<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

For the quarterly period ended June 30, 1997

                                       OR

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

For the transition period from _____________ to _____________

Commission file number: 1-14128

                              STERLING VISION, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

New York                                                 11-3096941
------------------------                                 -------------------
(State of Incorporation)                                 (IRS Employer
                                                         Identification No.)

                             1500 Hempstead Turnpike
                              East Meadow, NY 11554
          ------------------------------------------------------------
          (Address of Principal Executive Offices, including Zip Code)

                                  (516)390-2100
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         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

    ---                       ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes                        No
    ---                       ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

There were 13,356,107 shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of August 11, 1997.


<PAGE>

Item 1. Financial Statements
----------------------------

                     STERLING VISION, INC. AND SUBSIDIARIES
                     --------------------------------------
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                      -------------------------------------
                             (Dollars In Thousands)

<TABLE>
<CAPTION>


                                                              June 30,     December 31,
                                                                1997           1996
                                                            (Unaudited)
                                                            -----------    ------------
<S>                                                         <C>            <C>         

ASSETS
------

Current Assets:
   Cash and cash equivalents                                $     2,590    $        868
   Accounts receivable - net of allowance for
         doubtful accounts of $559 and $557, respectively         8,084           7,911
   Franchise and other notes receivable - current                 3,092           3,375
   Inventories                                                    3,488           3,678
   Due from related parties - current                               120             124
   Prepaid expenses and other current assets                      1,131             883
                                                            -----------    ------------
         Total Current Assets                                    18,505          16,839

Property and equipment - net of
         accumulated depreciation                                11,205          10,818
Franchise and other notes receivable - net of allowance
         for doubtful accounts of $562                           16,672          16,089

Other assets                                                      5,752           2,523
                                                            -----------    ------------

         Total Assets                                       $    52,134    $     46,269
                                                            ===========    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current Liabilities:
   Current portion of long-term debt                        $     1,998    $      9,151
   Notes payable - Shareholders and Directors                      --             2,000
   Accounts payable and accrued liabilities                       3,800           8,267
   Franchise related obligations - current                          848           1,224

   Deferred income taxes payable - current                         --              --
                                                            -----------    ------------
         Total Current Liabilities                                6,646          20,642

Long term debt                                                   12,961           4,033
Deferred franchise income                                           172             328
Excess of fair value of assets acquired over cost                 1,515           1,709
Commitments and contingencies

Shareholders' Equity:
   Preferred stock, $.01 par value per share;
         authorized 5,000,000 shares                               --              --
   Common stock, $.01 par value per share; authorized
         28,000,000 shares; issued 12,928,092                       129             124
   Common stock to be issued - net of costs of issuance
         of $480                                                  6,520            --
   Additional paid-in capital                                    29,309          24,982
   (Deficit)                                                     (5,118)         (5,549)
                                                            -----------    ------------

         Total Shareholders' Equity                              30,840          19,557
                                                            -----------    ------------

         Total Liabilities and Shareholders' Equity         $    52,134    $     46,269
                                                            ===========    ============
</TABLE>

The accompanying notes are an integral part of these Consolidated Condensed
Financial Statements.

                                       -2-


<PAGE>

                     STERLING VISION, INC. AND SUBSIDIARIES
                     --------------------------------------
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                                   (Unaudited)
                                   -----------
                  (Dollars In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                               Three Months Ended      Six Months Ended
                                               June 30,   June 30,    June 30,   June 30,
                                                 1997       1996        1997       1996
                                               --------   --------    --------   --------

<S>                                            <C>        <C>         <C>        <C>     
Systemwide sales                               $ 36,279   $ 32,621    $ 72,937   $ 63,506
                                               ========   ========    ========   ========


Revenues:
   Net sales - Company stores                  $  5,753   $  7,104    $ 11,757   $ 14,377
   Franchise royalties                            2,555      1,930       4,668      3,760
   Net gains and fees from the conveyance of
         Company-owned assets to franchisees         68      1,028         878      1,562
   Other income                                     670        307       1,217        697
                                               --------   --------    --------   --------
Total Revenues                                    9,046     10,369      18,520     20,396
                                               --------   --------    --------   --------

Costs and expenses:
   Cost of sales                                  1,552      1,849       3,173      3,740
   Selling expenses                               3,516      5,058       7,365      9,875
   General and Administrative expenses            3,586      3,424       6,930      6,160
   Interest expense                                 287        283         621        603
                                               --------   --------    --------   --------
Total Costs and Expenses                          8,941     10,614      18,089     20,378
                                               --------   --------    --------   --------


Net income (loss) before provision for
         income taxes                               105       (245)        431         18
Provision (benefit) for income taxes               --          (98)       --            7
                                               --------   --------    --------   --------
Net income (loss)                              $    105   $   (147)   $    431   $     11
                                               ========   ========    ========   ========
Weighted average number of common
         shares outstanding                      13,915     12,294      13,915     12,294
                                               ========   ========    ========   ========

Earnings (loss) per common share                    .01       (.01)        .03          0
                                               ========   ========    ========   ========

</TABLE>

The accompanying notes are an integral part of these Consolidated Condensed
Financial Statements.

