See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000.

As a result of the Company's exit from the physician practice management ("PPM") business and the ambulatory surgery center/refractive surgery center ("ASC/RSC") business, the Company has accounted and reported for these business segments as discontinued operations. Consequently, prior period financial statements have been restated to reflect discontinued operations treatment for the results of these business segments.

The following table sets forth the computation of basic and diluted income (loss) per share:

There were no dilutive securities included in the computations of income (loss) per share for the three month period ended September 30, 2001 and in the three and nine month periods ended September 30, 2000 because the Company incurred a loss from continuing operations. Options and warrants to purchase shares of common stock were not included in the computation of diluted income (loss) per share in the nine month period ended September 30, 2001 because the effect would have been anti-dilutive.

The accrued restructuring charge of approximately $324,000 at December 31, 2000 was reduced by approximately $320,000 during the nine-month period ended September 30, 2001. The reduction was related to a reversal of severance costs as a result of an employee settlement.

The Company settled most outstanding payables from prior periods for approximately $236,000 and $4,100,000 less than the carrying amount during the three and nine month periods ended September 30, 2001, and has included them in other charges and credits in the accompanying statements of operations.

Effective August 31, 1999, the Company completed the sale of Vision World, Eyecare One Corp., and The Eye DRx (the "Retail Optical Chains") to Eye Care Centers of America, Inc. ("ECCA"). In connection with this transaction, the Company received approximately $37,300,000 in cash, of which approximately $1,250,000 was utilized to fund an escrow arrangement between the parties relative to terms under the agreement. Based on post-closing adjustments, the final sales price was approximately $31,800,000, and the Company had recorded a liability of approximately $4,032,000 to ECCA, net of escrow, with respect to such post-closing adjustments in 1999. In September 2000, the Company and ECCA reached a comprehensive resolution of all disputed matters which provided for, among other things, the reduction in the post-closing adjustment liability from $4.0 million to $1.5 million. In July 2001, the Company and ECCA reached final resolution of the liability for the post-closing adjustment and the Company made a $153,187 settlement payment to ECCA in complete satisfaction of this obligation. The approximately $1,400,000 difference in carrying amount of the obligation and the ultimate settlement is included in the approximately $4,149,000 in other charges and credits for the nine month period ended September 30, 2001.

On October 25, 1999, the Company announced its intent to exit the business of managing optometry and ophthalmology practices. This represented a crucial step in the Company's strategy of focusing its corporate resources on expanding its managed care business. The exit of the PPM business, completed in September, 2000, was accomplished through the sale of the practice assets back to the physicians or affiliates, the termination of management agreements and the restructuring of certain refractive surgery center facility access agreements. The terms of each managed practice divestiture were subject to the prior approval of the lenders under the Company's credit facilities, as well as the Company's Board of Directors.

During the third quarter of 2000, the Company announced its intent to exit the business of owning and managing ASC/RSC centers. The Company sold substantially all of the assets and liabilities of five refractive and ambulatory surgery centers to American Surgisite Management Services Organization, Inc. and R.E.S.C., LLC, for cash consideration of $3,700,000. The transaction closed in the first quarter of 2001 with an effective date of December 31, 2000. The Company withdrew as a member of Suffolk Eye Management Associates, LLC and received cash consideration of $100,000 for its membership interest. The transaction closed in the second quarter of 2001 with an effective date of December 8, 2000. During the second quarter of 2001, the Company also disposed of its partnership interest in Pasco Surgery Center, LLP for cash consideration of $550,000, and ceased operations of its refractive surgery center in Phoenix, Arizona and retained cash of approximately $103,000.

The (loss) income of the discontinued operations of approximately $(136,000) and $944,000 for the three and nine months ended September 30, 2001, reflects operations during the period prior to the sale.

As a result of the changes occurring in the Company's business, including, but not limited to, the divestiture of large business units, the shift in operating focus, changes in the Company's managed care business, the Company's exiting the PPM and ASC/RSC businesses and issues relating to the Company's accessibility to future working capital, the overall results should not necessarily be relied upon as being indicative of future operating performance.

The operating results of these discontinued operations are summarized as follows:

As a result of the termination of the merger agreement with Opticare Health Systems, Inc. and OC Acquisition Corp., professional fees incurred in connection with the proposed merger of approximately $1.0 million for the nine months ended September 30, 2000 were expensed and reported as an extraordinary item.

