<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                                     FORM 10-K
(Mark One)
     X            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 31, 2000

                                       OR

   / /            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                           COMMISSION FILE NO. 0-23397

                               U. S. VISION, INC.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                        22-3032948
(State or other jurisdiction of             (I.R.S. employer identification no.)
 incorporation or organization)

                                 1 HARMON DRIVE
                            GLEN OAKS INDUSTRIAL PARK
                           GLENDORA, NEW JERSEY 08029
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (856) 228-1000

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

           Securities Registered Pursuant to Section 12(g) of the Act:

<TABLE>
<CAPTION>
COMMON STOCK, PAR VALUE $.01 PER SHARE                                                       7,793,807
<S>                                                                      <C>
               (Title of class)                                          (Number of Shares Outstanding as of April 20, 2000)
</TABLE>

   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 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 voting stock held by nonaffiliates of the
registrant is approximately $7,935,173. This amount was calculated by reducing
the total number of shares of the registrant's common stock outstanding by the
total number of shares of common stock held by officers, directors, and
stockholders owning in excess of 10% of the registrant's common stock, and
multiplying the remainder by the average of the bid and asked price for the
registrant's common stock on April 20, 2000, as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System. The
information provided shall in no way be construed as an admission that any
officer, director, or more than 10% stockholder of the registrant may be deemed
an affiliate of the registrant or that such person is the beneficial owner of
the shares reported as being held by such person, and any such inference is
hereby disclaimed.

                      DOCUMENTS INCORPORATED BY REFERENCE:

         Portions of the Registrant's definitive proxy statement concerning the
2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A are
incorporated by reference into Part III of this report. The Proxy Statement will
be filed by the Commission not later than 120 days after the Registrant's fiscal
year ended January 31, 2000.
<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS.

OVERVIEW

         U.S. Vision, Inc. ("we," "us," "our," or the "company") is a retailer
of optical products and services through retail optical departments licensed to
operate within national and regional department stores and through a limited
number of freestanding retail locations. As of January 31, 2000, we operated 686
locations in 48 states and Canada, consisting of 640 licensed departments and 46
freestanding stores. We currently operate 429 retail optical departments in J.C.
Penney's and are their primary optical licensee. In addition, we operate 70
Sears retail optical departments and 141 retail optical departments in regional
department stores. Our freestanding stores are generally located in malls and
shopping centers.

         Our retail optical departments are generally full-service retail vision
care stores that offer an extensive selection of designer brands and private
label prescription eyewear, contact lenses, sunglasses, ready made readers and
accessories with an on-premises, independent doctor of optometry who performs
complete eye examinations and prescribes eyeglasses and contact lenses. Our
extensive selection of designer and private label branded eyewear allows us to
tailor our merchandise selection to meet the needs of our host store customers.
See "Business -- Products and Services -- Merchandise Selection" and "Store
Operations."

         We operate a single, modern optical laboratory, distribution and lens
grinding facility at which we fill customer orders for prescription eyewear and
maintain a central inventory of frames. Customer orders are placed at the retail
stores and are transmitted into the central optical laboratory daily, where the
lenses are ground, cut, finished and custom fitted to optical frames in the size
and style selected by the customer. The finished eyewear is then shipped to the
retail store for delivery to the customer within a few working days and can be
completed overnight if requested by the customer. See "Business -- Optical
Laboratory."

         Since 1991, we have been a national provider of managed vision care
benefits through our participation in programs which offer comprehensive eyewear
benefits to plan participants. In fiscal 1999, approximately 34% of our revenues
were attributable to purchases by participants in managed vision care programs.
See "Business -- Managed Vision Care."

         Our corporate headquarters are located at 1 Harmon Drive, Glen Oaks
Industrial Park, Glendora, New Jersey 08029 and our telephone number is (856)
228-1000.

PRODUCTS AND SERVICES

         Merchandise Selection. We carry a full selection of men's, women's and
children's eyeglass frames, a complete line of contact lenses, sunglasses, ready
made readers, and ancillary products for eyeglasses and contact lenses.
Prescription eyewear and accessories accounted for 88% of our sales during
fiscal 1999. We offer an extensive selection of designer and private label
branded eyewear. Designer eyeglass frames offered include Guess, Halston and
Eddie Bauer, among others and, at certain stores, Giorgio Armani, Calvin Klein
and Polo by Ralph Lauren. We also offer private label branded

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<PAGE>   3
eyeglass frames such as Hunt Club, Arizona, Ashley Stewart, Oliver Winston, City
Slickers and Rascals, among others. U.S. Vision also offers a wide variety of
value-added eyewear features and services on which we realize a higher gross
margin. These eyewear features and services include lightweight, virtually
unbreakable polycarbonate lenses, including Kodak progressive lenses and
photochromic lenses, as well as scratch resistant and anti-reflective coatings.
In addition, we carry a complete line of contact lenses by major contact lens
manufacturers such as Bausch & Lomb, Wesley Jessen, and Johnson & Johnson,
including daily wear and extended wear soft contact lenses and cosmetic tinted
lenses. During fiscal 1999, contact lenses accounted for approximately 12% of
the company's sales.

         Pricing. U.S. Vision maintains a promotional pricing strategy which
stresses a quality product delivered at a competitive price. Our frames and
lenses are generally competitively priced, with prices varying based on market
locations. While we earn a higher gross margin on our private-label lines,
designer frames generally command premium prices, resulting in higher gross
profit dollars per transaction.

         Full Customer Service. We strive to provide our customers with
exceptional care and value by combining the personal service typically
associated with a private optometrist with the broad product selection and
competitive prices of a large optical retailer. Management believes that
providing superior customer service from knowledgeable and courteous employees
complements the customer-oriented policies of our department store hosts.