                                       -3-


<PAGE>

                     STERLING VISION, INC. AND SUBSIDIARIES
                     --------------------------------------
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (Unaudited)
                                   -----------
                             (Dollars In Thousands)

<TABLE>
<CAPTION>
                                                             For the Six Months Ended
                                                                     June 30,
                                                                1997          1996
                                                             ------------------------
<S>                                                          <C>           <C>       
Cash flow from operating activities:
   Net income                                                $      431    $       11
   Adjustments to reconcile net income to net
         cash provided by operating activities:
                  Depreciation and amortization                     929           436
                  Allowance for doubtful accounts                   879           110
                  Net gain from the conveyance
                     of Company-owned assets
                     to franchisees                                (757)       (1,371)
                  Deferred income taxes payable                    --             334
                  Accrued interest                                   42          --
                  Amortization of fair value of assets
                     acquired over cost                            (194)         --
                  Changes in assets and liabilities:
                  Accounts receivable                              (115)       (1,853)
                  Inventories                                       190            82
                  Prepaid expenses and other
                     current assets                                (240)         (814)
                  Other assets                                   (1,332)         (380)
                  Accounts payable and accrued liabilities       (4,767)       (1,698)
                  Franchise related obligations                    (376)           78
                  Deferred franchise income                        (156)         --
                                                             ----------    ----------

Net cash (used in) operating activities                      $   (5,466)   $   (5,065)
                                                             ----------    ----------

Cash flows from investing activities:
   Acquisition, net of cash acquired                               --          (4,715)
   Franchise notes receivable issued                             (2,583)       (2,494)
Repayment of franchise notes receivable                           1,411         1,121
   Purchase of property and equipment                              (405)       (1,398)
Conveyance of property and equipment                                690         2,369
                                                             ----------    ----------

Net cash (used in) investing activities                            (887)       (5,117)
                                                             ----------    ----------


Cash flows from financing activities:
   Sale of common stock and other
         capital contributions                                    8,802           625
   Borrowing on revolving credit note                              --             225
   Payments on other debt                                        (9,727)       (1,328)
   Restricted cash related to acquisition                          --          (4,150)
   Borrowings related to acquisition of a
         retail optical chain                                      --           4,311
   Borrowings under franchise notes
         receivable Loan Agreement                               10,000          --
   Repayment of revolving credit note                            (1,000)         --
                                                             ----------    ----------

Net cash provided by (used in) financing activities               8,075          (317)
                                                             ----------    ----------
Net increase (decrease) in cash and cash equivalents              1,722       (10,499)
Cash and cash equivalents - beginning of year                       868        15,493
                                                             ----------    ----------
Cash and cash equivalents - end of period                    $    2,590    $    4,994
                                                             ==========    ==========
Supplemental disclosure of cash flow information:

Cash paid during the period for:
   Interest                                                  $      579    $      603
                                                             ==========    ==========
   Taxes                                                     $       47    $      423
                                                             ==========    ==========
   Acquisition, net of cash acquired:
         Working capital, other than cash                          (231)        1,324
         Property, plant and equipment                              600           600
         Other assets                                              --           2,791
         Goodwill                                                 2,141          --
         Less: Common Stock issued                               (2,510)         --
                                                             ----------    ----------
         Acquisition, net of cash acquired                   $        0    $    4,715
                                                             ==========    ==========
</TABLE>

The accompanying notes are an integral part of these Consolidated Condensed
Financial Statements.

                                       -4-


<PAGE>



                     STERLING VISION, INC. AND SUBSIDIARIES
                     --------------------------------------
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
              ----------------------------------------------------
                                   (Unaudited)
                                   -----------

NOTE 1

         The accompanying Consolidated Condensed Financial Statements of
Sterling Vision, Inc. (the "Registrant") and Subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statement presentation. In the
opinion of management, all adjustments for a fair statement of the results of
operations and financial position for the interim periods presented have been
included. All such adjustments are of a normal recurring nature. This financial
information should be read in conjunction with the Consolidated Condensed
Financial Statements and Notes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996. There have been no
changes in significant accounting policies since December 31, 1996.

NOTE 2

         Income tax provisions are based on estimated annual effective tax
rates. The effective income tax rate (before a reduction due to a net operating
loss carryforward) used for the six months ended June 30, 1997 was approximately
40%.

         A reconciliation between the statutory Federal income tax rate and the
effective income tax rate based on continuing operations for the six months
ended June 30, 1997 is as follows:
 
                                                           1997    1996
                                                           ----    ----
         Statutory Federal income tax rate                  34%     34%

         State and local income tax rate, net of
            Federal income tax benefit                       6       6

         Reduction in tax rate due to net operating
            loss carryforward                              (40)    --
                                                           ===     ===

         Effective income tax rate                           0%     40%
                                                           ===     ===

NOTE 3


         During the calendar year ended December 31, 1996, the Registrant issued
80,040 shares of its Common Stock to certain of the franchisees of those
franchised stores in existence on the date of the consummation of the Company's
inital public offering (the "Offering"), in consideration of their future
performance of, and compliance with, the terms of their respective Franchise
Agreements. The fair value of such shares is being amortized over the vesting
period of three years.

