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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

________________________

FORM 10-K

  X       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

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 0-27610

LCA-VISION INC.

Delaware Corporation

11-2882328

(State of Incorporation)

(I.R.S. I.D.)

7840 Montgomery Road, Cincinnati, Ohio 45236

Telephone Number (513) 792-9292

_________________________

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

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

Common Stock, $.001 Par Value per Share

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

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of March 15, 2002 was approximately $50,219,000.

The number of shares outstanding of the registrant's Common Stock as of March 15, 2002 was 42,839,962.

________________________

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Stockholders to be held May 13, 2002 are incorporated by reference in Items 10, 11, 12 and 13 of Part III of this Report.

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LCA-VISION INC.

FISCAL YEAR 2001 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this Annual Report on Form 10-K, including information with respect to our future business plans, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "may," "will," "estimates," "continues," "anticipates," "intends," "plans," "expects" and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements. These factors inc lude those set forth in Part II "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results and Market Price of Stock."

Item 1. Business.

Background and History of Company

LCA-Vision Inc. (the "Company" or "LCA-Vision") is the successor to two businesses which were founded and controlled by Stephen N. Joffe: Laser Centers of America, Inc. and Toronto Laservision Centre, Inc.  Laser Centers of America was founded in 1985 to assist hospitals in establishing and managing laser surgery centers, and Toronto Laservision was one of the earliest laser vision surgery centers in Canada, which approved refractive laser surgery several years prior to its introduction in the United States in 1995.

On August 18, 1997, we acquired all of the outstanding shares of Refractive Centers International, Inc., an operator of laser vision correction centers and a majority-owned subsidiary of the refractive laser manufacturer Summit Technology, Inc., in exchange for 17,065,579 newly-issued shares of LCA-Vision common stock.

In 1998, we raised a total of $9,463,000 of equity capital through the issuance of a new class of convertible preferred stock to fund the continued growth of our business, and in July 1999 we raised an additional $37,300,000 of equity capital, after expenses, through a public offering of 5,000,000 shares of our common stock.

In 1996 our common stock began trading on the Nasdaq SmallCap Market, and following our public offering in 1999, it began trading on the Nasdaq National Market.

The U.S. Eye Care Industry

More than 150 million Americans, or approximately 50% of our nation's population, require eyeglasses or contact lenses to correct common refractive vision.  Most people requiring vision correction suffer from one or more refractive vision disorders, which result from improper curvature of the cornea as related to the size and shape of the eye. If the cornea's curvature is not precisely correct, it cannot properly focus the light passing through it onto the retina, and the viewer will see a blurred image. The three most common refractive vision disorders are:

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Myopia (nearsightedness) -- images are focused in front of the retina, resulting in the blurred perception of distant objects

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Hyperopia (farsightedness) -- images are focused behind the retina, resulting in the blurred perception of near

  objects

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Astigmatism -- images are not focused on any point due to the varying curvature of the eye along different axes

Laser Vision Correction Procedures

Laser vision correction procedures are designed to reshape the outer layers of the cornea to correct refractive vision disorders by changing its curvature with an excimer laser, which eliminates or reduces the need for corrective lenses. Prior to the procedure, an assessment is made of the correction required to program the excimer laser. The software of the excimer laser then calculates the optimal number of pulses needed to achieve the intended correction using a specially developed algorithm. A speculum is inserted to prevent blinking and topical anesthetic eye drops are applied. The patient reclines in a chair, eyes focused on a fixed target, while the ophthalmologist positions the patient's cornea for the procedure. The excimer laser emits energy in a series of pulses with each pulse lasting only several billionths of a second. High-energy ultraviolet light produced b y the excimer laser creates a "non-thermal" ablation, which removes tissue and reshapes the cornea without damaging adjacent tissue. The amount of tissue removed depends upon the degree of the vision disorder being corrected. Following the procedure, the front surface of the eye is flatter when corrected for nearsightedness and steeper when corrected for farsightedness. In effect, the change made in the middle or periphery of the cornea is translated to the front surface of the cornea which results in vision correction. A series of patient follow-up visits are scheduled with an optometrist or ophthalmologist to monitor the corneal healing process, to verify that there are no complications and to test the correction achieved by the laser vision correction procedure. The typical procedure takes 15 to 30 minutes from set-up to completion.