In March 2001, the Company settled litigation with The Source Buying Group, Inc. for $30,000. As a result of the settlement with The Source Buying Group, Inc., the Company recognized an extraordinary gain on forgiveness of indebtedness of $532,500 during the nine-month period ended September 30, 2001.

During the quarter ended September 30, 2001, there have been no material developments to previously reported legal proceedings.

Except as previously reported, or as described in the section of this report captioned "Part II, Item1. Legal Proceedings," the Company is not a party to any material litigation and is not aware of any threatened material litigation.

Management of the Company is unable to determine the impact, if any, that the resolution of the reported pending lawsuits will have on the financial position or results of operations of the Company. However, there can be no assurance that the resolution of the reported pending lawsuits will not have a material adverse effect on the Company and further contribute to its negative financial operations.

The Company is required to adopt the provisions of SFAS No. 141 immediately and SFAS No. 142 effective January 1, 2002. Any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-SFAS No. 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of SFAS No. 142.

Because of the extensive effort needed to comply with adopting SFAS Nos. 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. However, for the three and nine months ended September 30, 2001, the Company recognized $0.4 million and $1.2 million of goodwill amortization, respectively.

Vision Twenty-One, Inc. ("Vision Twenty-One" or the "Company") is a vision care company that is mainly focused on the provision of administrative services to managed care entities. The Company manages routine vision and medical/surgical eye care programs through contracts with managed care organizations and other third-party payors.

During 2000, the Company completely divested itself of the PPM business in order to focus on the managed care business. The PPM divestiture required multiple transactions involving the sale of practice assets, typically back to the doctors or their affiliates, and the termination of management agreements. This divestiture program commenced late in the fourth quarter of 1999 and was completed by September 30, 2000. During the third quarter of 2000 the Company similarly announced its plans to exit the ASC/RSC business to further focus on managed care business. During the first and second quarters of 2001, the Company completed the divestiture of eight refractive and ambulatory surgery centers. See Note 5 to Condensed Consolidated Financial Statements.

Consolidation of Managed Care Offices. The consolidation of the corporate executive office in Largo, Florida and managed care office in Boca Raton, Florida was started in October 2000 and was substantially completed by year-end 2000. Additional steps to integrate the IS function from the Boca Raton service center into MEC's Baltimore service center were completed during the first quarter of 2001. The Vision Twenty-One executive offices in Largo were leased directly from the landlord to a new tenant and all equipment was moved or sold. The lease for the Block Vision facility in Boca Raton was terminated on April 1, 2001, and Block Vision leased smaller space in the same building for certain of its staff. Equipment not retained at the Boca Raton location was either moved to the Baltimore location or sold.

The following table sets forth, as a percentage of total revenues, certain items in the Company's statement of operations for the periods indicated. As a result of the changes occurring in the Company's business, including, but not limited to the shift in operating focus, changes in the Company's managed care business, the Company's exiting the PPM and ASC/RSC businesses, the Company's settlement of claims with numerous unsecured creditors and issues relating to the Company's accessibility to future working capital, the overall results should not necessarily be relied upon as being indicative of future operating performance.

Revenue decreased 3.2% from $12.9 million for the three months ended September 30, 2000 to $12.5 million for the three months ended September 30, 2001. This decrease was primarily due to the withdrawal from the Medicare market by several of our contracted plans.

Medical Claims.

Medical claims expense increased 0.5% from $9.2 million for the three months ended September 30, 2000 to $9.3 million for the three months ended September 30, 2001. The Company's medical claims ratio increased from 71.8% for the three months ended September 30, 2000 to 74.5% for the three months ended September 30, 2001. Medical claims expense consists of payments by the Company to its affiliated providers for vision care and utilization increased during this period.

General and Administrative.