NOTE 4

         On February 26, 1997, the Company entered into Convertible Debentures
and Warrants Subscription Agreements with certain investors in connection with
the private placement (the "Private Placement") of units consisting of an
aggregate of $8,000,000 principal amount of Convertible Debentures
(collectively, the "Debentures") and an aggregate of 800,000 warrants
(collectively, the "Warrants"), each Warrant entitling the holder thereof to
purchase one share of Common Stock at a price to be determined in accordance
with a specified formula and, for each two Warrants exercised within a specified
period of time, an additional warrant (collectively, the "Bonus Warrants") to
purchase one additional share of the Common Stock at a price of $7.50 per share.
The Company used the net proceeds (approximately $7,500,000) of the Private
Placement to: (i) repay a

                                       -5-

<PAGE>





NOTE 4 (Continued)

portion of the loans made to it by certain principal shareholders of the Company
($1,000,000, together with interest thereon, in the approximate amount of
$50,000); and (ii) pay down the Company's revolving line of credit ($1,000,000)
with The Chase Manhattan Bank (the "Bank").

         The Debentures bear no interest and mature on August 25, 1998. They are
convertible at a price per share (the "Conversion Price") equal to the lesser of
$6.50 or 85% of the average closing bid price of the Common Stock as reported on
the Nasdaq National Market System ("Nasdaq") for the 5 trading days immediately
preceding the date of conversion; provided, however, that the Company has the
right to redeem that portion of the Debentures requested to be converted in the
event the Conversion Price is $6.00 or less. In such event, the redemption price
will be equal to 115% of the face amount of that portion of the Debentures
requested to be converted. The Debentures are convertible subject to the
following limitations: 25% of the original principal amount is convertible
beginning on the date of issuance provided a registration statement, pursuant to
which the underlying shares of Common Stock will be registered under the
Securities Act of 1933, as amended (the "Act"), is then in effect; 50% of the
original principal amount is convertible beginning three months after the date
of issuance; 75% of the original principal amount is convertible beginning six

months after the date of issuance; and the entire original principal amount is
convertible beginning nine months after the date of issuance. Notwithstanding
the foregoing, if, at any time, the intra-day bid price of the Common Stock (as
reported on Nasdaq) equals or exceeds $10, the entire principal amount of the
Debentures will be convertible at any time thereafter.

         In addition to the foregoing, the Debentures provide for the automatic
conversion of any Debentures not previously converted as of the maturity date,
provided that, as of such date: (i) the Company's registration statement with
respect to the underlying shares continues to be effective; and (ii) no Event of
Default exists under the Debentures. In the event that the Company does not have
a registration statement with respect to the underlying shares or an event of
default exists under the Debentures, the holders of the Debentures would be
entitled to a cash payment, (in lieu of shares of the Company's Common Stock) in
an amount equal to the aggregate principal of those Debentures not previously
converted. The Debentures are classified on the Company's Consolidated Condensed
Balance Sheet as Common Stock to be issued, net of costs of issuance of
approximately $500,000, because the Company believes the likelihood that the
Debentures will not be converted to Common Stock is remote (see Note 8).

         The Warrants entitle the holders thereof to purchase an aggregate of
800,000 shares of Common Stock at an exercise price per share equal to the lower
of $6.50 or the average of the Conversion Price of any Debentures converted, by
the holder, prior to the date of exercise. The Warrants are exercisable until
February 26, 2000. If a holder of a Warrant exercises a Warrant at any time
during the 2 year period following the effectiveness of the registration
statement, such holder will receive, for each two Warrants exercised within such
time, an additional Bonus Warrant entitling the holder thereof to purchase one
additional share of Common Stock at an exercise price of $7.50 per share, which
Bonus Warrants have a term of 3 years from the date of grant.

         The Company has filed, and the U.S. Securities and Exchange Commission
(the "SEC") has declared effective, a registration statement on behalf of the
holders of the Debentures with respect to all of the shares of Common Stock
underlying the Debentures, the Warrants and the Bonus Warrants, not to exceed,
in any event, an aggregate amount equal to 19.999% of the number of shares of
Common Stock issued and outstanding on February 26, 1997; and the Company has
agreed to maintain the effectiveness of such registration statement until the
earlier of: (i) 3 years; and (ii) the date all of the shares underlying the
Debentures have been sold and the Warrants and the Bonus Warrants have been
exercised.

         The Company was required to obtain the consent of the Bank to complete
the Private Placement and, in connection therewith, the Bank, on February 26,
1997, amended the Company's Term Loan and Revolving Credit Agreement, dated
April 5, 1994, as amended,

                                       -6-

<PAGE>

NOTE 4 (Continued)

(the "Credit Agreement") by: (i) extending the maturity date of the Company's

line of credit to May 30, 1997; (ii) requiring a $1,000,000 pay down of the line
of credit; (iii) permanently reducing the line of credit by such amount; (iv)
granting waivers with respect to the Company's anticipated non-compliance with
certain financial covenants contained in the Credit Agreement through February
26, 1997; and (v) amending, for the period ending December 31, 1997, certain
financial covenants contained in the Credit Agreement.

