10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended June 30, 2004.
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT.

For the transition period from                  to                  

Commission file number 0-27610

LCA-Vision Inc.

(Exact name of registrant as specified in its charter)

Delaware	11-2882328
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

7840 Montgomery Road, Cincinnati, Ohio 45236

(Address of principal executive offices)

(513) 792-9292

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 o

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

Yes o               No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 13,419,381 shares as of July 23, 2004.

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LCA-Vision Inc.
INDEX

Part I.	Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003		3
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2004 and 2003		4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3. Quantitative and Qualitative Disclosures About Market Risk		14
Item 4. Controls and Procedures		14
Part II.	Other Information
Item 4. Submission of Matters to a Vote of Security Holders		15
Item 6. Exhibits and Reports on Form 8-K		15
Signatures		16
Exhibit 3
Exhibit 31.1
Exhibit 31.2
Exhibit 32

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LCA-Vision Inc.

Condensed Consolidated Balance Sheets
(Dollars in thousands)

	June 30, 2004			December 31, 2003
Assets
Current assets
Cash and cash equivalents	$	79,566		$	64,908
Accounts receivable, net of allowance for doubtful accounts of $1,913 and $1,480		5,862			3,255
Receivables from vendors		969			802
Prepaid expenses, inventory and other		618			1,422
Deferred tax asset		11,145			—
Total current assets		98,160			70,387
Property and equipment		43,638			41,967
Accumulated depreciation and amortization		(28,029	)		(24,622	)
Property and equipment, net		15,609			17,345
Accounts receivable, net of allowance for doubtful accounts of $745 and $416		1,368			749
Investments in equities		298			—
Goodwill		275			275
Deferred compensation plan assets		773			461
Investment in unconsolidated businesses		420			385
Other assets		466			435
Total assets	$	117,369		$	90,037
Liabilities and Stockholders’ Investment
Current liabilities
Accounts payable	$	2,843		$	4,883
Accrued liabilities and other		6,970			4,518
Total current liabilities		9,813			9,401
Deferred compensation liability		737			457
Insurance reserve		1,700			963
Minority equity interest		719			414
Stockholders’ investment
Common stock ($0.001 par value; 15,785,071 and 15,643,561 shares and 13,417,874 and 13,276,364 shares issued and outstanding, respectively)		16			16
Contributed capital		133,265			131,203
Common stock in treasury, at cost (2,367,197 shares and 2,367,197 shares)		(15,462	)		(15,462	)
Accumulated deficit		(13,491	)		(37,069	)
Accumulated other comprehensive income		72			114
Total stockholders’ investment		104,400			78,802
Total liabilities and stockholders’ investment	$	117,369		$	90,037

The Notes to the Condensed Consolidated Financial Statements are an integral part of this statement.

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LCA-Vision Inc.

Condensed Consolidated Statements of Income
(Dollars in thousands except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenues — Laser refractive surgery	$	31,554		$	20,224		$	63,204		$	40,206
Operating costs and expenses
Medical professional and license fees		5,891			3,901			12,356			7,973
Direct costs of services		10,350			7,844			19,981			15,617
General and administrative expenses		2,306			1,994			4,595			4,011
Marketing and advertising		4,991			3,155			9,780			6,129
Depreciation		1,743			1,534			3,458			3,039
Operating income		6,273			1,796			13,034			3,437
Equity in earnings from unconsolidated businesses		113			59			185			205
Minority equity interest		(181	)		(71	)		(305	)		(151	)
Net interest		497			71			864			107
Other income		8			—			8			52
Income before taxes on income		6,710			1,855			13,786			3,650
Income tax (benefit) expense		(4,139	)		62			(9,792	)		100
Net income	$	10,849		$	1,793		$	23,578		$	3,550
Income per common share
Basic	$	0.81		$	0.17		$	1.77		$	0.33
Diluted	$	0.78		$	0.17		$	1.71		$	0.33
Weighted average shares outstanding
Basic		13,385			10,743			13,353			10,743
Diluted		13,870			10,819			13,815			10,758

The Notes to the Condensed Consolidated Financial Statements are an integral part of this statement.

