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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended June 30, 2003.

or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Transition period from to
------------------- -------------------

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)

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


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 X No
----- -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act

Yes No X
----- -----

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
----- -----

The number of shares of the registrant's common stock outstanding as of December
31, 2003 is 27,841,941. As detailed herein, the Company filed Chapter 11
bankruptcy on September 5, 2003. As a result of the bankruptcy, the company
canceled these shares and issued 9,997,195 new shares on June 30, 2004. As of
November 30, 2004, there are 9,997,195 outstanding.

LASERSIGHT INCORPORATED AND SUBSIDIARIES

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS
REPORT CONTAINS FORWARD-LOOKING STATEMENTS (WITHIN THE MEANING OF SECTION 21E OF


THE SECURITIES EXCHANGE ACT OF 1934) THAT INVOLVE RISKS AND UNCERTAINTIES.
LASERSIGHT'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN THE SECTIONS ENTITLED "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - RISK FACTORS AND
UNCERTAINTIES" IN THIS REPORT AND IN LASERSIGHT'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2002. LASERSIGHT UNDERTAKES NO OBLIGATION TO UPDATE
ANY SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE RESULTS OF ANY REVISIONS TO ANY OF
THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY FUTURE EVENTS OR
DEVELOPMENTS.




INDEX
PAGE
PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002 3

Condensed Consolidated Statements of Operations for the Three Month
Periods and Six Month Periods Ended June 30, 2003 and 2002 4

Condensed Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 2003 and 2002 5

Notes to Condensed Consolidated Financial Statements 6



Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14

Item 3. Quantitative and Qualitative Disclosures about Market Risk
37

Item 4. Controls and Procedures 37

PART II OTHER INFORMATION

Item 1. Legal Proceedings 38

Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds 38

Item 3. Defaults Upon Senior Securities 38

Item 4. Submission of Matters to a Vote of Security Holders 38


Item 5. Other Information 38

Item 6. Exhibits 38




Page 2 of 39




PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS





June 30, December 31,
ASSETS 2003 2002
------------- -------------
Current assets: (Unaudited)

Cash and cash equivalents ......................................................$ 323,271 $ 1,065,778
Accounts receivable - trade, net ............................................... 1,060,136 3,811,065
Notes receivable - current portion, net ........................................ 481,416 1,763,106
Inventories .................................................................... 4,414,898 8,928,099
Deferred tax assets ............................................................ - 28,850
Other current assets ........................................................... 113,620 593,842
------------- -------------
Total Current Assets ................ 6,393,341 16,190,740

Notes receivable, less current portion, net ...................................... - 1,020,731
Property and equipment, net ...................................................... 213,747 444,049
Patents and acquired intangibles, net ............................................ 500,000 4,828,725
Other assets, net ................................................................ 581,548 623,376
------------- -------------
$ 7,688,636 $ 23,107,621
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Note payable, net of unamortized discount of zero and $12,246 at

June 30, 2003 and December 31,2002, repectively .................................$ 1,960,000 $ 2,077,754
Accounts payable ............................................................... 3,254,619 2,755,358
Accrued expenses ............................................................... 1,251,141 1,993,993
Accrued license fees ........................................................... 1,000,653 1,504,400
Accrued warranty ............................................................... 1,579,931 1,667,656
Accrued commissions ............................................................ - 1,594,634
Deferred revenue ............................................................... 2,936,648 1,657,352
------------- -------------
Total Current Liabilities ................ 11,982,992 13,251,147

Accrued expenses, less current portion ........................................... - 187,449

Deferred royalty revenue ......................................................... 5,272,321 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 anding at June 30,
2003 and December 31, 2002 ....................................................... 9,281 9,281

Common stock - par value $.001 per share; authorized 100,000,000
shares; 27,987,141 shares issued at June 30, 2003 and December 31, 2002 27,987 27,987

Additional paid-in capital ....................................................... 103,801,064 103,796,812

Stock subscription receivable .................................................... - (32,336)

Accumulated deficit .............................................................. (112,862,362) (99,360,863)

Less treasury stock, at cost; 145,200 common shares at June 30, 2003 and
December 31, .................................................................... (542,647) (542,647)
------------- -------------
(9,566,677) 3,898,234
------------- -------------
$ 7,688,636 $ 23,107,621
============= =============


See accompanying notes to the condensed consolidated financial statements.

Page 3 of 39





LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
2003 2002 2003 2002
----------------------------- -----------------------------

Revenues:
Products ............................................ $ 1,595,642 $ 1,359,711 $ 3,681,797 $ 3,225,916
Royalties ........................................... 234,810 535,913 469,620 642,913
------------ ------------ ------------ ------------
1,830,452 1,895,624 4,151,417 3,868,829
Cost of revenues:
Product cost ........................................ 4,539,718 1,041,968 5,885,262 2,434,580
------------ ------------ ------------ ------------
Gross profit ............................................ (2,709,266) 853,656 (1,733,845) 1,434,249

Research and development and regulatory expenses ........ 96,800 392,238 293,299 935,212

Other general and administrative expenses ............... 3,453,091 4,033,294 5,881,613 8,133,807
Selling-related expenses ................................ 586,287 639,190 1,204,067 1,462,187
Amortization of intangibles ............................. 115,059 115,059 230,118 230,118
Impairment of patents .................................. 4,098,607 - 4,098,607 -
------------ ------------ ------------ ------------
8,253,044 4,787,543 11,414,405 9,826,112
------------ ------------ ------------ ------------

Loss from operations .................................... (11,059,110) (4,326,125) (13,441,549) (9,327,075)
Other income and expenses:
Interest and other income ............................... 11,357 79,992 37,972 145,941
Interest expense ........................................ (43,000) (154,042) (155,628) (297,983)
------------ ------------ ------------ ------------
Loss before income tax benefit .......................... (11,090,753) (4,400,175) (13,559,205) (9,479,117)
Income tax benefit ...................................... - - (57,708) -
------------ ------------ ------------ ------------
Net Loss ................................................ (11,090,753) (4,400,175) (13,501,497) (9,479,117)

Conversion discount on preferred stock .................. (483,837) - (959,698) -
------------ ------------ ------------ ------------
Loss attributable to common shareholders ................ $(11,574,590) $ (4,400,175) $(14,461,195) $ (9,479,117)
============ ============ ============ ============
Loss per common share
Basic and diluted: ...................................... (0.42) (0.16) (0.52) (0.35)
============ ============ ============ ============
Weighted average number of shares outstanding
Basic and diluted: ...................................... 27,842,000 27,003,000 27,842,000 26,747,000
============ ============ ============ ============



See accompanying notes to the condensed consolidate financial statements.