         In March 2000, we entered into a co-management agreement with Laser
Vision Centers, Inc., pursuant to which our employees will be trained to
identify potential candidates for laser vision corrective procedures. Qualified
candidates will then be referred to health care professionals who will discuss
the laser vision procedure further with the candidate and, if requested, will
perform the corrective procedure. We will offer convenient follow-up visits with
a certified optometrist at any of our locations. We receive a fee for our
services based on a percentage of the total cost of the corrective procedure.

MANAGED VISION CARE

         Since 1991, we have been a participating provider of managed vision
care benefits primarily through Vision One, a national vision care program which
offers comprehensive eyewear benefits to over 54 million covered lives through a
network of over 3,500 optical locations. Managed care programs are marketed
directly to employers, employee benefit plan sponsors and insurance companies
such as General Motors, Metropolitan Life, Aetna, Cigna, PruCare HMO and Blue
Cross/Blue Shield. Managed care programs give employers the opportunity to offer
their employees a group discount at retail optical locations of participating
providers with minimal direct cost to the employer. The discounts vary under the
plans from fixed percentage discounts to fixed dollar amounts with the balance
paid by the subscriber. As a result of these benefits, management believes that
many managed care participants have vision examinations on a regular basis and
may become more frequent customers of the company. In addition, managed care
participants frequently apply their discounts and allowances toward the purchase
of premium eyeglass products and related accessories. Under the terms of our
contract with Cole National, a competitor of the company and the owner of the
Vision One program, we pay an administrative fee for each Vision One member
transaction. Our contract with Cole National expires in 2002. We retain the
right, though we have not exercised it in the past, to refuse to participate in
particular Vision One programs under which we cannot profitably provide goods
and services, and to

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<PAGE>   4
participate in other managed care vision plans under certain conditions.
Approximately 34% of our revenues are generated from our participation in
various managed vision care programs.

STORE OPERATIONS

         Location and Layout. We operate most of our stores on the premises of
national and regional department stores. These stores generally operate under
names such as "J.C. Penney Optical Center" and "Sears Optical," which associate
the departments with the host store. Our retail optical departments generally
operate under a lease or license arrangement through which the host store
collects the sales receipts, retains an agreed upon percentage of sales, which
is recorded as rent expense by the company, and remits the remainder to us on a
regular basis. Our leased retail optical departments typically average in size
from 500 to 800 square feet. Our retail optical departments are often located
within the host department store near the host store's other licensed
departments such as the beauty salon and photography studio. Management believes
that the location of our retail optical departments within a host store
influences our ability to take full advantage of the host store's customer
traffic.

         Each of our stores follows a standard merchandise layout plan which is
designed to emphasize fashion, invite customer browsing and enhance the
customer's shopping experience. All of our stores are similar in appearance and
are operated under certain uniform standards and procedures. We have developed a
new store prototype design and all of our new and remodeled retail optical
departments are designed in accordance with this prototype.

         Our freestanding stores operate under various trade names such as Royal
Optical, Service Optical and Wall & Ochs and are located in malls and shopping
centers. A limited number of these stores are housed in freestanding buildings
with adjacent parking facilities. Our freestanding stores generally range in
size from 900 to 1,400 square feet.

         Store Management. Our store management structure consists of field
managers and store managers. The store managers, along with two to three
associates known as Optechs, are responsible for the day-to-day operations of
each of our retail optical departments. Optechs undertake a comprehensive
training program that familiarizes them with the company's product lines,
customer services, store procedures and automated systems. Management believes
that providing knowledgeable and responsive customer service is an important
element of our success and, accordingly, has developed and implemented a variety
of employee training and incentive programs.

         On-Site Independent Optometrist. We have made arrangements with
licensed optometrists to provide eye examination services at or adjacent to our
retail locations in those states where it is permitted. See "Government
Regulations." The independent optometrists sublease space and equipment from us
or from the host store. We and the optometrists do not share in each other's
revenues. We believe the presence of the optometrists at the stores helps to
generate eyeglass sales, leads to repeat customers and reinforces the quality
and professionalism of each store.

                                        3
<PAGE>   5
RELATIONSHIP WITH HOST STORES

         Most of our stores operate as licensed optical departments within a
host department store such as J.C. Penney, Sears, Federated (Rich's, Burdines
and Lazarus), May (Strawbridge's, Famous Barr and L.S. Ayres), Marshall Field's,
Dayton's, Hudson's and Carson Pirie Scott, among others. Management believes
that our relationships with our host stores provide several competitive
advantages such as:

         -        lower operating expenses;

         -        lower initial capital investment;

         -        loyal host store customer base;

         -        established host store advertising and marketing programs;

         -        one-stop shopping convenience; and

         -        access to the host store's private label credit card.

Management believes its hosts' reputation of quality, trust and value further
enhances our customer relations.

         Management believes the company has developed excellent relationships
with the host stores in which it operates. We routinely consult with the host
stores about the size and placement of our optical departments within newly
opened or remodeled host stores. Although management strives to continue to
enhance these relationships, the loss of one of our major host stores, such as
J.C. Penney or Sears, could cause a significant decrease in our sales and
materially adversely effect our results of operations.

         Our retail optical departments within J.C. Penney stores are subject to
a master lease that expires in December 2003. We have 429 locations within J.C.
Penney. Our master lease with J.C. Penney provides that only a limited number of
our J.C. Penney optical centers may be closed by J.C. Penney in any calendar
year without cause. This limitation, however, does not apply if J.C. Penney
closes an entire J.C. Penney department store, either temporarily or
permanently. The lease also provides that J.C. Penney will reimburse us for
certain costs relating to the closed department. Our optical departments within
Sears stores are each subject to a lease which provides for a year-to-year term,
subject to early termination by either party, without cause, on thirty-days
prior written notice. Our retail optical departments located within other
department stores are subject to lease arrangements which contain short notice
lease termination provisions. These leases provide for monthly lease payments
based upon a percentage of our sales at each location.