NOTE 5

         On April 1, 1997, the Company acquired all of the issued and
outstanding shares of the capital stock of Singer Specs, Inc., a Delaware
corporation, and certain of its wholly-owned subsidiaries (collectively,
"Singer"), pursuant to the terms of a certain Agreement and Plan of
Reorganization, dated February 19, 1997 (the "Singer Agreement"), between the
Company and the owners (collectively, the "Shareholders") of all of such capital
stock of Singer Specs, Inc. As of the closing, Singer was the: (i) operator of
four retail optical stores (collectively, the "Company Stores"); (ii) franchisor
of an additional, approximately 27 other retail optical stores, all of which
company operated and franchised stores are located in the States of
Pennsylvania, Delaware, New Jersey and Virginia, and a store that opened in the
U.S. Virgin Islands in July 1997; and (iii) owner of a commercial building
located in Philadelphia, Pennsylvania (collectively, the "Singer Transaction").

         The Singer Agreement provided for the Shareholders to convey all of
said capital stock to the Company, free and clear of any and all claims, liens
and/or encumbrances, in exchange for 305,747 shares of the Company's Common
Stock.

         In addition, pursuant to the Singer Agreement, the Company, immediately
after the closing, lent to Singer the aggregate sum of $300,000, which was used
to repay a portion of Singer's liabilities existing as of the closing date
(April 1, 1997), the balance of which liabilities were assumed by corporations
owned by the Shareholders, who each personally guaranteed the repayment of same.

         The Singer Agreement provided: (i) that the assets of each of the
Company Stores be conveyed to corporations owned by one or more of the
Shareholders, which entities, simultaneously with the closing, each entered into
a Sterling Optical Center Franchise Agreement; (ii) that the Company file, with
the SEC, a registration statement seeking registration of the Common Stock
issued to the Shareholders, as discussed below; (iii) for the pledge, by the
Shareholders, of all of their shares of the Common Stock, to secure their
obligations under the Singer Agreement; (iv) that the Shareholders being
restricted from selling a portion of their shares of said Common Stock, all as
more particularly set forth in the Singer Agreement; and (v) the requirement
that the Company, under certain circumstances, pay to the Shareholders the
difference between the market price of its Common Stock (upon which the purchase
price was calculated) and the selling price (net of 50% of commissions) of any
such shares sold by the Shareholders (see Note 8). This transaction has been
accounted for as a purchase, effective April 1, 1997, in accordance with
Accounting Principle Board Pronouncements ("APB") 16 and 17, with allocations
made based upon the estimated, fair market value of the assets acquired.
Franchise Agreements of approximately $2,100,000 areis being amortized over a
period of seven years.


         Effective with its acquisition in April 1997, the operations of Singer
included in the results of operations of the Company for the six months ended
June 30, 1997, are as follows:

                          Revenue                                         217
                                                                          ===
                          Net income before extraordinary items           190
                                                                          ===
                          Net income                                      190
                                                                          ===
                          Earnings per share                              .01
                                                                          ===

                                       -7-

<PAGE>

NOTE 5 (Continued)

         The Company was required to obtain the consent of the Bank to complete
the aforesaid transactions and, in connection therewith, the Bank, on April 1,
1997, amended the Credit Agreement by: (i) extending the maturity date of the
line of credit to November 15, 1998; (ii) requiring that such line of credit be
further reduced by the sum of $75,000 per month, commencing April 15, 1997 and
continuing until the maturity date; and (iii) granting a waiver, permitting the
Company to purchase all of the issued and outstanding capital stock of Singer.

         On April 21, 1997, the Company entered in a Note Amendment and
Conversion Agreement (the "BEC Agreement") with BEC Group, Inc. ("BEC"), the
holder of two promissory notes (each having an original term of 25 months and in
the original principal amounts of $1,050,000 and $200,000, respectively) issued
by the Company in connection with its acquisition (the "Pembridge Transaction"),
on August 26, 1994, from Pembridge Optical Partners, Inc., of the assets of
eight retail optical stores. Pursuant to the BEC Agreement: (i) the Company, on
June 9, 1997, prepaid the principal balance of (but not accrued interest on)
each of said promissory notes in registered shares of its Common Stock; and (ii)
the Company, in certain circumstances, will be required to pay to BEC the
difference between the market price of its Common Stock (upon which the number
of shares issued to BEC was calculated) and the selling price of any such shares
sold by BEC (see Note 8).

         On May 9, 1997, the Company filed, with the SEC, a registration
statement on Form S-3 seeking registration, under the Act, of an aggregate of
3,213,464 shares of its Common Stock, as follows: (i) 2,477,506 shares being
registered on behalf of the investors in the Private Placement (see Note 4);
(ii) 305,747 shares being registered on behalf of the Shareholders, as discussed
above; (iii) 152,211 shares being registered on behalf of BEC, as discussed
above; and (iv) 278,000 shares being registered on behalf of the holders of
certain options granted to the former President of the Company and certain
warrants issued to the underwriters of the Offering.

NOTE 6

         On June 30, 1997, the Company entered into a loan agreement (the "Loan

Agreement") with STI Credit Corporation ("STI") that: (i) established, in favor
of the Company, a $20,000,000 credit facility to finance a portion of the
Company's currently existing and future franchise promissory notes receivable;
and, (ii) funded $10,000,000 of such credit facility (less a facility fee equal
to two percent of the amount of the loan). 65% of the funded amount is to be
repaid by the Company, together with interest payable at the rate of 10.25% per
annum, over a term of 60 months, with a final balloon payment at the expiration
of the sixty-first month of the term of said loan. The Company granted to STI a
first priority, continuing security interest in a substantial portion of its
franchise notes and the proceeds related to such notes. A portion of the net
proceeds (approximately $6,100,000) of the loan was used to satisfy, pay and
discharge, in full, all amounts due by the Company to: (i) the Bank ($5,035,000,
together with accrued interest thereon, in the approximate amount of $37,000);
and (ii) certain principal shareholders of the Company ($1,000,000, together
with accrued interest thereon, in the approximate amount of $9,000). As a result
of the foregoing: (i) the Bank's lien upon, and security interest in,
substantially all of the Company's assets (previously securing the Bank's
various loans to the Company) was discharged; and (ii) restrictions previously
imposed upon the Company (pursuant to the Credit Agreement) are no longer
applicable.