Page 4 of 39







LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)

2003 2002
------------ ------------


Cash flows from operating activities

Net loss ...................................................... $(13,501,497) $ (9,479,117)

Adjustments to reconcile net loss to net cash used in operating
activities:

Depreciation and amortization ................................. 486,563 895,522

Provision for uncollectable accounts, net ..................... 3,790,201 1,113,947

Write off of Inventory ........................................ 3,588,040 -

Impairment charge on patent.................................... 4,098,607 -

Common stock issued for services .............................. - 42,500

Stock options issued for services ............................. 4,251 12,377

Changes in assets and liabilities:

Accounts and notes receivable .............................. 1,263,149 2,725,615

Inventories ................................................ 925,161 1,299,199

Accounts payable ........................................... 499,261 (20,582)

Accrued expenses ........................................... (3,116,408) (27,264)

Deferred revenue ........................................... 1,279,296 1,909,405

Other ...................................................... 52,430 453,305
------------ ------------
Net cash used in operating activities ......................... (630,946) (1,075,093)

Cash flows from investing activities

Purchases of property and equipment ............................ (13,897) (4,437)
------------ ------------

Net cash used in investing activities ......................... (13,897) (4,437)

Cash flows from financing activities

Payments on debt financing ................................. (130,000) (560,000)
Proceeds from stock subscription receivable ................ 32,336 82,354
------------ ------------

Net cash used in financing activities ......................... (97,664) (477,646)
------------ ------------

Decrease in cash and cash equivalents ......................... (742,507) (1,557,176)

Cash and cash equivalents, beginning of period ................ 1,065,778 2,762,062
------------ ------------
Cash and cash equivalents, end of period ...................... $ 323,271 $ 1,204,886
============ ============


See accompanying notes to the condensed consolidated financial statements.




Page 5 of 39



LASERSIGHT INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Periods Ended June 30, 2003 and 2002


NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited, condensed consolidated financial
statements of LaserSight Incorporated and subsidiaries ("LaserSight",
or the "Company") as of June 30, 2003, and for the three and six month
periods ended June 30, 2003 and 2002 have been prepared in accordance
with accounting principles generally accepted in the United States of
America on a going concern basis, which contemplates the realization
of assets and the discharge of liabilities in the normal course of
business for the foreseeable future. The Company has suffered
recurring losses from operations and has a significant accumulated
deficit that had raised substantial doubt about its ability to
continue as a going concern. The Company had an accumulated deficit of
$112.9 million at June 30, 2003.

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;
on June 10, 2004, the Bankruptcy Court confirmed the Plan. Under
Chapter 11, certain claims against the Company in existence prior to
the filing of the petitions for relief under the federal bankruptcy
laws were stayed while the Company continued business operations as
debtor-in-possession. 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"). No professional
fees due to the bankruptcy filing were paid in the three months ended
June 30, 2003.


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

As previously announced, in August 2002, the Company and New
Industries Investment Consultants (HK), Ltd. ("NIIC") and New
Industries Investment Group ("NII") (collectively the "China Group")
had entered into a strategic relationship, including the purchase of
at least $10 million worth of Company products during a twelve-month
period ending in August of 2003, distribution of Company products in
mainland China, Hong Kong, Macao and Taiwan, and a $2 million equity
investment in the Company by the China Group. The investment in the
Company 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 the
China Group. The China Group 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, the China Group had purchased
approximately $4.5 million worth of products. Thereafter the China
Group 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.

Page 6 of 39


As previously announced, the Company had been in continuous
negotiations with 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 outline a
framework for additional product purchases. The Company reached a new
agreement with the China Group on June 20, 2003. That agreement called
for the China Group 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 its restructured business plan. While the Company sold products to
the China Group during the second and third quarter of 2003, and they
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. 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.

The Company also announced that Francis E. O'Donnell, Jr., M.D. and
David Peroni had resigned from their positions as members of the 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 the China
Group 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 the Company's Chief
Executive Officer and President and Director. Danghui ("David") Liu,
Ph. D., Vice President of Product Development and Technical Marketing,
was named Interim 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 the Company 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. After the Company was removed from OTCBB, it has
been traded in the over-the-counter (OTC) market via the "Pink
Sheets".

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 on May 6,
2003 and served legal action against the Company on August 12, 2003
invoking an acceleration clause 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 it difficult for the Company to continue to operate without the
protection a bankruptcy petition would provide.

The Company had 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. As a result of the abovementioned, on September 5, 2003
the Company filed a voluntary petition for relief un the United States
Bankruptcy Court, Middle District of Florida - Orlando Division, under
Chapter 11 of the Title II of the U.S. Bankruptcy code.

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

Page 7 of 39


additional equity capital and/or debt financing. These condensed
consolidated financial statements include substantial re-structuring
charges recorded during the second quarter of 2003 necessary to
reflect the diminution of asset carrying values due to the Company's
re-focus of its products to core product lines.

The condensed consolidated financial statements have been prepared in
accordance with the requirements for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and note
disclosures required by accounting principles generally accepted in
the United States of America for complete financial statements. These
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in LaserSight's annual report on Form 10-K for the
years ended December 31, 2002. In the opinion of management, the
condensed consolidated financial statements include all adjustments
necessary for a fair presentation of consolidated financial position
and the results of operations and cash flows for the periods
presented. There are no other components of comprehensive loss other
than the Company's consolidated net loss for the three and six month
periods ended June 30, 2003 and 2002. The results of operations for
the three and six month periods ended June 30, 2003 are not
necessarily indicative of the operating results for the full year.

