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, 2002

                                       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

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


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

                         100 Quentin Roosevelt Boulevard
                           Garden City, New York 11530
              ----------------------------------------------------
          (Address of Principal Executive Offices, including Zip Code)

                                 (516) 390-2100
              (Registrant's Telephone Number, Including Area Code)


     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 CORPORATE ISSUERS:

     As of August 12, 2002,  there were  29,490,620  shares of the  Registrant's
Common Stock, par value $0.01 per share, outstanding.


<PAGE>


Item 1.  Financial Statements

                     EMERGING VISION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                                                                    June 30,         December 31,
                                                                                                      2002               2001
                                                                                                 --------------     -------------
                                                                                                   (Unaudited)

                                     ASSETS
<S>                                                                                                 <C>               <C>
Current assets:
         Cash and cash equivalents                                                                  $    743          $   1,053
         Franchise receivables, net of allowance of $2,164 and $3,095, respectively                    1,295              1,837
         Other receivables, net of allowance of $52 and $171, respectively                               370                739
         Current portion of franchise notes receivable                                                 2,338              2,993
         Inventories, net                                                                                592                783
         Prepaid expenses and other current assets                                                       223                 94
                                                                                                    ---------         ----------
                     Total current assets                                                              5,561              7,499
                                                                                                    ---------         ----------

Property and equipment, net                                                                              911              1,075
Franchise notes and other receivables, net of allowance of $3,223 and $3,326, respectively             1,247                862
Goodwill, net                                                                                          1,266              1,266
Other assets                                                                                             302                355
                                                                                                    ---------         ----------
                     Total assets                                                                   $  9,287          $  11,057
                                                                                                    =========         ==========

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
         Current portion of long-term debt, net                                                     $    587          $     186
         Accounts payable and accrued liabilities                                                      6,527              7,122
         Accrual for store closings (Note 6)                                                             472                964
         Related party borrowings                                                                        150                750
         Net liabilities of discontinued operations                                                      220                235
                                                                                                    ---------         ----------
                     Total current liabilities                                                         7,956              9,257
                                                                                                    ---------         ----------

Long-term debt, net (Note 10)                                                                            552                363
                                                                                                    ---------         ----------
Related party borrowings                                                                                 100                  -
                                                                                                    ---------         ----------
Franchise deposits and other liabilities                                                                 902                820
                                                                                                    ---------         ----------
Contingencies (Note 7)

Shareholders' equity:
     Preferred stock, $0.01 par value per share; 5,000,000 shares authorized:
       Senior Convertible Preferred Stock, $100,000 liquidation preference per
          share; 1 and 3 shares issued and outstanding, respectively                                      74                287
     Common stock, $0.01 par value per share; 50,000,000 shares authorized; 29,422,957 and
        27,187,309 shares issued, respectively, and 29,240,620 and 27,004,972 shares outstanding,
        respectively                                                                                     294                272
     Treasury stock, at cost, 182,337 shares                                                            (204)              (204)
     Additional paid-in capital                                                                      120,345            119,926
     Accumulated deficit                                                                            (120,732)          (119,664)
                                                                                                   ----------         ----------
                     Total shareholders' equity (deficit)                                               (223)               617
                                                                                                   ----------         ----------
                     Total liabilities and shareholders' equity (deficit)                          $     287          $  11,057
                                                                                                   ==========         ==========

</TABLE>
     The accompanying notes are an integral part of these  consolidated  balance
sheets.


                                       2
<PAGE>



                     EMERGING VISION, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                                   For the Three Months          For the Six Months
                                                                      Ended June 30,               Ended June 30,
                                                                  ------------------------     -----------------------
                                                                      2002       2001              2002       2001
                                                                  ------------------------     -----------------------
<S>                                                                 <C>         <C>              <C>        <C>
Revenues:
       Net sales                                                    $  2,084    $  2,900         $  5,074   $  5,740
       Franchise royalties                                             1,690       2,098            3,387      4,330
       Net gains from the conveyance of Company-owned
          store assets to franchisees, and other fees                      7          34                7        122
       Interest on franchise notes receivable                             89         256              174        555
       Other income                                                       66          19               96         58
                                                                    ---------   ---------        ---------  ---------
          Total revenues                                               3,936       5,307            8,738     10,805
                                                                    ---------   ---------        ---------  ---------

Costs and expenses:
       Cost of sales                                                     626         652            1,402      1,206
       Selling, general and administrative expenses                    3,648       4,559            8,168      9,405
       Loss from franchised stores operated under
          management agreements                                            -         134                -        247
       Interest expense                                                   59          19               98         45
                                                                    ---------   ---------        ---------  ---------
          Total costs and expenses                                     4,333       5,364            9,668     10,903
                                                                    ---------   ---------        ---------  ---------

       Loss from continuing operations before provision for
          income taxes                                                  (397)        (57)            (930)       (98)
       Provision for income taxes                                          -           -                -          -
                                                                    ---------   ---------        ---------  ---------
          Loss from continuing operations                               (397)        (57)            (930)       (98)
                                                                    ---------   ---------        ---------  ---------

Discontinued operations (Note 3):
   Income (loss) from discontinued operations                           (120)      1,064             (120)     1,495
                                                                    ---------   ---------        ---------  ---------
          Net income (loss)                                         $   (517)   $  1,007         $ (1,050)  $  1,397
                                                                    =========   =========        =========  =========

Per share information - basic and diluted (Note 5):

       Loss from continuing operations                              $  (0.02)   $   0.00         $  (0.04)  $   0.00
       Income (loss) from discontinued operations                       0.00        0.04             0.00       0.06
                                                                    ---------   ---------        ---------  ---------
          Net income (loss)                                         $  (0.02)   $   0.04         $  (0.04)  $   0.06
                                                                    =========   =========        =========  =========

Weighted-average number of common shares    outstanding -
   basic and diluted                                                  28,396      25,556           27,700     25,469
                                                                    =========   =========        =========  =========

</TABLE>

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


                                       3
<PAGE>



                     EMERGING VISION, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                    For the Six Months
                                                                                      Ended June 30,
                                                                                ---------------------------
                                                                                    2002           2001
                                                                                ---------------------------
<S>                                                                              <C>            <C>
Cash flows from operating activities:
   Net loss from continuing operations                                           $   (930)      $    (98)
      Adjustments to reconcile net loss from continuing operations
         to net cash (used in) provided by operating activities:
         Depreciation and amortization                                                246            669
         Provision for doubtful accounts                                              106              7
         Non-cash charges related to options and warrants                              41            165
         Charges related to long-lived assets                                          36             21
         Changes in operating assets and liabilities:
            Franchise and other receivables                                           195           (558)
            Inventories                                                               154            (90)
            Prepaid expenses and other current assets                                (129)           101
            Other assets                                                               53             75
            Accounts payable and accrued liabilities                                 (595)            86
            Franchise deposits and other liabilities                                   82           (265)
            Accrual for store closings                                               (492)             -
                                                                                 ---------      ---------
Net cash (used in) provided by operating activities                                (1,233)           113
                                                                                 ---------      ---------

Cash flows from investing activities:
   Franchise notes receivable issued                                                  (31)          (231)
   Proceeds from franchise and other notes receivable                                 948          1,018
   Purchases of property and equipment                                               (118)          (229)
                                                                                 ---------      ---------
Net cash provided by investing activities                                             799            558
                                                                                 ---------      ---------