         In January 1999, as part of our growth objectives to diversify our host
store base, we signed master lease agreements with Hudson's Bay Company, which
operates over 450 retail locations in Canada. In March 1999, we opened 15 retail
optical departments within The Bay, a traditional department store division of
Hudson's Bay. In April 1999, we opened our first location in Zellers, the
upscale discount retail division of Hudson's Bay. At January 31, 2000, we were
operating in 41 Hudson's Bay vision centers.

                                        4
<PAGE>   6
MARKETING AND ADVERTISING

         We engage in a variety of marketing and promotional efforts to maintain
and strengthen our customer base. Our advertising program is targeted at the
department store consumer and is designed to convey a message of value, fashion,
convenience and trust to our customer base. We work with each of our host stores
to design advertising programs that convey this message in a manner consistent
with that of the host store and are targeted at the specific customer base. For
example, we work with J.C. Penney to develop targeted catalog inserts which
advertise our J.C. Penney optical departments. These advertising promotions
generally mention the availability of on-site professional eye examinations and
our acceptance, as a participating provider of managed vision care benefits, of
the discounts and allowances offered by managed vision care plans. These
targeted inserts are mailed to selected customers based on previous spending
patterns at the host store. We actively support our stores by providing local
advertising in individual geographic markets. We have an in-house advertising
department which permits us to respond quickly to fashion trends, competitor
advertising and promotional initiatives.

OPTICAL LABORATORY

         We operate a 60,000 square foot modern optical laboratory and lens
grinding facility adjacent to our headquarters in Glendora, New Jersey. Customer
orders for prescription eyewear, sunglasses and contact lenses are transmitted
daily from each of our store locations to our central laboratory. Customer
orders generally are processed and shipped to stores within a few working days
and can be completed overnight if requested by the customer. Most prescription
lenses are completed from semi-finished polycarbonate or plastic lenses obtained
from third-party suppliers. These lenses are finished in a highly technical
process that grinds the surface of the lens to fit the prescription utilizing
modern grinding equipment, much of it computer-guided. The lenses are then
custom fitted to optical frames in the size and style selected by the customer.
Other prescriptions, including many standard prescriptions, can be manufactured
by cutting and edging a prefinished lens, also purchased from a third-party
supplier, to fit the frames selected. Contact lenses, accessories and
non-prescription sunglass orders are filled from available stock and shipped to
our retail optical departments.

         Our laboratory is furnished with machinery capable of custom grinding,
polishing, cutting, edging, tinting and coating prescription lenses. Management
believes it has the manufacturing capacity in our laboratory to accommodate all
of our projected growth for the foreseeable future.

PURCHASING

         Our relationship with our vendors has enabled us to gain access to a
wide array of brand name product offerings. As a leading retailer of eyewear in
the United States, we purchase significant quantities of frames, lenses and
contact lenses from our suppliers. No purchases are made under long-term
contracts. In fiscal 1999, Bausch & Lomb, Signet Armorlite and Vistakon, our
largest suppliers, accounted for approximately 10%, 17% and 12%, respectively,
of our total merchandise purchases. All raw materials for products we
manufacture are available from numerous suppliers.

         Historically, we manufactured, imported and distributed optical frames
and sunglasses principally for sale in our retail optical stores and, to a
lesser extent, for sale to other optical distributors and retailers through our
Styl-Rite Optical subsidiary. During fiscal 1999, we decided it was more cost

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effective to import optical frames and sunglasses rather than manufacture these
products. Accordingly, management has decided to close or sell our manufacturing
operations at Styl-Rite and consolidate our importing and distribution functions
with our other centralized operations at our corporate headquarters in Glendora,
New Jersey. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation."

MANAGEMENT INFORMATION SYSTEMS

         Currently, customer prescription orders for our optical products are
prepared by the stores on order forms and the details of each order are
transmitted daily to our centralized laboratory. These orders are then entered
into the laboratory's computerized order entry system which, for lenses, also
makes the necessary optical calculations to grind and finish the lenses to the
correct prescription and shape them to the dimensions of the frame selected by
the customer. The present laboratory order entry system also tracks each order
through every step of the manufacturing process until the finished product is
shipped to the retail optical department.

         In fiscal 1999, we continued our efforts to design an integrated
management information system, which includes an automated order entry system at
each of our optical stores, and new manufacturing and financial systems at our
corporate headquarters. This new integrated system is designed to facilitate the
transmission of the order to the laboratory and provide our stores with improved
order pricing and costing capability. This new system is also designed to
provide our stores with the capability to capture sales and customer
information, including prescription data, enhancing our ability to monitor sales
and merchandise trends and to improve customer service after the sale. In
addition, the automated order entry system is designed to enable the stores to
validate, at the time of sale, whether a particular frame selected by the
customer is in stock and whether the combination of the customer's prescription,
selected lenses and frame is within manufacturing tolerances. The integrated
information system is expected to enhance our operating efficiencies by
permitting all orders to be electronically transmitted from the stores to the
laboratory. We are currently in the design and testing phase of the automated
order entry portion of the system. There can be no assurance that we will be
able to implement and operate this information system effectively or that the
system will produce the expected benefits.

COMPETITION

         We compete with other national, regional, and local retail optical
chains and independent optical retailers. Most optical retailers generally serve
individual or local markets, and, as a result, competition is fragmented and
varies substantially among locations and geographic areas. Although the retail
optical industry is highly competitive, management believes none of our
competitors has more than an 8% market share based on revenue. The principal
competitive factors affecting our retail operations are merchandise selection,
quality and consistency of products and services, price, location within the
host store, convenience, availability of on-site professional eye examinations
and access to a host store's private label credit card. The retail optical
industry engages in price-related promotions as a standard marketing practice.
Several of our competitors have greater financial and other resources than us,
which may enable competitors to pursue more aggressive pricing and promotional
strategies at the expense of profits for longer periods of time than we can.

