operating  profit is total  revenue  less  operating  expenses.  In  determining
operating  profit for  operating  segments,  the  following  items have not been
considered:  general  corporate  expenses;   discontinued  operations;  expenses
attributable to Centers, a developmental stage company; non-operating income and
expense;  and income tax expense.  Identifiable  assets by operating segment are

                                      F-17

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

those  that  are  used by or  applicable  to  each  operating  segment.  General
corporate assets consist  primarily of cash,  marketable  equity  securities and
income tax accounts.
Segment information is as follows:

                            2003          2002         2001
                            ----          ----         ----
Operating revenues:
    Refractive products$    5,497,937     9,400,316   13,076,039
    Patent services           939,240     1,101,819      392,000
    Gain on sale of patent         --            --    3,950,836
                         ------------   -----------  ----------- 
  Total revenues           $6,437,177    10,502,135   17,418,875
                         ============   ===========  =========== 


Operating profit (loss):
    Refractive products  $(22,988,210)  (12,631,473) (25,605,689)
    Patent services           939,240     1,101,819    4,342,836
      General corporate    (1,481,067)   (1,728,723)  (1,498,207)
                         ------------   -----------  ----------- 
                                               
  Loss from operations   $(23,530,037)  (13,258,375) (22,761,060)
                         ============   ===========  =========== 

Impairment and inventory reserve costs of $8.0 million are included in operating
loss of refractive products in 2003.

                                 2003        2002         2001
                                 ----        ----         ----
Identifiable assets:
    Refractive products      $4,557,092  21,811,526   33,212,199             
    Patent services                  --          --           --
    Discontinued operations          --          --       66,145
    General corporate assets    417,788   1,307,459    3,031,573
                             ----------  ----------   ----------             
  Total assets               $4,974,880  23,118,985   36,309,917
                             ==========  ==========   ==========             
Depreciation and amortization:
    Refractive products         627,786   1,343,542    1,737,698
    Patent services                  --          --          --
    Discontinued operations          --          --      325,378
    General corporate               841       2,836        9,340              
                             ----------  ----------   ----------             
    Total depreciation
    and amortization         $  628,627   1,346,378    2,072,416
                             ==========  ==========   ==========             

Amortization  of  deferred  financing  costs and  accretion  of discount on note
payable of $12,246 and $52,383 for the years ended  December  31, 2003 and 2002,
respectively, is included as interest expense in the table below.

                                2003        2002     2001
                                ----        ----     ----
Capital expenditures:
    Refractive products       $  13,897   22,535    249,048
    Discontinued operations          --       --     47,544
    General corporate                --       --     --
                              ---------    -------  -------
 Total capital expenditures   $  13,897   22,535    296,592
                              =========   =======   =======

Interest & other income:
    Refractive products       $ 280,424  263,254    300,522
    General corporate           255,553   13,062    278,212
                              ---------  -------    -------
        Total interest income $ 305,977  276,316    578,734
                              =========  =======    =======

Interest expense:
    General corporate         $ 350,120  586,748    480,411
                              =========  =======    =======

The following  table  presents the  Company's  refractive  products  segment net
revenues by geographic area, based on location of customer,  for the three years
ended December 31, 2003. The individual  countries  shown generated net revenues
of at least 10% of the total  segment net revenues for at least one of the years
presented.


                            2003        2002          2001
                            ----        ----          ----
Geographic area:
    China               $ 4,373,545   4,673,304  1,726,798
    Mexico                        *           *  1,508,960
    Netherlands                   *   1,107,950          *
    United States                 *           *  3,481,045
    Africa                  744,678           *          *
    Other                   379,714   3,619,062  6,359,236
                        -----------   --------- ----------
  Total refractive
    products revenues   $ 5,497,937   9,400,316 13,076,039
                        ===========   ========= ==========
* Less than 10% of annual segment revenues.