Cash flows from financing activities:
   Proceeds from the exercise of stock warrants                                        20              -
   Proceeds from borrowings                                                         1,300              -
   Payments on borrowings                                                          (1,061)          (118)
   Acquisition of treasury shares                                                       -             (1)
                                                                                 ---------      ---------
Net cash provided by (used in) financing activities                                   259           (119)
                                                                                 ---------      ---------
Net cash (used in) provided by continuing operations                                 (175)           552
                                                                                 ---------      ---------
Net cash used in discontinued operations                                             (135)        (3,840)
                                                                                 ---------      ---------
Net decrease in cash and cash equivalents                                            (310)        (3,288)
Cash and cash equivalents - beginning of period                                     1,053          5,215
                                                                                 ---------      ---------
Cash and cash equivalents - end of period                                        $    743       $  1,927
                                                                                 =========      =========

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
      Interest                                                                   $     61       $     45
                                                                                 =========      =========
      Taxes                                                                      $     47       $     50
                                                                                 =========      =========
Non-cash investing and financing activities:
   Franchise store assets reacquired                                             $      -       $    349
   Issuance of common shares for consulting services                                    -            165

</TABLE>

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



                                       4
<PAGE>
                     EMERGING VISION, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                     FOR THE SIX MONTHS ENDED JUNE 30, 2002
                        (In Thousands, Except Share Data)


<TABLE>
<CAPTION>


                                                                            Treasury
                                    Senior Convertible                       Stock,           Additional                   Total
                                     Preferred Stock        Common Stock     at cost           Paid-In    Accumulated  Shareholders'
                                    Shares    Amount   Shares       Amount   Shares   Amount   Capital      Deficit       Equity
                                    ------    ------  ----------   --------  ------   ------  ----------  -----------  ------------


<S>                                 <C>      <C>      <C>          <C>       <C>      <C>      <C>         <C>           <C>
BALANCE - DECEMBER 31, 2001              3   $  287   27,187,309   $   272   182,337  $(204)   $119,926    $(119,664)    $    617
                                    ------   ------   ----------   --------  -------  -----    --------    ---------     --------
Issuance of warrants in
   connection with financing
   arrangements (Note 10)                -        -            -         -         -      -         190            -          190
Issuance of common shares upon
   conversion of Senior Convertible
   Preferred Stock (Note 9)             (2)    (213)     235,648         2         -      -         229          (18)           -
Exercise of stock warrants (Note 9)      -        -    2,000,000        20         -      -           -            -           20
Net loss                                 -        -            -         -         -      -           -       (1,050)      (1,050)
                                    ------   ------   ----------   --------  -------  -----    --------    ---------     --------
BALANCE - JUNE 30, 2002                  1   $   74   29,422,957   $   294   182,337  $(204)   $120,345    $(120,732)    $   (223)
                                    ======   ======   ==========   ========  =======  =====    ========    =========     ========



</TABLE>

     The accompanying notes are an integral part of this consolidated statement.

                                       5
<PAGE>



                     EMERGING VISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION:

     The accompanying Consolidated Financial Statements of Emerging Vision, Inc.
and subsidiaries (collectively,  the "Company") have been prepared in accordance
with accounting  principles  generally accepted for interim financial  statement
presentation 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  accounting  principles  generally  accepted 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  Financial  Statements  and  Notes  thereto
included in the Company's  Annual Report on Form 10-K, as amended,  for the year
ended December 31, 2001.  There have been no changes in  significant  accounting
policies since December 31, 2001.


NOTE 2 - MANAGEMENT'S LIQUIDITY PLANS

     As of June 30, 2002, the Company had negative working capital of $2,395,000
and cash on hand of $743,000.  During the six months  ended June 30,  2002,  the
Company used approximately $1,233,000 of cash in its operating activities.  This
usage was in line with management's plans and was mainly a result of $492,000 of
costs  related to the Company's  store closure plan (Note 6),  $595,000 of costs
related to the  Company's  settlement  of certain  accounts  payable and accrued
liabilities  that existed as of December 31, 2001,  and $129,000  related to the
prepayment of certain other  business  expenses  offset,  in part, by a $195,000
decrease in franchise and other receivables. Management anticipates that it will
continue to incur significant costs in order to continue to close certain of its
non-profitable  Company-owned stores, all in its effort to eliminate future cash
flow losses currently generated by such stores.

     The Company  plans to continue to attempt to improve its cash flows  during
2002  by  improving  store   profitability   through  increased   monitoring  of
store-by-store   operations,   closing   non-profitable   Company-owned  stores,
implementing  reductions of administrative overhead expenses where necessary and
feasible, actively supporting development programs for franchisees,  and seeking
additional financing, if available. Management believes that with the successful
implementation of the aforementioned plans to attempt to improve cash flows, its
existing cash, the collection of outstanding  receivables,  and the availability
under its existing credit facility (Note 10), there will be sufficient liquidity
available for the Company to continue in operation until at least the end of the
third quarter of 2003. However,  there can be no assurance that the Company will
be able to achieve the aforementioned  plans, or that additional  financing will
be available.

     In this regard,  on April 29, 2002,  the Board of Directors  (the  "Board")
unanimously  approved  of  the  Company's  initiation  of a  shareholder  rights
offering  (Note  9),  pursuant  to  which  the  Company  will  attempt  to raise
approximately $2,000,000 of gross proceeds from the sale of additional shares of
its Common Stock to its existing shareholders.


NOTE 3 - DISCONTINUED OPERATIONS:

     On March 28,  2001,  the Board  decided  that the Company  should focus its
efforts and resources on growing its retail  optical  business and, as a result,
approved a plan to discontinue all other  operations then being conducted by the
Company.  In connection with this decision,  during 2001, the Company  completed
its plan of disposal  of  substantially  all of the net assets of Insight  Laser
Centers,  Inc.  ("Insight Laser") - which operated three laser vision correction
centers in the New York  metropolitan  area,  Insight Laser Centers N.Y.I,  Inc.
(the  "Ambulatory  Center") - which  owned the assets of an  ambulatory  surgery
center located in Garden City,  New York, and its Internet  Division - which was
to provide a web-based portal designed to take advantage of business-to-business
opportunities in the optical  industry.  As a result,  the remaining  results of
operations and cash flows of these divisions have been reflected as discontinued
operations in the accompanying Consolidated Financial Statements.


                                       6
<PAGE>


     As of June 30, 2002 and December 31, 2001, net  liabilities of discontinued
operations  of $220,000  and  $235,000,  respectively,  were  segregated  on the
accompanying  Consolidated Balance Sheets. In addition,  as of June 30, 2002 and
December 31, 2001, respectively, approximately $120,000 and $141,000 was accrued
as  part  of  accounts  payable  and  accrued  liabilities  on the  accompanying
Consolidated   Balance  Sheets,   representing  the  remaining  estimated  costs
associated with the Company's original plan of disposal,  and additional accrued
costs associated with the Company's  guarantee of certain  potential  continuing
liabilities of the Ambulatory Center (Note 7).


NOTE 4 - SIGNIFICANT ACCOUNTING POLICY - REVENUE RECOGNITION

     The Company generally charges franchisees a nonrefundable initial franchise
fee.  Initial  franchise fees are  recognized at the time all material  services
required  to be  provided  by the  Company  have been  substantially  performed.
Continuing  franchise  royalty  fees are based  upon a  percentage  of the gross
revenues  generated  by each  franchised  location  and are  recorded as earned,
subject to meeting all of the requirements of SAB 101 described below.