Reclassifications

Certain prior years' amounts have been reclassified to conform with
the current year presentation.


NOTE 2 CRITICAL ACCOUNTING POLICIES

The Company's condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted
in the United States of America. Preparation of these statements
requires management to make judgments and estimates. Some accounting
policies have a significant impact on amounts reported in these
financial statements. A summary of significant accounting policies and
a description of accounting policies that are considered critical may
be found in our 2002 Annual Report on Form 10-K, filed on March 28,
2003, in the Critical Accounting Policies and Estimates section of
"Item 7. - Management's Discussion and Analysis of Financial Condition
and Results of Operations."

NOTE 3 PER SHARE INFORMATION

Basic loss per common share is computed using the weighted average
number of common shares and contingently issuable shares (to the
extent that all necessary contingencies have been satisfied). Diluted
loss per common share is computed using the weighted average number of
common shares, contingently issuable 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. All common share
equivalents had an anti-dilutive effect for the periods ended June 30,
2003 and 2002. However, 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. On June
30, 2004 the Company issued 9,997,195 new common shares.



Page 8 of 39


NOTE 4 INVENTORIES

Inventories, which consist primarily of excimer and erbium laser
systems and related 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 basis. As
a result of the Company's financial difficulties, the company increased
its inventory reserves at June 30, 2003. The additional reserves,which
are classified as cost of revenues, approximated $3.6 million during
the second quarter, and brought the total reserve to $7.1 million at
June 30, 2003. The components of inventories, net of reserves, at June
30, 2003 and December 31, 2002 are summarized as follows:

June 30, 2003 December 31, 2002
------------- -----------------
Raw materials $ 3,912,392 5,994,564
Work-in-process 502,506 245,195
Finished goods -0- 2,057,672
Test equipment - clinical trials -0- 630,668
----------- ---------
4,414,898 8,928,099
=========== =========

NOTE 5 SEGMENT INFORMATION

The Company's operations principally include refractive products.
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
patents.

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,
non-operating income and expense and income tax expense. Identifiable
assets by operating segment are those that are used by or applicable
to each operating segment. General corporate assets consist primarily
of cash and income tax accounts.

The table below summarizes information about reported segments as of
and for the three months ended June 30:



Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
-------- ------------- ------ ------------ ------------

2003
----
Operating segments:
Refractive products $ 1,595,642 (10,750,424) 7,367,687 223,896 13,897
Patent services 234,810 234,810 -- -- --
General corporate -- (543,496) 320,949 141 --
----------- ---------- --------- ------- ------
Consolidated total $ 1,830,452 (11,059,110) 7,688,636 224,037 13,897
=========== ========== ========= ======= ======


2002
----
Operating segments:
Refractive products $ 1,359,711 (4,375,583) 26,829,123 365,969 --
Patent services 535,913 535,913 -- -- --
General corporate -- (486,455) 1,471,109 1,052 --
----------- ---------- --------- ------- ------
--
Consolidated total $ 1,895,624 (4,326,125) 28,300,232 367,021 --
=========== ========== ========== ======= ======


Amortization of deferred financing costs and discount on note payable of
zero and $63,612 for the three months ended June 30, 2003 and 2002,
respectively, is included as interest expense.


Page 9 of 39



The table below summarizes information about reported segments as of
and for the six months ended June 30:



Depreciation
Operating Operating Profit and Capital
Revenues (Loss) Assets Amortization Expenditures
-------- ------------- ------ ------------ ------------

2003
----
Operating segments:
Refractive products $ 3,681,797 (12,734,832) 7,367,687 486,281 13,897
Patent services 469,620 469,620 -- -- --
General corporate -- (1,176,337) 320,949 282 --
----------- ---------- --------- ------- ------
Consolidated total $ 4,151,417 (13,441,549) 7,688,636 486,563 13,897
=========== ========== ========== ======= ======


2002
----
Operating segments:
Refractive products $ 3,225,916 (9,086,811) 26,829,123 893,293 4,437
Patent services 642,913 642,913 -- -- --
General corporate (883,177) 1,471,109 2,229
----------- ---------- --------- ------- ------
Consolidated total $ 3,868,829 (9,327,075) 28,300,232 895,522 4,437
=========== ========== ========== ======= ======



Amortization of deferred financing costs and discount on note payable of
$12,246 and $127,224 for the six months ended June 30, 2003 and 2002,
respectively, is included as interest expense.

NOTE 6 AMENDED LOAN AGREEMENT

On March 12, 2003, our loan agreement with GE was extended 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 had 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 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. The Company continued to negotiate with GE during the June
and July 2003 period until a new agreement was executed on August 28,
2003 providing for an extension of its loans through January 2005.
Since the September 5, 2003 bankruptcy filing, the Company had been in
active discussions with GE for further modifications of the debt.

On August 30, 2004, the Company signed an amended agreement with GE.
The new note was effective June 30, 2004 and matures June 30, 2007.
The note bears 9% interest per year. The loan covenants were modified
to: net worth $750,000, tangible net worth $1,000,000 and minimum
quarterly revenue of $1,000,000. The note also requires all SEC
filings to be up to date by November 30, 2004. 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. After adding legal fees, commitment
fees and termination fees, the new principal balance was $2,149,249 as
of June 30, 2004.


Page 10 of 39


NOTE 7 CHINA BACKGROUND

As indicated in Note 1, we had been in continuous negotiations with
the China Group to secure immediate cash payments for the purchase of
Company products, further define the terms of the a long term strategy
for the Company in China, and to outline a framework for additional
product purchases. Further background on the China Group:

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

NIMD became the exclusive distributor in China for LaserSight in
September 2002. NIMD purchased more than $7.5 million value of
LaserSight's products and services after it was engaged in the
exclusive distributorship with LaserSight and before LaserSight went
into Chapter 11 Bankruptcy.

