SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                    FORM 10-K

                                   (Mark One)

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 30, 2000

                                       OR

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

                         Commission File Number 0-20001

                               VISTA EYECARE, INC.
             (Exact name of Registrant as specified in its charter)

                                     Georgia
                         (State or other jurisdiction of
                         incorporation or organization)

                                   58-1910859
                      (I.R.S. Employer Identification No.)

                               296 Grayson Highway
                             Lawrenceville, Georgia
                    (Address of principal executive offices)

                                      30045
                                   (Zip Code)

       Registrant's telephone number, including area code: (770) 822-3600

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

                                      None

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

                     Common Stock, par value $.01 per share

                                (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /



<PAGE>

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

     The number of shares of Common Stock of the  registrant  outstanding  as of
March 15, 2001, was 21,169,103.  The aggregate  market value of shares of Common
Stock  held by  non-affiliates  of the  registrant  as of March  15,  2001,  was
approximately $2.1 million based on a closing price of $0.14 on the OTC Bulletin
Board on such date. For purposes of this computation, all executive officers and
directors of the  registrant  are deemed to be  affiliates.  Such  determination
should not be deemed to be an admission that such directors and officers are, in
fact, affiliates of the registrant.


                                     Page 2


<PAGE>

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     Vista is a retail optical company,  with 725 vision centers  throughout the
United  States  and  Mexico.  We  operate  499 of our  vision  centers  in  host
departments,  such as Wal-Mart  and Fred Meyer  locations,  and 226 of our free-
standing  vision centers in malls and strip  centers.  Our locations sell a wide
range of optical products, including eyeglasses, contact lenses, and sunglasses.
At  approximately  690 of our locations,  we offer the services of optometrists.
These  optometrists  are  typically  independent  of us and  operate  their  own
practices within our retail locations. To support our retail operations, we also
operate three manufacturing and distribution centers.

CHAPTER 11 CASES

     On April 5, 2000,  the Company and ten of its  subsidiaries  (collectively,
the "Debtors") filed voluntary  petitions with the United State Bankruptcy Court
for the Northern  District of Georgia for  reorganization  under Chapter 11 (the
"Chapter 11 Cases"). The Chapter 11 Cases have been consolidated for the purpose
of joint  administration  under Case No.  00-65214.  The Debtors  are  currently
operating their businesses as  debtors-in-possession  pursuant to the Bankruptcy
Code.  All  affiliated  entities of the  Company are  included in the Chapter 11
Cases,  except  only (a) three  subsidiaries  which are  licensed  managed  care
organizations and (b) foreign subsidiaries of the Company.

     In March 2001, the Debtors filed a plan of  reorganization  for the Chapter
11 Cases.  We expect  the  Company  will  emerge  from  Chapter 11 in the second
quarter of 2001. There can be no assurance that the reorganization  plan will be
confirmed by the Bankruptcy  Court,  or that such plan will be  consummated.  If
confirmed and consummated,  the proposed plan of  reorganization  will result in
the settlement of unsecured claims at less than 100% of face value. The existing
Common Stock will be cancelled,  resulting in existing shareholders receiving no
value for their interests. (See Item 7, "Proceedings Under Chapter 11", and Note
3 of Notes to Consolidated Financial Statements and Report of Independent Public
Accountants included herein.)

DEPENDENCE ON WAL-MART

     We operate  397 units in  domestic  Wal-Mart  stores,  of which 395 operate
pursuant  to  a  master  license  agreement  (See  Item  1,  "Leased  Department
Agreements"). These units generated approximately 68% of our revenue in 2000. We
therefore  depend on  Wal-Mart  and on our  agreement  with them for much of our
operations.

ACQUISITIONS AND DISPOSITIONS

     To reduce our dependence on Wal-Mart,  we acquired Midwest Vision,  Inc. in
1997 and  Frame-n-Lens  Optical,  Inc. and New West Eyeworks,  Inc. in 1998 (the
"Acquired Businesses"). At the time of the respective acquisitions,  these three
companies  collectively  generated  approximately  $140  million  in  annualized
revenues and operated more than 500 vision centers,  including approximately 330
freestanding locations.

                                     Page 3


<PAGE>

     Throughout  1999 and 2000, we were unable to  profitably  operate the free-
standing vision centers.  Sales  shortfalls in these vision centers  resulted in
pressure on earnings and liquidity,  which ultimately forced the Company to seek
protection under Chapter 11 in April 2000.

     In  February   2001,   we  entered  into  a  purchase   agreement  to  sell
substantially  all  of  the  freestanding  vision  centers  and  our  Fullerton,
California laboratory-distribution center. We expect the transaction to close in
April 2001.

DATE OF INFORMATION

     Unless  otherwise  expressly  stated,  all  information in this  "Business"
section of this Form 10-K is as of December 30, 2000.

VISION CENTER OPERATIONS

     Our vision  centers  typically  occupy between 1,000 and 1,500 square feet,
including  areas for merchandise  display,  customer  service,  and contact lens
fitting.  Each vision center maintains inventory of approximately 1,000 eyeglass
frames and 550 pairs of contact lenses,  along with sunglasses and other optical
accessories.  Our three optical laboratories deliver prescription eyewear to all
our vision  centers.  The vision  centers  located in Wal-Mart  typically have a
finishing  laboratory,  which  allows for the vision  center to provide one hour
service for most single vision prescription  lenses.  These vision centers carry
inventory of approximately 725 pairs of spectacle lenses.

MARKETING

     We are a value  provider  of  optical  goods and  stress  that theme in our
marketing.  We offer everyday low prices at our vision centers. Vista also has a
"satisfaction guaranteed" customer policy. We are constantly vigilant about ways
to lower our own costs so we may pass savings on to our customers.

MANAGED VISION CARE

     We expect that retail  optical sales through  managed  vision care programs
will  increase  over the next several  years as a percentage  of overall  retail
optical sales.  Under managed vision care programs,  participants  fulfill their
eyecare  and  eyewear  needs at  specific  locations  designated  by the program
sponsor.  We believe our network of vision centers combined with the convenience
of their  locations and our ability to offer low prices should enable us to make
competitive bids for managed care contracts.

TRADEMARKS

     We use  the  "Vista  Optical"  name to  identify  our  freestanding  vision
centers, as well as those vision centers operating in Fred Meyer locations.  Our
vision  centers in Wal-Mart  are  identified  as the "Vision  Center  located in
Wal-Mart." Vista has also licensed the right to use the "Guy Laroche"  trademark
for certain  optical goods.  Our agreement with Guy Laroche  expires on December
31, 2001, but can be renewed at our option.

     We have provisionally determined,  effective upon our anticipated emergence
from Chapter 11, to change our name to "National  Vision, Inc.".  As part of our
agreement to sell the freestanding  vision centers, we have agreed to phase out,
over 18 months, our use of the "Vista" name.


                                     Page 4


<PAGE>

EMPLOYEES

     We employ 2,860  associates on a full-time basis and 1,200  associates on a
part-time  basis.  We have  3,450  associates  engaged in retail  sales,  360 in
laboratory   and   distribution   operations,   and   250  in   management   and
administration. Apart from our retail employees in Mexico, none of our employees
are  governed  by any  collective  bargaining  agreements.  We believe  that our
employment relations are generally good.

OPTOMETRISTS

     Optometrists are important to the success of our vision centers.  We strive
to have an  optometrist  on at least a part time basis at most of our locations.
These  optometrists are typically  independent from Vista and lease a portion of
our locations for an eye examination facility. We typically charge rent to these
optometrists,  in exchange for the premises and the equipment  which we provide.
Our agreement with Wal-Mart  requires us to have an optometrist on duty at least
48 hours each week. Our relationships with optometrists are subject to extensive
regulation. (See Item 1, "Government Regulation".)

MANUFACTURING AND DISTRIBUTION

     Vista operates three manufacturing and distribution facilities which supply
substantially all requirements of our vision centers. The facilities are located
in   Lawrenceville,   Georgia   (this   facility   also   includes  the  central
administrative  offices of Vista);  Fullerton,  California  (this  facility also
includes administrative  offices); and St. Cloud, Minnesota.  Each vision center
located in Wal-Mart stores (with the exception of two vision centers acquired in
1998)  has  its  own  finishing   laboratory,   which  manufactures  lenses  for
approximately half of all customers purchasing spectacle lenses.

     Our distribution centers provide lens blanks,  frames,  contact lenses, and
sunglasses to our vision centers.  We use an overnight  delivery service to ship
completed orders and replenishment items to the vision centers. The distribution
centers and the manufacturing  facilities are interfaced with Vista's management
information system.

MANAGEMENT INFORMATION SYSTEM

     In 1999, Vista completed the development of a new point of sale system.  We
began installing the system in our vision centers in the fall of 1999 and expect
to complete the installation in all of our units by the second half of 2001. The
system is working  substantially as planned.  The system was designed to upgrade
data  processing,  broaden  capabilities  at the retail  level,  and improve the
processing of managed care transactions.

LEASED DEPARTMENT AGREEMENTS

     We  have   agreements  in  place  which  govern  our   operations  in  host
environments,  such as Wal-Mart.  Typically,  each agreement is for a base term,
followed by an option to renew.  The agreements  provide for payments of minimum
and percentage rent, and also contain customary provisions for leased department
operations. The table below sets forth key data about each of these agreements:

                                     Page 5


<PAGE>


<TABLE>
<CAPTION>

                     No. of Units as      Length of    Length of      No. of Options
Vision Centers       of December 30,      Base Term   Option Term     Exercisable in
  Located In             2000            (in years)   (in years)       Fiscal 2001
------------------------------------------------------------------------------------
<S>                      <C>                <C>           <C>             <C>
Wal-Mart(1)              395                  9           3               50


-----------------------------------------------------------------------------------

Fred Meyer                56                  5           5               __


-----------------------------------------------------------------------------------
Wal-Mart Mexico           27                  5           2               __


-----------------------------------------------------------------------------------

Military Bases            19                2 or 5        __              __


-----------------------------------------------------------------------------------
</TABLE>

(1)  The Company also  operates two  additional  Wal-Mart  stores which  operate
     under individual leases.

Other Terms
-----------

     Our agreement  with Wal-Mart gives us the right to open at least 400 vision
centers, including those already open. Our agreement with Wal-Mart also provides
that,  if  Wal-Mart  converts  its own store to a  "supercenter"  (a store which
contains a grocery  department  in addition to the  traditional  Wal-Mart  store
offering) and relocates our vision center as part of the conversion, the term of
our lease begins again.  We believe that Wal-Mart may in the future convert many
of its stores and  thereby  cause  many of our  leases to start  again.  We have
received no  assurances  from  Wal-Mart as to how many of their  locations  will
ultimately be converted.

     Our agreement with Wal-Mart  Mexico  provides that each party will not deal
with other parties to operate leased department  vision centers in Mexico.  This
agreement  also permits each party to terminate the lease for each vision center
which fails to meet minimum sales requirements specified in the agreement.

Options to Renew
----------------

     Wal-Mart  Vision  Centers

     We exercised our option to renew the leases for 44 Wal-Mart  vision centers
in 2000. The base term for 50 vision  centers  expires in 2001, and we will need
to determine which leases to extend.  We expect to renew the leases for the vast
majority  of these  vision  centers.  These  decisions  will be based on various
factors,  including sales levels,  anticipated future  profitability,  increased
rental fees in the option period, and market share.


                                     Page 6


<PAGE>

     Other Vision Centers

     Our agreement  with Fred Meyer  obligates us to exercise our renewal option
as to all or none of these  locations  with the exception of five stores,  which
are covered by a separate  agreement.  This option  must be  exercised  in 2003.
Under our  agreement  with  Wal-Mart  Mexico,  we have two  options for two year
renewals,  and one option for an additional  one year  renewal,  for each vision
center.

No  Assurances of  Expansion
----------------------------

     We have no  assurances  or  guarantees  that we will be able to expand  our
operations in any of our host  environments.  However,  we periodically  discuss
such opportunities with existing and new potential host companies.

GOVERNMENT REGULATION

     Our business is heavily regulated by federal, state, and local law. We must
comply with federal laws such as the Social  Security Act (which  applies to our
participation in Medicare  programs),  the Health  Insurance  Portability Act of
1996 (which governs our  participation  in managed care programs),  and the Food
and Drug  Administration  Act (which  regulates  medical devices such as contact
lenses).  In  addition,  all states have passed laws which  govern or affect our
arrangements  with the  optometrists  who practice in our vision  centers.  Some
states, such as California, Texas, North Carolina, and Kansas, have particularly
extensive and burdensome  requirements which affect the way we do business. Many
of these states also have  adopted laws which mirror the federal laws  described
above.   Local  ordinances  (such  as  zoning   requirements)  can  also  impose
significant burdens and costs of compliance.  Frequently, our competitors sit on
state and local boards. Our risks and costs of compliance are often increased as
a result.

     We believe that we  substantially  comply with material  regulations  which
apply to our business.

COMPETITION

     The retail  eyecare  industry is  extremely  competitive.  We compete  with
national  companies such as Lenscrafters and Cole; we also compete with numerous
regional  and local  firms.  In addition,  optometrists,  ophthalmologists,  and
opticians provide many of the same goods and services we provide.  The level and
intensity of  competition  can vary  dramatically  depending  on the  particular
market.  We believe that we have numerous  competitive  advantages,  such as our
everyday low pricing, product selection, and quality and consistency of service.

     We also  compete  for  managed  care  business.  Our  competition  for this
business  is  principally  the  larger  national  and  regional  optical  firms.
Competition for this business is driven by size of provider network, quality and
consistency of service,  and by pricing of vision care services.  We have one of
the largest  networks  in the  country and believe  that the size of the network
gives us a competitive advantage.

     Several of our competitors have significantly  greater financial  resources
than we do. As a result,  they may be able to engage in extensive  and prolonged
price promotions which may adversely affect our business.  They may also be able
spend more than we do for advertising.


                                     Page 7

<PAGE>

MEXICO OPERATIONS

     We operate 27 vision  centers in Mexico  under a master  license  agreement
with  Wal-Mart.  Our  operations in Mexico face unique  risks,  such as currency
devaluations,  inflation,  difficulties in cross-cultural marketing, and similar
factors.

ITEM  2.   PROPERTIES

     Our 725 vision  centers in operation as of December 30, 2000 are located as
follows:

    Location                  Total         Location                  Total
    --------                  -----         --------                  -----

 Alabama                         9       Nevada                          7
 Alaska                         16       New Hampshire                   4
 Arizona                        38       New Jersey                     13
 California                    196       New Mexico                     10
 Colorado                       24       New York                       26
 Connecticut                    10       North Carolina                 56
 Florida                         5       North Dakota                   10
 Georgia                        37       Oregon                         38
 Hawaii                          4       Pennsylvania                   18
 Idaho                          11       South Carolina                 11
 Iowa                            8       South Dakota                    1
 Kansas                         10       Tennessee                       2
 Kentucky                        1       Texas                           7
 Louisiana                       2       Virginia                       23
 Maine                           1       Washington                     43
 Maryland                        3       West Virginia                   7
 Massachusetts                   5       Wisconsin                       3
 Minnesota                      32       Wyoming                         3
 Montana                         4
                                         Mexico                         27

     Our  headquarters in  Lawrenceville,  Georgia is located in a 66,000 square
foot building  which  includes a distribution  center and lens  laboratory.  The
building is subleased  from  Wal-Mart  through  2001. We have an option to renew
this lease for approximately seven years.

     The Company has regional  facilities  located in St.  Cloud,  Minnesota and
Fullerton, California. The 20,000 square foot St. Cloud facility is subject to a
lease that expires in October 2007. The 45,000 square foot Fullerton facility is
subject to a lease that expires in August  2006.  The Company also has an option
to extend the Fullerton lease for five years.  Both  facilities  contain optical
laboratories.

ITEM 3.   LEGAL PROCEEDINGS

     On April 5, 2000, the Company and ten of its  subsidiaries  filed voluntary
petitions with the United States  Bankruptcy Court for the Northern  District of
Georgia for reorganization  under Chapter 11 of the Bankruptcy Code. The Debtors
are currently operating their businesses as  debtors-in-possession.  The Chapter
11 Cases have been  consolidated for the purpose of joint  administration  under
case number 00-65214. All affiliated entities of the Company are included in the
Chapter 11 cases,  except only (a) three subsidiaries which are licensed managed
care organizations and (b) foreign subsidiaries of the Company. Page 8


<PAGE>


     In March 2001, the Debtors filed a plan of  reorganization  for the Chapter
11 Cases.  We expect  the  Company  will  emerge  from  Chapter 11 in the second
quarter of 2001. There can be no assurance that the reorganization  plan will be
confirmed by the Bankruptcy  Court,  or that such plan will be  consummated.  If
confirmed and consummated,  the proposed plan of  reorganization  will result in
the settlement of unsecured claims at less than 100% of face value. The existing
Common Stock will be cancelled,  resulting in existing shareholders receiving no
value for their interests. (See Item 7, "Proceedings Under Chapter 11", and Note
3 of Notes to Consolidated Financial Statements and Report of Independent Public
Accountants included herein.)

     On October 6, 1999,  former store  managers of  Frame-n-Lens  filed a class
action in the Orange County  Superior Court in California  (Kremer and Riddle v.
Vista Eyecare,  Inc.), alleging that the Company failed to pay overtime wages to
present and former  store  managers.  The Company is  vigorously  defending  the
lawsuit.  The Company has also asserted a right of  indemnification  pursuant to
the share purchase agreement for the acquisition of Frame-n-Lens.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters  were  submitted to a vote of security  holders  during the last
quarter of fiscal 2000.



                                     Page 9


<PAGE>

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS

     The Company's  Common Stock was traded on the NASDAQ National Market System
under the symbol "NVAL" from May 1992 until January 4, 1999, when the symbol was
changed to "VSTA". From October 12, 1999 through April 4, 2000, our Common Stock
was  traded on the NASDAQ  SmallCap  Market.  On April 5,  2000,  trading of our
Common Stock was halted after we issued a press release announcing the filing of
the Chapter 11 Cases.  As of May 17, 2000, our common stock began trading on the
OTC Bulletin Board.

     The following  table sets forth for the periods  indicated the high and low
prices of the  Company's  Common  Stock in the various  market  systems as noted
above.

                    Quarter Ended             High                Low
                  ------------------         ------              ------

Fiscal 1999       April 3, 1999              $6.250              $4.500
                  July 3, 1999               $6.250              $3.625
                  October 2, 1999            $3.938              $2.250
                  January 1, 2000            $2.750              $0.625

Fiscal 2000       April 1, 2000              $2.500              $0.844
                  July 1, 2000               $0.875              $0.203
                  September 30, 2000         $0.359              $0.125
                  December 30, 2000          $0.219              $0.031


     As of December 30, 2000, there were  approximately 500 holders of record of
the Company's Common Stock.

     In March  2001,  the  Company  filed  its plan of  reorganization  with the
Bankruptcy  Court.  The  plan  provides  for  the  conversion  of the  Company's
Liabilities Subject to Compromise into new secured notes and common stock. Under
the proposed plan, the existing Common Stock  outstanding would be cancelled and
would result in existing  shareholders  receiving no value for their  interests.
The Company  believes  that the value of the Common Stock is highly  speculative
since it is probable that it will be cancelled, and therefore, will be worthless
if the expected plan of reorganization is consummated.

     Under the proposed plan of  Reorganization,  it is the Company's  intent to
use cash resources only for its operations,  expenses  related to its Chapter 11
proceedings  and,  ultimately,  for payment of interest expense and repayment of
principal on the Company's new secured notes. Future dividend policy will depend
upon the earnings and financial condition of the Company, the Company's need for
funds and other factors.


ITEM 6.   SELECTED FINANCIAL DATA

     The following  selected  financial  data of the Company with respect to the
consolidated financial statements for the years ended December 30, 2000, January
1, 2000,  January 2, 1999,  January 3, 1998,  and December 28, 1996,  is derived
from the Company's  Consolidated  Financial  Statements.  The selected financial
data set  forth  below  should  be read in  conjunction  with  the  Consolidated
Financial  Statements  and Notes  thereto  included  elsewhere  in this  Report.
Amounts presented are in thousands, except per share data.


                                     Page 10

<PAGE>
                               Vista Eyecare, Inc.
                             DEBTORS-IN-POSSESSION
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                      2000          1999          1998         1997         1996
                                                                   ---------     ---------     ---------    ---------    ---------
 <S>                                                               <C>           <C>          <C>          <C>           <C>
                                                                     (1)(4)        (1)(3)         (1)         (1)(2)         (1)
 Net sales                                                         $ 307,694     $ 329,055    $  245,331   $  186,354    $ 160,376
 Cost of goods sold                                                  143,458       147,768       112,929       86,363       76,692
                                                                   ---------     ---------     ---------    ---------    ---------
 Gross profit                                                        164,236       181,287       132,402       99,991       83,684
 Gross profit percentage                                                53.4%         55.1%         54.0%        53.7%        52.2%

 Selling, general, & administrative expense                          166,364       177,162       121,413       89,156       76,920
 Impairment of long-lived assets                                       2,684         1,952          --           --           --
 Restructuring expense                                                 1,601          --            --           --           --
                                                                   ---------     ---------     ---------    ---------    ---------
 Operating income/(loss)                                              (6,413)        2,173        10,989       10,835        6,764
 Interest expense                                                      7,723        19,329         5,538        1,554        2,084
                                                                   ---------     ---------     ---------    ---------    ---------
 Earnings/(loss) before reorganization items and taxes               (14,136)      (17,156)        5,451        9,281        4,680
 Reorganization items (See Note 5)                                   121,539          --            --           --           --
                                                                   ---------     ---------     ---------    ---------    ---------
 Earnings/(loss) before taxes, extraordinary item and cumulative
    effect of a change in accounting principle                      (135,675)      (17,156)        5,451        9,281        4,680
 Income tax expense (See Note 14)                                       --            --           2,037        3,708        1,200
                                                                   ---------     ---------     ---------    ---------    ---------
 Earnings/(loss) before extraordinary loss and cumulative
     effect of a change in accounting principle                     (135,675)      (17,156)        3,414        5,573        3,480
 Extraordinary loss, net (See Note 11)                                  (827)         (406)         --           --           --
 Cumulative effect, net (See Note 2)                                  (3,378)         --            --           --           --
                                                                   ---------     ---------     ---------    ---------    ---------
 Net earnings/(loss)                                               $(139,880)    $ (17,562)    $   3,414    $   5,573     $  3,480
                                                                   =========     =========     =========    =========    =========
 Basic earnings/(loss) per share:
    Earnings/(loss) before extraordinary item
      and cumulative effect                                            (6.41)        (0.81)         0.16         0.27         0.17
    Loss from extraordinary item                                       (0.04)        (0.02)         --           --           --
    Loss from cumulative effect                                        (0.16)         --            --           --           --
                                                                   ---------     ---------     ---------    ---------    ---------
 Net earnings/(loss) per basic share                               $   (6.61)    $   (0.83)    $    0.16    $    0.27    $    0.17
                                                                   =========     =========     =========    =========    =========
 Diluted earnings/(loss) per share:
    Earnings/(loss) before extraordinary item and
      cumulative effect                                                (6.41)        (0.81)         0.16         0.27         0.17
    Loss from extraordinary item                                       (0.04)        (0.02)         --           --           --
    Loss from cumulative effect                                        (0.16)         --            --           --           --
                                                                   ---------     ---------     ---------    ---------    ---------
 Net earnings/(loss) per diluted share                             $   (6.61)    $   (0.83)   $     0.16    $    0.27     $   0.17
                                                                   =========     =========     =========    =========    =========
STATISTICAL DATA (UNAUDITED):
 (In thousands except vision center data)
Domestic vision centers open at end of period:
    Leased department vision centers                                     472          577           562          364          320
    Freestanding vision centers                                          226           322           331           50          --
 Average weekly consolidated sales
    per leased department vision center (5)                        $   8,700     $   8,200      $  9,000     $  9,400     $  9,300
Average weekly consolidated sales
    per freestanding vision center (5)                             $   4,500     $   4,700      $  4,900     $    --      $    --

 Capital expenditures                                              $   5,379     $  12,704      $  9,183     $  8,049     $  2,713
 Depreciation and amortization                                        17,526        18,602        14,177       11,035       10,058
 EBITDA (6)                                                           11,113        20,775        25,166       21,870       16,822
    EBITDA margin percentage                                             3.6%          6.3%         10.3%        11.7%        10.5%
 EBITDA prior to significant provisions (6)                           17,009        25,427        25,166        21,870       16,822
    EBITDA margin percentage
     prior to significant provisions                                     5.5%          7.7%         10.3%        11.7%        10.5%

 BALANCE SHEET DATA:
 Working capital                                                   $  17,866     $ (11,714)     $  4,208     $ 12,171     $ 13,502
 Total assets                                                         90,888       220,219       229,097       83,250       74,564
 Current and long-term debt
    obligations (7)                                                  183,735       151,902       139,608       24,973       26,500
 Shareholders' (deficit) equity                                     (113,323)       26,557        43,927       35,598       29,906
</TABLE>


                                    Page 11

<PAGE>

PRO FORMA RESULTS:

     As part of the proposed Plan of  Reorganization  filed with the  Bankruptcy
Court in March 2001,  the Company will dispose of all  freestanding  operations,
including  the  Fullerton,  California   laboratory/distribution   facility.  In
February 2001, the Company signed a purchase agreement to sell the assets of its
freestanding  locations  and  the  Fullerton,  California  laboratory  for  $8.5
million. The sale is expected to close in April 2001.