The Company derives its revenues from the following four principal sources:

       Net sales - Represents sales from eye care products and related services;

       Franchise royalties - Represents continuing franchise fees based upon a
       percentage of the gross revenues generated by each franchised location;

       Net gains from the conveyance of Company-store assets to franchisees -
       Represents the net gains from the sale of Company-owned store assets to
       franchisees; and

       Interest on franchise notes - Represents interest charged to franchisees
       pursuant to promissory notes issued in connection with a franchisee's
       acquisition of the assets of a Sterling Store or a qualified refinancing
       of a franchisee's obligations to the Company.

     The Company  recognizes  revenues in accordance  with SEC Staff  Accounting
Bulletin No. 101,  "Revenue  Recognition in Financial  Statements"  ("SAB 101").
Accordingly,  revenues are recorded when  persuasive  evidence of an arrangement
exists,  delivery has occurred or services  have been  rendered,  the  Company's
price to the buyer is fixed or determinable,  and  collectibility  is reasonably
assured.  To the extent that  collectibility  of  royalties  and/or  interest on
franchise notes is not reasonably  assured,  the Company recognizes such revenue
when the cash is received.

     The Company  also  follows  the  provisions  of Emerging  Issues Task Force
("EITF")  Issue  01-09,  "Accounting  for  Consideration  Given by a Vendor to a
Customer  (Including  Reseller  of the  Vendor's  Products)"  and,  accordingly,
accounts  for  discounts,  coupons  and  promotions  (that  are  offered  to its
customers) as a direct reduction of sales.


NOTE 5 - PER SHARE INFORMATION:

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
128,  "Earnings  Per Share",  basic net income  (loss) per common share  ("Basic
EPS") is computed by dividing net income (loss) by the  weighted-average  number
of common  shares  outstanding.  Diluted  net income  (loss)  per  common  share
("Diluted   EPS")  is  computed  by  dividing  the  net  income  (loss)  by  the
weighted-average  number of common shares and dilutive common share  equivalents
and  convertible  securities  then  outstanding.   SFAS  No.  128  requires  the
presentation  of both  Basic EPS and  Diluted  EPS on the face of the  Company's
Consolidated  Statements of Operations.  Common stock  equivalents were excluded
from the computation for all periods presented,  as their impact would have been
anti-dilutive.


                                       7
<PAGE>


     The  following  table sets forth the  computation  of basic and diluted per
share information (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                For the Three Months Ended         For the Six Months Ended
                                                                         June 30,                         June 30,
                                                                    2002          2001                 2002        2001
                                                                --------------------------         ------------------------
<S>                                                               <C>           <C>                 <C>          <C>
Numerator:

   Loss from continuing operations                                $  (397)      $   (57)            $   (930)    $   (98)
   Conversion of Senior Convertible
      Preferred Stock                                                 (18)            -                  (18)          -
                                                                  --------      --------            ---------    --------
   Numerator for basic and diluted per share
      information - loss attributable to common
      shareholders                                                   (415)          (57)                (948)        (98)
                                                                  --------      --------            ---------    --------

Basic and Diluted:

   Loss attributable to common shareholders                          (415)          (57)                (948)        (98)
   Income (loss) from discontinued operations                        (120)        1,064                 (120)      1,495
                                                                  --------      --------            ---------    --------
      Net income (loss) available (attributable) to
         common shareholders                                       $ (535)      $ 1,007             $ (1,068)    $ 1,397
                                                                  ========      ========            =========    ========

Denominator:

   Denominator for basic and diluted per share
      information - weighted-average number of
      common shares outstanding                                    28,396        25,556               27,700      25,469
                                                                  ========      ========            =========    ========

Basic and Diluted Per Share Information:

   Loss attributable to common shareholders                       $ (0.02)      $  0.00             $  (0.04)    $  0.00
   Income (loss) from discontinued operations                        0.00          0.04                 0.00        0.06
                                                                  --------      --------            ---------    --------
      Net income (loss) available (attributable) to
         common shareholders                                      $ (0.02)      $  0.04             $  (0.04)    $  0.06
                                                                  ========      ========            =========    ========
</TABLE>

NOTE 6 - PROVISION FOR STORE CLOSINGS:

     The Company  follows  the  provisions  of Emerging  Issues Task Force Issue
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity," and in accordance therewith,  provides for losses it
anticipates  incurring  with respect to those  Company-owned  stores that it has
identified  for  future  closure,  at the time  that  management  makes a formal
commitment  to any such plan of closure.  The  provision is recorded at the time
the  determination  is made to  close a  particular  store  and is  based on the
expected net  proceeds,  if any, to be  generated  from the  disposition  of the
store's  assets,  as compared to the  carrying  value  (after  consideration  of
impairment,  if any) of such store's assets and the estimated  costs  (including
lease  termination costs and other expenses) that are anticipated to be incurred
in the closing of the store in question.  As of December  31, 2001,  the Company
had accrued  approximately  $964,000 (comprised of $766,000 in lease termination
costs and $198,000 for other  associated  expenses)  related to its  anticipated
closure of 11 stores.  During the six months  ended June 30,  2002,  the Company
successfully closed 6 of such stores and, as of June 30, 2002, $472,000 remained
accrued as accrual for store closings on the accompanying  Consolidated  Balance
Sheet. The Company anticipates completing its closure plan by the end of 2002.


                                       8
<PAGE>

NOTE 7 - CONTINGENCIES:

Litigation

     In 1999, the Company  commenced an action in the Supreme Court of the State
of New York against Dr. Larry Joel and Apryl Robinson for amounts claimed due by
the  Company  on a series of five  separate  Negotiable  Promissory  Notes  (the
"Notes").  The Notes were  issued by  corporations  owned by the  defendants  in
connection  with their purchase of the assets of, and a Sterling  Optical Center
Franchise  for, an aggregate of four of the Company's  retail optical stores and
an  optical  laboratory.  The  repayment  of each of the  Notes  was  personally
guaranteed  by each of the  defendants.  In response,  the  defendants  asserted
counterclaims in excess of $13,000,000  based upon the Company's alleged failure
to comply with the terms of an oral, month-to-month consulting agreement between
Dr. Joel and the Company, as well as to purchase the assets of various companies
owned by Dr. Joel,  including Duling Optical and D & K Optical - notwithstanding
the fact that the parties  failed to agree upon the terms of any such  purchase,
the parties  failed to enter into any  written  agreement  memorializing  such a
transaction,  and the Company  subsequently  purchased  such assets from Norwest
Bank (which held a first lien on  substantially  all of the assets as collateral
for  various  loans  made to each of the  entities,  all of which  were  then in
default) in a private  foreclosure  sale. In March 2001, the Appellate  Division
granted  the  Company's  Motion  for  Summary  Judgment  on  the  issue  of  the
defendants' liability, as guarantors of each of such Notes; and, in August 2001,
the Court granted the Company's claim for damages in the  approximate  amount of
$800,000,  which the  Company is seeking  to  enforce.  In  November  2001,  the
defendants  each filed for  protection  under the U.S.  Bankruptcy  Code and, in
February 2002,  received a discharge in such  proceedings,  which the Company is
presently attempting to overturn.  In addition, in March 2001, the Company filed
an  additional  Motion for  Summary  Judgment  seeking  dismissal  of all of the
defendants'  counterclaims;  and the  defendant,  Dr. Joel,  thereafter  filed a
cross-motion   seeking  a   determination   that  the   Company   breached   the
aforementioned  oral,  month-to-month  consulting  agreement  and  that  he  is,
accordingly,  entitled to damages of  approximately  $13,000,000,  each of which
motions were decided entirely in favor of the Company.  Subsequently, on July 2,
2001, the defendants,  without counsel,  filed an appeal of this decision by the
Court,  which  appeal  has not yet been  decided.  Furthermore,  in 1999,  Apryl
Robinson  commenced  an action in  Kentucky  against  Larry Joel and the Company
seeking  an  unspecified  amount of  damages  and  alleging  a myriad of claims,
including fraud and misrepresentation.  The Company is defending such action and
intends to file a motion to dismiss the same based on the  decisions  in the New
York action.