General and administrative expenses decreased 22.9% from $3.4 million for the three months ended September 30, 2000 to $2.7 million for the three months ended September 30, 2001. General and administrative expenses consist mainly of salaries, wages and benefits related to management and administrative staff located at the Company's corporate headquarters plus it includes the operating staff of its managed care service centers as well as professional fees, occupancy costs and other related costs. Expenses as a percentage of revenue also decreased from 26.7% for the three months ended September 30, 2000 to 21.3% for the three months ended September 30, 2001. Management has been aggressively reducing staff and related overhead expenses in an effort to bring overall general and administrative expenses in line with the current run rate of the continuing businesses, including the consolidation of the managed care operations and corporate operations. As part of this effort, effective August 31, 2001, the Company terminated the employment of Andrew Alcorn, President of the Company and Block Vision. Mark Gordon, O.D., the Company's Chief Executive Officer and a director was elected President to fill the vacancy created by Mr. Alcorn's termination. Mr. Alcorn continues to serve on the Company's Board of Directors and has agreed to make himself available to the Company on a consulting basis through August 31, 2002. The Company also terminated the employment of Ellen Gordon, Chief Operating Officer of the Company, effective September 30, 2001. Mrs. Gordon has agreed to make herself available to the Company on a consulting basis through June 30, 2002. In accordance with the terms of their respective employment agreements, each Mr. Alcorn and Mrs. Gordon have received the portion of their severance compensation due at the time of termination and the Company will pay their remaining severance compensation as set forth in such employment agreements.

Depreciation and Amortization.

Depreciation and amortization expense decreased from $0.7 million for the three months ended September 30, 2000 to $0.5 million for the three months ended September 30, 2001. As a percentage of revenues, depreciation and amortization expense decreased from 5.1% for the three months ended September 30, 2000 to 3.7% for the three months ended September 30, 2001 due to the consolidation of offices.

Special Items.

Other charges and credits of $0.2 million for the three months ended September 30, 2001 were the result of settling outstanding payables from prior periods for less than their carrying amounts.

Interest Expense.

Interest expense decreased 65.1% from $1.8 million for the three months ended September 30, 2000 to $0.6 million for the three months ended September 30, 2001. Average borrowings decreased approximately $2.6 million in the third quarter of 2001 versus the same period in 2000 and interest rates decreased.

Discontinued Operations.

Income (loss) on disposal of discontinued operations decreased 108.6% from $1.6 million for the three months ended September 30, 2000 to $(0.1) million for the three months ended September 30, 2001.

Revenues.

Revenues decreased 10.4% from $39.7 million for the nine months ended September 30, 2000 to $35.6 million for the nine months ended September 30, 2001. This decrease was primarily due to the withdrawal from the Medicare market by several of our contracted plans.

Medical Claims.

Medical claims expense decreased 10.3% from $28.8 million for the nine months ended September 30, 2000 to $25.8 million for the nine months ended September 30, 2001. The Company's medical claims ratio increased from 72.4% for the nine months ended September 30, 2000 to 72.5% for the nine months ended September 30. 2001. Medical claims expense consists of payments by the Company to its affiliated providers for vision care and utilization increased during this period..

General and Administrative

General and administrative expenses decreased 52.9% from $15.4 million for the nine months ended September 30, 2000 to $7.3 million for the nine months ended September 30, 2001 General and administrative expenses consist mainly of salaries, wages and benefits related to management and administrative staff located at the Company's corporate headquarters plus it includes the operating staff of its managed care service centers as well as professional fees, occupancy costs and other related costs. Expenses as a percentage of revenue also decreased from 38.9% for the nine months ended September 30, 2000 to 20.4% for the nine months ended September 30, 2001. Management has been aggressively reducing staff and related overhead expenses in an effort to bring overall general and administrative expenses in line with the current run rate of the continuing business, including the consolidation of the managed care and corporate operations. See "Management's Discussion and Analysis of Financial Condition And Results of Operations - Three-Month Period Ended September 30, 2001 Compared to Three-Month Period Ended September 30, 2000 - General and Administrative" regarding the Company's termination of its former President and Chief Operating Officer.

Depreciation and Amortization

Depreciation and amortization expense decreased 33.4% from $2.1 million for the nine months ended September 30, 2000 to $1.4 million for the nine months ended September 30, 2001. As a percentage of revenues, depreciation and amortization expense decreased from 5.2% for the nine months ended September 30, 2000 to 3.8% for the nine months ended September 30, 2001 due to the consolidation of offices.

Special Items.

Restructuring credits of $0.3 million were recognized for the nine months ended September 30, 2001. This credit was related to a reversal of severance costs as a result of an employee settlement.

Other charges and credits of $4.1 million for the nine months ended September 30, 2001 were the result of settling outstanding payables from prior periods for less than their carrying amounts.

Interest Expense.

Interest expense decreased 58.1% from $5.4 million for the nine months ended September 30, 2000 to $2.3 million for the nine months ended September 30, 2001. Even though average borrowings were approximately $0.5 million higher for the nine months ended September 30, 2001 versus the same period in 2000, interest expense dropped due to reduced interest rates.

Discontinued Operations.