         Our ability to achieve our growth strategy by opening new retail
optical departments in existing and new host stores is dependent on our ability
to obtain suitable optical locations within existing and

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new host stores. Management does not believe our growth strategy will be
adversely affected by the fact that some competitors operate more retail optical
departments in host stores than we do.

         Additionally, we face competition from advances in vision correction
technologies, including laser surgery and other surgical vision correction
procedures. This could result in decreased demand for eyeglasses and contact
lenses.

         To the extent our customers may not be covered by our eye care benefit
plans, we may compete with other vision care benefit plans and retailers who
provide alternative vision care plans. As the number of national and regional
managed vision care programs increase, competition for customers will intensify
among the various vision care programs.

EMPLOYEES

         As of January 31, 2000, we had approximately 2,800 full-time and
part-time employees, of which approximately 2,200 were employed in our retail
outlets; 400 were employed in manufacturing and distribution in our laboratory
in Glendora, New Jersey; 80 were employed at the company's Styl-Rite
manufacturing facility in Miami; and 90 were employed in administrative,
marketing and managerial positions at the company's headquarters in Glendora.

GOVERNMENT REGULATIONS

         We are subject to a variety of federal, state and local laws, rules and
regulations affecting the health care industry and the delivery of health care
services. State and local legal requirements vary widely among jurisdictions and
are subject to frequent change. Federal legal requirements are also subject to
change.

         Relationships between the company and independent optometrists and
ophthalmologists are subject to federal, state and local laws and regulations.
State laws generally prohibit the practice of medicine and optometry by
unlicensed practitioners. In addition, many states prohibit medical
practitioners and optometrists from splitting fees with business corporations
such as the company and prohibit the practice of medicine and optometry by
corporate entities. 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. Some states
prohibit the company from computing our fee for rent, equipment leases and
management services provided by us based on a percentage of the gross revenue of
the ophthalmologists and the optometrists. Such requirements are particularly
comprehensive in California and Texas, where we operate a significant number of
stores. Further, some states restrict the location of optometric offices in
relation to optical stores, such as ours, and regulate advertising and the
solicitation of prospective patients.

         Relationships between us and independent ophthalmologists and
optometrists are also subject to the fraud and abuse provisions of the federal
Social Security Act which include the "anti-kickback" laws. The anti-kickback
laws prohibit the offering, payment, solicitation or receipt of any direct or
indirect remuneration for the referral of Medicare or Medicaid patients or for
the ordering or providing of Medicare or Medicaid covered services, items or
equipment. Violations of these laws may result in substantial civil or criminal
penalties for individuals or entities and exclusion from participation in the
Medicare and Medicaid programs. Several states, including states in which we
operate, have adopted

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similar laws that cover patients with private health insurance coverage as well
as those covered by government programs. Although management believes it is not
in violation of the anti-kickback laws, the applicability of these provisions
has been subject to only limited judicial and regulatory interpretation. In
addition, certain of our products must comply with standards set by the United
States Food and Drug Administration.

         We, as well as the independent optometrists providing services in or
adjacent to our stores, from time to time receive inquiries from regulatory
bodies regarding our compliance with applicable state and local regulations. If
our relationships with ophthalmologists and optometrists are challenged, we may
be required to alter the manner in which we conduct our business. There can be
no assurance that a review of our business by courts or regulatory authorities
will not result in determinations that could adversely affect operations or that
new laws, regulations or interpretations of current laws and regulations will
not have a material adverse effect on our business, financial condition or
results of operations.

ITEM 2.  PROPERTIES

         We own a 20,000 square foot facility in Glendora, New Jersey, which
serves as our corporate headquarters, a neighboring 24,000 square foot
distribution facility, and a neighboring 60,000 square foot optical laboratory.
The real property on which these facilities are located, as well as the
buildings and certain equipment located therein, other than the distribution
facility, secure the company's obligations under the DRPA Term Loans. See Note 5
to Notes to Consolidated Financial Statements. The real property on which the
distribution facility is located secures the company's obligations under a
mortgage loan agreement. Styl-Rite owns and operates a 40,000 square foot
facility in Miami, Florida. The real property on which this facility is located,
as well as the building, secure the company's obligations under the revolving
line of credit. We plan to sell this building after we wind-up our operations in
June 2000. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Liquidity and Capital Resources."

         Our freestanding store locations are subject to lease arrangements
which contain varying terms and are not subject to short notice lease
termination provisions. The leases provide for monthly base lease payments plus,
under certain circumstances, include an additional rent provision based on a
percentage of the company's sales at each location.

ITEM 3.  LEGAL PROCEEDINGS.

         We are subject to various pending and threatened litigation from time
to time in the ordinary course of our business. Although all litigation involves
some degree of uncertainty, in the opinion of management, liabilities, if any,
arising from such litigation or threat thereof are not expected to have a
material adverse effect on the company.

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

         None.

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                                     PART II

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

         Our stock is traded on Nasdaq under the symbol "USVI." We completed our
initial public offering of 2,500,000 shares of stock on December 5, 1997 and the
first day of trading in the stock was December 1, 1997.

         For the period indicated below, the following table sets forth the high
and low bid information of our stock as reported on Nasdaq, rounded to the
nearest eighth of a dollar.

<TABLE>
<CAPTION>
                                                   1999 CLOSING PRICES            1998 CLOSING PRICES
                                                   -------------------            -------------------
           CALENDAR PERIOD                           LOW          HIGH               LOW       HIGH
           ---------------                           ---          ----               ---       ----
<S>                                                <C>           <C>              <C>         <C>
        February 1 - April 30                       $3.50        $6.68             $ 9.63     $13.13
        May 1 - July 31                              4.93         5.63              10.75      13.38
        August 1 - October 31                        3.43         5.25               7.38      11.38
        November 1 - January 31                      2.38         3.75               6.50       9.88
</TABLE>

        As of April 20, 2000, there were approximately 60 record holders of our
stock. We have not declared or paid any cash dividends on our stock since our
organization. Under the terms of our revolving bank line of credit, our ability
to pay cash dividends to our stockholders is restricted.