     In 1999, Berenter Greenhouse and Webster, the advertising agency previously
utilized by the Company,  commenced an action,  against the Company,  in the New
York State Supreme  Court,  New York County,  for amounts  alleged to be due for
advertising and related fees. The amounts claimed by the plaintiff are in excess
of $200,000.  In response to this action,  the Company  filed  counterclaims  of
approximately $500,000,  based upon estimated overpayments allegedly made by the
Company pursuant to the agreement  previously  entered into between the parties.
As of the date hereof, this action was still in the discovery stage.

     In February 2000, Essilor Laboratories of America, L.P. commenced an action
against  the  Company in the  District  Court of Dallas  County,  Texas  seeking
damages of  approximately  $250,000,  representing  the  alleged  unpaid cost of
certain  ophthalmic lenses previously  purchased by the Company.  In April 2002,
the Company settled this action for approximately $50,000.

     In April 2000, the Company  commenced an action in the Supreme Court of the
State of New Jersey against  Preit-Rubin,  Inc. and Cumberland Mall  Associates,
the landlord of the former  Sterling  Optical Store located in Cumberland  Mall,
Vineland,  New Jersey,  seeking damages of approximately $200,000 as a result of
the defendants  alleged wrongful eviction of the Company from this location.  In
response  thereto,  the  defendants  asserted   counterclaims  of  approximately
$100,000  plus legal fees based upon the Company's  alleged  breach of the lease
pursuant to which it occupied  such store.  Thereafter,  the  defendant  filed a
motion for summary judgment seeking a dismissal of the Company's  claims,  which
motion has not yet been decided by the Court. Although the Company believes that
it has a meritorious defense to the defendant's  counterclaims,  there can be no
assurance that it will be successful in the defense thereof.


                                       9
<PAGE>


     In February  2001,  five of the  Company's  Site for Sore Eyes  franchisees
(owning an aggregate of seven franchised Site for Sore Eyes stores) commenced an
action  in the  United  States  District  Court  for the  Northern  District  of
California  seeking  $35,000,000 of damages as a result of the Company's alleged
breach of the respective Franchise Agreements whereby each  franchisee/plaintiff
operates  its Site for Sore  Eyes  Optical  store(s),  fraud and  violations  of
California  law, as well as a  declaratory  judgment  that each of the Franchise
Agreements had been modified to afford each  plaintiff  certain rights which are
in addition to those set forth in the applicable Franchise Agreements.  On April
1, 2002, the parties entered into a Settlement Agreement, whereby the plaintiffs
dismissed the action,  with prejudice,  in exchange for the Company  agreeing to
certain  amendments  to  the  Franchise  Agreement  pertaining  to  each  of the
aforementioned  seven Site for Sore Eyes  Optical  Centers,  and the Company and
Site-Ncal  Area Rep, LLC, a California  limited  liability  company owned by the
plaintiffs ("NCAL"), entering into an Area Representation Agreement whereby NCAL
is  authorized  to  solicit  individuals  that are  interested  in  acquiring  a
franchise  for one or more new Site for Sore Eyes  retail  optical  stores to be
opened in the San Francisco Bay area of California. Additionally, NCAL agreed to
provide certain services to each such new franchisee,  all in consideration  for
the Company's  payment,  to NCAL, of a portion of the initial franchise fees and
continuing  royalty  fees to  become  payable  to the  Company  under  each  new
Franchise  Agreement,  as well as the Company's  reimbursement  of the estimated
administrative  costs  and  expenses  to  be  incurred  by  NCAL  in  connection
therewith.

     In July 2001,  the  Company  commenced  an  Arbitration  Proceeding  in the
Ontario  Superior  Court  of  Justice,  against  Eye-Site,  Inc.  and  Eye  Site
(Ontario),  Ltd.,  as the  makers  of two  promissory  notes  (in the  aggregate
original  principal  amount of  $600,000)  made by one or more of the  makers in
favor of the Company,  as well as against  Mohammed Ali, as the guarantor of the
obligations  of each maker under each note.  The notes were issued by the makers
in connection  with their  acquisition of a Master  Franchise  Agreement for the
Province of Ontario,  Canada,  as well as their purchase of the assets of, and a
Sterling  Optical  Center  Franchise  for, four of the Company's  retail optical
stores  then  located  in  Ontario,   Canada.   In  response,   the   defendants
counterclaimed for damages, in the amount of $1,500,000, based upon, among other
items,  alleged  misrepresentations  made by  representatives  of the Company in
connection  with  these  transactions.  The  Company  believes  that  it  has  a
meritorious  defense  to  each  counterclaim.  As  of  the  date  hereof,  these
proceedings were in the discovery stage.

     In February 2002, Kaye Scholer,  LLP, the law firm  previously  retained by
the Company as its outside  counsel,  commenced  an action in the New York State
Supreme  Court  seeking  unpaid legal fees in the amount of $122,500.  As of the
date hereof,  the Company has answered the Complaint in such action. The Company
believes that it has a meritorious defense to such claim.

     In May 2002, a class action was commenced in the California Superior Court,
Los Angeles County,  against the Company and VisionCare of California ("VCC"), a
wholly owned subsidiary of the Company,  by Consumer Cause, Inc. seeking:  (i) a
preliminary  and  permanent  injunction  enjoining  the  defendants  from  their
continued alleged violation of the California Business and Professions Code (the
"California  Code");  and (ii)  restitution  based upon the defendants'  alleged
illegal  charging  of  dilation  fees  during the four year  period  immediately
preceding  the  date of the  plaintiff's  commencement  of such  action.  In its
complaint, the plaintiff alleges that VCC's employment of licensed optometrists,
as well as its  operation  (under the name  Sterling  VisionCare)  of optometric
offices in locations which are usually situated adjacent to the Company's retail
optical stores located in the State of California,  violates certain  provisions
of the California  Code and seeks to permanently  enjoin VCC from  continuing to
operate in such manner.  EVI and VCC intend to vigorously defend this action and
believe  that they have  meritorious  defenses to the  plaintiff's  allegations,
which  defenses  will  include a claim  that VCC is a  Specialized  Health  Care
Maintenance  Organization  which  has  been  specifically  licensed,  under  the
California  Knox Keene  Health  Care  Service  Plan Act of 1975,  to provide the
identical services which the plaintiff seeks to enjoin. However, there can be no
assurance that EVI and VCC will be successful in such defense of this action. As
of the date  hereof,  the action has been  transferred  to the Court  located in
Orange County, California and is in its preliminary stages.