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LCA-Vision Inc.

Condensed Consolidated Statements of Cash Flow
(Dollars in thousands)

	Six Months Ended June 30,
	2004			2003
Cash flow from operating activities:
Net income	$	23,578		$	3,550
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,458			3,039
Provision for loss on doubtful accounts		762			—
Deferred income taxes		(10,801	)		—
Deferred compensation		280			165
Insurance reserve		737			—
Equity in earnings of unconsolidated affiliates		(113	)		(205	)
Other, net		—			(2	)
Changes in working capital:
Accounts receivable		(3,988	)		(1,588	)
Receivables from vendors		(167	)		(255	)
Prepaid expenses, inventory and other		804			155
Accounts payable		(2,040	)		(1,751	)
Accrued liabilities and other		2,452			2,271
Net cash provided by operations		14,962			5,379
Cash flow from investing activities:
Purchase of property and equipment		(1,746	)		(1,142	)
Purchase of investments - equity		(300	)		—
Deferred compensation plan		(312	)		(156	)
Loan payments made by shareholders		—			341
Loans to shareholders		—			(18	)
Other, net		258			330
Net cash used in investing activities		(2,100	)		(645	)
Cash flows from financing activities:
Principal payments of long-term notes, debt and capital lease obligations		—			(6	)
Exercise of stock options		1,718			—
Distribution of minority equity investees		78			64
Net cash provided by financing activities		1,796			58
Increase in cash and cash equivalents		14,658			4,792
Cash and cash equivalents at beginning of period		64,908			18,298
Cash and cash equivalents at end of period	$	79,566		$	23,090

The Notes to the Consolidated Condensed Financial Statements are an integral part of this statement.

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LCA-Vision Inc.

Notes to Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies

This filing includes condensed consolidated Balance Sheets as of June 30, 2004 and December 31, 2003; condensed consolidated Statements of Income for the three and six months ended June 30, 2004 and 2003; and condensed consolidated Statements of Cash Flow for the six months ended June 30, 2004 and 2003. In the opinion of management, these condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. We suggest that these financial statements be read together with the financial statements and notes in our 2003 annual report on Form 10-K.

About Our Company

We are a leading provider of fixed-site laser vision correction services at our LasikPlus vision centers. Our vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employs advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. We currently utilize fixed-site excimer lasers, and our vision centers are supported primarily by credentialed board-certified ophthalmologists, optometrists and other health care professionals. The ophthalmologists perform the laser vision correction procedures in our vision centers, and either ophthalmologists or optometrists generally carry out the pre-procedure evaluations and post-procedure follow-ups in-center. We have performed over 365,000 laser vision correction procedures in our vision centers in the United States and Canada since 1991.

We currently operate 41 laser vision correction centers, including 37 wholly-owned vision centers located in large metropolitan markets throughout the United States, three joint ventures in Canada and one joint venture in Europe.

Internet

The Company’s website is www.lasikplus.com. We make available free of charge through a link provided at the website our Forms 10-K, 10-Q and 8-K, as well as any amendments thereto. These reports are available as soon as reasonably practicable after they are filed or furnished to the Securities and Exchange Commission. To obtain a copy of Form 10-K by mail, please send a request to Investor Relations at LCA-Vision Inc., 7840 Montgomery Road, Cincinnati, Ohio 45236.

Consolidation Policy

We use two different methods to report our investments in our subsidiaries and other companies – consolidation and the equity method.

Consolidation

We use the consolidation method to report our investment in our subsidiaries and other companies when we own a majority of the voting stock of the subsidiary. In addition, we consolidate the results of operations of professional corporations with which we contract to provide the services of ophthalmologists or optometrists at our vision centers, in accordance with EITF 97-2, Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician Management Entities and Certain Other Entities with Contractual Management Agreements, and FASB FIN 46 Consolidation of Variable Interest Entities, An Interpretation of ARB No. 51.

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Equity Method

We use the equity method to report investments in businesses where we hold a 20% to 50% voting interest, giving us the ability to exercise significant influence, but not control, over operating and financial policies. Under the equity method we report:

• Our interest in the entity as an investment in our Condensed Consolidated Balance Sheets

• Our percentage share of the earnings or losses in our Condensed Consolidated Statements of Income

We own 43% of Silmalaseri Oy, our joint venture in Europe, and 50% of EyeMed LCA Vision LLC and report these investments under the equity method.