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<PAGE>   11
ITEM 6.  SELECTED FINANCIAL DATA.

         The selected consolidated financial information regarding the company's
financial position and operating results set forth below for the years ended
January 31, 2000, 1999, 1998 and 1997, and the ten months ended January 31, 1996
have been derived from our audited consolidated financial statements. The
selected consolidated financial data set forth below should be read in
conjunction with our consolidated financial statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                                                                   TEN MONTHS
         (In thousands                                              YEAR ENDED JANUARY 31,                           ENDED
        except share and                     -------------------------------------------------------------------   JANUARY 31,
         per share data)                         2000             1999             1998              1997            1996(1)
         ---------------                         ----             ----             ----              ----            -------
<S>                                          <C>               <C>              <C>               <C>              <C>
STATEMENTS OF OPERATIONS DATA:
Net sales ............................       $  143,419        $  131,491       $  122,763        $  111,544       $   91,172
Cost of sales ........................           45,516            40,648           38,584            34,273           29,652
                                             ----------        ----------       ----------        ----------       ----------
Gross profit .........................           97,903            90,843           84,179            77,271           61,520
Operating expenses:
 Selling, general and
  administrative .....................           91,726            79,119           73,367            68,366           61,598
 Depreciation and amortization .......            4,670             3,879            3,390             3,271            2,608
 Write-off of goodwill (2) ...........               --                --               --                --            8,067
 Writedown of Dallas facility (3) ....               --                --               --                --            1,305
 Loss on closure of frame
  manufacturing facility (4) .........            2,835                --               --                --               --
 Store closings and
  disposals (5) ......................               --                --             (389)               --           10,473
                                             ----------        ----------       ----------        ----------       ----------
              Total operating expenses           99,231            82,998           76,368            71,637           84,051
                                             ----------        ----------       ----------        ----------       ----------
Operating income (loss) ..............           (1,328)            7,845            7,811             5,634          (22,531)
Interest expense, net ................              469                21            2,486             3,499            2,041
                                             ----------        ----------       ----------        ----------       ----------
Income (loss) before income tax
 (benefit) ...........................           (1,797)            7,824            5,325             2,135          (24,572)
Income tax provision (benefit) .......               22               355               --                --           (1,686)
                                             ----------        ----------       ----------        ----------       ----------
Net income (loss) ....................       $   (1,819)       $    7,469       $    5,325        $    2,135       $  (22,886)
                                             ==========        ==========       ==========        ==========       ----------
Net income (loss) per share (6) ......       $    (0.23)       $     0.96       $     0.90        $     0.41       $    (4.33)
                                             ==========        ==========       ==========        ==========       ==========
Shares used in computing net
   income (loss) per share -- (6) ....        7,793,807         7,780,164        5,651,954         5,261,543        5,282,668
                                             ==========        ==========       ==========        ==========       ==========
Net income (loss) per share --
assuming dilution (7) ................       $    (0.23)       $     0.94       $     0.89        $     0.40       $    (4.33)
                                             ==========        ==========       ==========        ==========       ==========
Shares used in computing net
  income (loss) per share --
  assuming dilution (7) ..............        7,793,807         7,955,274        5,758,411         5,368,700        5,282,668
                                             ==========        ==========       ==========        ==========       ==========
Net income per share --
 pro forma (8) .......................                                          $     0.96
                                                                                ==========
Shares used in computing net
 income per share -- pro forma(8) ....                                           7,868,700
                                                                                ==========
</TABLE>

                          Footnotes on following page.

                                       10
<PAGE>   12
<TABLE>
<CAPTION>
                                                                                                                   TEN MONTHS
         (In thousands                                              YEAR ENDED JANUARY 31,                           ENDED
        except share and                         --------------------------------------------------------------    JANUARY 31,
         per share data)                         2000             1999             1998              1997            1996(1)
         ---------------                         ----             ----             ----              ----            -------
<S>                                          <C>               <C>              <C>               <C>              <C>
SELECTED OPERATING DATA:
Stores open at end of period:
 Licensed departments................             640              557             507               488               467
 Freestanding stores.................              46               57              63                66                73
                                                  ---              ---            ---                ---               ---
Total stores.........................             686              614             570               554               540
Comparable store sales
 increase (9)........................             1.9%             4.2%           9.2%               8.3%              6.3%
</TABLE>



<TABLE>
<CAPTION>
                                                                      JANUARY 31,
                                               --------------------------------------------------------------------------
                                               2000              1999            1998             1997               1996
                                               ----              ----            ----             ----               ----
<S>                                           <C>              <C>             <C>               <C>               <C>
BALANCE SHEET DATA:
Cash ...............                          $   454          $   693         $   365           $   374           $ 1,529
Working capital ....                           19,126           23,152          17,967            11,321            12,252
Total assets .......                           83,033           75,594          60,129            54,403            53,033
Long-term debt .....                           20,693           14,069           8,296            22,623            21,516
Stockholders' equity                           44,651           46,470          38,818            13,810            11,897
</TABLE>

(1)      The difference in duration of this period must be considered in making
         period-to-period comparisons.

(2)      Represents write-off of goodwill related to the 1990 acquisition of
         Royal. The goodwill was attributed to the closing of the Dallas
         facility and closed or otherwise liquidated stores described in notes
         (3) and (5) below, respectively. The write-off was determined based
         upon a measurement of the remaining undiscounted operating cash flows
         of the company.

(3)      Represents the write down of the Dallas facility, which was closed by
         us in connection with our plan to consolidate our laboratories into a
         single facility.

(4)      See Note 12 to Notes to Consolidated Financial Statements.