     Pro forma unaudited financial results of operations are presented below, as
if the freestanding  operations were disposed of at the beginning of the periods
presented.  The pro forma results  presented  include  certain  adjustments  and
estimates by management.  The pro forma information does not necessarily reflect
actual  results that would have  occurred nor is it  necessarily  indicative  of
future results of operations of the Company without the freestanding operations.
(See Item 7, "Management's Discussion and Analysis".)

<TABLE>
<CAPTION>

                                                   2000            1999             1998            1997            1996
                                              -------------   -------------    ------------     ----------      ----------
<S>                                            <C>            <C>              <C>               <C>            <C>
Net sales                                      $  246,915     $  247,875       $  209,220        $  182,813     $  160,376
Gross profit                                   $  133,481     $  134,057       $  112,509        $   98,174     $   83,684

Operating income                               $   13,493     $   12,230       $   11,424        $   10,888     $    6,764
EBITDA prior to significant provisions (6)     $   25,833     $   26,021       $   23,751        $   21,797     $   16,822
</TABLE>


(1)  Financial  information  for  all  years  presented  includes   results   of
     international  operations  for the 12 months ended November 30. (See Note 2
     to Consolidated Financial Statements.)

(2)  Effective January 1, 1995, the Company changed its year end to a 52/53 week
     retail calendar. (See Note 2 to Consolidated Financial Statements.)  Fiscal
     1997  consisted of 53 weeks ended January 3, 1998.  Sales for the 53rd week
     approximated $3.0 million in fiscal 1997.

(3)  In 1999, the Company recorded a $2.7 million provision for the write-off of
     certain receivables and an impairment of $1.9 million in connection with 36
     underperforming vision centers.

(4)  In 2000,  the Company  recorded an  impairment  provision for inventory and
     receivables  at  the  freestanding  locations  totaling  $1.1  million  and
     $518,000, respectively. These items were included in Cost of goods sold and
     SG&A expense, as appropriate.

(5)  Calculated  from  sales from each  month  during the period  divided by the
     number of store weeks of sales during the period, excluding stores not open
     a full month.

(6)  EBITDA  is  calculated  as  operating   income  before   interest,   taxes,
     depreciation and amortization.  EBITDA is presented  because it is a widely
     accepted  financial  indicator  of a company's  ability to service or incur
     indebtedness.  However, EBITDA does not represent cash flow from operations
     as defined by generally accepted  accounting  principles  ("GAAP"),  is not
     necessarily  indicative  of cash  available  to fund all cash  flow  needs,
     should not be considered an  alternative to net income or to cash flow from
     operations  (as  determined  in  accordance  with  GAAP) and  should not be
     considered an indication of the  Company's  operating  performance  or as a
     measure of  liquidity.  EBITDA is not  necessarily  comparable to similarly
     titled measures for other companies. EBITDA prior to significant provisions
     is  calculated  as EBITDA prior to  Restructuring  Expense,  Reorganization
     Items,  Extraordinary Items,  Cumulative Effect and provisions described in
     Footnote 3 and 4 above.

(7)  Current  and  long-term  debt  obligations  include  the  Revolving  Credit
     Facility and term loan,  Senior  Notes,  Redeemable  Common Stock and other
     long-term debt and capital lease  obligations.  In 2000, this includes $171
     million of Liabilities  Subject to Compromise  which may be settled at less
     than face value.


                                        Page 12

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

Proceedings Under Chapter 11 of the Bankruptcy Code

     On April 5, 2000, the Company and ten of its  subsidiaries  filed voluntary
petitions with the  Bankruptcy  Court for  reorganization  under Chapter 11. The
Debtors  are  currently  operating  their  businesses  as  debtors-in-possession
pursuant to the  Bankruptcy  Code.  All  affiliated  entities of the Company are
included in the Chapter 11 Cases,  except only (a) three  subsidiaries which are
licensed managed care organizations and (b) foreign subsidiaries of the Company.

     At a hearing held on April 5, 2000,  the  Bankruptcy  Court entered  orders
granting  authority to the  Debtors,  among other  things,  to maintain our cash
management  system,  to  pay  pre-petition  and  post-petition  employee  wages,
salaries, benefits and other employee obligations, and to honor customer service
programs, including warranties,  returns  and gift certificates.  The Bankruptcy
Court also  ordered  that the Company  could  enter into a  debtor-in-possession
credit facility.  (See Note 3 of Notes to Consolidated  Financial Statements and
the Report of Independent Public Accountants included herein.)

     In March 2001, the Debtors filed a plan of  reorganization  for the Chapter
11 Cases.  We expect the  Company  will  emerge  from  bankruptcy  in the second
quarter of 2001. There can be no assurance that the reorganization  plan will be
confirmed by the Bankruptcy  Court,  or that such plan will be  consummated.  If
confirmed and consummated,  the proposed plan of  reorganization  will result in
the  settlement  of  unsecured  claims at less  than 100% of face  value and the
common  stock of the Company  will have no value.  (See Item 7,  "Liquidity  and
Capital Resources" and Note 3 of Notes to Consolidated  Financial Statements and
Report of Independent Public Accountants included herein.)


                                     Page 13

<PAGE>

Consolidated Financial Statements

     The Company's  Consolidated  Financial  Statements  have been prepared on a
going concern basis of accounting and do not reflect any adjustments  that might
result if the Company is unable to continue as a going  concern.  The  Company's
recent losses and negative cash flows from operations, and the Chapter 11 Cases,
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern. As discussed above,  management has submitted a plan for reorganization
to the  Bankruptcy  Court.  The  ability of the  Company to  continue as a going
concern and the  appropriateness  of using the going  concern basis is dependent
upon,  among  other  things,  (i) the  Company's  ability  to  comply  with  the
debtor-in-possession  financing agreements ("DIP" Facility),  (ii) the Company's
ability  to  obtain  financing  upon  expiration  of  the  DIP  Facility,  (iii)
confirmation  of a plan of  reorganization  under the Bankruptcy  Code, (iv) the
Company's ability to achieve profitable operations after such confirmation,  and
(v) the Company's  ability to generate  sufficient  cash from operations to meet
its obligations.

     As  a  result  of  the  filing  of  the   Chapter  11  Cases  and   related
circumstances,  realization of assets and  liquidation of liabilities is subject
to substantial  doubt. While under the protection of Chapter 11, the Debtors may
sell or otherwise dispose of assets,  and liquidate or settle  liabilities,  for
amounts other than those  reflected in the  Consolidated  Financial  Statements.
Further,  the confirmation of a plan or plans of reorganization could materially
change  the  amounts  reported  in  the  accompanying   Consolidated   Financial
Statements. The Consolidated Financial Statements do not include any adjustments
relating to recoverability of the value of recorded asset amounts or the amounts
and  classification of liabilities that might be necessary as a consequence of a
plan or reorganization.

Results of Operations

     The  Company's  results  of  operations  in any  period  are  significantly
affected by the number and mix of vision  centers  opened and  operating  during
such period.  As of December 30, 2000,  the Company  operated 725 vision centers
versus 926 vision  centers as of January 1, 2000.  In the third quarter of 2000,
the Company  terminated its 72 leases  governing all the Company's units located
in Sam's Club locations. (See Note 5 to Consolidated Financial  Statements).  In
addition, the Company terminated its ten leases in Meijer Thrifty Acre locations
in October 2000. (See Note 5 to Consolidated Financial Statements.)  The Company
also  rejected,  or  otherwise  terminated  the  leases  for,  approximately  97
freestanding vision centers.

     As part of our  proposed  plan of  reorganization,  we will  dispose of all
free-standing     operations,     including    the     Fullerton,     California
laboratory-distribution  facility.  In  February  2001,  the  Company  signed  a
purchase  agreement  to sell the assets of its  freestanding  locations  and the
Fullerton, California laboratory for $8.5 million. The sale, which is subject to
customary terms and conditions,  is expected to close in April 2001. (See Note 6
of Consolidated Financial Statements.)

     Pro forma unaudited financial results of operations are presented below, as
if the freestanding  operations were disposed of at the beginning of the periods
presented.  The pro forma results  presented  include  certain  adjustments  and
estimates by management.  The pro forma information does not necessarily reflect
actual  results that would have  occurred nor is it  necessarily  indicative  of
future results of operations of the Company without the freestanding operations.

                                           2000           1999           1998
                                        ---------     -----------     ----------
Net Sales                              $  246,915     $  247,875      $  209,220
Gross Profit                           $  133,481     $  134,057      $  112,509

Operating Income                       $   13,493     $   12,230      $   11,424
EBITDA before significant provisions   $   25,833     $   26,021      $   23,751


                                     Page 14


<PAGE>

     EBITDA prior to  significant  provisions  is  calculated as EBITDA prior to
Restructuring  Expense,  Reorganization Items,  Extraordinary Items,  Cumulative
Effect and the 1999 provision for receivables.

YEAR ENDED DECEMBER 30, 2000 COMPARED TO YEAR ENDED JANUARY 1, 2000

     NET SALES. The Company recorded net sales of $307.7 million in fiscal 2000,
a decrease of 6.5% over sales of $329.1 million in fiscal 1999.  Sales decreased
due to the following reasons:

o    The Company closed 91 freestanding  stores in April 2000. Theses stores had
     sales of $3.1 million in 2000 versus $13.0  million in 1999, a reduction of
     $9.9 million.

o    The remaining freestanding stores generated negative comparable store sales
     of 15.5% resulting in a decrease of $10.6 million in sales.

o    During 2000, the Company closed 117 Sam's Club locations,  72 of which were
     terminated prior to the end of their lease term. These closings resulted in
     a sales decrease of $12.2 million in 2000.

     These decreases were partially offset by:

o    Favorable  comparable store sales at the Wal-Mart and Military divisions of
     2.0%  and  6.5%,  respectively.  This  resulted  in a  $4.7  million  sales
     increase.

o    New store openings at the Wal-Mart and Military divisions resulted in sales
     increases of $6.9 million over the prior year.

     In addition,  the Company's adoption of SAB 101 deferred the recognition of
approximately  $300,000 of net sales in fiscal 2000. (See Note 2 of Consolidated
Financial Statements.)

     GROSS PROFIT.  In 2000, gross  profit  decreased  to  $164.2 million versus
$181.3 million in 1999.  This decrease was due to the following:

o    A reduction  in sales caused by the closure of all of the  Company's  Sam's
     Club  locations,  as  well  as the  operation  of  approximately  97  fewer
     freestanding locations  and the  negative comparable store sales registered
     by the remaining freestanding vision centers acquired by the Company ($11.8
     million).

o    A charge of approximately $1.1 million to adjust inventory at the Company's
     freestanding  stores to net realizable  value (See  "Reorganization  Items,
     Restructuring Expenses and Impairment of Long-lived Assets").

o    A  reduction  in vendor  promotional  monies  and  independent  optometrist
     revenue from the amounts received a year ago.

     Gross profit as a percentage  of sales  decreased  from 55.1% a year ago to
53.4% in the current period.  In addition to the reasons  described  above,  the
decrease can also be attributed to the following:

o    A loss of  efficiency in the Fullerton Lab caused by the decrease in volume
     as a result of declining sales levels in the Company's  freestanding vision
     centers as well as lower volume resulting from closed stores.

o    A sales shift from  eyeglasses  to contact  lenses  caused by contact  lens
     promotions in the  freestanding  vision  centers.  Eyeglasses have a higher
     margin than do contact lenses. Additionally, contact lens margins decreased
     due to competitive price pressure.


                                     Page 15


<PAGE>

o    A  decline  in  average  sales  per  store  recorded  by  the  freestanding
     operations caused rent as a percentage of net sales to increase and thereby
     reduced margin as a percent of net sales.

     SELLING,  GENERAL,  AND  ADMINISTRATIVE  EXPENSE.  This category of expense
includes  both retail  operating  expense and  corporate  office  administrative
costs.  SG&A expense  decreased from $177.2 million in 1999 to $166.4 million in
2000. The decrease was due primarily to the following:

o    Payroll  savings  of $6.7  million  from  the  closure  of the  Sam's  Club
     locations and approximately 97 freestanding locations.

o    Home  office  savings  of  $2.2  million  related  to  the  elimination  of
     amortization  of  goodwill  from the  Frame-n-Lens,  New  West and  Midwest
     acquisitions,  which was  impaired  in the  third  quarter  of 2000,  and a
     reduction in payroll, recruiting and relocation expenses.

     OPERATING   INCOME/(LOSS).   Operating   results   for   2000,   prior   to
reorganization  and  restructuring  items and  impairment of long-lived  assets,
decreased to an operating loss of $2.1 million versus  operating  income of $4.1
million in 1999.

     INTEREST EXPENSE.  Interest expense decreased from $19.3 million in 1999 to
$7.7  million in 2000.  Because of the filing of the  Chapter 11 Cases,  we have
stopped  accruing for interest on unsecured debt until the Company  emerges from
Chapter 11 of the Bankruptcy  Code, or it becomes probable that the Company will
pay these amounts as part of a plan of  reorganization.  (See "Accounting During
Reorganization  Proceedings".)  Contractual interest  expense for 2000 was $20.7
million.  In addition,  interest  expense  excludes  $144,000 of interest income
which has been reflected as a reorganization item.

     BENEFIT FOR INCOME TAXES.  We recorded a pre-tax  operating  loss of $135.7
million versus a loss of $17.2 million in the prior period. The resulting income
tax benefit was  approximately  $1.7  million.  We have  established a valuation
allowance equal to the amount of the tax benefit.

     EXTRAORDINARY  LOSS. Results also include an extraordinary loss of $827,000
in 2000 associated with the write-off of the capitalized  costs of the Company's
previous Foothill Credit Facility.

     CUMULATIVE  EFFECT OF A CHANGE IN ACCOUNTING  PRINCIPLE.  In December 1999,
the SEC issued  Staff  Accounting  Bulletin  No. 101,  "Revenue  Recognition  in
Financial  Statements." SAB 101 summarizes the SEC's view in applying  generally
accepted accounting  principles to selected revenue recognition issues. Prior to
the adoption of SAB 101, the Company  recognized  revenues and the related costs
from retail sales when at least 50% of the payment was received.  In response to
SAB 101,  the Company is  required to  recognize  revenue  upon  delivery of the
product. The cumulative effect of this change in accounting principle was a $3.4
million reduction in net earnings of 2000.

     NET INCOME. The Company recorded a net loss of $139.9 million, or a loss of
$6.61 per basic and diluted share.


                                          Page 16

<PAGE>

ACCOUNTING DURING REORGANIZATION PROCEEDINGS

     Entering  the  reorganization  proceedings  does not  affect or change  the
application of generally accepted accounting  principles followed by the Company
in the preparation of its Consolidated Financial Statements. During the pendency
of the  Chapter 11 Cases,  our  consolidated  financial  statements  distinguish
transactions  and events that are directly  associated  with the  reorganization
from the ongoing  operations  of the  business in  accordance  with the American
Institute  of  Certified  Public  Accountants'  Statement  of  Position  90-7  -
"Financial  Reporting by Entities in  Reorganization  under the Bankruptcy Code"
("SOP 90-7"). The Company's  consolidated  balance sheets segregate  Liabilities
Subject to Compromise from  liabilities not subject to compromise.  In addition,
we have  stopped  accruing  for  interest  on  unsecured  debt until the Company
emerges from protection  under Chapter 11 of the Bankruptcy  Code, or it becomes
probable that we will pay these amounts as part of a plan of reorganization.

Liabilities Subject to Compromise

     Liabilities  Subject to Compromise refers to liabilities  incurred prior to
the  commencement  of the Chapter 11 Cases,  including  those  considered by the
Bankruptcy  Court to be  pre-petition  claims,  such as claims  arising out of a
rejection of a lease for real property.  These liabilities  consist primarily of
amounts  outstanding  under  long-term debt and also include  accounts  payable,
accrued interest, accrued restructuring costs  and other accrued expenses. These
amounts  represent  the  Company's  estimate of known or potential  claims to be
resolved  in the  Chapter  11  Cases.  Such  claims  remain  subject  to  future
adjustments.  Adjustments may result from (1)  negotiations;  (2) actions of the
Bankruptcy Court; (3) further  development with respect to disputed claims;  (4)
future rejection of additional  executory contracts or unexpired leases; (5) the
determination as to the value of any collateral  securing claims;  (6) proofs of
claim;  or (7)  other  events.  Payment  terms  for  these  amounts,  which  are
considered long-term liabilities at this time, will be established in connection
with the Chapter 11 Cases.

     The principal  categories of claims  classified as  Liabilities  Subject to
Compromise in the Chapter 11 Cases are identified below: (amounts in thousands)

                                                              December 30, 2000
                                                              -----------------

Accounts payable                                                       $ 25,856
Accrued expenses                                                          2,717
Provision for rejected contracts                                          3,142
Senior notes, net of discount including $7,480 accrued interest         131,266
Other long-term debt and capital lease obligations                        7,843
                                                                       --------
                                                                       $170,824
                                                                       ========

     The  Company  has  received  approval  from  the  Bankruptcy  Court  to pay
pre-petition  and  post-petition  employee wages,  salaries,  benefits and other
employee obligations,  to pay vendors and other providers in the ordinary course
for goods and services received from April 5, 2000 and to honor customer service
programs,  including warranties and returns. These items are recorded as accrued
expenses not subject to compromise.


                                    Page 17

<PAGE>

REORGANIZATION  ITEMS,  RESTRUCTURING  EXPENSES  AND  IMPAIRMENT  OF  LONG-LIVED
ASSETS.

General

     In the last  quarter  of 1999  and in  fiscal  2000,  we  recorded  charges
relating to store closings,  to impairment of long-lived  assets and to expenses
incurred  in the  Chapter 11 Cases.  Generally  accepted  accounting  principles
require different presentations depending on whether we incurred the cost before
or after the filing of the Chapter 11 Cases.

Impairment of Fixed Assets and Restructuring Expenses

     We have recorded  charges for impairment of fixed assets and  restructuring
expenses in  connection  with stores  closed before the filing of the Chapter 11
Cases.  Emerging  Issues  Task Force Issue  94-03,  "Liability  Recognition  for
Certain Employee  Termination  Benefits to Exit an Activity  (Including  Certain
Costs Incurred in a  Restructuring)",  requires that we present these charges as
components of operating income.

     In connection  with stores closed after the filing of the Chapter 11 Cases,
we have recorded  charges for  impairment of fixed assets and for  restructuring
expenses.  All expenses of this nature  incurred after the first quarter of 2000
have been presented as reorganization items, below operating income.

Summary of Restructuring Charges

     The table below  summarizes  charges  for  impairment  of fixed  assets and
restructuring expenses incurred in the fourth quarter 1999 and the first quarter
2000.  These charges were incurred before the Company began the Chapter 11 Cases
(amounts in thousands):

                                       Fourth Quarter 1999    First Quarter 2000
                                       -------------------    ------------------

     Impairment of fixed assets             $1,952                 $2,684

     Restructuring expense:
       Provision for rejected leases        $ --                   $1,362
       Other store closing costs              --                      239
                                            ------                 ------
                                            $ --                   $1,601
                                            ======                 ======

     Impairment and  restructuring  charges  incurred after the first quarter of
2000 are  considered  reorganization  items and are  presented  below  operating
income.


                                     Page 18

<PAGE>

Summary of Reorganization Items

     Results for fiscal  2000  include  charges  which were  incurred  after the
Company  filed the  Chapter 11 Cases.  Expenses  related  to the  reorganization
process and the Chapter 11 Cases are considered  reorganization items. The table
below summarizes these charges: (amounts in thousands)

                                                      2000
                                                    --------

              Impairment of goodwill               $ 100,805
              Impairment of fixed assets              12,000
              Provision for rejected leases            1,920
              Other store closing costs                  670
              Professional fees                        3,421
              Retention bonus                          2,173
              Interest income on accumulated cash       (144)
              Other reorganization costs                 694
                                                   ---------
                                                   $ 121,539
                                                   =========

Impairment of Long-Lived Assets

     Due to continuing  negative  cash flows,  coupled with the possible sale or
disposition of certain  Company  assets,  we recorded a noncash charge of $100.8
million  for the  impairment  of goodwill  associated  with the  acquisition  of
Frame-n-Lens Optical,  Inc., New West Eyeworks, Inc. and Midwest Vision, Inc. in
the third  quarter of 2000. In addition,  we recorded a noncash  charge of $10.6
million to reflect the impairment of fixed assets associated with these acquired
entities.

     The Company  terminated  ten leases  governing all of the  Company's  units
located in Meijer Thrifty Acre locations. The Company recorded a noncash pre-tax
charge of $987,000 in 2000 related to the  impairment of leasehold  improvements
and furniture and fixtures in the Meijer locations.