Use of Estimates

Management makes estimates and assumptions when preparing financial statements under generally accepted accounting principles. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may differ significantly from management’s expectations. These estimates and assumptions affect various matters including:

• Allowance for doubtful accounts – patient financing

• Deferred income taxes – valuation allowance

• Loss reserves – insurance captive

Allowance for Doubtful Accounts

We provide patient financing to some of our customers, including those who could not otherwise obtain third-party financing. The terms of the financing require the patient to pay an up-front fee which is intended to cover some or all of our variable costs, with the remainder due from the patient over a period of 12 to 36 months. We began our patient financing program in May 2002. Based upon our own experience with patient financing and based upon our knowledge of the credit experience of others who provide financing to customers similar to ours, we have established bad debt reserves as of June 30, 2004 of $2,658,000 against accounts receivable of $9,888,000.

Captive Insurance Company Reserves

Effective as of December 18, 2002, we established a captive insurance company to provide professional liability insurance coverage for claims brought against us after December 17, 2002. In addition, our captive insurance company’s charter allows it to provide professional liability insurance for our doctors, some of whom are currently insured by the captive. Our captive insurance company is managed by an independent insurance consulting and management firm and is capitalized and funded by us based on actuarial studies performed by an affiliate of the consulting and management firm. For the 12 months ending December 17, 2003, our captive insurance company purchased excess liability coverage for 80% of our losses in the year in excess of $1,000,000 per occurrence, up to $11,000,000. Beginning December 18, 2003, the Company elected to use the captive insurance company for both primary insurance and excess liability coverage. The captive insurance company continues to be funded at a rate determined by actuarial studies performed by an independent consulting firm. The financial statements of the captive insurance company are consolidated with our financial statements since it is a wholly-owned enterprise. As of June 30, 2004, we recorded an insurance reserve amount of $1,700,000, which represents an estimate of costs to settle existing claims and an actuarially determined estimate of claims incurred but not yet reported.

Income Tax Benefit

The Company recorded an income tax benefit of $10,489,000, or $0.76 per share, for the six months ended June 30, 2004, as a result of the reversal of our deferred tax asset valuation allowance. A benefit of $5,900,000, or $0.43 per share, was recorded in the first quarter of 2004, and the balance of $4,589,000, or $0.33 per share, was recorded in the second quarter of 2004. Beginning in the third quarter of 2004, book tax expense is estimated to be at a combined rate of 39% to 40% for federal, state and local income taxes. The reversal of the valuation allowance on deferred tax assets was made because of continued profitability in 2004 and expected future profitability. As a result, we currently believe it is more likely than not that the deferred tax asset relating primarily to our U.S. net operating loss carryforwards will be realized to the

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extent of the tax benefit recorded. The computation of our deferred tax asset and valuation allowance is based on taxable income we expect to earn over future periods, which will include the utilization of previously accumulated net operating tax losses.

Per Share Data

Basic per share data is income applicable to common shares divided by the weighted average common shares outstanding. Diluted per share data is income applicable to common shares divided by the weighted average common shares outstanding plus the potential issuance of common shares if stock options are exercised.

Following is a reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2004 and 2003 (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Basic earnings:
Net income	$	10,849	$	1,793	$	23,578	$	3,550
Weighted average shares outstanding		13,385		10,743		13,353		10,743
Basic earnings per share	$	0.81	$	0.17	$	1.77	$	0.33
Diluted earnings:
Net income	$	10,849	$	1,793	$	23,578	$	3,550
Weighted average shares outstanding		13,385		10,743		13,353		10,743
Effect of dilutive securities
Stock options		485		76		462		15
Weighted average common shares and potential dilutive shares		13,870		10,819		13,815		10,758
Diluted earnings per share	$	0.78	$	0.17	$	1.71	$	0.33

Stock-Based Compensation

In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation, was issued. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation and requires more prominent and more frequent disclosures in the financial statements of the effects of stock-based compensation. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002.