         Pursuant to the terms of the Loan Agreement, the Company must comply
with certain financial covenants relating to its: (i) annual net income; (ii)
tangible net worth; (iii) working capital, all as such terms are defined in the
Loan Agreement. At June 30, 1997, the Company was in compliance with all of such
covenants.

                                       -8-

<PAGE>

NOTE 7

         In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 changes the computational guidelines for earnings per share
information. The Company will adopt the provisions of SFAS 128 in its December
31, 1997 consolidated financial statements. SFAS 128 will eliminate the
presentation of primary earnings per share and replace it with basic earnings
per share. Basic earnings per share differs from primary earnings per share
because common stock equivalents are not considered in computing basic earnings
per share. Fully diluted earnings per share will be replaced with diluted
earnings per share. Diluted earnings per share is similar to fully diluted
earnings per share, except in determining the number of dilutive shares
outstanding for options and warrants, in that the proceeds that would be
received upon the conversion of all dilutive options and warrants, are assumed
to be used to repurchase the Company's Common Stock at the average market price
of such stock during the period. For fully diluted earnings per share, the
higher of the average market price or closing market price is used. If SFAS 128
had been in effect, basic earnings per share would have approximated primary
earnings per share and fully diluted earnings per share for the six month period
ended June 30, 1997.

NOTE 8


         On July 2, 1997, the Company entered into a letter agreement with the
former Shareholders of Singer Specs, Inc. whereby such Shareholders, in
consideration of a loan (the "First Advance") by the Company to the
Shareholders, in an amount equal to $400,000 plus the amount required
(approximately $105,000) to pay off their debt to a bank holding a first
mortgage on the building owned by Singer (and acquired by the Company in
connection with the Singer Transaction), agreed that they would not sell or
offer to sell, without the prior written consent of the Company, any of their
remaining Initial Sale Shares (as defined in the Singer Agreement) for a period
of thirty (30) days, expiring July 31, 1997 (the "First Standstill Period").

         The agreement further provides that, upon the expiration of the First
Standstill Period, the Company would have the option, which the Company did not
exercise, to extend the period of time during which the Shareholders would
refrain from selling any of their remaining Initial Sale Shares without the
prior, written consent of the Company, for an additional period of three (3)
months, expiring October 31, 1997 (the "Second Standstill Period"), in exchange
for a "Second Advance" equal to the difference between (i) $820,940 and (ii) the
sum of (A) the First Advance and (B) the gross proceeds (less 50% of any
commissions payable to broker agents, underwriters, etc.) realized from all
sales of the Initial Sale Shares theretofore consummated or in the process of
being consummated.

         The First Advance is evidenced by a Note, accruing no interest and
providing for the payment of the principal amount thereof, only out of the first
proceeds received by any of the Shareholders from their sale of the remaining
Initial Sale Shares.

         In July 1997, the Company was required, under the terms of the BEC
Agreement (see Note 5), to pay to BEC approximately $67,000, which represented
the difference between the market price of its Common Stock (upon which the
number of shares issued to BEC, in prepayment of the promissory notes discussed
above, was calculated) and the selling price of a portion of such shares issued
to BEC.

         In July 1997, the Company was required, under the terms of the Singer
Agreement (see Note 5), to pay to the Shareholders approximately $32,000, which
represented the difference between the market price of its Common Stock (upon
which the purchase price for the capital stock of Singer Specs, Inc. was
calculated) and the selling price (net of 50% of commissions) generated from the
sale of approximately 20,000 shares by the Shareholders.

                                       -9-

<PAGE>

NOTE 8 (Continued)

         In July 1997, the Company elected, in connection with its Private
Placement (see Note 4), to pay to one of its Debenture holders $460,000, which
represented the redemption price for the conversion of $400,000 principal amount
of Debentures.


NOTE 9

         The Company continues to account for its stock-based awards using the
intrinsic value method in accordance with APB 25, "Accounting for Stock Issued
to Employees" and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements.

         SFAS 123, "Accounting for Stock-Based Compensation", requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1996. Under SFAS
123, the fair value of stock-based awards to employees is calculated through the
use of option pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values. The Company's calculations were made using the Black-Scholes option
pricing model with the following weighted aver assumptions: expected life 60
months following vesting; stock volatility, 20% in 1996, risk free interest
rates, 6% and no dividends during the expected term. The Company's calculations
are based on a multiple option valuation approach and forfeitures are recognized
as they occur. If the computed fair values of the award had been amortized to
expense over the vesting period of the awards, the pro forma net income (loss)
and earnings (loss) for common shares for the three months and six months ended
June 30, 1997, would have been ($216,000) or (.02) and $110,000 or .01,
respectively.