     On August 2, 2002,  Sterling  Advertising,  Inc.  ("SAI"),  a wholly  owned
subsidiary  of the Company,  commenced  an action in the New York State  Supreme
Court,  Nassau  County,  against  Harvey Herman  Associates,  Inc.  ("HHA"),  an
advertising agency previously retained by SAI, seeking damages, in the estimated
amount of $150,000,  as a result of HHA's alleged  failure to provide certain of
the  services  otherwise  required  of it  pursuant  to the  terms of a  certain
Client-Agency  Agreement,  dated July 9, 2001, between SAI and HHA.  Thereafter,
HHA, on August 6, 2002, commenced an action in the New York State Supreme Court,
New York County,  against EVI, Sterling Optical and Site For Sore Eyes,  seeking
damages in the approximate amount of $90,000,  based upon one or more additional


                                       10
<PAGE>

agreements  allegedly  entered  into  between  HHA,  Site For Sore  Eyes  and/or
Sterling Optical,  which, in the opinion of SAI, required HHA to perform certain
services which were already  included within the scope of the services  required
to be performed,  by HHA,  under such  Client-Agency  Agreement.  As of the date
hereof,  SAI intends to file a motion,  with the Nassau County Court,  seeking a
transfer of the New York action to Nassau County and consolidating the same with
SAI's action pending in such Nassau County court.

     In  addition  to the  foregoing,  the  Company  is a  defendant  in certain
lawsuits  alleging  various claims  incurred in the ordinary course of business,
certain of which claims are covered by various  insurance  policies,  subject to
certain  deductible  amounts  and  maximum  policy  limits.  In the  opinion  of
management,  the  resolution of these claims should not have a material  adverse
effect,  individually  or in the  aggregate,  upon  the  Company's  business  or
financial  condition.  Other than as set forth above,  management  believes that
there are no other legal proceedings  pending or threatened to which the Company
is, or may be, a party, or to which any of its properties are or may be subject,
which, in the opinion of management,  will have a material adverse effect on the
Company.


Guarantees

     In connection  with the Company's sale of the Ambulatory  Center on May 31,
2001 (Note 2), the Company agreed to guarantee  certain of the potential ongoing
liabilities of the Ambulatory  Center.  As of December 31, 2001, the Company had
accrued $104,000 for estimated  guaranteed  liabilities in 2002.  During the six
months ended June 30, 2002, the Company accrued an additional  $120,000 for such
estimated guaranteed  liabilities in 2002,  representing the estimated cash flow
losses of the Ambulatory  Center  through the date hereof,  based on information
provided by the owner.  Although the term of the  Company's  guarantee  (of such
liabilities)  will not expire until April 2008, its exposure  thereunder may, in
the  future,  be  reduced,  on a pro-rata  basis,  based upon the ability of the
current  owner to attract  additional  investors who agree to guarantee all or a
portion thereof.  However,  there can be no assurance that such liabilities will
be so reduced  and,  as a result,  the Company  could in the future  continue to
incur further costs associated with such guarantee should the Ambulatory  Center
continue to generate cash flow losses.

     As of June 30,  2002,  the  Company was a  guarantor  of certain  leases of
retail optical stores franchised and subleased to its franchisees.  In the event
that all of such  franchisees  defaulted  on  their  respective  subleases,  the
Company would be obligated  for aggregate  lease  obligations  of  approximately
$2,682,000.


NOTE 8 - RELATED PARTY TRANSACTIONS:

     On  December  3,  2001 and  December  20,  2001,  respectively,  the  Board
authorized the Company to borrow  $150,000 and $300,000 from Horizons  Investors
Corp.  ("Horizons"),  a New York corporation principally owned by a director and
principal  shareholder of the Company. The loan was payable on demand,  together
with  interest  calculated  at the prime rate plus 1%. The Company  repaid these
loans (which  aggregated  $450,000 as of December 31, 2001), in full, on January
23, 2002 (Note 10).

     On December 6, 2001, the Board  authorized  the Company to borrow  $300,000
from Broadway  Partners  LLC, a partnership  owned by certain of the children of
certain of the Company's  principal  shareholders  and  directors.  The loan was
payable on demand,  together with interest calculated at the prime rate plus 1%.
The Company  repaid this loan  ($300,000 as of December 31,  2001),  in full, on
January 23, 2002 (Note 10).

     Until January 10, 2002,  the Company  subleased,  from a limited  liability
company owned by certain of the Company's principal  shareholders and directors,
and shared with Cohen Fashion  Optical,  Inc.  ("CFO"),  a retail  optical chain
owned by certain of the principal shareholders and directors of the Company, and
other tenants,  an office building located in East Meadow,  New York.  Occupancy
costs were  appropriately  allocated  based upon the  applicable  square footage
leased by the  respective  tenants of the building.  For the year ended December
31, 2001, the Company paid  approximately  $440,000 for rent and related charges
for these  offices.  On January 10,  2002,  the Company  relocated  to an office
building  located in Garden City, New York, and entered into a sublease with CFO
for one of the two floors then being  subleased  to CFO.  The Company  estimates
that its new annual rent will be  approximately  $163,000.  Occupancy  costs are
being  allocated  between the Company and CFO based upon the  respective  square
footages being occupied. Management believes that the sublease is at fair market
rental value.


                                       11
<PAGE>

     In April 2002, the Company sold  substantially  all of the assets of one of
its stores  located in New York City,  together with all of the capital stock of
its wholly-owned subsidiary, Sterling Vision of 125th Street, Inc., which is the
tenant under the master lease for such store,  to General Vision Services LLC, a
retail  optical  chain  owned  by  certain  of the  principal  shareholders  and
directors of the Company and members of their respective immediate families, for
the sum of $55,000.

     On July 23, 2002, the Board  authorized the Company to borrow $300,000 from
one of its principal shareholders and directors.  The loan was payable on August
10,  2002,  together  with  interest in an amount  equal to 1% of the  principal
amount of such loan.  The Company  repaid this loan,  in full, on August 8, 2002
(Note 10).

     In the  ordinary  course  of  business,  largely  due to the fact  that the
entities  occupy office space in the same  building,  and in an effort to obtain
savings with respect to certain  administrative costs, the Company and CFO will,
at times, share in the costs of minor expenses.  Management  believes that these
expenses have been appropriately accounted for by the Company.

     In the opinion of management,  all of the above transactions were conducted
at "arms-length."


NOTE 9 - SHAREHOLDERS' EQUITY:

Issuance of Warrants in Connection with Financing Arrangements

     On  January  23,  2002,   in  connection   with   obtaining  its  financing
arrangements  (Note 10), the Company granted  Horizons an aggregate of 2,500,000
warrants  (1,750,000  of which were  immediately  exercisable,  with the balance
vesting in quarterly increments of 250,000, beginning April 22, 2002, subject to
any amounts then  remaining  unpaid  under the secured  term note and/or  credit
facility).  The warrants have a five-year term and provide for an exercise price
of  $0.01  per  share.  The  fair  value of these  warrants  (valued  using  the
Black-Scholes  model)  was  approximately  $234,000.  On May 1,  2002,  Horizons
exercised 2,000,000 of such warrants.  Additionally,  on July 22, 2002, Horizons
exercised an additional 250,000 of such warrants.