     In the second  quarter of 2000,  the  Company  reached  an  agreement  with
Wal-Mart Stores,  Inc. to terminate its 72 leases governing all of the Company's
units located in Sam's Club locations.  Pursuant to this agreement,  the Company
turned over all such  locations to Wal-Mart  Stores by  September  1, 2000.  The
Company  received no  proceeds  from  Wal-Mart  for the early  termination,  and
Wal-Mart  will waive all claims for rent under the leases for the balance of the
original lease term. The Company  recorded a noncash  pre-tax charge of $367,000
related to the impairment of leasehold  improvements  and furniture and fixtures
in the Sam's Club locations. (See Note 5 to Consolidated Financial Statements.)


                                     Page 19


<PAGE>

     A summary of the impairment charges  recorded in 2000 follows:  (amounts in
thousands)

               Impairment of goodwill:
                        Frame-n-Lens                 $ 38,318
                        New West Eyeworks              60,610
                        Midwest Vision                  1,877
                                                     --------
               Total goodwill impairment             $100,805
                                                     ========

               Impairment of fixed assets:
                        Frame-n-Lens                 $  4,792
                        New West Eyeworks               5,186
                        Midwest Vision                    668
                        Meijer Thrifty Acre               987
                        Sam's Club                        367
                                                     --------
               Total fixed asset impairment          $ 12,000
                                                     ========


     In addition to the  impairment  of goodwill and fixed  assets,  the Company
recorded  adjustments to inventory of $1.1 million and to accounts receivable of
$0.5 million to adjust the carrying value to net realizable value. These charges
were included in Cost of goods sold and SG&A expense, as appropriate.


YEAR ENDED JANUARY 1, 2000 COMPARED TO YEAR ENDED JANUARY 2, 1999

     NET SALES. The Company recorded net sales of $329.1 million in fiscal 1999,
an  improvement of 34% over sales of $245.3 million in fiscal 1998. We increased
sales for two reasons.  First,  in 1999 our net sales  included the net sales of
our Acquired  Businesses  for the entire fiscal year,  whereas our net sales for
1998  included  the sales of the acquired  businesses  for only a portion of the
year. Second,  our sales in our core leased  departments  increased by 4.1% over
1998 results.

     NET  SALES IN  ACQUIRED  BUSINESSES.  In  1999,  the  integration  of these
businesses fell below  expectations which negatively  affected our results.  The
most important  reason for the  disappointing  performance  was the  significant
shortfall in sales.  The following  factors  contributed  to our poor  operating
results in the Acquired Businesses:

o    The  consolidation  of three  different  retail  concepts into one existing
     concept proved more difficult than we anticipated.

o    We  underestimated  the power of the  existing  trade names of the acquired
     businesses  and lost market share when we changed the store names to "Vista
     Optical".

o    We incurred  significant  service  disruptions  when we closed three of our
     manufacturing locations and consolidated their operations into our existing
     facilities.

o    We had  substantial  turnover  at the field and  management  levels,  which
     further disrupted our operations.


                                         Page 20


<PAGE>

     In 1999,  we made a number of  changes  to  improve  these  businesses.  In
particular, we:

o    improved the inventory carried by these vision centers.

o    recruited optometrists to many locations.

o    instituted intensive training programs for retail personnel.

o    created a new advertising campaign, which began running in early 2000.


     GROSS PROFIT.  In 1999, we increased gross profit to $181.3 million,  a 37%
increase over $132.4  million in 1998.  The increase in net sales resulted in an
increase in gross profit dollars. Our gross profit percentage increased from 54%
in 1998 to 55.1% in 1999. Several factors contributed to this increase:

o    We increased our purchasing power since completing the acquisitions.

o    The  consolidation of our  manufacturing  operations from six facilities to
     three facilities reduced our average lens cost.

o    We received significant promotional payments from key vendors.

     Other factors had a negative impact on gross profit percentage:

o    Retail prices for contact  lenses  continued to decline  because of intense
     price competition.

o    During the  consolidation  of our  manufacturing  operations,  our  service
     declined,  causing an  increase  in remake and  warranty  work on  customer
     orders.

o    Shortfalls in sales at the acquired vision centers caused rent as a percent
     of sales to increase.

     SELLING,  GENERAL,  AND  ADMINISTRATIVE  EXPENSE.  This category of expense
includes  both retail  operating  expense and  corporate  office  administrative
costs.  SG&A expense  increased from $121.4 million in 1998 to $177.2 million in
1999.  The  increase was  primarily  due to the increase in the number of vision
centers. As a percent of net sales, SG&A expense increased from 49.5% in 1998 to
53.8% in 1999. This increase was due to:

    -     A decline in sales at the acquired  businesses,  which thereby  caused
          store payroll to increase as a percent of sales.

    -     An  increase in goodwill  amortization  from  $800,000 in 1998 to $3.5
          million in 1999 (this increase  reflects the goodwill  associated with
          the businesses acquired by the Company in 1998 and therefore amortized
          over all of 1999 versus a portion of 1998).


                                         Page 21


<PAGE>

    -     SG&A  includes a non-cash  expense  provision  of $2.7 million for the
          write-off  of managed  care  receivables.  During  1999,  the  Company
          continued its efforts with its third party processor to timely collect
          managed care receivable  accounts.  In the fourth quarter,  management
          concluded  these efforts were not achieving  anticipated  results and,
          consequently, determined an additional provision for doubtful accounts
          was warranted.

     In addition,  before  giving effect to goodwill  amortization,  home office
expense as a percent of sales decreased by 0.5% over levels recorded in 1998.

     Results  for  1999  include  a  non-cash  charge  of  $1.9  million,  which
represents an impairment loss on fixed assets associated with 36 underperforming
vision centers acquired by the Company. We closed these vision centers in 2000.

     OPERATING  INCOME.  Operating  income  decreased  to $2.2  million from $11
million in 1998.  Operating  margin  decreased from 4.5% to 0.7% of net sales in
1999.  The  decrease  was  attributable  to:

o    The shortfall in operating results of the acquired businesses.

o    The increase in SG&A expense discussed above.

o    The non-cash charges discussed above.

     Despite  poor results in the acquired  businesses,  we increased  operating
income in our core leased business more than 10% over levels recorded in 1998.

     INTEREST  EXPENSE.  Interest  expense  increased to $19.3 million from $5.5
million in 1998.  The Company  issued its $125 million senior notes in 1998 (See
Note 10 to  Consolidated  Financial  Statements)  and  incurred  the  associated
expense  over the entirety of 1999 versus a portion of 1998.  In November  1999,
the Company  refinanced  its secured credit  facility at a higher  interest rate
than that provided for in its previous credit facility. (See Item 7,  "Liquidity
and Cash Resources".)

     PROVISION FOR INCOME TAXES.  Vista recorded a pre-tax operating loss before
extraordinary  item of $17.2 million in 1999.  The resulting  income tax benefit
was approximately $5.2 million.  We have established a valuation allowance equal
to the amount of the tax benefit.

     EXTRAORDINARY  LOSS. Results also include an extraordinary loss of $406,000
associated  with the write-off of the  capitalized  costs of the Company's  1998
secured credit facility.

     NET INCOME.  The Company  recorded a net loss of $17.6  million,  or a loss
of $0.83 per basic and diluted share.

Inflation

     Although the Company cannot determine the precise effects of inflation,  it
does not believe  inflation has had a material  effect on its domestic  sales or
results of operations.  The Company cannot determine whether inflation will have
a material long-term effect on its sales or results of operations.

     As a result  of  inflation  in prior  years,  the  Company  has in the past
adjusted its retail  pricing.  Further  pricing  adjustments are contingent upon
competitive  pricing  levels in the  marketplace.  Management is monitoring  the
continuing impact of these inflationary trends.


                                     Page 22


<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Our capital needs have been for operating expenses,  capital  expenditures,
and interest expense. Our sources of capital have been cash flow from operations
and borrowings under our credit facilities.

     In October 1998, we issued our $125 million notes due 2005 to help fund the
acquisition of  Frame-n-Lens  Optical,  Inc. and New West  Eyeworks,  Inc. These
notes bear  interest of 12.75% and were issued  pursuant to an  indenture  which
contains a variety of customary  provisions and restrictions.  Interest payments
are due on April 15 and  October 15 of each year.  The  Company did not make the
interest  payments due in 2000.  Amounts due under the  indenture  are unsecured
claims in the Chapter 11 Cases,  and are  classified as  Liabilities  Subject to
Compromise. (See Note 4 to Condensed Consolidated Financial Statements.)

     On April 5, 2000,  the Debtors filed the Chapter 11 Cases.  On May 9, 2000,
the Bankruptcy  Court  approved an order  permitting the Company to enter into a
$25  million   debtor-in-possession   credit  facility  with  Foothill   Capital
Corporation (the "DIP Facility"). The DIP Facility (which replaced the Company's
prior secured credit  facility)  consists of a $12.5 million term loan and $12.5
million  revolving  credit  facility.  As of December 30, 2000,  the Company had
borrowed a total of $12.9  million  (inclusive  of the $12.5  million  term loan
portion) under the DIP Facility.

     The DIP Facility contains customary terms and conditions. It expires on May
31, 2001. The DIP Facility further provides that:

o    The Company must maintain a rolling twelve month EBITDA of no less than $15
     million,  calculated prior to restructuring charges,  reorganization items,
     extraordinary  losses,   cumulative  effect  losses  and  store  impairment
     reserves.

o    The $12.5 million term loan portion of the DIP Facility  bears  interest at
     15% per annum.

o    Interest  rates on the  revolver  portion of the DIP  Facility are based on
     either  the Wells  Fargo  Bank,  N.A.  Base  Rate  plus 2% or the  Adjusted
     Eurodollar Rate plus 3.25%.

     Although the Company is currently in  compliance  with the terms of the DIP
Facility,  a continuation of negative sales and cash flow trends could cause the
Company to breach the EBITDA covenant.

     The Company  believes that the DIP Facility should provide it with adequate
liquidity  to  conduct  its  operations  while  it  awaits  confirmation  of its
reorganization plan. The Company is currently working with Foothill to establish
a revolving credit facility which will be available upon exiting from bankruptcy
(the "Exit  Facility").  The Exit Facility will replace the current DIP Facility
and should provide the Company with adequate liquidity to conduct its operations
upon  emergence  from  bankruptcy.  However,  the Company's  liquidity,  capital
resources,  results of operations and ability to continue as a going concern are
subject  to known  and  unknown  risks  and  uncertainties.  (See  "MANAGEMENT'S
DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - RISK FACTORS.")


                                     Page 23

<PAGE>

     The plan of  reorganization  filed with the Bankruptcy  Court in March 2001
assumes the conversion of  pre-petition  unsecured  claims into a combination of
new secured notes and common stock.  The secured notes will have a face value of
$120  million and will pay  interest of 12% twice a year at the end of March and
September. The notes have an eight year duration with principal repayments based
on excess  cash  balances  available  at each  interest  payment  date.  It also
provides for the  cancellation of the Company's  current Common Stock. We do not
know  whether the plan will be approved,  or if it is approved,  whether it will
succeed.  If the Company is successful in restructuring its debt obligations and
its equity,  the Company may trigger  limitations  on certain tax net  operating
loss carry-forwards.

    Under the proposed plan of reorganization, it is the Company's intent to use
cash reserves for its ongoing operations and for payment of interest expense and
repayment of principal on the Company's outstanding debt.

     We plan, as of December 30, 2000, to open  approximately  5 Wal-Mart vision
centers  during  fiscal 2001.  We may open up to 10  additional  vision  centers
dependent upon liquidity, construction schedules and other constraints. For each
of our new vision centers,  we typically spend between $100,000 and $160,000 for
fixed  assets  and   approximately   $25,000  for   inventory.   We  also  spend
approximately  $20,000 for pre-opening costs.  Before 1998, we capitalized these
pre-opening  costs.  Beginning  in 1998,  we  expensed  them as  required by new
accounting rules (See Note 2 to Consolidated Financial Statements).

Risk Factors

     This Form 10-K  contains a number of statements  about the future.  It also
contains  statements  which  involve  assumptions  about the  future.  All these
statements  are  forward  looking  statements  within the meaning of the Private
Securities Litigation Reform Act of 1995.  Forward-looking  statements represent
our expectations or belief  concerning  future events,  including the following:
any statements  regarding  future sales levels,  the  continuation of historical
trends,  and the  Company's  liquidity  and the Chapter 11 Cases,  including the
Company's plan of  reorganization.  Without  limiting the  foregoing,  the words
"believes",  "anticipates",  "plans",  "expects",  and similar  expressions  are
intended to identify forward-looking statements.

     We do not know  whether the  forward-looking  statements  made in this Form
10-K will prove to be correct. We have tried to identify factors which may cause
these  statements to be incorrect,  but we may not have  identified all of them.
These factors could also have a negative impact on our results. The following is
our list of these factors:

o    We have filed for protection  under Chapter 11 of the Bankruptcy  Code. The
     fact of this filing,  along with the process through the Bankruptcy  Court,
     could affect our business in a variety of unforeseen  ways.  There could be
     impairment of our ability to:  operate our business  during the pendency of
     the  proceedings;  continue normal  operating  relationships  with our host
     licensors,  such as Wal-Mart;  obtain  shipments and  negotiate  terms with
     vendors;  fund, develop,  and execute an operating plan; attract and retain
     key executives and  associates;  maintain our gross margins  through vendor
     participation  programs  and  otherwise  to maintain  favorable  courses of
     dealing with vendors.


                                     Page 24


<PAGE>

o    Under the plan of  reorganization we have proposed to the Bankruptcy Court,
     the equity of the current shareholders in the Company will have no value.

o    The Purchase and Sale Agreement for the remaining  freestanding  stores and
     the  Fullerton  lab/DC may not close  thus  creating  additional  unsecured
     claims.

o    There are various risks  associated with the Chapter 11 Cases.  Our plan of
     reorganization  may not be  approved  or, even if it is  approved,  may not
     succeed.

o    We  may not obtain exit financing to replace our DIP Facility.

o    We  depend  heavily  on our host  store  relationships,  particularly  with
     Wal-Mart.  Any  change  in these  relationships  could  have a  significant
     negative  impact on our business.  The filing of the Chapter 11 Cases could
     affect those relationships.

o    Managed care plans are increasingly  important in the optical industry.  We
     will need to  attract  new  managed  care  business  if we intend to remain
     competitive.  We will  also  need  to  retain  our  existing  managed  care
     arrangements.  Loss of these  arrangements,  or our  failure to attract new
     managed care business, would impair our competitive position. The filing of
     the Chapter 11 Cases could impair our ability to retain existing  contracts
     and to enter into new ones.

o    We depend on reliable and timely reimbursement of claims we submit to third
     party payors. There are risks we may not be paid on a timely basis, or that
     we will be  paid  at all.  Some  plans  have  complex  forms  to  complete.
     Sometimes  our  staff  may  incorrectly   complete   forms,   delaying  our
     reimbursement.  These  delays  can hurt our cash flow and also  force us to
     write-off more of these accounts receivable.

o    Each year, we expect to have increasing numbers of vision centers under our
     Wal-Mart agreement come up for renewal.  Our rental obligations to Wal-Mart
     will increase in the three year option period.  We will need to continue to
     improve sales at these vision centers.  If we do not, our rent as a percent
     of  sales  will   increase   significantly   during   the  option   period.
     Alternatively, we may choose not to exercise the options.

o    Operating factors affecting  customer  satisfaction and quality controls of
     the Company in optical manufacturing.


                                     Page 25


<PAGE>

    Liabilities Subject to Compromise may increase as a result of:

    o    negotiations
    o    actions of the Bankruptcy Court
    o    further development with respect to disputed claims
    o    future rejection of additional executory contracts or unexpired leases
    o    the determination as to the value of any collateral securing claims
    o    proofs of claim
    o    other events

     Payment terms for these amounts, which are considered long-term liabilities
     at this time,  will be established in connection with the Chapter 11 Cases.
     This may further reduce the settlement of unsecured claims.

     -    Pricing and other competitive factors, including,  without limitation,
          increased price competition with respect to contact lenses.

     -    Technological  advances in the eyecare industry,  such as new surgical
          procedures or medical  devices,  which could reduce the demand for the
          Company's  products.  The  number of  individuals  electing  Lasik and
          similar surgical  procedures has dramatically  increased each year. If
          these  trends  continue,  demand  for our  goods  and  services  could
          decrease significantly.

     -    The mix of goods sold.

     -    Availability  of optical and optometric  professionals.  An element of
          the  Company's  business  strategy and a  requirement  of the Wal-Mart
          Agreement is the availability of vision care  professionals at clinics
          in or nearby the Company's vision centers.

     -    State and federal  regulation  of managed  care and of the practice of
          optometry and opticianry.

     -    General  risks  arising  from   investing  and  operating  in  Mexico,
          including  a  different   regulatory,   political,   and  governmental
          environment,  currency fluctuations,  high inflation,  price controls,
          restrictions  on profit  repatriation,  lower per  capita  income  and
          spending levels, import duties, value added taxes, and difficulties in
          cross-cultural marketing.

     -    The Company's  ability to select  in-stock  merchandise  attractive to
          customers.

     -    Weather affecting retail operations.

     -    Variations in the level of economic activity affecting  employment and
          income levels of consumers.

     -    Seasonality of the Company's business.

Recent Accounting Pronouncements

     In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No.  101,
"Revenue Recognition in Financial Statements". SAB 101 summarizes the SEC's view
in  applying  generally  accepted  accounting  principles  to  selected  revenue
recognition  issues.  We  applied  the  guidance  in SAB  101  to our  financial
statements  in 2000.  The  impact  has been  reflected  as a  cumulative  effect
adjustment to our consolidated  financial  statements resulting from a change in
accounting principles.

                                        Page 26


<PAGE>

     In 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  133  ("SFAS No.  133"),  "Accounting  for
Derivative  Instruments  and Hedging  Activities".  SFAS No. 133 is effective in
fiscal 2000. The Company had no derivatives in 2000.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

     Market risk is the potential change in an instrument's value caused by, for
example,  fluctuations in interest and currency  exchange  rates.  The Company's
primary market risk exposures are interest rate risk and the risk of unfavorable
movements  in  exchange  rates  between the U.S.  dollar and the  Mexican  peso.
Monitoring and managing these risks is a continual process carried out by senior
management,  which reviews and approves the Company's risk management  policies.
We  manage  market  risk on the  basis of an  ongoing  assessment  of  trends in
interest  rates,  foreign  exchange  rates,  and economic  developments,  giving
consideration  to possible  effects on both total return and reported  earnings.
The Company's  financial advisors,  both internal and external,  provide ongoing
advice regarding trends that affect management's assessment.

Interest Rate Risk

     The Company  borrows  long-term debt under our credit  facility at variable
interest rates. (See Note 10 to Consolidated Financial Statements.) We therefore
incur the risk of increased interest costs if interest rates rise.

Foreign Exchange Rate Risk

     Historically,  Mexico qualified as a highly inflationary  economy under the
provisions  of SFAS No. 52, "Foreign  Currency  Translation".  Consequently,  in
1997, the financial  statements of the Mexico operation were remeasured with the
U.S. dollar as the functional currency.  Since 1997, we have recorded immaterial
losses  because of changes in foreign  currency  rates  between the peso and the
U.S. dollar.

ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  Consolidated  Financial  Statements  of the Company are  included as a
separate section of this Report commencing on page F-1.

ITEM  9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

   None.


                                     Page 27

<PAGE>

                               PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>

Information Concerning Directors

     Name and Age as of March 30, 2001    Position, Business Experience and Directorships
     ---------------------------------    -----------------------------------------------
<S>                                      <C>
     James W. Krause............56        Joined  the  Company in April  1994 as  President  and Chief  Executive  Officer  and a
                                          director.  He was named Chairman of the Company in June 1995.

     Ronald J. Green............53        A director since December 1990, Mr. Green has been a partner in the accounting  firm of
                                          Stephen M. Berman & Associates, Atlanta, Georgia, since 1980.

     James E. Kanaley...........59        A director  since  October  1998,  Mr.  Kanaley was employed at Bausch & Lomb Inc. from
                                          1978 until his  retirement  in 1997.  From 1990 until  1993,  he served as Senior  Vice
                                          President and Group President  Contact Lens Care, and from 1993 until his retirement he
                                          served as Senior Vice President and President, North American Healthcare.

     Peter T. Socha.............41        Mr.  Socha  joined the Company  in October  1999 as Senior  Vice  President,  Strategic
                                          Planning.  Prior to  joining  the  Company  he worked as a  consultant,  and  served as
                                          Executive  Vice  President of COHR,  Inc.,  from May 1998 to October 1998; and as Chief
                                          Credit Officer with Sirrom Capital  Corporation,  from 1994 to 1997. Mr. Socha became a
                                          director and was appointed Senior Vice President,  Strategic  Planning and Managed Care
                                          in February 2000.


                                     Page 28


<PAGE>

Information Concerning Executive Officers

  Name, Age and Position
  as of March 30, 2001                  Business Experience
  -------------------                   -------------------

  James W. Krause            56         See "Information Concerning Directors"
    Chairman
    and Chief Executive Officer

  Michael J. Boden           53         Mr. Boden joined the Company in June 1995 as Vice President,  Sales and Marketing and was
    Executive Vice President,           named a Senior Vice  President  in February  1998.  He was named  Senior Vice  President,
    Retail Operations                   Leased  retail  Operations  in February  1999.  From 1992 until  joining the Company,  he
                                        served as Vice  President-- Store  Operations  of This End Up Furniture  Company.  He was
                                        appointed to his current position in February 2000.

  Richard D. Anderson        42         Mr.  Anderson  joined the Company in January  1999 and was named  Senior Vice  President,
    Senior Vice President,              Real Estate in February  1999.  From 1987 until  joining the Company,  he was employed by
    Real Estate                         W.H.  Smith,  PLC where he served as Vice  President,  Real  Estate  and Vice  President,
                                        Development and Construction.

  Eduardo A. Egusquiza       48         Mr.  Egusquiza  joined the  Company in March 1998 as Senior Vice  President,  Information
    Senior Vice President,              Technology.  From 1982 until  joining the Company,  he was  employed by Musicland  Stores
    Information Technology              Corporation, Inc. where he served as Vice President of Information Systems and Services.

  Mitchell Goodman           47         Mr.  Goodman  joined the Company as General  Counsel and Secretary in September  1992 and
    Senior Vice President,              was named a Vice President in November 1993 and Senior Vice President in May 1998.
    General Counsel and Secretary

  Charles M. Johnson         51         Mr.  Johnson joined the Company in October 1997 as Senior Vice  President,  Manufacturing
    Senior Vice President,              and  Distribution.  From  1988  until  joining  the  Company,  he  was  employed  by  the
    Manufacturing and Distribution      Sherwin-Williams  Company, where he served as Vice President and Director of Research and
                                        Development.

  Angus C. Morrison          44         Mr.  Morrison  joined  the  Company  in  February  of 1995 as Vice  President,  Corporate
    Senior Vice President,              Controller.  He  was  appointed  Senior  Vice  President,  Chief  Financial  Officer  and
    Chief Financial Officer             Treasurer in March 1998.  From 1993 until  joining the  Company,  he was  Controller  and
                                        Senior  Financial Officer of  the Soap Division  of  The Dial Corp. He was Controller and
                                        Senior Financial Officer of the Food Division of the same company from 1989 through 1992.

  Timothy W. Ranney          48         Mr. Ranney joined the Company in September 1998 and was named Vice  President,  Corporate
    Vice President,                     Controller in October 1998.  From 1991 until joining the Company,  he was employed by CVS
    Corporate Controller                Corporation  where he  served  as Store  Controller  and then as  Director  of  Financial
                                        Systems.