We apply APB No. 25 and related interpretations utilizing the intrinsic value method in accounting for our stock option plans. We have adopted the disclosure-only provisions of SFAS No. 123. We recognize no compensation expense for our stock options granted to employees or directors. If we had elected to recognize compensation expense based on the fair value at the grant dates consistent with the provisions of SFAS No. 123, net income and income per share would have been changed to the pro forma amounts indicated below (dollars in thousands, except per share amounts):

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		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2004		2003		2004		2003
Net income	As reported	$	10,849	$	1,793	$	23,578	$	3,550
	Pro forma		10,340		1,553		22,582		3,090
Basic per share income	As reported	$	0.81	$	0.17	$	1.77	$	0.33
	Pro forma		0.77		0.14		1.69		0.29
Diluted per share income	As reported	$	0.78	$	0.17	$	1.71	$	0.33
	Pro forma		0.75		0.14		1.63		0.29

Segment Information

We operate in one segment: laser refractive surgery.

Commitments and Contingencies

In the opinion of management, there are currently no commitments or contingencies that will have a material adverse effect on our financial position or results of operations.

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

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors including, but not limited to, market acceptance of our services, competition in the laser vision correction industry, an inability to attract new patients, the possibility of long-term side effects and adverse publicity regarding laser vision correction, adverse economic conditions and the relatively high fixed-cost structure of our business, among other factors. In addition to the information given below, please refer to “Item 1. Business – Factors That May Affect Future Results and Market Price of Stock” in our 2003 annual report on Form 10-K for a discussion of important factors that could affect our results.

Overview

We are a leading provider of fixed-site laser vision correction services at our LasikPlus vision centers. Our vision centers provide the facilities, equipment and support services for performing laser vision correction that employs advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism.

Substantially all of our revenues currently are derived from laser vision correction procedures performed in our U.S. vision centers.

Our operating costs and expenses include:

• Medical professional and license fees, including per procedure fees for the ophthalmologists performing laser vision correction and license fees per procedure paid to certain suppliers of our excimer lasers

• Direct costs of services, including center rent and utilities, equipment lease and maintenance costs, surgical supplies, center staff expense and costs related to other revenues

• General and administrative costs, including headquarters staff expense and other overhead costs

• Marketing and advertising costs

• Depreciation of equipment

     Our vision centers have a relatively high degree of operating leverage due to the fact that many of our costs

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are fixed in nature. As a result, our level of procedure volume can have a significant impact on our level of profitability.

We derive substantially all of our revenues from the delivery of laser vision correction services. Our revenues in any period are primarily a function of the number of laser vision correction procedures performed and the pricing for those services.

Our revenues are impacted by a number of factors, including the following:

• Our ability to generate customers through our arrangements with managed care companies, direct- to-consumer advertising and word-of-mouth referrals

• Our mix of procedures among the different types of laser technology that we use

• New vision center openings and our ability to increase procedure volume at existing vision centers

• The availability of patient financing

• General economic conditions and consumer confidence levels

• The continued growth and increased acceptance of laser vision correction

• The effect of competition and discounting practices in our industry

     The following table details the number of laser vision correction procedures performed at our consolidated vision centers.

	2004		2003
Q1		24,270		17,028
Q2		24,093		16,432
Q3				15,965
Q4				16,060
Year				65,485

Our strongest quarter in terms of procedures performed historically has been the first quarter of the year. We believe this seasonality is caused primarily because of the use of employer sponsored medical flexible spending programs which commonly use the calendar year as the plan year.

Results of Operations for the Three Months Ended June 30, 2004 and 2003

We believe that continued improvement in marketing and advertising effectiveness and continued growth and increased acceptance of laser vision correction, together with third-party patient financing and our own patient financing plan, among other factors, helped to grow procedure volume in the second quarter of 2004 over the second quarter of 2003.

In the second quarter of 2004, revenues increased to $31,554,000, up 56.0% from $20,224,000 in the second quarter of 2003, primarily as a result of higher procedure volume and increased pricing per procedure. For vision centers open at least 12 months, revenues increased by 39% in the second quarter of 2004 compared to the second quarter of 2003.