The excimer lasers used in our U.S. centers are manufactured by VISX, Inc., Bausch & Lomb Surgical and Summit Autonomous.  VISX is currently approved to treat nearsightedness of up to -14 diopters with astigmatism of up to 5 diopters, and farsightedness of up to +5 diopters. The Bausch & Lomb Surgical Technolas 217 is approved for up to -7 diopters of nearsightedness with up to 3 diopters of astigmatism.  The Summit Autonomous laser is approved for up to –9 diopters of nearsightedness with up to 3 diopters of astigmatism, and farsightedness up to +6 diopters.

Virtually all of our patients receive a procedure named Laser In-Situ Keratomileusis (LASIK). In LASIK, an FDA-approved automated microsurgical instrument called a microkeratome is used to create a thin corneal flap, which remains hinged to the eye. Patients do not feel or see the cutting of the corneal flap, which takes only a few seconds. The corneal flap is then laid back and excimer laser pulses are applied to the exposed surface of the cornea to treat the eye according to the patient's prescription. The corneal flap is then folded back to its original position and inspected to ensure that it remains secured in position by the natural suction within the cornea. Because the surface layer of the cornea remains intact with LASIK, no bandage contact lens is required and the patient experiences minimal discomfort. LASIK has the advantage of more rapid recovery than PRK, wit h most patients seeing well enough to drive a car the next day.  The LASIK procedure allows an ophthalmologist to treat both eyes of a patient during the same visit.

The Laser Vision Correction Market

 In 1995, the FDA approved the first laser to perform laser vision correction procedures in the U.S.  Currently, laser vision correction is the most widely performed elective surgical procedure in the United States with 1,474,000 procedures performed in 2000, an increase of 55% over the 948,000 procedures performed in 1999. Industry analysts estimate approximately 1,350,000 procedures were performed in 2001.

The rapid growth of laser vision correction procedures performed in the U.S. is attributable to many factors which include:

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Word of Mouth -- As the number of procedures performed increases, so does the number of patients able to attest
to the benefits of laser vision correction.

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Improved Procedure -- The LASIK procedure results in immediate improvement, minimal patient discomfort and
recovery in a matter of days.

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Expanded Applications -- The excimer laser is now approved to treat the three most common types of refractive
vision disorders: nearsightedness, farsightedness and astigmatism.

Our Laser Vision Correction Centers

We currently operate 34 laser vision correction centers, 31 of which are located in metropolitan markets throughout the United States, two in Canada and one in Europe. Our centers are supported by credentialed ophthalmologists and optometrists. The ophthalmologists perform the laser vision correction procedures, and either ophthalmologists or optometrists carry out the pre-procedure evaluations and post-procedure follow-ups. We have performed laser vision correction procedures since 1991 and nearly all procedures are now LASIK.

Our Business Strategy

Our business strategy is to provide laser vision correction at an affordable price. Beginning in July 1999, we converted our centers to closed access facilities from open access facilities.  Under our closed-access model, the Company either directly employs the ophthalmologist and the optometrist or exclusively contracts for their services from a professional corporation which employs them.  The Company also assumes responsibility for patient acquisition.  

By the first quarter of 2000, we changed the names of all of our centers to LasikPlus and began building consumer awareness of the brand name through a saturation local media campaign that included newsprint, radio and direct mailings.  We intend to increase penetration and market share in our current markets and expand into contiguous markets. The key elements of our business strategy include:

Developing and implementing innovative direct marketing campaigns. Our marketing programs seek to reinforce the LasikPlus brand name in addition to raising awareness concerning laser vision correction and promoting our centers. We direct the patient marketing efforts to two potential sources: our network call center's patient base and consumers in general. In each market, we target a specific demographic group of potential patients that we believe is most likely to be interested in laser vision correction. Our marketing programs include print, television, radio and direct mail campaigns as well as brochures and videos. Our public relations rely on placement of news stories in various media to highlight the opening of new centers or the availability of laser vision correction services within a specific market. In most advertisements, prospective patients are provided our web-site address for LasikPlus and a toll-free number to contact our call center representatives who screen prospective patients and record patient names and information into our centralized computer system for future mailings. Once patient information has been recorded, our representatives attempt to schedule eye evaluation appointments for prospective patients with the local center ophthalmologist or optometrist to determine whether the prospective patient is a candidate for laser vision correction. If a prospective patient elects not to proceed with a laser vision procedure following an initial evaluation, the prospective patient's name is kept on a follow-up mailing list and additional materials are sent to the patient for a certain period of time.

Attracting leading ophthalmologists and optometrists. We believe the most effective way to attract leading ophthalmologists and optometrists is to establish ourselves as a leading provider and operator of laser vision correction centers within the eyecare community.