(5)      Represents lease termination costs, write-off of leasehold improvements
         and other related costs associated with the closing and disposal of
         stores during fiscal 1992 through 1995. As a result of favorable
         settlements on the terminated leases, the company realized a gain in
         fiscal 1997.

(6)      Net income per share has been computed using the weighted average
         number of shares outstanding after giving effect for all periods
         presented to the 64-for-1 stock dividend and the conversion of all
         outstanding Series A Preferred Stock and Series C Preferred Stock into
         stock upon the closing of the company's initial public offering as
         described in Note 1 to Notes to Consolidated Financial Statements. Cash
         dividends on preferred stock of $217,000 were deducted from net income
         in computing net income per share for the fiscal year ended January 31,
         1998.

(7)      Net income per share -- assuming dilution has been computed using the
         weighted average number of shares outstanding after giving effect to
         the 64-for-1 stock dividend and the conversion of all outstanding
         Series A Preferred Stock and Series C Preferred Stock into stock upon
         the closing of the company's initial public offering as described in
         Note 1 to Notes to Consolidated Financial Statements. In addition,
         common share equivalents such as warrants and options are included in
         the computation for the years ended January 31, 1999, 1998 and 1997,
         respectively. Cash dividends on preferred stock of $217,000 were
         deducted from net income in computing net income per share - assuming
         dilution for the fiscal year ended January 31, 1998.

(8)      Net income per share -- pro forma is calculated by dividing net income
         after adjustment for applicable interest expense, net of tax
         ($2,208,000) by the adjusted number of weighted average shares
         outstanding after giving effect to the 2,500,000 shares that were sold
         at the initial public offering price to repay $20,375,000 of debt.

(9)      Comparable-store sales reflect existing stores that have been open over
         twelve months.

                                       11
<PAGE>   13
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

GENERAL OVERVIEW

         Our net sales consist primarily of retail sales of prescription eyewear
and contact lenses, net of refunds and allowances for customer returns. The
company's sales are influenced by customer traffic in our host department
stores, the successful implementation of our promotional programs and our
participation in various managed vision care plans. The principal components of
our cost of sales include the cost of materials, including eyeglass frames and
lenses, as well as manufacturing, assembly, labor and overhead costs associated
with operating our centralized optical laboratory. Prices of frames vary widely,
from inexpensive to high-end designer brands.

         Our selling, general and administrative expenses include primarily
labor-related expenses at the store level, rent and occupancy costs, managed
vision care costs, advertising and administrative expenses. The rent we pay to
our host stores is calculated as a percentage of net sales within each retail
optical department. Freestanding store rent is generally a fixed monthly payment
plus, in many cases, a percentage of net sales above certain revenue levels.
Flat fees per transaction are paid by us to vision care plans in which we
participate.

RESULTS OF OPERATIONS

         The following table sets forth selected statements of operations items
expressed as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                 YEAR ENDED JANUARY 31,
                                             2000           1999        1998
                                             ----           ----        ----
<S>                                          <C>           <C>          <C>
Net sales ..........................         100.0%        100.0%       100.0%
Cost of sales ......................          31.7          30.9         31.4
                                             -----         -----        -----
  Gross profit .....................          68.3          69.1         68.6

Operating expenses:
 Selling, general and administrative          63.9          60.2         59.8
 Depreciation and amortization .....           3.3           2.9          2.7
                                             -----         -----        -----

Operating income, excluding
 unusual items .....................           1.1           6.0          6.1
Unusual (charges) credits ..........          (2.0)          0.0          0.3
                                             -----         -----        -----

Operating income (loss) ............          (0.9)          6.0          6.4
Interest expense, net ..............           0.3           0.0          2.1
                                             -----         -----        -----
Income(loss) before income tax .....          (1.2)          6.0          4.3
Income tax provision ...............           0.0           0.3          0.0
                                             -----         -----        -----
Net income (loss) ..................          (1.2)%         5.7%         4.3%
                                             =====         =====        =====
</TABLE>

FISCAL 1999 COMPARED TO FISCAL 1998

         Net sales increased $11.9 million, or 9.1%, from $131.5 million for
fiscal 1998 to $143.4 million for fiscal 1999. A 1.9% increase in
comparable-store sales accounted for $2.4 million of the increase in net sales.
New store openings, net of store closings, accounted for the remaining $9.5
million of the increase. The increase in comparable store sales was the result
of an increase in the number of eyeglasses sold.

         Cost of sales increased by $4.9 million, or 12.0%, from $40.6 million
in fiscal 1998 to $45.5 million in fiscal 1999. The increase was due principally
to the $11.9 million increase in net sales. As a percentage of net sales, cost
of sales increased from 30.9% in fiscal 1998 to 31.7% in fiscal 1999. The
increase was due to additional discounts offered by the company in response to
increased promotional

                                       12
<PAGE>   14
pressure from our competition, as well as an increase in labor rates in the
manufacturing facilities in response to low unemployment rates.

         Selling, general and administrative expenses increased by $12.6
million, or 15.9%, from $79.1 million in fiscal 1998 to $91.7 million in fiscal
1999. As a percentage of net sales, selling, general and administrative expenses
increased from 60.2% in fiscal 1998 to 63.9% in fiscal 1999. The increase was
principally due to an increase in expenses associated with new store openings,
as these stores open with relatively low sales volume, an overall increase in
base salary rates as a result of the competitive labor market, and greater
department store rents which are tied directly to sales volume. Duplicate
administrative fees and claims associated with changing healthcare
administrators during fiscal 1999 also contributed to the increase.