Export sales are as follows:

                             2003        2002     2001
                             ----        ----     ----
North and
     Central America$       352,087     646,931  1,649,461
South America                27,627     393,750  2,679,420
Asia                      4,373,545   5,291,489  2,811,797
Europe                           --   2,125,991  2,243,868
Africa                      744,678     215,140    210,448              
                        -----------   ---------  ---------
                        $ 5,497,937   8,673,301  9,594,994
                        ===========   =========  =========

The geographic areas above include significant sales to the following countries:
North and Central  America  -Mexico;  South  America - Brazil;  Asia - China and
Malaysia; Europe - Spain, Italy, Israel and Africa. In the Company's experience,
sophistication  of  ophthalmic  communities  varies  by  region,  and is  better
segregated by the geographic areas above than by individual country.

As of December 31, 2001, the Company had approximately $19,000 in assets located
at a  manufacturing  facility in Costa Rica and $12,000 in assets  located at an
administrative  office  in  Europe.  As of  December  31,  2002,  both of  these
facilities  were closed and the Company did not have any other  subsidiaries  in
countries  where  it  does  business.  As a  result,  substantially  all  of the
Company's operating losses and assets apply to the U.S.

Revenues  from  one  customer  of  the  refractive   products   segment  totaled
approximately  $4.2 million in 2003 or 66% and $2.7  million in 2002,  or 26% of
the  Company's  consolidated  revenues.  See notes 16 and 18. This customer is a
related  party who owned 40% of the  Company's  stock,  as of June 30, 2004 this
customer owns 72% of the Company's stock.

NOTE 16 --RELATED PARTY TRANSACTIONS

During 2000, the Company sold one laser system to a physician  associated with a
director  of the  Company  for  $240,000.  At the time of the sale,  the Company
expected the physician to obtain third party  financing for the system and to be

                                      F-18

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

paid in full.  Since that time,  the  physician  financed  and paid the  Company
$100,000 and began making monthly payments  towards the balance.  As of December
31, 2003,  $107,848 is included in notes receivable and the Company is receiving
approximately  $4,000 per month.  During the year ended  December 31, 2003,  the
Company additionally  recognized procedure fee revenues of approximately $13,550
related to this laser.

As of December 31, 2002, TLC Laser Eye Centers Inc. owned  approximately  14% of
the Company's Common Stock.


On August 15, 2002, the Company  executed  definitive  agreements with the China
Group.  The China Group  specializes  in advanced  medical  treatment  services,
medical device  distribution  and medical  project  investment.  The transaction
established a strategic relationship that includes the commitment to purchase at
least  $10.0  million  worth of  Company  products  during the  12-month  period
following  the signing of the  definitive  agreements,  distribution  of Company
products in mainland  China,  Hong Kong,  Macao and Taiwan,  and a $2.0  million
investment  in the  Company.  Under the terms of the  agreements,  the  products
purchased are being paid by irrevocable  letters of credit,  confirmed by a U.S.
bank and payable upon presentation of shipping  documents.  Through December 31,
2003,  approximately  $4.2  million  worth of  products  were sold  under  these
agreements. In October 2002, the investment called for under the agreements with
the China Group was completed. In exchange for its $2.0 million investment,  the
Company  issued  the  China  Group  9,280,647  shares  of  Series H  Convertible
Preferred Stock that, subject to certain  restrictions,  could be converted into
18,561,294  shares of the  Company's  Common  Stock and result in the  purchaser
holding  approximately  40% of the Company's Common Stock. In 2003 and 2004 the
China  Group  provided  $2.0  million of  debtor-in-possession  financing,  with
$750,000  received as of year-end  2003.  The DIP financing was an interest only
note, at 9%. The note matured when the Company's  re-organization  was conformed
by the  bankruptcy  court or April 30,  2004,  which  ever  occured  first.  The
re-organization  plan as  confirmed  included a  provision  for $1 million to be
converted to 6,850,000 new common shares, The remaining $1 million was converted
into a three year interest only note.  The note bears an interest rate of 9% and
has a balloon  payment  due June 30,  2007.  The China  Group has the  option to
convert the remaining $1 million for an additional 2,500,000 common shares.