Although the market for laser vision correction remains highly competitive, we have raised our average price per procedure over the last 14 quarters. Our average price per procedure has increased from $877 in the fourth quarter of 2000 to $1,310, in the quarter ended June 30, 2004. In the second quarter of 2003, the average price per procedure was $1,231.

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Medical professional and license fees

Medical professional expenses increased by $1,510,000 from the second quarter of 2003; approximately $1,317,000 of this increase was due to costs and fees associated with higher revenues, and $193,000 was due to the consolidation of three Professional Corporations subsequent to June 2003. License fees increased by $464,000 from the second quarter of 2003. This was primarily the result of increased costs of $817,000 due to higher volume and an increase in enhancement expenses of $26,000. These increases were partially offset by purchasing rebates from suppliers of $379,000.

Direct costs of services

Direct costs of services include the salary component of physician compensation, staffing, equipment, medical supplies, and facility costs of operating laser vision correction centers. These direct costs increased in the second quarter of 2004 by $2,506,000 over the second quarter of 2003, primarily as a result of increased salaries, employee incentives, financing fees and surgical supplies in connection with an increase in the number of vision centers and our higher procedure volumes.

General and administrative

General and administrative expenses increased by $312,000 in the second quarter of 2004 from the second quarter of 2003, primarily due to increases in salaries and benefits of $239,000.

Marketing and advertising expenses

Marketing and advertising expenses increased by $1,836,000 in the second quarter of 2004 from the second quarter of 2003, primarily as a result of our efforts to support new markets and help grow volume in existing markets.

Depreciation and amortization

Depreciation and amortization increased by $209,000 in the second quarter of 2004 from the second quarter of 2003, primarily as a result of laser upgrades and the acquisition of diagnostic equipment to support custom LASIK.

Non-operating income and expenses

Investment income in the second quarter of 2004 increased $435,000, due both to income on patient financing and to higher levels of invested cash.

Income Taxes

Income tax expense of $450,000 was recorded in the second quarter of 2004. U.S. income tax was accrued for the amount of $262,000. The income tax provision of our Canadian facility was $188,000. These expenses were more than offset by a $4,589,000 income tax benefit from the reversal of the remainder of the deferred tax asset valuation allowance.

Results of Operations for the Six Months Ended June 30, 2004 and 2003

We believe that improved marketing and advertising effectiveness and continued growth and increased acceptance of laser vision correction, together with third-party patient financing and our own patient financing plan, among other factors, helped to grow procedure volume in the first six months of 2004 over the first six months of 2003.

In the first six months of 2004, revenues increased to $63,204,000, up 57.2% from $40,206,000 in the second quarter of 2003, primarily as a result of higher procedure volume and increased pricing per procedure.

In the first six months of 2004, the average price per procedure was $1,307, as compared to the first six months of 2003 average of $1,202.

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Medical professional and license fees

Medical professional expenses increased by $3,120,000 from the first six months of 2003; approximately $2,520,000 of this increase was due to costs and fees associated with higher revenues, and $600,000 was due to the consolidation of three Professional Corporations subsequent to June 2003. License fees increased by $1,255,000 from the first six months of 2003. This was primarily the result of increased costs of $2,024,000 due to higher volume and an increase in enhancement expenses of $113,000. These increases were partially offset by purchasing rebates from suppliers of $882,000.

Direct costs of services

Direct costs of services increased in the first six months of 2004 by $4,364,000 over the first six months of 2003, primarily as a result of increased salaries, fringe benefits, employee incentives, financing fees, rent/utilities and surgical supplies in connection with an increase in the number of vision centers and our higher procedure volumes.

General and administrative

General and administrative expenses increased by $584,000 in the first six months of 2004 from the first six months of 2003, primarily due to increases in salaries, benefits and employee incentives of $487,000.

Marketing and advertising expenses

Marketing and advertising expenses increased by $3,651,000 in the first six months of 2004 from the first six months of 2003, primarily as a result of our efforts to support new markets and help grow volume in existing markets.

