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
      March 31, 2001

                                  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.)

                        1500 Hempstead Turnpike
                      East Meadow, New York 11554
                     -----------------------------
     (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:

          There were 25,376,894  shares  outstanding of the Registrant's  Common
Stock, par value $.01 per share, as of May 11, 2001.

<PAGE>

Item 1.  Financial Statements

                     EMERGING VISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                                                                        March 31,       December 31,
                                                                                                          2001              2000
                                                                                                       ------------     ------------
                                                                                                       (Unaudited)
ASSETS
Current assets:
<S>                                                                                                     <C>              <C>
         Cash and cash equivalents                                                                      $   3,880        $   5,215
         Franchise receivables, net of allowance of $2,792 and $3,521, respectively                         1,405            1,493
         Other receivables, net of allowance for doubtful account of $316 and $323, respectively              843            1,997
         Current portion of notes receivable from franchisees                                               2,717            2,622
         Inventories                                                                                          978            1,033
         Prepaid expenses and other current assets                                                            422              475
                                                                                                        ---------        ---------
                 Total current assets                                                                      10,245           12,835
                                                                                                        ---------        ---------

Property and equipment, net                                                                                 2,994            2,995
Franchise notes and other receivables, net of allowance of $3,746 and $3,019, respectively                  2,879            3,926
Intangible assets, net                                                                                      1,511            1,534
Other assets                                                                                                  351              401
Net assets of discontinued operations                                                                         859              840
                                                                                                        ---------        ---------
                 Total assets                                                                           $  18,839        $  22,531
                                                                                                        =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
         Current portion of long-term debt                                                              $     188        $     221
         Accounts payable and accrued liabilities                                                          10,169           13,227
         Net liabilities of discontinued operations                                                         1,846            3,006
                                                                                                        ---------        ---------
                 Total current liabilities                                                                 12,203           16,822
                                                                                                        ---------        ---------

Long-term debt                                                                                                504              533
                                                                                                        ---------        ---------
Excess of fair value of assets acquired over cost                                                             230              317
                                                                                                        ---------        ---------
Franchise deposits and other liabilities                                                                    1,307            1,322
                                                                                                        ---------        ---------

Commitments and contingencies (Note 4)

Shareholders' equity
     Preferred stock, $.01 par value per share; authorized 5,000,000 shares:
        Senior Convertible Preferred Stock, $100,000 liquidation preference per share;
                3 shares issued and outstanding                                                               287              287
     Common stock, $.01 par value per share; authorized 50,000,000 shares; issued 25,559,231;
             and 25,376,894 and 25,382,230 shares outstanding, respectively                                   256              256
     Treasury stock, at cost, 182,337 and 177,001 shares, respectively                                       (204)            (203)
     Additional paid-in capital                                                                           119,754          119,453
     Accumulated deficit                                                                                 (115,498)        (115,888)
                                                                                                        ---------        ---------
                  Total shareholders' equity                                                                4,595            3,905
                                                                                                        ---------        ---------
                  Total liabilities and shareholders' equity                                            $  18,839        $  22,531
                                                                                                        =========        =========

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

</TABLE>



                                       2
<PAGE>

                EMERGING VISION, INC. AND SUBSIDIARIES
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>


                                                                                           For the Three Months Ended
                                                                                                   March 31,
                                                                                         -------------------------------
                                                                                              2001           2000
                                                                                         --------------- ---------------
                                                                                            (Unaudited)
Revenues:
<S>                                                                                             <C>             <C>
         Net sales                                                                           $ 2,840         $ 3,754
         Franchise royalties                                                                   2,232           2,377
         Net transfer fees from the conveyance of franchise-owned store assets                    88              14
         Interest on franchise notes receivable                                                  299             327
         Other income                                                                              5              61
                                                                                              ------         -------
                          Total revenues                                                       5,464           6,533
                                                                                              ------         -------
Costs and expenses:

         Cost of sales                                                                           554           1,042
         Selling, general and administrative expenses                                          4,516           5,616
         Loss from franchised stores operated under management agreements                        113             111
         Non-cash charges for issuance of warrants                                               301             272
         Interest expense                                                                         21             188
                                                                                              ------         -------
                          Total costs and expenses                                             5,505           7,229
                                                                                              ------         -------

         Loss from continuing operations before provision for income taxes                       (41)           (696)
         Provision for income taxes                                                                -               -
                                                                                              ------         -------
                          Loss from continuing operations                                       (41)            (696)
                                                                                              ------         -------

Discontinued operations: (Note 2)
              Income (loss) from discontinued operations                                         431          (1,279)
                                                                                              ------         -------
                          Net income (loss)                                                   $  390         $(1,975)
                                                                                              ======         =======

Per share information - basic and diluted: (Note 3)

              Loss from continuing operations                                                 $ 0.00         $ (1.60)
              Income (loss) from discontinued operations                                        0.02           (0.07)
                                                                                              ------         -------
                          Net income (loss) per share                                         $ 0.02         $ (1.67)
                                                                                              ======         =======

Weighted-average number of common shares outstanding - basic and diluted                      25,381          18,714
                                                                                              ======          ======


         The accompanying Notes are an integral part of these Consolidated Condensed Financial Statements.
</TABLE>


                                       3
<PAGE>
                     EMERGING VISION, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                            For the Three Months Ended
                                                                                                    March 31,
                                                                                           ----------------------------
                                                                                                2001            2000
                                                                                           ----------------------------
                                                                                              (Unaudited)
Cash flows from operating activities:
<S>                                                                                           <C>             <C>
     Net loss from continuing operations                                                      $   (41)        $  (696)
         Adjustments to reconcile net loss from continuing operations
                to net cash provided by (used  in) operating activities:
            Depreciation and amortization                                                         184             263
            Provision for doubtful accounts                                                        75             226
            Accrued interest                                                                        -              18
            Non-cash compensation charges related to options and warrants                         301               -
            Impairment of long-lived assets                                                        21               -
        Changes in operating assets and liabilities:
            Franchise receivables                                                                 125            (242)
            Inventories                                                                            55              71
            Prepaid expenses and other current assets                                              53             184
            Other assets                                                                            2            (109)
            Accounts payable and accrued liabilities                                             (502)         (2,375)
            Franchise deposits and other liabilities                                               15              23
            Deferred franchise income                                                               -              (3)
            Accrual for store closings                                                              -             (38)
                                                                                              -------         -------
Net cash provided by (used in) operating activities                                               288          (2,678)
                                                                                              -------         -------

Cash flows from investing activities:
     Franchise notes receivable issued                                                           (301)           (197)
     Proceeds from franchise and other notes receivable                                           592             498
     Purchases of property and equipment                                                          (25)           (149)
                                                                                              -------         -------
Net cash provided by investing activities                                                         266             152
                                                                                              -------         -------