  Peter T. Socha             41         See "Information Concerning Directors"
    Senior Vice President,
    Strategic Planning and
    Managed Care

  Robert W. Stein            45         Mr.  Stein  joined the  Company as Director of Human  Resources  in May 1992.  In January
    Senior Vice President,              1993, he was appointed Vice President,  Human  Resources,  and was appointed  Senior Vice
    Human Resources and                 President in February 1999.  He was appointed to his current position in February 2000.
    Professional Services
</TABLE>

                                     Page 29
<PAGE>

            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a)  of the  Exchange  Act  requires  our  directors,  executive
officers and holders of more than ten percent (10%) of Common Stock to file with
the Securities and Exchange  Commission initial reports of ownership and reports
of changes in  ownership  of Common  Stock and other  equity  securities  of the
Company.  We believe that,  during 2000, our officers,  directors and holders of
more than ten percent  (10%) of Common  Stock  complied  with all Section  16(a)
filing  requirements  except  that  the  Company  did not  timely  file a Form 5
(relating to our  transactions  for Timothy Ranney). In making these statements,
we have relied upon the written  representations  of our  directors and officers
and upon copies of reports furnished to the Company.


ITEM 11.  EXECUTIVE COMPENSATION

     The following table discloses compensation received from the Company by the
Company's  Chief  Executive   Officer,   and  the  Company's  four  most  highly
compensated   officers  other  than  the  Chief  Executive   Officer  (all  such
individuals, collectively, the "named executive officers").

<TABLE>

                                            Summary Compensation Table

                                                                                              Long Term Compensation
                                       Annual Compensation                      ------------------------------------------------
   Name and                --------------------------------------------------    Restricted      Securities
   Principal                Fiscal                              Other Annual       Stock         Underlying        All Other
   Position                  Year   Salary($)     Bonus($)    Compensation($)   Awards($)(1)    Options/SARs(#)  Compensation($)
   --------                -------  ---------     --------    ---------------   ------------    ---------------  ---------------
<S>                         <C>      <C>           <C>            <C>              <C>              <C>               <C>
   James W. Krause          2000     375,000       112,000             --            --(2)           40,000           20,000(3)
     Chairman of            1999     375,000            --             --            --             340,000           20,000
     the Board              1998     368,000       101,500             --          79,688           250,000           20,000
     and Chief
     Executive Officer

   Michael J. Boden         2000     222,000        64,000             --            --(4)           12,000               --
     Executive Vice         1999     200,000            --             --            --              12,000               --
     President,             1998     193,000        38,000             --          26,563            15,000               --
     Retail Operations

   Eduardo A. Egusquiza     2000     188,000        58,000             --           --(7)            12,000               --
     Senior Vice            1999     170,000            --        153,000(6)        --               12,000               --
     President,             1998(5)  139,000        36,000             --          26,563            50,000               --
     Information
     Technology

   Charles M. Johnson       2000     218,000        67,000             --            --(7)            12,000               --
     Senior Vice            1999     204,000            --             --            --               12,000               --
     President,             1998     197,000        39,000         37,000(8)       26,563             15,000               --
     Manufacturing and
     Distribution

   Peter T. Socha           2000     208,000         62,000            --            --               40,000               --
     Senior Vice            1999(9)   36,000            --             --            --              100,000               --
     President, Strategic
            Planning
</TABLE>

                                     Page 30

<PAGE>


(1)  Restricted  Stock  Awards  vest  and  restrictions  lapse  after  five-year
     performance  period to the extent and  depending  upon  achievement  by the
     Company  of  return  on  asset  goals  relative  to a  comparison  group of
     companies.  For awards made in 1998,  restricted  shares, to the extent not
     vested  after five years,  vest after ten years of  employment.  Vesting is
     accelerated automatically upon a change of control (as defined).  Dividends
     (if any are  declared)  will  not be paid on  restricted  stock.
(2)  As  of  December  30,  2000,  Mr.  Krause  had  restricted  stock  holdings
     representing 30,000 shares of Common Stock with a value of $936.
(3)  The Company has  executed a "split  dollar"  insurance  agreement  with Mr.
     Krause.  The annual premium  (payable by the Company) is $20,000.  The term
     life  portion of this  premium  is $2,500;  the  non-term  life  portion is
     $17,500.
(4)  As  of  December  30,  2000,  Mr.  Boden  had  restricted   stock  holdings
     representing 10,000 shares of Common Stock with a value of $312.
(5)  Mr. Egusquiza joined the Company in March 1998.
(6)  $82,000 represents reimbursement of relocation expenses; $71,000 represents
     tax reimbursement payments on the foregoing.
(7)  As of December 30, 2000,  this  executive  had  restricted  stock  holdings
     representing 5,000 shares of Common Stock with a value of $156.
(8)  $34,000 represents reimbursement of relocation expenses;  $3,000 represents
     tax reimbursement payments.
(9)  Mr. Socha joined the Company in October 1999.


                        OPTION GRANTS IN LAST FISCAL YEAR

     The  following  table  provides  information  on option grants to the named
executive officers by the Company in 2000. The table also shows the hypothetical
gains or "option  spreads" that would exist for the  respective  options.  These
gains are based on assumed rates of annual compound stock price  appreciation of
5% and 10% from the date the options were granted over the full option term.

<TABLE>
<CAPTION>
                                                                                Potential Realizable
                                                                                  Value at Assumed
                            No. of      % of Total                              Annual Rates of Stock
                          Securities   Options/SARs                              Price Appreciation
                          Underlying    Granted to                             for Option Terms($)(2)
                         Option/SARs   Employees in   Exercise or   Expiration -----------------------
                           Granted    Fiscal Year(1) Base Price($)     Date        5%          10%
                        ------------  -------------- ------------------------- ----------- -----------

<S>                         <C>             <C>          <C>          <C>        <C>         <C>
  James W. Krause           40,000(3)       9.3          2.00         2/24/10    130,312      207,499
  Michael J. Boden          12,000(3)       2.8          2.00         2/24/10     39,093       62,250
  Eduardo A. Egusquiza      12,000(3)       2.8          2.00         2/24/10     39,093       62,250
  Charles M. Johnson        12,000(3)       2.8          2.00         2/24/10     39,093       62,250
  Peter T. Socha            40,000(3)       9.3          2.00         2/24/10    130,312      207,499
</TABLE>

(1)  The  Company  granted options covering 431,200 shares to employees in 2000.
(2)  These amounts represent  assumed rates of appreciation  only. Actual gains,
     if any,  on stock  option  exercises  and  holdings  of  Common  Stock  are
     dependent  on the future  performance  of Common  Stock and  overall  stock
     market conditions.  There can be no assurance that the amounts reflected in
     this table will be achieved.  Under the plan of reorganization filed by the
     Company,  all  existing  Common Stock and other  equity  interests  will be
     cancelled.
(3)  Grants under the Company's  Restated Stock Option and Incentive Award Plan.
     Options vest 50% on second anniversary of grant date and 25% on each of the
     third  and  fourth   anniversary  of  grant  date,   subject  to  continued
     employment. Expiration date is 10th anniversary of grant date.


                                    Page 31

<PAGE>

                          FISCAL YEAR END OPTION VALUES

     The  following  table  provides  information,  as  of  December  30,  2000,
regarding the number and value of options held by the named executive officers.


<TABLE>
<CAPTION>
                           No. of Securities Underlying         Value of Unexercised
                              Unexercised Options at            In-the-Money Options
                                 Fiscal Year End               At Fiscal Year End($)
                          -------------------------------   ----------------------------
                           Exercisable    Unexercisable(1)  Exercisable    Unexercisable
<S>                         <C>             <C>             <C>              <C>

  James W. Krause            362,500          367,500            0              0
  Michael J. Boden            33,750           35,250            0              0
  Eduardo A. Egusquiza        25,000           49,000            0              0
  Charles M. Johnson          56,250           42,750            0              0
  Peter T. Socha             100,000           40,000            0              0
</TABLE>

--------------------

(1)  Shares represented were not exercisable as of December 30, 2000, and future
     exercisability  is subject to the  executive's  remaining  employed  by the
     Company  for up to four years from grant date of options.  No options  were
     exercised by the named executive officers in fiscal 2000.

Change in Control Arrangements

     The Company has agreements with the named executive  officers which provide
severance  benefits in the event of  termination  of  employment  under  certain
circumstances  following a change in control of the Company  (as  defined).  The
circumstances are:

     -    termination by the Company,  other than because of death or disability
          commencing prior to a threatened change in control (as defined);

     -    for cause (as defined); or

     -    by an officer as the result of a voluntary termination (as defined).


                                     Page 32


<PAGE>

     Following any such  termination,  in addition to compensation  and benefits
already  earned,  the officer  will be entitled to receive a lump sum  severance
payment equal to up to three times the officer's annual rate of base salary.

     Cause for termination by the Company is the:

     -    commission of any act that constitutes, on the part of the officer,

     (a)  fraud,  dishonesty,  gross negligence,  or willful  misconduct and

     (b)  that directly results in material injury to the Company, or

     -    officer's material breach of the agreement, or

     -    officer's conviction of a felony or crime involving moral turpitude.


     Circumstances  which would  entitle the officer to terminate as a result of
voluntary termination following a change in control include, among other things:

     -    the  assignment  to the  officer of any duties  inconsistent  with the
          officer's title and status in effect prior to the change in control or
          threatened change in control;

     -    a reduction by the Company of the officer's base salary;

     -    the Company's  requiring the officer to be based  anywhere  other than
          the Company's principal executive offices;

     -    the failure by the Company,  without the officer's consent,  to pay to
          the officer any portion of the officer's then current compensation;

     -    the  failure  by the  Company  to  continue  in  effect  any  material
          compensation plan in which the officer participates  immediately prior
          to the change in control or threatened change in control; or

     -    the failure by the  Company to  continue  to provide the officer  with
          benefits  substantially  similar to those enjoyed by the officer under
          any of the Company's life insurance, medical, or other plans.

     The term of each  agreement is for a rolling three years unless the Company
gives  notice that it does not wish to extend such term,  in which case the term
of the agreement would expire three years from the date of the notice.

     Under the plan of reorganization filed by the Company, all these agreements
will be rejected by the Company,  or amended to the  satisfaction of the Company
and the Official Committee of Unsecured Creditors.


                                     Page 33


<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                        COMMON STOCK OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The  Company is not aware of any  person  who,  on March 1,  2001,  was the
beneficial  owner of five percent (5%) or more of  outstanding  shares of Common
Stock, except as set forth below.

                                            Amount and Nature of     Percent
                                            Beneficial Ownership    of Class
                                            --------------------    --------

               Campbell B. Lanier, III           4,363,062(a)(b)      20.7
               Rayna Casey                       1,808,152(c)          8.5
----------

(a)  Includes shares owned by the following individuals and entities, who may be
     deemed a "group" within the meaning of the beneficial  ownership provisions
     of the federal  securities laws: Mr. Lanier (838,832 shares);  Mr. Lanier's
     wife (750  shares);  Campbell B. Lanier,  IV (25,550  shares);  ITC Service
     Company (3,356,648 shares);  William H. Scott, III (82,782 shares);  Martha
     J. Scott  (28,000  shares,  inclusive  of 10,000  shares owned by the Scott
     Trust,  of which Ms.  Scott is the sole  trustee);  William H.  Scott,  III
     Irrevocable  Trust F/B/O Martha Scott (the "Scott Trust") (10,000  shares);
     Bryan W. Adams (8,000 shares).

(b)  Includes  24,375 shares which Mr. Lanier has the right to acquire under the
     Company's Non-Employee Director Stock Option Plan.

(c)  Includes  159,948 shares owned by a trust of which Ms. Casey is the trustee
     and her daughter the  beneficiary.  Ms.  Casey's  address is 712 West Paces
     Ferry Road, Atlanta, Georgia.

     The following table sets forth information, as of March 1, 2001, concerning
beneficial  ownership by all directors,  by each of the executive officers named
in the Summary  Compensation  Table above,  and by all  directors  and executive
officers as a group.


                                     Page 34


<PAGE>
<TABLE>
<CAPTION>

                                                                      Percent of
                                                    Beneficially       Number of
             Name and Address                          Owned             Shares
          of Beneficial Owner(1)                    Common Stock      Outstanding
          ----------------------                    ------------      -----------
<S>                                                 <C>                  <C>
    Campbell B. Lanier, III.................        4,363,062(2)(3)      20.7
    James W. Krause.........................          797,193(4)          3.7
    J. Smith Lanier, II.....................          304,110(3)(5)       1.4
    Ronald J. Green.........................          113,375(3)(6)        *
    Peter T. Socha..........................          100,000(7)           *
    James E. Kanaley........................            5,625              *
    Michael J. Boden........................           60,327(8)           *
    Charles M. Johnson......................           75,600(9)           *
    Eduardo A. Egusquiza....................           48,500(10)          *
    All directors and executive officers as a
    group (sixteen persons).................        6,137,982            27.6
--------------------

*    Represents less than one percent of the outstanding Common Stock.
(1)  Unless  otherwise  indicated below, the address of the persons named is 296
     Grayson Highway, Lawrenceville, GA 30045.
(2)  See footnote (a) in table above.
(3)  Includes 24,375 shares which this individual has the right to acquire under
     the Company's Non-Employee Director Stock Option Plan.  Messrs. Campbell B.
     Lanier, III and J. Smith Lanier, II resigned from the Board of Directors in
     March 2001.
(4)  Includes 532,500 shares which Mr. Krause has the right to acquire under the
     Company's Restated Stock Option and Incentive Award Plan (the "Plan"). Also
     includes 30,000 shares of restricted stock awarded under the Plan.
(5)  Includes 1,800 shares owned by Mr.  Lanier's wife, as to which he disclaims
     beneficial ownership.
(6)  Includes  9,000  shares  owned  by Mr.  Green's  children,  as to  which he
     disclaims beneficial ownership.
(7)  Represents  100,000  shares which Mr. Socha has the right to acquire  under
     the Plan.
(8)  Includes 47,250 shares which  Mr. Boden has the right to  acquire under the
     Plan. Also  includes 10,000 shares of  restricted stock  awarded under  the
     Plan.
(9)  Includes 62,250 shares which Mr. Johnson has the right to acquire under the
     Plan and 5,000 shares of restricted stock awarded under the Plan.
(10) Includes 43,500 shares which Mr.  Egusquiza has the right  to acquire under
     the Plan and 5,000 shares of restricted stock awarded under the Plan.
</TABLE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company paid insurance  premiums of approximately  $443,000 in 2000 for
insurance  policies  purchased through an agency in which J. Smith Lanier, II, a
director  of the  Company,  has a  substantial  ownership  interest.  The  Audit
Committee (which has ratified the purchase of insurance by the Company from this
insurance  agency) and management of the Company believe that these premiums are
comparable to those which could have been obtained from unaffiliated companies.


                                     Page 35


<PAGE>

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) (1) and (2) The Consolidated  Financial  Statements and Schedule of the
Company  and its  subsidiaries  are filed as a separate  section of this  Report
commencing on page F-1.

     (3) We have filed or incorporated by reference the following exhibits:

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

3.1    -- Amended and Restated  Articles of  Incorporation of the Company, dated
          April 8, 1992,  along with  Articles of  Amendment  to the Amended and
          Restated  Articles of  Incorporation  of the Company dated January 17,
          1997,  and Articles of Amendment to the Amended and Restated  Articles
          of Incorporation of the Company dated December 31, 1998,  incorporated
          by reference to the  Company's  Form 8-K filed with the  Commission on
          January 6, 1999.

3.2    -- Amended and Restated By-Laws of the Company, incorporated by reference
          to the  Company's  Registration  Statement  on Form S-1,  registration
          number  33-46645,  filed with the  Commission  on March 25, 1992,  and
          amendments thereto.

4.1    -- Form of Common  Stock  Certificate, incorporated  by  reference to the
          Company's Registration Statement on Form 8-A filed with the Commission
          on January 17, 1997.

4.2    -- Rights  Agreement  dated  as  of  January 17, 1997 between the Company
          and Wachovia Bank of North Carolina,  N.A.,  incorporated by reference
          to the  Company's  Registration  Statement  on Form 8-A filed with the
          Commission on January 17, 1997.

4.3    -- Indenture  dated as of October 8, 1998, among the Company, the Guaran-
          tors and State Street Bank & Company,  as Trustee  (including  form of
          Exchange   Note),   incorporated   by  reference   to  the   Company's
          Registration  Statement on Form S-4,  registration  number  333-71825,
          filed with the Commission on February 5, 1998, and amendments thereto.

4.4    -- Purchase Agreement dated as of October 8, 1998, among the Company, the
          Guarantors and the Initial  Purchasers,  incorporated  by reference to
          the Company's  Registration Statement on Form S-4, registration number
          333-71825,  filed  with  the  Commission  on  February  5,  1998,  and
          amendments thereto.

4.5    -- Registration Rights Agreement  dated as of October 8, 1998,  among the
          Company,  the Guarantors and the Initial  Purchasers,  incorporated by
          reference  to  the  Company's  Registration  Statement  on  Form  S-4,
          registration  number 333- 71825, filed with the Commission on February
          5, 1998, and amendments thereto.


                                     Page 36


<PAGE>

10.1   -- Sublease  Agreement, dated  December 16, 1991, by and between Wal-Mart
          Stores,  Inc.  and  the  Company,  incorporated  by  reference  to the
          Company's  Registration  Statement  on Form S-1,  registration  number
          33-46645,  filed with the Commission on March 25, 1992, and amendments
          thereto.

10.2   -- Form indemnification  agreement for  directors and  executive officers
          of  the Company,  incorporated by reference to the Company's Form 10-K
          for the fiscal year ended December 31, 1992.

10.3   -- Vision Center Master License Agreement,  dated as of June 16, 1994, by
          and between  Wal-Mart  Stores,  Inc. and the Company,  incorporated by
          reference to the Company's  Form 10-Q for the  quarterly  period ended
          September  30,  1994.  [Portions  of  Exhibit  10.3 have been  omitted
          pursuant  to an  order  for  confidential  treatment  granted  by  the
          Commission.  The omitted  portions have been filed separately with the
          Commission.]

10.4++ -- Split  Dollar Life Insurance Agreement,  dated as of November 3, 1994,
          among the  Company,  A.  Kimbrough  Davis,  as  Trustee,  and James W.
          Krause,  incorporated  by reference to the Company's Form 10-K for the
          fiscal year ended December 31, 1994.

10.5++ -- Level IV Management Incentive Plan,  incorporated  by reference to the
          Company's Form 10-K for the fiscal year ended December 31, 1994.

10.6   -- Agreement dated as of November 23, 1995 by and between Mexican  Vision
          Associates Operadora,  S. de R.L. de C.V. and Wal-Mart de Mexico, S.A.
          de C.V. in original  Spanish and an uncertified  English  translation,
          incorporated  by reference to the  Company's  Form 10-K for the fiscal
          year ended  December  30,  1995.  [Portions  of Exhibit 10.6 have been
          omitted  pursuant to a request for  confidential  treatment filed with
          the Commission.  The omitted  portions have been filed separately with
          the Commission.]

10.7++ -- Executive   Relocation   Policy,  incorporated  by  reference  to  the
          Company's Form 10-Q for the quarterly period ended March 30, 1996.

10.8++ -- Restated  Stock  Option  and  Incentive  A ward Plan,  incorporated by
          reference to the  Company's Form  10-Q for the quarterly period  ended
          June 29, 1996.

10.9++ -- First  Amendment  to  Restated Stock  Option and Incentive Award Plan,
          incorporated by reference to the Company's Form 10-Q for the quarterly
          period ended March 29, 1997.

10.10++-- Form  Change  in  Control  Agreement  for  executive  officers of  the
          Company, incorporated by reference to the  Company's Form 10-K for the
          fiscal year ended December 28, 1996.


                                         Page 37

<PAGE>

10.11++-- Form Restricted  Stock  Award,     incorporated  by  reference to  the
          Company's Form 10-Q for the quarterly period ended March 29, 1997.

10.12++-- Restated  Non-Employee  Director  Stock  Option  Plan, incorporated by
          reference to the Company's Form 10-Q filed on June 28, 1997.

10.13++-- Executive Deferred Compensation Plan, incorporated by reference to the
          Company's Form 10-K for the fiscal year ended January 3, 1998.

10.14  -- Credit  Agreement dated  October  8, 1998  by  and  among the Company,
          Bank of America,  FSB,  First Union  National  Bank and the  financial
          institutions listed hereto, incorporated by reference to the Company's
          Registration  Statement on Form S-4,  registration  number  333-71825,
          filed with the Commission on February 5, 1999, and amendments thereto.

10.15 --  Amended and Restated Credit Agreement dated as of November 12, 1999 by
          and between the Company and Foothill Capital Corporation, incorporated
          by  reference  to the  Company's  Form 10-K for the fiscal  year ended
          January 1, 2000.

10.16  -- Agreement dated as of September 9, 1999, by and among the Company, ITC
          Service  Company,  and  Campbell  B.  Lanier,  III,   incorporated  by
          reference to the Company's Form 10-K for the fiscal year ended January
          1, 2000.

10.17  -- Senior Secured,  Super-Priority Debtor in Possession Loan and Security
          Agreement  dated as of April 6, 2000 by and  between  the  Company and
          Foothill  Capital  Corporation,   incorporated  by  reference  to  the
          Company's Form 10-Q for the quarterly period ended July 1, 2000.

21     -- Subsidiaries  of  the Registrant, incorporated  by  reference  to  the
          Company's Form 10-K for the fiscal year ended January 1, 2000.

23**   -- Consent by Arthur Andersen LLP.

** Filed with this Form 10-K.

++   Management contract or compensatory plan or arrangement in which a director
     or named executive officer participates.

     (b)  No reports on Form 8-K have been filed  during the last quarter of the
period covered by this report.


                                        Page 38

<PAGE>

                    VISTA EYECARE, INC. AND SUBSIDIARIES
                             DEBTORS-IN-POSSESSION

                 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
          AS OF DECEMBER 30, 2000, JANUARY 1, 2000 AND JANUARY 2, 1999
                         TOGETHER WITH AUDITORS' REPORT


             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

     The  following  consolidated  financial  statements  and  schedule  of  the
registrant and its subsidiaries are submitted herewith in response to Item 8 and
Item 14(a)1 and to Item 14(a)2, respectively.

                                                                           Page
                                                                           ----

Report of Independent Public Accountants                                   F-2

Consolidated Balance Sheets as of December 30, 2000 and
  January 1, 2000                                                          F-3

Consolidated Statements of Operations for the
  Years Ended December 30, 2000, January 1, 2000 and
  January 2, 1999                                                          F-5

Consolidated Statements of Shareholders' (Deficit)/Equity
  for the Years Ended December 30, 2000, January 1, 2000
  and January 2, 1999                                                      F-6

Consolidated  Statements  of Cash  Flows for the
  Years  Ended December 30, 2000, January 1, 2000 and
  January 2, 1999                                                          F-7

Notes to Consolidated Financial Statements                                 F-8

Schedule II, Valuation and Qualifying Accounts                             F-37

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting  regulations  of the  Securities  and  Exchange  Commission  are  not
required  under  the  related  instructions,  are  inapplicable,  or  have  been
disclosed in the notes to consolidated financial statements and, therefore, have
been omitted.