                                      -10-

<PAGE>

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

         All statements contained herein which are not historical facts
including, but not limited to, statements regarding the Company's future
development plans, the Company's ability to generate cash from its operations
and the operations of Insight Laser Centers, Inc. ("Insight"), and any losses
related thereto, are based upon current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: competition in the retail
optical and managed care industries; the ability of the Company to acquire, at
favorable prices, retail optical chains; the uncertainty of the acceptance of
Photorefractive Keractectomy ("PRK"); the availability of new and better
ophthalmic laser technologies or other technologies that serve the same purpose
as PRK; the ability of the Company to finalize favorable affiliation agreements
with ophthalmologists offering PRK; cost over-runs; and general business and
economic conditions.

Results of Operations

For the Six Months Ended June 30, 1997 compared to June 30, 1996


         Systemwide sales represent combined retail sales generated by
Company-owned and franchised stores, as well as revenues generated by VisionCare
of California ("VCC"), a wholly-owned subsidiary of the Company licensed by the
California Department of Corporations as a specialized health maintenance
organization, and Insight. There were 339 and 317 Sterling Stores in operation
as of June 30, 1997 and June 30, 1996, respectively, of which 228 and 242,
respectively, were franchised. Such stores operate under various tradenames
including Sterling Optical, Site for Sore Eyes, IPCO Optical, Benson Optical,
Superior Optical, Southern Optical, Nevada Optical, Duling Optical, Monfried
Optical, Kindy Optical and Singer Specs. Systemwide sales increased by
$9,431,000, or 14.9%, to $72,937,000 for the six months ended June 30, 1997, as
compared to $63,506,000 for the same period in 1996. On a same store basis (for
stores that operated as either a Company-owned or franchised store during the
entirety of both of the six month periods ended June 30, 1997 and 1996),
systemwide sales decreased by $996,000, or 3.9%, to $24,413,000 for the six
months ended June 30, 1997, as compared to $25,409,000 for the same period in
1996. The Company believes that such decrease resulted, in part, from general
business conditions. There were 186 stores that operated as either a
Company-owned or franchised store during the entirety of both of the six month
periods ended June 30, 1997 and 1996.

         Aggregate sales generated from the operation of Company-owned stores
decreased by $2,620,000, or 18.2%, to $11,757,000 for the six months ended June
30, 1997, as compared to $14,377,000 for the same period in 1996. Such decrease
was primarily due to the conveyance of the assets of Company-owned stores to
franchisees. Historical comparisons of aggregate sales generated by
Company-owned stores can become distorted due to the conveyance of Company-owned
store assets to franchisees. When Company-owned store assets are conveyed to
franchisees, sales generated by such franchised store are no longer reflected in
Company-owned store sales; however, the Company receives on-going royalties
based upon a percentage of the sales generated by such franchised stores. On a
same store basis, aggregate sales generated by Company-owned stores in operation
during the entirety of both of the six month periods ended June 30, 1997 and
1996, decreased by $715,600, or 8.6%, to $7,577,000 for the six months ended
June 30, 1997, as compared to $8,292,000 for the same period in 1996.

         Aggregate sales generated from the operation of franchised stores
increased by $12,051,000, or 24.5%, to $61,180,000 for the six months ended June
30, 1997, as compared to $49,129,000 for the same period in 1996, due primarily
to the acquisition of certain franchised stores on:(i) May 30, 1996, from Vision
Centers of America, Ltd. ("VCA") and its affiliates (the "VCA Transaction"); and
(ii) April 1, 1997, in connection with the Singer Transaction. On a same store
basis, aggregate sales generated by franchised stores in operation during the
entirety of both of the six month periods ended June 30, 1997 and 1996,
decreased by $1,636,000, or 3.9%, to $40,907,000

                                      -11-

<PAGE>

for the six month period ended June 30, 1997, as compared to $42,543,000 for the
same period in 1996.


         Aggregate ongoing franchise royalties increased by $908,000, or 24.2%,
to $4,668,000 for the six months ended June 30, 1997, as compared to $3,760,000
for the same period in 1996, due primarily to the acquisition of certain
franchised stores in connection with the VCA and Singer Transactions.

         Net gains on the conveyance of the assets of seven Company-owned stores
to franchisees decreased by $684,000, or 43.8%, to $878,000 for the six months
ended June 30, 1997, as compared to net gains on the conveyance of the assets of
seven Company-owned stores to franchisees, in the aggregate amount of $1,562,000
for the same period in 1996.

         The Company's gross profit margin decreased by one percentage point, to
73.0, for the six months ended June 30, 1997, as compared to 74% for the same
period in 1996. This decrease resulted primarily from the continuation of
promotional programs, instituted in the Fall of 1996, in response to certain
promotional incentives offered by certain major competitors of the Company. To
match such incentives, the Company offered similar types of promotional programs
to its customers, which resulted in lower gross profit margins. In the future,
the Company's gross profit margin may fluctuate depending upon the extent and
timing of changes in the product mix in Company-owned stores, competition and
promotional incentives.

         Selling expenses decreased by $2,510,000 or 25.4%, to $7,365,000 for
the six months ended June 30, 1997, as compared to $9,875,000 for the same
period in 1996, due primarily to the conveyance of the assets of Company-owned
stores to franchisees.