During the nine months ended September 30, 2001, the Company sold eight refractive and ambulatory surgery centers for cash considerations of approximately $4.4 million.

Extraordinary Items.

The extraordinary gain of approximately $0.5 million represents forgiveness of indebtedness as a result of a settlement agreement with The Source Buying Group during the nine months ended September 30, 2001.

The Company has historically funded its working capital and capital expenditure requirements primarily through institutional borrowings and private debt and equity financing. Net cash provided by operating activities for the nine months ended September 30, 2001 was $1.0 million as compared to net cash used in operating activities of $8.9 million for the nine months ended September 30, 2000.

The Company currently has insufficient liquidity and capital resources to meet its obligations to unsecured creditors and mandatory principal payments due to the Company's lenders.

Additionally, the Company may have to post additional cash reserves to meet reserve/solvency requirements for its managed care operations. The Company cannot estimate the amount, if any, of such reserve requirements at this time.

Net cash used in investing activities for the nine months ended September 30, 2000 was $0.7 million resulting primarily from purchases of office equipment and furniture. Net cash provided by investing activities for the nine months ended September 30, 2001 was $3.1 million and resulted from proceeds of the sale of the ASC/RSC businesses.

Net cash used in financing activities for the nine months ended September 30, 2001 of $5.3 million was primarily attributable to paying down existing debt as compared to net cash provided by financing activities of $0.6 for the nine months ended September 30, 2000.

On November 10, 2000 the Company amended and restated its credit agreement dated July 1, 1998, as previously amended (the "Credit Agreement"). The $64.2 million restated and amended credit facility consists of a $3.0 million revolving loan, $45.8 million term loan and $6.4 million convertible note with maturity dates of October 31, 2003 and a $9.0 million bridge loan which matures on March 31, 2002. Quarterly principal repayments under the term loan of $0.5 million begin March 31, 2002. The bridge loan was reduced to $5.3 million in the first quarter of 2001, to $4.3 million in the second quarter of 2001, to $3.8 million in the third quarter of 2001 and is required to be further reduced by $0.5 million on December 31, 2001, with a balloon payment due at maturity. Mandatory principal payments are required from 100% of the proceeds of any asset sale. In addition, mandatory prepayments are required from 75% of Annual Excess Funds. Annual Excess Funds are defined as Earnings Before Interest, Taxes, Depreciation and Amortization "EBITDA", as determined by Generally Accepted Accounting Principles ("GAAP"), for the immediately preceding four quarters, less payments made for interest, income tax, capital expenditures, capital lease payments, required term loan principal payments, and permanent bridge and revolver paydowns. For 2001 only, EBITDA shall exclude income arising as a result of excess prior period restructuring/transition accruals and shall be reduced by cash payments on prior period restructuring/transition accruals. Mandatory loan prepayments will be applied first to the permanent reduction of the Bridge Loan Commitment and second to the Term Facility. Any Term Facility prepayments will be applied to the reduction of the remaining scheduled amortization payments in inverse order of maturity.

On March 31, 2001, the Company entered into a First Amendment to the Credit Agreement (the "First Amendment"). The First Amendment (i) reduced the amount due under the bridge facility on March 31, 2001, (ii) revised certain covenants and financial ratios, (iii) extended the date by which the Company is required to obtain the approval of its shareholders, (the "Shareholder Approval") of an increase in the authorized shares of the Company's capital stock from February 28, 2001 until May 31, 2001, and (iv) waived the Company's non-compliance with certain financial reporting obligations through May 31, 2001. On March 31, 2001, the Company also entered into a First Amendment to the Convertible Note Agreement, Warrant Agreement, and Warrants providing for the extension of the date by which the Company is required to obtain the Shareholder Approval.

On May 31, 2001, the Company entered into a Second Amendment to the Credit Agreement and a Second Amendment to the Convertible Note Agreement, Warrant Agreement, and Warrants (collectively, the "Second Amendments"). The Second Amendments extended the date by which the Company is required to obtain the Shareholder Approval from May 31, 2001 until July 15, 2001.

On July 12, 2001, the Company entered into a Third Amendment to the Credit Agreement and a Third Amendment to the Convertible Note Agreement, Warrant Agreement, and Warrants (collectively, the "Third Amendments"). The Third Amendments extended the date by which the Company is required to obtain the Shareholder Approval from July 15, 2001 until September 30, 2001.