         Unusual charges for fiscal 1999 included the one time write-off of
approximately $2.8 million related to the strategic decision to close our
Styl-Rite frame manufacturing facility in Miami, Florida. We are relocating
Styl-Rite's importing and distribution functions to our corporate headquarters.
In connection with this plan, the company recorded a charge of $2,835,000, which
was comprised of $2,224,000 in write-offs of inventory used solely in the
manufacturing process, $161,000 in machinery and equipment, $250,000 in
buildings and $200,000 for uncollectible receivables. The write-offs associated
with the buildings and machinery and equipment were intended to reduce their
carrying costs to their estimated net realizable value. The company also will
incur approximately $250,000 in additional payroll costs between February 1 and
June 30, 2000, which will be expensed when paid.

         Depreciation and amortization increased by $0.8 million, or 20.4%, from
$3.9 million in fiscal 1998 to $4.7 million in fiscal 1999. This was due to
increased amortization of goodwill as a result of the acquisitions of businesses
during fiscal 1998 and 1999. In addition, depreciation expense increased due to
capital expenditures associated with new store openings and the purchase of
additional machinery for the manufacturing facility.

         Interest expense, net increased by $448,000 from $21,000 in fiscal 1998
to $469,000 in fiscal 1999. The increase was principally due to increased
borrowings on our line of credit. See "Liquidity and Capital Resources."

FISCAL 1998 COMPARED TO FISCAL 1997

         Net sales increased $8.7 million, or 7.1%, from $122.8 million for
fiscal 1997 to $131.5 million for fiscal 1998. A 4.2% increase in
comparable-store sales accounted for $5.0 million of the increase in net sales.
New store openings, net of store closings, accounted for the remaining $3.7
million of the increase. The increase in comparable-store sales was the result
of an increase in the number of eyeglasses sold, as well as an increase in value
added eyewear features, such as anti-reflective coatings and accessory kits.

         Cost of sales increased by $2.0 million, or 5.2%, from $38.6 million in
fiscal 1997 to $40.6 million in fiscal 1998. The increase was due principally to
the $8.7 million increase in net sales. As a percentage of net sales, cost of
sales decreased from 31.4% in fiscal 1997 to 30.9% in fiscal 1998. The decrease
was due principally to sales of higher margin merchandise, as discussed above,
and the benefit of additional discounts on inventory bulk purchases.

         Selling, general and administrative expenses increased by $5.7 million,
or 7.8%, from $73.4 million in fiscal 1997 to $79.1 million in fiscal 1998. The
increase was principally due to an increase in retail salaries associated with
new store openings and greater department store rents which are tied directly to
sales volume. As a percentage of net sales, selling, general and administrative
expenses increased slightly for fiscal 1998 compared to fiscal 1997 due
principally to the opening of 63 new locations, as well as an overall increase
in base salary rates as a result of the competitive labor market and the low
unemployment factor.

                                       13
<PAGE>   15
         Depreciation and amortization increased by $0.5 million, or 14.7%, from
$3.4 million in fiscal 1997 to $3.9 million in fiscal 1998 due principally to
the increase in capital expenditures associated with new store openings and
acquisitions.

         Interest expense, net decreased by $2,465,000, or 100.0%, from
$2,486,000 in fiscal 1997 to $21,000 in fiscal 1998. The decrease was due to:
(a) the repayment of debt in connection with the completion of the initial
public offering in December 1997 and (b) the capitalization of interest expense
incurred during the development of our integrated management information system.
See "Liquidity and Capital Resources."

QUARTERLY FLUCTUATIONS

         Our financial position and results of operations are slightly affected
by seasonal fluctuations in sales and operating profits. Our sales and operating
profits are generally lower in the fourth quarter, due to the Christmas season,
which has historically been a period of reduced sales of prescription optical
products. This trend has been mitigated somewhat by the increase in vision care
sales under plans which are on a calendar year basis and require participants to
use or lose their benefits annually. Quarterly sales can also be affected by the
timing and amount of sales contributed by new stores. Accordingly, the results
of operations for interim periods are not necessarily indicative of results for
the entire fiscal year.

The following tables set forth certain unaudited financial data for the quarters
indicated:

<TABLE>
<CAPTION>
                                         FISCAL 1999 QUARTER ENDED                             FISCAL 1998 QUARTER ENDED
                             --------------------------------------------------   ------------------------------------------------
                             APRIL 30,     JULY 31,     OCT. 31,     JAN. 31,     APRIL 30,    JULY 31,      OCT. 31,     JAN. 31,
                               1999          1999         1999         2000          1998        1998          1998         1999
                               ----          ----         ----         ----          ----        ----          ----         ----
                                                (In thousands, except percentages and per share data)
<S>                          <C>           <C>          <C>          <C>          <C>          <C>           <C>          <C>
Net sales .................   $37,841      $35,601      $36,223      $33,754       $34,666      $31,753      $34,090      $30,982
Gross profit ..............    26,180       24,781       25,004       21,938        24,024       22,106       23,703       21,010
 % of net sales ...........      69.2%        69.6%        69.0%        65.0%         69.3%        69.6%        69.5%        67.8%
Operating income (loss) ...   $ 2,931      $ 1,435      $   170      $(5,864)      $ 2,935      $ 2,253      $ 2,390      $   267
 % of net sales ...........       7.7%         4.0%         0.5%       (17.4)%         8.5%         7.1%         7.0%         0.8%
Net income (loss) .........   $ 2,270      $ 1,180      $   488      $(5,757)      $ 2,817      $ 2,094      $ 1,957      $   601
% of net sales ............       6.0%         3.3%         1.3%       (17.1)%         8.1%         6.6%         5.8%         1.9%
 Net income (loss)
   per share ..............   $  0.29      $  0.15      $  0.06      $ (0.74)      $  0.36      $  0.27      $  0.25      $  0.08
Net income (loss) per share
 -- assuming dilution .....   $  0.29      $  0.15      $  0.06      $ (0.74)      $  0.35      $  0.26      $  0.25      $  0.08
</TABLE>

          The decrease in operating income in the fourth quarter of fiscal 1999
was due to seasonally lower net sales, a $2.8 million write-off due to the
closure of the Styl-Rite manufacturing facility, duplicate administrative fees
and claims associated with changing healthcare administrators during the year
and the negative leverage on expenses of opening 106 locations during the year
with an extremely low sales base.