The China Group provided $2.0 million of debtor-in-possession
financing. On June 30, 2004, $1.0 million of the DIP financing was
converted into 6,850,000 shares of common stock which resulted in the
China Group owning 72% of the Company. Revenues from the China Group
were $0.8 and $2.9 million in the three and six months ended June 30,
2003, respectively.

NOTE 8 STOCK BASED COMPENSATION

The Company accounts for stock-based employee compensation plans using
the intrinsic value method under Accounting Principles Board Opinion
No. 25 and related interpretations. Accordingly, stock-based employee
compensation cost is not reflected in net earnings, as all stock
options granted under the plans had an exercise price equal to or in
excess of the market value of the underlying common stock on the date
of grant. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of
Statement No. 123, "Accounting for Stock-Based Compensation," the
Company's net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:



Three Months Ended
------------------
June 30, 2003 June 30, 2002
------------- -------------


Net loss, as reported $ (11,090,753) (4,400,175)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects 190,527 313,598
------------- ----------
Pro forma net loss (11,281,280) (4,713,773)

Conversion discount on preferred stock (483,837) --
------------- ----------
Pro forma loss attributable to common shareholders (11,765,117) (4,713,773)
============= ==========

Basic and diluted loss per share:
As reported $ (0.42) (0.16)
Pro forma (0.42) (0.17)




Page 11 of 39






Six Months Ended
----------------
June 30, 2003 June 30, 2002
------------- -------------

Net loss, as reported $ (13,501,497) (9,479,117)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects 381,054 627,195
------------- -----------
Pro forma net loss (13,882,551) (10,106,312)

Conversion discount on preferred stock (959,698) --
------------- -----------
Pro forma loss attributable to common shareholders (14,842,249) (10,106,312)
============= ===========

Basic and diluted loss per share:
As reported $ (0.52) (0.35)
Pro forma (0.53) (0.38)

As previously announced, as a result of the Chapter 11 filing the
Company cancelled all of the common and preferred shares, options and
warrants outstanding at June 30, 2004 and issued 9,997,195 new shares
on June 30, 2004. Included in the 9,997,195 new shares are 1,134,000
shares to be issued to the creditors of the Company after the
resolution of a creditor's objection.

NOTE 9 LITIGATION

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
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


Page 12 of 39


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.

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 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. 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 had
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
settled in bankruptcy.

Kremer. In November 2000, a lawsuit was filed in the United States
District Court for the Eastern District of Pennsylvania on behalf of


Page 13 of 39


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 had 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 settled 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

LaserSight is principally engaged in the manufacture and supply of narrow
beam scanning excimer laser systems, topography-based diagnostic workstations,
and other related products used to perform procedures that correct common
refractive vision disorders such as nearsightedness, farsightedness and
astigmatism. Since 1994, the Company has marketed its laser systems commercially
in over 30 countries worldwide and currently has an installed base of
approximately 400 laser systems, including over 220 of our LaserScan LSX(TM)
laser systems. We are currently focused on selling in selected international
markets, primarily China.

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 recurring losses
from operations and net capital deficiency raise substantial doubt about our
ability to continue as a going concern. We have experienced significant losses
and operating cash flow deficits, and we expect that operating cash flow
deficits will continue without improvement in our operating results. In August
2002 and February 2004, we executed definitive purchase agreements relating to
our China Transaction (see "China Transaction").


China Transaction

In July 2002, we 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 Group 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 in the form of Series H convertible
preferred stock that, subject to certain restrictions, could have been converted
into 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
presentation of shipping documents. The Company started shipping products under
this agreement in August 2002. The Company reached an agreement with the China
Group on June 20, 2003. That agreement called for the China Group 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 its restructured business plan. The China Group provided $2.0


Page 14 of 39


million of debtor-in-possession financing. On June 30, 2004, $1.0 million of the
DIP financing was converted into 6,850,000 shares of common stock and the China
Group owns 72% of the Company.


Results of Operations

The following table sets forth for the periods indicated information
derived from our statements of operations for those periods 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.

































Page 15 of 39





Percent Increase (Decrease)
As a Percentage of Net Sales Over Prior Periods

Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002 2003 vs. 2002 2003 vs. 2002
---- ---- ---- ---- ------------- -------------

Statement of Operations Data:
Net Revenues:
Refractive products 87.2% 71.7% 88.7% 83.4% 17.4% 14.1%
Patent services 12.8% 28.3% 11.3% 16.6% -56.2% -27.0%
----- ----- ----- ----- ----- ----
Net Revenues 100.0% 100.0% 100.0% 100.0% -3.4% 7.3%
Cost of Revenue 248.0% 55.0% 141.8% 62.9% 335.7% 141.7%
----- ----- ----- ----- ----- ----
Gross Profit (1) -148.0% 45.0% -41.8% 37.1% -417.4% -220.9%
Research, development and
regulatory expenses (2) 5.3% 20.7% 7.1% 24.2% -75.3% -68.6%
Other general and administrative
expenses 188.6% 212.8% 141.7% 210.2% -14.4% -27.7%
Selling-related expenses (3) 32.0% 33.7% 29.0% 37.8% -8.3% -17.7%
Impairment of Patents 223.9% 0.0% 98.7% 0.0% 100.0% 100.0%
Amortization of intangibles 6.3% 6.0% 5.5% 6.0% 0.0% 0.0%
----- ----- ----- ----- ----- ----
Loss from continuing operations. -604.2% -228.1% -323.8% -241.2% 155.6% 44.1%




(1) As a percentage of net revenues, the gross loss for refractive products
only for the three months ended June 30, 2003 and 2002, and the six months
ended June 30, 2003 and 2002, were (185%), 23%,(60%) and 25%, respectively.

(2) As a percentage of refractive product net sales, research, development and
regulatory expenses for the three months ended June 30, 2003 and 2002, and
the six months ended June 30, 2003 and 2002, were 6%, 29%, 8% and 29%,
respectively.