Building and operating new laser vision correction centers. We plan to expand our business primarily through the development of new centers in desirable markets and within existing markets. In evaluating new and current markets for building a laser vision correction center, we evaluate population demographics, determine the number of existing excimer lasers and interview local ophthalmologists and optometrists. The targeted market must exhibit a potential for generating break-even procedure volume within the first 3 to 6 months after opening, including the necessary ophthalmologist and optometrist participation to support such levels. We seek to lease 2,400 to 5,000 square feet of space in professional office buildings located in high volume traffic areas. In addition, we have developed standardized center plans and designs to be used in building each new center.

Acquiring established laser vision correction centers. We will continue to evaluate selective acquisition opportunities.  This evaluation includes an analysis of the potential laser vision correction center's historical operating performance and clinical outcomes and verification of all credentialing, licensures and certifications for the ophthalmologists performing procedures. Furthermore, we assess each targeted center's physical structure, geographic location and support staff qualifications. We seek to acquire laser vision correction centers that have established profitability and can benefit from our management and marketing programs.

We Provide Our Patients With

Convenient access to highly credentialed ophthalmologists and optometrists. We focus on recruiting leading ophthalmologists and optometrists who have a reputation for providing quality eye care within their respective markets and have performed at least 2,000 laser vision correction procedures. Our ophthalmologists have completed extensive FDA-mandated training and also have met our rigorous qualification criteria, including an extensive review of state licensure, Board certification, malpractice insurance and historical procedure experience and clinical outcomes. In addition, all newly-recruited ophthalmologists are placed under the supervision of a more experienced laser vision correction ophthalmologist to closely monitor clinical outcomes and patient satisfaction.

Treatment environments designed to enhance customer satisfaction. Our centers are designed to create a patient friendly environment and reduce any anxiety associated with laser vision correction. Each center has an aesthetically pleasing and comfortable waiting area for patients and our center staff is focused on addressing each patient's needs. In addition, each center provides consultation areas where the patient and center staff can discuss procedures and financing alternatives in a private setting.

Educational consultations and materials. The education process begins with our initial contact with the patient. All of our educational materials focus on information regarding vision correction procedures. Our call center personnel are trained to answer questions regarding procedures and have access to both an ophthalmologist to address more difficult inquiries and past patients to relate procedure experiences. Once in the center, potential patients receive a consultation focused on educating the patient on vision correction procedures, how the procedure corrects the specific refractive vision disorder that the patient presents with and what results the patient should expect after the procedure. Patients are given written materials and can view a video of the procedure or witness an actual procedure during their initial visit. We believe that an educated patient ha s realistic expectations and is therefore more satisfied with procedure results.

Affordable financing alternatives. Because laser vision correction procedures are elective and generally not reimbursable by third party payors, we offer patients several financing alternatives and in certain circumstances promotional discounts. Customers can pay for the procedure with cash, personal check, bank check, money order or credit card. In addition, we make available multiple payment plans offered by an unaffiliated finance company. We also provide information regarding installment plans, insurance coverage, home equity loans and payment through employer flexible benefit plans. In the majority of the procedures financed, we bear no credit risk.

Competition

Laser vision correction, whether performed at one of our centers or elsewhere, competes with several surgical and non-surgical treatments to correct refractive vision disorders including eyeglasses, contact lenses, other types of refractive surgery (such as radial keratotomy) and corneal implants. In addition, other technologies currently under development may ultimately prove to be more attractive to consumers than laser vision correction.

We face competition from other providers of laser vision correction. Eye care services in the U.S., including laser vision correction services, are delivered through a fragmented system of local providers, including individual or small groups of opticians, optometrists and ophthalmologists and chains of retail optical stores and multi-site eye care centers. Laser vision correction chains, like LCA-Vision, are a specialized type of multi-site eye care center that primarily provide laser vision correction. Among the laser vision correction center chains, we believe we are one of the largest providers in terms of number of centers in the U.S.

The market for providing access to excimer lasers is highly competitive. We compete with laser centers operated by other national operators of laser vision correction centers as well as with local operators and ophthalmologists who have purchased their own laser. Other private and public companies that operate laser centers in the U.S. include TLC Laser Eye Centers, Inc.; Laser Vision Centers, Inc.; Laser Vision Institute; NovaMed Eyecare, Inc.; Prime Medical Services; Aris Vision Institute and Laser Eye Centers.  