                                  F-1


<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Vista Eyecare, Inc. and Subsidiaries:

     We have  audited  the  accompanying  consolidated  balance  sheets of VISTA
EYECARE,  INC. (a Georgia  corporation) AND SUBSIDIARIES as of December 30, 2000
and  January 1, 2000 and the  related  consolidated  statements  of  operations,
shareholders'  (deficit)/equity,  and cash flows for each of the three  years in
the period ended December 30, 2000. These financial  statements and the schedule
referred  to below  are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of Vista  Eyecare,  Inc. and
subsidiaries  as of  December  30,  2000 and  January 1, 2000 and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 30, 2000 in  conformity  with  accounting  principles  generally
accepted in the United States.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the Company filed  voluntary  petitions  with the United
States Bankruptcy Court for reorganization under Chapter 11. These matters raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in  regard to these  matters  are  described  in Note 3. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.

     As explained in Note 2 to the financial  statements,  effective  January 2,
2000 the Company changed its method of accounting for revenues and related costs
of retail  sales upon  adoption of  Securities  and  Exchange  Commission  Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
consolidated  financial  statements is presented for purposes of complying  with
the  Securities  and  Exchange  Commission's  rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audit of the basic  financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 30, 2001

                                       F-2

<PAGE>

                                     VISTA EYECARE, INC. AND SUBSIDIARIES
                                            (DEBTORS-IN-POSSESSION)
                                          CONSOLIDATED BALANCE SHEETS
                                      December 30, 2000 and January 1, 2000
                                    (In thousands except share information)
<TABLE>
<CAPTION>
                                                                                        2000           1999
                                                                                    -----------    -----------
 <S>                                                                                 <C>          <C>
                                                    ASSETS
 CURRENT ASSETS:
   Cash and cash equivalents                                                           $  8,066     $   2,886
   Accounts receivable (net of allowance: 2000 - $5,744; 1999 - $4,403)                  10,119        10,416
   Inventories                                                                           31,478        34,373
   Other current assets                                                                   1,590         2,761
                                                                                       ----------   ----------
      Total current assets                                                               51,253        50,436
                                                                                       ----------   ----------
 PROPERTY AND EQUIPMENT:
   Equipment                                                                             47,187        57,750
   Furniture and fixtures                                                                23,272        26,600
   Leasehold improvements                                                                18,664        28,458
   Construction in progress                                                                 540         3,427
                                                                                       ----------   ----------
                                                                                         89,663       116,235
   Less accumulated depreciation                                                        (60,092)      (62,329)
                                                                                       ----------   ----------
   Net property and equipment                                                            29,571        53,906

 OTHER ASSETS AND DEFERRED COSTS
   (net of accumulated amortization:  2000 - $2,142; 1999 - $1,500)                       7,766         9,315
 DEFERRED INCOME TAX ASSET                                                                  385           385
 GOODWILL AND OTHER INTANGIBLE ASSETS
   (net of accumulated amortization: 2000 - $2,691; 1999 - $6,994)                        1,913       106,177
                                                                                       ----------   ----------
                                                                                       $ 90,888     $ 220,219
                                                                                       ==========   ==========
</TABLE>


                                             F-3

<PAGE>

<TABLE>
<CAPTION>
                                                                                          2000        1999
                                                                                      ----------   ----------
<S>                                                                                   <C>           <C>
LIABILITIES AND SHAREHOLDERS' (DEFICIT)/EQUITY

LIABILITIES NOT SUBJECT TO COMPROMISE:

 CURRENT LIABILITIES:
   Accounts payable                                                                    $    783    $  17,288
   Accrued expenses and other current liabilities                                        19,693       24,472
   Current portion of other long-term debt and capital lease obligations                     --        1,098
   Revolving credit facility and term loan                                               12,911       19,292
                                                                                       ---------   ---------
      Total current liabilities                                                          33,387       62,150
                                                                                       ---------   ---------
 SENIOR NOTES (net of discount: 1999 - $1,253)                                               --      123,747

 OTHER LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                          --        6,865

LIABILITIES SUBJECT TO COMPROMISE (See Note 4)                                          170,824           --

 COMMITMENTS AND CONTINGENCIES (See Note 13)                                                 --           --

 REDEEMABLE COMMON STOCK                                                                     --          900

 SHAREHOLDERS' (DEFICIT)/EQUITY:
    Preferred deficit stock, $1 par value; 5,000,000 shares authorized, none issued          --          --
    Common stock, $0.01 par value, 100,000,000 shares authorized, 21,169,103
      and 21,179,103 shares issued and outstanding as of December 30, 2000 and
      January 1, 2000, respectively                                                          211         211
    Additional paid-in capital                                                            47,387      47,387
    Retained deficit                                                                    (156,848)    (16,968)
    Accumulated other comprehensive income                                                (4,073)     (4,073)
                                                                                       ---------   ---------
         Total shareholders' (deficit)/equity                                           (113,323)     26,557
                                                                                       ---------   ---------
                                                                                       $  90,888   $ 220,219
                                                                                       =========   =========
</TABLE>


     The accompanying notes are an integral part of these consolidated financial
statements.


                                           F-4

<PAGE>

<TABLE>
<CAPTION>
                                      VISTA EYECARE, INC. AND SUBSIDIARIES
                                             (DEBTORS-IN-POSSESSION)
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     For the years ended December 30, 2000, January 1, 2000 and January 2, 1999
                                   (In thousands except per share information)

                                                                            2000          1999          1998
                                                                        ----------     ----------    ----------
 <S>                                                                     <C>           <C>            <C>
 NET SALES                                                               $ 307,694     $  329,055     $ 245,331
 COST OF GOODS SOLD                                                        143,458        147,768       112,959
                                                                         ----------    ----------     ---------
 GROSS PROFIT                                                              164,236        181,287       132,402
 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE                              166,364        177,162       121,413
 IMPAIRMENT OF LONG-LIVED ASSETS                                             2,684          1,952             -
 RESTRUCTURING EXPENSE                                                       1,601              -             -
                                                                         ---------     ----------     ---------

 OPERATING INCOME/(LOSS)                                                    (6,413)         2,173        10,989
 INTEREST EXPENSE                                                            7,723         19,329         5,538
                                                                         ----------    ----------     ---------
 INCOME/(LOSS) BEFORE REORGANIZATION ITEMS AND TAXES                       (14,136)       (17,156)        5,451
 REORGANIZATION ITEMS (SEE NOTE 5)                                         121,539             -              -
                                                                         ----------    ----------     ---------
 EARNINGS/(LOSS) BEFORE TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT   (135,675)       (17,156)        5,451
 INCOME TAX EXPENSE                                                             -              -          2,037
                                                                         ----------    ----------     ---------

 NET EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT      (135,675)       (17,156)        3,414
 EXTRAORDINARY LOSS, NET (SEE NOTE 11)                                        (827)          (406)            -
 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET (SEE NOTE 2)      (3,378)            -              -
                                                                         ---------     ----------     ---------
 NET INCOME/(LOSS)                                                       $(139,880)    $  (17,562)    $   3,414
                                                                         =========     ==========     ==========

 BASIC EARNINGS/(LOSS) PER SHARE:
  EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT            (6.41)         (0.81)         0.16
  LOSS FROM EXTRAORDINARY ITEM                                               (0.04)         (0.02)            -
  LOSS FROM CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE              (0.16)             -             -
                                                                         ---------      ---------     ---------
  NET EARNINGS/(LOSS)PER BASIC SHARE                                     $   (6.61)     $   (0.83)    $    0.16
                                                                         =========      =========     =========

 DILUTED EARNINGS/(LOSS) PER SHARE:
  EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT           (6.41)         (0.81)          0.16
  LOSS FROM EXTRAORDINARY ITEM                                              (0.04)         (0.02)             -
  LOSS FROM CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE             (0.16)             -              -
                                                                         ----------    ----------     ---------
  NET EARNINGS/(LOSS)PER DILUTED SHARE                                   $  (6.61)     $   (0.83)     $    0.16
                                                                         ==========    ==========     ==========

     Pro forma amounts as if the new revenue recognition policy was applied retroactively (See Note 2):

                                                                                           1999          1998
                                                                                        ----------     ---------

  NET EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM                                         $ (17,239)    $   3,352
  NET EARNINGS/(LOSS)                                                                   $ (17,645)    $   3,352

  NET EARNINGS/(LOSS) PER SHARE-BASIC AND DILUTED:
     NET EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM                                      $   (0.82)    $    0.16
     NET EARNINGS/(LOSS)                                                                $   (0.84)    $    0.16


     The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>


                                            F-5


<PAGE>


<TABLE>
<CAPTION>

                                      VISTA EYECARE, INC. AND SUBSIDIARIES
                                             (DEBTORS-IN-POSSESSION)
                             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT)/EQUITY
                    For the years ended December 30, 2000, January 1, 2000 and January 2, 1999
                                     (In thousands except share information)

                                                                                              Accumulated
                                         Common Stock           Additional  Retained              Other
                                     ----------------------      Paid-In    Earnings          Comprehensive
                                     Shares          Amount      Capital    (Deficit)        Income       Total
                                     ------          ------     ----------  ----------    -----------  ----------
 <S>                                <C>              <C>         <C>         <C>            <C>           <C>
 BALANCE, January 3, 1998           20,819,955          207      42,284        (2,820)       (4,073)      35,598
 Awards of restricted stock             52,000            1         121                                      122
 Exercise of stock options             294,657            3       1,482                                    1,485
 Tax settlement (See Note 14)                                     3,308                                    3,308
 Net income                                                                     3,414                      3,414
                                    ----------        -----    --------     ---------     ---------     --------
 BALANCE, January 2, 1999           21,166,612          211      47,195           594        (4,073)      43,927
 Restricted stock                                                   136                                      136
 Exercise of stock options              12,491                       56                                       56
 Net loss                                                                     (17,562)                   (17,562)
                                    ----------        -----    --------     ---------     ---------     --------
 BALANCE, January 1, 2000           21,179,103          211      47,387       (16,968)       (4,073)      26,557
 Cancellation of Shares                (10,000)
 Net Loss                                                                    (139,880)                  (139,880)
                                    ----------        -----    --------     ---------    ----------    ---------
 BALANCE, December 30, 2000         21,169,103        $ 211    $ 47,387     $(156,848)    $  (4,073)   $(113,323)
                                    ==========        =====    ========     =========    ==========    =========

     The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>






                                             F-6


<PAGE>

<TABLE>
<CAPTION>
                                   VISTA EYECARE, INC. AND SUBSIDIARIES
                                         (DEBTORS-IN-POSSESSION)
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                       For the Years Ended December 30, 2000, January 1, 2000, and
                                      January 2, 1999 (In thousands)

                                                                    2000            1999            1998
                                                                    ----            ----            ----
<S>                                                              <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)                                                $(139,880)      $(17,562)       $  3,414
Adjustments to reconcile net income/(loss) to                     --------        -------         -------
   net cash provided by (used in) operating activities:
     Depreciation and amortization                                  17,526         18,602          14,177
     Provision for deferred income tax expense                          --             --           1,173
     Impairment of long-lived assets                                 2,684          1,952              --
     Restructuring expense                                           1,601             --              --
     Reorganization items                                          121,539             --              --
     Extraordinary loss                                                827            406              --
     Cumulative effect of a change in accounting principle           3,378             --              --
     Other                                                           1,181           (459)            936
     Changes in operating assets and liabilities, net of
       effects of acquisitions:
        Receivables                                                 (1,480)          (281)         (1,504)
        Inventories                                                  5,026         (2,703)          1,304
        Other current assets                                         1,171            138          (1,630)
        Accounts payable                                             9,351         (1,733)           (410)
        Accrued expenses                                            (4,335)        (2,069)         (7,691)
                                                                  ---------      ---------       ---------
            Total adjustments                                    $ 158,469      $  13,853       $   6,355
                                                                  ---------      ---------       ---------
            Net cash (used in) provided by operating activities     18,589         (3,709)          9,769
                                                                  ---------      ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                  (5,379)       (12,704)         (9,183)
Acquisitions, net of cash acquired                                      --             --         (97,357)
Proceeds from sale of property and equipment                            --            955              --
                                                                  ---------      ---------       ---------
            Net cash used in investing activities                   (5,379)       (11,749)       (106,540)
                                                                  ---------      ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of senior notes, net of discount                     --             --         123,580
Advances on revolving credit facility                              305,751         79,238          52,500
Repayments on revolving credit facility                           (312,132)       (65,946)        (66,000)
Principal payment on notes payable and capital leases                 (934)        (1,265)           (436)
Proceeds from exercise of stock options                                 --             56           1,485
Deferred financing costs                                              (715)          (811)         (9,845)
                                                                  ---------      ---------       ---------
            Net cash provided by (used in) financing activities     (8,030)        11,272         101,284
                                                                  ---------      ---------       ---------
NET INCREASE/(DECREASE) IN CASH                                      5,180         (4,186)          4,513
CASH, beginning of year                                              2,886          7,072           2,559
                                                                  ---------      ---------       ---------
CASH, end of year                                                $   8,066       $  2,886        $  7,072
                                                                  =========      =========       =========
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements.


                                    F-7

<PAGE>


                      VISTA EYECARE, INC. AND SUBSIDIARIES
                             (DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND OPERATIONS

     Vista  Eyecare,  Inc.  (the  "Company")  is engaged  in the retail  sale of
optical goods and services. The Company is largely dependent on Wal-Mart Stores,
Inc.  ("Wal-Mart")  for continued  operation of vision  centers which generate a
significant portion of the Company's revenues (See Note 7). In October 1997, the
Company  acquired the capital stock of Midwest  Vision,  Inc., a retail  optical
company with 51 locations in Minnesota and three adjoining states. In July 1998,
the Company  acquired the capital stock of  Frame-n-Lens  Optical,  Inc.,  which
operated approximately 280 vision centers,  mainly in the western United States.
In October 1998,  the Company  acquired the capital stock of New West  Eyeworks,
Inc. which operated approximately 175 vision centers in 13 states (See Note 8).

2.   SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its  subsidiaries.  All significant  intercompany  balances and transactions
have been  eliminated  in  consolidation.  The Company  operates on a 52/53 week
retail calendar with the fiscal year ending on the Saturday  closest to December
31. Pursuant to such calendar,  financial  information for 1998 is presented for
the  52-week  period  ended  January  2.  Due to  various  statutory  and  other
considerations,  international  operations  do not  operate  on this  52/53 week
calendar.  To allow for more timely  consolidation and reporting,  international
operations are reported using a fiscal year ending November 30.

     Certain  amounts in the  financial  statements  have been  reclassified  to
conform to the current year presentation.

Revenue Recognition

     In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No.  101,
"Revenue Recognition in Financial Statements". SAB 101 summarizes the SEC's view
in  applying  generally  accepted  accounting  principles  to  selected  revenue
recognition  issues.  Prior to the adoption of SAB 101,  the Company  recognized
revenues  and the  related  costs  from  retail  sales  when at least 50% of the
payment  was  received.  In  response  to SAB 101,  the  Company is  required to
recognize  revenue upon delivery of the product.  The amount of cash received at
the time the customer's  order is placed is recorded as a deposit  liability and
is presented within accrued liabilities. The effect of this change in accounting
principle was applied  cumulatively as of the beginning of 2000 and totaled $3.4
million.

Cash and Cash Equivalents

     The Company  considers cash on hand and short-term  cash  investments to be
cash and cash equivalents.  The Company's policy is to maintain  uninvested cash
at minimal levels.  Cash includes cash equivalents which represent highly liquid
investments  with a  maturity  of one  month  or  less.  The  Company  restricts
investment of temporary  cash  investments to financial  institutions  with high
credit standings.


                                       F-8


<PAGE>

Inventories

     Inventories  are valued at the lower of  weighted  average  cost or market.
Market represents the net realizable value.

Property and Equipment

     Property  and  equipment  are  stated  at  cost.  For  financial  reporting
purposes,  depreciation  is  computed  using the  straight-line  method over the
assets'  estimated  useful  lives or terms of the related  leases,  whichever is
shorter.  Accelerated  depreciation  methods  are used for income tax  reporting
purposes.   For  financial  reporting  purposes,   the  useful  lives  used  for
computation of  depreciation  range from five to ten years for  equipment,  from
three to nine  years for  furniture  and  fixtures,  from three to six years for
hardware and software related to information systems  processing,  and from five
to  nine  years  which  approximate  the  remaining  lease  term  for  leasehold
improvements.  At the time  property and  equipment  are  retired,  the cost and
related  accumulated  depreciation are removed from the accounts and any gain or
loss is credited or charged to income.  Periodically,  the Company evaluates the
net book value of property and  equipment  for  impairment.  This  evaluation is
performed for retail locations and compares management's best estimate of future
cash flows with the net book value of the  property and  equipment.  (See Note 4
for a discussion of impaired  property and  equipment.)  Maintenance and repairs
are  charged  to  expense  as  incurred.   Replacements   and  improvements  are
capitalized.

Balance Sheet Financial Instruments:  Fair Values

     The carrying amounts reported in the consolidated  balance sheets for cash,
accounts  receivable,  accounts  payable and short-term debt  approximates  fair
value  because  of the  immediate  or  short-term  maturity  of these  financial
instruments.  The carrying  amount  reported for "Revolving  Credit Facility and
Term Loan"  approximates  fair value  because  the  underlying  instrument  is a
variable rate note that reprices frequently.

     Liabilities  Subject to Compromise refers to liabilities  incurred prior to
the commencement  of the Chapter 11 Cases (See Note 4). The  settlement of these
liabilities will be determined in a court-approved  plan of  reorganization.  In
March 2001, the Company filed a plan of reorganization  which will result in the
settlement of these  liabilities at less than 100% of face value.  No adjustment
to these liabilities has been made in the December 30, 2000 financial statements
as the proposed plan of reorganization has yet to be approved.

     The Company is party to letters of credit  totaling  $4.5  million and $2.2
million at December 30, 2000 and January 1, 2000, respectively. In the Company's
past  experience,  virtually  no claims have been made against  these  financial
instruments. Management does not expect any material losses to result from these
off-balance-sheet   instruments  because  performance  is  not  expected  to  be
required.  Therefore,  management is of the opinion that the fair value of these
instruments is zero.

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist principally of trade accounts  receivable.
The  risk is  limited  due to the  large  number  of  individuals  and  entities
comprising the Company's customer base.


                                       F-9


<PAGE>

Goodwill and other Intangible Assets

     Goodwill and other  intangible  assets  represent the excess of the cost of
net assets acquired in certain contract  transactions and business  acquisitions
over their fair value.  Such amounts are amortized over periods  ranging from 11
years to 30 years.  The Company  periodically  evaluates  the carrying  value of
goodwill and other intangible  assets based on the expected future  undiscounted
operating cash flows of the related  business unit. (See Note 5 for a discussion
of goodwill impairments in 2000.)

Income Taxes

     Deferred  income  taxes are  recorded  using  current  enacted tax laws and
rates.  Deferred  income taxes are provided for  depreciation,  inventory  basis
differences,  and accrued  expenses  where there is a  temporary  difference  in
recording such items for financial reporting and income tax reporting purposes.

Other Deferred Costs

     Other deferred costs include  capitalized  financing  costs which are being
amortized  on a  straight  line basis over  periods  from one to seven  years to
correspond  with  the  terms  of  the  underlying  debt.  In  addition,  certain
capitalized  assets resulting from contractual  obligations are included and are
being  amortized  on a straight  line basis  over  periods of up to five  years.
Certain deferred financing costs which relate to pre-petition debt are no longer
being amortized.  When the related  pre-petition  debt is approved as an allowed
claim by the  Bankruptcy  Court,  these  deferred costs will adjust the carrying
value  of  the  related   debt.  Any gain  or  loss  will  be  recognized  as  a
reorganization item at that time.

Advertising and Promotion Expense

     Production  costs  of  future  media   advertising  and  related  promotion
campaigns are deferred until the advertising events occur. All other advertising
and  promotion  costs are expensed over the course of the year in which they are
incurred.

Interest Expense, Net

     Interest expense includes  interest on debt and capital lease  obligations,
purchase  discounts on invoice  payments,  the amortization of finance fees, and
the  amortization  of the discount on the senior notes.  The Company has stopped
accruing  interest on unsecured debt until the Company  emerges from Chapter 11,
or it becomes  probable  that the  Company  will pay these  amounts as part of a
reorganization plan.

Foreign Currency Translation

     The financial  statements of foreign  subsidiaries are translated into U.S.
dollars in accordance  with Statement of Financial  Accounting  Standards No. 52
("SFAS  52").  Translation  adjustments,   which  result  from  the  process  of
translating  foreign financial  statements into U.S. dollars,  were not material
for the years ended December 30, 2000 or January 1, 2000.

Derivative Instruments and Hedging Activities

     In  1998,  the  Financial  Accounting  Standards  Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". The Company's adoption of SFAS 133 in 2000
had no impact on the Company's financial statements as the Company did not hold
derivative instruments, nor participate in hedging activities during the
reporting period.

                                      F-10


<PAGE>

Other Comprehensive Income

     In July 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 130 ("SFAS 130"),  "Reporting  Comprehensive
Income". The statement  addresses the reporting and display of changes in equity
that result from transactions and other economic events,  excluding transactions
with owners.  The adoption of SFAS No. 130 did not have a material impact on the
Company's financial statements,  as comprehensive income was equal to net income
in 2000, 1999 and 1998.

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

3.   BANKRUPTCY PROCEEDINGS AND GOING CONCERN MATTERS

Proceedings Under Chapter 11 of the Bankruptcy Code

     On April 5, 2000,  the Company and ten of its  subsidiaries  (collectively,
the "Debtors") filed voluntary  petitions with the United State Bankruptcy Court
for the Northern  District of Georgia for  reorganization  under Chapter 11 (the
"Chapter 11 Cases"). The Chapter 11 Cases have been consolidated for the purpose
of joint  administration  under Case No.  00-65214.  The Debtors  are  currently
operating their businesses as  debtors-in-possession  pursuant to the Bankruptcy
Code.  All  affiliated  entities of the  Company are  included in the Chapter 11
Cases,  except  only (a) three  subsidiaries  which are  licensed  managed  care
organizations and (b) foreign subsidiaries of the Company.

     In March 2001, the Debtors filed a plan of  reorganization  for the Chapter
11 Cases.  We expect  the  Company  will  emerge  from  Chapter 11 in the second
quarter of 2001. There can be no assurance that the reorganization  plan will be
confirmed by the Bankruptcy  Court,  or that such plan will be  consummated.  If
confirmed and consummated,  the proposed plan of  reorganization  will result in
the settlement of unsecured claims at less than 100% of face value. The existing
Common Stock will be cancelled,  resulting in existing shareholders receiving no
value for their interests.

     The  proposed  plan  of  reorganization  includes  the  conversion  of  the
Company's pre-petition unsecured claims into new secured notes and common stock.
The secured  notes will have a face value of $120  million and will pay interest
of 12% twice a year at the end of March and  September.  The notes have an eight
year duration with principal  repayments based on excess cash balances available
at each interest payment date.