Cash flows from financing activities:
     Proceeds from the exercise of stock options and warrants                                       -           7,692
     Net proceeds from the issuance of Series B Convertible Preferred Stock                         -          10,618
     Proceeds from long-term debt                                                                   -             939
     Payments on long-term debt                                                                   (62)         (2,147)
     Acquisition of treasury shares                                                                (1)              -
                                                                                              -------         -------
Net cash (used in) provided by financing activities                                               (63)         17,102
                                                                                              -------         -------
Net cash provided by continuing operations                                                        491          14,576
                                                                                              -------         -------
Net cash used in discontinued operations                                                       (1,826)           (718)
                                                                                              -------         -------
Net (decrease) increase in cash and cash equivalents                                           (1,335)         13,858
Cash and cash equivalents - beginning of period                                                 5,215             108
                                                                                              -------         -------
Cash and cash equivalents - end of period                                                     $ 3,880         $13,966
                                                                                              =======         =======

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
        Interest                                                                               $   18          $  219
                                                                                               ======          ======
        Taxes                                                                                  $   29          $   29
                                                                                               ======          ======

     Non-cash investing and financing activities:
         Net assets of franchise stores reacquired through exchange of receivables             $  304          $    -
         Issuance of common shares for consulting services and other                                -           9,808
         Extinguishment of related party debt                                                       -             727

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

</TABLE>



                                       4
<PAGE>

<TABLE>
<CAPTION>

                                          EMERGING VISION, INC. AND SUBSIDIARIES
                               CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
                                         FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                              (In Thousands, Except Share Data)


                                                                             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>
BALANCE - DECEMBER 31, 2000              3   $  287   25,559,231    $  256   177,001  $(203)   $119,453    $(115,888)    $  3,905
                                    ------   ------   ----------   --------  -------  -----    --------    ---------     --------
Issuance of warrants for
  consulting services (Note 5)           -        -            -         -         -      -         301            -          301
Acquisition of treasury shares           -        -            -         -     5,336     (1)          -            -           (1)
Net income                               -        -            -         -         -      -           -          390          390
                                    ------   ------   ----------   --------  -------  -----    --------    ---------     --------
BALANCE - MARCH 31, 2001                 3   $  287   25,559,231    $  256   182,337  $(204)   $119,754    $(115,498)    $  4,595
                                    ======   ======   ==========   ========  =======  =====    ========    =========     ========


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










                                        5
<PAGE>
                     EMERGING VISION, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 - BASIS OF PRESENTATION:

     The accompanying  Consolidated  Condensed Financial  Statements of Emerging
Vision,  Inc.  (formerly  known as  Sterling  Vision,  Inc.;  (hereinafter,  the
"Registrant")) and subsidiaries (collectively, the "Company") have been prepared
in  accordance  with  generally  accepted  accounting   principles  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  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  Financial  Statements and
Notes thereto  included in the  Registrant's  Annual Report on Form 10-K for the
Year Ended  December  31, 2000,  as  supplemented  by its Annual  Report on Form
10-K/A for such year.  There  have been no  changes  in  significant  accounting
policies since December 31, 2000.

     Certain  reclassifications  have been made to the prior period's  financial
statements to conform to the current presentation.


NOTE 2 - DISCONTINUED OPERATIONS:

     On March 28, 2001, the Company  announced its Board of Directors'  decision
to  discontinue  further  development  of its  Internet  Division  and focus its
efforts and resources on its franchise/retail  optical store business,  Sterling
Optical.  The Company continues to adhere to its previously announced formalized
plan to sell the assets of its 66.5% owned  subsidiary,  Insight Laser  Centers,
Inc.  ("Insight  Laser"),  as  well  as  the  Company's  assets  located  in the
Ambulatory Surgery Center (the "Ambulatory Center") situated in Garden City, New
York.  Accordingly,  all of the net assets,  operating results and cash flows of
these  segments of the Company's  business have been  presented as  discontinued
operations in the accompanying  Consolidated  Condensed Financial Statements for
all  periods  presented.  As of  March  31,  2001 and  December  31,  2000,  net
liabilities  of   discontinued   operations  of  $(987,000)  and   $(2,166,000),
respectively,  have been segregated on the accompanying  Consolidated  Condensed
Balance  Sheets.  The  Company  expects to  substantially  complete  its plan of
disposal of the assets of such discontinued  segments of its business by the end
of the second quarter of 2001.

     In connection  with the foregoing,  the Company had reserved  approximately
$5,608,000 for such discontinued operations at December 31, 2000, which reserves
included  anticipated  future operating losses of these divisions,  the expenses
associated with the disposal of the assets of these  divisions,  and an estimate
of loss upon disposition. The Company has, since December 31, 2000, successfully
settled certain  liabilities  related to its Internet Division for less than the
amounts  initially  recorded at December 31, 2000. In addition,  the Company has
since reevaluated its reserve for discontinued operations and, accordingly,  had
reversed  approximately $400,000 of such reserves as of March 31, 2001. At March
31, 2001,  $3,150,000  of this  provision  remained  accrued as part of accounts
payable and  accrued  liabilities  on the  accompanying  Consolidated  Condensed
Balance Sheet.

     During  the  three  months  ended  March 31,  2001,  the  Company  utilized
approximately  $2,058,000  of its  reserve  for  discontinued  operations.  This
included  approximately  $805,000 in  severance  payments to all of its Internet
Division's  personnel  located in its Dallas,  Texas office,  and  approximately
$1,253,000 of operating costs for such division through March 31, 2001. Included
in such total  severance  costs were  payments of $277,000  and  $205,000 to Mr.
Gregory Cook, the Company's  former President and Chief Executive  Officer,  and
Mr. James Ewer,  the  Company's  former  Senior Vice  President  of  Operations,
respectively.

     On April 24, 2001, the Company and Ms. Sara V. Traberman,  the former Chief
Financial  Officer of the  Company,  settled  her claim for  severance  benefits
(which called for a cash  settlement,  in the approximate  amount of $1,300,000,
and the immediate vesting of the 400,000 stock options previously granted to her

                                       6
<PAGE>

under her then existing Employment Agreement,  all as a result of the failure of
the Company to sell its  non-Internet  related  assets by March 1, 2001),  for a
lump sum payment of $750,000  plus the issuance of fully vested stock options to
purchase  125,000 shares of the  Registrant's  Common Stock at an exercise price
equal to the  composite  per share  closing  price  ($0.29) of the  Registrant's
Common Stock, as quoted on the Nasdaq National Market System  ("Nasdaq-NMS")  on
such date.