(3) As a percentage of refractive product net sales, selling-related expenses
for the three months ended June 30, 2003 and 2002, and the six months ended
June 30, 2003 and 2002, were 37%, 47%, 33% and 45%, respectively.



THREE MONTHS ENDED JUNE 30, 2003, COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

REVENUES. Net revenues for the three months ended June 30, 2003 decreased
by $0.07 million, or 3%, to $1.8 million from $1.9 million for the comparable
period in 2002.

During the three months ended June 30, 2003, refractive products revenues
increased $0.2 million, or 17%, to $1.6 million from $1.4 million for the
comparable period in 2002. This revenue increase was primarily the result of
higher unit sales of our excimer laser system and the sale of our diagnostic
software. During the three months ended June 30, 2003, excimer laser system
sales accounted for approximately $0.8 million in revenues compared to $0.7


16 of 39


million in revenues over the same period in 2002. During the three months ended
June 30, 2003, four laser systems were sold compared to three laser systems for
the comparable period in 2002. This increase was slightly offset by a reduction
in our average selling price that decreased approximately 7%. During the three
months ended June 30, 2003, parts revenue accounted for approximately $0.6
million compared to $0.5 million over the same period in 2002.

Net revenues from patent services for the three months ended June 30, 2003
decreased approximately $0.3 million, or 56%, to $0.2 million from $0.5 million
for the comparable period in 2002, due to a non-exclusive license agreement we
entered into in June 2002.

Geographically, China has become our most significant market with $1.2
million in revenue during the three months ended June 30, 2003, all of which
resulted from the China Group.

COST OF REVENUES; GROSS PROFIT. For the three months ended June 30, 2003
and 2002, gross profit margins were (148%) and 45%, respectively. The gross
margin decrease during the three months ended June 30, 2003 was primarily
attributable to a $3.6 million inventory obsolescence reserve offset by higher
unit sales of our excimer laser system and the higher margins that the Company
experiences on sales of its AstraMax diagnostic workstations, AstraPro
diagnostic software and parts sales.


RESEARCH, DEVELOPMENT AND REGULATORY EXPENSES. Research, development and
regulatory expenses for the three months ended June 30, 2003 decreased
approximately $0.3 million, or 75%, to $0.1 million from $0.4 million for the
comparable period in 2002. While decreasing our expenses including salaries,
consulting fees and materials, we still continued to develop our AstraMax
diagnostic workstation and excimer laser systems.

OTHER GENERAL AND ADMINISTRATIVE EXPENSES. Other general and administrative
expenses for the three months ended June 30, 2003 decreased $0.6 million, or
14%, to $3.5 million from $4.0 million for the comparable period in 2002. This
decrease was primarily due to a decrease in expenses incurred at our refractive
products subsidiary of approximately $0.4 million related to cost reductions to
the sales and marketing, customer support, administration, $0.1 million in cost
reductions in other departments, a $0.1 million reduction in depreciation
expense.

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 three months ended June 30, 2003 decreased
$53,000, or 8%, to a $586,000 in 2003 from $639,000 in 2002.

AMORTIZATION OF INTANGIBLES. During the three months ended June 30, 2003,
costs relating to the amortization of intangible assets were unchanged from the
comparable period in 2002. Items directly related to the amortization of
intangible assets are acquired technologies, patents and license agreements.

IMPAIRMENT OF PATENTS. Impairment of patents for the three months ended
June 30, 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 three months ended June
30, 2003 was $10.3 million compared to the operating loss of $4.3 million for
the same period in 2002. This increase in the loss from operations was primarily





17 of 39


due to the recognition of the inventory write off and the impairment of patents
offset by overhead cost reductions.

OTHER INCOME AND EXPENSES. Interest and other income for the three months
ended June 30, 2003 was $11,000, a decrease of $69,000 over the comparable
period in 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. During the three months ended June 30, 2003, interest
expense decreased by $111,000, or 72%, from $154,000 to $43,000 as a result of
loan discounts and fees being fully amortized.

INCOME TAXES. During the three months ended June 30, 2003 and 2002, the
Company had no income tax expense.

NET LOSS. Net loss for the three months ended June 30, 2003, was $11.1
million compared to a net loss of $4.4 million for the comparable period in
2002. The increase in net loss for the three months ended June 30, 2003 can be
primarily attributed to re-structuring charges related to the Chapter 11
bankruptcy petition.

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. For the three months ended June
30, 2003, the Company's loss attributable to common shareholders was impacted by
the accretion of the value of the conversion discount on the Series H Preferred
Stock.

LOSS PER SHARE. The loss per basic and diluted share was $0.42 for the
three months ended June 30, 2003 and $0.16 for the comparable period in 2002.
Since June 30, 2002, the weighted average shares of common stock outstanding
increased due to the conversion of preferred stock during May 2002. However, as
previously announced the Company canceled all of the common and preferred stock
outstanding, including options and warrants, at June 30, 2004. On June 30, 2004
the Company issued 9,997,195 new common shares.

SIX MONTHS ENDED JUNE 30, 2003, COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

REVENUES. Net revenues for the six months ended June 30, 2003 increased by
$0.3 million, or 7%, to $4.2 million from $3.9 million for the comparable period
in 2002.

During the six months ended June 30, 2003, refractive products revenues
increased $0.5 million, or 14%, to $3.7 million from $3.2 million for the
comparable period in 2002. This revenue increase was primarily the result of
higher excimer laser unit sales, a higher average selling price of our excimer
laser system, which increased approximately 6%, and the sale of our diagnostic
software, which increased 100%. During the six months ended June 30, 2003,
excimer laser system sales accounted for approximately $2.3 million in revenues
compared to $2.1 million in revenues over the same period in 2002. During the
six months ended June 30, 2003, 11 laser systems were sold compared to 10 laser
systems sold during the comparable period in 2002.During the six months ended
June 30, 2003 and 2002, parts revenue accounted for $1.0 million in revenues.

Net revenues from patent services for the six months ended June 30, 2003
decreased approximately $173,000, or 27%, to $0.5 million from $0.6 million for
the comparable period in 2002, due to a non-exclusive license agreement we
entered into in June 2002..