On September 30, 2001, the Company entered into a Fourth Amendment to the Credit Agreement and a Fourth Amendment to the Convertible Note Agreement, Warrant Agreement, and Warrants (collectively, the "Fourth Amendments"). The Fourth Amendments extended the date by which the Company is required to obtain the Shareholder Approval from September 30, 2001 until December 31, 2001.

Management has been aggressively reducing staff and related overhead spending, carefully managing business unit operating cash flow and working toward completing the divestiture of the ASC/RSC business in an effort to further improve the Company's liquidity position and restore profitability. See "Management's Discussion and Analysis of Financial Condition And Results of Operations - Three-Month Period Ended September 30, 2001 Compared to Three-Month Period Ended September 30, 2000 - General and Administrative" regarding the Company's termination of its former President and Chief Operating Officer. Additionally, during the first quarter of 2001, the Company engaged an investment banking firm to assist it in evaluating strategic alternatives which may include private debt or equity financing, the sale of one or more business units or the sale of the entire Company. In August 2001, the Company received indications of interest regarding the possible acquisition of the Company's managed care business which the Company is currently evaluating. There can be no assurance that the Company will be able to reach an agreement regarding the terms of such a transaction. Moreover, there can be no assurance that the proceeds which may be realized by the Company from such a transaction, if one were to occur, would be sufficient to satisfy the Company's obligations under the Credit Agreement or to its unsecured creditors, or that sufficient proceeds would remain for the benefit of the shareholders. In the event the Company's efforts are not successful, the Company will have to restructure its obligations under the Credit Agreement. If such restructuring efforts are not successful, the Company may need to seek protection under the Federal Bankruptcy Code.

The Company is exposed to changes in interest rates primarily as a result of borrowing activities under its Credit Agreement, which is used to maintain liquidity and fund the Company's business operations. The nature and amount of the Company's debt may vary as a result of future business requirements, market conditions and other factors. The extent of the Company's interest rate risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements, but the Company does not believe such risk is material in the short term. Pursuant to the Credit Agreement, commencing in November 2002, the interest rate on all remaining debt except the revolver will increase to prime plus 2%. The Company did not use derivative instruments to adjust the Company's interest rate risk profile during the nine months ended September 30, 2001.

You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following:

1. our inability to sell the Company or, alternatively, certain business units and any potential losses arising therefrom;
2. our inability to obtain sufficient cash from our credit facility and business divestitures to fund our ongoing operations including severance obligations and contingent payment obligations;
3. our loss of, changes in, or inability to keep, key personnel, management or directors;
4. Any unexpected increases in or additional charges or losses related to the unwinding of the ASC/RSC centers;
5. the continuation of operating and net losses being experienced by the Company and increases in such losses;
6. any material inability to acquire additional sufficient capital at a reasonable cost to fund our continued operations or to maintain compliance with our credit facility;
7. the inability to maintain our managed care business or to increase and expand managed care initiatives;
8. any adverse changes in our managed care business, including but not limited to, the inability to renew existing managed care contracts or obtain future contracts or maintain and expand our provider network;
9. our inability to negotiate managed care contracts with HMOs;
10. our inability to successfully and profitably operate our managed care business or for existing managed care contracts to positively impact gross profit;
11. any adverse change in our medical claims to managed care revenue ratio;
12. the inability to maintain or obtain required licensure in the states in which we operate; or any changes in state or federal governmental regulations which could materially affect our ability to operate;
13. consolidation of our competitors, poor operating results by our competitors, or adverse governmental or judicial rulings against our competitors;
14. our inability to realize any significant benefits, cost savings or reductions from our restructuring program;
15. unexpected cost increases;
16. our inability to successfully defend against the class action lawsuits, or any additional litigation that currently exists or may arise in the future;
17. our inability to timely file our required reports with the SEC or to maintain the listing of our Common Stock on NASDAQ Bulletin Board;
18. our inability to restructure and settle any and all indebtedness, claims and disputes in a manner that permits continued operations of the Company;
19. our inability to enter into acceptable settlement agreements with parties making claims against us or to fulfill our obligations pursuant to such settlement agreements;
20. our inability to complete our restructuring efforts, including, but not limited to, obtaining any required consents or approvals of the shareholders;
21. our stock price;
22. in the event the Company becomes a debtor in Bankruptcy Court; and
23. other factors including those identified in our filings from time-to-time with the SEC.

The Company undertakes no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date of this Form 10-Q and annual report or to reflect the occurrence of unanticipated events.