     On May 4, 2001, the Company and the owner/licensee of the Ambulatory Center
reached an agreement  in  principle  pursuant to which the Company will sell and
transfer,  to a limited  liability  owned, in principal part, by such owner, its
assets located at the Center in exchange for: (i) the purchaser's  assumption of
the Center's liabilities (subject to certain  limitations);  (ii) the release of
the Company from its  obligation  under the Lease  pursuant to which the Company
leases the premises of the Center (except in limited  circumstances);  (iii) the
termination of the Administrative  Services and Consulting Agreement pursuant to
which the Company renders services to such owner/licensee in connection with its
operation of the Center;  and (iv) the  termination  of the  Purchase  Agreement
pursuant to which the  Company  agreed to  purchase  the New York State  License
(Certificate of Need) for the Center. If the Company,  however,  is unsuccessful
in consummating the terms of such agreement,  it will, in all likelihood,  close
such  facility,  whereupon it will be in default in performing  its  obligations
under such Consulting Agreement,  Lease, and Purchase Agreement. As of March 31,
2001,  $1,145,000 of reserves relating to the aforementioned  future obligations
remained  accrued (as part of accounts  payable and accrued  liabilities) on the
accompanying Consolidated Condensed Balance Sheet. During the three months ended
March 31,  2001,  the net  operating  results of the  Ambulatory  Center was $0;
therefore no costs were charged against the previously  established  reserve for
discontinued operations related to the center.

     The  Company  continues  to pursue a sale of the assets of  Insight  Laser.
Subsequent  to March 31, 2001,  the Company  received an offer to purchase  such
assets, which the Company is currently evaluating. During the three months ended
March 31, 2001, Insight Laser's results from operations  generated net income of
$31,000.

     Summarized  financial  information for these discontinued  operations is as
follows (in thousands):

      As of and for the Three Months Ended March 31:
<TABLE>
<CAPTION>


                                                  Internet        Insight       Ambulatory
                                                  Division         Laser          Center            Total
                                                  --------        -------       ----------        --------
2001
<S>                                               <C>             <C>             <C>              <C>
Net revenues                                      $     -         $  416          $   77           $   493
Income before income taxes                        $     -         $   31          $    -           $    31
Gain on disposal of discontinued operations       $   400         $    -          $    -           $   400
Net income                                        $   400         $   31          $    -           $   431
Current assets                                    $     -         $  164          $  104           $   268
Total assets                                      $     -         $1,023          $  104           $ 1,127
Current liabilities                               $   404         $1,696          $   14           $ 2,114
Net (liabilities) assets                          $  (404)        $ (673)         $   90           $   987

2000
Net revenues                                      $     -         $  862          $  185           $ 1,047
Loss before income taxes                          $(1,212)        $  (66)         $   (1)          $(1,279)
Net loss                                          $(1,212)        $  (66)         $   (1)          $(1,279)
Current assets                                    $     -         $  376          $  131           $   507
Total assets                                      $ 1,020         $2,552          $2,540           $ 6,112
Current liabilities                               $    76         $1,302          $   47           $ 1,425
Net assets                                        $   944         $  545          $2,493           $ 3,982
</TABLE>

                                       7
<PAGE>


NOTE 3 - PER SHARE INFORMATION:

     The Company  follows the provisions of SFAS No. 128,  "Earnings Per Share".
Basic net loss per common  share  ("Basic  EPS") is computed by dividing the net
loss  attributable  to common  shareholders  by the  weighted-average  number of
common shares outstanding.  Diluted net loss per common share ("Diluted EPS") is
computed by dividing the net loss  attributable  to common  shareholders  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  appear  on the  Company's
Consolidated  Condensed Statements of Operations.  Common stock equivalents were
excluded from the computation for all periods  presented,  as their impact would
be anti-dilutive.

     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
                                                                                                   March 31,
                                                                                        ---------------------------------
                                                                                             2001             2000
                                                                                             ----             ----
Numerator:

<S>                                                                                          <C>           <C>
     Loss from continuing operations                                                         $(41)         $   (696)
     Induced conversion of Senior Convertible Preferred Stock                                   -           (21,707)
     Accretion of dividends on Series B Convertible Preferred Stock                             -            (7,495)
                                                                                             ----          --------
     Numerator for basic and diluted loss per share -
          Loss attributable to common shareholders                                            (41)          (29,898)
                                                                                             ----          --------

Basic and Diluted:

     Loss attributable to common shareholders                                                 (41)          (29,898)
     Income (loss) from discontinued operations                                                31            (1,279)
     Gain on disposal of discontinued operations                                              400                 -
                                                                                             ----          --------
          Net income (loss) attributable to common shareholders                              $390          $(31,177)
                                                                                             ====          ========

Denominator:

     Denominator for basic and diluted per share information -
          weighted average shares outstanding                                              25,381            18,714
                                                                                           ======            ======

Basic and Diluted Per Share Information:

     Loss attributable to common shareholders                                              $ 0.00           $ (1.60)
     Income (loss) from discontinued operations                                              0.00             (0.07)
     Gain on disposal of discontinued operations                                             0.02                 -
                                                                                           ------           -------
          Net income (loss) attributable to common shareholders                            $ 0.02           $ (1.67)
                                                                                           ======           =======


</TABLE>


NOTE 4 - CONTINGENCIES:

     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:  (i)  $35,000,000  of damages as a result of the  Company's
alleged breach of the  respective  Franchise  Agreements  pursuant to which each
such  Franchisee  operates  its Site for Sore  Eyes  Optical  Center,  fraud and
violations  of California  law; and (ii) a  declaratory  judgment that each such

                                       8
<PAGE>

Franchise  Agreement had been modified to afford each  plaintiff  certain rights
which are in addition to those set forth in the applicable Franchise Agreements.
As of the date hereof, the Company and the plaintiffs are attempting to reach an
amicable settlement of this dispute.

     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 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 which Notes was  personally  guaranteed  by each of the  defendants.  In
response thereto, 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: (i) the parties failed
to agree upon the terms of any such  purchase;  (ii) the parties failed to enter
into any written agreement memorializing such transaction; and (iii) the Company
subsequently purchased such assets from Norwest Bank (which held a first lien on
substantially all of said assets as collateral for various loans made to each of
said  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, a hearing on damages having been scheduled for June 2001. In
addition,  in March 2001,  the Company  filed an  additional  Motion for Summary
Judgment seeking dismissal of all of such counterclaims;  and the defendant, Dr.
Joel,  thereafter filed a cross-motion  seeking a determination that the Company
breached  such  oral,  month-to-month  consulting  agreement  and  that  he  is,
accordingly,  entitled to damages of  approximately  $13,000,000,  both of which
motions have not yet been decided by the Court.