         General and administrative expenses (including interest expense,
depreciation and bad debt expense) increased by $788,000, or 11.7%, to
$7,551,000 for the six months ended June 30, 1997, as compared to $6,763,000 for
the same period in 1996. This increase was due primarily to the following five
factors: (i) approximately $325,000 in administrative costs and legal fees
related to the stores acquired in the VCA Transaction; (ii) approximately
$140,000 in higher occupancy expenses related to the Company's relocation, in
the second quarter of 1996, of its administrative offices; (iii) approximately
$100,000 in higher costs related to operating as a publicly-held company; (iv)
approximately $85,000 in costs related to stock options granted to certain
consultants to the Company; and (v) approximately $113,000 in costs related to
compensation paid to the Company's new President and Chief Operating Officer,
and consulting fees paid to a company owned by two of the Company's principal
shareholders. Interest expense, which is included in general and administrative
expenses, increased by $18,000, or 3.0%, to $621,000 for the six months ended
June 30, 1997, as compared to $603,000 for the same period in 1996. The
Company's provision for doubtful accounts, which is included in general and
administrative expenses, decreased by $131,000, or 56.7%, to $100,000 for the
six months ended June 30, 1997, as compared to $231,000 for the same period in
1996.

         The Company's income before income taxes increased by $413,000, or
2294.4%, to $431,000 for the six months ended June 30, 1997 as compared to
$18,000 for the same period in 1996. During the second quarter of 1996, the
Company consummated the VCA Transaction and, as a result, certain aspects of the
Company's operations during the six months ended June 30, 1997 were not
comparable to its operations for the same period in 1996. Losses from the

Company's operations (excluding income applicable to the operation of the stores
acquired in the VCA Transaction) increased by $1,106,000, or 256%, to a loss of
$1,538,000 for the six months ended June 30, 1997, as compared to a loss of
$432,000 for the same period in 1996. This increase was primarily due to the
increase in general and administrative expenses (including interest expense,
depreciation and bad debt expense), as explained above, (excluding such expenses
applicable to the operation of the stores acquired in the VCA Transaction) and a
decrease in the net gains on the conveyance of the assets of Company-owned
stores to franchisees (excluding such gains applicable to the conveyance of the
assets of five Company-owned stores acquired in the VCA Transaction).

                                      -12-

<PAGE>

Liquidity and Capital Resources

         On February 26, 1997, the Company entered into Convertible Debentures
and Warrants Subscription Agreements (see Note 4) with certain investors in
connection with the Private Placement. The Company utilized the net proceeds
(approximately $7,500,000) of the Private Placement to: (i) repay $1,000,000 of
the loans made to it by certain principal shareholders of the Company, as
discussed above, together with interest thereon, in the approximate amount of
$50,000; and (ii) pay down the Company's revolving line of credit with the Bank
($1,000,000). The balance of such proceeds were utilized for general corporate
purposes.

         On June 30, 1997, the Company entered into a Loan Agreement (see Note
6) with STI to finance a portion of its existing and future franchise promissory
notes receivable. The Company utilized a portion of the net proceeds
(approximately $6,100,000) of the loan to repay the balance of all outstanding
amounts due to: (i) the Bank ($5,035,000, together with interest thereon, in the
approximate amount of $37,000); and (ii) certain principal shareholders of the
Company ($1,000,000, together with interest thereon, in the approximate amount
of $9,000). The Company intends to use the balance of such proceeds for general
corporate purposes.

         As of June 30, 1997 and December 31, 1996, the Company had $11,859,000
and $(3,803,000), respectively, in working capital, and $2,590,000 and $868,000,
respectively, of cash and cash equivalents. As of the date hereof, the Company
has ceased the construction of any new Insight Laser Centers, including the one
in San Francisco, California (which was anticipated to open during the first
quarter of 1997). During the twelve months ending December 31, 1997, the Company
anticipates having the following capital requirements: renovating six existing
Company-owned stores; the continuing upgrade of the Company's management
information system in conjunction with the point-of-sale computer systems being
installed in its Company-owned stores, in the aggregate, approximate amount of
$250,000; acquiring retail optical stores, subject to the availability of
qualified opportunities in furtherance of the Company's business strategy, in
amounts that cannot be projected by the Company at this time, and opening new
retail optical stores in furtherance of the Company's business strategy, also in
amounts that cannot be projected by the Company at this time.

         The Company experienced negative cash flow from its operations during

the six months ended June 30, 1997 resulting, primarily, from losses
attributable to the operations of Insight and a substantial reduction in the
Company's accounts payable. By the end of 1996, the following measures were
taken by the Company, which management believes will reduce the magnitude of the
losses it sustained for the calendar year ended December 31, 1996, as well as
improve the Company's operations and cash flow in 1997: (i) closed or failed to
renew the leases for nine of the stores acquired from Benson Optical Co., Inc.
in November 1995 (collectively, the "Benson Stores"), some of which were
unprofitable; (ii) franchised eleven Benson Stores which are currently producing
royalty income; (iii) eliminated virtually all administrative overhead in
connection with Insight; and (iv) reduced overhead at the Company's Insight
Laser Center located in New York City. Although the Company anticipates a
positive cash flow, for 1997, from its retail optical store operations, it
nevertheless anticipates that Insight will continue to operate at a loss for the
twelve months ending December 31, 1997 and, therefore, the Company believes that
such store operating cash flow will be insufficient to result in a positive cash
flow from operations for the Company for this period. However, the Company
believes that it can meet its cash requirements through either additional
borrowings, financing future franchise notes receivable under the terms of the
Loan Agreement, or additional sales of equity, although there can be no
assurance that the Company would be successful in obtaining any such additional
borrowings, financing future franchise notes receivable and/or selling
additional equity, or on what terms such transactions could be effected. In
addition, the Company is currently finalizing an agreement with the Bank for a
new short-term line of credit which the Bank offered to the Company subsequent
to the Company's repayment of all outstanding sums due to the Bank, although
there can be no assurance that such transaction will be consummated.