Depreciation and amortization

Depreciation and amortization increased by $419,000 in the first six months of 2004 from the first six months of 2003, primarily as a result of laser upgrades and the acquisition of diagnostic equipment to support custom LASIK.

Non-operating income and expenses

Investment income in the first six months of 2004 increased $766,000, due both to income on patient financing and to higher levels of invested cash.

Income Taxes

Income tax expense of $697,000 was recorded in the first six months of 2004. U.S. income tax was accrued for the amount of $362,000. The income tax provision of our Canadian facility was $335,000. These expenses were more than offset by a $10,489,000 income tax benefit from the reversal of the deferred tax asset valuation allowance.

Liquidity and Capital Resources

Net cash provided by operating activities in the first six months of 2004 was $14,962,000. Proceeds from exercising of 141,510 stock options totaled $1,718,000. The combination of cash provided by operations and cash provided by financing activities more than offset the cash used in investing activities. This caused an increase in cash and cash equivalents to $79,566,000 as of June 30, 2004, an increase of 23% from $64,908,000 as of December 31, 2003.

In view of our increased cash and cash equivalents, we have chosen not to renew our line of credit with Provident Bank, which expired on July 31, 2004.

As of June 30, 2004, we had approximately $7,230,000 in accounts receivable, net of allowance for doubtful accounts, which was an increase of approximately $3,227,000 since December 31, 2003.

Our consolidated cash and cash equivalents includes $500,000 of cash maintained by our consolidated captive insurance company pursuant to statutory requirements as of June 30, 2004. These funds are not available for general corporate purposes.

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Our costs associated with the opening of a new vision center primarily consist of capital expenditures, including the purchase or lease of lasers, diagnostic equipment, office equipment, leases and leasehold improvements. In addition, we typically incur other startup expenses and pre-opening advertising expenses. Generally, we estimate the costs associated with opening a new vision center to be between $1,000,000 and $1,500,000. Actual costs will vary from vision center to vision center based upon the market, the number of lasers purchased or leased for the vision center, the site of the vision center and the level of leasehold improvements required, among other variables. Our capital expenditures consist primarily of investments incurred in connection with the opening of new vision centers and equipment purchases or upgrades at existing facilities.

Through June 30, 2004, we opened three new vision centers in Orlando, Florida, Toronto, Canada, and San Antonio, Texas. Capital expenditures through June 30, 2004 were $1,746,000. Three additional vision centers are under development with anticipated opening dates in the third quarter of 2004, and we expect to open additional vision centers in the fourth quarter of 2004.

The ability to fund our marketing and advertising program, planned capital expenditures and new vision center rollouts depends on our future performance, which, to a certain extent, is subject to general economic, competitive, legislative, regulatory and other factors that are beyond our control. Based upon our current level of operations and anticipated revenue growth, we currently believe that cash flow from operations and available cash and short-term investments should provide sufficient cash reserves and liquidity to fund our current working capital needs and our capital expenditures.

Critical Accounting Estimates

Significant accounting policies are disclosed in the Notes to Condensed Consolidated Financial Statements. Critical accounting estimates are discussed in the following paragraphs.

Accounts Receivable and Allowance for Doubtful Accounts

We provide patient financing to some of our customers, including those who could not otherwise obtain third-party financing. The terms of the financing require the patient to pay an up-front fee which is intended to cover some or all of our variable costs, with the remainder due from the patient over a period of 12 to 36 months. We began our patient financing program in May 2002. Accounts receivable for patients that we finance for a period of 12 months or less are recorded at the undiscounted total expected payments less an estimated allowance for doubtful accounts. For patients we finance with an initial term over 12 months, we record the present value of expected payments discounted at a rate of 17.5% per year. The discount rate assumption is based upon current market rates charged by some other providers of unsecured credit to similar customers. Interest income is recorded over the term of the payment program.

Based upon our own experience with patient financing and based upon the credit experience of some others who provide financing to customers similar to ours, we have established bad debt reserves as of June 30, 2004 of $2,658,000 against accounts receivable of $9,888,000. To the extent that our actual bad debt write-offs are greater than our estimated bad debt reserve, it would adversely impact our results of operations and cash flows. To the extent that our actual bad debt write-offs are less than our estimated bad debt reserve, it would favorably impact our results of operations and cash flows.