     As a result of the Chapter 11 filings,  absent  approval of the  Bankruptcy
Court, the Company is prohibited from paying,  and creditors are prohibited from
attempting  to collect,  claims or debts arising prior to April 5,2000 (See Note
10). We may assume or reject certain contracts which were signed before the date
the Debtors filed the  Bankruptcy  petition.  Rejected  contracts  will generate
unsecured claims in the Chapter 11 Cases. To assume  contracts,  we will have to
cure any outstanding  defaults.  We believe that, as part of our  reorganization
plan, the Company will be able to assume the contracts it desires to continue.


                                            F-11


<PAGE>

     Because of our operating  losses and the changes we recorded in 2000,  (See
Note 5), we do not meet certain requirements contained in some of our contracts.
We  anticipate  that,  as part of our  reorganization  plan,  we will meet these
requirements upon emergence from Chapter 11.

Going Concern Matters

     The accompanying  consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments  that might
result if the Company is unable to continue as a going  concern.  The  Company's
recent losses and negative cash flows from operations, and the Chapter 11 Cases,
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern. As discussed above,  management has submitted a  plan of reorganization
to the  Bankruptcy  Court.  The  ability of the  Company to  continue as a going
concern and the  appropriateness  of using the going  concern basis is dependent
upon,  among  other  things,  (i) the  Company's  ability  to  comply  with  the
debtor-in-possession  financing  agreements ("DIP" Facility), (ii) the Company's
ability    to    obtain     financing    upon     expiration    of    the    DIP
Facility, (iii) confirmation of a plan of reorganization  under  the  Bankruptcy
Code, (iv) the Company's  ability to achieve  profitable  operations  after such
confirmation,  and (v) the Company's  ability to generate  sufficient  cash from
operations to meet its obligations.

     Management  believes  that the DIP  Facility,  along with cash  provided by
operations,  will provide sufficient  liquidity to allow the Company to continue
as a going  concern;  however,  there can be no  assurance  that the  sources of
liquidity  will be available or  sufficient  to meet the  Company's  needs.  The
consolidated  financial  statements do not include any  adjustments  relating to
recoverability  and  classification  of recorded asset amounts or the amount and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

     A plan of  reorganization  could  materially  change the amounts  currently
recorded in the consolidated  financial statements.  The consolidated  financial
statements do not give effect to any adjustments to the carrying value of assets
or amounts and  classifications  of  liabilities  that might be  necessary  as a
result of the Chapter 11 Cases, except as discussed in Note 5.

4. ACCOUNTING DURING REORGANIZATION PROCEEDINGS

     Entering  the  reorganization  proceedings  does not  affect or change  the
application of generally accepted accounting  principles followed by the Company
in the preparation of its consolidated financial statements. During the pendency
of the  Chapter 11 Cases,  our  consolidated  financial  statements  distinguish
transactions  and events that are directly  associated  with the  reorganization
from the ongoing  operations  of the  business in  accordance  with the American
Institute  of  Certified  Public  Accountants'  Statement  of  Position  90-7  -
"Financial  Reporting by Entities in  Reorganization  under the Bankruptcy Code"
("SOP 90-7"). The Company's  consolidated  balance sheets segregate  Liabilities
Subject to Compromise from  liabilities not subject to compromise.  In addition,
we have  stopped  accruing  for  interest  on  unsecured  debt until the Company
emerges from protection  under Chapter 11 of the Bankruptcy  Code, or it becomes
probable that we will pay these amounts as part of a plan of reorganization.


                                         F-12


<PAGE>

Liabilities Subject to Compromise

     Liabilities  Subject to Compromise refers to liabilities  incurred prior to
the  commencement  of the Chapter 11 Cases,  including  those  considered by the
Bankruptcy  Court to be  pre-petition  claims,  such as claims  arising out of a
rejection of a lease for real property.  These liabilities  consist primarily of
amounts  outstanding  under  long-term debt and also include  accounts  payable,
accrued interest, accrued restructuring costs  and other accrued expenses. These
amounts  represent  the  Company's  estimate of known or potential  claims to be
resolved  in the  Chapter  11  Cases.  Such  claims  remain  subject  to  future
adjustments.  Adjustments may result from (1)  negotiations;  (2) actions of the
Bankruptcy Court; (3) further  development with respect to disputed claims;  (4)
future rejection of additional  executory contracts or unexpired leases; (5) the
determination as to the value of any collateral  securing claims;  (6) proofs of
claim;  or (7)  other  events.  Payment  terms  for  these  amounts,  which  are
considered long-term liabilities at this time, will be established in connection
with the Chapter 11 Cases.

     The principal  categories of claims  classified as  Liabilities  Subject to
Compromise  in the Chapter 11 Cases are identified below: (amounts in thousands)


                                                              December 30, 2000
                                                              -----------------
       Accounts payable                                             $ 25,856
       Accrued expenses                                                2,717
       Provision for rejected contracts                                3,142
       Senior notes, net of discount including $7,480
         accrued interest                                            131,266
       Other long-term debt and capital lease obligations              7,843
                                                                    --------
                                                                    $170,824
                                                                    ========


     The  Company  has  received  approval  from  the  Bankruptcy  Court  to pay
pre-petition  and  post-petition  employee wages,  salaries,  benefits and other
employee obligations,  to pay vendors and other providers in the ordinary course
for goods and services received from April 5, 2000 and to honor customer service
programs,  including warranties and returns. These items are recorded as accrued
expenses not subject to compromise.

5. REORGANIZATION  ITEMS,  RESTRUCTURING  EXPENSES  AND IMPAIRMENT OF LONG-LIVED
   ASSETS.

General

     In the last quarter of 1999 and in fiscal 2000,  we have  recorded  charges
relating to store closings,  to impairment of long-lived  assets and to expenses
incurred  in the  Chapter 11 Cases.  Generally  accepted  accounting  principles
require different presentations depending on whether we incurred the cost before
or after the filing of the Chapter 11 Cases.


                                      F-13


<PAGE>

Impairment of Fixed Assets and Restructuring Expenses

     We have recorded  charges for impairment of fixed assets and  restructuring
expenses in  connection  with stores  closed before the filing of the Chapter 11
Cases.  Emerging  Issues  Task Force Issue  94-03,  "Liability  Recognition  for
Certain Employee  Termination  Benefits to Exit an Activity  (Including  Certain
Costs Incurred in a  Restructuring)",  requires that we present these charges as
components of operating income.

     In connection  with stores closed after the filing of the Chapter 11 Cases,
we have recorded  charges for  impairment of fixed assets and for  restructuring
expenses.  All expenses of this nature  incurred after the first quarter of 2000
have been presented as reorganization items, below operating income.

Summary of Restructuring Charges

     The table below  summarizes  charges  for  impairment  of fixed  assets and
restructuring expenses incurred in the fourth quarter 1999 and the first quarter
2000. These charges were incurred before the Company began the Chapter 11 Cases:
(amounts in thousands)

                                       Fourth Quarter 1999    First Quarter 2000
                                       -------------------    ------------------
      Impairment of fixed assets               $1,952                 $2,684

      Restructuring expense
        Provision for rejected leases          $ --                   $1,362
        Other store closing costs                --                      239
                                               ------                 ------
                                               $ --                   $1,601
                                               ======                 ======

     Impairment and  restructuring  charges  incurred after the first quarter of
2000 are  considered  reorganization  items and are  presented  below  operating
income.

Summary of Reorganization Items

     Results for fiscal  2000  include  charges  which were  incurred  after the
Company  filed the  Chapter 11 Cases.  Expenses  related  to the  reorganization
process and the Chapter 11 Cases are considered  reorganization items. The table
below summarizes these charges: (amounts in thousands)

                                                           2000
                                                      -------------
       Impairment of goodwill                            $ 100,805
       Impairment of fixed assets                           12,000
       Provision for rejected leases                         1,920
       Other store closing costs                               670
       Professional fees                                     3,421
       Retention bonuses                                     2,173
       Interest income on accumulated cash                    (144)
       Other reorganization costs                              694
                                                         ---------
                                                         $ 121,539
                                                         =========

     The following  represents  activity in the restructuring and reorganization
provisions during 2000:  (amounts in thousands)

                                                                  Accrued at
                            Charged to expense      Paid      December 30, 2000
                            ------------------      ----      -----------------

Restructuring and
  reorganization items            $8,505           $3,778          $4,727


                                      F-14


<PAGE>


Impairment of Long-Lived Assets

     Due to continuing  negative  cash flows,  coupled with the possible sale or
disposition of certain  Company  assets,  we recorded a noncash charge of $100.8
million  for the  impairment  of goodwill  associated  with the  acquisition  of
Frame-n-Lens  Optical,  Inc.,  New West  Eyeworks, Inc. and Midwest Vision, Inc.
("Acquired  Entities").  In  addition,  we  recorded  a noncash  charge of $10.6
million to reflect the impairment of fixed assets  associated  with the Acquired
Entities.

     The Company  terminated  ten leases  governing all of the  Company's  units
located in Meijer Thrifty Acre locations. The Company recorded a noncash pre-tax
charge of $987,000 in 2000 related to the  impairment of leasehold  improvements
and furniture and fixtures in the Meijer locations.

     In the second  quarter of 2000,  the  Company  reached  an  agreement  with
Wal-Mart Stores,  Inc. to terminate its 72 leases governing all of the Company's
units located in Sam's Club locations.  Pursuant to this agreement,  the Company
turned over all such  locations to Wal-Mart  Stores by  September  1, 2000.  The
Company  received no  proceeds  from  Wal-Mart  for the early  termination,  and
Wal-Mart  will waive all claims for rent under the leases for the balance of the
original lease term. The Company  recorded a noncash  pre-tax charge of $367,000
related to the impairment of leasehold  improvements  and furniture and fixtures
in the Sam's Club locations.

     A summary of the  impairment  charges  recorded since filing the Chapter 11
Cases follows: (amounts in thousands)

                      Impairment of goodwill:
                             Frame-n-Lens                 $ 38,318
                             New West Eyeworks              60,610
                             Midwest Vision                  1,877
                                                          --------
                    Total goodwill impairment             $100,805
                                                          ========

                    Impairment of fixed assets:
                             Frame-n-Lens                 $  4,792
                             New West Eyeworks               5,186
                             Midwest Vision                    668
                             Meijer Thrifty Acre               987
                             Sam's Club                        367
                                                          --------
                     Total fixed asset impairment         $ 12,000
                                                          ========

     We periodically  evaluate the carrying value of long-lived  assets based on
the expected future  undiscounted  operating cash flows of the related  business
unit. As part of the reorganization  process, we may decide to sell or otherwise
dispose of assets for amounts  other than those  reflected  in the  Consolidated
Financial  Statements,  which may result in  further  impairment  of  long-lived
assets.

     In addition to the  impairment  of goodwill and fixed  assets,  the Company
recorded  adjustments to inventory of $1.1 million and to accounts receivable of
$0.5 million to adjust the carrying value to net realizable value. These charges
were included in cost of goods sold and SG&A expense, as appropriate.


                                          F-15


<PAGE>


6. SUBSEQUENT EVENTS

     In  March  2001,  the  Company  filed a plan  of  reorganization  with  the
Bankruptcy Court. Major provisions of the plan are as follows:

o    Unsecured  creditors  will  receive 12% secured  notes with a face value of
     $120  million  and  equity  in  the  Reorganized  Company.   This  proposed
     settlement is less than 100% of the face value of this debt.
o    The existing Common Stock will be cancelled and current  shareholders  will
     not receive a distribution for their interests.
o    The  freestanding  operations  will  be  disposed  of  either  by  sale  or
     abandonment, prior to emergence from Bankruptcy.

     In February  2001,  the  Company  signed a purchase  agreement  to sell the
assets of its freestanding  locations and the Fullerton,  California  laboratory
for $8.5 million. The sale is expected to close in April 2001.

     Freestanding  operations  include the remaining 226 freestanding  locations
acquired from Midwest  Vision,  Inc.  ("Midwest"),  Frame-n-Lens  Optical,  Inc.
("Frame-n-Lens"),  and New West  Eyeworks,  Inc. ("New West") and the Fullerton,
California laboratory and administrative  facility. The assets to be disposed of
consist primarily of inventory,  fixed assets and a California HMO license.  The
principal  liability of this  division is rent  obligations  that will either be
assumed  by  the  purchaser  or  rejected  through  the  Company's   Chapter  11
proceedings.

     Pro forma unaudited financial results of operations are presented below, as
if the freestanding  operations were disposed of at the beginning of the periods
presented.  The pro forma results  presented  include  certain  adjustments  and
estimates by management.  The pro forma information does not necessarily reflect
actual  results that would have  occurred nor is it  necessarily  indicative  of
future results of operations of the Company without the freestanding operations.

                                             2000        1999       1998
                                           --------    --------   --------
   Net sales                               $246,915    $247,875   $209,220
   Gross profit                            $133,481    $134,057   $112,509
   Operating income                        $ 13,493    $ 12,230   $ 11,424
   EBITDA prior to significant provisions  $ 25,833    $ 26,021   $ 23,751

     EDITDA  is  calculated  as  operating   income  before   interest,   taxes,
depreciation  and  amortization.  EBITDA  prior  to  significant  provisions  is
calculated  as EBITDA  prior to  Restructuring  Expense,  Reorganization  Items,
Extraordinary  Items,  Cumulative Effect and the 1999 provisions for receivables
of $1.3 million.


7.   WAL-MART MASTER LICENSE AGREEMENT AND OTHER AGREEMENTS

     Wal-Mart Agreement
     ------------------

     In 1994, the Company and Wal-Mart replaced their original  agreement with a
new master license agreement (the "Wal-Mart Agreement"), which increased minimum
and percentage  license fees payable by the Company and also granted the Company
the  opportunity  to  operate up to 400 vision  centers in  existing  and future
Wal-Mart  stores  (395  vision  centers  were in  operation  under the  Wal-Mart
Agreement at fiscal year end 2000). In January 1995, the Company made a lump sum
payment in exchange for such  opportunity.  The payment is being  amortized over
the initial term of the vision  centers  opened  subsequent  to January 1, 1995.
Each vision center  covered by the Wal-Mart  Agreement  has a separate  license.
Pursuant to the Wal-Mart Agreement,  the term of each such license is nine years
with a renewable option for one additional  three-year term.  Percentage license
fees remain the same over the  nine-year  base term and three- year option term,
whereas minimum license fees increase during the three-year option term.


                                      F-16


<PAGE>

     Consulting and Management Agreement
     -----------------------------------

     Among  other  things,  the  Wal-Mart  Agreement  requires  an  independent,
licensed  optometrist  to  practice  adjacent  to or near each of the  Company's
vision centers for at least 48 hours per week. In 1990, the Company entered into
a long-term  consulting and management service agreement,  as amended,  with two
companies  (Eyecare Leasing,  Inc. ("ELI") and  Stewart-Phillips,  Inc. ("SPI"))
jointly owned by two  shareholders to recruit such  optometrists  for certain of
its vision centers.  Subject to applicable  state  regulations,  this agreement,
among other things,  required the Company to provide space and certain equipment
to the optometrists for which the optometrists pay the Company an occupancy fee.
In exchange  for their  services,  ELI and SPI  received  certain fees under the
agreement.  The net payments offset  occupancy  expense incurred by the Company.
Occupancy expense is a component of cost of goods sold.

     In January 1997, the Company completed various  transactions related to its
relationship with each of ELI and SPI. The transactions involved the termination
of such consulting agreement and transfer of the responsibilities of ELI and SPI
to a subsidiary of the Company. As a result of these  transactions,  the Company
acquired the right to the payments which  otherwise  would have been made to ELI
and SPI under the consulting  agreement.  The aggregate cost of the transactions
was $4.6 million,  which was  capitalized  as an  intangible  asset and is being
amortized  over the remaining life of the original term of vision center leases.
The Company  made a lump sum  payment of  $500,000  at closing and entered  into
promissory  obligations  for the balance,  payable over a 12-year period at 6.4%
interest.

     Mexico Agreement
     ----------------

     In 1994,  the Company  opened 8 vision centers in stores owned and operated
by Wal-Mart de Mexico, S.A. de C.V. ("Wal-Mart de Mexico"). In 1995, the Company
completed the negotiation of a master license  agreement  governing these vision
centers.  Pursuant to this agreement,  each vision center has an individual base
term of five years from the date of opening,  followed by two options  (each for
two years), and one option for one year. Each party has the right to terminate a
location which fails to meet specified sales levels.  The agreement provides for
annual fees based on a minimum and percentage of sales. The agreement also gives
the  Company a right of first  refusal to open  vision  centers in all stores in
Mexico  owned by  Wal-Mart  de Mexico.  As of  December  30,  2000,  the Company
operated 27 vision centers in Wal-Mart de Mexico stores.

     Fred Meyer
     ----------

     The Company operates 56 leased vision centers in stores owned by Fred Meyer
pursuant to a master license  agreement.  The agreement provides for minimum and
percentage  rent and  other  customary  terms  and  conditions.  The term of the
agreement  is for five years  (expiring  December  31,  2003),  with a five-year
option.


                                      F-17


<PAGE>

8.   ACQUISITIONS

     On July 28, 1998, the Company acquired all the outstanding capital stock of
Frame-n-Lens Optical, Inc.  ("Frame-n-Lens") in a transaction accounted for as a
purchase business combination.  Prior to the acquisition,  Frame-n-Lens operated
approximately  280 retail optical centers in 23 states.  The aggregate  purchase
price was $50  million  of which  $23  million  was paid in cash and  additional
borrowings from the Company's credit facilities, $24 million was assumed in debt
and  liabilities,  and  $3  million  was  established  as  a  deferred  purchase
obligation to be paid in quarterly installments over six years.

     The Company has  deposited  installment  payments of the deferred  purchase
obligation  into a separate  company bank account.  As of December 30, 2000, the
Company had  deposited a total of  $914,000  which is included in the  Company's
cash  balance.  The Company has the right to  withhold  payment of the  deferred
purchase   obligation   based  upon  the   identification   of  any  undisclosed
liabilities. The Company is currently defending a class-action lawsuit which was
filed  against  Frame-n-Lens  and which was not  disclosed to the Company at the
time of  acquisition.  Although  management  cannot  predict the outcome of this
litigation,  we  believe  that the  amount  accrued  for the  deferred  purchase
obligation  will be  sufficient  to cover any  costs  incurred  related  to this
lawsuit.

     The excess of cost over fair value of assets acquired was $41 million,  and
was being amortized over 30 years using the  straight-line  method. In the third
quarter of 2000, the Company  determined  that the goodwill  associated with the
Frame-n-Lens acquisition was impaired, resulting in a charge of $38.3 million in
2000.  Frame-n-Lens'  financial  position and results of operations are included
with  those  of the  Company  for  the  periods  subsequent  to the  date of the
acquisition.  In November 2000, the Company  decided to dispose of the remaining
locations acquired from Frame-n-Lens. (See Note 6.)

     On October 23, 1998, the Company acquired all the outstanding capital stock
of New West  Eyeworks,  Inc.  ("New West") in a  transaction  accounted for as a
purchase  business  combination.  Prior to the  acquisition,  New West  operated
approximately  175 retail optical centers in 13 states.  The aggregate  purchase
price was $79 million,  including  the  assumption of certain  indebtedness  and
acquisition-related  expenses  which were paid with a portion of the proceeds of
the  Company's  12 3/4% Senior  Notes  due 2005  (the  "Notes")  (See Note 10 to
Consolidated  Financial  Statements).  In September  1999,  the Company sold the
Tempe  manufacturing  facility acquired from New West Eyeworks for approximately
$1 million.

     The excess of cost over fair value of the assets  acquired  was $64 million
and was being  amortized over 30 years using the  straight-line  method.  In the
third quarter of 2000, the Company determined that the goodwill  associated with
the New West acquisition was impaired, resulting in a charge of $60.6 million in
2000. New West's financial  position and results of operations are included with
those of the Company in the period subsequent to the date of the acquisition. In
November  2000,  the Company  decided to dispose of the  freestanding  locations
acquired from New West. (See Note 6.)


                                      F-18


<PAGE>

     The following  summary  prepared on an unaudited basis presents the results
of operations of the Company  combined with  Frame-n-Lens and New West as if the
acquisitions  had occurred at the beginning of 1998, after the impact of certain
adjustments.  These  adjustments  include  1) the cost  savings  related  to the
consolidation   of  duplicative   manufacturing   and   administrative   support
facilities,  2) the amortization of goodwill,  3) increased  interest expense on
the  acquisition  debt, 4)  elimination of interest on debt repaid with proceeds
from the Notes,  and 5) the related  income tax effects: (amounts in  thousands,
except per share amounts)


                                                               January 2,
                                                                  1999
                                                               (unaudited)
                                                               -----------
 Net sales                                                     $  325,670
 Operating income                                              $   15,831
 Net loss                                                      $   (2,811)
 Loss per share                                                $    (0.13)
--------------------------------------------------------------------------------

     The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had occurred as of the beginning of the period
presented.

     In October 1997, the Company  acquired all the outstanding  common stock of
Midwest Vision,  Inc.  ("Midwest") in a transaction  accounted for as a purchase
business combination. Midwest's financial position and results of operations are
included  with  those of the  Company in the  period  subsequent  to the date of
acquisition.  Prior to the  acquisition,  Midwest  operated  51  retail  optical
centers in Minnesota,  Wisconsin,  Iowa and North Dakota. The aggregate purchase
price  was  approximately  $5  million,  including  assumed  long-term  debt  of
approximately  $1  million.  The  excess of cost over fair  value of the  assets
acquired was $2 million and was being amortized on a straight-line basis over 15
years.  In the third quarter of 2000, the Company  determined  that the goodwill
associated with the Midwest  acquisition was impaired,  resulting in a charge of
$1.9 million in 2000.

     The purchase  price was paid in cash of $2 million,  a note payable of $0.6
million and 110,975  shares of the  Company's  common  stock.  In addition,  the
Company  issued a put option to the seller,  entitling the seller to put 100,000
of such shares to the Company at $9.00 per share in January 2000.  Subsequent to
January 1, 2000, the seller  exercised the put option.  The Company has not paid
this obligation.  Any claims asserted by the seller will be addressed during the
Company's Chapter 11 proceedings.  The additional  obligation has been reflected
in Liabilities Subject to Compromise in the Consolidated Balance Sheets.

9.   INVENTORY

     The Company  classifies  inventory as finished  goods if such  inventory is
readily  available  for  sale to  customers  without  assembly  or  value  added
processing.  Finished goods include contact lenses,  over the counter sunglasses
and  accessories.  The Company  classifies  inventory  as raw  materials if such
inventory  requires  assembly  or value  added  processing.  This would  include
grinding a lens blank, "cutting" the lens in accordance with a prescription from
an  optometrist,  and  fitting  the lens in a frame.  Frames  and uncut lens are
considered raw materials.  A majority of the Company's  sales  represent  custom
orders;  consequently,  the majority of the Company's inventory is classified as
raw materials.