                                      -13-


<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.   Not applicable.
--------------------------

Item 2. Changes in Securities.   Not applicable.
------------------------------

Item 3. Defaults Upon Senior Securities.  Not applicable.
----------------------------------------

Item 4. Submission of Matter to a Vote of Security Holders.
-----------------------------------------------------------

         (a)      The second Annual Meeting of Shareholders of the Company was
                  held on June 20, 1997.

         (c)      

                  (i)      The election of the nominees for three Class II
                           Directors who will serve for a term to expire at the
                           1998 Annual Meetings of Shareholders or until each of
                           their respective successors shall have been duly
                           elected and qualified was voted on by the
                           shareholders. The three Class II nominees, all of
                           whom were elected, were Robert Cohen, Alan Cohen and
                           Joel Gold. The Inspectors of Election certified the
                           following vote tabulations with respect thereto:


                           Class I Director         For           Withheld
                           ----------------         ---           --------
                           Robert Cohen          10,759,628       281,843
                           Alan Cohen            10,759,628       281,843
                           Joel Gold             10,919,004       122,467

                  (ii)     A proposal to approve Amendment No. 2 to the
                           Company's 1995 Stock Incentive Plan was approved by
                           the shareholders. The Inspectors of Election
                           certified the following vote tabulations:

                                                                Broker
                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                           7,425,553   393,152     23,450      3,199,316

                  (iii)    A proposal to approve Amendment No. 3 to the
                           Company's 1995 Stock Incentive Plan was approved by
                           the shareholders. The Inspectors of Election
                           certified the following vote tabulations:

                                                                Broker

                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                             899,250   388,519     23,950      3,199,316

                  (iv)     A proposal to approve the granting, to each Drs.
                           Robert, Alan and Edward Cohen, of options to purchase
                           shares of the Company's Common Stock was approved by
                           the shareholders. The Inspectors of Election
                           certified the following vote tabulations:

                                                                Broker
                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                           5,453,623   268,576     185,976     3,199,316

                                      -14-

<PAGE>

                  (v)      A proposal to approve the granting, to Jay Fabrikant,
                           of options to purchase shares of the Company's Common
                           Stock was approved by the shareholders. The
                           Inspectors of Election certified the following vote
                           tabulations:

                                                                Broker
                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                            7,351,502  466,253     23,400      3,200,316

                  (vi)     A proposal to approve the granting to Meadows
                           Management, LLC, a limited liability company owned by
                           Drs. Robert and Alan Cohen, of options to purchase
                           shares of the Company's Common Stock was approved by
                           the shareholders. The Inspectors of Election
                           certified the following vote tabulations:

                                                                Broker
                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                            5,442,639  442,936     22,600      3,199,316

                  (vii)    A proposal to approve the reappointment of Deloitte &
                           Touche LLP, independent certified public accountants,
                           as the Company's auditors for the calendar year
                           ending December 31, 1997, was approved by the
                           shareholders. The Inspectors of Election certified
                           the following vote tabulations:

                                                                Broker
                              For      Against    Abstain      Non-Votes
                              ---      -------    -------      ---------
                           10,939,171  88,950      13,350        - 0 -


Item 5. Other Information.  Not applicable.
--------------------------

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

a.) Exhibits
    --------

                                  EXHIBIT INDEX

Exhibit
Number

10.72    Loan Agreement, dated June 30, 1997, between the Company and STI Credit
         Corporation (incorporated by reference to Exhibit 10.72 to the
         Company's Current Report on Form 8-K, dated June 30, 1997).

10.73    Letter Agreement, dated July 2, 1997, among the Company and Messrs.
         Sidney, Alan and David Singer.

10.74    Form of Non-Negotiable Judgment Note, dated July 1, 1997, among the
         Company and Messrs. Sidney, Alan and David Singer.

11       Computation of Earnings Per Common Share.


27       Financial Data Schedule.

b.) Reports on Form 8-K
    -------------------

         1)       On June 30, 1997, the Company filed a Report on Form 8-K with
                  respect to the Loan Agreement.

                                      -15-

<PAGE>

                                   SIGNATURES

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

                                    STERLING VISION, INC.
                                    (Registrant)

                                    BY: /s/Sebastian Giordano
                                        ---------------------------
                                        Sebastian Giordano
                                        Chief Financial Officer,
                                        Executive Vice President-
                                        Finance and Treasurer

                                        Signing on behalf of the 
                                        Registrant as its Principal 
                                        Financial Officer.

                                        Date: August 14, 1997

                                      -23-