A new purchase agreement was signed with the China Group in February 2004, where
they agreed to purchase $12 million of lasers and products over the next twelve
months and the previous agreement was cancelled. The new agreement allows for
two one-year extensions. See notes 12 and 18

NOTE 17--COMMITMENTS AND CONTINGENCIES

VISX, INCORPORATED
------------------
On November  15,  1999,  the  Company was served with a complaint  filed by VISX
asserting that the Company's technology infringed one of VISX's U.S. patents for
equipment  used in ophthalmic  surgery.  On February 1, 2000,  the Company filed
suit against VISX claiming  non-infringement  and  invalidity of the VISX patent
and asserting that VISX infringes U.S.  Patent No.  5,630,810.  In May 2001, the
Company  settled this  litigation  in exchange for payments and related costs of
approximately $591,000.

FORMER MRF, INC. SHAREHOLDER
----------------------------
In November 1999, a lawsuit was filed on behalf of a former  shareholder of MRF,
Inc. (the  Subsidiary),  a wholly owned  subsidiary of the Company.  The lawsuit
named the  Company's  then chief  executive  officer as the sole  defendant  and
alleged fraud and breach of fiduciary duty in connection  with the redemption by
the Subsidiary of the former shareholder's  capital stock in the Subsidiary.  At
the time of the  redemption,  which  redemption  occurred prior to the Company's
acquisition of the Subsidiary,  the Company's former chief executive officer was
the president and chief executive officer of the Subsidiary. The Company's Board
of  Directors  authorized  the  Company to retain  and,  to the  fullest  extent
permitted by the Delaware  General  Corporation  Law, pay the fees of counsel to
defend the Company's chief executive officer,  the Subsidiary and the Company in
the  litigation so long as a court had not determined  that the Company's  chief
executive  officer  failed to act in good  faith  and in a manner he  reasonably
believed  to be in the  best  interest  of the  Subsidiary  at the  time  of the
redemption.  During 2002, the Company  agreed to the terms of a settlement  with
the  plaintiff.  The terms of the settlement  required  three payments  totaling
$140,000.  The first  payment of $50,000  was paid in October  2002.  The second
payment of $45,000 was due in September  2003,  and the third payment of $45,000
was due in March  2004.  All of the  payments  are to be made  without  interest
unless  there  were to be a default in payment  in which  event  interest  would
accrue at 9%. During 2002, the Company  recorded  expense of $140,000 related to
this  settlement.  This creditor did not file a proof of claim in the bankruptcy
case and accordingly the claim was discharged in bankruptcy.
See note 18.
                                      F-19

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

LAMBDA PHYSIK
-------------
In January 2000, a lawsuit was filed on behalf of Lambda Physik,  Inc.  (Lambda)
alleging  that the  Company is in breach of an  agreement  it entered  into with
Lambda  for  the   purchase  of  lasers  from  Lambda.   Lambda  has   requested
approximately $1.9 million in damages, plus interest, costs and attorney's fees.
The  Company  has  since  successfully  argued  for a change  in venue to Orange
County, Florida. After no activity for over a year, the plaintiff filed a motion
in July 2002 to have the court set a trial  date,  which  they set for  December
2002. Subsequently, the plaintiff filed a motion for continuance of the trial to
allow the parties an  opportunity  to settle the dispute.  In October 2002,  the
court entered an order  continuing the trial and will  reschedule  only upon the
filing of a new notice for trial by either party.  The Company believes that the
allegations  made by the plaintiff are without merit.  Management  believed that
the Company has  satisfied  its  obligations  under the  agreement and that this
action  would not have a  material  adverse  effect on the  Company's  financial
condition or results of  operations.  This action was  eliminated in bankruptcy.
See note 18.