     Pursuant  to  the  terms  of the  Company's  Professional  Services  Master
Agreement (the "Agreement") with Rare Medium,  Inc.  ("Rare"),  the Company paid
Rare the cash sum of  $1,000,000  and,  on  February  29,  2000,  issued to Rare
1,000,000 shares of the Registrant's Common Stock (valued at $9,750,000), all in
exchange for Rare's  agreement to provide  services to the Company in connection
with the development and  implementation of its previously  proposed,  web-based
business  strategy.  In addition,  the terms of the  Agreement  afforded  Rare a
price-protection  guarantee on any such shares (which have since been registered
by the Company under the Securities  Act of 1933, as amended;  (the "Act")) sold
in the open  market  at a price of less  than  $3.00 per  share,  and  contained
certain "lock-up"  provisions regarding Rare's ability to sell such shares prior
to certain dates,  which  Agreement was  subsequently  terminated by the Company
based upon its opinion that Rare was unable to provide the services  required of
it pursuant to the Agreement.  In November 2000,  Rare notified the Company that
it was allegedly in default of the terms of the  Agreement  entered into between
the Company and Rare in February  2000, as a result of the Company's  refusal to
permit the  transfer  of the  1,000,000  shares of its Common  Stock  previously
issued to Rare in partial  consideration  of the  services to be rendered to the
Company  pursuant to such  Agreement;  and in February 2001,  Rare  additionally
claimed  that there was due and owing to it the  additional  approximate  sum of
$840,000  for rent for office  space  utilized by the  Company,  in both Dallas,
Texas and New York City, pending the opening of the Company's  corporate offices
in each such  city,  and for  additional  services  rendered  to the  Company by
certain  of its  employees,  all of  which,  the  Company  believes,  were to be
provided  to  it  without   additional  cost.  The  Company   thereupon  advised
representatives  of Rare that, in its opinion,  Rare was not able to provide the
services  required of it  pursuant to such  Agreement,  which  necessitated  the
Company to terminate such Agreement. As of the date hereof, the Company and Rare
are attempting to reach an amicable settlement of this dispute.

     In January,  2001,  the Company  commenced an action against Binns Optical,
Inc. ("BOI"), Michael Binns and Mary Ann Binns (collectively,  the "Guarantors")
in the United States District Court for the Eastern District of Missouri seeking
to prohibit the defendants from operating the Sterling Optical Center located in
Ballwin,  Missouri,  under any name other than Sterling  Optical,  as well as to
require the  defendants to return to the Company all patient  records,  customer
lists,  furniture,  fixtures and equipment  removed by  defendants  from the six
Sterling Optical Centers previously  franchised to, and ultimately abandoned by,
BOI. In February,  2001, the defendants  entered into a Stipulation  agreeing to
the entry of a preliminary injunction pursuant to which the defendants agreed to
substantially  all of the relief requested by the Company.  In March,  2001, the
defendants  filed a  counterclaim  against  the Company  seeking  damages in the
amount of $3,000,000 plus punitive damages as a result of the Company's  alleged
fraud in the inducement,  negligent misrepresentation,  breach of fiduciary duty
and claims stated in the  alternative  for breach of contract and breach of oral
agreement.  The Company  has denied  defendants'  counterclaims  and has filed a

                                       9
<PAGE>

motion to dismiss all such counterclaims,  which motion has not yet been decided
by the Court. In a related matter,  in February,  2001, the Company  commenced a
separate  action  against the  Guarantors in the New York State Supreme Court by
filing a Motion for  Summary  Judgment  in Lieu of  Complaint,  seeking  damages
(under the Guarantors'  payment guaranty in favor of the Company) as a result of
the  failure  of BOI to  comply  with its  obligations  under a series  of eight
Negotiable Promissory Notes made by BOI in its favor; and on April 17, 2001, the
Court  granted  the  Company's  motion and awarded the Company a judgment in the
approximate  sum of  $1,300,000,  which the Company  will seek to enforce in the
State of Missouri, where the Guarantors both reside.

     In  addition  to the  foregoing,  the  Company  is a  defendant  in certain
lawsuits  alleging  various claims  incurred in the ordinary course of business.
These claims are generally  covered by various  insurance  policies,  subject to
certain  deductible  amounts  and  maximum  policy  limits.  In the  opinion  of
management, the resolution of such additional, existing lawsuits 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 are likely to have a material  adverse  effect on the
Company.



NOTE 5 - SHAREHOLDER'S EQUITY:

SERIES B CONVERTIBLE PREFERRED STOCK

     During the first quarter of 2000, the Company completed a private placement
pursuant to which it sold an aggregate of 1,677,570  units (the  "Units"),  each
Unit  consisting  of one share of the Company's  Series B Convertible  Preferred
Stock,  par value $.01 per share,  with a  liquidation  preference  of $7.00 per
share (the "Series B Preferred Stock"), and one warrant (the "Series B Warrant")
to purchase one-half share of Series B Preferred Stock at an exercise price, per
one-half  share,  of $7.5875,  exercisable  from and after the expiration of the
six-month  period  following  the date of the first  issuance  of such  Series B
Warrants, for a period of 5 years thereafter.

     Each share of Series B Preferred Stock was automatically converted into two
shares of the Company's  Common Stock upon the Company's  filing of an amendment
to its Certificate of Incorporation (the "Amendment")  increasing its authorized
Common Stock from  28,000,000  to 50,000,000  shares.  Each Series B Warrant was
initially  exercisable for one-half share of Series B Preferred Stock;  however,
upon the automatic conversion of the Series B Preferred Stock into Common Stock,
the  Series  B  Warrants  (to  the  extent  not  previously   exercised)  became
exercisable,  at the same  exercise  price of  $7.5875,  for one share of Common
Stock.

     In accordance with EITF Issue 98-05, "Accounting for Convertible Securities
with  Beneficial  Conversion  Features  or  Contingently  Adjustable  Conversion
Ratios,"  the net  proceeds  received  in the private  placement  (approximately
$10,618,000)  were  allocated  based on the relative fair values of the Series B
Preferred Stock and the Series B Warrants. Accordingly, approximately $6,239,000
was allocated to the Series B Preferred  Stock and  $4,379,000  was allocated to
the Series B Warrants.  The approximately  $11,743,000  liquidation value of the
1,677,570  shares of Series B Preferred Stock was recorded net of issuance costs
of approximately $1,125,000,  and net of a full discount, of which approximately
$4,379,000 was attributable to the fair value of the Series B Warrants issued in
connection  therewith,  and  approximately  $6,239,000 was  attributable  to the
beneficial  conversion  feature embodied in the Series B Preferred  Stock.  This
discount was accreted in its entirety as preferred  dividends  through April 17,
2000,  the  date on which  all of the  Series B  Preferred  Stock  automatically
converted  into shares of the Company's  Common Stock (as described  above) at a
ratio of 1 to 2. In connection with the private placement, the Company issued to
the placement agents 500,000 warrants to purchase shares of the Company's Common
Stock at an exercise price of $7.59,  which warrants will expire on February 13,
2005.  The fair value of these  warrants  was  treated  as part of the  issuance
costs.

ISSUANCE OF WARRANTS FOR CONSULTING SERVICES

     On January 16, 2001,  the Company  entered  into an  agreement  with Goldin
Associates, L.L.C. ("Goldin") pursuant to which Goldin agreed to provide interim
management  services  to the  Company,  for an initial  six-month  period,  with
respect to its retail  optical,  Insight Laser and Ambulatory  Center  divisions
(collectively,  the  "Divisions")  at the direction of the Board of Directors of

                                       10
<PAGE>

the Company or its Chairman or other officers,  pursuant to delegated authority.
In connection  with the foregoing,  Michael C. McGeeney was initially  appointed
Chief Executive  Officer of the retail optical  division and,  subsequently,  on
March 28, 2001,  replaced  Gregory T. Cook as the Company's  President and Chief
Executive  Officer.  The fee for such  services  is  $50,000  per month  plus an
Incentive Fee, comprised, in the aggregate, of warrants (at an exercise price of
$0.01  each)  to  purchase  up  to an  aggregate  of 5%  (subject  to  customary
anti-dilution  provisions) of the outstanding  Common Stock of the Company as of
January 22, 2001.  The  Incentive  Fee is to be provided to Goldin in increments
according to the following  schedule:  (1) warrants to purchase  422,272 of such
outstanding  Common Stock on January 22, 2001 (the fair value of this portion of
the total  warrants  issued to Goldin were valued using the Black Scholes model,
which amounted to approximately  $301,000, and recorded, as a non-cash charge to
compensation expense, in the first quarter of fiscal year 2001); (2) warrants to
purchase  an  additional  1.11% of such  outstanding  Common  Stock  immediately
following a year in which the Divisions shall realize  earnings before interest,
depreciation,  taxes and  amortization  (EBIDTA) of $1,000,000;  (3) warrants to
purchase  an  additional  1.11% of such  outstanding  Common  Stock  immediately
following a year in which the Divisions shall realize EBIDTA of $2,000,000;  and
(4) warrants to purchase an additional  1.12% of such  outstanding  Common Stock
immediately  following a year in which the  Divisions  shall  realize  EBIDTA of
$3,000,000.  These warrants,  except for the warrants  referred to in clause (1)
above (which  became  exercisable  immediately),  may be  exercised  only if the
applicable  EBITDA targets are achieved  prior to January 12, 2005;  and, due to
these  contingencies,  will  result  in  charges  to the  Company's  results  of
operations in future  periods,  if and when achieved.  All warrants expire seven
years after their issuance date.



NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS:

     Financial   instruments   that   potentially   subject  the  Company  to  a
concentration  of credit risk  consist of cash,  cash  equivalents  and accounts
receivable.  Cash and cash equivalents are deposited with high quality financial
institutions.  All highly liquid investments with an original maturity from date
of purchase of three months or less are considered to be cash  equivalents.  The
Company's  cash and cash  equivalents  are invested in various  investment-grade
money  market  accounts  and  are  recorded  on  the  accompanying  Consolidated
Condensed Balance Sheet, as of March 31, 2001, at $3,880,000.



NOTE 7 - SUBSEQUENT EVENTS:

     The Nasdaq requires, among other items, that the Company maintain a minimum
of $4,000,000 of net tangible assets to maintain the listing of the Registrant's
shares of Common Stock on the  Nasdaq-NMS.  The Company's net tangible assets as
of March 31, 2001 was  $3,084,000.  Accordingly,  the Company  anticipates  that
unless: (i) the Company's  profitability  continues to improve during the second
quarter of 2001;  and (ii) the Company is successful in completing  its plan for
disposing of the assets of its  Internet,  Insight Laser and  Ambulatory  Center
divisions,  it  will  require  additional  funds  (in  the  form  of  an  equity
investment) to comply with the Nasdaq-NMS net tangible assets  requirement;  and
there  can be no  assurance  that  the  Company  will be able  to  improve  such
profitability  and  dispose of such assets  within the time  period  required by
Nasdaq,  or that funds will be  available  from  equity  financings  or, that if
available,  any  such  financings  will be  available  on terms  and  conditions
acceptable  to the  Company.  The Nasdaq also  requires,  as a condition  to the
continued  listing of such Common Stock on the  Nasdaq-NMS,  a minimum bid price
for the  Registrant's  Common  Stock of $1.00 per share.  On April 9, 2001,  the
Company  was  notified  by Nasdaq  that it did not meet the minimum bid price of
$1.00 for continued listing of its shares on the Nasdaq-NMS and that the Company
had until  July 5, 2001 to  comply  with such rule in order to avoid  delisting.
Additionally,  on April 11,  2001,  Nasdaq  notified the Company that it did not
meet the aforementioned net tangible assets  requirement.  The Company responded
to Nasdaq on April 30, 2001 by providing  Nasdaq with its  anticipated  plans by
which the Company  believes it will meet such  requirement.  Nasdaq is reviewing
these plans as of the date of this Report. If the Registrant's Common Stock were
delisted,  such delisting  would have an adverse affect on the trading prices of
the Registrant's Common Stock and would, in all likelihood, adversely affect the
liquidity of the shares of Common Stock held by the Company's stockholders.

                                       11
<PAGE>

     On April 26, 2001, the Company's  Board of Directors  approved the terms of
an agreement  pursuant to which it will issue to Balfour Investors  Incorporated
("Balfour"),  in  exchange  for its  advisory  services  to be  rendered  to the
Company's  Board of  Directors,  warrants to purchase up to an aggregate of 2.5%
(subject to customary anti-dilution  provisions) of the Registrant's outstanding
Common Stock as of April 26, 2001, 190,327 of which warrants will be immediately
exercisable and will be valued,  using the Black Scholes model, at approximately
$62,000.  The  balance  of such  aggregate  number of  warrants  to be issued to
Balfour  will  become  exercisable  according  to the  following  schedule:  (1)
warrants  to purchase  an  additional  0.58% of such  outstanding  Common  Stock
immediately  following a year in which the Divisions  shall realize EBIDTA of $1
million  or  more;  (2)  warrants  to  purchase  an  additional  0.58%  of  such
outstanding  Common Stock  immediately  following a year in which the  Divisions
shall realize EBIDTA of  $2,000,000;  and (3) warrants to purchase an additional
0.59% of such outstanding Common Stock immediately following a year in which the
Divisions  shall realize EBIDTA of $3,000,000.  These  warrants,  except for the
warrants  which became  exercisable  immediately,  may be exercised  only if the
applicable EBITDA targets are achieved prior to April 26, 2005 and, due to these
contingencies,  will result in charges to the Company's results of operations in
future  periods,  if and when  achieved.  All warrants  expire seven years after
their issuance date.


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  is  based  on  the  beliefs  of  the  Company's
management,  as well as assumptions made by and information  currently available
to the Company's  management within the meaning of Section 21E of the Securities
Exchange  Act of  1934,  as  amended.  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;  success of transactions with third parties; the
impact of  competitive  products,  services  and pricing;  product  development,
commercialization  and  technological  difficulties;  the outcome of current and
future litigation;  delisting by Nasdaq-NMS; and other risks described elsewhere
herein.  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.

     The Company's historical financial  information has been restated to report
the  operating  results,  net assets and cash  flows of the  Internet  Division,
Insight  Laser and  Ambulatory  Center  through  March 31, 2001 as  discontinued
operations  for all periods  presented.  The following  discussion  and analysis
focuses on continuing operations, as restated, unless otherwise noted.



RESULTS OF OPERATIONS


      FOR THE THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO MARCH 31, 2000

     Net sales for Company-owned  stores,  as well as revenues  generated by the
Registrant's  wholly owned  subsidiary,  VisionCare  of  California  ("VCC"),  a
specialized  health care  maintenance  organization  licensed by the  California
Department of Corporations,  decreased by approximately  $914,000,  or 24.3%, to
$2,840,000  for the three months ended March 31, 2001, as compared to $3,754,000
for the comparable  period in 2000. This decrease was principally due to a lower
average  number of stores in  operation  during the three months ended March 31,
2001, as compared to the comparable period in 2000, as described below. At March
31,  2001,  there  were 223  Sterling  Stores  in  operation,  consisting  of 39
Company-owned  stores  (including  12  Company-owned  stores  being  managed  by
franchisees)  and 184  franchised  stores  (including 3 franchised  stores being
managed by the Company on behalf of  franchisees),  as compared to 251  Sterling
Stores  in  operation  for the  comparable  period  in  2000,  consisting  of 37
Company-owned  stores  (including  12  Company-owned  stores  being  managed  by
franchisees) and 214 franchised  stores (including 5 stores being managed by the

                                       12
<PAGE>

Company on behalf of  franchisees).  On a same  store  basis  (for  stores  that
operated as a  Company-owned  store during both of the three month periods ended
March 31, 2001 and 2000), comparative net sales decreased by $220,000, or 10.7%,
to  $1,830,000  for the three  months  ended  March 31,  2001,  as  compared  to
$2,050,000 for the comparable period in 2000.

     Franchise royalties  decreased by $145,000,  or 6.1%, to $2,232,000 for the
three months ended March 31, 2001, as compared to $2,377,000  for the comparable
period in 2000.  This  decrease was as a result of a fewer number of  franchised
stores in operation  throughout  the three month period ended March 31, 2001, as
compared to 2000.

     Net gains and fees from the  conveyance  of  Company-owned  store assets to
franchisees,  including  renewal fees and the fees charged as a condition to the
transfer  of  ownership  of the  assets  and  franchise  for a  store,  from one
franchisee to another, increased by $74,000, or 528.6%, to $88,000 for the three
months ended March 31, 2001, as compared to $14,000 for the comparable period in
2000.  This  increase  was  principally  due to transfer  fees  collected on the
conveyance  of the assets of 8  franchise-owned  stores  during the three months
ended  March  31,  2001,  as  compared  to the  conveyance  of the  assets  of 2
franchise-owned  stores  for  the  comparable  period  in  2000.  There  were no
conveyances of the assets of Company-owned store locations to franchisees during
either of the three months ended March 31, 2001 and 2000.

     Interest on franchise notes  receivable  decreased by $28,000,  or 8.6%, to
$299,000 for the three months ended March 31, 2001,  as compared to $327,000 for
the comparable  period in 2000.  This decrease was principally due to reductions
of the  principal  balance of several  franchisees  notes and fewer  notes being
generated  during the three  months  ended  March 31,  2001,  as compared to the
comparable period in 2000.

     Other income (primarily  initial  franchise fees) decreased by $56,000,  or
91.8%,  to $5,000 for the three  months  ended  March 31,  2001,  as compared to
$61,000 for the comparable  period in 2000, due to fewer stores being franchised
during the three months ended March 31, 2001.

     The Company's gross profit margin  increased by 8.3% to 80.5% for the three
months ended March 31, 2001, as compared to 72.2% for the  comparable  period in
2000,  due to the mix of products being sold in Company  operated  stores during
each  respective  period.  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,  general and administrative  expenses decreased by $1,100,000,  or
19.6%,  to $4,516,000  for the three months ended March 31, 2001, as compared to
$5,616,000 for the comparable period in 2000. This change was primarily due to a
decrease of  approximately  $949,000  related to  reductions  in  operating  and
administrative  payroll related costs for the three months ended March 31, 2001,
as compared to the comparable period in 2000. In addition,  there was a decrease
of approximately $151,000 in the provision for doubtful accounts associated with
accounts and notes receivable due from franchisees during the three months ended
March 31, 2001, as compared to the  comparable  period in 2000. As a result of a
change in  management  philosophy,  policy,  direction,  and related  courses of
action  resulting  from a change in the Company's  senior  management  personnel
during the first  quarter of fiscal year 2001,  (e.g.,  to take back  franchised
stores from various problem franchisees), the Company reacquired the assets of 8
franchised  store locations during the three months ended March 31, 2001, and an
additional 2 franchised stores subsequent to March 31, 2001.

     Warrant  issuance and induced  conversion  costs  increased by $29,000,  or
10.7%,  to $301,000 for the three months ended March 31, 2001, from $272,000 for
the comparable period in 2000, as a result of the Company's issuance of warrants
to Goldin Associates, L.L.C.

     Loss  from the  operation  of  franchised  stores  managed  by the  Company
increased by approximately $2,000, or 1.8%, to approximately  $(113,000) for the
three months ended March 31, 2001, as compared to  approximately  $(111,000) for
the comparable period in 2000.

     Interest expense decreased by $167,000,  or 88.8%, to $21,000 for the three
months ended March 31, 2001, as compared to $188,000 for the  comparable  period
in 2000.  This decrease  resulted from a reduction in the principal  balances of

                                       13
<PAGE>

the  Company's  long-term  debt during the three months ended March 31, 2001, as
compared to the comparable period in 2000.

     The Company incurred a net loss from continuing operations of $(41,000) for
the three months ended March 31, 2001,  as compared to a net loss of  $(696,000)
for the comparable  period in 2000.  These losses were a result of the financial
effects of the items discussed above.

     Income from discontinued operations represents the operating results of the
Company's Internet Division, Insight Laser and Ambulatory Center of $0, $31,000,
and $0,  respectively.  For the three months ended March 31, 2001,  the Internet
Division had actual  operating losses of  approximately  $2,058,000,  which were
charged to the discontinued  operations  accrual at March 31, 2001. In addition,
the Company reversed  approximately  $400,000 of liabilities previously recorded
in connection with its disposal of discontinued operations.  This reversal was a
result of the Company  settling  certain  liabilities  for less than the amounts
initially recorded.



LIQUIDITY AND CAPITAL RESOURCES

     For the three months ended March 31, 2001, cash flows provided by operating
activities were $288,000, as compared to cash flows used in operating activities
of  $(2,678,000)  for the  three  months  ended  March 31,  2000.  Net loss from
continuing  operations  for the three months ended March 31, 2001 was ($41,000),
as  compared  to a  loss  from  continuing  operations  of  ($696,000)  for  the
comparable  period in 2000.  During the three months  ended March 31, 2001,  the
Company made  significant  payments to its vendors from proceeds  generated from
the exercise of stock options.

     For the three months ended March 31, 2001, cash flows provided by investing
activities were $266,000,  as compared to $152,000 for the comparable  period in
2000. This increase was principally due to an increase of approximately $94,000,
to $592,000, in proceeds from franchise and other notes receivables,  a decrease
of  approximately  $(124,000)  in  capital  expenditures,  and  an  increase  of
approximately $104,000 in notes issued by franchisees.

     For the three  months  ended March 31,  2001,  cash flows used in financing
activities  were  $(63,000),  principally  due to payments  on,  reductions  of,
long-term  debt, as compared to  $17,102,000  of cash  provided  from  financing
activities for the comparable  period in 2000. During the first quarter of 2000,
the Company received proceeds from the Company's private placement, completed in
March 2000,  of  approximately  $10,618,000,  and proceeds  from the exercise of
stock options and warrants of approximately  $7,692,000,  in each case offset by
net payments on long-term debt of approximately $1,208,000.

     The Company's  working capital deficit was  $(1,963,000) at March 31, 2001.
This  amount  included   reserves  in  the  aggregate  amount  of  approximately
$2,000,000 related to anticipated  liabilities to be incurred in connection with
potential settlements related to the Company's  discontinued  operations.  These
liabilities reflect a range of possible settlements, which the Company will seek
to resolve for a lesser amount  (although there can be no assurance that it will
be able to do so). The Company  believes  that it will improve cash flows during
2001  by  improving  store   profitability   through  increased   monitoring  of
store-by-store  operations and actual results as compared to expected results; a
reduction of  administrative  overhead  expenses,  if  necessary;  new marketing
programs for franchisees; and seeking additional financing, if available.

     The Nasdaq requires, among other items, that the Company maintain a minimum
of $4,000,000 of net tangible assets to maintain the listing of the Registrant's
shares of Common Stock on the  Nasdaq-NMS.  The Company's net tangible assets as
of March 31, 2001 was  $3,084,000.  Accordingly,  the Company  anticipates  that
unless: (i) the Company's  profitability  continues to improve during the second
quarter of 2001;  and (ii) the Company is successful in completing  its plan for
disposing of the assets of its  Internet,  Insight Laser and  Ambulatory  Center
divisions,  it  will  require  additional  funds  (in  the  form  of  an  equity
investment) to comply with the Nasdaq-NMS net tangible assets  requirement;  and
there  can be no  assurance  that  the  Company  will be able  to  improve  such
profitability  and  dispose of such assets  within the time  period  required by
Nasdaq,  or that funds will be  available  from  equity  financings  or, that if
available,  any  such  financings  will be  available  on terms  and  conditions

                                       14
<PAGE>

acceptable  to the  Company.  The Nasdaq also  requires,  as a condition  to the
continued  listing of such Common Stock on the  Nasdaq-NMS,  a minimum bid price
for the  Registrant's  Common  Stock of $1.00 per share.  On April 9, 2001,  the
Company  was  notified  by Nasdaq  that it did not meet the minimum bid price of
$1.00 for the  continued  listing of its shares on the  Nasdaq-NMS  and that the
Company  had  until  July 5,  2001 to  comply  with  such rule in order to avoid
delisting.  Additionally, on April 11, 2001, Nasdaq notified the Company that it
did not meet the  aforementioned  net tangible assets  requirement.  The Company
responded to Nasdaq on April 30, 2001 by providing  Nasdaq with its  anticipated
plans by which the  Company  believes it will meet such  requirement.  Nasdaq is
reviewing these plans as of the date of this Report. If the Registrant's  Common
Stock were delisted,  such delisting would have an adverse affect on the trading
prices of the Registrant's Common Stock and would, in all likelihood,  adversely
affect  the  liquidity  of the  shares of  Common  Stock  held by the  Company's
stockholders.

     The Company  believes that, in the furtherance of its business  strategies,
the Company's  future  capital  requirements  will include:  (i)  renovating and
remodeling  Company-owned stores; (ii) acquiring retail optical stores,  subject
to the availability of qualified opportunities; and (iii) continued upgrading of
management  information systems for Company operated stores.  Additionally,  the
Company  may  provide  financing  of  sales of  Company-owned  store  assets  to
franchisees, which is likely to defer the inflow of cash related to the sales of
such assets.

     The Company  believes  that,  based on its current  cash  position  and the
implementation  of the  plans  described  above,  sufficient  resources  will be
available for the Company to continue in operation  through the end of the first
quarter of fiscal year 2002. However, there can be no assurance that the Company
will be able to generate  positive  cash flows and,  even if it does,  that such
cash flows will be  sufficient  to adequately  fund its ongoing  operations  and
future  plans.  If the  Company  cannot  generate  sufficient  cash  flows  from
operations, it may be required to seek alternative debt and/or equity financing.
However,  there can be no assurance that such debt and/or equity  financing will
be available to the Company when  necessary,  or on terms that are acceptable to
the Company.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company maintains certain equity instruments with beneficial conversion
terms and certain  contractual  price-protection  provisions that are indexed to
the performance of the Company's Common Stock. Accordingly, the Company may bear
a financial  risk in the form of future cash or stock  payments made to equalize
any stock price declines that are indexed to a specific  contractual stock price
floor. Additionally,  as a result of the above, the Company could incur non-cash
charges  to  equity,  which  would  have a  negative  impact on future per share
calculations.