Geographically, China has become our most significant market with $2.9
million in revenue during the six months ended June 30, 2003, all of which
resulted from the China Transaction. We expect China to continue as our most
significant market.

COST OF REVENUES; GROSS PROFIT. For the six months ended June 30, 2003 and
2002, gross profit margins were 42% and 37%, respectively. The gross margin
decrease during the six months ended June 30, 2003 was primarily attributable to
a $3.6 million inventory obsolescence reserve offset by higher average selling
prices of our excimer laser system, the higher margins that the Company
experiences on sales of its AstraMax diagnostic workstations and AstraPro
diagnostic software.


18 of 39


RESEARCH, DEVELOPMENT AND REGULATORY EXPENSES. Research, development and
regulatory expenses for the six months ended June 30, 2003 decreased
approximately $0.6 million, or 69%, to $0.3 million from $0.9 million for the
comparable period in 2002. While decreasing our expenses, we continued to
develop our AstraMax diagnostic workstation and excimer laser systems.

OTHER GENERAL AND ADMINISTRATIVE EXPENSES. Other general and administrative
expenses for the six months ended June 30, 2003 decreased $2.3 million, or 37%,
to $5.9 million from $8.1 million for the comparable period in 2002. This
decrease was primarily due to a decrease in expenses incurred at our refractive
products subsidiary of approximately $0.5 million related to cost reductions to
the sales and marketing, customer support, administration, professional services
departments of $2.0 million, $0.5 million in cost reductions in other
departments,and a $0.3 reduction in depreciation expense.

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 six months ended June 30, 2003 decreased $0.3
million, or 18%, to $1.2 million from $1.5 million during the comparable period
in 2002. This decrease was primarily attributable to a $0.1 million decrease in
costs of sales commissions, a decrease of $0.1 million of warranty expense
primarily related to the terms on our excimer laser system sales and a decrease
of $0.1 million of shipping expenses related to the cost of shipping our
finished products.

AMORTIZATION OF INTANGIBLES. During the six months ended June 30, 2003,
costs relating to the amortization of intangible assets were unchanged from the
comparable period in 2002. Items directly related to the amortization of
intangible assets are acquired technologies, patents and license agreements.

IMPAIRMENT OF PATENTS.Impairment of patents for the six months ended June
30, 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 six months ended June 30,
2003 was $13.4 million compared to the operating loss of $9.3 million for the
same period in 2002. This increase in the loss from operations was primarily due
to the inventory write off and the impairment of patents offset by reductions in
operating expenses and higher related margins of our excimer laser systems,
AstraMax diagnostic workstations and AstraPro diagnostic software.

OTHER INCOME AND EXPENSES. Interest and other income for the six months
ended June 30, 2003 was $38,000, a decrease of $108,000 from the comparable
period in 2002. Interest and other income were earned from the investment of
cash and cash equivalents and the collection of long-term receivables related to
laser system sales. During the six months ended June 30, 2003, interest expense
decreased by $142,000, or 48%, from $298,000 to $156,000 as a result of fully
amortized financing and fees on our term loan.

INCOME TAXES. For the six months ended June 30, 2003, income tax benefit
amounted to approximately $58,000, which was related to a refund the Company
received from a settlement with the IRS on its 1995 return. During the six
months ended June 30, 2002, we had no income tax expense.




19 of 39


NET LOSS. Net loss for the six months ended June 30, 2003, was $13.5
million compared to a net loss of $9.5 million for the comparable period in
2002. The increase in net loss for the six months ended June 30, 2003 can be
attributed to our Chapter 11 petition related re-structuring charges.

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. For the six months ended June 30,
2003, the Company's loss attributable to common shareholders was impacted by the
accretion of the value of the conversion discount on the Series H Preferred
Stock.

LOSS PER SHARE. The loss per basic and diluted share was $0.52 for the six
months ended June 30, 2003 and $0.35 for the comparable period in 2002. As a
result of the September 5, 2003 chapter 11 petition, the company cancelled all
of its outstanding common and preferred shares, including options and warrants.
On June 30, 2004 the Company issued 9,997,195 new common shares.


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 petition for relief were stayed while the
Company continued business operations as debtor-in-possession. The Company
operated in this manner from September 5, 2003 through June 10, 2004 when a
final bankruptcy order was obtained, which was effective June 30, 2004. As a
result of the bankruptcy re-structuring, the company will record credits for
debt forgiveness of approximately $15.6 million during the three months ended
June 30, 2004. Additionally, the company recognized charges of approximately
$7.7 million during the three months ended June 30, 2003 for patent impairments
and inventory write-offs. The Company also 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 will emerge from bankruptcy with
approximately $0.6 million in unsecured liabilities, approximately $2.1 million
in secured debt to GE, approximately $7.4 million in deferred revenue.
Additionally the China Group converted $1.0 million of its $2.0 million DIP loan
for 68.5%, or 6,850,000 common shares in the re-organized Company. The China
Group can convert, at their option, the remaining DIP financing for an
additional 2,500,000 common shares.

With the new revenues being generated from the China Transaction and
projected sales to other customers, management expects 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 our accounts receivable
collection and 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. We are currently unable to
borrow under our revolving credit facility.

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
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.

20 of 39


We have actively sought additional funds through the possible sale of
certain company assets or through additional investment or loans, which would
provide temporary relief from our current liquidity pressures. We have sought a
strategic partner or buyer. Given the extent of those efforts and the publicity
about the China Group, it is unlikely that there will be any other buyer,
strategic partner or investor in the near future.

On March 12, 2001, we 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 was payable monthly and the loan was to have been repaid on
March 12, 2003. As of June 30, 2003, the outstanding principal on our term loan
was approximately $2.0 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 received
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 GE loans were collareralizied by substantially all of
the Company's assets. The term loan and credit facility required 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 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.
The Company continued to negotiate with GE during 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.

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 of $750,000, tangible net worth of $1,000,000 and minimum quarterly
revenues of $1,000,000. On June 30, 2004, 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.