KREMER
------

In November  2000, a lawsuit was filed in the United States  District  Court for
the Eastern  District of Pennsylvania on behalf of Frederic B. Kremer,  M.D. and
Eyes of the Future, P.C. alleging that the Company is in breach of certain terms
and  conditions of an agreement it entered into with Dr. Kremer  relating to the
Company's  purchase  of a patent  from Dr.  Kremer.  Dr.  Kremer  has  requested
equitable  relief in the form of a  declaratory  judgment  as well as damages in
excess of $1.6 million,  plus interest,  costs and attorney's  fees. The parties
have  agreed to postpone  discovery  and attempt to agree on the final form of a
settlement  with the  plaintiffs.  The  terms of the  settlement  agreement,  as
currently contemplated, would not require the Company to make any cash payments.
The Company  believed that the  allegations  made by the plaintiff  were without
merit.  Management believed that the Company had satisfied its obligations under
the agreement and that this action would not have a material  adverse  effect on
the  Company's  financial  condition or results of  operations.  This action was
eliminated in bankruptcy. See note 18.

FORMER U.S. DISTRIBUTORS
------------------------
In October 2001,  three  entities that  previously  served as  distributors  for
LaserSight's  excimer laser system in the United  States,  Balance,  Inc.  d/b/a
Bal-Tech Medical,  Sun Medical,  Inc. and Surgical Lasers, Inc., filed a lawsuit
in the Circuit Court of the Ninth Judicial Circuit,  Orange County, Florida. The
lawsuit  names the  Company,  its then  chief  executive  officer  and then vice
president of sales, as defendants. The lawsuit alleges various claims related to
the Company's  termination of the distribution  arrangements with the plaintiffs
including  breach of  contract,  breach of the  covenant  of good faith and fair
dealing,   tortuous   interference  with  business   relationships,   fraudulent
misrepresentation, conversion and unjust enrichment. Plaintiffs requested actual
damages  in excess of $5.0  million,  punitive  damages,  prejudgment  interest,
attorneys' fees and costs and other equitable relief. The Company filed a motion
for  summary  judgment  that was denied.  The  Company  then filed an answer and
counterclaim.  The plaintiffs have answered the  counterclaim  and have moved to
strike some of the Company's  affirmative  defenses and the Company has moved to
strike  portions of the  plaintiff's  answer.  To date,  limited  discovery  has
occurred.  In March  2003,  one of the three  entities  agreed to dismiss all of
their claims with prejudice.  Management  believed that LaserSight  Technologies
had satisfied its obligations  under the distribution  agreements,  and that the
allegations  against  LaserSight  Technologies,  Mr.  Farris and Mr. Spivey were
without  merit.  As a result of the  September  2003  Chapter 11  petition,  and
subsequent  re-structuring,  claims  such as these have been  resolved  with the
issuance of a portion of the 9,997,195 new common shares. See note 18.

JARSTAD
-------
In January 2002, a customer  filed a lawsuit in the Superior  Court of the State
of  Washington  in and for the  County of King.  The  lawsuit  was  subsequently
remanded to federal  court.  The lawsuit  names the Company and an  unaffiliated
finance company as defendants. The lawsuit alleges various claims related to the
Company's sale of a laser system to the plaintiff  including breach of contract,
breach of express warranty,  breach of implied warranty,  fraudulent inducement,
negligent  misrepresentation,  unjust  enrichment,  violation  of  the  consumer
protection  act  and  product  liability.  Plaintiffs  requested  damages  to be
determined  at trial,  reimbursement  for  leasing  fees,  prejudgment  and post
judgment interest, attorneys' fees and costs and other equitable relief. In this
matter, a settlement  agreement has been signed by the parties. The terms of the
settlement  do not require the  Company to make any cash  payments.  The Company
agreed to service and calibrate the plaintiff's laser as well as provide certain
software and equipment upgrades at either no cost to plaintiff or at prices that
were negotiated in connection with the settlement, if and when such upgrades are
available in the U.S.
                                      F-20