     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.   These  investments  are  deposited  with  high  quality  financial
institutions.  The Company believes that the amount of risk as it relates to its
investments is not material to the Company's  financial  condition or results of
operations because the Company does not use derivative financial  instruments in
its investments.


                                       15
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS


     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:  (i)  $35,000,000  of damages as a result of the  Company's
alleged breach of the  respective  Franchise  Agreements  pursuant to which each
such  Franchisee  operates  its Site for Sore  Eyes  Optical  Center,  fraud and
violations  of California  law; and (ii) a  declaratory  judgment that each such
Franchise  Agreement had been modified to afford each  plaintiff  certain rights
which are in addition to those set forth in the applicable Franchise Agreements.
As of the date hereof, the Company and the plaintiffs are attempting to reach an
amicable settlement of this dispute.

     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 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 which Notes was  personally  guaranteed  by each of the  defendants.  In
response thereto, 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: (i) the parties failed
to agree upon the terms of any such  purchase;  (ii) the parties failed to enter
into any written agreement memorializing such transaction; and (iii) the Company
subsequently purchased such assets from Norwest Bank (which held a first lien on
substantially all of said assets as collateral for various loans made to each of
said  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, a hearing on damages having been scheduled for June 2001. In
addition,  in March 2001,  the Company  filed an  additional  Motion for Summary
Judgment seeking dismissal of all of such counterclaims;  and the defendant, Dr.
Joel,  thereafter filed a cross-motion  seeking a determination that the Company
breached  such  oral,  month-to-month  consulting  agreement  and  that  he  is,
accordingly,  entitled to damages of  approximately  $13,000,000,  both of which
motions have not yet been decided by the Court.

     In January 2001,  the Company  commenced an action  against Binns  Optical,
Inc.  ("BOI")  and  Michael  Binns  and  Mary  Ann  Binns   (collectively,   the
"Guarantors")  in the United States  District Court for the Eastern  District of
Missouri  seeking to prohibit the defendants from operating the Sterling Optical
Center located in Ballwin, Missouri, under any name other than Sterling Optical,
as well as to  require  the  defendants  to return to the  Company  all  patient
records, customer lists, furniture, fixtures and equipment removed by defendants
from the six Sterling Optical Centers  previously  franchised to, and ultimately
abandoned by, BOI. In February,  2001, the defendants entered into a Stipulation
agreeing  to the  entry  of a  preliminary  injunction  pursuant  to  which  the
defendants  agreed to substantially  all of the relief requested by the Company.
In March, 2001, the defendants filed a counterclaim  against the Company seeking
damages in the amount of  $3,000,000  plus  punitive  damages as a result of the
Company's alleged fraud in the inducement,  negligent misrepresentation,  breach
of fiduciary  duty and claims stated in the  alternative  for breach of contract
and breach of oral agreement.  The Company has denied defendants'  counterclaims
and has filed a motion to dismiss all such  counterclaims,  which motion has not
yet been  decided by the Court.  In a related  matter,  in February,  2001,  the
Company commenced a separate action against the Guarantors in the New York State
Supreme  Court by filing a Motion for  Summary  Judgment  in Lieu of  Complaint,
seeking damages (under the Guarantors' payment guaranty in favor of the Company)
as a result of the failure of BOI to comply with its obligations  under a series
of eight Negotiable  Promissory Notes made by BOI in its favor; and on April 17,
2001, the Court granted the Company's  motion and awarded the Company a judgment
in the approximate sum of $1,300,000,  which the Company will seek to enforce in
the State of Missouri, where the Guarantors both reside.

                                       16
<PAGE>

     In  addition  to the  foregoing,  the  Company  is a  defendant  in certain
lawsuits  alleging  various claims  incurred in the ordinary course of business.
These claims are generally  covered by various  insurance  policies,  subject to
certain  deductible  amounts  and  maximum  policy  limits.  In the  opinion  of
management, the resolution of such additional, existing lawsuits 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 are likely to have a material  adverse effect on the
Company.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

      Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

       Not applicable.

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

      Not applicable.

ITEM 5. OTHER INFORMATION.

     The Nasdaq requires, among other items, that the Company maintain a minimum
of $4,000,000 of net tangible assets to maintain the listing of the Registrant's
shares of Common Stock on the  Nasdaq-NMS.  The Company's net tangible assets as
of March 31, 2001 was  $3,084,000.  Accordingly,  the Company  anticipates  that
unless: (i) the Company's  profitability  continues to improve during the second
quarter of 2001;  and (ii) the Company is successful in completing  its plan for
disposing of the assets of its  Internet,  Insight Laser and  Ambulatory  Center
divisions,  it  will  require  additional  funds  (in  the  form  of  an  equity
investment) to comply with the Nasdaq-NMS net tangible assets  requirement;  and
there  can be no  assurance  that  the  Company  will be able  to  improve  such
profitability  and  dispose of such assets  within the time  period  required by
Nasdaq,  or that funds will be  available  from  equity  financings  or, that if
available,  any  such  financings  will be  available  on terms  and  conditions
acceptable  to the  Company.  The Nasdaq also  requires,  as a condition  to the
continued  listing of such Common Stock on the  Nasdaq-NMS,  a minimum bid price
for the  Registrant's  Common  Stock of $1.00 per share.  On April 9, 2001,  the
Company  was  notified  by Nasdaq  that it did not meet the minimum bid price of
$1.00 for the  continued  listing of its shares on the  Nasdaq-NMS  and that the
Company  had  until  July 5,  2001 to  comply  with  such rule in order to avoid
delisting.  Additionally, on April 11, 2001, Nasdaq notified the Company that it
did not meet the  aforementioned  net tangible assets  requirement.  The Company
responded to Nasdaq on April 30, 2001 by providing  Nasdaq with its  anticipated
plans by which the  Company  believes it will meet such  requirement.  Nasdaq is
reviewing these plans as of the date of this Report. If the Registrant's  Common
Stock were delisted,  such delisting would have an adverse affect on the trading
prices of the Registrant's Common Stock and would, in all likelihood,  adversely
affect  the  liquidity  of the  shares of  Common  Stock  held by the  Company's
stockholders.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

A.    Exhibits

10.113       Form of Settlement Agreement, dated as of  April 24, 2001,  between
             Emerging Vision, Inc. and Sara V. Traberman.

B.    Reports on Form 8-K

      Not applicable.




                                       17
<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/ Michael C. McGeeney
                                       -----------------------------------------
                                       Michael C. McGeeney
                                       President and Chief Executive Officer

                              BY:      /s/ George D. Papadopoulos
                                       -----------------------------------------
                                       George D. Papadopoulos
                                       Senior Vice President and
                                       Chief Financial Officer

                                       Dated: May 15, 2001






















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