21 of 39


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, our present inability to borrow
under our revolving credit facility, 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. We adopted Statement No. 146 on January 1,
2003. The adoption of Statement No. 146 did not have a material effect on our
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. While we have not elected to adopt fair
value accounting for its stock-based compensation, we have complied with the new
disclosure requirements under Statement No. 148. As adopted, this statement does
not have a material impact on our consolidated financial statements. As stated
above, the Company canceled all of the outstanding common and preferred stock,
including options and warrants, outstanding as of June 30, 2004. As part of the
re-organization, the Company issued 9,997,195 new common shares on June 30,
2004.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 clarifies the requirements
of SFAS No. 5, Accounting for Contingencies, relating to a guarantor's
accounting for, and disclosure of, the issuance of certain types of guarantees.
For certain guarantees issued after December 31, 2002, FIN 45 requires a
guarantor to recognize, upon issuance of a guarantee, a liability for the fair
value of the obligations it assumes under the guarantee. Guarantees issued prior
to January 1, 2003, are not subject to liability recognition, but are subject to
expanded disclosure requirements. This interpretation did not have a material
impact on our consolidated financial statements.

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.

22 of 39



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 can not predict if future cash flow deficits can be overcome.

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 the China group 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 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 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, 2002, 2001 and for the six months
ended June 30, 2003, 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.

Six months Ended
Year Ended December 31, June 30,
2001 2002 2003
---- ---- ----
Net loss $26.2 million $13.6 million $13.5 million

Deficit in cash flow from
operations $17.7 million $2.7 million $0.6 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, our present inability to borrow under our
revolving credit facility, AstraMax diagnostic workstations and AstraPro
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;


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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 near future and the risks and uncertainties relating
to those expectations, readers are encouraged to review the discussions under
the captions "--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," "--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 near future 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 the China Group 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 $8.8 million at June 30, 2003, will be
sufficient to cover the amount of our actual write-offs over time. At June 30,
2003, our trade accounts and notes receivable totaled approximately $11.2
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


24 of 39


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 $3.6 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.

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.

.
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 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


25 of 39


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 $3.7 million to such inventory reserves. 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 as a reason why a
buyer shouldn't buy our laser.


Many of our competitors received earlier regulatory approvals than us 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.


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.

26 of 39


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.
Initial FDA approvals of excimer laser vision correction systems historically
have been limited to the treatment of low to moderate nearsightedness, with
additional approvals for other and broader treatments granted only as a result
of subsequent FDA applications and clinical trials. The range of treatments is
generally described in terms of diopters. The term diopter is used to describe
the measure of severity of the particular refractive error, and the greater the
number expressed in terms of diopters, the more severe the refractive error. In
addition, diopters that are expressed as a negative number represent the
severity of nearsightedness and diopters that are expressed as a positive number
reflect the severity of farsightedness.

Our LaserScan LSX is currently approved in the US 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. 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 directly to the corneal surface reshaping the curvature
of the cornea. 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. VISX and Alcon have
received FDA approval, in 2001 and 2000, respectively, for the treatment of
moderate levels of farsightedness with or without astigmatism and VISX received
approval for the treatment of mixed astigmatism in 2001.

Currently, the excimer laser vision correction systems manufactured by
VISX, Alcon, Bausch & Lomb and Nidek have been approved for higher levels of
nearsightedness than the LaserScan LSX. Alcon's Apex Plus and Ladarvision
Excimer Laser Workstations, VISX's Star S2 Excimer Laser System and Nidek's
EC-5000 Excimer Laser System have received FDA approval for the LASIK treatment
of nearsightedness with or without astigmatism. The approvals for many of the
systems are for the correction of nearsightedness in the range of 0 diopters to
- -14.0 diopters and nearsightedness with astigmatism generally in the range of
- -0.5 diopters to -5.0 diopters. Bausch & Lomb's Technolas 217 excimer laser has
also received FDA approval for the treatment of nearsightedness from -1.0
diopter up to -11.0 diopters with up to -3.0 diopters of astigmatism. The VISX
and Alcon excimer laser systems are also approved for the treatment of moderate
farsightedness. In September 2000, the FDA approved Alcon's Ladarvision system
for the correction of farsightedness, using LASIK, of up to +6.0 diopters and an
astigmatism range of up to 6.0 diopters. In October 2000, the FDA approved
VISX's Star S2 and S3 systems for the correction using PRK of farsightedness of
up to +5.0 diopters and an astigmatism range of up to 3.0 diopters. In February
2001, the FDA approved of VISX's Custom-Contoured Ablation Pattern Method for
treatment of decentered ablations under a Humanitarian Device Exemption (HDE).
An HDE authorizes the use and marketing of a device that is intended to benefit
patients in the treatment of conditions that affect fewer than 4,000
individuals. In August 2002, Alcon announced the approval of its
wavefront-guided laser eye surgery application for the treatment of
nearsightedness between zero and -7.0 diopters. Competitors' earlier receipt of
LASIK and farsightedness-specific FDA regulatory approvals have given them a
significant competitive advantage 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;


27 of 39


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 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.
Potential patients may not distinguish between our precision beam scanning spot
technology and the laser technology incorporated by our competitors in their
laser systems, and customers may not differentiate laser systems and procedures
that have not received FDA approval from FDA-approved systems and procedures.
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 the U.S. or international 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.



28 of 39


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
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 laser system 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


29 of 39


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.

Reduced staffing levels could impact our ability to provide customer
service and field support to our customers.

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 the year
2002 and through June 30,2003, 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.

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


30 of 39


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
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


31 of 39


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 six months ended June 30, 2003 and the year ended December 31, 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
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


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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.


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;


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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 NASDAQ Small Cap - 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 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.

The Company 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


34 of 39


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 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
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
June 30, 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. We could have
been required to issue more than 5,800,000 additional shares of common stock
upon the exercise of outstanding warrants and stock options. However, these
instruments were cancelled in June 2004 as part of the confirmed bankruptcy
plan.