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

ITALIAN DISTRIBUTOR
-------------------
In February 2003, an Italian court issued an order  restraining the Company from
marketing its AstraPro software at a trade show in Italy. This restraining order
was issued in favor of LIGI Tecnologie Medicali S.p.a.  (LIGI), a distributor of
the Company's products, and alleges that its AstraPro software product infringes
certain  European  patents  owned by LIGI.  The Company  retained  Italian legal
counsel to defend the Company in this  litigation,  and the Company was informed
that the Italian court has revoked the restraining order and had ruled that LIGI
must pay the Company's  attorney's  fees in  connection  with its defense of the
restraining order. In addition, the Company's Italian legal counsel informed the
Company  that LIGI had filed a motion for a  permanent  injunction.  The Company
believes that its AstraPro software does not infringe the European Patents owned
by LIGI,  but due to cash  flow  constraints  the  Company  has not been able to
continue  to defend  its  rights to  distribute  the  AstraPro  software  in the
European markets.  Management  believes that the outcome of this litigation will
not have a material  adverse  impact on the  Company's  financial  condition  or
results of  operations.  Since the Chapter 11 petition does not apply to foreign
courts, this action is still pending.

LEASE OBLIGATIONS

The Company  leases office space and certain  equipment  under  operating  lease
arrangements.

Future minimum payments under  non-cancelable  operating leases, with initial or
remaining terms in excess of one year, as of December 31, 2003 are approximately
as follows:

         2004                            367,000
         2005                            192,000
         2006                             77,000

Rent expense during 2003, 2002 and 2001 was  approx-imately  $397,000,  $634,000
and $1,168,000, respectively.

OTHER COMMITMENTS

The Company owes royalties to third parties on certain products sold,  primarily
international  laser  sales,  generally at a rate of 6% of the sales price after
certain  adjustments.  Such  royalties are expensed at the time of sale and paid
quarterly based on cash collections in accordance with the license agreement. 

NOTE 18 - VOLUNTARY REORGANIZATION UNDER CHAPTER 11

BANKRUPTCY PROCEEDINGS

On September 5, 2003, the Company and two of its subsidiaries  filed a voluntary
petition  for relief in the  Bankruptcy  Court  under  Chapter  11. The  Debtors
continued to operate their businesses as debtors-in-possession through the close
of business June 9, 2004. The Company filed a plan of reorganization  (the Plan)
with the Bankruptcy  Court on April 28, 2004 the Bankruptcy  Court confirmed the
Plan. The Company emerged from Chapter 11 on June 10, 2004.

Under Chapter 11, certain  claims against the Company in existence  prior to the
filing of the petitions for relief under the federal  bankruptcy laws are stayed
while the Company continues business operations as  debtor-in-possession.  These
claims are  reflected in the December  31, 2003  balance  sheet as  "liabilities
subject  to  compromise."  The  majority  of  secured  claims are held by Heller
Healthcare  Finance,  Inc  and  GE  Healthcare  Financial  Services,   Inc.,  as
successor-in-interest to Heller (collectively "GE").

RESTRUCTURING CHARGE

Additionally,  the company  recognized  reorganization  charges of approximately
$7.6 million  during 2003.  In applying  Statement of Position  90-7,  Financial
Reporting by Entities in  Reorganization  under the Bankruptcy Code, the Company
recognized the following expenses in 2003:

     Write off patents                      $ 4,098,607
     Inventory obsolescence                   3,588,039
     Other                                      (54,373)
                                            -----------
                                              7,632,273
  
     Bad debt reserve                         2,578,304
     Accrued commissions/licenses            (2,210,174)
                                            -----------
     Net bad debt expense                       368,130

The inventory obsolescence was classified as part of cost of revenues.

                                      F-21

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Additional expenses recognized per approved bankruptcy claims:

     Warranty reserve                          4,640,319
     Salaries/severance                          791,307
     General & administrative                     68,253
                                            ------------
                                               5,499,879

The China Group owned 40% of the Company  before  bankruptcy and they own 72% of
the  Company  after  bankruptcy.  The  fresh  start  provisions  of SOP 90-7 are
followed if the  pre-petition  shareholders  do not control more than 50% of the
post-petition  entity.  The Company determined that since this was not the case,
that fresh start reporting could not be adopted.