Increase in Authorized Number of Shares of Common Stock

     On  April  29,  2002,  the  Board  unanimously  voted to  recommend  to the
shareholders  that the  Company's  Certificate  of  Incorporation  be amended to
increase the number of authorized  shares of its Common Stock from 50,000,000 to
150,000,000 shares, and to increase the total number of authorized shares of its
capital stock from  55,000,000 to  155,000,000.  On July 11, 2002, the Company's
shareholders  approved  of such  amendment,  which was  thereafter  filed by the
Company.

Shareholder Rights Offering

     On  April  29,  2002,  the  Board  unanimously  approved  of the  Company's
initiation of a shareholder rights offering (the "Rights Offering),  pursuant to
which,  on a date to be  established  by the Board,  the Company will grant each
holder of shares of its Common Stock the right to purchase one additional  share
of Common Stock (the "Purchased  Share"), at a price per share to be established
by the Board,  for each share of Common Stock owned by such  shareholder as of a
record  date  also to be  established  by the  Board.  For  each  right  that is
exercised by a shareholder,  such  shareholder  will receive one Purchased Share
together  with a warrant to purchase one  additional  share of Common Stock at a
price to be established by the Board (the  "Warrant").  The Company will attempt
to raise approximately $2,000,000 of gross proceeds in the Rights Offering.

Conversion of Senior Convertible Preferred Stock

     In April 1998,  the Company  issued a series of its  Preferred  Stock,  par
value $0.01 per share (the "Senior Convertible Preferred Stock"),  together with
warrants (all of which expired in February 2001) to acquire shares of its Common
Stock.  Each  share of Senior  Convertible  Preferred  Stock  had a  liquidation
preference of $100,000,  and was originally  convertible  into Common Stock at a
price of $5.00 per share. In December 1999, the conversion  price was reduced to
$0.75 per share for all of the remaining holders of Senior Convertible Preferred


                                       12
<PAGE>

Stock.  As of December  31, 2001,  there were 2.51 shares of Senior  Convertible
Preferred Stock outstanding with a stated value of $251,000.

     On June 8, 2002,  one of the remaining two holders of the Company's  Senior
Convertible  Preferred  Stock  exercised  its right to convert an  aggregate  of
$177,736 stated value of Senior  Convertible  Preferred Stock, into an aggregate
of 235,648 shares of the Company's Common Stock.


NOTE 10 - FINANCING ARRANGEMENTS

     On  January  23,  2002,   the  Company   secured  two  separate   financing
arrangements as follows:

     Secured Term Note
     -----------------

     The  Company  entered  into a  secured  term  note for  $1,000,000  with an
independent  financial  institution.  This note is repayable in 24 equal monthly
installments  of $41,666,  and bears interest as defined (4.95% at the inception
of the note, and  subsequently  amended on April 1, 2002 to 3.95%).  The note is
fully collateralized by a $1,000,000  certificate of deposit posted by Horizons,
a related party (Note 8), at the same financial institution.

     Credit Facility
     ---------------

     The  Company  entered  into an  agreement  with  Horizons to borrow up to a
maximum of  $1,000,000.  This credit  facility  bears interest at the prime rate
plus 1% (5.5% as of the date of the loan  agreement),  provided  for an  initial
advance of $300,000,  requires minimum incremental advances of $150,000, matures
on January 22, 2004, requires ratable monthly principal and interest payments of
each  borrowing,  is amortizable  through the maturity date of the facility,  is
fully  collateralized  by a  pledge  of  certain  of  the  Company's  qualifying
franchise  notes,  and  requires  the payment of a facility fee of 2% per annum,
payable monthly, on the unused portion of the credit facility.

     Simultaneous  with  obtaining the above  financing,  the Company repaid its
outstanding related party borrowings totaling $750,000,  plus interest (Note 8).
In  consideration  for providing  access to the credit facility and guaranteeing
the term note, the Company granted Horizons an aggregate of 2,500,000  warrants,
the fair value of which was $234,000  (Note 9). The net proceeds  received  were
allocated  based on the  relative  fair  values  of the  debt and the  warrants.
Accordingly,  $810,00 0 was allocated to the debt, and $190,000 was allocated to
the warrants as a discount to the debt to be amortized as interest  expense over
the  term of the  note (2  years).  For the six  months  ended  June  30,  2002,
approximately  $41,000 of such discount was amortized and recognized as interest
expense in the accompanying Consolidated Statement of Operations.

     On August 8, 2002,  the Company  obtained an  additional  advance under the
credit  facility  of  $300,000,  the  proceeds  of which  were  used to repay an
outstanding  related party borrowing  (Note 8). As of the date hereof,  $450,000
remained available to the Company under the credit facility.



                                       13
<PAGE>


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

     This Report  contains  certain  forward-looking  statements and information
relating  to the  Company  that  are  based  on  the  beliefs  of the  Company's
management,  as well as assumptions made by, and information currently available
to, the Company's management.  When used in this Report, the words "anticipate",
"believe",  "estimate", "expect", and similar expressions, as they relate to the
Company or the Company's  management,  are intended to identify  forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events,  are not guarantees of future  performance  and are subject to
certain  risks and  uncertainties.  These risks and  uncertainties  may include:
product demand and market acceptance  risks; the effect of economic  conditions;
the impact of competitive products,  services and pricing;  product development,
commercialization and technological difficulties; and the outcome of pending and
future  litigation.   Should  one  or  more  of  these  risks  or  uncertainties
materialize,  or should underlying  assumptions prove incorrect,  actual results
may vary materially from those described  herein as  "anticipated",  "believed",
"estimated",  or  "expected".  The  Company  does not  intend  to  update  these
forward-looking statements.


Results of Operations

For the Three and Six Months Ended June 30, 2002, as Compared to the Comparable
-------------------------------------------------------------------------------
Periods in 2001
---------------

     Net sales for Company-owned  stores,  including  revenues  generated by the
Company's  wholly-owned  subsidiary,  VisionCare  of  California,  a specialized
health  care  maintenance  organization  licensed  by the  State  of  California
Department  of Managed  Health Care,  decreased by  approximately  $816,000,  or
28.1%,  to  $2,084,000  for the three months ended June 30, 2002, as compared to
$2,900,000  for the comparable  period in 2001,  and decreased by  approximately
$666,000,  or 11.6%,  to $5,074 ,000 for the six months ended June 30, 2002,  as
compared to $5,740,000 for the comparable  period in 2001.  These decreases were
primarily due to the lower average number of  Company-owned  stores in operation
during the three and six months  ended June 30,  2002,  as  compared to the same
periods in 2001. These decreases were in line with management's expectations due
to the plan to close the Company's non-profitable Company-owned stores.

     As of June 30, 2002,  there were 187 stores in operation,  consisting of 32
Company-owned  stores  (including  10  Company-owned  stores  being  managed  by
franchisees) and 155 franchised  stores,  as compared to 218 stores in operation
as of June  30,  2001,  consisting  of 28  Company-owned  stores  (including  12
Company-owned  stores being managed by  franchisees)  and 180 franchised  stores
(including 2 stores being managed by the Company on behalf of franchisees). On a
same store basis (for stores that operated as a Company-owned  store during both
of the three and six month  periods  ended June 30, 2002 and 2001),  comparative
net sales  decreased by $344,000,  or 22.7%,  to $1,171,000 for the three months
ended June 30, 2002,  as compared to  $1,515,000  for the  comparable  period in
2001, and decreased by $460,000 or 14.5%, to $2,716,000 for the six months ended
June 30, 2002,  as compared to  $3,176,000  for the  comparable  period in 2001.
Management  believes  that  this  decline  was a direct  result  of the  general
downturn in the economy that has occurred during 2002.