As of June 30, 2004, the discount in receivables with an initial term over 12 months was $724,000.

Captive Insurance Company Reserves

Effective December 18, 2002, we established a captive insurance company to provide professional liability insurance coverage for claims brought against us after December 17, 2002. In addition, our captive insurance company’s charter allows it to provide professional liability insurance for our doctors, some of whom are currently insured by the captive. Our captive insurance company is managed by an independent insurance consulting and management firm, and it is capitalized and funded by us based on actuarial studies performed by an affiliate of the consulting and management firm. For the year ending December 31, 2003, our captive insurance company purchased excess liability coverage for 80% of our aggregate losses in a given policy year in excess of $1,000,000, up to $11,000,000. Our captive insurance company was responsible for 20% of our aggregate losses in excess of $1,000,000 per claim, up to $11,000,000.

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Beginning December 18, 2003, the Company elected to use the captive insurance company for both primary insurance and excess liability coverage. The financial statements of the captive insurance company are consolidated with our financial statements since it is a wholly-owned enterprise. As of June 30, 2004, we recorded an insurance reserve amount of $1,700,000, which represents an estimate of costs to settle existing claims and an actuarially determined estimate of claims incurred but not yet reported. To the extent that our actual claim experience is greater than our estimated insurance reserve, it would adversely impact our results of operations and cash flows. To the extent that our actual claim experience is less than our estimated insurance reserve, it would favorably impact our results of operations and cash flows.

Income Taxes

The Company recorded an income tax benefit of $10,489,000 for the six months ended June 30, 2004, as a result of the reversal of our deferred tax asset valuation allowance. The reversal of the allowance was made because we currently believe it is more likely than not that the deferred tax asset relating to our U.S. net operating loss carryforward will be realized to the extent of the tax benefit recorded. The computation of our deferred tax asset and valuation allowance is based on taxable income we expect to earn over future periods, which will include the utilization of previously accumulated net operating tax losses.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The carrying values of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of the short maturity of these instruments.

We have historically had low exposure to changes in foreign currency exchange rates and, as such, have not used derivative financial instruments to manage foreign currency fluctuation risk.

Item 4. Controls and Procedures

(a)	Evaluation Of Disclosure Controls And Procedures
	Under the supervision of and with the participation of the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), an evaluation of the effectiveness of the Company’s disclosure controls and procedures was performed as of June 30, 2004. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Securities Exchange Act of 1934 and the SEC rules thereunder.
(b)	Changes In Internal Control Over Financial Reporting
	There were no changes in the Company’s internal control over financial reporting that occurred during the last quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. Other Information.

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

The Company held its Annual Meeting of Stockholders on May 17, 2004. The only matter submitted to the vote of the stockholders was the election of directors. All incumbent directors were re-elected, with the following vote totals:

	Shares Voted		Authority
	For		Withheld
Stephen N. Joffe		9,854,647		2,631,285
William O. Coleman		11,970,502		515,430
John H. Gutfreund		9,603,735		2,882,197
John C. Hassan		11,971,286		514,646
Craig P. R. Joffe		9,749,106		2,736,826
E. Anthony Woods		11,969,864		516,068

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

Number	Description
3	Bylaws of the Registrant
31.1	CEO Certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	CFO Certification under Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)	Reports on Form 8-K
	Form 8-K, dated and furnished April 27, 2004 under Item 12, containing a press release reporting 2004 first quarter financial results.

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Signatures

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

LCA-VISION INC.

Date: August 3, 2004	/s/ Stephen N. Joffe
	Stephen N. Joffe
	Chairman and Chief Executive Officer

Date: August 3, 2004	/s/ Alan Buckey
	Alan Buckey
	Chief Financial Officer

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EX-3

Exhibit 3

As adopted May 17, 2004

BY-LAWS OF

LCA VISION INC.

ARTICLE I.

Stockholders

     Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.

     Section 1.2. Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors that has been duly designated by the Board of Directors and whose powers and authority, as expressly provided in a resolution of the Board of Directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons.

     Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given that shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the certificate of incorporation or these by-laws, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation.

     Section 1.4. Adjournment. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     Section 1.5. Quorum. Except as otherwise provided by law, the certificate of incorporation or these by-laws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.4 of these by-laws until a quorum shall attend. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of

such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

     Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary or any Assistant Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of the meeting shall announce at the meeting of stockholders the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote.

     Section 1.7. Voting; Proxies. Except as otherwise provided by the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the corporation. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law, the certificate of incorporation or these by-laws, be decided by the vote of the holders of shares of stock having a majority of the votes which could be cast by the holders of all shares of stock outstanding and entitled to vote thereon.

     Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof; or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of stockholders entitled to

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express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

     Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.

     Section 1.10. Action By Consent of Stockholders. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of minutes of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

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     Section 1.11. Conduct of Meetings. The Board of Directors of the corporation may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting: (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

ARTICLE II.

Board of Directors

     Section 2.1. Number; Qualifications. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors need not be stockholders.

     Section 2.2. Election; Resignation; Removal; Vacancies. At each annual meeting of stockholders, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his or her successor is elected and qualified. Any director may resign at any time upon written notice to the corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified.

     Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given.

     Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the President, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting.

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     Section 2.5. Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.

     Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Except in cases in which the certificate of incorporation or these by-laws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

     Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his or her absence by the Vice Chairman of the Board, if any, or in his or her absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary or any Assistant Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

     Section 2.8. Informal Action by Directors. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.

ARTICLE III.

Committees

     Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it.

     Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct

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of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these by-laws.

ARTICLE IV.

Officers

     Section 4.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board and a Vice Chairman of the Board from among its members. The Board of Directors may also choose one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. At the discretion of the Board of Directors, officers may be designated as “Senior” or “Executive” and their titles may bear additional descriptive appellations. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.

     Section 4.2. Powers and Duties of Executive Officers. The officers of the corporation shall have such powers and duties in the management of the corporation as may be prescribed in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties.

ARTICLE V.

Stock

     Section 5.1. Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the corporation certifying the number of shares owned by him or her in the corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.

     Section 5.2. Lost, Stolen, Destroyed Stock Certificates; Issuance of New Certificates. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may

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require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

ARTICLE VI.

Indemnification

     Section 6.1. Right to Indemnification. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors of the corporation.

     Section 6.2. Prepayment of Expenses. The corporation may, in its discretion, pay the expenses (including attorneys’ fees) incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise.

     Section 6.3. Claims. If a claim for indemnification or payment of expenses under this Article is not paid in full within sixty days after a written claim therefor has been received by the corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

     Section 6.4. Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.

     Section 6.5. Other Indemnification. The corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit enterprise.

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     Section 6.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VII.

Miscellaneous

     Section 7.1. Fiscal Year. The fiscal year of the corporation shall be determined by resolution of the Board of Directors.

     Section 7.2. Seal. The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.

     Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.

     Section 7.4. Interested Directors; Quorum. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

     Section 7.5. Form of Records. Any records maintained by the corporation in the regular course of its business, including its stock ledger, books of account, and minute books,

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may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into dearly legible form within a reasonable time.

     Section 7.6. Amendment of By-Laws. These by-laws may be altered or repealed, and new by-laws made, by the Board of Directors, but the stockholders may make additional by-laws and may alter and repeal any by-laws whether adopted by them or otherwise.

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EX-31.1

Exhibit 31.1

CEO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen N. Joffe, certify that:

1.	I have reviewed this report on Form 10-Q of LCA-Vision Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2004	/s/ Stephen N. Joffe
	Stephen N. Joffe
	Chief Executive Officer

EX-31.2

Exhibit 31.2 

CFO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan H. Buckey, certify that:

1.	I have reviewed this report on Form 10-Q of LCA-Vision Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2004	/s/ Alan H. Buckey
	Alan H. Buckey
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of LCA-Vision Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

This quarterly report on Form 10-Q for the period ended June 30, 2004 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in this Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen N. Joffe	/s/ Alan Buckey
Stephen N. Joffe	Alan Buckey
Chief Executive Officer	Chief Financial Officer