                                      F-19


<PAGE>



     Inventory  balances,  by  classification,  may  be  summarized  as follows:
(amounts in thousands)

                                               2000           1999
                                            ---------      ---------
 Raw materials                              $  22,175      $  24,408
 Finished goods                                 8,153          8,804
 Supplies                                       1,150          1,161
                                            ---------      ---------
                                            $  31,478      $  34,373
                                            =========      =========

10.  LONG-TERM DEBT

     All of the  Company's  unsecured  debt is  considered  part of  Liabilities
Subject to Compromise in the Consolidated Balance Sheets (See Note 4) and may be
settled at less than face value. All interest accruals and payments on unsecured
debt were suspended  upon filing the Chapter 11 Cases.  No principal or interest
payments will be made on unsecured debt until approved by the Bankruptcy Court.

Debtor-in-Possession Financing

     On May 9, 2000,  the  Bankruptcy  Court  approved an order  permitting  the
Company to enter into a $25 million  debtor-in-possession  credit  facility with
Foothill  Capital  Corporation  (the "DIP  Facility").  The DIP Facility  (which
replaced the Company's  prior  secured  credit  facility  with Foothill  Capital
Corporation)  consists of a $12.5 million term loan and $12.5 million  revolving
credit facility.  The Company paid  professional  fees,  organization  fees  and
waiver fees of $500,000 to convert the previous  Foothill Credit Facility to the
DIP Facility. As of December 30, 2000, the Company had borrowed a total of $12.9
million  (inclusive  of the  $12.5  million  term  loan  portion)  under the DIP
Facility.

     The DIP Facility contains customary terms and conditions. It expires on May
31, 2001. The DIP Facility further provides that:

o    The Company must maintain a rolling twelve month EBITDA of no less than $15
     million,  calculated prior to restructuring charges,  reorganization items,
     extraordinary losses and store impairment reserves.

o    The $12.5 million term loan portion of the DIP Facility  bears  interest at
     15% per annum.

o    Interest  rates on the  revolver  portion of the DIP  Facility are based on
     either  the Wells  Fargo  Bank,  N.A.  Base  Rate  plus 2% or the  Adjusted
     Eurodollar Rate plus 3.25%.

o    Availability  under the DIP Facility is limited to certain  percentages  of
     accounts  receivable and inventory,  subject to other  limitations based on
     rolling 60-day cash collections.

Although the  Company  is  currently  in  compliance  with the  terms of the DIP
     Facility, a continuation of negative sales and cash flow trends could cause
     the Company to breach the EBITDA covenant.


                                          F-20


<PAGE>

     The Company  believes that the DIP Facility should provide it with adequate
liquidity  to  conduct  its  operations  while  it  awaits  confirmation  of its
reorganization plan. The Company is currently working with Foothill to establish
a revolving credit facility which will be available upon exiting from bankruptcy
(the "Exit  Facility").  The Exit Facility will replace the current DIP Facility
and should provide the Company with adequate liquidity to conduct its operations
upon  emergence  from  bankruptcy.  However,  the Company's  liquidity,  capital
resources,  results of operations and ability to continue as a going concern are
subject to known and unknown risks and uncertainties.

     Foothill Credit Facility
     ------------------------

     On  November  12,  1999,  the Company  replaced  its prior  secured  credit
facility with a new $25.0 million secured credit facility with Foothill  Capital
Corporation  (the "Foothill  Credit  Facility").  The Foothill  Credit  Facility
consists of a $12.5 million term loan and a $12.5 million revolver.

     The proceeds of the Foothill  Credit Facility were available for making the
October 15, 1999 payment  under the Senior  Notes,  refinancing  existing  debt,
working capital, and general corporate purposes.  All obligations of the Company
under  the  Foothill  Credit  Facility  were   unconditionally  and  irrevocably
guaranteed jointly and severally by certain of the Company's subsidiaries.

     The revolver  under the Foothill  Credit  Facility  carried  interest rates
equal to, at the option of the Company,  either (i)  Foothill's  Reference  Rate
plus  2.00% or (ii) the  LIBOR  rate plus  3.25%.  The term  loan  portion  bore
interest at the rate of 15% per annum.

     The Company filed for protection under Chapter 11 of the Bankruptcy Code on
April 5, 2000 and  negotiated  with Foothill to establish the DIP Facility.  The
DIP Facility,  which was approved by the Bankruptcy Court in May 2000,  replaced
the Foothill Credit Facility.

     The Company  paid  approximately  $715,000  and  $811,000  in various  fees
related to its various credit facilities in 2000 and 1999, respectively.

     Senior Notes
     ------------

     On October 8, 1998,  the Company  issued $125  million 12 3/4% Senior Notes
due 2005 (the "Notes")  pursuant to Rule 144A of the Securities  Act. The Notes,
which were sold at a discount for an aggregate price of $123.6 million,  require
semiannual interest payments commencing on April 15, 1999. The Notes were issued
pursuant to an indenture containing customary provisions including:  limitations
on incurrence of additional  indebtedness;  limitations on restricted  payments;
limitations  on  asset  sales;  payment  restrictions  affecting   subsidiaries;
limitations on liens;  limitations on transactions  with  affiliates;  and other
customary terms.

     A  portion  of the  proceeds  from the  Notes was  utilized  to  extinguish
outstanding  indebtedness on the Company's existing credit facility (such credit
facility was terminated  simultaneously with the repayment),  with the remainder
to be utilized to complete the acquisition of New West and pay for miscellaneous
expenses related to the acquisitions of Frame-n-Lens and New West.


                                      F-21


<PAGE>

     In  anticipation  of the Notes  offering,  the Company  entered  into three
anticipatory  hedging  transactions with a notional amount of $100 million.  The
interest rates on these  instruments were tied to U.S.  Treasury  securities and
ranged  from  5.43%  to  5.62%.  The  Company  settled  these  transactions  for
approximately $4.6 million.  The settlement costs were being treated as deferred
financing  costs  amortized  over the life of the Notes;  however,  the  Company
stopped  amortizing  these deferred  financing  costs upon filing the Chapter 11
Cases.  When the senior notes are approved as an allowed claim by the Bankruptcy
Court,  these  deferred  financing  costs,  along with the Bond discount of $1.2
million,  will adjust the carrying value of the notes to the allowed value.  Any
gain or loss will be recognized as a reorganization item at that time.

     Unsecured Notes
     ---------------

     The Company  entered into  unsecured  promissory  notes relative to various
transactions  completed with the Frame-n-Lens and New West  acquisitions in 1998
and the ELI and Midwest Vision  acquisitions in 1997 (See Note 8). The notes are
fixed  rate  instruments,  with  rates  ranging  from 6.4% to 8.5%.  The  future
scheduled contractual principal payments for the Company's borrowings (which are
subject to being  restructured  in connection with the Chapter 11 Cases) were as
follows at December 30, 2000:  (amounts in thousands)

                                                 Contractual
                                              Principal Payments
                                              ------------------
 2001                                           $   14,303
 2002                                                  545
 2003                                                  373
 2004                                                  373
 2005                                                  373
 Thereafter                                        128,752
                                                -----------
                                                $  144,719
                                                ===========
     Long-Term Debt Balances
     -----------------------

     Long-term  debt  obligations,  exclusive of capital lease  obligations,  at
December  30, 2000 and January 1, 2000  consisted of the  following: (amounts in
thousands)

<TABLE>
<CAPTION>
                                                                2000               1999
                                                             ---------          ----------
        <S>                                                  <C>                <C>
        12 3/4% Senior Notes Due 2005                        $125,000           $ 125,000
        Discount on 12 3/4 % Senior Notes                      (1,214)             (1,253)
        Borrowings under Foothill Credit Facility                  --              19,292
        Borrowings under DIP Facility                          12,911                  --
        Other promissory notes                                  6,808               7,586
                                                             ---------          ---------
                                                             $143,505           $ 150,625
        Less: Borrowings not subject to compromise
              classified as current                            12,911              20,154
                                                             ---------          ---------
        Long-term debt subject to compromise                 $130,594           $ 130,471
                                                             =========          =========
</TABLE>

     As of December 30, 2000,  the Company had borrowed  $12.9 million under the
DIP Facility at a weighted  average  interest  rate of 15%. The  aggregate  fair
value of the  Company's  long-term  debt  obligation  under the DIP  Facility is
estimated to approximate its carrying value.


                                         F-22

<PAGE>



11.      EXTRAORDINARY ITEM

     In 2000, the Company recorded an extraordinary loss of $827,000 as a result
of refinancing  the Company's  Foothill  Credit  Facility.  In 1999, the Company
recorded  an  extraordinary  loss of  $406,000  as a result of  refinancing  the
previous secured credit facility.  Both refinancings  necessitated the write-off
of capitalized  costs  associated with the previous  facilities.  Because of the
Company's decision to fully reserve for the Company's 2000 and 1999 tax benefit,
the net tax effect on these extraordinary items is zero.

12.   FINANCIAL INFORMATION OF GUARANTORS

     The Company's  wholly owned domestic  subsidiaries,  Midwest Vision,  Inc.;
NVAL  Healthcare  Systems,   Inc.;   International   Vision  Associates,   Ltd.;
Frame-n-Lens Optical, Inc.; Vision Administrators,  Inc.; Family Vision Centers,
Inc.; New West Eyeworks,  Inc.; Alexis Holdings Company, Inc.; and Vista Eyecare
Network,  LLC  (collectively,  the  "Guarantors"),  have  guaranteed on a senior
unsecured  basis,  jointly  and  severally,  the  payment of the  principal  of,
premium,  if any,  and  interest  on the Notes.  Combined  summarized  financial
information of the Guarantors is presented below: (amounts in thousands)

<TABLE>
<CAPTION>
 For the years ending:             December 30, 2000         January 1, 2000        January 2, 1999
                                   -----------------         ---------------        ---------------
 <S>                                   <C>                     <C>                     <C>
 Net sales                           $   77,004                $  123,090              $   49,904
 Gross profit                        $   41,772                $   63,747              $   21,545
 Net loss                            $ (133,126)               $  (10,151)             $   (2,861)

                                   December 30, 2000         January 1, 2000        January 2, 1999
                                   ------------------        ---------------        ---------------
 Current assets                      $   13,963                $   14,287              $  22,080
 Noncurrent assets                   $    2,989                $   16,574              $  15,832
 Current liabilities                 $    3,288                $   25,742              $  18,979
 Noncurrent liabilities              $    3,554                $    3,265              $   3,748
</TABLE>


13.   COMMITMENTS AND CONTINGENCIES

     The Company incurred  liabilities  prior to the commencement of the Chapter
11 Cases  (Liabilities  Subject to Compromise),  including claims arising out of
rejections of leases for real property.  These liabilities  consist primarily of
amounts  outstanding  under  long-term debt and also include  accounts  payable,
accrued interest, accrued restructuring costs  and other accrued expenses. These
amounts  represent  the  Company's  estimate of known or potential  claims to be
resolved  in the  Chapter  11  Cases.  Such  claims  remain  subject  to  future
adjustments.  Adjustments may result from (1)  negotiations;  (2) actions of the
Bankruptcy Court; (3) further  development with respect to disputed claims;  (4)
future rejection of additional  executory contracts or unexpired leases; (5) the
determination as to the value of any collateral  securing claims;  (6) proofs of
claim;  or (7)  other  events.  Payment  terms  for  these  amounts,  which  are
considered long-term liabilities at this time, will be established in connection
with the  Chapter  11  Cases.  As part of the  disposition  of the  freestanding
locations,  the  Company  expects to either  assign or reject  all  freestanding
location leases, including the Fullerton, California facility lease.


                                            F-23


<PAGE>

     Non-cancellable Operating Lease and License Agreements
     ------------------------------------------------------

     As of  December  30,  2000,  the Company is a lessee  under non-cancellable
operating lease  agreements for certain  equipment which expire at various dates
through  2003.  Additionally,  the  Company  is  required  to  pay  minimum  and
percentage  license fees pursuant to certain  commercial  leases and pursuant to
its agreements with its host store companies.

     Effective  December 20, 1991,  the Company  entered into a lease  agreement
with Wal-Mart for  approximately  66,000 square feet of corporate  office space.
The term of the lease is ten years  with a renewal  option of seven  years.  The
Company paid Wal-Mart  approximately  $215,000  annually in rental fees in 2000,
1999 and 1998.

     In connection with its  acquisition of Midwest  Vision,  Inc. (See Note 8),
the Company entered into a ten-year lease for administrative headquarters and an
optical laboratory located in St. Cloud, Minnesota.  The facility is leased from
the former  owner of Midwest  Vision.  Lease  expense  on the  headquarters  and
laboratory is approximately  $6,667 monthly which, in the opinion of management,
represents a fair market lease rate. Additionally, the Company assumed operating
lease agreements in connection with 51 freestanding  locations obtained from the
acquisition. Lease expense on these leases is approximately $64,000 monthly.

     In connection with its  acquisitions of Frame-n-Lens and New West (See Note
8),  the  Company  assumed   operating  lease   agreements  in  connection  with
approximately  280 and 175  vision  centers,  respectively,  obtained  from  the
acquisitions.  Through the Frame-n-Lens acquisition, the Company assumed a lease
for a manufacturing and distribution facility located in Fullerton,  California.
This  facility is subject to a lease with a term  expiring  on August 31,  2006.
Lease expense is $408,000 annually for this facility.

     Aggregate future minimum payments under the license and lease  arrangements
that will not be  assigned  or rejected  in the  Bankruptcy  proceedings  are as
follows: (amounts in thousands)

                  Fiscal Year                Leases             Leases
                  -----------                ------             ------

                     2001                    $ 131           $  21,026
                     2002                       12              18,188
                     2003                        -              10,567
                     2004                        -               6,307
                     2005                        -               4,778
                  Thereafter                     -               6,336
                                             ------          ---------
 Total minimum lease payments                  143           $  67,202
 Less amounts representing interest              7           =========
                                             ------

 Present value of minimum capital lease
    payments                                   136
 Less current installments of obligations
    under capital leases                       124
                                             ------
 Obligations under capital leases
    excluding current installments           $  12
                                             ======


                                      F-24


<PAGE>



     Total rental expenses  related to cancellable and non-cancellable operating
leases were approximately $41.0 million, $43.1 million and $30.1 million for the
years  ended   December  30,  2000,   January  1,  2000  and  January  2,  1999,
respectively.

     Guy Laroche and Gitano Trademark Licenses
     -----------------------------------------

     The Company  has a license  agreement  with Guy  Laroche of North  America,
Inc.,  giving the Company the right to use the  trademark  "Guy  Laroche" in its
vision  centers in North  America.  The  agreement  requires  the Company to pay
minimum and percentage  royalties on retail and wholesale sales. The Guy Laroche
agreement,  as amended,  expires on  December  31,  2001.  Under the Guy Laroche
agreement, the Company paid $310,000, $310,000 and $389,000 in fees during 2000,
1999 and 1998, respectively.

     In 2000,  1999 and 1998,  the Company paid $34,000,  $53,000,  and $96,000,
respectively,  in fees to Gitano,  Inc. and its successors in connection  with a
license agreement which gave the Company the right to use the "Gitano" trademark
in its vision centers.

       Change in Control and Other Arrangements
       ----------------------------------------

     There are  agreements  between the Company and twelve of its officers which
provide  severance  benefits in the event of  termination  of  employment  under
certain circumstances following a change in control of the Company (as defined).
The  circumstances are termination by the Company other than because of death or
disability  commencing prior to a threatened change in control (as defined),  or
for  cause  (as  defined),  or by the  officer  as  the  result  of a  voluntary
termination  (as  defined).  Following  any such  termination,  in  addition  to
compensation  and  benefits  already  earned,  the  officer  will be entitled to
receive a lump sum  severance  payment  equal to up to three times the officer's
annual  rate of  base  salary.  The  term of  each  agreement  is for a  rolling
three-years unless the Company gives notice that it does not wish to extend such
term, in which case the term of the agreement  would expire three years from the
date of the notice.


14.  INCOME TAXES

     The  Company  accounts  for  income  taxes  under  Statement  of  Financial
Accounting  Standards  (SFAS No.  109)  "Accounting  for  Income  Taxes,"  which
requires the use of the  liability  method of  accounting  for  deferred  income
taxes. The components of the net deferred tax assets are as follows: (amounts in
thousands)

                                             December 30,        January 1,
                                                 2000               2000
                                           ----------------   ----------------

 Total deferred tax liabilities                $   (6,053)         $ (8,980)
 Total deferred tax assets                         23,773            17,918
 Valuation allowance                              (17,335)           (8,553)
                                                ---------          ---------
 Net deferred tax asset                        $      385          $    385
                                               ==========          =========


                                            F-25


<PAGE>

     The sources of the  difference  between the  financial  accounting  and tax
basis of the  Company's  liabilities  and assets which give rise to the deferred
tax  liabilities  and  deferred  tax assets  and the tax  effects of each are as
follows:  (amounts in thousands)


<TABLE>
<CAPTION>
                                             December 30,        January 1,
                                                 2000               2000
                                           ----------------   ----------------
 <S>                                           <C>                <C>
 Deferred tax liabilities:
   Depreciation                                $   2,875          $   4,935
   Reserve for foreign losses                      2,218              2,218
   Other                                             960              1,827
                                               ---------          ---------
                                               $   6,053          $   8,980
                                               =========          =========
 Deferred tax assets:
   Accrued expenses and reserves               $   5,929           $  3,206
   Inventory basis differences                       334                171
   Net operating loss carryforwards               14,222             10,698
   Alternative minimum tax                         2,062              2,062
   Other                                           1,226              1,781
                                               ---------          ---------

                                               $  23,773          $  17,918
                                               =========          =========
</TABLE>

     The consolidated  provision  for income  taxes  consists of the  following:
(amounts in thousands)

                                                 Year Ended
                                  -------------------------------------------
                                   December 30,     January 1,    January 2,
                                      2000             2000          1999
                                      ----             ----          ----
 Current:
    Federal                         $      0         $     0        $  1,426
    State                                  0               0             191
                                    --------         -------        --------
                                           0               0           1,617
                                    --------         -------        --------
 Deferred:
    Federal                                0               0             338
    State                                  0               0              82
                                    --------         -------        --------
                                           0               0             420
                                    --------         -------        --------
 Total Provision for Income         $      0         $     0        $  2,037
   Taxes                            ========         =======        ========


                                      F-26


<PAGE>

     The tax expense differs from the amounts resulting from multiplying income
before income taxes by the statutory federal income tax rate for the following
reasons: (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                  Year Ended
                                                               -------------------------------------------------
                                                               December 30,       January 1,         January 2,
                                                                  2000               2000               1999
                                                               ----------         ----------         ----------
 <S>                                                           <C>                <C>                  <C>
 Federal income tax/(benefit) provision at statutory rate       $(46,148)          $ (5,971)           $  1,853
 State income taxes, net of federal income tax benefit            (3,393)              (439)                180
 Foreign losses not deductible for U.S. federal tax purposes          13                  3                  37
 Change in valuation allowance for U.S. federal and state taxes    8,782              5,182                 (548)
 Nondeductible goodwill                                           38,640              1,425                  292
 Other, net                                                        2,106               (200)                 223
                                                                --------           --------             -------
                                                                $     0            $      0            $  2,037
                                                                ========           ========             ========
</TABLE>


     At December 30, 2000,  the Company had U.S.  regular tax net operating loss
carryforwards  of  approximately  $37.4 million that can reduce  future  federal
income taxes.  If not utilized,  these  carryforwards  will expire  beginning in
2007.  The  Company  also  has  non-expiring   alternative  minimum  tax  credit
carryforwards of $2.1 million available to offset future regular taxes.

     On July 28, 1998, the Company acquired all of the outstanding capital stock
of Frame-n-Lens.  The Company accounted for the acquisition as a purchase,  with
the excess of the purchase price over the fair value of the net assets  acquired
to be allocated to goodwill.  Frame-n-Lens had net operating loss  carryforwards
of $1.4 million.

     On October 25, 1998,  the Company  acquired all of the  outstanding  common
stock and common stock  equivalents of New West.  The Company  accounted for the
acquisition  as a purchase,  with the excess of the purchase price over the fair
value of the net assets  acquired to be allocated to goodwill.  New West had net
operating  loss  carryforwards  of $5.5 million and $4.9 million for regular tax
and  alternative  minimum tax purposes,  respectively,  which begin to expire in
2006.  These net  operating  losses  are  subject  to  limitations  from a prior
ownership change.

     As a result of an examination by the Internal  Revenue  Service  ("IRS") of
the  Company's  1992  tax  return,   the  Company  adjusted  its  net  operating
carryforward loss by $314,000. The agreement between the Company and the IRS was
reached  in  February  1998 for which no income tax was due or  receivable.  The
Company  reduced its  valuation  allowance  by  approximately  $3.3  million and
increased additional paid-in-capital for this benefit.

     At  December  30,  2000,  the  Company  recorded  an  additional  valuation
allowance of $8.8 million due to the  uncertainty  of the  realizability  of the
current year net operating losses.

     The Company's net operating loss carryforwards of $37.4 million at December
30,  2000,  could be limited in the event of a greater  than 50% change in stock
ownership of the Company.  The limitation  would be based on the stock value and
the Federal Exempt Tax Rate on the date of ownership  change.  These limitations
could create a cap on the amount of the NOLs that would be deductible  each year
going  forward  until the amount is depleted or the time  limitation on the NOLs
expires.

     In Mexico,  the location of the Company's foreign  operations,  the Company
pays the  greater of its income tax or an asset tax.  Because  the  Company  has
operating losses in Mexico, the Company pays no income tax, but it is subject to
the asset tax.  Therefore,  no  provision  for income taxes has been made on the
Company's books for its operations in Mexico.


                                      F-27

<PAGE>

15.  EARNINGS PER COMMON SHARE

     Basic  earnings per common share are computed by dividing net income by the
weighted average number of common shares  outstanding  during the year.  Diluted
earnings  per common  share are  computed as basic  earnings  per common  share,
adjusted for  outstanding  stock options that are dilutive.  The computation for
basic and diluted  earnings per share may be summarized as follows:  (amounts in
thousands except per share information)

<TABLE>
<CAPTION>
                                                                          2000          1999         1998
                                                                       -----------    ----------    ----------
 <S>                                                                   <C>            <C>           <C>
Earnings/(loss) before extraordinary loss and Cumulative Effect
   and change in accounting principle                                  $  (135,675)   $  (17,156)   $    3,414
Extraordinary loss, net                                                       (827)         (406)            0
Cumulative effect, net                                                      (3,378)            0             0
                                                                       -----------    ----------    ----------
Net earnings/(loss)                                                    $  (139,880)   $  (17,562)   $    3,414
                                                                       ===========    ==========    ==========

Weighted shares outstanding                                                 21,169        21,068        20,949

Basic earnings/(loss) per share:
     Earnings/(loss) before extraordinary Item and cumulative effect   $     (6.41)   $    (0.81)   $     0.16
     Loss from extraordinary item                                            (0.04)        (0.02)         0.00
     Loss from cumulative effect                                             (0.16)         0.00          0.00
                                                                       -----------    ----------    ----------
     Net earnings/(loss) per basic share                               $     (6.61)   $    (0.83)   $     0.16
                                                                       ===========    ==========    ==========

Weighted shares outstanding                                                 21,169        21,068        20,949
Impact of dilutive options held by employees                                     0           110           285
                                                                       -----------    ----------    ----------
Aggregate shares outstanding                                                21,169        21,178        21,234
                                                                       ===========    ==========    ==========

Diluted earnings/(loss) per share:
     Earnings/(loss) before extraordinary item and cumulative effect   $     (6.41)   $    (0.81)   $     0.16
     Loss from extraordinary item                                            (0.04)        (0.02)         0.00
     Loss from cumulative effect                                             (0.16)         0.00          0.00
                                                                       -----------    ----------    ----------
     Net earnings/(loss) per diluted share                             $     (6.61)   $    (0.83)   $     0.16
                                                                       ===========    ==========    ==========
</TABLE>


     Outstanding options with an exercise price below the average price of the
Company's common stock have been included in the computation of diluted earnings
per common share, using the treasury stock method, as of the date of the grant.
In 1999, these options have been excluded from the calculation due to their
anti-dilutive effect.