Except as described below, the Company is not a party to any material litigation and is not aware of any threatened material litigation:

The Company, one of its former executive officers who was also a director and two former officers are named as defendants in several purported class action lawsuits filed in the United States District Court for the middle District of Florida, Tampa Division. The complaints allege, principally, that the Company and other defendants issued materially false and misleading statements related to the Company's integration of its acquisitions, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The plaintiffs seek to certify their complaints as class actions on behalf of all purchasers of the Company's Common Stock in the period between December 5, 1997 and November 5, 1998, and seek an award of an unspecified amount of monetary damages to all of the members of the purported class. The purported class action lawsuits were as follows: (i) Tad McBride against Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch, and Michael P. Block (filed on January 22, 1999); (ii) Robert Rosen v, Vision Twenty-One, Inc., Theodore N. Gillette and Richard T. Welch (filed on January 27, 1999); (iii) Charles Murray against Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P. Block (filed on January 29,1999); and (iv) Sam Cipriano, on behalf of himself and all others similarly situated v. Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P. Block (filed on February 22, 1999 ).

On April 20, 1999, pursuant to a motion and order, these complaints were consolidated into one case captioned: Tad McBride, Plaintiff, v. Vision Twenty-One, Inc., Theodore N. Gillette, Richard T. Welch and Michael P. Block (Case No. 99I38-CIV-T-25F), and one plaintiff's group was appointed lead plaintiff by judicial order on May 6, 1999. This uncertified consolidated class action seeks to hold the Company and one of its former officers, who was also a director, as well as two former officers liable for alleged federal securities law violations based upon alleged misstatements and omissions in analyst reports, trade journal articles, press releases and filings with the Securities and Exchange Commission.

Pursuant to judicial orders, the lead plaintiffs filed an amended consolidated complaint on August 14, 1999. On October 11, 1999, the lead plaintiffs and Michael P. Block executed a stipulation dismissing without prejudice the action against Mr. Block. The Defendants filed a motion to dismiss the amended consolidated complaint on October 15, 1999. The lead plaintiffs served answering papers on December 3, 1999. The Defendant's motion to dismiss was granted in part on August 18, 2000. A Motion for Class Certification was filed on January 26, 2001. The parties are continuing in class certification discovery to enable the Defendants to respond to the Plaintiffs' Motion for Class Certification. The Company believes that it has substantial defenses to this matter and intends to assert them vigorously.

On July 12, 2001, the Company was named as third-party defendant by Ocean County Eye Associates, P.C. ("OCEA"), Dr. Barinder Athwal, Dr. Omar Almallah and Dr. Anthony Interdonata as defendants/third-party plaintiffs in an action commenced by American Surgisite Management Services Organization ("ASMSO") in the Superior Court of New Jersey Law Division, Somerset County. ASMSO is seeking, among other things, a declaratory judgement to enforce the consent ("Consent") given by OCEA on February 26, 2001 regarding the Company's assignment to ASMSO of the Company's management contract ("Management Contract") with OCEA, due to OCEA's threat to rescind the Consent. OCEA is seeking, among other things, a declaratory judgement that the Consent is invalid, void and/or voidable on the grounds of duress. The defendents/third party plaintiffs also allege that the Company and ASMSO inadequately performed their obligations under the Management Contract in breach thereof. The parties are currently engaged in discovery. The Company believes that it has substantial defenses to this matter and intends to assert them vigorously.

On August 9, 2001, Information Leasing Corporation commenced an action against the Company and Vision Twenty-One Eye Surgery Centers, Inc. in the Circuit Court for Pinellas County, Florida seeking damages in the approximate amount of $372,000, for the alleged breach of an equipment lease agreement. The Company believes that it has substantial defenses to this matter and intends to assert them vigorously.

The Company is party to a few lawsuits alleging medical malpractice by providers which were previously associated with the Company through certain of its discontinued operations. Certain of these lawsuits have been referred to the Company's malpractice insurance carrier for defense and coverage; however, the Company is unable to determine whether its exposure, if any, would exceed its insurance coverage. The Company is also unable to determine its exposure, if any, for those lawsuits for which it may not have insurance coverage.

1. Exhibits - See Exhibits under attached hereto.
2. Reports on Form 8-K. The Company filed a report on Form 8-K, during the quarter ended September 30, 2001 with respect to the Fourth Amendment to the Credit Agreement and related loan documents.

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, in the city of Baltimore, State of Maryland on November, 12, 2001.