     Franchise royalties decreased by $408,000,  or 19.4%, to $1,690,000 for the
three months ended June 30, 2002, as compared to $2,098,000  for the  comparable
period in 2001, and decreased by $943,000,  or 21.8%,  to $3,387,000 for the six
months ended June 30, 2002, as compared to $4,330,000 for the comparable  period
in 2001.  These  decreases  were primarily a result of a lower average number of
franchised stores in operation during the three and six month periods ended June
30, 2002 as compared to 2001, as described above.

     For the three and six months ended June 30,  2002,  there was $7,000 of net
gains  from  the  conveyance  of  Company-owned   store  assets  to  franchisees
(including  initial  franchise  fees). For the three and six month periods ended
June 30, 2001, the Company  recognized  $34,000 and $122,000,  respectively,  of
such gains and fees.  These  decreases were due to the fact that the Company did
not  convey to  franchisees  (and thus did not  realize a gain on) any assets of
Company-owned stores during the three and six months ended June 30, 2002.


                                       14
<PAGE>


     Interest on franchise notes receivable decreased by $167,000,  or 65.2%, to
$89,000 for the three months  ended June 30,  2002,  as compared to $256,000 for
the comparable period in 2001, and decreased by $381,000,  or 68.6%, to $174,000
for the six  months  ended  June 30,  2002,  as  compared  to  $555,000  for the
comparable  period in 2001.  These  decreases  were  primarily  due to  numerous
franchise notes maturing,  principal payments on the balance of franchise notes,
and fewer new notes being generated during the three and six month periods ended
June 30, 2002 as compared to the comparable periods in 2001.

     Other income increased to $66,000 for the three months ended June 30, 2002,
as compared to $19,000  for the  comparable  period in 2001,  and  increased  to
$96,000 for the six months ended June 30,  2002,  as compared to $58,000 for the
comparable  period in 2001. These increases were primarily due to an increase in
certain  franchise  related  fees  (related  to  renewals  and/or  transfers  of
franchise agreements) during the three and six months ended June 30, 2002.

     The Company's gross profit margin decreased by 8.7%, to 68.8% for the three
months ended June 30, 2002,  as compared to 77.5% for the  comparable  period in
2001, and decreased by 7.1%, to 71.9% for the six months ended June 30, 2002, as
compared  to 79.0% for the  comparable  period  in 2001.  In an effort to remain
competitive  with other retail  optical  chains during the economic  downturn in
2002,  the  Company  substantially  reduced  the  selling  prices on many of its
products, thus causing profit margins to decrease. Further, during the three and
six months ended June 30, 2002, the Company, largely due to a decrease, from the
comparable periods in 2001, of its financial resources, was unable to obtain the
same  discounts  from certain of its vendors than in the  comparable  periods in
2001,  and,  additionally,  was  unable to take  advantage  of  certain  product
purchase  discounts tied to prompt payment.  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,  competitive  pricing,  promotional
incentives,  and the  ability  of the  Company  to take  advantage  of  purchase
discounts.

     Selling,  general and  administrative  expenses  decreased by $911,000,  or
20.0%,  to  $3,648,000  for the three months ended June 30, 2002, as compared to
$4,559,000  for the comparable  period in 2001, and decreased by $1,237,000,  or
13.2%,  to  $8,168,000  for the six months ended June 30,  2002,  as compared to
$9,405,000  for the  comparable  period in 2001.  These  decreases were a direct
result of the  closure  of  non-profitable  Company-owned  stores  during  2002,
management's  implementation of reductions of administrative  overhead expenses,
and closer monitoring of store-by-store and corporate operations.

     The  Company  has  certain  outstanding  contingent  warrants  that  become
exercisable  upon the  achievement,  by the  Company,  of certain  predetermined
EBITDA  targets.  Due to these  contingencies,  the  future  valuation  of these
contingent warrants, if and when they become exercisable, will result in charges
to the Company's  results of operations in future periods.  The  significance of
these  charges,  if any,  will be  dependent  upon the fair market  value of the
Company's  Common  Stock at the time  that the  respective  EBITDA  targets  are
achieved.

     Loss from  franchised  stores  operated  under  management  agreements  was
$134,000 and $247,000, respectively, for the three and six months ended June 30,
2001.  There was no such loss for the three and six months  ended June 30, 2002,
as there are no longer any  franchised  stores  being  managed by the Company on
behalf of franchisees.

     Interest expense increased  $40,000,  to $59,000 for the three months ended
June 30, 2002,  as compared to $19,000 for the  comparable  period in 2001,  and
increased  by $53,000,  to $98,000 for the six months  ended June 30,  2002,  as
compared to $45,000 for the  comparable  period in 2001.  These  increases  were
primarily due to the interest  being paid in  connection  with the related party
debt financing  obtained in January 2002 (Note 10), and the  amortization of the
discount associated with such financing.


Liquidity and Capital Resources

     As  of  June  30,  2002,  the  Company  had  negative  working  capital  of
$2,395,000,  and cash on hand of  $743,000.  For the six  months  ended June 30,
2002,  the  Company  used  approximately  $1,233,000  of cash  in its  operating
activities.  This  usage was in line with  management's  plans and was  mainly a
result of $492,000 of costs  related to the  Company's  store closure plan (Note
6),  $595,000 of costs related to the Company's  settlement of certain  accounts


                                       15
<PAGE>

payable and  accrued  liabilities  that  existed as of December  31,  2001,  and
$129,000 related to the prepayment of certain other business expenses offset, in
part, by a $195,000 decrease in franchise and other receivables.

     For the six months  ended June 30, 2002,  cash flows  provided by investing
activities were $799,000,  as compared to $558,000 for the comparable  period in
2001.  This  increase  was  principally  due to a lower  amount of  purchases of
property and equipment,  and less  franchise  notes  receivable  being issued in
favor of the Company.

     For the six months  ended June 30, 2002,  cash flows  provided by financing
activities  were  $259,000,  principally  due to the $1,300,000 of financing the
Company received in January 2002 (Note 10), offset  principally by the repayment
of a portion of such financing and $750,000 of related party borrowings.

     On  January  23,  2002,   the  Company   secured  two  separate   financing
arrangements, as follows:

     Secured Term Note
     -----------------

     The  Company  entered  into a  secured  term  note for  $1,000,000  with an
independent  financial  institution.  This note is repayable in 24 equal monthly
installments  of $41,666,  and bears interest as defined (4.95% at the inception
of the note, and  subsequently  amended on April 1, 2002 to 3.95%).  The note is
fully collateralized by a $1,000,000 certificate of deposit posted by Horizon, a
related party, at the same financial institution.

     Credit Facility
     ---------------

     The  Company  entered  into an  agreement  with  Horizon  to borrow up to a
maximum of  $1,000,000.  This credit  facility  bears interest at the prime rate
plus 1% (5.5% as of the date of the loan  agreement),  provided  for an  initial
advance of $300,000,  requires minimum incremental advances of $150,000, matures
on January 22, 2004, requires ratable monthly principal and interest payments of
each  borrowing,  is amortizable  through the maturity date of the facility,  is
fully  collateralized  by a  pledge  of  certain  of  the  Company's  qualifying
franchise  notes,  and  requires  the payment of a facility fee of 2% per annum,
payable monthly, on the unused portion of the credit facility.

     Simultaneous  with  obtaining  the  above  financing,  the  Company  repaid
outstanding  related  party  borrowings  due to Horizon  and  Broadway  totaling
$750,000,  plus interest.  On August 8, 2002, the Company obtained an additional
advance under the credit  facility of $300,000,  the proceeds of which were used
to repay an outstanding related party borrowing (Note 8). As of the date hereof,
$450,000 remained available to the Company under the credit facility.

     The Company  plans to continue to attempt to improve its cash flows  during
2002  by  improving  store   profitability   through  increased   monitoring  of
store-by-store   operations,   closing   non-profitable   Company-owned  stores,
implementing  reductions of administrative overhead expenses where necessary and
feasible, actively supporting development programs for franchisees,  and seeking
additional financing, if available. Management believes that with the successful
implementation of the aforementioned plans to attempt to improve cash flows, its
existing cash, the collection of outstanding  receivables,  and the availability
under its existing credit facility (Note 10), there will be sufficient liquidity
available for the Company to continue in operation until at least the end of the
third quarter of 2003. However,  there can be no assurance that the Company will
be able to achieve the aforementioned  plans, or that additional  financing will
be available.

     In this  regard,  on April  29,  2002,  the  Company's  Board of  Directors
unanimously  approved  of  the  Company's  initiation  of a  shareholder  rights
offering  (Note  9),  pursuant  to  which  the  Company  will  attempt  to raise
approximately $2,000,000 of gross proceeds from the sale of additional shares of
its Common Stock to its existing shareholders.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk
         ----------------------------------------------------------

     The Company  presently has  outstanding  certain  equity  instruments  with
beneficial  conversion terms.  Accordingly,  the Company,  in the future,  could
incur non-cash charges to equity (as a result of the exercise of such beneficial
conversion  terms),  which  would  have a  negative  impact on future  per share
calculations.


                                       16
<PAGE>


     The Company is exposed to market risks from  potential  changes in interest
rates as they relate to the Company's  investments  in highly liquid  marketable
securities and borrowings  under its credit  facility and term loan. The Company
believes  that  the  level  of risk  related  to its  investments  and any  such
borrowings,  is not material to the Company's  financial condition or results of
operations.  The  Company  does not expect to use  interest  rate swaps or other
instruments to hedge its borrowings under its credit facility or term loan.














                                       17
<PAGE>



                           PART II - OTHER INFORMATION



Item 1.  Legal Proceedings
         -----------------

     In May 2002, a class action was commenced in the California Superior Court,
Los Angeles County,  against the Company and VisionCare of California ("VCC"), a
wholly owned subsidiary of the Company,  by Consumer Cause, Inc. seeking:  (i) a
preliminary  and  permanent  injunction  enjoining  the  defendants  from  their
continued alleged violation of the California Business and Professions Code (the
"California  Code");  and (ii)  restitution  based upon the defendants'  alleged
illegal  charging  of  dilation  fees  during the four year  period  immediately
preceding  the  date of the  plaintiff's  commencement  of such  action.  In its
complaint, the plaintiff alleges that VCC's employment of licensed optometrists,
as well as its  operation  (under the name  Sterling  VisionCare)  of optometric
offices in locations which are usually situated adjacent to the Company's retail
optical stores located in the State of California,  violates certain  provisions
of the California  Code and seeks to permanently  enjoin VCC from  continuing to
operate in such manner.  EVI and VCC intend to vigorously defend this action and
believe  that they have  meritorious  defenses to the  plaintiff's  allegations,
which  defenses  will  include a claim  that VCC is a  Specialized  Health  Care
Maintenance  Organization  which  has  been  specifically  licensed,  under  the
California  Knox Keene  Health  Care  Service  Plan Act of 1975,  to provide the
identical services which the plaintiff seeks to enjoin. However, there can be no
assurance that EVI and VCC will be successful in such defense of this action. As
of the date  hereof,  the action has been  transferred  to the Court  located in
Orange County, California and is in its preliminary stages.

     On August 2, 2002,  Sterling  Advertising,  Inc.  ("SAI"),  a wholly  owned
subsidiary  of the Company,  commenced  an action in the New York State  Supreme
Court,  Nassau  County,  against  Harvey Herman  Associates,  Inc.  ("HHA"),  an
advertising agency previously retained by SAI, seeking damages, in the estimated
amount of $150,000,  as a result of HHA's alleged  failure to provide certain of
the  services  otherwise  required  of it  pursuant  to the  terms of a  certain
Client-Agency  Agreement,  dated July 9, 2001, between SAI and HHA.  Thereafter,
HHA, on August 6, 2002, commenced an action in the New York State Supreme Court,
New York County,  against EVI, Sterling Optical and Site For Sore Eyes,  seeking
damages in the approximate amount of $90,000,  based upon one or more additional
agreements  allegedly  entered  into  between  HHA,  Site For Sore  Eyes  and/or
Sterling Optical,  which, in the opinion of SAI, required HHA to perform certain
services which were already  included within the scope of the services  required
to be performed,  by HHA,  under such  Client-Agency  Agreement.  As of the date
hereof,  SAI intends to file a motion,  with the Nassau County Court,  seeking a
transfer of the New York action to Nassau County and consolidating the same with
SAI's action pending in such Nassau County court.


Item 2. Changes in Securities and Use of Proceeds
        -----------------------------------------

     On January 23, 2002, the Company issued warrants to Horizons to purchase an
aggregate of 2,500,000  shares of its Common Stock at an exercise price of $0.01
per share,  in  consideration  for providing the Company  access to a $1,000,000
credit facility and for  guaranteeing a $1,000,000 term note made by the Company
in favor of an independent  financial  institution.  On May 1, 2002 and July 22,
2002,  respectively,  Horizons exercised 2,000,000 and 250,000 of such warrants,
and  shares of the  Company's  Common  Stock  were  issued in their  place.  The
issuance of all of the  aforementioned  securities was exempt from  registration
requirements  pursuant to an exemption  under Section 4(2) of the Securities Act
of 1933, as amended.

     On June 8, 2002,  one of the remaining two holders of the Company's  Senior
Convertible  Preferred  Stock  exercised  its right to convert an  aggregate  of
$177,736 stated value of Senior  Convertible  Preferred Stock, into an aggregate
of 235,648  shares of the Company's  Common Stock.  The issuance of all of these
securities was exempt from  registration  requirements  pursuant to an exemption
under Section 4(2) of the Securities Act of 1933, as amended.


Item 3. Defaults Upon Senior Securities
        -------------------------------

Not applicable.


                                       18
<PAGE>

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

Not applicable.

Item 5. Other Information
        -----------------

Not applicable.

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

A.    Exhibits
      --------

Not applicable.

B.    Reports on Form 8-K
      -------------------

     On June 24,  2002,  the Company  filed a Report on Form 8-K  regarding  the
dismissal of Arthur Andersen LLP as its independent public accountants.



                                       19
<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 hereunto duly authorized.


                                               EMERGING VISION, INC.
                                                    (Registrant)



                                         BY:  /s/  Christopher G. Payan
                                             -------------------------------
                                              Christopher G. Payan
                                              Senior Vice President,
                                              Chief Financial Officer and
                                              Co-Chief Operating Officer
                                              (Principal Financial and
                                              Accounting Officer)


                                              Dated: August 19, 2002







                                       20