In addition to competition from other chains of laser vision correction centers, we face competition from hospitals, surgical clinics and ophthalmologists, either as sole practitioners or as a group, who practice in the same geographic area as one of the centers. Furthermore, retail optical chains could potentially provide laser vision correction procedures. Certain chains have entered the laser vision correction market. Management believes they have had moderate success and have limited their involvement in the industry.

Employees

As of December 31, 2001, we had 241 employees, 213 of whom were full-time. None of our employees are subject to a collective bargaining agreement nor have we experienced a work stoppage.

Trademarks

Not all of our trademarked names have been formally registered yet.  Where the trademark symbol is used, it is our intention to claim a trademark on such names under common law by using the "TM" symbol.  The duration of such trademarks under common law is the length of time we continue to use them.

Suppliers of Laser Equipment

We are not directly involved in the research, development or manufacture of ophthalmic laser systems. There are at least five companies, Bausch & Lomb, VISX, Summit Autonomous, Nidek and LaserSight, whose excimer laser systems have been approved by the FDA for commercial sale in the U.S.

Government Regulation

Our operations are subject to extensive federal, state and local laws, rules and regulations affecting the health care industry and the delivery of health care. These include laws and regulations, which vary significantly from state to state, prohibiting unlawful rebates and division of fees, and limiting the manner in which prospective patients may be solicited. Furthermore, contractual arrangements with hospitals, surgery centers, ophthalmologists and optometrists, among others, are extensively regulated by state and federal law.  

Failure to comply with applicable FDA requirements could subject excimer laser manufacturers and us to enforcement action, including product seizures, recalls, withdrawal of approvals and civil and criminal penalties, any one or more of which could have a material adverse affect on our business, financial condition and results of operations. In addition, clearance or approvals could be withdrawn in appropriate circumstances. Failure by us or our principal suppliers to comply with regulatory requirements, or any adverse regulatory action, could result in a limitation on or prohibition of our use of excimer lasers which in turn would have a material adverse effect on our business, financial condition and results of operations. Discovery of problems, violations of current laws or future legislative or administrative action in the United States or elsewhere may adversely affec t the manufacturers' ability to obtain regulatory approval of laser equipment. Furthermore, the failure of VISX, Bausch & Lomb Surgical or any other manufacturers that supply or may supply excimer lasers to us to comply with applicable federal, state, or foreign regulatory requirements, or any adverse regulatory action against such manufacturers, could limit the supply of lasers or limit our ability to use the lasers.

Item 2.  Properties.

Our corporate headquarters and one of our laser refractive surgery centers are located in a 32,547 sq. ft. office building that we own in Cincinnati, Ohio. Our other laser refractive surgery centers are in leased locations.  The typical location is in a professional office building and includes a laser surgery room, private examination rooms, and patient waiting areas. The leased space ranges in size from approximately 2,400 to 5,000 square feet with expiration dates ranging from March 31, 2003 to July 31, 2010.  

 Item 3. Litigation.

We are a defendant and counter-claimant in a consolidated case entitled Cabrini Development Council, et al. v. LCA-Vision Inc., et al., which was commenced in October, 1997 in the Supreme Court of the State of New York, County of New York and subsequently removed to the United States District Court for the Southern District of New York. Also named as co-defendants are various current and former employees, officers and directors. The case involves claims and counterclaims asserted by and against us, and two other members of a New York limited liability company formerly engaged in operating a laser refractive surgery center, and arises out of the cessation of operations of such limited liability company.

The Court has ruled that it lacks subject matter jurisdiction over the controversy.  The decision has been appealed in an effort to keep the action in federal court.  If the appeal is unsuccessful, the claims may be pursued in New York State Supreme Court.

In the opinion of management this action will not have a material adverse effect on our financial position or results of operations.

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

Not applicable.

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PART II

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

Since June 30, 1999 our common stock has been included for quotation on the Nasdaq National Market under the symbol "LCAV." From 1996 through June 29, 1999 our common stock was included for quotation on the Nasdaq Small Cap Market under the symbol "LCAV."  There were approximately 26,500 holders of record of our Common Stock on February 28, 2002.

The following table sets forth the range of high and low closing prices as reported by the Nasdaq National Market since June 30, 1999 and the Nasdaq Small Cap Market prior to that date. These quotations  reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

We did not pay any cash dividends on our common stock during the three years ended December 31, 2001 and do not anticipate doing so in the future. Our loan agreement with our principal lender prohibits us from declaring or paying any dividend or distribution, except stock dividends, on our capital stock without the lender's approval.

Item 6.

Selected Consolidated Financial Data.

The data set forth below should be read in conjunction with the Consolidated Financial Statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations."