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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

X    Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the Year ended December 31, 1999.

__   Transition Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 Commission File Number: 1-14128

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

                New York                           11-3096941
        (State of Incorporation)      (IRS Employer Identification Number)

                             1500 Hempstead Turnpike
                              East Meadow, NY 11554
                        Telephone Number: (516) 390-2100
         (Address and Telephone Number of Principal Executive Offices)

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

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  None

                TITLE                                     EXCHANGE
                -----                                     --------
Common Stock, par value $.01 per share         Nasdaq National Market System

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 ____

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

       The aggregate market value of the Registrant's Common Stock, par value
$.01 per share (the "Common Stock") held by nonaffiliates of the Registrant as
of March 10, 2000, (based upon the closing price of $10.4375 per share as quoted
on the Nasdaq National Market System) was approximately $186,101,500. For
purposes of this computation, the shares of Common Stock held by directors,
executive officers and principal shareholders owning more than 5% of the
Registrant's outstanding Common Stock and for which a Schedule 13G was filed,
were deemed to be stock held by affiliates. As of March 10, 2000, there were
approximately 17,830,100 outstanding shares of Common Stock held by
nonaffiliates.

       As of March 10, 2000, there were outstanding 22,185,679 shares of the
Registrant's Common Stock, 2.51 shares of the Registrant's Senior Convertible
Preferred Stock (convertible into an aggregate of 334,166 shares of the
Registrant's Common Stock) and 1,528,571 shares of the Registrant's Series B
Convertible Preferred Stock (convertible into 3,057,142 shares of the
Registrant's Common Stock, subject to, and contingent upon, the approval, by the
Company's Shareholders, of an increase in the Company's authorized shares of
Common Stock, which approval will be sought by the Company at a Special Meeting
of Shareholders anticipated to be held on April 17, 2000).

                       Documents Incorporated by Reference

       The Company's Proxy Statement for the 2000 Annual Meeting of Shareholders
is incorporated herein by reference in Part III of this Annual Report on Form
10-K.

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Item 1.    Business

       Sterling Vision, Inc. (the "Registrant" and, together with its
subsidiaries, hereinafter the "Company" or "Sterling"), is one of the largest
chains of retail optical stores and the second largest franchise optical chain
in the United States, based upon domestic sales and the number of locations of
Company-owned and franchised stores (collectively referred to herein as
"Sterling Stores").

       The Company and its franchisees develop and operate retail optical stores
principally under one of the trade names "Sterling Optical," "IPCO Optical,"
"Site For Sore Eyes," "Benson Optical," "Southern Optical," "Superior Optical,"
"Nevada Optical," "Duling Optical," "Monfried Optical," "Kindy Optical" and
"Singer Specs," although most stores (other than the Company's Site for Sore
Eyes stores located in Northern California) operate under the name "Sterling
Optical." The Company also operates VisionCare of California ("VCC"), a
specialized health care maintenance organization licensed by the California
Department of Corporations. VCC employs licensed optometrists who render
services in offices located immediately adjacent to, or within, most Sterling
Stores located in California.

       As of December 31, 1999, there were 254 Sterling Stores in operation,
consisting of 36 Company-owned stores (including 6 stores being managed by
franchisees), and 218 franchised stores including 5 stores being managed by the
Company on behalf of the franchisee/owners thereof. The Company continually
seeks to expand both its Company-owned and franchised store operations. Sterling
Stores are located in 26 states, the District of Columbia, Ontario, Canada, and
the U.S. Virgin Islands.

       Most Sterling Stores offer eyecare products and services such as
prescription and non-prescription eyeglasses, eyeglass frames, ophthalmic
lenses, contact lenses, sunglasses and a broad range of ancillary items. To the
extent permitted by individual state regulations, an optometrist is employed by,
or affiliated with, most Sterling Stores to provide professional eye
examinations to the public. The Company fills prescriptions from these employed
or affiliated optometrists, as well as from unaffiliated optometrists and
ophthalmologists. Most Sterling Stores have an inventory of ophthalmic and
contact lenses, as well as on-site lab equipment for cutting and edging
ophthalmic lenses to fit into eyeglass frames, which, in many cases, allows
Sterling Stores to offer same-day service.

       One of the Company's strategies is to treat certain of its Company-owned
stores as inventory to be strategically sold to qualified franchisees. By
selling Company-owned Sterling Stores to franchisees, the Company hopes to
achieve two goals: to recognize a gain on the conveyance of the assets of such
stores, and to create a stream of royalty payments based upon a percentage of
the gross revenues of the franchised locations. Sterling currently derives its
retail optical store revenues principally from: the sale of eyecare products and
services at Company-owned stores; ongoing royalties based upon a percentage of
gross revenues of franchised stores; and the conveyance of Company-owned store
assets to existing and new franchisees.

       In addition to its retail optical business, as of December 31, 1999,
Insight Laser Centers, Inc. ("Insight"), which is a 66.67% owned subsidiary of
the Registrant, owned and operated two laser vision correction centers located
in New York City. These centers specialize in offering the refractive laser
surgical procedure known as Laser Assisted In-Situ Keratomileusis ("LASIK").
This procedure, which corrects certain degrees of myopia (near-sightedness),
hyperopia (far-sightedness) and astigmatisms with the use of excimer lasers, is
performed by licensed opthalmologists in exchange for their payment to Insight
of a fee for each procedure performed. Insight also is in the process of
constructing, and expects to open, in early 2000, two additional centers, and
has also finalized and/or is in the process of finalizing agreements with other
ophthalmologists who will perform this procedure in offices to be located in the
New York metropolitan area that will be constructed and operated by Insight. In
connection with the foregoing, Insight will be seeking additional capital
(through the sale of additional shares of its capital stock) in order to fund a
portion of such expansion plans, as well as to market and promote its refractive
laser surgery business.

       On May 6, 1998, the Company, through its wholly-owned subsidiary, Insight
Laser Centers N.Y.I, Inc., purchased substantially all of the assets of an
ambulatory surgery center located in Garden City, New York (the "Center"). In
connection therewith, the Company entered into a long-term lease of the premises
in which the Center is located, and entered into an agreement whereby it
provides administrative and consulting services to the Center's licensed
owner/operator, on an interim basis, pending the approval, from the New York
State Department of Health, of the transfer of the license and certificate of
need therefor to an affiliate of the Company, after which time it will continue
to provide such services to such affiliate.

       In addition to the foregoing, the Company, through its new Emerging
Vision.com Division, has begun the process of developing a web-based optical
portal business that will focus on business-to-business opportunities. To date,
this business has not yet generated any revenues and is subject to various
risks and uncertainties.

       As part of its new business strategy, the Company will seek to capitalize
on this robust growth potential in the business-to-business, e-commerce market,
by providing comprehensive e-commerce solutions for the buyers and suppliers of
business goods and services in the optical industry. This, the Company believes,
will lower the overall costs of business-to-business transactions by reducing
the inefficiencies experienced by both buyers and suppliers of eye care goods
and services in traditional business transactions. The Company believes that
this market is not currently being adequately served by Internet companies,
which tend to

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focus on consumers and not on the business-to-business market.

       In implementing this new business initiative, the Company has developed a
strategic alliance and is presently working together with Rare Medium,
Inc.("Rare"), the web consulting services arm of Rare Medium Group, Inc., to
develop and launch an extensive network of state-of-the-art web sites designed
to provide information, interaction and electronic business-to-business
commerce. Rare Medium is one of the country's leading providers of Internet
solutions and e-commerce strategies that improve business processes and develop
branding strategies, marketing communications and interactive content to large
and medium sized companies in the financial, automotive, consumer servicing,
retail and consumer goods industries. In December 1999, the Company paid
$1,000,000 in cash to Rare, and on February 29, 2000, issued to Rare Medium
1,000,000 unregistered shares of the Company's Common Stock, with the
understanding that the Company will be required on or prior to April 15, 2000,
to file a registration statement seeking to register such shares.

Background of the Company

       The Registrant was incorporated under the laws of the State of New York
in January 1992 and, in February 1992, purchased substantially all of the assets
(the "IPCO Acquisition") of Sterling Optical Corp., f/k/a IPCO Corporation
("IPCO"), a New York corporation then a debtor-in-possession under Chapter 11 of
the U.S. Bankruptcy Code. Subsequent to the IPCO Acquisition, the Company, in
October 1993, acquired, through a merger, 26 retail optical stores (both company
operated and franchised) operating under the name "Site For Sore Eyes" ("SFSE")
and located in Northern California (the "SFSE Merger"). In connection with the
SFSE Merger, the Company also acquired VCC. In addition, the Company: (i) in
August 1994, purchased the assets of 8 additional retail optical stores located
in New York and New Jersey (the "Pembridge Transaction") from Pembridge Optical
Partners, Inc. ("Pembridge"); (ii) in November 1995, acquired, through one of
its wholly-owned subsidiaries, substantially all of the retail optical assets of
Benson Optical Co., Inc., OCA Acquisition Corp. and Superior Optical Company,
Inc. (the "Benson Transaction"), including the assets located in approximately
70 retail optical store locations, a substantial number of which were
subsequently closed by the Company; (iii) in May 1996, acquired, through one of
its wholly-owned subsidiaries (the "VCA Transaction"), substantially all of the
retail optical assets of Vision Centers of America, Ltd., D & K Optical, Inc.,
Monfried Corporation and Duling Finance Corporation (collectively, "VCA"),
including the assets located in approximately 13 company operated stores and
franchise agreements, together with related agreements, with respect to
approximately 75 additional franchised stores; and (iv) in April 1997, acquired,
in exchange for shares of its Common Stock, all of the issued and outstanding
capital stock of Singer Specs, Inc., a chain of approximately 30 franchised
retail optical stores (the "Singer Transaction").

       The following chart sets forth the breakdown of Sterling Stores as of
December 31, 1999 and December 31, 1998:

                                                              December 31
                                                           -----------------
                                                           1999(*)      1998
                                                           -------      ----
   I.  COMPANY-OWNED STORES:
       --------------------

       Company-Owned Stores in Operation............         30          35
       Company-Owned Stores Being Managed by
         Franchisees................................          6           6
                                                             --          --
         Total......................................         36          41
                                                             ==          ==

      (*) Existing store locations: California (4), Florida (1), Illinois (3),
          Iowa (1), Kentucky (2), Minnesota (1), New Jersey (1), New York (18),
          North Dakota (1), Pennsylvania (2), Virginia (1) and West Virginia
          (1).


  II.  FRANCHISED STORES:
       -----------------

       Stores in Operation..........................        213         239
       Franchise Owned Stores Being Managed by
         Company....................................          5          12
                                                           ----         ---
         Total......................................        218         251
                                                            ===         ===

       (*) Existing store locations: California (25), Colorado (1), Connecticut
           (1), Delaware (5), Florida (1), Illinois (5), Kentucky (4), Maryland
           (20), Massachusetts (1), Minnesota (14), Missouri (7), Montana (2),
           Nebraska (1), Nevada (1), New Jersey (9), New York (44), North
           Carolina (4), North Dakota (6), Ontario, Canada (1), Pennsylvania
           (17), South Dakota (3), Texas (1), Virginia (11), Washington, D.C.
           (1), West Virginia (3), Wisconsin (26), Ontario, Canada (2) and the
           U.S. Virgin Islands (2).


       Sterling Stores generally range in size from approximately 1,000 square
feet to 2,000 square feet, are substantially similar in

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appearance and are operated under certain uniform standards and operating
procedures. Many Sterling Stores are located in enclosed regional shopping malls
and smaller strip centers; however, some Sterling Stores are located on the
ground floor of office buildings or other commercial structures. A limited
number of Sterling Stores are housed in freestanding buildings with adjacent
parking facilities, and certain Sterling Stores are situated in professional
optometric offices (such as facilities which also include sports therapy,
physical therapy and other medical services), clinics or hospitals. Sterling
Stores are generally clustered within geographic market areas to maximize the
benefit of advertising strategies and minimize the cost of supervising
operations. Sterling Stores which are not clustered within geographic market
areas (e.g., Sterling Stores located in Texas and Massachusetts) have not
produced results from which any consistent performance standards can be drawn by
the Company.

       Most Sterling Stores offer a full line of prescription and
non-prescription eyeglasses, sunglasses and contact lenses, and, if permitted
under applicable law, professional eye examinations which are performed by
employed or affiliated optometrists. In response to the eyewear market becoming
increasingly fashion-oriented during the past decade, most Sterling Stores carry
a large selection of designer eyeglass frames. The Company continually
test-markets various brands of sunglasses, ophthalmic lenses, contact lenses and
designer frames in an attempt to maximize systemwide sales and profits from
these categories of merchandise. Small quantities of these items are usually
purchased for selected stores that test customer response and interest. If a
product test is successful, the Company attempts to negotiate a systemwide
preferred vendor discount for the product, and the discount is made available to
the Company's franchisees. In addition, a full line of eyeglass and contact lens
accessories is also available at most Sterling Stores. For the year ended
December 31, 1999, net sales at Company-owned stores were approximately
$23,042,000, and net sales at Company-managed stores were approximately
$1,524,000.

       Most Sterling Stores maintain a working inventory of the most often
prescribed contact and ophthalmic lenses and an on-site facility for cutting and
edging ophthalmic lenses to fit into eyeglass frames, which enables most
Sterling Stores to offer same-day or next-day service to the majority of
customers ordering prescription eyeglasses.

Company-Managed Stores

       In the fourth quarter of 1998, the Company, as required, adopted the
provisions of Emerging Issues Task Force Issue 97-2 ("EITF 97- 2"), "Application
of FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
In connection with the adoption of EITF 97-2, for the year ended December 31,
1998, the Company deconsolidated the results of operations of certain franchise
locations operated by the Company under management agreements. In accordance
with EITF 97-2, the results of operations for the year ended December 31, 1997
were restated to conform to the provisions of EITF 97-2 adopted for the year
ended December 31, 1998. Such restatement had the effect of reducing net sales
by approximately $2,047,000, and total expenses by approximately $2,220,000, for
the year ended December 31, 1997. Such restatement had no impact on the net loss
or net loss per share for either period.

       During 1999, the Company managed a total of 5 locations for franchisees
under the terms of management agreements entered into with each such franchisee.
Such agreements generally provide for the operation of the Sterling Store by the
Company, with primarily all operating decisions made by the Company. The Company
owns the inventory at the locations and is generally responsible for the
collection of all revenues and the payment of all expenses. For the year ended
December 31, 1999, these stores generated revenues of approximately $1,524,000
and incurred total expenses of approximately $2,129.000. The net result of such
operations is classified as a loss from stores operated under management
agreements in the accompanying Consolidated Statements of Operations.

Franchise Operations

       As of December 31, 1999, the Company had 218 franchised stores in
operation, as compared to 251 franchised stores as of December 31, 1998. An
integral part of the Company's franchising system includes providing what the
Company believes to be a high level of marketing, financial, training and
administrative support to its franchisees. The Company provides "grand opening"
assistance for each new franchised location by consulting with its franchisees
with respect to store design, fixture and equipment requirements and sources,
inventory selection and sources, and initial marketing and promotional programs.
Specifically, the Company's grand opening assistance: (i) helps to establish
business plans and budgets; (ii) provides preliminary store designs and plan
approval prior to construction of a franchised store; and (iii) provides initial
training, an operations manual and a comprehensive business review to aid the
franchisee in attempting to maximize its sales and profitability. In addition,
the Company generally restricts itself from operating or franchising other
Sterling Stores within a specified radius of existing franchised stores.
Further, on an ongoing basis the Company provides training through regional
seminars and an annual convention, offers assistance in marketing and
advertising programs and promotions, and consults with its franchisees as to
their management and operational strategies and business plans.

       Preferred Vendor Network. With the collective buying power of
Company-owned and franchised stores, the Company has established a network (the
"Preferred Vendor Network") of preferred vendors (the "Preferred Vendors") whose
products may be purchased directly by franchisees at group discount prices,
thereby providing the franchisees with the opportunity for higher gross margins.
In addition, many Preferred Vendors pay promotional fees to the Company to be
used to defray a portion of the Company's

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costs in conducting certain meetings, training seminars, conventions and other
activities.

       Franchising Agreements. Each franchisee enters into a franchise agreement
(the "Franchise Agreement") with the Company, the material terms of which
generally are as follows:

        (a) Term. Generally, the term of each Franchise Agreement is ten years
and, subject to certain conditions, is renewable at the option of the
franchisee.

        (b) Initial Fees. Generally, all franchisees (except for any franchisees
converting their existing retail optical store to a Sterling Store [a "Converted
Store"] and those entering into agreements for more than one location) must pay
the Company a non-recurring, initial franchise fee of $20,000. The Company
charges each franchisee of a Converted Store a non-recurring, initial franchise
fee of $10,000 per location; and, for each franchisee entering into agreements
for more than one location, the Company charges a non-recurring, initial
franchise fee of $15,000 for the second location, and $10,000 for each location
in excess of two. Initial fees collected by the Company for the year ended
December 31, 1999 were approximately $351,000.

        (c) Ongoing Royalties. Typically, all franchisees are obligated to pay
the Company ongoing royalties in an amount equal to a percentage (generally 8%)
of the gross revenues of their Sterling Store. Franchisees of Converted Stores,
however, pay ongoing royalties on their store's historical average base sales at
reduced rates increasing (in most cases) from 2% to 6% for the first three years
of the term of the Franchise Agreement. In addition, most of the Franchise
Agreements acquired by the Company in the Singer Transaction (the "Singer
Franchise Agreements") provide for ongoing royalties calculated at 7% of gross
revenues. Franchise Agreements entered into prior to January 1994 provide for
the payment of ongoing royalties on a monthly basis, while those entered into
after January 1994 provide for their payment on a weekly basis, in each case,
based upon the gross revenues for the preceding period. Gross revenues generally
include all revenues generated from the operation of the Sterling Store in
question, except for refunds to customers, sales taxes, a limited amount of bad
debts, and, to the extent required by state law, fees charged by independent
optometrists. Ongoing royalty fees earned by the Company for the year ended
December 31, 1999 were approximately $9,355,000.

        (d) Advertising Fund Contributions. Most franchisees must make ongoing
contributions to one of two advertising funds (the "Advertising Funds") equal to
a percentage of their store's gross revenues. Except for the Singer Franchise
Agreements, which generally provide for contributions equal to 7% of gross
revenues, for Franchise Agreements entered into prior to August 1993, the rate
of contribution is generally 4% of the store's gross revenues, while Franchise
Agreements entered into after August 1993 generally provide for contributions
equal to 6% of the store's gross revenues. For the year ended December 31, 1999,
the Company received approximately $4,213,000 in Advertising Fund contributions
from franchisees.

        (e) Financing. The Company generally has financed up to 90% of the
acquisition price of the assets (other than inventory) of Company stores sold to
franchisees, to be repaid over a period of seven years, together with interest
computed at the rate of 12% per annum. The Company generally does not finance
the initial, non-recurring franchise fee or rent security deposits, which are
generally required under a franchisee's sublease. The purchase price is
generally based upon the historical and projected cash flow of the Sterling
Store in question and, in 1999, ranged from approximately $37,600 to $302,800.
However, the Company has on occasion financed, and may in the future finance, up
to 100% of the acquisition price of a franchised store. Substantially all such
financing is personally guaranteed by the franchisee (or, if a corporation, by
the principals owning in excess of an aggregate of 51% thereof) and is generally
secured by all of the assets of the store in question, including subsequently
acquired assets and the proceeds thereof. From time to time, certain franchisees
obtain financing from third parties. In such cases, the Company generally
subordinates its security interest in the assets of the franchised location to
the security interests granted to the provider of such financing.

        (f) Termination. Franchise Agreements may be terminated if the
franchisee has defaulted on its payment of monies due to the Company, or in its
performance of the other terms and conditions of the Franchise Agreement. During
1999, 42 franchised stores were closed, and an additional 12 franchised stores
and substantially all of the assets located therein were voluntarily surrendered
and transferred back to the Company in connection with the termination of the
related Franchise Agreements. The Company has, in certain such instances,
reconveyed the assets of such stores to a new franchisee, requiring such new
franchisee to enter into the Company's then current form of Franchise Agreement
and related documents.

Insight Laser Centers

       An integral part of the Company's business strategy of becoming a
full-service eyecare company originally included developing and/or managing a
chain of eyecare centers offering the laser vision correction procedure commonly
known as PRK. Insight leases equipment and office space and provides
administrative, marketing and other services to physicians ("Affiliated
Physicians") engaged in performing laser refractive eye surgery. The offices
("Centers") leased and managed by Insight are designed specifically for the
performance of laser refractive eye surgery by Affiliated Physicians. Insight
currently manages two Centers, a flagship Center located in Trump Tower, 725
Fifth Avenue, New York City, which opened in the spring of 1996, and a second
Center located in the Soho district of New York City, which opened in December
1999. In addition, Insight: (i) is readying for opening, in the immediate
future, an additional Center in Bayside, New York; (ii) is in the process of
constructing a fourth Center in Carle Place, New York; (iii) has

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placed one of its excimer lasers in the offices of an Affiliated Physician
located in Garden City, New York; and (iv) subleases two of its other excimer
lasers to an independent third party. The Company provides its equipment and
administrative services on an "open access" basis to multiple Affiliated
Physicians. From 1996 through January 2000, Affiliated Physicians had performed
more than 10,000 laser vision correction procedures at the Centers or in medical
offices in which its excimer lasers were installed. Insight continually seeks
affiliations with additional Affiliated Physicians and intends to construct,
open and manage additional Centers in the New York City metropolitan area and
other areas selected, from time to time, by Insight.

       Insight seeks to design the Centers to be able to provide
state-of-the-art, FDA approved, excimer laser equipment, technologies,
facilities, and support services to its Affiliated Physicians, each of which is
an ophthalmologist certified to perform various corrective eye procedures using
the excimer laser. Affiliated Physicians pay license and administrative fees for
the use of such equipment and facilities, we well as for the provision of the
Company's administrative services. The principal procedure currently performed
at the Centers is "LASIK" for the treatment of myopia (nearsightedness),
hyperopia (farsightedness) and astigmatism. LASIK is an outpatient surgical
procedure performed with a computer-controlled, cool beam excimer laser whereby
microscopic layers of corneal tissue are removed from the surface of the cornea.
This reshaping of the cornea allows the eye to focus properly and generally
results in significantly improved vision.

       Of the approximately 170 million U.S. residents who need to wear
corrective eyewear, more than 85% fall within the current laser vision
correction ("LVC") guidelines promulgated by the U.S. Food and Drug
Administration ("FDA"). Approximately 100,000 LVC procedures (one eye per
procedure) were performed in the U.S. in 1996, growing to over 220,000 in 1997,
approximately 450,000 in 1998, and approximately 950,000 in 1999. U.S.
refractive laser surgery industry estimates are for approximately 1.4 million
procedures to be performed in 2000.

       The Company was one of the first, in the New York Metropolitan area, to
provide facilities and services on an open access basis to physicians, initially
for performing photo-refractive keratectomy ("PRK") and currently for performing
LASIK, the procedure preferred by most physicians and patients.

       On July 1, 1999, the Company acquired all of the issued and outstanding
capital stock of RBG Consulting, Ltd. in exchange for a one-third interest in
the Company's subsidiary, Insight, which one-third was estimated to be valued at
$640,000.

Competition

       Retail Optical Business

       The optical business is highly competitive and includes chains of retail
optical stores, superstores, individual retail outlets, the operators of
websites and a large number of individual opticians, optometrists and
ophthalmologists who provide professional services or may, in connection
therewith, dispense prescription eyewear. As retailers of prescription eyewear
generally service local markets, competition varies substantially from one
location or geographic area to another. Since 1994, certain major competitors of
the Company have been offering promotional incentives to their customers; and in
response to this, the Company has, from time to time, offered the same or
similar incentives to its customers, which competitive promotional incentives
adversely affect the Company's results of operations.

       The Company believes that the principal competitive factors in the retail
optical business are convenience of location, on-site availability of
professional eye examinations, quality and consistency of product and service,
price, product warranties, a broad selection of merchandise and the
participation in third party, managed care provider agreements. The Company
believes that it competes favorably in each of these respects.

       Insight Laser Center Business

       The market for providing refractive laser surgery is highly competitive.
Insight competes with laser centers operated by local operators, as well as with
eye surgeons who have purchased their own laser. It also competes with several
other companies, including at least one manufacturer of laser equipment, in
providing access to excimer lasers in the U.S. Other companies are currently in
the process of gaining FDA approval for their lasers, and these companies may
elect to enter the laser center business.

       The services and equipment Insight offers also compete with other forms
of treatment for refractive disorders, including eyeglasses, contact lenses,
radial keratotomy, corneal rings and other technologies currently under
development. Insight expects that companies may attempt to develop new products
directly competitive with its excimer lasers, and other companies could
introduce new or enhanced products with features which render its equipment
obsolete or less marketable. Accordingly, Insight's success will depend in large
part on its ability to adapt to technological changes and advances in the
treatment of refractive vision disorders.

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       Internet Business-to-Business Activities

       The market for Internet-based, business-to-business electronic commerce
is extremely competitive. Competition in this area is expected to intensify as
current competitors expand their service offerings and new competitors,
including larger, more established companies with far more resources, enter the
market. There can be no assurance that the Company will be able to compete
successfully against current or future competitors, or that competitive
pressures will not harm the Company's business. Because there are relatively low
barriers to entry in the electronic commerce market, competition from other
established and emerging companies may develop in the future. Increased
competition is likely to result in lower average transaction prices, reduced
margins and a decrease or loss of market share, any of which could harm the
Company's business. In addition, competitors may be able to develop services
that are superior to, or that achieve greater acceptance than, the services to
be offered by the Company as part of its anticipated, web-based, optical portal
business.

Marketing and Advertising

       The Company's marketing strategy emphasizes professional eye
examinations, value pricing (primarily through product promotions), convenient
locations, excellent customer service, customer-oriented store design and
product displays, knowledgeable sales associates, and a broad range of quality
products, including privately labeled contact lenses and lens cleaning solutions
presently being offered by the Company and certain of its franchisees.
Optometric examinations by licensed optometrists are generally available on the
premises of, or directly adjacent to, all Sterling Stores.

       The Company continually prepares and revises in-store point of purchase
displays, which provide various promotional messages to customers upon arrival
at Sterling Stores. Both Company-owned and most franchised Sterling Stores
participate in advertising and in-store promotions, which include visual
merchandising techniques to draw attention to the products displayed in Sterling
Stores. The Company is also in the process of refining its inter-active website
on which its products are offered, and, in many instances, also uses direct mail
advertising to reach prospective, as well as existing, consumers.

       The Company annually budgets approximately 4% to 6% of systemwide sales
for advertising and promotional expenditures. Franchisees are obligated to
contribute a percentage of their store's gross revenues to the Company's
segregated advertising fund accounts, which the Company maintains for
advertising, promotions and public relations programs. In most cases, the
Company may expend approximately 50% of such funds as it deems necessary or
appropriate, to advertise and promote all Sterling Stores.

Management Information Systems

       Over the past few years, management had conducted research as to the
availability and development of a point-of-sale computer system (the "POS
System" or the "System") for use in both Company-operated and franchised
Sterling Stores. The Company tested several systems available in the
marketplace, as well as developed and installed, on a trial basis, its own
Windows-based POS System. During 1995, as a result of this research, the Company
undertook the installation of ADD-POWER, a UNIX-based POS System (the "A-P
System"), that is presently utilized by various retail optical chains in
approximately 600 retail optical stores nationwide, to provide, among other
features, inventory and patient database management. The Company has commenced
utilization of the A-P System and anticipates that it will take between one or
two additional years to install the A-P System in all existing Company-owned
stores. As of December 31, 1999, the Company had installed seven A-P Systems in
existing Company-owned stores.

Government Regulation

       Ophthalmic excimer lasers are considered medical devices and are subject
to regulation by the FDA. The Company understands that Summit and VISX, the
manufacturers of the excimer laser systems that the Company currently uses in
its Insight Laser Centers or makes available to its Affiliated Physicians, have
received approval from the FDA for their use to treat certain degrees of
near-sightedness. This approval contains restrictions on the use, labeling,
promotion and advertising of the excimer laser. In addition, as part of the FDA
approval process, Summit and VISX have agreed to conduct post-marketing studies
on the long-term safety of the excimer laser, including continuing to follow
patients treated in existing studies, for at least four years after FDA
approval, to assure that those parties' vision remains stable over long periods
of time.

       Manufacturers of lasers are also subject to regulation under the
Electronic Product Radiation Control Provisions of the Federal Food, Drug and
Cosmetic Act. This law requires laser manufacturers to file new product and
annual reports, maintain quality control, keep product testing and sales
records, incorporate certain design and operating features in lasers to
end-users and certify and label each laser sold as belonging to one of four
classes based on the level of radiation (from the laser) that is accessible to
users. Certain maintenance levels at the user level are also required. Various
warning labels must be affixed and certain protective devices installed,
depending on the class of the product. The Federal Food, Drug and Cosmetic Act
applicable to all medical devices, imposes fines and other remedies for
violations of the regulatory requirements.

       The Company and its operations (including those pertaining to its
provision of administrative and consulting services to the

                                       7

<PAGE>

licensee of its ambulatory surgery center) are subject to extensive federal,
state and local laws, rules and regulations affecting the health care industry
and the delivery of health care, including laws and regulations prohibiting the
practice of medicine and optometry by persons not licensed to practice medicine
or optometry, prohibiting the unlawful rebate or unlawful division of fees and
limiting the manner in which prospective patients may be solicited. The
regulatory requirements that the Company must satisfy to conduct its business
will vary from state to state. In particular, some states have enacted laws
governing the ability of ophthalmologists and optometrists to enter into
contracts to provide professional services with business corporations or lay
persons and some states prohibit the Company from computing its continuing
royalty fees based upon a percentage of the gross revenues of the fees collected
by its affiliated optometrists. Various federal and state regulations limit the
financial and non-financial terms of agreements with these health care
providers; and the revenues potentially generated by the Company differ among
its various health care provider affiliations.

       The FDA and other United States state or local government agencies may
amend current, or adopt new rules and regulations that could affect the use of
ophthalmic excimer lasers for LASIK, and thereby adversely affect the business
of the Company.

       The Company is also subject to certain regulations adopted under the
Federal Occupational Safety and Health Act with respect to its in-store
laboratory operations. The Company believes that it is in material compliance
with all such applicable laws and regulations.

       As a franchisor, the Company is subject to various registration and
disclosure requirements imposed by the Federal Trade Commission and by many
states in which the Company conducts franchising operations. The Company
believes that it is in material compliance with all such applicable laws and
regulations.

Environmental Regulation

       The Company's business activities are not significantly affected by
environmental regulations, and no material expenditures are anticipated in order
for the Company to comply with environmental regulations. However, the Company
is subject to certain regulations promulgated under the Federal Environmental
Protection Act ("EPA") with respect to the grinding, tinting, edging and
disposal of ophthalmic lenses and solutions. In addition, the Company is subject
to additional EPA regulations as a result of its use of the excimer laser
approved by the FDA.

Seasonality

       The Company's retail optical and laser correction businesses, as well as
the operation of its ambulatory surgery center, are not seasonal.

Patents and Trademarks

       The Company has registered, among others, the following trademarks and/or
servicemarks with the United States Patent and Trademark Office and the Canadian
Registrar of Trademarks: "Sterling Optical" "IPCO Optical," and "Site For Sore
Eyes". The Company believes that these trademarks and servicemarks have acquired
significant commercial value and have helped to promote the Company's
reputation, even though the Company intends to change the trade name of most
Sterling Stores (other than the Site for Sore Eyes stores located in Northern
California) to "Sterling Optical." In connection with the Benson, VCA and Singer
Transactions, the Company also acquired several additional trademarks, some of
which the Company continues to utilize in connection with the operation of its
Sterling Stores.

Employees

       As of December 31, 1999, the Company employed approximately 422
individuals, of which approximately 85% were employed on a full-time basis.
Except for those individuals employed at Company operated/managed Sterling
stores located in the New York metropolitan area, and except for those
individuals employed by the Registrant's wholly owned subsidiary, Insight IPA of
New York, Inc. (which solicits managed care provider agreements in the State of
New York), no employees are covered by any collective bargaining agreement. The
Company considers its labor relations with its employees to be good and has not
experienced any interruption of its operations due to disagreements.

Item 2.    Properties.
           ----------

       The Company's headquarters, approximately 14,630 square feet in size (or
approximately 40% of the entire building), are located in an office building
(owned by certain of the Company's principal shareholders) in East Meadow, New
York, under a sublease which expires in 2006. This facility houses the Company's
principal executive and administrative offices.

       The Company leases the space occupied by all of its Company-owed stores
and the majority of its franchised stores. The balance of the leases for
franchisees' Sterling Stores are held in the names of the individual
franchisees.

                                       8

<PAGE>


       Sterling Stores are generally located in commercial areas, including
major shopping malls, strip centers, free-standing buildings and other areas
conducive to retail trade. Certain Sterling Stores, not located in commercial
areas, are located in professional optometric offices, clinics and hospitals.

       The Company also leases the space occupied by all of its laser centers.
These centers are all located in the New York metropolitan area.


Item 3.    Legal Proceedings.
           -----------------

       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 existing lawsuits
should not have a material adverse effect, individually or in the aggregate,
upon the Company's business or financial condition. 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 4.    Submission of Matters to a Vote of Security Holders

       There were no matters submitted to a vote by the Company's shareholders
during the fourth quarter ended December 31, 1999.

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

       The Registrant's Common Stock has been listed on the Nasdaq National
Market System ("Nasdaq") under the trading symbol "ISEE" since December 25,
1995. The range of high and low sales prices for the Registrant's Common Stock
for the last two years are as follows:


                                          1999                  1998
                                     --------------        --------------
     Quarter Ended:                  High      Low         High      Low
                                     ----      ---         ----      ---

     March 31                       $5.50     $2.88       $6.88     $4.63
     June 30                        $4.94     $3.00       $6.88     $4.50
     September 30                   $4.13     $2.13       $7.38     $2.50
     December 31                    $7.69     $1.50       $4.75     $2.13

       The approximate number of Shareholders of record of the Registrant's
Common Stock at March 17, 2000, was 168.

       The Company has no intention to pay dividends on its Common Stock in the
foreseeable future. It is the present policy of the Company's Board of Directors
to retain earnings to finance the Company's operations and expansion.

       In February 1998, the Registrant issued $3,500,000 (stated value) of its
Senior Convertible Preferred Stock (the "Senior Convertible Preferred Stock"),
which required the Company to pay quarterly dividends thereon during the one
year period which commenced on such date, calculated at the rate of 10% per
annum.

       During 1998, the Company paid the aggregate sum of $87,500 in cash
($57,500 of interest on its Convertible Debentures Due August 1998 (the "1997
Debentures") and $30,000 of dividends on its Senior Convertible Preferred Stock)
and issued an aggregate of 47,494 registered shares of its Common Stock in
payment of two quarterly dividends on such Senior Convertible Preferred Stock,
as well as interest on its 1997 Debentures.

       During 1999, the Company and each of the then, four remaining holders of
the Senior Convertible Preferred Stock entered into another amendment to the
original agreement, whereby the conversion price of all outstanding shares of
Senior Convertible Preferred Stock was reduced from $5.00 to $3.00, and the date
by which the Company was required to redeem all outstanding Senior Convertible
Preferred Stock was extended from February 17, 1999 to February 17, 2000.
Additionally, the requirement that the Company pay dividends on the Senior
Convertible Preferred Stock from and after February 17, 1999, was eliminated,
and the exercise price of the outstanding new Warrants was reduced from $5.00 to
$4.00. As of March 10, 2000, there were 2.51 shares of Senior Convertible
Preferred Stock outstanding, convertible into an aggregate of 334,166 shares of
Common Stock.

       During 1999, the Company paid cash dividends (on its Senior Convertible
Preferred Stock) in the aggregate amount of $8,419

                                       9

<PAGE>


and, in addition, issued, in the form of stock dividends, an aggregate of
22,506 registered shares of its Common Stock.


                                       10


<PAGE>


Item 6.    Selected Financial Data

               SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

       The following Selected Financial Data should be read in conjunction with
the Consolidated Financial Statements of the Company and the related notes
thereto included in Item 8 of this Report, which Consolidated Financial
Statements have been examined and reported on by Arthur Andersen LLP,
independent public accountants, with respect to the years ended December 31,
1998 and 1999. The Consolidated Statements of Operations, Shareholders' Equity
and Cash Flows for the year ended December 31, 1997 were audited by Deloitte &
Touche LLP, independent public accountants.

<TABLE>
<CAPTION>


                                                                                Year Ended December 31,
                                                         ---------------------------------------------------------------------
                                                            1999          1998          1997             1996           1995
                                                         ----------    ----------    ----------       ----------      --------
Statement of Operations Data:                                  (In thousands except for per share data and number of stores)

<S>                                                      <C>           <C>            <C>           <C>              <C>
     Systemwide sales                                    $ 145,762     $ 149,947      $ 146,333     $ 131,593        $ 112,258
                                                         =========     =========      =========     =========        =========

     Net sales                                           $  23,042     $  23,163      $  22,402     $  27,496        $  25,773
     Franchise royalties                                     9,355         9,135          9,550         7,616            6,891
     Net gains and fees from the conveyance of
         Company-owned store assets to Franchisees             667           564          1,462         1,963            2,197
     Interest on franchise notes                             1,465         1,877          1,966         1,703              954
     Other income (1)                                          492           388            612           584            1,063
                                                         ---------     ---------      ---------     ---------        ---------

         Total revenues                                     35,021        35,127         35,992        39,362           36,878
                                                         ---------     ---------      ---------     ---------        ---------

     Cost of sales                                           6,731         8,087          6,973         8,587            6,495
     Selling expenses                                       14,710        15,981         16,296        18,961           16,127
     General and administrative expenses                    11,790        21,336         17,859        16,743           10,529
     Warrant issuance and induced conversion costs           2,371           422             --            --               --
     Loss from Company-managed stores (2)                      605           792            173           265               --
     Provision for store closings (3)                           --         2,800          1,336           --                --
     Amortization of debt discount                              --         1,110          5,916           --                --
     Interest expense                                        1,023         1,571          1,601         1,297              831
                                                         ---------     ---------      ---------     ---------        ---------

         Total costs and expenses                           37,230        52,099         50,154        45,853           33,982
                                                         ---------     ---------      ---------     ---------        ---------

     (Loss) Income before provision for
       income taxes and extraordinary item and
       minority interest                                    (2,209)      (16,972)       (14,162)       (6,491)           2,896
     Provision for (benefit from) income taxes                  --            --             --        (2,001)           2,129
     Minority interest                                         (52)           --             --            --               --
                                                         ---------     ---------      ---------     ---------        ---------

     (Loss) income before extraordinary item                (2,261)      (16,972)       (14,162)       (4,490)             767
                                                         ---------     ---------      ---------     ---------        ---------

     Extraordinary charge for early retirement of debt          --          (805)            --            --               --
     Net (loss) income (A)                                  (2,261)   $  (17,777)     $ (14,162)    $  (4,490)       $     767
                                                         ---------     ---------      ---------     ---------        ---------

     (Loss) income per share of common stock - basic and
       diluted (Note 4)                                  $    (.38)   $    (1.22)     $   (1.02)    $    (.36)       $     .08
                                                         ---------     ---------      ---------     ---------        ---------

     Weighted average common shares - basic and
       diluted (6)                                          15,232        14,627         13,883        12,341           10,031
                                                         ---------     ---------      ---------     ---------        ---------
</TABLE>

(A)

       The Company incurred a net loss of $(2,261,000) for the year ended
December 31, 1999 as compared to a net loss of $(17,777,000) for the comparable
period in 1998. In 1999, non-cash charges of $2,371,000 were incurred relating
to the issuance of warrants to an outside consultant and induced warrant
conversion costs. Had this expense not been incurred, 1999 net income would have
been $110,000. In 1998, certain non-cash charges of approximately $11,000,000
were incurred related to the Company's provision for doubtful accounts,
provision for store closings, and amortization of debt discount and
extraordinary item. Had this expense not been incurred, 1998 the net loss would
have been $(6,777,000).