The former owners of our series C preferred stock had the right, subject to
certain limitations, to participate in our below-market certain equity financing
transactions that would have allowed them to maintain their ownership level in
common stock at the same level as immediately prior to the closing of any such
financing. See "Description of Capital Stock--Series C Preferred Stock." In
connection with future equity financings we could have included anti-dilution
provisions that have would required us to issue additional shares if we issued
shares of common stock below specified price levels. If a future share issuance
had triggered these adjustments, the beneficiaries of such provisions
effectively would have received some protection from declines in the market
price of our common stock, while our other stockholders incurred additional
dilution of their ownership interest. 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 China Transaction will in all probability prevent or
discourage an acquisition or change of control of LaserSight.

In connection with the NIMD transaction, we issued shares of our series H
preferred stock that, upon conversion into shares of our common stock, would
result in the series H stockholders owning 40% of our outstanding common stock.


35 of 39


In addition, the series H preferred stockholders had the right to elect that
number of directors that will constitute up to 40% of the membership on our
board of directors. Either or both of these factors could have discouraged or
even prevented a party from acquiring us or making a bid that may result in a
change of control. See also " Common Stock Risks." The China transaction
includes a provision under which the purchaser of our preferred stock could
acquire approximately 40% of our common stock. That ownership position alone
diminished the possibility of a competing bid for a majority of the common
stock, but the anti-takeover provision under Delaware law and in our certificate
of incorporation, our by-laws and our stockholder rights plan will nonetheless
require the board to exercise its fiduciary duty on any bid (whether by the
purchaser in the China Transaction or another) taking into consideration all of
the circumstances at that time" and "Description of Capital Stock--Series H
Preferred Stock.". As a result of the Chapter 11 petition, and subsequent
re-structuring, our NIMD will initially control 6,850,000 or 68.5% of the newly
issued shares. Under certain circumstances their control could increase to
approximately 75%.


The NIMD transaction includes a provision under which the purchaser of our
preferred stock could acquire approximately 40% of our common stock. That
stockholding position alone diminished the possibility of a competing bid for a
majority of the common stock, but the anti-takeover provision under Delaware law
and in our certificate of incorporation, our by-laws and our stockholder rights
plan would nonetheless require the board to exercise its fiduciary duty on any
bid (whether by the purchaser in the China Transaction or another) taking into
consideration all of the circumstances at that time.

Certain provisions of our certificate of incorporation, by-laws,
stockholder rights plan and Delaware law could delay or frustrate the removal of
incumbent directors, discourage potential acquisition proposals and delay, defer
or prevent a change in control of us, even if such events could be beneficial,
in the short term, to the economic interests of our stockholders. For example,
our certificate of incorporation allows us to issue preferred stock with rights
senior to those of the common stock without stockholder action, and our by-laws
require advance notice of director nominations or other proposals by
stockholders. We also are subject to provisions of Delaware corporation law that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an interested
stockholder) for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. We also have
adopted a stockholder rights agreement, or "poison pill," and declared a
dividend distribution of one preferred share purchase right for each share of
common stock.

The board will act with respect to anti-takeover provisions with its
fiduciary duty in mind.

As a result of the Chapter 11 petition, and subsequent re-structuring, the
China Group will initially control 6,850,000 or 68.5% of the newly issued
9,997,195 common shares. Under certain circumstances their control could
increase to approximately 75%.


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 June 30, 2003, approximately $0.5 million, or 6%, 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


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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
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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe that our exposure to market risk for changes in interest and
currency rates is not significant. Our investments are limited to highly liquid
instruments generally with maturities of three months or less. All of our
transactions with international customers and suppliers are denominated in U.S.
dollars.




ITEM 4. CONTROLS AND PROCEDURES

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


We carry out a variety of on-going procedures, under the supervision
and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, to evaluate the
effectiveness of the design and operation of our disclosure controls
and procedures. While our Chief Executive Officer and Chief Financial
Officer were unable to reach a conclusion regarding the effectiveness
of our disclosure controls and procedures as of June 30, 2003, they
have concluded that such controls and procedures are currently
effective at the reasonable assurance level.




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PART II - OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

Certain legal proceedings against LaserSight are described in Item 3
(Legal Proceedings) of LaserSight's Form 10-K for the year ended
December 31, 2002. These matters are updated in note 8 to the
condensed consolidated financial statements above.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As discussed in Note 1 to the unaudited condensed consolidation
financial statements, the Company and two of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. As a result of this petition, the company canceled all common
and preferred shares, including options and warrants. On June 30, 2004
the Company issued 9,997,195 new common shares pursuant to the plan
approved by the Bankruptcy Court. .

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

As discussed in Note 1 to the unaudited condensed consolidation
financial statements, the Company and two of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. The Company has been in continuous negotiations with GE during
the term of the bankruptcy and the Company signed a new note with GE
on August 29, 2004, effective June 30, 2004.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.




ITEM 5 OTHER INFORMATION

Not applicable.

ITEM 6 EXHIBITS

a) Exhibits

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

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

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b) Reports on Form 8-K

On April 1, 2003, we filed a Current Report on Form 8-K describing our
press release dated April 1, 2003 announcing our Fourth Quarter 2002
earning release.

On April 8, 2002, we filed a Current Report on Form 8-K describing our
April 8, 2003 Press Release announcing the resignation of Gregory
Wilson as the Company's Chief Financial Officer.

On April 29, 2003, we filed a Current Report on Form 8-K describing
our press release dated April 29, 2003 announcing our de-listing from
NASDAQ and the stock's listing on the OTCBB.

On May 20, 2003, we filed a Current Report on Form 8-K describing our
press release dated May 19, 2003 announcing our First Quarter 2003
earning release.

On June 25, 2003, we filed a Current Report on Form 8-K describing our
press release dated June 20, 2003 announcing the Company's receipt of
a default notice from GE on its secured loan.




SIGNATURES
----------

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

LaserSight Incorporated

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

Dated: March 22, 2005 By:/s/ Dorothy M. Cipolla
-------------------------
Dorothy M. Cipolla
Chief Financial Officer




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