All  professional  expenses  related to the  bankruptcy  have been  expensed  as
occurred.  $110,000 of professional fees for bankruptcy legal services were paid
for in 2003.  As a  result  of the  September  2003  Chapter  11  petition,  and
subsequent  re-structuring,  all legal claims,  except for the LIGI claim,  have
been resolved with the issuance of a portion of the 9,997,195 new common shares.
Since the Chapter 11 petition does not apply to foreign courts,  the LIGI action
is still pending.

NOTE 19 - SUBSEQUENT EVENT

BANKRUPTCY/CONFIRMATION

On April 28, 2004, the Plan was confirmed by the Bankruptcy Court. The effective
date of the Plan was June 30, 2004.

On June 30, 2004,  the Company  cancelled  all  outstanding  stock,  options and
warrants  and issued  9,997,195  new shares of common  stock.  The shares  were
distributed as follows:

     Creditors of LSI                       1,116,000
     Creditors of LST                       1,134,000 (1)
     Old Preferred Stockholders               360,000
     Old common stockholders                  539,997 (2)
     Cancel treasury stock                     (2,802)
     Conversion of $1 million DIP
     Financing                              6,850,000
                                            ---------
                                            9,997,195

(1) These shares will be issued upon the  resolution of a creditor  objection to
claim.

(2) The old common stock was converted at a 51.828 to 1 ratio. Due to
rounding on conversion only 539,997 shares were issued

On August 30,  2004,  the Company  signed a three year  amended note with GE for
$2,149,249.  The note was effective June 30, 2004 and bears 9% interest.  In the
amendment,  GE  provided a waiver of the  Company's  failure to comply  with all
covenants.  In exchange  for the  amendment  and waiver,  the Company will pay a
$50,000  commitment fee, a $100,000  termination fee,  attorney fees of $126,078
and an audit  fee of  $8,151.  All fees  were  added to the  principal  balance.
Revised  covenants became effective that adjusted the minimum level of net worth
to $750,000,  minimum  tangible net worth to $1.0 million and minimum  quarterly
net revenue to $1.0 million.  GE was issued warrants to purchase  100,000 common
shares,  at $0.25 per share, or $0.40 per share if the China Group converts it's
remaining $1 million of DIP financing.

The China Group  provided $2 million of DIP  financing,  of which  $750,000  was
funded at  December  31,  2003.  On June 30,  2004,  $1 million of the total was
converted  to  6,850,000  common  shares.  The  remaining  $1 million note bears
interest of 9%, with  interest  only  payments due  monthly.  It is a three year
balloon  note.  The  China  Group  has the  option  to  convert  the  note to an
additional  2,500,000  common  shares.  This note is  subject to any GE liens on
Company assets.

In June of 2004,  as of the  effective  date of the  re-organization  plan,  the
following liabilities were relieved:

     Accounts Payable                       2,905,814
     Accrued TLC license fee                  825,500
     Accrued salaried/severance               235,367
     Accrued warranty                       6,125,370
     Accrued Ruiz license fees              3,471,613
     Deposits/service contracts               720,399
     Other accrued expenses                 1,331,711
                                           ----------
                                           15,616,134

In June 2004, $8.4 million of accounts and notes receivable were written off 
against the allowance for doubtful accounts.
                                      F-22

                    LASERSIGHT INCORPORATED AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

LIABILITIES SUBJECT TO COMPROMISE
---------------------------------

The company  operated as a  debtor-in-possession  from September 5, 2003 through
June 10, 2004 when a final bankruptcy  release was obtained.  As a result of the
bankruptcy  re-structuring,  the  company  expects  to record  credits  for debt
forgiveness of approximately $15.6 during the three months ended June 30, 2004.

                                      F-23