                                       11

<PAGE>

<TABLE>
<CAPTION>


                                                                                 Year Ended December 31,
                                                         ------------------------------------------------------------------------
                                                            1999          1998          1997             1996            1995
                                                         ----------    ----------    ----------       ----------      --------
Sterling Store Data:                                                  (In thousands except number of stores)
<S>                                                      <C>           <C>           <C>              <C>             <C>


Company-owned stores bought, opened or reacquired                11              6             7              24             39
Company-owned stores sold or closed                             (16)           (17)          (19)            (33)            (8)
Company-owned at end of period                                   30             35            50              62             71
Company-owned stores being managed by Franchisees at
   end of period                                                  6              6             0               0              0
Franchised stores being managed by Company at end of
   period                                                         5             12             6               6              1
Franchise-owned/managed stores at end of period                 218            251           263             257            150

Average sales per store: (5)
  Company-owned stores                                      $   420        $   478       $   424        $    395        $   659
  Franchised stores                                         $   495        $   475       $   478        $    392        $   600

Average franchise royalties per
  franchised store (5)                                      $    38        $    35       $    37        $     43        $    48

Balance Sheet Data:

Working capital (deficit)                                   $(5,647)       $(3,351)      $ 3,472        $ (3,803)       $16,312
Total assets                                                 31,087         34,494        45,843          46,269         46,455
Total debt                                                    8,426         11,552        15,378          15,184         13,900
Shareholders' equity                                         14,161         12,547        21,271          19,557         22,825

</TABLE>


(1)  Other income consists primarily of franchise fees and funds provided by
     certain Preferred Vendors for use in connection with the Company's annual
     convention and regional seminars.

(2)  Loss from Company-managed stores represents the loss from those Sterling
     Stores which the Company manages on behalf of the Franchisees/owners
     thereof.

(3)  A provision of approximately $2,800,000 and $1,336,000 was established for
     the closing of certain Company stores in 1998 and 1997, respectively.

(4)  In accordance with SFAS No. 128, as a result of losses from operations for
     the years ended December 31, 1999, 1998, 1997 and 1996, the inclusion of
     employee stock options and warrants were anti-dilutive and, therefore, were
     not utilized in the computation of diluted earnings per share.

(5)  Average sales per store and average franchise royalties per franchised
     store are computed based upon the weighted average number of Company-owned
     and franchised stores, respectively, for each of the specified periods. For
     periods less than a year, the averages have been annualized.


                                       12

<PAGE>



Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations

Results of Operations

For the Year Ended December 31, 1999 compared to December 31, 1998

       Systemwide sales, which represent combined retail sales generated by
Company-owned stores, as well as revenues generated: (i) by VCC, a specialized
health care maintenance organization licensed by the California Department of
Corporations; (ii) the Company's rendering of consulting and administrative
services to the licensee of an ambulatory surgery center; and (iii) from the
operation of Insight, decreased by approximately $4,185,000, or 2.8%, to
$145,762,000 for the year ended December 31, 1999, as compared to $149,947,000
for the comparable period in 1998. This decrease was principally due to a lower
number of stores in operation for the year ended December 31, 1999, as compared
to the comparable period in 1998 as described below, offset, in part, by an
increase in the revenues generated from the operation of Insight of $2,697,000,
or 37.3%, to $4,661,000 for the year ended December 31, 1999, as compared to
$1,964,000 for the comparable period in 1998. As of December 31, 1999, there
were 254 Sterling Stores in operation, consisting of 36 Company-owned stores
(including 6 Company-owned stores being managed by franchisees) and 218
franchised stores (including 5 franchised stores being managed by the Company on
behalf of franchisees), as compared to 292 Sterling Stores in operation for the
comparable period in 1998, consisting of 41 Company-owned stores (including 6
Company-owned stores being managed by franchisees) and 251 franchised stores
(including 12 stores being managed by the Company on behalf of franchisees). On
a same store basis (for stores that operated as either a Company-owned or
franchised store during the entirety of both of the years ended December 31,
1999 and 1998), systemwide comparative sales decreased by $382,000, or 0.3%, to
$117,550,000 for the year ended December 31, 1999, as compared to $117,932,000
for the comparable period in 1998.

       Franchise royalties increased by $220,000, or 2.4%, to $9,355,000 for the
year ended December 31, 1999, as compared to $9,135,000 for the comparable
period in 1998.

       Net gains and fees on the conveyance of Company-owned store assets to
franchisees, including renewal fees and the fees related to the transfer of
ownership from one franchisee to another, increased by $103,000, or 18.3%, to
$667,000 for the year ended December 31, 1999, as compared to $564,000 for the
comparable period in 1998. This increase was principally due to the conveyance
of the assets of 13 Company-owned stores to franchisees during the year ended
December 31, 1999, as compared to 4 Company-owned stores to franchisees for the
comparable period in 1998.

       Interest on franchise notes decreased by $412,000, or 21.9% to $1,465,000
for the year ended December 31, 1999, as compared to $1,877,000 for the
comparable period in 1998. This decrease was principally due to certain
franchisees voluntarily prepaying their notes prior to the scheduled maturity
dates thereof.

       Other income (primarily franchise fees) increased $104,000, or 26.8% to
$492,000 for the year ended December 31, 1999, as compared to $388,000 for the
comparable period in 1998.

       The Company's gross profit margin increased by 5.7%, to 70.8% for the
year ended December 31, 1999, as compared to 65.1% for the comparable period in
1998. The increase resulted principally from the increased revenue from Insight
Laser, which has higher margins and improved cost controls at the store level.
In the future, the Company's gross profit margin may fluctuate depending upon
the extent and timing of changes in the product mix in Company-owned stores,
competition and promotional incentives.

       Selling expenses decreased by $1,270,000, or 5.2%, to $14,710,000, or
63.8% of net sales, for the year ended December 31, 1999, as compared to
$15,981,000 or 69.0% of net sales for the comparable period in 1998. This
percentage decrease was principally due to lower payroll costs at the store
level for the year ended December 31, 1999, as compared to the comparable period
in 1998.

       General and administrative expenses (including depreciation) decreased by
$9,546,000, or 44.7%, to $11,790,000 for the year ended December 31, 1999, as
compared to $21,336,000 for the comparable period in 1998. The decrease resulted
principally from a decrease of approximately $6,000,000 in the Company's
provision for doubtful accounts and store closings, a decrease of approximately
$1,000,000 of certain nonrecurring professional fees, and a decrease of
approximately $550,000 in depreciation expenses.

       Warrant issuance and induced conversion costs increased by $1,949,000,
to $2,371,000 for the year ended December 31, 1999, from $422,000 for the
comparable period in 1998. This increase was principally due to the incurrence
of $2,000,000 of expenses related to the Company's issuance of
2,500,000 warrants, all of which vested immediately, to an outside consultant.

       Loss from the operation of franchised stores managed by the Company
decreased by approximately $187,000, or 23.6%, to approximately $(605,000) for
the year ended December 31, 1999, as compared to approximately $(792,000) for
the comparable period in 1998. This decrease was principally due to a decrease
in the number of franchised stores managed by the Company, from 5, as of
December 31, 1999, to 12 for the comparable period in 1998.

       Interest expense decreased by $548,000, or 34.9%, to $1,023,000 for the
year ended December 31, 1999, as compared to

                                       13

<PAGE>

$1,571,000 for the comparable period in 1998. This decrease resulted from a
decrease in long-term debt for the year ended December 31, 1999, as compared to
the comparable period in 1998, and from a decrease of debt issuance costs of
$155,000 for the year ended December 31, 1999.

       The Company incurred a net loss of $(2,261,000) for the year ended
December 31, 1999 as compared to a net loss of $(17,777,000) for the comparable
period in 1998. In 1999, non-cash charges of $2,371,000 were incurred relating
to the issuance of warrants to an outside consultant and induced warrant
conversion costs. Had this expense not been incurred, 1999 net income would have
been $110,000. In 1998, certain non-cash charges of approximately $11,000,000
were incurred related to the Company's provision for doubtful accounts,
provision for store closings, and amortization of debt discount and
extraordinary item. Had this expense not been incurred, 1998 the net loss would
have been $(6,777,000).

For the Year Ended December 31, 1998 compared to December 31, 1997

       Systemwide sales, which represent combined retail sales generated by
Company-owned and franchised stores, as well as revenues generated by VCC and
Insight Laser, increased by approximately $3,614,000, or 2.5%, to approximately
$149,947,000 for the year ended December 31, 1998, as compared to approximately
$146,333,000 for the same period in 1997. On a same store basis (for stores that
operated as either a Company-owned or franchised store during the entirety of
both of the years ended December 31, 1998 and 1997), systemwide sales increased
by approximately $2,066,000, or 1.7%, to approximately $122,378,000 for the year
ended December 31, 1998, as compared to approximately $120,312,000 for the
comparable period in 1997. There were 230 stores that operated as either a
Company-owned, a Company-managed or a franchised store during the entirety of
both of the years ended December 31, 1998 and 1997.

       Aggregate sales generated from the operation of Company-owned stores
increased by approximately $761,000, or 3.4%, to approximately $23,163,000 for
the year ended December 31, 1998, as compared to approximately $22,402,000 for
the same period in 1997. This increase was principally due to an increase of
2.7% in comparable store sales, offset in part by the closing of certain
Company-owned stores. Historical comparisons of aggregate sales generated by
Company-owned stores can become distorted due to the conveyance of Company-owned
store assets to franchisees. When Company-owned store assets are conveyed to
franchisees, sales generated by such franchised stores are no longer reflected
in Company-owned store sales; however, the Company receives on-going royalties
based upon a percentage of the sales generated by the franchised stores. On a
same store basis, aggregate sales generated by Company-owned stores in operation
during the entirety of both of the years ended December 31, 1998 and 1997,
increased by approximately $333,000, or 2.7%, to $12,910,000 for the year ended
December 31, 1998, as compared to approximately $12,577,000 for the same period
in 1997.

       Aggregate sales generated from the operation of Company-managed stores
increased by approximately $2,456,000, or 120%, to approximately $4,503,000 for
the year ended December 31, 1998, as compared to approximately $2,047,000 for
the comparable period in 1997. This increase was principally due to an increase
in the number of Company-managed stores to 12 stores for the year ended December
31, 1998, as compared to 6 stores for the comparable period in 1997.

       Aggregate sales generated from the operation of franchised stores
increased by approximately $397,000, or .3%, to approximately $122,281,000 for
the year ended December 31, 1998, as compared to approximately $121,884,000 for
the same period in 1997. On a same store basis, aggregate sales generated by
franchised stores in operation during the entirety of both of the years ended
December 31, 1998 and 1997, increased by approximately $1,733,000, or 1.6%, to
approximately $109,468,000 for the year ended December 31, 1998, as compared to
approximately $107,735,000 for the same period in 1997.

       Aggregate ongoing franchise royalties decreased by approximately
$415,000, or 4.4%, to approximately $9,135,000 for the year ended December 31,
1998, as compared to approximately $9,550,000 for the same period in 1997. This
decrease was principally due to a lower number of franchised units in operation
during the year ended December 31, 1998, as compared to the same period in 1997.

       Net gains and fees on the conveyance of Company-owned store assets to
franchisees decreased by approximately $898,000, or 61.4%, to approximately
$564,000 for the year ended December 31, 1998, as compared to approximately
$1,462,000 for the same period in 1997. This decrease was principally due to net
gains on the conveyance of the assets of 4 Company-owned stores to franchisees
for the year ended December 31, 1998, as compared to net gains on the conveyance
of the assets of 20 Company-owned stores to franchisees for the comparable
period in 1997.

       The Company's gross profit margin decreased by 3.8%, to 65.1% for the
year ended December 31, 1998, as compared to 68.9% for the same period in 1997.
In the future, the Company's gross profit margin may fluctuate depending upon
the extent and timing of changes in the product mix in Company-owned stores,
competition and promotional incentives.

       Selling expenses decreased by approximately $315,000, or 1.9%, to
approximately $15,981,000 or 69% of net sales for the year

                                       14

<PAGE>

ended December 31, 1998, from approximately $16,296,000 or 72.7% for the same
period in 1997. This decrease was principally due to lower operating costs
related to stores in operation for the year ended December 31, 1998, as compared
to the comparable period in 1997, offset, in part, by an increase in payroll
related expenses.

       General and administrative expenses (including depreciation and provision
for doubtful accounts) increased by approximately $3,477,000, or 19.5%, to
approximately $21,336,000 or 60.7% of net sales for the year ended December 31,
1998, as compared to approximately $17,859,000 or 79.7% for the comparable
period in 1997. The increase was principally due to an increase of approximately
$5,200,000 in the Company's provision for doubtful accounts, reflecting the
Company's assessment that certain receivables have become uncollectible, offset,
in part, by a reduction in payroll costs as a result of the Company's reduction
in certain administrative overhead expenses.

       Warrant issuance and induced conversion costs increased to $422,000 for
the year ended December 31, 1998, from $0 for the comparable period in 1997.

       The Company has identified certain long-lived assets, principally those
contained in certain of its Company-owned stores, where there has been, or there
is expected to be, a change in circumstances which would affect the
recoverability of all or a portion of the depreciated cost of such long-lived
assets. The Company anticipates the future closure of certain of its
Company-owned stores and/or the sale, to franchisees, of the assets contained
therein; and, as such, the Company has recorded a provision for store closings
of approximately $2,800,000 for the year ended December 31, 1998, as compared to
approximately $1,336,000 for the comparable period in 1997.

       Loss from the operation of franchised stores managed by the Company
increased by approximately $619,000, or 358%, to approximately $(792,000) for
the year ended December 31, 1998, as compared to approximately $(173,000) for
the comparable period in 1997. This increase was principally due to an increase
in the number of franchised stores managed by the Company to 12, as of December
31, 1998, as compared to 6 for the comparable period in 1997.

       The Company's net loss increased by approximately $3,615,000, or 25.5%,
to a loss of approximately $(17,777,000) for the year ended December 31, 1998,
as compared to a loss of approximately $(14,162,000) for the comparable period
in 1997. The increase in the net loss was principally due to an increase of
approximately $5,200,000 in the Company's provision for doubtful accounts,
reflecting the Company's assessment that certain receivables had become
uncollectible; an increase of approximately $1,464,000 in the Company's
provision for store closings; a non-cash charge of approximately $1,915,000
(approximately $1,110,000 of amortization of debt discount and an extraordinary
loss of approximately $805,000) related to the extinguishment of debt upon the
issuance of the Preferred Stock on April 14, 1998; approximately $421,000 of
costs related to the inducement of Warrant conversions (see Note 14), a
reduction of $898,000 in the net gains on the conveyance of Company-owned store
assets to franchisees; and a $619,000 increase in the losses attributable to
Company-managed, franchised stores; all of which were offset, in part, by a
decrease in the amortization of debt discount of approximately $4,806,000.

Liquidity and Capital Resources

       The Company incurred losses before income taxes, minority interest and
extraordinary items, in the aggregate amount of approximately $33,343,000, over
the three year period ended December 31, 1999, and had a working capital
deficiency of $5,647,000 as of December 31, 1999.

       For the year ended December 31, 1999, cash flows used in operating
activities were $(112,000), as compared to cash flows used in operating
activities of $(4,120,000) for the year ended December 31, 1998. The reduction
in cash flows used in operating activities was principally due to a decrease in
the net loss of approximately ($15,516,000,) to $(2,261,000) for the year ended
December 31, 1999, as compared to $(17,777,000) for the comparable period in
1998; offset, in part, by a decrease in the provision for doubtful accounts of
approximately $5,500,000, a decrease of approximately $2,800,000 in the
provision for store closings and a decrease of approximately $1,915,000, in
amortization of Debt Discount.

       For the year ended December 31, 1999, cash flows provided by investing
activities were $1,487,000, as compared to $1,601,000 for the comparable period
in 1998. This increase was principally due to an increase of approximately
$924,000, to $1,947,000, in proceeds from the conveyance of property and
equipment for the year ended December 31, 1999, as compared to $1,023,000 for
the comparable period in 1998 offset, in part, by an increase of approximately
$712,000 in purchase of property and equipment, and a decrease of approximately
$1,598,000 in acquisition costs.

       For the year ended December 31, 1999, cash flows used in financing
activities were $(2,095,000), comprised primarily of the repayment of borrowings
under the Company's Loan Agreement with STI Credit Corporation (the "STI Loan
Agreement") and other debt, offset, in part, by the conversion of warrants and
borrowings under an additional loan agreement. The net impact of other financing
activities (proceeds from net of payments made under various debt arrangements)
was not significant.

       The Company believes that, in the furtherance of its business strategies,
the Company's future capital requirements will include (i) the renovating and/or
remodeling of Company-owned stores; (ii) acquiring retail optical stores,
subject to the availability of qualified opportunities; and (iii) continued
upgrading of management information systems for the Company operated Sterling
Stores.

                                       15

<PAGE>


Additionally, the Company is likely to continue to provide financing of sales of
Company-owned store assets to franchisees, which is likely to defer the inflow
of cash relating to the sales of such assets.

       The Company believes that it will improve cash flows during 2000 based on
the following factors, among others: (i) the private placement of shares of the
Registrant's Series B Preferred Stock completed by the Company in March 2000
(see Note 19); (ii) proceeds from the exercise of stock options; (iii) the sale
of the assets of certain under-performing Company-owned stores; (iv) improvement
in store profitability through increased monitoring of store by store operations
and actual results as compared to expected results; and (v) a reduction of
administrative overhead expenses, if necessary (see Note 20).

       As of December 31, 1999, the Company was not in compliance with the
financial covenants of its loan agreement with STI Credit Corporation ("STI").
The Company has notified STI of its intent to pay off such loan in the immediate
future. In the interim, the Company plans to restrict approximately $2,900,000
of its cash necessary to pay off the loan. The Company believes that the process
of finding a company to review its notes will be completed in a relatively short
period of time (see Note 20).

       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 2000.
However, there can be no assurance that the Company will be able to generate
positive cash flows and, 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 at terms that are attractive to the Company.

       In addition, (I) the Company's 66.67% owned subsidiary Insight, will be
seeking additional capital (to fund a portion of its planned expansion costs)
from the sale of additional shares of its Common Stock; and (ii) it is
anticipated that the Company's new, Internet initiatives will require capital in
addition to that provided by the private placement referred to above.

Impact of Inflation and Changing Prices

       Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on sales or results of operations.

Forward Looking Statements

       All statements contained herein (other than historical facts) are based
upon current expectations. These statements are forward looking in nature and
involve a number of risks and uncertainties. Actual results may differ
materially from anticipated results or other expectations expressed in the
Company's forward looking statements. Generally, the words "anticipate,"
"believe," "estimate," "expects," and similar expressions as they relate to the
Company and/or its management, are intended to identify forward looking
statements.

                                       16


<PAGE>

Item 8.    Financial Statements and Supplementary Data


                                TABLE OF CONTENTS
                                                                         PAGE
                                                                         -----
   REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS                            18, 19

   CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated Balance Sheets as of December 31, 1999 and 1998          20

     Consolidated Statements of Operations for the Years Ended
       December 31, 1999, 1998 and 1997                                    21

     Consolidated Statements of Shareholders' Equity for the
       Years Ended December 31, 1999, 1998 and 1997                        22

     Consolidated Statements of Cash Flows for the Years Ended
       December 31, 1999, 1998 and 1997                                23, 24

     Notes to Consolidated Financial Statements                            25

       Information required by schedules called for under Regulation S-X is
either not applicable or is included in the financial statements or notes
thereto.

                                       17

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To the Board of Directors and Shareholders of
Sterling Vision, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Sterling Vision,
Inc. (a New York corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sterling Vision, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.


                                                     Arthur Andersen LLP

Melville, New York
March 29, 2000


                                       18

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Sterling Vision, Inc. and Subsidiaries
East Meadow, New York

We have audited the accompanying consolidated statements of operations,
shareholders' equity, and cash flow of Sterling Vision, Inc. and subsidiaries
(the "Company") for the year ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows, of Sterling Vision,
Inc. and subsidiaries for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.


Deloitte and Touche LLP
New York, New York

April 15, 1998

                                       19


<PAGE>


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

<TABLE>
<CAPTION>


                                                                                                        December 31,
                                                                                                  -----------------------
                                                                                                   1999              1998
                                                                                                  ------            ------
<S>                                                                                             <C>                <C>
ASSETS
Current assets:
         Cash and cash equivalents                                                               $    108         $   828
         Franchise receivables, net of allowance for doubtful accounts of $2,443 and
            $2,060, respectively                                                                    2,643           2,257
         Other receivables                                                                            935           1,121
         Current portion of notes receivable from franchisees                                       2,670           3,077
         Inventories                                                                                1,995           2,268
         Due from related parties                                                                     129             125
         Prepaid expenses and other current assets                                                    223             395
                                                                                                 --------         -------

                  Total current assets                                                              8,703          10,071

Property and equipment, net                                                                         5,248           8,104
Franchise notes and other receivables, net of allowance for doubtful accounts
         of $400 and $450, respectively                                                            10,626          11,359
Intangible assets, net                                                                              4,014           3,735
Restricted cash                                                                                       124             624
Other assets                                                                                        2,372             601
                                                                                                 --------         -------

                                                                                                  $31,087         $34,494
                                                                                                 ========         =======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Current portion of long-term debt                                                       $  6,637         $ 4,130
         Accounts payable and accrued liabilities                                                   6,512           7,099
         Accrual for store closings                                                                   349           1,254
         Franchise deposits and other current liabilities                                             852             939
                                                                                                 --------         -------

                  Total current liabilities                                                        14,350          13,422
                                                                                                 --------         -------

Long-term debt                                                                                      1,789           7,422
                                                                                                 --------         -------
Deferred franchise income                                                                              70              90
                                                                                                 --------         -------
Excess of fair value of assets acquired over cost                                                     665           1,013
                                                                                                 --------         -------
Minority interest                                                                                      52               -
                                                                                                 --------         -------
Commitments and contingencies (Note 11)

Shareholders' equity:
  Preferred stock, $.01 par value per share; authorized 5,000,000 shares;
    21 and 35 shares issued and outstanding in 1999 and 1998, respectively                          2,417           4,025
  Common stock, $.01 par value per share; authorized 28,000,000 shares;
    16,676,630 and 14,920,351 shares issued and outstanding in 1999 and 1998, respectively            167             149
  Additional paid-in capital                                                                       55,023          46,036
  Accumulated deficit                                                                             (43,446)        (37,663)
                                                                                                 --------         -------
                                                                                                   14,161          12,547
                                                                                                 --------         -------

                                                                                                 $ 31,087         $34,494
                                                                                                 ========         =======

</TABLE>

       The accompanying notes are an integral part of these consolidated
                                 balance sheets.


                                       20

<PAGE>


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

<TABLE>
<CAPTION>


                                                                                      For the Year Ended December 31,
                                                                               --------------------------------------
                                                                                1999             1998           1997
                                                                                ----             ----           ----
<S>                                                                            <C>              <C>            <C>
Revenues:
         Net sales                                                             $23,042          $ 23,163      $ 22,402
         Franchise royalties                                                     9,355             9,135         9,550
         Net gains from the conveyance of Company-owned
            assets to franchisees                                                  667               564         1,462
         Interest on franchise notes                                             1,465             1,877         1,966
         Other income                                                              492               388           612
                                                                               -------          --------      --------

                                                                                35,021            35,127        35,992
                                                                               -------          --------      --------

Costs and expenses:

         Cost of sales                                                           6,731             8,087         6,973
         Selling expenses                                                       14,710            15,981        16,296
         General and administrative expenses                                    11,790            21,336        17,859
         Loss from stores operated under management agreements                     605               792           173
         Provision for store closings                                             -                2,800         1,336
         Non-cash charges for issuance of warrants and induced
              conversions of warrants                                            2,371               422          -
         Amortization of debt discount                                            -                1,110         5,916
         Interest expense                                                        1,023             1,571         1,601
                                                                               -------          --------      --------

                                                                                37,230            52,099        50,154
                                                                               -------          --------      --------

Loss before provision for income taxes, minority interest and
  extraordinary item                                                           ( 2,209)          (16,972)      (14,162)
Provision for income taxes                                                        -                 -              -
                                                                               -------          --------      --------

Loss before minority interest and extraordinary item                            (2,209)          (16,972)      (14,162)
Minority interest                                                                  (52)             -              -
                                                                               -------          --------      --------

Loss before extraordinary item                                                  (2,261)          (16,972)      (14,162)
Extraordinary item - loss from early retirement of debt                           -                 (805)           -
                                                                               -------          --------      --------
Net loss                                                                       $(2,261)         $(17,777)     $(14,162)
                                                                               =======          ========      ========


Net loss per common share - basic and diluted: (Note 3)

         Loss from continuing operations                                       $  (.38)        $   (1.17)     $  (1.02)
         Extraordinary item - loss from early retirement of debt                    -              (0.06)         -

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

         Net loss                                                              $  (.38)        $   (1.23)     $  (1.02)
                                                                               =======         =========      ========


Weighted-average number of common shares outstanding - basic
         and diluted                                                            15,232            14,627        13,883
                                                                               =======         =========      ========
</TABLE>


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


                                       21

<PAGE>


                     STERLING VISION, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                 (Dollars in Thousands, Except Number of Shares)

<TABLE>
<CAPTION>


                                                                                             Additional                Total
                                                     Preferred Stock          Common Stock    Paid-In               Shareholders'
                                                     Shares   Amount       Shares     Amount  Capital    Deficit       Equity
                                                     ------   -------      -------    ------- ---------  --------   -------------
<S>                                                 <C>      <C>          <C>         <C>     <C>        <C>        <C>
     Balance - December 31, 1996                      --      $  --      12,387,535   $124   $ 24,982    $ (5,549)   $ 19,557

     Issuance of common shares in exchange
        for debt                                      --         --         144,916      1        973        --           974
     Issuance of common shares related to an
       acquisition                                    --         --         305,747      3      2,293        --         2,296
     Issuance of common shares to franchisees         --         --           4,002    --          30        --            30
     Issuance of shares upon conversion of
       debentures                                     --         --       1,085,027     11      6,348        --         6,359
     Debt discount                                    --         --            --      --       5,436        --         5,436
     Non-employee stock options                       --         --            --      --         781        --           781
     Net loss                                         --         --            --      --        --       (14,162)    (14,162)
                                                     ------   -------    ----------   ----   --------    --------    --------

     Balance - December 31, 1997                      --         --      13,927,227    139     40,843     (19,711)     21,271

     Issuance of shares upon conversion of 1997
       Debentures                                     --         --         395,630      4      1,648        --         1,652
     Debt discount for the intrinsic value of the
       1998 Debentures and the fair value of the
       1998 Warrants                                  --         --            --      --       1,915        --         1,915
     Issuance of shares upon conversion of
       warrants                                       --         --         550,000      6      2,038        --         2,044
     Issuance of Senior Convertible Preferred
       Stock                                            35      4,025          --      --        (525)       --         3,500
     Reduction related to stock price guarantees      --         --            --      --        (285)       --          (285)
     Stock dividend on Senior Convertible
       Preferred Stock                                --         --          47,494    --         175        (175)          0
     Non-employee stock options                       --         --            --      --         227        --           227
     Net loss                                         --         --            --      --        --       (17,777)    (17,777)
                                                     ------   -------    ----------   ----   --------    --------    --------

     Balance - December 31, 1998                        35      4,025    14,920,351    149     46,036     (37,663)     12,547

     Issuance of common shares upon
       induced conversion of Senior Convertible
       Preferred Stock                                 (14)    (1,608)    1,172,500     12      5,035      (3,439)       --
     Issuance of common shares to vendors and
       franchisees                                    --         --          61,273      1        249        --           250
     Acquisition of RBG Consulting, Ltd.              --         --            --      --         640        --           640
     Issuance of shares upon exercise of warrants     --         --         500,000      5        995        --         1,000
     Charge for payments related to stock price
       guarantees                                     --         --            --      --        (386)       --          (386)
     Dividends on Senior Convertible Preferred
       Stock                                          --         --          22,506    --          83         (83)       --
     Charge related to issuance of warrants
       for consulting services                        --         --            --      --       2,000        --         2,000
     Charge related to reductions in exercise price
       of warrants                                    --         --            --      --         371        --           371

     Net loss                                         --         --            --      --        --        (2,261)     (2,261)
                                                     ------   -------    ----------   ----   --------    --------    --------

     Balance - December 31, 1999                        21    $ 2,417    16,676,630   $167   $ 55,023    $(43,446)   $ 14,161
                                                      ====    =======    ==========   ====   ========    ========    ========

</TABLE>

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

                                       22

<PAGE>


                     STERLING VISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)


<TABLE>
<CAPTION>


                                                                                            For the Year Ended
                                                                                               December 31,
                                                                                 ---------------------------------------
                                                                                     1999          1998             1997
                                                                                 ------------  ------------     --------
<S>                                                                              <C>           <C>              <C>
Cash flows from operating activities:
    Net loss                                                                       $  (2,261)     $(17,777)     $(14,162)
    Adjustments to reconcile net loss to net cash used in
         operating activities:
             Depreciation and amortization                                             2,490         3,000         2,310
             Provision for doubtful accounts                                           1,007         6,500         1,198
             Provision for store closings                                               -            2,800           772
             Net gains from the conveyance of Company-owned assets
                to franchisees                                                          (667)         (564)       (1,131)
             Accrued interest                                                             83            72            84
             Amortization of fair value of assets acquired over cost                    (348)         (349)         (347)
             Non-cash charges related to options and warrants                          2,371           227           781
             Amortization of debt discount                                              -            1,915         5,436
             Changes in operating assets and liabilities:
                Accounts receivable                                                   (1,167)         (549)         (477)
                Inventories                                                              273         1,042           368
                Prepaid expenses and other current assets                                169           127           375
                Other assets                                                          (1,852)        1,122           223
                Accounts payable and accrued liabilities                                (284)          536        (2,760)
                Franchise deposits and other current liabilities                         (86)          102          (387)
                Deferred franchise income                                                (20)           (6)         (232)
                Accrual for store closings                                               180        (2,318)          320
                                                                                     -------        -------      -------

Net cash used in operating activities                                                   (112)       (4,120)       (7,629)
                                                                                     --------       -------       -------

Cash flows from investing activities:
    Acquisition, net of cash acquired                                                   -           (1,598)         -
    Franchise notes receivable issued                                                 (2,816)       (2,001)       (2,658)
    Proceeds from franchise and other notes receivable                                 3,859         4,968         2,756
    Purchases of property and equipment                                               (1,503)         (791)       (1,992)
    Proceeds from conveyance of property and equipment                                 1,947         1,023         2,517
                                                                                    --------       -------        ------

Net cash provided by investing activities                                              1,487         1,601           623
                                                                                     -------       -------       -------

</TABLE>

                            (Continued on next page)

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

                                       23


<PAGE>

                     STERLING VISION, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (Dollars in Thousands)

<TABLE>
<CAPTION>


                                                                                            For the Year Ended
                                                                                               December 31,
                                                                                 --------------------------------------------
                                                                                  1999              1998               1997
                                                                                 -------           -------           --------
<S>                                                                              <C>               <C>               <C>
     Cash flows from financing activities:
         Sale of common stock and other capital contributions                       --               2,044               --
         Payments related to stock price guarantees                                 (386)             (285)              --
         Proceeds from the exercise of warrants                                    1,000              --                 --
         Debt borrowings                                                             981             1,610             10,500
         Debt repayments                                                          (3,690)           (3,856)           (11,568)

         Issuance of convertible debentures                                         --               3,500              7,540
                                                                                 -------           -------           --------

     Net cash provided by (used in) financing activities                          (2,095)            3,013              6,472
                                                                                 -------           -------           --------

     Net increase (decrease) in cash and cash equivalents                           (720)              494               (534)

     Cash and cash equivalents - beginning of year                                   828               334                868
                                                                                 -------           -------           --------

     Cash and cash equivalents - end of year                                     $   108           $   828           $    334
                                                                                 =======           =======           ========

     Supplemental disclosures of cash flow information:
       Cash paid during the year for:
               Interest                                                          $   895           $ 1,351           $  1,226
                                                                                 =======           =======           ========

               Taxes                                                             $    62           $    88           $     57
                                                                                 =======           =======           ========


          Non-cash investing and financing activities:
              Franchise stores reacquired                                        $   815           $ 1,480           $   --
              Exchange of convertible debentures for Senior Convertible
                Preferred Stock                                                     --               4,025               --
              Preferred stock dividend paid in common shares                          83               175               --

          Acquisitions, net of cash acquired:
              Working capital, other than cash                                   $  --             $  (314)          $   (231)
              Property, plant and equipment                                         --                 160                200
              Intangible assets                                                      640             1,722              2,541
              Other assets                                                          --                  30               --
              Common stock issued                                                   (640)             --               (2,510)
                                                                                 -------           -------           --------

         Acquisitions, net of cash acquired                                      $  --             $ 1,598           $   --
                                                                                 =======           =======           ========
</TABLE>

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

                                       24


<PAGE>


                     STERLING VISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS:

Business

       The Company, through its new Emerging Vision.com Division, has begun the
process of developing a web-based optical portal business that will focus on
business-to-business opportunities. To date, this business has not yet
generated any revenues and is subject to various risks and uncertainties.

       In implementing this new business initiative, the Company has developed a
strategic alliance and is presently working together with Rare Medium, Inc., the
web consulting services arm of Rare Medium Group, Inc., to develop and launch an
extensive network of state-of-the-art web sites designed to provide information,
interaction and electronic business-to-business commerce. Rare Medium is one of
the country's leading providers of Internet solutions and e-commerce strategies
that improve business processes and develop branding strategies, marketing
communications and interactive content to large and medium sized companies in
the financial, automotive, consumer servicing, retail and consumer goods
industries.

       In addition, Sterling Vision, Inc. (together with its subsidiaries,
collectively, the "Company" or "Sterling") and its franchisees develop and
operate retail optical stores (collectively, "Sterling Stores"). The Company
also operates VisionCare of California ("VCC"), a specialized health care
maintenance organization licensed by the California Department of Corporations.
VCC employs licensed optometrists who render services in offices located
immediately adjacent to, or within, most Sterling Stores located in California.

       The Company, through its 66.67% owned subsidiary, Insight Laser Centers,
Inc. ("Insight") also affiliates with health care providers (ophthalmologists)
in offering laser vision correction procedures, performed with an excimer laser,
for the correction of certain degrees of myopia (near-sightedness), hyperopia
(farsightedness) and astigmatisms. Insight and these affiliated ophthalmologists
enter into agreements whereby the ophthalmologists pay Insight a fee for each
procedure performed using the excimer laser. The Company currently operates two
Insight laser centers (in which there are three lasers between them) located in
New York City, New York, has placed an additional excimer laser in an
ophthalmological office located in Long Island, New York, and subleases, to an
unaffiliated third party, two additional lasers.

       The Company also owns the tangible assets located in, and provides
administrative and consulting services to the licensee of, a full service
ambulatory surgery center located in Garden City, New York, which contains 4
surgical operating rooms.

Results of Operations and Management's Plans

       The Company has incurred losses before income taxes, minority interest
and extraordinary items aggregating $33,343,000 over the three year period ended
December 31, 1999, and had a working capital deficiency of $5,647,000 as of
December 31, 1999.

       In the first quarter of 2000, the Company generated proceeds of
approximately $10,600,000 from the issuance of 1,697,500 shares of preferred
stock in a private placement and an additional $7,459,000 from the exercise of
certain warrants and options. The proceeds of the private placement are to be
used to further the Company's development of its business to business portal.
The Company will use the proceeds from the exercise of warrants and options to
satisfy its current obligations, which satisfaction is expected to include the
settlement of certain current debt obligations as discussed further in Note 20.

       The Company believes that its most significant future capital
requirements will relate to the furtherance of its business to business internet
initiatives. Additionally, the Company expects to require additional capital to
further its existing business lines, including: (i) the expansion, marketing and
promotion of the Insight laser business,; (ii) the renovating and/or remodeling
of

                                       25

<PAGE>


Company-owned stores; (iii) acquiring retail optical stores, subject to the
availability of qualified opportunities; and (iv) continued upgrading of
management information systems for its Company-operated stores. Additionally,
the Company is likely to continue to provide financing of sales of Company-owned
stores to franchisees, which will defer the inflow of cash relating to the sale
of such assets.

       The Company believes that it will continue to generate cash flows during
the remainder of fiscal 2000 from (i) additional proceeds from the exercise of
stock options, (ii) sales of certain Company-owned stores, and (iii) expected
increases in operations and cash flows of the Company's Insight laser business.

       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 first quarter of
2001. However, there can be no assurance that the Company will be able to
generate positive cash flows and, 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 attractive to the Company.
Additionally, there can be no assurance that the Company's use of funds to
develop a commercially viable business to business portal will be successful,
that the Company will generate sufficient revenues to provide positive cash
flows from operations of this business or that sufficient capital will be
available, when required, to permit the Company to realize these plans.

                                       26

<PAGE>

NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates

       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities as of the dates of such
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.

Principles of Consolidation

       The consolidated financial statements include the accounts of Sterling
Vision, Inc. and its subsidiaries, all of which, except for the Company's 66.7%
owned subsidiary, Insight, are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.

Franchised Locations Operated by the Company under Management Agreements

       In the fourth quarter of 1998, the Company, as required, adopted the
provisions of Emerging Issues Task Force Issue 97-2 ("EITF 97-2"), "Application
of FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
In connection with the adoption of EITF 97-2, for the year ended December 31,
1998, the Company deconsolidated the results of operations of certain franchise
locations operated by the Company under management agreements. In accordance
with EITF 97-2, the results of operations for the year ended December 31, 1997
were restated to conform to the provisions of EITF 97-2. This restatement had
the effect of reducing net sales by approximately $2,047,000, and total expenses
by approximately $2,220,000, for the year ended December 31, 1997. This
restatement had no impact on the net loss or net loss per share for the period.

       During 1999, 1998 and 1997 the Company managed a total of 5, 12 and 6
locations, respectively, for franchisees under the terms of management
agreements entered into with each such franchisee. Such agreements generally
provide for the operation of the Sterling Store by the Company, with
substantially all operating decisions made by the Company. The Company owns the
inventory at the locations and is generally responsible for the collection of
all revenues and the payment of all expenses. For the years ended December 31,
1999 and 1998, these stores generated revenues of approximately $1,524,000 and
$4,503,000, respectively and incurred total expenses of approximately $2,129,000
and $5,295,000, respectively. The net result of these operations is classified
as a loss from stores operated under management agreements in the accompanying
consolidated statements of operations.

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 of each franchised location and are recorded as earned.

       Interest earned on franchise notes receivable is recorded as earned.
Gains or losses from the conveyance of Company-owned store assets to franchisees
are recognized upon closing.

Cash and Cash Equivalents

       Cash equivalents include all highly liquid investments with maturities of
90 days or less when purchased. Cash equivalents are comprised of money market
funds, and are recorded at cost, which approximates market value.

Fair Value of Financial Instruments

       At December 31, 1999 and 1998, the carrying value of financial
instruments, such as cash and cash equivalents, accounts and notes receivable
and credit facilities, approximated their fair value, based on the short-term
maturities and nature of these instruments, with the exception of the Benson
Debentures (Note 9 and 20).

Inventories

       Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value, and consist primarily of contact lenses,
ophthalmic lenses, eyeglass frames and sunglasses.

                                       27
<PAGE>

Property and Equipment

       Property and equipment are recorded at cost. Depreciation is provided on
a straight-line basis over the estimated useful lives of the respective classes
of assets.

Intangible Assets

       Intangible assets are comprised of the goodwill and other intangible
assets resulting from the acquisition of Singer Specs, Inc., the Ambulatory
Surgery Center and RBG Consulting Ltd. These intangibles are being amortized on
a straight line basis over their estimated useful lives of between 5 and 20
years. Accumulated amortization on intangible assets was approximately $497,000
and $709,000 at December 31, 1999 and 1998, respectively.

Impairment of Long-Lived Assets

       Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long Lived Assets and for Long-Lived Assets to be Disposed
Of", requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amounts of the assets may not be
recoverable. In accordance with SFAS No. 121, the Company periodically evaluates
the realizability of long-lived assets based on, among other factors, the
estimated undiscounted future cash flows expected to be generated from such
assets in order to determine if an impairment exists. Impairments are charged to
the statement of operations in the period identified.

Web Site Development Costs

         The Company accounts for web site development costs in accordance with
EITF Issue 00-02: "Accounting for Web Site Development Costs." This issue
provides that the accounting for specific web site development costs be based on
a model consistent with AICPA Statement of Position ("SOP") 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use."
Under SOP 98-1, costs are expensed or capitalized according to the stage and
related process of web site development that they relate to. Amortization of
capitalized costs begins at the point in time that the web site becomes
operational. During 1999, the Company incurred web site development costs of
approximately $1.3 million, which are included in other assets in the
accompanying consolidated balance sheet. Amortization has not commenced with
respect to such costs as the related web sites are not yet operational.

Comprehensive Income

       The Company follows the provisions of SFAS 130, "Reporting Comprehensive
Income," which establishes rules for the reporting of comprehensive income and
its components. The adoption of SFAS 130 in fiscal 1998 had no impact on
reported net loss or shareholders' equity. For the years ended December 31,
1999, 1998 and 1997, the Company's operations did not give rise to items
includible in comprehensive income which were not already included in net loss.
Therefore, the Company's comprehensive loss is the same as its net loss for all
periods presented.

Income Taxes

       The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Under the asset and liability method specified by
SFAS No. 109, the deferred income tax amounts included in the balance sheet are
determined based on the differences between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates that will
be in effect when these differences reverse. Differences between assets and
liabilities for financial statement and tax return purposes are principally
related to inventories and depreciable lives of assets.

Reclassifications

       Certain reclassifications have been made to prior years' financial
statements to conform with the current year presentation.

New Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued SFAS
No.133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal years beginning after June 15, 2000 and will not require retroactive
restatement of prior period financial statements. This statement requires the
recognition of all derivative instruments as either assets or liabilities in the
balance sheet, measured at fair value. Derivative instruments will be recognized
as gains or losses in the period of change. The Company does not expect the


                                       28
<PAGE>

adoption of SFAS No. 133 to have a material impact on its financial position or
results of operations as the Company does not presently make use of derivative
instruments.

         In December 1999, the SEC staff released Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition," which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. SAB
No. 101 explains the SEC staff's general framework for revenue recognition,
including the criteria that need to be met in order to recognize revenue, as
well as required disclosures related to revenue recognition.

         In March 2000, the Emerging Issues Task Force ("EITF") issued Issue
00-03: "Application of AICPA SOP 97-2, "Software Revenue Recognition," to
Arrangements That Include the Right to Use Software Stored on Another Entity's
Hardware." This Issue provides guidance with respect to the recognition of
revenue for arrangements where software resides on a vendor's or a third party's
server, and the customer accesses the software on an as-needed basis over the
Internet or via a dedicated phone line.


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
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 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 on the face of the consolidated
statements of operations. The following provides a reconciliation of information
used in calculating the per share amounts for the years ended December 31, 1999,
1998 and 1997.



                                       29
<PAGE>

<TABLE>
<CAPTION>

                                                                                                 For the Year Ended
                                                                                                    December 31,

<S>                                                                                   <C>            <C>              <C>
                                                                                         1999            1998              1997
                                                                                     -----------     ------------     -------------
Loss attributable to common shareholders:
     Net loss                                                                        $(2,261,000)    $(17,777,000)    $(14,162,000)
     Dividends on Senior Convertible Preferred Stock                                     (83,000)        (175,000)          --
     Effect of the induced conversion of Senior Convertible Preferred                 (3,439,000)          --               --
                                                                                     -----------     ------------     -------------

     Loss attributable to common shareholders -  basic and diluted                   $(5,783,000)    $(17,952,000)    $(14,162,000)
                                                                                     -----------     ------------     -------------

Weighted-average shares outstanding:
     Weighted-average shares outstanding - basic and diluted                          15,232,000       14,627,000       13,883,000
                                                                                     -----------     ------------     -------------

Basic and diluted loss per share                                                     $      (.38)    $      (1.23)    $      (1.02)
                                                                                     ============    =============    =============
</TABLE>

NOTE 4 - FRANCHISE NOTES RECEIVABLE:

       Franchise notes held by the Company consist primarily of purchase money
notes relating to Company-financed conveyances of Company-store assets to
franchisees, certain franchise notes receivable acquired by the Company and the
conversion of certain aged royalty and other franchise receivables into
long-term notes. Substantially all notes are secured by the underlying assets of
the related franchised store, as well as, in most cases, the personal guarantee
of the principal owners of the franchisee. Interest is charged at various rates
ranging from 8% to 12%.

       Scheduled maturities of such notes receivable as of December 31, 1999,
are as follows (in thousands):

                 2000                              $ 2,670
                 2001                                4,303
                 2002                                2,413
                 2003                                2,045
                 2004                                1,382
                 Thereafter                            883
                                                   --------
                                                   $13,696
                                                   ========

       Franchise notes receivable of approximately $8,472,000 at December 31,
1999, are pledged to STI Credit Corporation ("STI") pursuant to the Company's
Loan Agreement with STI, dated June 30, 1997 (see Note 9).

Valuation and Qualifying Accounts

       Accounts and notes receivable are shown in the consolidated balance
sheets net of the following allowances for doubtful accounts:

      Accounts Receivable:

                                                  (In thousands)
                                                As of December 31,

                                                  1999      1998     1997
                                                  ----      ----     ----
     Balance, beginning of year                 $2,060    $  514      557
          Charged to expense                       910     3,915      756
          Reductions, principally write-offs      (527)   (2,369)    (799)
                                                -------   -------    -----
     Balance, end of year                       $2,443    $2,060     $514
                                                ======    =======    =====

                                       30
<PAGE>

         Notes Receivable:

                                                  (In thousands)
                                                As of December 31,
                                                   1999     1998    1997
                                                   ----     ----    ----
     Balance, beginning of year                   $ 450   $  562     562
     Charged to expense                              97    2,585     442
     Reductions, principally write-offs            (147)  (2,697)   (442)
                                                  -----   ------    ----
     Balance, end of year                         $ 400   $  450    $562
                                                  =====   ======    ====

NOTE 5  -  PROPERTY AND EQUIPMENT, net:

       Property and equipment, net, consists of the following:

                                                 (In thousands)      Estimated
                                               As of December 31,      Useful
                                             1999       1998           Lives
                                           --------   --------       ---------
     Furniture and fixtures                $    772    $ 1,073        7 years
     Machinery and equipment                  7,580     10,244      5-7 years
     Leasehold improvements                   2,474      2,466       10 years*
                                           --------      -----
                                             10,826     13,783
         Less: Accumulated depreciation      (5,578)    (5,679)
                                           --------    -------

                                            $ 5,248    $ 8,104
                                           ========    =======

*   Useful lives of leasehold improvements are based upon the lesser of the
    asset's useful life or the term of the lease of the related property.

       The net book value of assets held under capital leases included in
property and equipment, amounted to approximately $1,103,000 and $3,247,000 (net
of accumulated depreciation of approximately $666,000 and $2,224,000) as of
December 31, 1999 and 1998, respectively. Depreciation expense for the years
ended December 31, 1999, 1998 and 1997 was $1,993,000, $2,291,000, and
$2,310,000 respectively.

NOTE 6  - PROVISION FOR STORE CLOSINGS:

       The Company provides for losses anticipated to be incurred with respect
to those Company-owned stores which it has identified for closure in the future.
Such provision is recorded at the time the determination is made to close a
store and is based on the expected net proceeds to be generated from the
disposition of the store's assets, as compared to the carrying value of such
store assets and the estimated costs (including the present value of remaining
lease payments and other expenses) that will be incurred in the closing of the
store.

       This evaluation resulted in charges to the statements of operations of
$0, $2,800,000 and $1,336,000 for the years ended December 31, 1999, 1998 and
1997, respectively. As of December 31, 1999 and 1998, accruals for store
closings were $349,000 and $1,254,000, respectively, representing the estimated
remaining net costs to be incurred for stores that have been identified to be
closed in the future.

NOTE 7  -  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

       Accounts payable and accrued liabilities consist of the following:

                                                   (In thousands)
                                                 As of December 31,
                                                 1999           1998
                                                 ------       ------
     Accounts payable                            $4,726       $3,708
     Overdraft payable                              240          952
     Accrued rent                                   247          411
     Accrued payroll and fringe benefits            496          667
     Other accrued expenses                         803        1,361
                                                 ------       ------
                                                 $6,512       $7,099

                                       31
<PAGE>

NOTE 8 - INCOME TAXES:

       The Company's effective tax rate differs from the statutory Federal
income tax rate of 34% primarily due to the impact of recording a valuation
allowance to offset the potential future tax benefit resulting from net
operating loss carryforwards for all years presented.

       At December 31, 1999 and 1998, net deferred tax assets were approximately
$11.1 million and $9.9 million, respectively, resulting primarily from the
future tax benefit of net operating loss carryfowards. In accordance with SFAS
No. 109, the Company has fully reserved for its net deferred tax assets as of
December 31, 1999 and 1998 due to the uncertainty as to their future
realizability.

       At December 31, 1999, the Company had net operating loss carryforwards
totaling approximately $26.8 million which are available to offset future
taxable income for federal income tax purposes. The net operating loss
carryforwards expire in varying amounts through 2019 and may be limited in
accordance with Section 382 of the Internal Revenue Code of 1986, as amended
based on certain changes in ownership that have occurred.

NOTE 9 - LONG-TERM DEBT:

       Principal payments due on the Company's long-term debt, as of December
31, 1999, are as follows:

                   (a)       (b)          (c)          (d)
                   STI
                Credit       Broadway     Capital
Year              Corp.      Partners      Leases  Other Notes     Total
----            -------      --------      ------  -----------     ------
2000             $3,184        $2,090      $  813     $  550       $6,637
2001                -             -           522       -             522
2002                -             -           250       -             250
2003                -             -           176       -             176
2004                -             -           140       -             140
Thereafter          -             -             2        699          701
                 ------        ------      ------     ------      -------
                 $3,184        $2,090      $1,903     $1,249       $8,426
                 ======        ======      ======     ======      =======

       (a) On June 30, 1997, the Company entered into a loan agreement (the
           "Loan Agreement") with STI Credit Corporation ("STI") pursuant to
           which STI established a $20,000,000 credit facility to finance a
           portion of the Company's existing and future franchise promissory
           notes receivable. The Company initially borrowed $10,000,000 against
           this facility ($1,000,000 of which was placed in escrow pending the
           Company's satisfaction of a certain collateral ratio). In connection
           with the Loan Agreement , the Company granted STI a first priority
           security interest in a substantial portion of its franchise notes
           receivable and the proceeds related to those notes.

           On October 9, 1997, STI amended the Loan Agreement and disbursed
           $500,000 of the escrow to the Company. As of December 31, 1999, the
           outstanding remaining principal balance of the loan was approximately
           $3,184,000. In accordance with the terms of the Loan Agreement, the
           Company must comply with certain financial covenants. As of December
           31, 1999, the Company was not in compliance with certain of these
           financial covenants. Accordingly, the entire remaining balance of the
           debt is classified as a current liability as of December 31, 1999.
           The Company expects to repay the remaining balance due to STI during
           2000.

       (b) On October 14, 1998, Company's Board of Directors authorized the
           Company to borrow up to $2,000,000 from Broadway Partners, a New York
           general partnership owned by certain of the children of each of the
           Company's Chairman and President. The loans are payable on demand,
           together with interest calculated at the rate of 12% per annum. These
           loans are secured by a first lien upon, and security interest in, the
           assets of the Company's ambulatory surgery center.

       (c) As of December 31, 1999, Insight was the lessee of three excimer
           lasers and ancillary equipment under capital leases expiring in
           various years through 2002. The assets and liabilities under capital
           leases are recorded at the lower of the present value of the minimum
           lease payments or the fair value of the asset.

                                       32

<PAGE>

       (d) In November 1995, the Company acquired substantially all of the
           retail optical assets of Benson Optical Co., Inc. and its affiliates
           (the "Benson Transaction"). As part of the Benson Transaction, the
           Company issued a non-negotiable, subordinated convertible debenture
           (the "Benson Debenture"), in the original principal amount of
           $5,900,000, payable, without interest, on September 15, 2015. The
           Benson Debenture is subordinated to all existing and future debts and
           obligations of the Company. The Company had a right of offset against
           the principal amount of the Benson Debenture in the event the Company
           did not retain at least 40 of the 98 Benson stores acquired in the
           Benson Transaction, which offset was $147,000 for each store less
           than 40 that the Company retained. In December 1995, the principal
           amount of the Benson Debenture was reduced by approximately
           $1,176,000, to approximately $4,724,000, all in accordance with the
           original purchase agreement. In November 1998, the Benson Debenture
           was purchased from the then holder thereof, by Broadway Partners for
           approximately $203,000. As of December 31, 1999, the Benson
           Debenture is recorded at its present value of approximately
           $1,119,000 using an imputed internal interest rate of approximately
           8.5%. In March 2000, the Company purchased the Benson Debenture from
           Broadway Partners for $550,000 in full settlement of the debt.

NOTE 10 - ACQUISITIONS:

       On July 1, 1999, the Company acquired all of the issued and outstanding
capital stock of RBG Consulting, Ltd. and entered into employment agreements
with its two principal executives in exchange for a one-third interest in the
Company's subsidiary, Insight Laser Centers, Inc., which was valued at $640,000
based on an appraisal by an independent third party obtained by the Company. No
net assets were acquired, and accordingly, the total cost over the fair value of
the assets acquired of $640,000 was allocated to intangible assets, which will
be amortized over a 5-year period. The acquisition was accounted for under
the purchase method of accounting.

         On April 7, 1997, the Company acquired all of the issued and
outstanding capital stock of Singer Specs, Inc. and certain of its wholly-owned
subsidiaries (collectively, "Singer"), a privately-owned Delaware corporation.
Singer was the franchisor of approximately 30 retail optical stores. The
acquisition was accounted for as a purchase in accordance with APB Opinion No.
16 "Business Combinations." The purchase price of approximately $2,510,000 was
financed through issuance of approximately 306,000 shares of the Company's
Common Stock, and was allocated to the fair value of the net assets acquired.
Goodwill resulting from the acquisition was approximately $2,541,000 and is
being amortized on a straight-line basis over a period of 10 years, the term of
the franchise agreements related to the franchises acquired.

         On May 6, 1998, the Company, through its wholly-owned subsidiary,
Insight Laser Centers, N.Y.I., Inc. acquired substantially all of the assets of
an ambulatory surgery center for a purchase price of approximately $1,952,000.
Goodwill resulting from the acquisition was approximately $1,721,000, and is
being amortized on a straight-line basis over a period of 20 years.



                                       33
<PAGE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES:

Operating Lease Commitments

       The Company leases locations for the majority of both its Company-owned
and franchised stores, as well as its Ambulatory Surgery Center and all of the
Centers operated by Insight. Minimum future rental payments, as of December 31,
1999, for Company-owned stores and stores subleased to franchisees, in the
aggregate, are as follows:

                                    (In Thousands)
                       --------------------------------------
                        Total          Sublease         Net
                       Amount          Rentals        Rentals
                       ------          -------        -------
       2000           $  7,564        $  5,759         $1,805
       2001              6,164           4,497          1,667
       2002              5,125           3,544          1,581
       2003              3,208           2,059          1,149
       2004              2,303           1,306            997
       Thereafter        5,731           4,458          1,273
                      --------        --------        -------
                       $30,095         $21,623         $8,472
                      ========        ========        =======

       The Company holds the master lease on substantially all franchised
locations and, as part of the franchise agreements, sublets the subject premises
to the franchisee. In addition to the fixed rent payable under such master
leases, most master leases require payment of a pro rata portion of common area
maintenance and taxes, as well as percentage rent based upon sales volume. As
required by SFAS No. 13 "Accounting for Leases," the Company recognizes its rent
expense on a straight-line basis over the life of the related lease. Rent
expense was approximately $4,609,000, $5,458,000 and $5,554,000, net of sublease
rentals of approximately $9,190,000, $10,485,000 and $8,190,000, for the years
ended December 31, 1999, 1998 and 1997, respectively.

       At December 31, 1999, the Company was a guarantor of indebtedness of two
separate loans by two franchisees to third party lenders in the principal amount
of approximately $675,000. The remaining outstanding amounts due under these
loans is approximately $39,000 as of December 31, 1999.

Contingencies

       The Company is, from time to time, a party to litigation arising in the
ordinary course of its business. In the opinion of management, there are no
significant claims outstanding that are likely to have a material adverse effect
upon the consolidated financial statements of the Company.

NOTE 12  - CONCENTRATION OF RISK:

       The Company operates retail optical stores in North America,
predominantly in the United States, and its receivables are primarily from
franchisees who also operate retail optical stores in the United States.



                                       34
<PAGE>


NOTE 13 - RELATED PARTY TRANSACTIONS:

       The Company shares an office building with, among other tenants, a retail
optical company which is owned by certain of the principal shareholders and
Directors of the Company. Occupancy costs are appropriately allocated based upon
the applicable square footage leased by the respective tenants of the building.
During 1999, the Company transferred one of its stores for a store owned by the
other retail optical company, and purchased another unit from the other retail
optical company for $100,000, payable over 7 years at an interest rate of 10%
per annum.

       Included in due from related parties is approximately $65,000 and
$125,000 in loans to a former officer of the Company at December 31, 1999 and
1998, respectively, bearing interest at the prime rate.

       On October 31, 1995, as a condition of the Company's initial public
offering, it agreed to require three related party franchisees to reconvey their
franchises to independent franchisees. During 1996, two stores were sold by the
respective related party franchisees, and the Company continues to manage the
remaining store for an officer of the Company. The franchisee of this
Company-managed store has agreed to be liable for any cash losses up to its
equity, if any, in the franchise as of the date such franchise may be sold by
the Company to an independent franchisee.

       In November 1996, certain of the Company's principal shareholders
provided approximately $2,000,000 of short-term financing to the Company, which
was subsequently repaid by the Company. As part of the financing arrangement,
these principal shareholders received options, under the Company's Stock
Incentive Plan, to purchase an aggregate of 200,001 shares of the Company's
Common Stock at an exercise price of $6.375. These options expire on December
31, 2000.

       In March 1996, the Company entered into an agreement with a Director of
the Company whereby he agreed to serve as an advisor to, and as the Chairman of
the Board of Directors of Insight, in exchange for annual compensation of
$75,000. In connection therewith, the Company granted to this Director, under
its Stock Incentive Plan, options to purchase up to an aggregate of 310,000
shares of the Company's Common Stock at an exercise price of $6.00. These
options have a term of ten years. As of December 31, 1997, 160,000 of the
options had vested and, in February 1998, the balance of the options were
canceled due to the resignation of the individual.

       On April 7, 1997, the Company entered into an Option and Consulting
Agreement with Meadows Management, LLC, ("Meadows") a limited liability company
owned by two of the Company's principal shareholders and Directors. This
agreement provided for the Company's payment, to Meadows, of consulting fees of
$25,000 per month through the expiration date thereof, December 31, 1997. As
additional consideration, the Company also granted to such principal
shareholders, under its Stock Incentive Plan, an aggregate of 300,000 qualified
stock options, which options have a term of five years and are exercisable at
$8.9375.

       On December 12, 1997, the Company granted, under its Stock Incentive
Plan, an aggregate of 200,000 options to a former Director of the Company in
exchange for his providing and continuing to provide assistance to the Company
with respect to its third party, managed care programs. Two-thirds of such
options immediately vested. The options have a term of five years and are
exercisable at $6.4375. On August 10, 1998, this individual resigned as a
Director of the Company.

       On October 15, 1998, one of the principal shareholders of the Company
assumed the offices of Chief Executive Officer and President of the Company and,
in conjunction therewith, was granted 250,000 options, exercisable at $3.00.
One-third of the options vested immediately, one-third vested on October 15,
1999, and one-third will vest on October 15, 2000.

       On November 4, 1998, Broadway Partners, a New York general partnership
owned by certain of the children of each the Company's Chairman and President,
purchased the Benson Debenture from Benson (See Note 9 and 20) for approximately
$203,000.

NOTE 14 - CONVERTIBLE DEBENTURES:

1997 Debentures

       On February 26, 1997, the Company entered into Convertible Debentures and
Warrants Subscription Agreements with certain investors in connection with the
private placement (the "Private Placement") of units (collectively "the Units")
consisting of an aggregate of $8,000,000 principal amount of the Company's
debentures (collectively the "Debentures") and an aggregate of 800,000 warrants
(collectively the "Warrants"). Each Warrant, exercisable until February 26,
2000, entitled the holder to purchase one share of the Company's Common Stock,
at a price per share assumed to be $6.50. For every two Warrants exercised
during the 2-year period ending May 30, 1999, a holder will receive an
additional warrant (collectively, the "Bonus Warrants") to purchase an
additional share of Common Stock at a price of $7.50 per share. Bonus Warrants
have a term of 3 years from the date of grant. The Company used the net proceeds
(approximately $7,500,000) of the Private Placement to repay a portion of the
loans made to it by certain principal shareholders of the Company ($1,000,000,
together with interest thereon, in the approximate amount of $50,000), and to
pay down the

                                       35
<PAGE>

Company's revolving line of credit with the Bank of $1,000,000.

       The Debentures were convertible at a price per share (the "Conversion
Price") equal to the lesser of $6.50 or 85% of the average closing bid price of
the Common Stock, as reported on the Nasdaq National Market System ("Nasdaq"),
for the 5 trading days immediately preceding the date of conversion. The Company
did, however, have the right to redeem any Debentures requested to be converted,
in the event the Conversion Price was $6.00 or less. In such event, the
redemption price would have been equal to 115% of the face amount of that
portion of the Debentures requested to be converted. As of December 31, 1998,
all of the Debentures were converted by the holders thereof.

       Utilizing the conversion terms most beneficial to the purchasers of the
Units, in 1997, the Company recorded amortization of debt discount of
approximately $5,916,000. This charge was credited to additional paid-in-capital
over the period of time that the holders of the Debentures actually converted
them into shares of the Company's Common Stock. The non-cash portion of the
discount was approximately $5,436,000. Accordingly, since all of the Debentures
were previously converted by the holders in March 1998, the discount ultimately
had no effect on the Company's shareholders' equity. The debt discount
represented the intrinsic value of the beneficial conversion feature inherent in
the conversion terms of the Debenture, the fair value of the Warrants (with an
assumed exercise price of $6.50) and the Bonus Warrants (with an assumed
exercise price of $7.50), and the issuance cost of the Units. This discount was
amortized as additional interest expense over the minimum period the debentures
became convertible.

       In May 1998, certain of the holders of the Company's Warrants exercised
their right to acquire an aggregate of 392,000 registered shares of the
Company's Common Stock in exchange for the Company's agreement to reduce the
respective exercise prices by 15%. These transactions resulted in a $311,000
non-cash charge to earnings.

       In July 1998, certain of the holders of the Company's Warrants exercised
their right to acquire an aggregate of 158,000 registered shares of the
Company's Common Stock in exchange for the Company's agreement to reduce the
respective exercise prices to $4.50. These transactions resulted in a $110,000
non-cash charge to earnings.

1998 Debentures/Convertible Preferred Stock

       In February 1998, the Company again entered into Convertible Debentures
and Warrants Subscription Agreements with certain investors in connection with
the private placement of units consisting of an aggregate of $3,500,000
principal amount of convertible debentures (collectively, the "1998 Debentures")
and an aggregate of 700,000 warrants (collectively, the "1998 Warrants"). The
1998 Warrants entitled the holders thereof to purchase up to 700,000 shares of
the Company's Common Stock at a price of $5.00 per share.

       Subsequent to the date of the Company's issuance and sale of the 1998
Debentures and 1998 Warrants, the Company and the holders thereof (collectively,
the "Original Holders") determined that the issuance and sale of the 1998
Debentures and 1998 Warrants should be rescinded based upon a certain mutual
mistake of the Company and the Original Holders. Accordingly, on April 14, 1998,
the Company and the Original Holders entered into an Exchange Agreement,
effective as of February 17, 1998, whereby the 1998 Debentures were rescinded
and declared null and void from inception and were exchanged for $3,500,000
stated value (approximately $4,025,000 fair value) of a series of the Company's
Preferred Stock, par value $.01 per share (the "Senior Convertible Preferred
Stock"), and the 1998 Warrants were exchanged for new warrants (the "New
Warrants"), entitling the Original Holders to purchase up to 700,000 shares of
Common Stock at a price of $5.00 per share until February 17, 2001.

       The Senior Convertible Preferred Stock originally required the Company to
pay quarterly dividends (in cash or Common Stock) calculated at the rate of 10%
percent per annum, commencing May 17, 1998. Additionally the Company was
required to redeem (in cash or Common Stock) all of the Senior Convertible
Preferred Stock at 105% of the then outstanding stated value, based on a
conversion price of $5.00, after February 17, 1999 or, in lieu thereof, at the
Company's option, pay dividends at the rate of 24% per annum. Finally, there was
a price-protection guarantee provision, whereby the Company, under certain
circumstances, would be required to pay to the Original Holders the difference
between the $5.00 conversion price and the selling price (net of commissions) of
any such shares sold (see Note 20).

       As a result of the foregoing, the Company recorded, in its consolidated
financial statements for the year ended December 31, 1998, amortization of debt
discount of approximately $1,110,000 and an extraordinary charge of
approximately $805,000 related to the early extinguishment of the 1998
Debentures. This debt discount represented the intrinsic value of the beneficial
conversion feature inherent in the 1998 Debentures (approximately $963,000), and
amortization of approximately $147,000 related to the fair value of the New
Warrants. The extraordinary charge of $805,000 represents the unamortized
discount related to the 1998 Warrants in connection with the early
extinguishment of the 1998 Debentures and the issuance of the Senior Convertible
Preferred Stock and New Warrants.

       On August 18, 1998 and November 19, 1998, the Company issued 19,550 and
27,944 registered shares of its Common Stock, respectively, in payment of the
required dividend on the Senior Convertible Preferred Stock. During 1999, the
Company paid cash dividends (on its Senior Convertible Preferred Stock) in the
aggregate amount of $8,419 and, in addition, issued, in the form of stock
dividends, an aggregate of 22,506 registered shares of its Common Stock.

                                       36
<PAGE>

       On January 13, 1999, March 26, 1999, and December 7, 1999, certain
holders of the Company's Senior Convertible Preferred Stock exercised their
right to convert an aggregate of $1,398,125 stated value of Senior Convertible
Preferred Stock, into an aggregate of 1,172,500 registered shares of the
Company's Common Stock (see Note 20).

       On December 7, 1999, certain holders of the 1998 Warrants exercised their
right to acquire an aggregate of 500,000 registered shares of the Company's
Common Stock.

NOTE 15 - SHAREHOLDERS' EQUITY

       In February 2000, the Company, subject to shareholder approval,
authorized the increase of authorized shares to 50 million. Additionally, in
July 1999, the Company increased the authorized shares of Insight to 100 million
shares.

       In November 1999, the company authorized the repurchase of up to
1,000,000 shares of its common stock, subject to certain daily limitations, in
open market transactions, for a one year period. Through December 31, 1999, the
Company had not repurchased any shares under this plan.

       In February 2000, the Company, subject to shareholder approval, amended
its Certificate of Incorporation so that the holders of the Company's Senior
Convertible Preferred Stock have the right to vote, as a single class with the
Common Stock, on an as-converted basis, on all matters on which the holders of
the Company's Common Stock are entitled to vote.

NOTE 16 - STOCK OPTIONS AND WARRANTS:

Sterling Stock Option Plan
--------------------------

       In April 1995, the Company adopted a Stock Incentive Plan (the "Plan")
which permits the issuance of options to selected employees and directors of,
and consultants to, the Company. The Plan, as amended, reserves 3.5 million
shares of Common Stock for grant and provides that the term of each award be
determined by the Compensation Committee of the Board of Directors (the
"Committee") charged with administering the Plan. The Company's Board of
Directors has recommended an amendment to the Plan to increase the number of
shares reserved for issuance from 3.5 million shares to 7 million shares, which
will be voted on at the Company's next annual meeting of its shareholders. Under
the terms of the Plan, options may be qualified or non-qualified and granted at
exercise prices and for terms to be determined by the Committee. Additionally,
the Plan provides that certain employees who are terminated retain the rights to
options they have vested in until such time that the options expire in
accordance with the term of the original grant.

       A summary of the status of the Company's Plan is presented in the table
below:

<TABLE>
<CAPTION>
                                                     1999                             1998                        1997
                                           --------------------------------------------------------------------------------------
                                                           Weighted                       Weighted                       Weighted
                                                           Average                        Average                        Average
                                                           Exercise                       Exercise                       Exercise
                                            Shares          Price           Shares         Price           Shares         Price
                                           ---------       --------        ---------      --------        ---------      --------
<S>                                        <C>             <C>             <C>            <C>             <C>            <C>
Options outstanding, beginning of          2,598,624          $5.89        2,175,302        $6.76         1,462,694        $6.10
Granted                                    1,090,500          $4.31          723,500        $3.38           952,501        $7.54
Exercised                                      -              -               -              -               -              -
Canceled or expired                         (117,500)         $6.01         (300,178)       $7.36          (239,893)       $6.15
                                           ---------       --------        ---------      --------        ---------      --------
Options outstanding, end of period         3,571,624          $5.52        2,598,624        $5.89         2,175,302        $6.76
                                           ---------       --------        ---------      --------        ---------      --------
Options exercisable, end of period         2,992,791          $5.75        2,069,564        $5.98         1,771,181        $6.93
                                           ---------       --------        ---------      --------        ---------      --------
</TABLE>

       Of the total options outstanding at December 31, 1999, 1,402,023 are held
by current employees of the Company and 2,169,601 are held by directors of the
Company, outside consultants and former employees. Of the total options granted
during 1999, 810,500 were granted to employees of the Company and 280,000 were
granted to directors of the Company and outside consultants.

<TABLE>
       The following table summarizes information about stock options
outstanding at December 31, 1999:
<CAPTION>
                                               Options Outstanding                        Options Exercisable
                              -----------------------------------------------------  ------------------------------
                                                    Weighted-           Weighted-                       Weighted-
                                                     Average            Average                         Average
    Range of                                        Remaining           Exercise                        Exercise
 Exercise Prices               Outstanding       Contractual Life        Price        Exercisable        Price
-----------------             --------------  ---------------------  --------------  --------------  --------------

<S>                           <C>             <C>                    <C>             <C>             <C>
 $1.81 to $2.72                    87,000             9.85               $2.26            25,000           $2.00
 $2.73 to $4,10                   951,000             9.07               $3.33           686,666           $3.43
 $4.11 to $6.17                 1,473,457             6.84               $5.83         1,370,958           $5.92
 $6.18 to $9.44                 1,060,167             6.32               $7.34           910,167           $7.36
                              --------------  ---------------------  --------------  --------------  --------------

                                3,571,624             7.47               $5.52         2,992,791           $5.75
</TABLE>

       The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:

                                       1999       1998      1997
                                       ----       ----      ----
    Expected life (years)               5           5         5
    Interest rate                       6%          6%        6%
    Volatility                        102%        102%       32%
    Dividend yield                     -           -          -


       The Company has adopted the pro forma disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the options issued under the Plan. Had compensation
cost for the Company's Plan been determined under SFAS No. 123, the Company's
net loss and loss per share would approximate the pro forma amounts presented
below:

                                       37
<PAGE>

                                                  1999       1998       1997
                                               ---------  ---------  --------
 Net loss attributable to common shareholders:
         As reported                           $ (5,782)  $(17,952)  $(14,162)
         Pro forma                             $(10,009)  $(19,332)  $(15,510)
 Net loss per share - basic and diluted:
         As reported                           $   (.38)  $  (1.23)  $  (1.02)
         Pro forma                             $   (.66)  $  (1.32)  $  (1.12)

       All outstanding options, except for 300,000, were non-qualified options.
In 1999 and 1998, the Company recognized $2,000,000 and $227,000, respectively,
of expense related to its issuance of stock options and warrants to certain
non-employee consultants to the Company.

Insight Stock Option Plan
-------------------------

       In addition to the Company Plan described above, in July 1999, the
Company adopted a Stock Incentive Plan for Insight (the "Insight Plan"), its
66.7% owned subsidiary. The Insight Plan reserves 5 million shares of common
stock of Insight for grant and has terms similar to that of the Company's Plan.
Through December 31, 1999, 1,025,000 options have been granted under the Insight
Plan, all at an exercise price of $1.00 per share, the fair value as estimated
by management at the date of grant.

Stock Purchase Warrants
-----------------------

       In December 1999, the Company issued 2,500,000 warrants to MY2000, LLC,
an entity acting as an independent advisor to the Company in connection with its
new Internet business and strategy, to purchase 2,500,000 shares of the
Company's Common Stock at a price of $2.00 per share, the fair value of the
Company's common stock at the date of grant. The Company, in 1999, recognized
approximately $2,000,000 in expense representing the fair value of the warrants
granted. A principal of MY2000, LLC., is also an executive of the entity the
Company has retained and paid, in cash and stock, to develop its business to
business website and related strategy (Note 1). Subsequent to year end, the
Company entered into another agreement whereby if MY2000, LLC exercises all of
the December 1999 warrants within a specified period of time, the Company will
grant MY2000, LLC an additional 2,500,000 warrants at an exercise price of
$10.875 per share. As of March 29, 2000, 1,000,000 of these warrants were
exercised.

NOTE 17 - 401(K) EMPLOYEE SAVINGS PLANS:

       On December 28, 1994, Sterling Vision, Inc., Sterling Vision of
California, Inc. and VisionCare of California, each approved and adopted,
effective January 1, 1995, a 401(k) Employee Savings Plan (the "401(k) Plan") to
provide all qualified employees of these entities with retirement benefits.
Presently, the administrative costs of each 401(k) Plan are paid by the Plan and
each entity does not provide any matching contributions to any participants in
any of the 401(k) Plans.

NOTE 18 - SEGMENT INFORMATION:

       The Company follows the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes annual and
interim reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
Segment information is presented below.

       For the year ended December 31, 1999, the Company's operations were
classified into three principal industry segments:

       RETAIL OPTICAL: The retail optical segment, whereby the Company owns and
operates, as well as franchises a retail chain of optical stores which offer
eyecare products and services such as prescription and non-prescription
eyeglasses, eyeglass frames, ophthalmic lenses, contact lenses, sunglasses and a
broad range of ancillary items.

       LASER SURGERY: The laser surgery segment, whereby the Company owns and
administers the operation of laser surgery centers and provides access thereto,
for a fee, to affiliated ophthalmologists that utilize Insight's excimer lasers
in offering various laser vision correction procedures (i.e., myopia, hyperopia
and astigmatisms).

       AMBULATORY SURGERY CENTER: The Ambulatory Surgery Center segment, whereby
the Company owns substantially all of the tangible assets of a full-service
ambulatory surgery center located in Garden City, New York and renders
administrative and consulting services to the licensee thereof.

       Summarized financial information concerning the industry segments and
geographic areas in which the Company operated at December 31, 1999, 1998 and
1997 and for each of the years then ended is shown in the following tables (in
thousands):

                                       38
<PAGE>

                         OPERATIONS BY INDUSTRY SEGMENT

                                                        Ambulatory
                                   Retail      Laser     Surgery
                                  Optical     Surgery      Center    Total
                                 --------     -------   --------    -------
1999

Sales                             $17,602      $4,660    $   780    $23,042
Franchise related and other        11,979        -          -        11,979
                                 --------     -------   --------    -------

Total Revenues                     29,581       4,660        780     35,021
Operating Profit (Loss)              (272)      1,641        233      1,602
Identifiable Assets                28,483       2,442        162     31,087
Capital Expenditures                1,085         418       -         1,503
Depreciation and Amortization       1,654         718        118      2,490

1998

Sales                             $20,618      $1,964    $   581    $23,163
Franchise related and other        11,964        -          -        11,964
                                 --------     -------  ---------    -------

Total Revenues                     32,582       1,964        581     35,127
Operating Profit (Loss)            (1,853)        878        213       (762)
Identifiable Assets                29,360       2,973      2,161     34,494
Capital Expenditures                  587          20        184        791
Depreciation and Amortization       2,075         847         78      3,000

1997

Sales                             $21,603      $  799    $  -       $22,402
Franchise related and other        13,590        -          -        13,590
                                 --------     -------  ---------    -------

Total Revenues                     35,193         799       -        35,992
Operating Profit (Loss)            (1,657)        790       -          (867)
Identifiable Assets                41,734       4,109       -        45,843
Capital Expenditures                1,916          76       -         1,992
Depreciation and Amortization       1,551         759       -         2,310

       There were no intersegment sales for the years ended December 31, 1999,
1998 and 1997. No single customer represented more than ten percent of
consolidated revenues for the years ended December 31, 1999, 1998 and 1997.


NOTE 19 - RETAIL  OUTLET  COMPOSITION (UNAUDITED):

       In February 2000, the Company, subject to shareholder approval, amended
its Certificate of Incorporation so that the holders of the Company's Senior
Convertible Preferred Stock have the right to vote, as a single class with the
Common Stock, on an as-converted basis, on all matters on which the holders of
the Company's Common Stock are entitled to vote.

       The number of Company-owned and franchised stores were as follows:

                                                           As of December 31,
                                                       ------------------------
                                                          1999    1998    1997
                                                          ----    ----    ----
    Company-owned                                           30      35      50
    Company-owned stores being managed by franchisees        6       6       0
    Franchised                                             213     239     257
    Franchise owned stores being managed by Company          5      12       6
                                                          ----    ----   -----
                                                           254     292     313
                                                          ====    ====   =====

       The Company has the right to reacquire a franchised store upon the
occurrence of default under the applicable franchise agreement. The Company
reacquired the assets of 7, 4 and 4 franchised stores in 1999, 1998 and 1997,
respectively. Losses of approximately $0, $132,000 and $453,000 were recognized
in 1999, 1998 and 1997, respectively, on these reacquired stores, due to the
write-off of accounts receivable from the related franchisees.


NOTE 20 - SUBSEQUENT EVENTS (Unaudited):

       During the first quarter 2000, the Company reduced the debt to Broadway
Partners by $590,000. The remaining debt to Broadway Partners is $1,500,000.

       In the first quarter 2000, the Company notified STI of its intent to
satisfy and discharge, in full, its loan from STI; and the Company expects the
use of approximately $2,900,000 of the proceeds generated subsequent to year
end, which is the approximate amount necessary to pay off this loan, for such
purpose.

       In the first quarter 2000, Broadway Partners accepted, from the Company,
its offer of $550,000, to pay off the Benson Debenture.

       During the first quarter 2000, certain holders of the Company's Senior
Convertible Preferred Stock exercised their right to convert an aggregate of
$1,851,250 stated value of Senior Convertible Preferred Stock, into an aggregate
of 2,468,334 shares of the

                                       39
<PAGE>

Company's Common Stock.

       On February 25, 2000 certain of the holders of the Company's warrants,
issued in 1997, exercised their right to acquire an aggregate of 150,000 shares
of the Company's Common Stock. In addition, on February 26, 2000, approximately
130,000 of such warrants expired.

       In December 1999, the Company issued to MY2000, LLC (the "Holder") an
aggregate 2,500,000 warrants in exchange for such Holder's oral agreement to
render advisory services to the Company's Board of Directors with respect to its
new Internet business and strategy. On February 29, 2000, the Company agreed
that in the event the Holder should exercise its right to purchase all 2,500,000
shares of the Company's Common Stock covered by the original warrant within a
maximum period of thirty (30) days from the date thereof, the Company would
issue to the Holder an additional warrant to purchase an additional 2,500,000
shares of the Company's Common Stock at an exercise price of $10.875. As of
March 17, 2000, 1,000,000 of the December 1999 warrants were exercised. On March
29, 2000, the Company extended the thirty day period to sixty days.

       In December 1999, the Company paid an entity a non-refundable fee of
$1,000,000 and entered into an agreement for the development of the Company's
business to business website and related strategy. This agreement provided for,
among other things, the issuance by the Company of 1,000,000 shares of its
common stock to the entity, upon the completion of certain events between the
Company and the entity. This occurred and the Company issued such shares in
March 2000.

       During the first quarter 2000, the Company completed a Private Placement
pursuant to which it sold an aggregate of 1,697,570 units (the "Units"), each
Unit consisting of one (1) share of the Company's Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"), and one (1)
warrant (the "Warrant) to purchase one-half (1/2) of one share of Series B
Preferred Stock at an exercise price per one-half share equal to the greater of
$7.00 or $.10 above the average, composite closing prices of the shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), as
reported on the Nasdaq National Market System ("Nasdaq-NMS") during the five (5)
trading days immediately preceding the first issuance of such Warrants
($7.5875), exercisable from and after the expiration of the six (6) month period
following the date of the issuance thereof, for a period of five (5) years from
such date of issuance

       Each share of Series B Preferred Stock will automatically be 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 to 50,000,000 shares, which is subject to the Company's
receipt of the approval of a majority of its shareholders (the "Requisite
Shareholder Approval"), such approval to be sought by the Company at a Special
Meeting of Shareholders (the "Special Meeting") expected to be held on or about
April 17, 2000; prior to the date of filing of the amendment, the Series B
Preferred Stock will not be convertible into Common Stock. Each Warrant will
initially be exercisable for one-half share of Series B Preferred Stock;
however, upon the automatic conversion of the Series B Preferred Stock into
Common Stock (assuming the Company's receipt of the Requisite Shareholder
Approval), the Warrant (to the extent not previously exercised) will become
exercisable, at the same exercise price, for one whole share of Common Stock.

       The Private Placement resulted in approximately $10,600,000 of net
proceeds being paid to the Company, which proceeds will be used by the Company
in connection with its new Internet business.


                                       40

<PAGE>

                                    PART III

       Certain information required by Part III is omitted from this Report in
that the Registrant intends to file a Proxy Statement pursuant to Regulation 14A
of the Securities Exchange Act of 1934, as amended, not later than 120 days
after the end of the fiscal year covered by this Report, and certain information
included therein is incorporated herein by reference.

Item 10.  Directors and Executive Officers of the Registrant

       The information required by this Item regarding Directors, Executive
Officers, Promoters and Control Persons is set forth in Part I of this Report
under the heading "Executive Officers of the Registrant". The additional
information required by this Item will be set forth in the Company's Proxy
Statement for the 2000 Annual Meeting of Shareholders, which information is
hereby incorporated herein by reference.

Item 11.  Executive Compensation

       The information required by this Item will be set forth in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders, which information
is hereby incorporated herein by reference, including the Stock Price
Performance Graph and the Compensation Committee Report on Executive
Compensation.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

       The information required by this Item will be set forth in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders, which information
is hereby incorporated herein by reference.

                                       41
<PAGE>

Item 13.  Certain Relationships and Related Transactions

       The information required by this Item will be set forth in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders, which information
is hereby incorporated herein by reference.

Optical Dynamics

       Certain members of the families of Drs. Robert and Alan Cohen
collectively own an approximately 5% interest in Optical Dynamics Corporation
(f/k/a Fast Cast Corporation and Rapid Cast), of which Dr. Robert Cohen serves
as a director. Optical Dynamics sells equipment to produce ophthalmic lenses,
which lenses are made from a patented liquid monomer which must also be
purchased through Optical Dynamics. Until February 1, 1997, the Company operated
a laboratory at which ophthalmic lenses were manufactured, on Optical Dynamics
equipment, using such patented monomer (see "Transactions with Dura-Lab, Inc.").

Cohen Fashion Optical

       Drs. Robert and Alan Cohen are officers and directors of Cohen Fashion
Optical, Inc. ("CFO") and Real Optical Purchasing Corp. ("REAL"). CFO, which has
been in existence since 1978, owns a chain of company-operated and franchised
retail optical stores doing business under the name "Cohen's Fashion Optical."
As of April 15, 1999, CFO had 66 franchised stores and 26 company-owned stores
(including one store operated by an affiliate of CFO); and REAL, which has been
in existence since 1984, had five company-owned stores. In addition, CFO also
licenses to retail optical stores the right to operate under the name "Cohen's
Kids Optical" or "Ultimate Spectacle." As of April 15, 1999, there were 3
Ultimate Spectacle stores located in the State of New York and one Cohen's Kids
Optical store located in the State of Florida. CFO and REAL stores are similar
to the Company's retail optical stores. CFO has been offering franchises since
1979 and currently has retail optical stores in the states of Connecticut,
Florida, New Hampshire, Massachusetts, New Jersey and New York. In the future,
Cohen's Fashion Optical, Cohen's Kids Optical or Ultimate Spectacle stores may
be located in additional states. As of April 15, 1999, approximately 25 CFO
stores were located in the same shopping center or mall as, or in close
proximity to, the Company's retail optical stores. It is possible that one or
more additional Cohen's Fashion Optical stores, Cohen's Kids Optical stores or
Ultimate Spectacle stores may, in the future, be located near one or more of the
Company's retail optical stores, thereby competing directly with such of the
Company's stores. In addition, the Company's stores and certain of CFO's stores
jointly participate, as providers, under certain third party benefit plans
obtained by either Sterling or CFO, which arrangement is anticipated to continue
in the future.

       On April 9, 1997, the Independent Committee recommended, and the Board of
Directors (with Drs. Robert and Alan Cohen abstaining) approved, of the Company
entering into an eight and on-half (8 1/2) month consulting agreement with
Meadows Management, LLC, a limited liability company owned by Drs. Robert and
Alan Cohen ("MML"). Said agreement provided for compensation computed at the
rate of three hundred thousand ($300,000) dollars per annum, and for the
granting, to each of Drs. Robert and Alan Cohen, as the designees of MML, of
options, each having a term of five years, to each purchase 150,000 shares of
the Company's Common Stock at an exercise price equal to the closing price of
the Company's Common Stock as of the date of such approval ($8.9375). The
granting of said options was approved by the Company's shareholders at the 1997
Annual Meeting, were issued under the Company's 1995 Stock Incentive Plan and
will vest as follows: one-half (50%) immediately (April 9, 1997); and an
additional one-sixth (16.67%) on each of April 9, 1998, 1999 and 2000.

       On May 15, 1998, CFO subleased to the Company its retail optical store
located in Albany, New York (the "Albany Store"), including its furniture,
fixtures and equipment; and, in May 1999, the Company sold to CFO the assets of
one of its stores located in New York City (including the lease therefor) for
the assets of the Albany Store (including the lease therefor) and such sublease
was terminated.

Agreements and Transactions Between the Company and the Cohen Family

       During the calendar year ended December 31, 1999, certain of CFO's
employees rendered certain real estate and construction supervisory services to
the Company in exchange for a fee paid by the Company. In addition, during the
calendar year ended December 31, 1999, CFO purchased products fabricated from
the Company's poster reproduction system. The Company believes that the terms of
these transactions were as favorable to the Company as could have been obtained
from an unrelated party.

       An entity owned by Drs. Robert, Alan and Edward Cohen is the lessee of an
office building located in East Meadow, New York. In April, 1996, the Company
relocated all of its corporate offices to this building and initially subleased
approximately 22,000 square feet (approximately 60% of the building), on a "net
lease" basis, for a term of ten years at an aggregate base rental (in addition
to a pro rata share of the building's real estate taxes and costs of operations)
of $221,796 for the first three years, which amount increases gradually over the
remainder of the term of the sublease. In February, 1998, the Company and such
entity voluntarily agreed to reduce such space by approximately 2,500 square
feet and, in connection therewith, agreed on a pro-rata reduction of such
occupancy costs. The balance of the space not utilized by the Company is
subleased to CFO, an investment banking firm owned, in part, by Dr. Robert
Cohen's son-in-law, and two unrelated third parties. The Company believes that
the Company's rent with respect

                                       42
<PAGE>

to such space is equal to the fair market rental
value of such space. Such transaction was approved by the Independent Committee
on February 23, 1996.

       In November, 1998, Broadway Partners ("Broadway"), a New York partnership
owned by certain of Dr. Robert and Alan Cohen's children, accepted an offer to
purchase, from the holder thereof, the Company's Non-Negotiable Subordinated
Convertible Debentures issued in connection with its acquisition of
substantially all of the retail optical assets of Benson Optical Co., Inc. and
its affiliates, for the approximate sum of $203,000.00 (see Note 19).

       On October 14, 1998, the Board of Directors authorized the Company to
borrow up to $2 million from Broadway. The loans are payable, on demand,
together with interest, calculated at the rate of twelve (12%) percent per
annum, and are secured by a first lien upon, and security interest in, the
assets of the Company's ambulatory surgery center located in Garden City, New
York.

Matter Relating to Joel Gold

         In connection with the Company's issuance and private placement, in
February, 1997, of its Convertible Debentures, Due August 25, 1998, the Company
paid to L. T. Lawrence & Co., Inc. a fee of $480,000. Joel Gold, a Director of
the Company, was a Managing Director of L. T. Lawrence & Co., Inc. at such time.

Franchise Interest by Certain Members of Management and their Families

       Joseph Silver, together with his wife, are the shareholders of RJL
Optical, Inc. ("RJL"), the franchisee of the Sterling Optical Center located in
Great Neck, New York. In November, 1995, RJL entered into a management agreement
whereby the Company operates such store on behalf of RJL in exchange for the
payment to it of a fee, equal to 5% of the gross revenues of the store, subject
to such store generating sufficient cash flow proceeds to pay such amount. In
addition, RJL has agreed to sell the assets of, and the franchise for, its
Sterling Optical Center at a certain established, minimum purchase price.

Transactions with Dura-Lab, Inc.

       In February, 1997, the Company, in connection with the closing of its
Roslyn, New York laboratory facility, delivered and orally agreed to sublease to
Dura-Lab, Inc. ("Dura-Lab"), a company owned, in part, by Jeffrey Cohen, a
principal shareholder of the Company and the son of Dr. Robert Cohen, four of
its Optical Dynamics' lens manufacturing systems at a rental less than the
amount of rent payable by the Company under the equipment leases pursuant to
which the Company financed the cost of such systems, which lesser amount was
agreed to by the Company due to the age and condition of the systems delivered
to Dura-Lab.

       In addition to the foregoing, in March, 1997, the Company commenced
purchasing a portion of its ophthalmic lenses from Dura-Lab at prices which the
Company believes to be not more than those charged by other distributors of
similar type lenses.

Tax Indemnities

       In connection with the Company's initial public offering, the Company
agreed to indemnify the shareholders of the Company immediately prior to the
Company's initial public offering for any tax liability arising from a
determination, after consummation of the initial public offering, that the
Company's reported income was understated for any period prior to the
consummation of the initial public offering; provided that such indemnity is
limited to an adjustment equal to the amount by which the Company's deferred tax
liability is reduced as a result of such determination. Additionally, if and to
the extent any shareholder, who was a shareholder immediately prior to the
Company's initial public offering, receives a tax refund as a result of a
determination, after consummation of the initial public offering, that the
Company's reported income was overstated for any period prior to the
consummation of the initial public offering, such shareholder will be required
to pay such amount to the Company.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)The following documents are filed as a part of this Report:

1.  Financial Statements.

      Consolidated Balance Sheets as of December 31, 1999 and 1998

      Consolidated Statements of Income for the Years Ended December 31, 1999
      1998 and 1997


                                       43
<PAGE>

      Consolidated Statements of Shareholders' Equity for the Years Ended
      December 31, 1999, 1998 and 1997

      Consolidated Statements of Cash Flows for the Years Ended December 31,
      1999, 1998 and 1997

      Notes to Consolidated Financial Statements

2.  Financial Statement Schedules:

       All financial statement schedules have been omitted because they are not
applicable, are not required, or the information required to be set forth
therein is included in the Consolidated Financial Statements or Notes thereto.

3.  Exhibits

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number

<S>        <C>
3.1    -   Amended and Restated Certificate of Incorporation of Sterling Vision, Inc., dated December 18, 1995 (incorporated by
           reference to Exhibit 3.1 to the Company's Annual Report on Form 10K/A for the calendar year ended December 31, 1995, File
           No. 1-14128).

3.2    -   Amended and Restated  By-Laws of Sterling Vision,  Inc.,  dated December 18, 1995  (incorporated by reference to Exhibit
           3.2 to the Company's Annual Report on Form 10K/A for the calendar year ended December 31, 1995, File No. 1-14128).

4.1    -   Specimen of Common Stock Certificate  (incorporated by reference to Exhibit 4.1 to the Company's  Registration Statement
           No. 33-98368).

4.2    -   Form of Convertible Debentures and Warrants Subscription Agreement (Incorporated by reference to Exhibit 4.2 of the
           Registrant's Current Report on Form 8-K, dated February 17, 1998).

10.1   -   Credit Agreement between Sterling Vision, Inc. and Chemical Bank, dated as of April 5, 1994 (the "Credit Agreement")
           (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement No. 33-98368).

10.2   -   Sterling Vision, Inc.'s 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's
           Registration Statement No. 33-98368).

10.3   -   Form of Sterling Vision, Inc.'s Franchise Agreement (incorporated by reference to Exhibit 10.3 to the Company's
           Registration Statement No. 33-98368).

10.4   -   Settlement Agreement between Sterling Vision, Inc. and Neal Polan, dated as of August 31, 1994 (incorporated by reference
           to Exhibit 10.4 to the Company's Registration Statement No. 33-98368)

10.5   -   Lease Agreements between Neptune Technology Leasing Corp. and Sterling Vision, Inc., Sterling Vision of California, Inc.
           and Sterling Vision, Inc., as successor in interest to CFO (incorporated by reference to Exhibit 10.5 to the Company's
           Registration Statement No. 33-98368).

10.6   -   Assignment and Assumption of Equipment Lease by and between Cohen Fashion Optical, Inc. and Sterling Vision, Inc.
           (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement No. 33-98368).

10.7   -   Form of Purchase Order between Summit Technology, Inc. and Sterling Vision, Inc. (incorporated by reference to Exhibit
           10.7 to the Company's Registration Statement No. 33-98368).

10.8   -   Form of Summit Laser Patent License Agreement (incorporated by reference to Exhibit 10.8 to the Company's Registration
           Statement No. 33-98368).

10.9   -   Lease of 10 Peninsula Blvd., Lynbrook, N.Y. (incorporated by reference to Exhibit 10.9 to the Company's Registration
           Statement No. 33-98368).
</TABLE>

                                       44
<PAGE>

<TABLE>

<S>        <C>
10.10  -   Underwriters' Warrant Agreement, including form of Warrant (incorporated by reference to Exhibit 10.10 to the Company's
           Registration Statement No. 33-98368).

10.11  -   Referral Agreement between Cohen Fashion Optical, Inc. and Sterling Vision, Inc. (incorporated by reference to Exhibit
           10.11 to the Company's Registration Statement No. 33-98368).

10.12  -   Robert Greenberg Promissory Notes, dated August 19, 1994, as amended, August 19, 1994, and August 31, 1994, respectively
           (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement No. 33-98368).

10.13  -   Purchase Agreement between Sterling Vision, Inc. and RJL Optical, Inc. and Franchise Agreement related thereto
           (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement No. 33-98368).

10.14  -   Purchase Agreement between Sterling Vision, Inc. and Dani-Marc Optical, Inc. and Franchise Agreement related thereto
           (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement No. 33-98368).

10.15  -   Purchase Agreement between Sterling Vision, Inc. and Jeffrey Rubin, and Franchise Agreement and Management Agreement
           related thereto (incorporated by reference to Exhibit 10.15 to the Company's Registration Statement No. 33-98368).

10.16  -   Management Agreement, dated October 31, 1995, between Sterling Vision, Inc. and RJL Optical, Inc. (incorporated by
           reference to Exhibit 10.16 to the Company's Registration Statement No. 33-98368).

10.17  -   Amended and Restated Management Agreement, dated October 31, 1995, between Sterling Vision, Inc. and Jeffrey Rubin
           (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement No. 33-98368).

10.18* -   Employment Agreement, dated November 27, 1995, between Sterling Vision, Inc. and Joseph Silver (incorporated by reference
           to Exhibit 10.18 to the Company's Registration Statement No. 33-98368).

10.19* -   Employment Agreement, dated November 18, 1995, between Sterling Vision, Inc. and Kevin Cambra (incorporated by reference
           to Exhibit 10.19 to the Company's Registration Statement No. 33-98368).

10.20* -   Employment Agreement, dated November 18, 1995, between Sterling Vision, Inc. and Sebastian Giordano (incorporated by
           reference to Exhibit 10.20 to the Company's Registration Statement No. 33-98368).

10.21* -   Employment Agreement, dated November 27, 1995, between Sterling Vision, Inc. and Jerry Darnell (incorporated by reference
           to Exhibit 10.21 to the Company's Registration Statement No. 33-98368).

10.22* -   Employment Agreement, dated November 27, 1995, between Sterling Vision, Inc. and Robert Greenberg (incorporated by
           reference to Exhibit 10.22 to the Company's Registration Statement No. 33-98368).

10.23* -   Legal Fee Retainer Agreement, dated November 27, 1995, between Sterling Vision BOS, Inc. and Sterling Vision of
           California, Inc., and Joseph Silver (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement
           No. 33-98368).

10.24  -   Seventh Amendment to the Credit Agreement between Sterling Vision, Inc. Chemical Bank (incorporated by reference to
           Exhibit 10.24 to the Company's Registration Statement No. 33-98368).

10.25  -   Waiver, dated as of November 28, 1995, to the Credit Agreement, between Sterling Vision, Inc. and Chemical Bank
           (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement No. 33-98368).

10.26  -   Sixth Amendment, dated as of October 24, 1995, to the Credit Agreement between Sterling Vision, Inc. and Chemical Bank
           (incorporated by reference to Exhibit 10.26 to the Company's Registration Statement No. 33-98368).

10.27  -   Fifth Amendment and Waiver, dated as of September 15, 1995, to the Credit Agreement between Sterling Vision, Inc. and
           Chemical Bank (incorporated by reference to Exhibit 10.27 to the Company's Registration Statement No. 33-98368).

10.28  -   Waiver, dated as of August 8, 1995, to the Credit Agreement between Sterling Vision, Inc. and Chemical Bank (incorporated
           by reference to Exhibit 10.28 to the Company's Registration Statement No. 33-98368).
</TABLE>
--------
* Constitutes a management contract or compensatory plan or arrangement.

                                       45
<PAGE>

<TABLE>

<S>        <C>

10.29  -   Fourth Agreement and Waiver, dated as of April 25, 1995, to the Credit Agreement between Sterling Vision, Inc. and
           Chemical Bank (incorporated by reference to Exhibit 10.29 to the Company's Registration Statement No. 33-98368).

10.30  -   Third Amendment and Waiver, dated as of March 30, 1995, to the Credit Agreement between Sterling Vision, Inc. and
           Chemical Bank (incorporated by reference to Exhibit 10.30 to the Company's Registration Statement No. 33-98368).

10.31  -   Second Amendment and Waiver, dated as of September 30, 1994, to the Credit Agreement between Sterling Vision, Inc. and
           Chemical Bank (incorporated by reference to Exhibit 10.31 to the Company's Registration Statement No. 33-98368).

10.32  -   First Amendment and Waiver, dated as of July 26, 1994, to the Credit Agreement between Sterling Vision, Inc. and Chemical
           Bank (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement No. 33-98368).

10.33  -   Schedule No. 2 to Master Lease Agreement No. 1580, dated as of August 31, 1995, between BLT Leasing Corp. and Sterling
           Vision, Inc. (incorporated by reference to Exhibit 10.33 to the Company's Registration Statement No. 33-98368).

10.34  -   Order (1) Approving Sale of Assets and (2) Granting Related Relief in Re: OCA Acquisition, Inc. Case No. 395-35856-RCM 11
           and Benson Optical Co., Inc. Case NO. 395-35857-SAF-11 and Superior Optical Company, Inc. Case No. 395-36572-SAF 11,
           Jointly Administered under Case No. 395-35856-RCM-11, filed November 6, 1995 in the Bankruptcy Court for the Northern
           District of Texas, Dallas Division (incorporated by reference to Exhibit 10.34 to the Company's Registration Statement
           No. 33-98368).

10.35  -   Asset Purchase Agreement, dated August 26, 1994, between Pembridge Optical Partners, Inc. and Sterling Vision, Inc.
           (incorporated by reference to Exhibit 10.35 to the Company's Registration Statement No. 33-98368).

10.36  -   Asset Purchase Agreement, dated October 24, 1995, between Sterling Vision BOS, Inc. and Benson Optical Co., Inc., OCA
           Acquisition, Inc. n/k/a Optical Corporation of America, and Superior Optical Company, Inc. (incorporated by reference to
           Exhibit 10.36 to the Company's Registration Statement No. 33-98368).

10.37  -   Convertible, Callable, Subordinated Debenture Due September 15, 2015, made by Sterling Vision, Inc. and payable to Benson
           Eyecare Corp. (incorporated by reference to Exhibit 10.37 to the Company's Registration Statement No. 33-98368).

10.38  -   Assignment, by Benson Eyecare Corp. to Sterling Vision, Inc., of that certain Security Agreement, dated October 20, 1994,
           between Benson Eyecare Corp. and OCA Acquisition, Inc., dated September 15, 1995 (incorporated by reference to Exhibit
           10.38 to the Company's Registration Statement No. 33-98368).

10.39  -   Assignment, dated September 15, 1995, by Benson Eyecare Corporation to Sterling Vision, Inc. of that certain Revolving
           Credit Note (incorporated by reference to Exhibit 10.39 to the Company's Registration Statement No. 33-98368).

10.40  -   Assignment, dated September 15, 1995, by Benson Eyecare Corporation to Sterling Vision, Inc. of that certain Subordinated
           Promissory Note made by OCA Acquisition Inc. (incorporated by reference to Exhibit 10.40 to the Company's Registration
           Statement No. 33-98368).

10.41  -   Assignment, dated September 15, 1995, by Benson Eyecare Corporation to Sterling Vision, Inc. of Benson Eyecare
           Corporation's rights, title and interest in certain trade receivables (incorporated by reference to Exhibit 10.41 to the
           Company's Registration Statement No. 33-98368).

10.42  -   Note Purchase Agreement, dated September 15, 1995, between Benson Eyecare Corporation and Sterling Vision, Inc.
           (incorporated by reference to Exhibit 10.42 to the Company's Registration Statement No. 33-98368).

10.43* -   Employment Agreement, dated as of April 1, 1994, between VisionCare of California and Martin J. Shoman, as amended by a
           Letter Agreement, dated May 12, 1994 (incorporated by reference to Exhibit 10.44 to the Company's Registration Statement
           No. 33-98368).

10.44  -   Eighth Amendment and Waiver, dated as of December 19, 1995, to the Credit Agreement, between Sterling Vision, Inc. and
           Chemical Bank (incorporated by reference to Exhibit 10.45 to the Company's Registration Statement No. 33-98368).

10.45  -   Tax Agreement, dated as of December 19, 1995, between Sterling Vision, Inc. and the shareholders of Sterling Vision, Inc.
           (incorporated by reference to Exhibit 10.46 to the Company's Registration Statement No. 33-98368).
</TABLE>
--------
* Constitutes a management contract or compensatory plan or arrangement.

                                       46
<PAGE>

<TABLE>

<S>        <C>

10.46  -   Form of Franchisee Stockholder Agreement to be entered into between Sterling Vision, Inc. and certain of its Franchisees
           (incorporated by reference to Exhibit 10.47 to the Company's Registration Statement No. 33-98368).

10.47  -   Non-Qualified Stock Option Agreement between Sterling Vision, Inc. and Neal Polan (incorporated by reference to Exhibit
           10.48 to the Company's Registration Statement No. 33-98368).

10.48* -   Stock Purchase Agreement, dated as of December 18, 1995, between Sterling Vision, Inc. and Robert Cohen, Alan Cohen,
           Edward Cohen, Stefanie Cohen Rubin, Allyson Cohen, Jeffrey Cohen, Richard Cohen, Abby Cohen May, Jennifer Cohen, Meryl
           Cohen a/c/f Gabrielle Cohen and Meryl Cohen a/c/f Jaclyn Cohen (incorporated by reference to Exhibit 10.49 to the
           Company's Registration Statement No. 33-98368).

10.50  -   Stock Purchase Agreement, dated as of December 18, 1995, between Sterling Vision, Inc. and Neal Polan (incorporated by
           reference to Exhibit 10.51 to the Company's Registration Statement No. 33-98368).

10.51  -   Multiple Franchise Agreement, dated February 7, 1996, between Leonard Vainio and the Company (incorporated by reference
           to Exhibit 10.51 to the Company's Annual Report on Form 10K/A for the calendar year ended December 31, 1995, File No.
           1-14128).

10.52  -   Sublease, dated November 29, 1995, as amended, between Conopco, Inc. and the Company with respect to the Insight Laser
           Center to be located at 725 Fifth Avenue, New York, New York (incorporated by reference to Exhibit 10.52 to the Company's
           Annual Report on Form 10K/A for the calendar year ended December 31, 1995, File No.1-14128).

10.53  -   Sublease, dated February 27, 1996, between 1500 Hempstead Tpke., L.L.C. and the Company with respect to the Company's new
           office facilities to be located at 1500 Hempstead Turnpike, East Meadow, New York (incorporated by reference to Exhibit
           10.53 to the Company's Annual Report on Form 10 K/A for the calendar year ended December 31, 1995, File No. 1-14128).

10.54  -   Sales Agreement, dated January 31, 1996, between Insight Laser Centers, Inc. and VISX Incorporated, together with the
           form of VISX Patent and Software License Agreement to be entered into in connection therewith (incorporated by reference
           to Exhibit 10.54 to the Company's Annual Report on Form 10K/A for the calendar year ended December 31, 1995, File No.
           1-14128).

10.55  -   Waiver, dated as of March 25, 1996, to the Credit Agreement between Sterling Vision, Inc. and Chemical Bank (incorporated
           by reference to Exhibit 10.55 to the Company's Annual Report on Form 10K/A for the calendar year ended December 31, 1995,
           File No. 1-14128).

10.56* -   Employment Agreement, dated March 8, 1996, between Sterling Vision, Inc. and Mr. Ali Akbar (incorporated by reference to
           Exhibit 10.56 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, File No. 1-14128).

10.57  -   Employment Agreement, dated March 29, 1996, between Sterling Vision, Inc., Insight Laser Centers, Inc. and Dr. Francis A.
           L'Esperance, Jr., M.D. (Incorporated by reference to Exhibit 10.57 to the Company's Quarterly Report on Form 10-Q for the
           quarter ended March 31, 1996, File No. 1-14128).

10.58  -   Laser Access Agreement, dated March 28, 1996, between Insight Laser Centers, Inc. and Nassau Ophthalmic Services, P.C.
           (incorporated by reference to Exhibit 10.58 to the Company's Quarterly Report on Form 10-Q for the quarter ended
           March 31, 1996, File No. 1-14128).

10.59  -   Assignment and Assumption of Lease Agreement ("VCA" Company Store Leases"), dated June 7, 1996, between VCA and certain
           of its affiliates and DKM (incorporated by reference to Exhibit 10.59 to the Company's Quarterly Report on Form 10-Q for
           the quarter ended June 30, 1996, File No. 1-14128).

10.60  -   Assignment and Assumption of Lease Agreement ("VCA" Company Store Leases"), as amended by a Letter Agreement, dated June
           10, 1996, between VCA and certain of its affiliates and DKM (incorporated by reference by to Exhibit 10.60 to the
           Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-14128).

10.61  -   Assignment and Assumption of Lease Agreement ("VCA Franchised Store Leases") as amended by a Letter Agreement, dated July
           11, 1996 (incorporated by reference to Exhibit 10.61 to the Company's Quarterly Report on Form 10-Q for the quarter ended
           June 30, 1996, File No. 1-14128).
</TABLE>

                                       47
<PAGE>

<TABLE>

<S>        <C>
10.62  -   Assignment, dated June 19, 1996, by Bank One Kentucky, N.A. (Assignor") to DKM, all of Assignor's right, title and
           interest in and to that certain Revolving Credit Loan Agreement and Security Agreement, dated January 10, 1992, between
           the Assignor and Duling Optical Corporation, et. al. (incorporated by reference to Exhibit 10.62 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-14128).

10.63  -   First Amendment to the Company's 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.63 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-14128).

10.64  -   Purchase and Sale Agreement, dated September 30, 1996, between Eye Site (Ontario) Ltd. And the Company (incorporated by
           reference to Exhibit 10.64 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 , File
           No. 1-14128).

10.65  -   Master Franchise Agreement, dated September 30, 1996, between Eye Site, Inc., and Eye Site (Ontario) Ltd. and the Company
           (incorporated by reference to Exhibit 10.65 to the Company's Quarterly Report on Form 10-Q for the quarter ended
           September 30, 1996, File No. 1-14128).

10.66  -   Form of Promissory Notes, dated November 29, 1996, between the Company and each of Drs. Edward, Robert and Alan Cohen.
           (incorporated by reference to the Company's Annual Report on Form 10-K for the Year Ended December 31, 1996).

10.67  -   Ninth Amendment, dated November 29, 1996, to the Credit Agreement between the Company and Chase Manhattan Bank.
           (incorporated by reference to the Company's Current Report on Form 8-K, dated November 29, 1996).

10.68  -   Tenth Amendment and Waiver, dated February 26, 1997, to the Credit Agreement between the Company and Chase Manhattan
           Bank. (incorporated by reference to the Company's Annual Report on Form 10-K for the Year Ended December 31, 1996).

10.69  -   Form of Convertible Debentures and Warrants Subscription Agreement, dated February 26, 1997 (incorporated by reference to
           Exhibit 4.1 to the Company's Current Report on Form 8-K, dated February 26, 1997).

16.1   -   Letter, dated March 4, 1996, from Janover Rubinroit LLC, the former independent certified public accountant for the
           Company (incorporated by reference to Exhibit 16 to the Company's Current Report on Form 8-K dated March 7, 1996).

10.70  -   Eleventh Amendment and Waiver, dated April 1, 1997, to the Credit Agreement between the Company and Chase Manhattan Bank
           (incorporated by reference to Exhibit 10.70 to the Company's Current Report on Form 8-K, dated April 7, 1997).

10.71  -   Agreement and Plan of Reorganization, dated February 19, 1997, as amended, among the Company and Messrs., David, Alan and
           Sidney Singer (incorporated by reference to Exhibit 10.71 to the Company's Current Report on Form 8-K, dated April 7,
           1997).

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

10.73  -   Letter Agreement, dated July 2, 1997, among the Company and Messrs. Sidney, Alan and David Singer (incorporated by
           referenced to Exhibit 10.73 to the Company's Current Report on Form 8-K, dated June 30, 1997).

10.74  -   Form of Non-Negotiable Judgment Note, dated July 1, 1997, among the Company and Messrs. Sidney, Alan and David Singer
           (incorporated by reference to Exhibit 10.74 to the Company's Current Report on Form 8-K, dated June 30, 1997).

10.75  -   First Amendment to Loan Agreement, dated October 9, 1997, between the Company and STI Credit Corporation (Incorporated by
           reference to Exhibit 10.75 to the Company's Current Report on Form 8-K, dated September 30, 1997).

10.76  -   Stock Option Recission Letters, dated August 13, 1997, from each of Drs. Robert, Alan and Edward Cohen and Mr. Jay
           Fabrikant (Incorporated by reference to Exhibit 10.76 to the Company's Current Report on Form 10-Q, dated September 30,
           1997).

10.77  -   Waiver, dated April 14, 1998, to the Company's Loan Agreement, dated June 30, 1997, as previously amended on October 9,
           1997.

10.78  -   Exchange Agreement, dated April 14, 1998, between the Registrant and the Original Holders of the Registrant's Convertible
           Debentures Due February 17, 1999 (Incorporated by reference to Exhibit 10.78 to the Company's Current Form on 8-K, dated
           April 14, 1998).
</TABLE>

                                       48
<PAGE>

<TABLE>

<S>        <C>
10.79  -   Contract of Sale, dated May 6, 1998, between Insight Laser Centers N.Y.I, Inc. and Nassau Center for Ambulatory Surgery,
           Inc. (Incorporated by reference to Exhibit 10.79 to the Company's Current Report on Form 8-K, dated May 6, 1998).

10.80  -   Contract of Sale, dated May 6, 1998, between Insight AmSurg Centers, Inc. and Nassau Center for Ambulatory Surgery, Inc.
           (Incorporated by reference to Exhibit 10.80 to the Company's Current Report on Form 8-K, dated May 6, 1998).

10.81  -   Settlement Agreement, dated July 31, 1998, between the Registrant, Singer Specs, Inc. and Messrs. Sidney, Alan and David
           Singer (Incorporated by reference to Exhibit 10.83 to the Company's Current Report on Form 8-K, dated July 31, 1998).

10.82  -   Employment Agreement, dated as of March 2, 1998, between the Company and William J. Young (Incorporated by reference to
           Exhibit 10.82 of the Company's Quarterly Report on Form 10K/A for the Quarter Ended March 31, 1998).

10.83  -   Letter from Deloitte & Touche LLP, dated May 12, 1998, in response to the Company's Current Report on Form 8-K, dated May
           1, 1998 (Incorporated by reference to Exhibit 16 to the Company's Current Report on Form 8-K/A, dated May 13, 1998).

10.84  -   First Amendment to Convertible Preferred Stock and Warrants Subscription Agreement, dated January 4, 1999 (Incorporated
           by reference to Exhibit 10.78 to the Company's Current Report on Form 8-K, dated January 4, 1999).

10.85  -   Second Amendment to Convertible Preferred Stock and Warrants Subscription Agreement, dated March 4, 1999 (Incorporated by
           reference to Exhibit 10.79 to the Company's Current Report on Form 8-K, dated March 4, 1999).

10.86  -   Waiver, dated April 13, 1999, to the Registrant's Loan Agreement with STI Credit Corp., dated June 30, 1997, as
           previously amended on October 9, 1997 and April 14, 1998 (Incorporated by reference to Annual Report on Form 10-K for
           the year ended December 31, 1998).

10.87  -   Employment Agreement, dated as of August 20, 1999, between Insight Laser Center, Inc. and Robert Greenberg (Incorporated
           by reference to Exhibit 10.79 to the Company's Current Report on Form 8-K, dated August 20, 1999).

                                       49
<PAGE>


10.88  -   Employment Agreement, dated as of August 20,1999, between Insight Laser Centers, Inc. and Kim Greenberg (Incorporated by
           reference to Exhibit 10.88 to the Company's Current Report on Form 8-K, dated August 20, 1999).

10.89  -   Press Release, dated December 7, 1999 (Incorporated by reference to Exhibit 10.89 to the Company's Current Report on Form
           8-K, dated December 7, 1999).

10.90  -   Third Amendment to Convertible Preferred Stock and Warrants Subscription Agreement, dated December 7, 1999 (Incorporated
           by reference to Exhibit 10.90 to the Company's Current Report on Form 8-K, dated December 7, 1999).

10.91  -   Form of Engagement Letter, dated December 16, 1999, between the Company and Rare Medium, Inc. (Incorporated by reference
           to Exhibit 10.91 to the Company's Current Report on Form 8-K/A, dated December 16, 1999).

10.92  -   Press Release, dated December 17, 1999 (Incorporated by reference to Exhibit 10.92 to the Company's Current Report on
           Form 8-K/A, dated December 16, 1999).

10.93  -   Form of Warrant, dated December 16, 1999, in favor of MY2000, LLC (Incorporated by reference to Exhibit 10.93 to the
           Company's Current Report on Form 8-K/A, dated December 16, 1999).

10.94  -   Form of Certificate of Amendment of the Certificate of Incorporation of the Company, dated February 8, 2000 (Incorporated
           by reference to Exhibit 10.94 to the Company's Current Report on Form 8-K, dated February 8, 2000).

10.95  -   Press Release, dated February 15, 2000, with respect to the Agreement entered into with RMI (Incorporated by reference to
           Exhibit 10.95 to the Company's Current Report on Form 8-K, dated February 8, 2000).

10.96  -   Form of Certificate of Amendment of the Certificate of Incorporation of the Company, dated February 4, 2000 (Incorporated
           by reference to Exhibit 10.96 to the Company's Current Report on Form 8-K, dated February 8, 2000).

21         List of Subsidiaries.

27         Financial Data Schedule.
</TABLE>

b.)  Reports on Form 8-K

<TABLE>

     <S>   <C>
     1)    On March 7, 1996, the Registrant filed a Report on Form 8-K with respect to the appointment of Deloitte & Touche as
           principal accounting firm for SVI.

     2)    On May 30, 1996, the Registrant filed a Report on Form 8-K with respect to the D&K Purchase.

     3)    On November 29, 1996,  the Registrant  filed a Report on Form 8-K with respect to Cohen Loan and Ninth  Amendment and
           Waiver between Registrant and The Chase Manhattan Bank.

     4)    On February 26, 1997, the Registrant filed a Report on Form 8-K with respect to its Private Placement.

     5)    On April 7, 1997, the Registrant filed a Report on Form 8-K with respect to Singer Agreement and Plan of Reorganization.

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

     7)    On  August  11,  1997,  the  Registrant  filed a Report  on Form 8-K with  respect  to the  Private  Placement,  the
           Singer Transaction and the BEC Agreement.

     8)    On February 17, 1998, the Registrant filed a Report on Form 8-K with respect to Debentures.

     9)    On April 14, 1998, the Registrant filed a Report on Form 8-K with respect to Exchange Agreement and Preferred Stock.

     10)   On May 1, 1998, the Registrant filed a Report on Form 8-K with respect to change of Auditors - Arthur Andersen LLP.

     11)   On May 6, 1998, the Registrant  filed a Report on Form 8-K with respect to Insight Laser Centers N.Y. I, Inc.'s  purchase
           of the assets of Nassau  Center for  Ambulatory  Surgery,  Inc.  and  Contract of Sale  between  Nassau  Center for
           Ambulatory Surgery, Inc. and Insight AmSurg Centers, Inc.

     12)   On May 13, 1998,  the  Registrant  filed a Report on Form 8-K/A with respect to Form 8-K,  dated May 1, 1998 and letter
           from Deloitte & Touche LLP.
</TABLE>

                                       50
<PAGE>

<TABLE>

     <S>   <C>
     13)   On July 31, 1998, the Registrant filed a Report on Form 8-K with respect to Settlement Agreement between Sterling Vision,
           Inc., Singer Specs, Inc. and Messrs. Sidney, David and Alan Singer.

     14)   On August 10,  1998,  the  Registrant  filed a Report on Form 8-K with  respect to the  resignation  of Jay  Fabrikant as
           a Director of Sterling Vision, Inc.

     15)   On September 18, 1998, the Registrant  filed a Report on Form 8-K with respect to the  resignation of Jerry Lewis and
           change of executive officers.

     16)   On January 14, 1999, the Registrant filed a Report on Form 8-K with respect to the First Amendment to its Convertible
           Preferred Stock and Warrants Subscription Agreements.

     17)   On March 4, 1999, the Registrant filed a Report on Form 8-K with respect to the Second Amendment to its Convertible
           Preferred Stock and Warrants Subscription Agreement.

     18)   On August 20, 1999, the Registrant filed a Report on Form 8-K with respect to a series of transactions between Insight
           Laser Centers, Inc., and RBG Consulting, Ltd. and its principal shareholders.

     19)   On December 13, 1999, the Registrant filed a Report on Form 8-K with respect to the Press Release regarding the Amendment
           to its Convertible Preferred Stock and Warrants Subscription Agreement.

     20)   On December 23, 1999, the Registrant filed a Report on Form 8-K with respect to: (i) the Form of Engagement Letter, dated
           December 16, 1999, between the Registrant and Rare Medium, Inc.; (ii) Press Release, dated December 17, 1999; and (iii)
           Form of Warrant, dated December 16, 1999, in favor of MY2000, LLC.

     (21)  On January 10, 2000, the Registrant filed a Report on Form 8-K/A with respect to: (i) the Form of Engagement Letter,
           dated December 16, 1999, between the Registrant and Rare Medium, Inc.; (ii) Press Release, dated December 17, 1999; and
          (iii) Form of Warrant, dated December 16, 1999, in favor of MY2000, LLC.

     (22)  On February 18, 2000, the Registrant filed a Report on Form 8-K with respect to: (i) Form of Certificate of Amendment of
           the Certificate of Incorporation of the Registrant, dated February 8, 2000; (ii) Press Release, dated February 15, 2000,
           with respect to the Agreement entered into with RMI; and (iii) Form of Certificate of Amendment of the Certificate of
           Incorporation of the Registrant, dated February 4, 2000.

     (23)  On March 7, 2000, the Registrant  filed a Report on Form 8-K with respect to:(i) the Private  Placement of Securities;
           and (ii) Internet Initiatives.

</TABLE>

                                       51
<PAGE>

SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               STERLING VISION, INC.

                               By: /s/ Alan Cohen
                               ---------------------
                                   Alan Cohen,
                                   President and Chief Executive
                                     Officer

                               Date:  March 30, 2000

       Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                           Title                               Date
---------                           -----                               ----

<S>                                 <C>                                 <C>
/s/ Robert Cohen                    Chairman of the Board               March 30, 2000
------------------------
Robert Cohen                        of Directors

/s/ Alan Cohen                      Vice Chairman of the Board,         March 30, 2000
------------------------
Alan Cohen                          President and Chief Executive
                                    Officer

/s/ William J. Young                Chief Financial Officer             March 30, 2000
------------------------
William J. Young

/s/ Joel Gold                       Director                            March 30, 2000
------------------------
Joel Gold

/s/ Edward Celano                   Director                            March 30, 2000
------------------------
Edward Celano
</TABLE>



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