                                      F-28


<PAGE>

16.  SUPPLEMENTAL DISCLOSURE INFORMATION

     Supplemental disclosure information is as follows: (amounts in thousands)

     (i) Supplemental Cash Flow Information

                                        2000              1999              1998
                                        ----              ----              ----
            Cash paid for
              Interest                $ 2,729           $17,826           $2,257
              Income taxes                  -               495            1,918


     (ii) Supplemental Noncash Investing and Financial Activities

     The  following  information  relates  to  the  Frame-n-Lens  and  New  West
     acquisitions in 1998 (See Note 8).

                                                                         1998
                                                                       --------

           Business acquisitions, net of cash acquired
              Fair value of assets acquired                           $  30,240
              Purchase price in excess of net assets acquired           104,813
              Liabilities assumed                                       (37,696)
                                                                      ---------
           Net cash paid for acquisitions                             $  97,357
                                                                      =========

    (iii) Supplemental Balance Sheet Information

     Significant  components of accrued  expenses and other current  liabilities
     may be summarized as follows:

<TABLE>
<CAPTION>
                                                                 2000              1999
                                                              ---------          --------
           <S>                                                <C>                <C>
           Accrued employee compensation and benefits         $   5,859         $   6,343
           Accrued rent expense                                   3,758             4,047
           Accrued acquisition expenses                             546             1,678
           Accrued capital expenditures                               -             1,345
           Customer deposit liability (See Note 2)                3,282                 -
</TABLE>


     (iv) Supplemental Income Statement Information

     The components of interest expense, net, may be summarized as follows:

<TABLE>
<CAPTION>
                                                                 2000            1999             1998
                                                              ---------        --------         --------

<S>                                                           <C>             <C>               <C>
           Interest expense on debt and capital leases        $   6,902       $  18,306         $  5,721
           Purchase discounts on invoice payments                   (86)            (37)            (509)
           Finance fees                                             881           1,158              407
           Interest income                                            -             (73)             (86)
           Other                                                     26             (25)               5
                                                              ---------        --------         --------
                                                              $   7,723       $  19,329         $  5,538
                                                              =========       =========         ========
</TABLE>



                                      F-29


<PAGE>

17.  EQUITY TRANSACTIONS

     Employee Stock Option and Incentive Award Plan
     ----------------------------------------------

     In 1996, the Company  adopted the Restated Stock Option and Incentive Award
Plan (the "Plan")  pursuant to which  incentive stock options  qualifying  under
Section 422A of the Internal Revenue Code and nonqualified  stock options may be
granted to key  employees.  The Plan also  provides  for the  issuance  of other
equity  awards,  such as awards  of  restricted  stock.  The Plan  replaced  and
restated all the  Company's  prior  employee  stock option  plans.  The Plan was
amended in 1999 to increase the number of shares  under the Plan from  3,350,000
to 4,350,000.  The Plan is  administered  by the  Compensation  Committee of the
Company's Board of Directors.  The  Compensation  Committee has the authority to
determine the persons receiving  options,  option prices,  dates of  grants  and
vesting periods, although no option may have a term exceeding ten years. Options
granted prior to 1996 have a term of five years.

     Directors' Stock Option Plan
     ----------------------------

     In April 1997, the Company adopted the Restated Non-Employee Director Stock
Option Plan (the "Directors'  Plan"),  pursuant to which stock options for up to
500,000  shares of Common Stock may be granted to  non-employee  directors.  The
Directors' Plan replaced and restated the Company's prior non-employee  director
stock option plan. The Directors' Plan provides for automatic  grants of options
to purchase  7,500 shares of the  Company's  common  stock to each  non-employee
director serving on the date of each annual meeting of  shareholders,  beginning
with the 1997 annual  meeting.  No options were granted under this plan in 2000.
Of the  options  previously  granted,  50% of the shares  under each  option are
exercisable on the second  anniversary of the grant date, 75%in three years, and
100% in four years.  All option  grants are at exercise  prices no less than the
market value of a share of Common Stock on the date of grant and are exercisable
for a ten-year period.  Options granted under the predecessor  stock option plan
are exercisable for a five-year period. Options covering 69,375 shares under the
Directors' Plan were exercisable at December 30, 2000.

     All Stock Option Plans
     ----------------------

     In 2000 and 1999, all exercise prices represent the estimated fair value of
the Common Stock on the date of grant as  determined  by the Board of Directors.
Of the options  granted,  50% of the shares  under each  option are  exercisable
after two years from the grant date, 75% in three years, and 100% in four years.

     The  Committee  granted a stock option for 100,000  shares of the Company's
common stock to one executive officer which became fully vested in 2000.


                                      F-30


<PAGE>

     Stock option  transactions  during the three years ended  December 30, 2000
were as follows:

<TABLE>
<CAPTION>
                                                        2000               1999                1998
                                                      -------           ---------           ---------
 <S>                                                  <C>                 <C>                 <C>
 Options outstanding beginning of year              2,615.421           2,582,380           2,294,203
 Options granted                                      431,200             928,060           1,171,750
 Options exercised                                      -                 (12,491)           (294,657)
 Options cancelled                                  (306,979)            (882,528)           (588,916)
                                                    ---------           ---------           ---------
 Options outstanding end of year                    2,739,642           2,615,421           2,582,380
                                                    =========           =========           =========
 Options exercisable end of year                    1,245,105             760,162             748,803
                                                    =========           =========           =========
 Weighted average option prices per share:
    Granted                                        $    1.989          $    4.893          $    5.030
    Exercised                                      $     -             $    4.500          $    4.989
    Cancelled                                      $    4.611          $    5.044          $    9.461
 Outstanding at year end                           $    4.409          $    4.832          $    4.881

 Options exercisable end of year                   $    4.570          $    4.369          $    4.973
</TABLE>

     The Company  applies the  disclosure  provisions  of Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation".  The
Company will continue to account for stock option awards in accordance  with APB
Opinion No. 25. Had compensation  cost for the Plan been determined based on the
fair value at the grant date for awards in 2000,  1999 and 1998  consistent with
the  provisions  of SFAS No. 123,  the  Company's  net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below: (amounts
in thousands except per share information)


                                         2000             1999            1998
                                       --------         --------        --------
 As reported:

   Net earnings / (loss)                $(139,880)      $(17,562)       $  3,414
                                       ==========       ========        ========

   Earnings / (loss) per share          $   (6.61)      $  (0.83)       $   0.16
                                       ==========       ========        ========
 Pro forma:

   Net earnings / (loss)                $(141,792)      $(19,266)       $  2,655
                                       ==========       ========        ========

   Earnings / (loss) per share          $   (6.70)      $  (0.91)       $   0.13
                                       ==========       ========        ========

     Basic and diluted earnings per share are the same for each year.


                                      F-31


<PAGE>

     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes   option-pricing   model.  The  following   weighted  average
assumptions were used in the model:

                                        2000              1999             1998
                                      -------           -------          -------

 Dividend yield                        0.00%             0.00%            0.00%

 Expected volatility                    142%               88%              76%

 Risk free interest rates              5.1 %              5.1%             4.9%

 Expected lives (years)                5.0                4.7              4.9


     The  following  table  shows  the  options   outstanding  and  the  options
exercisable with pertinent data related to each:

<TABLE>
<CAPTION>
                                          Options Outstanding                  Options Exercisable
-------------------------------------------------------------------------------------------------------------
                                                      Weighted
                                                       Average        Weighted        Number        Weighted
                                       Number         Remaining        Average      Exercisable      Average
   Range of                          Outstanding      Contractual      Exercise        As of        Exercise
Exercise Prices                     as of 12/30/00       Life           Price         12/30/00        Price
--------------------------------------------------------------------------------------------------------------
    <S>                              <C>               <C>             <C>            <C>           <C>

$1.42 - $4.25                          950,499         7.88            $2.640         393,975         $3.002
$4.50 - $5.32                        1,222,832         7.17            $5.159         582,699         $5.075
$5.33 - $7.88                          566,361         4.97            $5.758         268,431         $5.773
------------------------------------------------------------------------------------------------------------
$1.42 - $7.88                        2,739,642         6.96            $4.409       1,245,105         $4.570
</TABLE>


     Restricted Stock Awards
     -----------------------

     Restricted stock grants,  with an outstanding  balance of 106,000 shares at
December 30,  2000,  were awarded to certain  officers and key  employees  which
require  five  years of  continuous  employment  from  the date of grant  before
vesting and receiving the shares without restriction. The number of shares to be
received without restriction is based on the Company's performance relative to a
peer group of  companies.  For awards made in 1998,  restricted  shares,  to the
extent  not  awarded  after  five  years,  vest  after ten years of  employment.
Unamortized  deferred  compensation expense with respect to the restricted stock
was  $302,000 at December 30, 2000 and January 1, 2000,  and is being  amortized
over the five-year  vesting period.  Deferred  compensation  expense  aggregated
$131,000  and $120,000 in 1999 and 1998,  respectively.  Due to the value of the
Company's  stock and the  uncertainties  surrounding  the  Chapter 11 Cases,  no
compensation  expense  was  recognized  in 2000.  There  were no new  grants  or
forfeitures of restricted  stock in 1999 or 2000. A summary of restricted  stock
granted during 1998 is as follows:

                                                             1998
                                                           -------
 Shares granted                                             67,000
 Shares forfeited                                           15,000
 Weighted-average fair value of
    stock granted during year                              $  5.34


                                      F-32


<PAGE>


      Preferred Stock
     ---------------

     The Company is  authorized  to issue up to  5,000,000  shares of  preferred
stock, par value $1 per share, with such terms, characteristics and designations
as may be determined  by the Board of  Directors.  No such shares are issued and
outstanding.


     Shareholder Rights Plan
     -----------------------

     In  January  of  1997,  the  Company's   Board  of  Directors   approved  a
Shareholders  Rights Plan (the "Rights Plan").  The Rights Plan provides for the
distribution  of one Right for each  outstanding  share of the Company's  Common
Stock held of record as of the close of  business  on January  27,  1997 or that
thereafter becomes outstanding prior to the earlier of the final expiration date
of the Rights or the first date upon which the Rights become  exercisable.  Each
Right  entitles  the  registered  holder to  purchase  from the Company one one-
hundredth of a share of Series A Participating  Cumulative  Preferred Stock, par
value $0.01 per share, at a price of $40.00 (the "Purchase  Price"),  subject to
adjustment.  The  Rights are not  exercisable  until ten  calendar  days after a
person or group (an "Acquiring Person") buys or announces a tender offer for 15%
or more of the Company's  Common  Stock,  or if any person or group has acquired
such an interest, the acquisition by that person or group of an additional 2% of
the Company's  Common Stock.  In the event the Rights become  exercisable,  then
each Right will  entitle  the holder to receive  that number of shares of Common
Stock (or, under certain circumstances,  an economically  equivalent security or
securities  of the Company)  having a market value equal to the Purchase  Price.
If, after any person has become an Acquiring Person (other than through a tender
offer approved by qualifying members of the Board of Directors),  the Company is
involved in a merger or other business  combination where the Company is not the
surviving corporation, or the Company sells 50% or more of its assets, operating
income,  or cash flow, then each Right will entitle the holder to purchase,  for
the Purchase  Price,  that number of shares of common or other  capital stock of
the acquiring  entity which at the time of such  transaction have a market value
of twice the Purchase Price. The Rights will expire on January 26, 2007,  unless
extended,  unless  the Rights are  earlier  exchanged,  or unless the Rights are
earlier  redeemed by the Company in whole, but not in part, at a price of $0.001
per Right. In February 1998, the Company's Board of Directors amended the Rights
Plan  effective  March 1, 1998 to  provide  that  Rights  under this plan can be
redeemed  and  certain  amendments  to this plan can be  effected  only with the
approval of the  Continuing  Directors,  which are defined in the Rights Plan as
the current  directors and any future directors that are approved or recommended
by Continuing Directors.

     On April 22,  1999,  the Company  permitted  a group,  of which a director,
Campbell B. Lanier,  III, is a member, to acquire beneficial  ownership of up to
25% of the  Company's  common stock  without  triggering  the  provisions of the
Rights Plan. By an agreement  dated as of September 9, 1999, the Company further
permitted  the same  group to acquire up to 28% of the  Company's  common  stock
(inclusive of amounts previously  purchased by the group) without triggering the
provisions  of the Rights Plan.  The group agreed that, if it acquired more than
25% of the  outstanding  common stock of the Company,  the group would vote such
additional  shares in the same ratio as all other shares  voted by  shareholders
other than the members of the group and their affiliates.

     In 2000, the Company cancelled 10,000 shares of its Common Stock.


                                      F-33


<PAGE>

18.  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

     Selected quarterly data for the Company for the fiscal years ended December
30, 2000 and  January 1, 2000 is as follows: (amounts  in  thousands  except per
share information)

<TABLE>
<CAPTION>
FISCAL 2000                                                           Quarter Ended
-------------------------------------------------------------------------------------------------------------------
                                                                  April 1      July 1    September 30  December 30
                                                                 ---------    ---------  ------------  -----------
<S>                                                              <C>          <C>          <C>          <C>
Net sales                                                        $  83,180    $  78,783    $  75,578    $  70,153
Cost of goods sold                                                  36,745       36,287       36,338       34,088
                                                                 ---------    ---------    ---------    ---------
Gross profit                                                        46,435       42,496       39,240       36,065
Selling, general & administrative                                   45,759       42,424       41,646       36,535
Impairment on long-lived assets                                      2,684            0            0            0
Restructuring expense                                                1,601            0            0            0
                                                                 ---------    ---------    ---------    ---------
Operating income/(loss)                                             (3,609)          72       (2,406)        (470)
Interest expense                                                     5,330          917          721          755
                                                                 ---------    ---------    ---------    ---------
Earnings / (loss) before reorganization
   items and taxes                                                  (8,939)        (845)      (3,127)      (1,225)
Reorganization items                                                     0        4,379      114,521        2,639
                                                                 ---------    ---------    ---------    ---------
(Loss) before taxes, extraordinary loss
   and cumulative effect                                            (8,939)      (5,224)    (117,648)      (3,864)
Income tax expense                                                       0            0            0            0
                                                                 ---------    ---------    ---------    ---------
Earnings / (loss) before extraordinary
   loss and cumulative effect                                       (8,939)      (5,224)    (117,648)      (3,864)
Extraordinary loss, net                                                  0         (827)           0            0
Cumulative effect, net                                              (3,378)           0            0            0
                                                                 ---------    ---------    ---------    ---------
Net loss                                                         $ (12,317)   $  (6,051)   $(117,648)   $  (3,864)
                                                                 =========    =========    =========    =========

Basic earnings/(loss) per share:
  Earnings/(loss) before extraordinary
    item and cumulative effect                                   $   (0.42)   $   (0.25)   $   (5.56)   $   (0.18)
  Loss from extraordinary item                                        0.00        (0.04)        0.00         0.00
  Loss from cumulative effect                                         0.00         0.00         0.00        (0.16)
                                                                 ---------    ---------    ---------    ---------
  Net earnings/(loss) per basic share                            $   (0.42)   $   (0.29)   $   (5.56)   $   (0.34)
                                                                 =========    =========    =========    =========

Diluted earnings/(loss) per share:
  Earnings/(loss) before extraordinary
    item and cumulative effect                                   $   (0.42)   $   (0.25)   $   (5.56)   $   (0.18)
  Loss from extraordinary item                                        0.00        (0.04)        0.00         0.00
  Loss from cumulative effect                                         0.00         0.00         0.00        (0.16)
                                                                 ---------    ---------    ---------    ---------

  Net earnings/(loss) per diluted share                          $   (0.42)   $   (0.29)   $   (5.56)   $   (0.34)
                                                                 =========    =========    =========    =========
</TABLE>



                                      F-34

<PAGE>


<TABLE>
<CAPTION>
 FISCAL 1999                                                          Quarter Ended
-------------------------------------------------------------------------------------------------------------------
                                                   April 3             July 3         October 2        January 1
                                                ------------         ----------      -----------      -------------
<S>                                              <C>               <C>               <C>                <C>
Net sales                                        $ 86,634          $   82,531        $  83,262          $  76,628
Cost of goods sold                                 37,088              36,745           37,474             36,461
                                                 --------            --------          --------          --------
Gross profit                                       49,546              45,786           45,788             40,167
Selling, general, and administrative expense       42,446              42,937           45,355             46,424
Impairment loss on long-lived assets                   --                  --               --              1,952
                                                 --------            --------          --------          --------
Operating income/(loss)                             7,100               2,849              433             (8,209)
Interest expense, net                               4,665               4,743            4,809              5,112
                                                 --------            --------          --------          --------
Income/(loss) before income taxes                   2,435              (1,894)          (4,376)           (13,321)
Provision/(benefit) for income taxes                  970                (584)          (1,396)             1,010
                                                 --------            --------          --------          --------
Income/(loss) before extraordinary item             1,465              (1,310)          (2,980)           (14,331)
Extraordinary item, net of tax                         --                  --               --               (406)
                                                 --------            --------          --------          --------
Net income/(loss)                                $  1,465            $ (1,310)         $(2,980)          $(14,737)
                                                 ========            ========          ========          ========
Basic earnings/(loss) per common share:
 Earnings/(loss) before extraordinary item       $   0.07            $  (0.06)         $ (0.14)          $  (0.68)
 Extraordinary loss                                    --                  --               --              (0.02)
                                                 --------            --------          --------          --------
Net income/(loss)                                $   0.07            $  (0.06)         $ (0.14)          $  (0.70)
                                                 ========            ========          ========          ========
Diluted earnings/(loss) per common share:
 Earnings/(loss) before extraordinary item       $   0.07            $  (0.06)         $ (0.14)          $  (0.68)
 Extraordinary loss                                    --                  --               --              (0.02)
                                                 --------            --------          --------          --------
Net income/(loss)                                $   0.07            $  (0.06)         $ (0.14)          $  (0.70)
                                                 ========            ========          ========          ========
</TABLE>


                                      F-35


<PAGE>


19.  REPORTABLE BUSINESS SEGMENTS

     The Company's  operating  business  segments provide quality retail optical
services  and  products  that  represent  high  value  and  satisfaction  to the
customer.  The separate  businesses  within the Company use the same  production
processes  for eyeglass  lens  manufacturing,  offer  products and services to a
broad  range of  customers  and  utilize the  Company's  central  administrative
offices to coordinate product purchases and distribution to retail locations.  A
field  organization  provides  management support to individual store locations.
The Mexico operation has a separate laboratory and distribution center in Mexico
and buys a majority of its products from local vendors. However, market demands,
customer requirements,  laboratory  manufacturing and distribution processes, as
well as product  offerings,  are  substantially  the same for the  domestic  and
Mexico  business.  Consequently,  the Company  considers its domestic and Mexico
businesses as one reportable segment under the definitions  required by SFAS No.
131 - "Disclosures about Segments of an Enterprise and Related Information."

     Information relative to sales and identifiable assets for the United States
and Mexico for the fiscal years ended  December  30,  2000,  January 1, 2000 and
January 2, 1999 are summarized in the following  tables  (amounts in thousands).
Identifiable  assets  include  all  assets  associated  with  operations  in the
indicated   reportable   segment   excluding   inter-company   receivables   and
investments.

<TABLE>
<CAPTION>

                                    United States         Mexico           Other        Consolidated
                                    -------------         ------           -----        ------------
 <S>                                  <C>                <C>               <C>           <C>
  2000

     Sales                            $  302,902         $  4,792          $   --        $  307,694
                                      ==========         ========          ======        ==========
     Identifiable Assets              $   88,666         $  2,222          $   --        $   90,888
                                      ==========         ========          ======        ==========

  1999

     Sales                            $  325,101         $  3,954          $   --        $  329,055
                                      ==========         ========          ======        ==========
     Identifiable Assets              $  217,690         $  2,328          $  201        $  220,219
                                      ==========         ========          ======        ==========

 1998

     Sales                            $  241,705         $  3,429          $  197        $  245,331
                                      ==========         ========          ======        ==========
     Identifiable Assets              $  226,323         $  2,147          $  627        $  229,097
                                      ==========         ========          ======        ==========
</TABLE>


                                      F-36

<PAGE>

<TABLE>
<CAPTION>
                                                     SCHEDULE II


                                        VISTA EYECARE, INC. AND SUBSIDIARIES
                                               (DEBTORS-IN-POSSESSION)
                                          VALUATION AND QUALIFYING ACCOUNTS
                               December 30, 2000, January 1, 2000 and January 2, 1999
                                                   (In thousands)

                                                          Additions
                                            -------------------------------------
                            Balance at          Charged to         Charged to                          Balance at
     Description        Beginning of Period  Cash and Expenses    Other Accounts      Deductions      End of Period
 --------------------   -------------------  -----------------    ---------------     ----------      -------------
  <S>                         <C>                  <C>                <C>               <C>            <C>
  Year ended
  January 2, 1999
     Allowance for
     Uncollectible
     Accounts Receivable     $   762               $  900             $   726           $   872         $ 1,516

 Year ended
  January 1, 2000
     Allowance for
     Uncollectible
     Accounts Receivable     $ 1,516              $ 3,384             $   885           $ 1,382         $ 4,403

  Year ended
  December 30, 2000
     Allowance for
     Uncollectible
     Accounts Receivable     $ 4,403              $ 2,503             $ 1,373           $ 2,535         $ 5,744

     Provision for
       reorganization
       and restructuring
       items                 $   --               $ 8,505             $   --            $ 3,778         $ 4,727
</TABLE>


                                      F-37


<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                         VISTA EYECARE, INC.


                                         By:  /s/ James W. Krause
                                         --------------------------------------
                                         James W. Krause
                                         Chairman of the Board & Chief Executive
                                         Officer and Director
Date: April 9, 2000


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant on April 9, 2000, in the capacities indicated.

  Signature                             Title

  /s/ James W. Krause
-----------------------------
  James W. Krause                       Chairman of the Board and
                                        Chief Executive Officer and Director

  /s/ Angus C. Morrison
-----------------------------
  Angus C. Morrison                     Senior Vice President, Chief Financial
                                        Officer
                                        (Principal Financial Officer)
  /s/ Timothy W. Ranney
-----------------------------
  Timothy W. Ranney                     Vice President, Corporate Controller
                                        (Principal Accounting Officer)

  /s/ Peter T. Socha
-----------------------------
  Peter T. Socha                        Senior Vice President,
                                        Strategic Planning and Managed Care,
                                        Director

  /s/ Ronald J. Green
-----------------------------
  Ronald J. Green                       Director


   /s/ James E. Kanaley
-----------------------------
  James E. Kanaley                      Director



<PAGE>



                                  EXHIBIT INDEX
                                  -------------


23        Arthur Andersen LLP Consent.