         The decrease in operating income in the fourth quarter of fiscal 1998
was due to seasonally lower net sales as well as an overall increase in base
salary rates as a result of the competitive labor market.

INCOME TAXES

         As of January 31, 2000, we had net operating loss carry forwards of
approximately $15,400,000 which will begin to expire in the year 2006.
Approximately $5,700,000 of these carry forwards are available to offset future
taxable income without limitation and approximately $9,700,000 of these carry
forwards (the "Restricted NOLs") are significantly limited due to ownership
changes. Approximately $780,000 of the Restricted NOLs will become available for
use each year through the year 2008. Approximately $3,400,000 of the Restricted
NOLs are expected to expire unutilized. A valuation

                                       14
<PAGE>   16
allowance has been established to fully reserve the future benefit of all the
net operating loss carry forwards.

LIQUIDITY AND CAPITAL RESOURCES

         Our primary cash sources for fiscal 1999 were from operations and our
revolving line of credit. Our working capital requirements are seasonal and
traditionally peak at the end of the fourth quarter and the beginning of the
first quarter. Cash and working capital at January 31, 2000 were $454,000 and
$19.1 million, respectively, compared to $693,000 and $23.2 million,
respectively, at January 31, 1999.

         For the year ended January 31, 2000, cash provided by operating
activities was $5.3 million compared to cash provided by operating activities of
$6.4 million for the year ended January 31, 1999. The $1.1 million decrease
resulted from a decrease in net income offset by favorable changes in the
collection of accounts receivable and controlling inventory levels after the
acquisitions and new store openings that began in the second half of fiscal
1998.

         Cash used in investing activities in fiscal 1999 was $10.4 million
compared to $10.8 million in fiscal 1998 and $5.2 million in fiscal 1997.
Capital expenditures in fiscal 1999 of $10.4 million were primarily for new
store openings, development work on the company's integrated management
information system and the acquisition of thirty-four licensed optical retail
stores. See Note 11 to Notes to Consolidated Financial Statements. In fiscal
2000, we expect to spend approximately $9.0 million on capital expenditures for
new store openings, new laboratory equipment, the integrated management
information system and other capital expenditures. Historically, we have funded
capital expenditures through a revolving line of credit, debt financing
activities, including capital leases and operating cash flow.

         Our principal external source of liquidity is our $20.0 million
revolving line of credit with Commerce Bank, N.A. The revolving line of credit
facility bears interest at the lower of the prime rate as published in the Wall
Street Journal or the thirty (30) day rate for United States Treasury Bills plus
250 basis points and matures in December 2001. As of January 31, 2000, we had
$14,214,000 outstanding under our revolving line of credit and $5,786,000 of
availability. The loan agreement prohibits the payment of dividends to
stockholders and contains customary covenants. We must also maintain certain
financial ratios including a specified net worth level, current ratio, and a
fixed charge ratio. As of January 31, 2000, we were not in compliance with the
fixed charge ratio. We received a waiver on this covenant until January 31,
2001. See Note 5 to Notes to Consolidated Financial Statements. We do not
believe that the financial covenants set forth in our revolving line of credit
will have an adverse impact on our operations or future plans.

         We have commitments from Commerce BankLease, a unit of Commerce Bank,
N.A., for a $2,000,000 five-year equipment lease financing facility. During
fiscal 1999, we executed the agreement and leased approximately $922,000 of
laboratory equipment, which will be paid for over a period of 60 months. The
leased laboratory equipment has been recorded as a capital lease on the
consolidated balance sheet.

         Based upon our current operating and new store opening plans, we
believe we can fund our working capital and capital expenditure needs for the
foreseeable future through borrowings under the revolving line of credit and
cash generated from operations.

                                       15
<PAGE>   17
EFFECTS OF INFLATION

         We believe that the effects of inflation on our operations have not
been material during the past three years.

ACCOUNTING FOR INTERNAL USE SOFTWARE

         In March 1998, the AICPA issued Statement of Position (SOP) 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". The SOP, which has been adopted as of February 1, 1998, requires
the capitalization of certain costs incurred in connection with developing or
obtaining internal use software. Prior to the adoption of SOP 98-1, we
capitalized all internal use software related costs except for interest which
was expensed as incurred. The effect of adopting the SOP was to increase net
income by $730,000 ($0.09 per share diluted) and $528,000 ($0.07 per share
diluted) for the year ended January 31, 2000 and 1999, respectively.

YEAR 2000 COMPLIANCE

         Prior to December 31, 1999, we completed an assessment of our internal
critical and non-critical computer programs and hardware, including
environmental systems that are dependent on embedded microchips, and had
modified or replaced those systems so that they would properly utilize dates
beyond December 31, 1999. As a result of this initiative, our internal critical
and non-critical systems were Year 2000 compliant. We did not experience any
significant problems with our internal systems nor with our key service
providers and host stores during the change to the Year 2000. We will continue
to monitor our critical computer applications and those of our suppliers and
host stores throughout the Year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed properly.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

         We occasionally make forward-looking statements concerning our plans,
goals, product and service offerings, store openings and closings and
anticipated financial performance. These forward-looking statements may
generally be identified by introductions such as "outlook" for an upcoming
period of time, or words and phrases such as "should", "expect", "hope",
"plans", "projected", "believes", "forward-looking" (or variants of those words
and phrases) or similar language indicating the expression of an opinion or view
concerning the future.

         These forward-looking statements are subject to risks and uncertainties
based on a number of factors and actual results or events may differ materially
from those anticipated by such forward-looking statements. These factors
include, but are not limited to: our ability to maintain our relationship with
our host stores such as J.C. Penney and Sears, as well as with Cole National
Corporation, a competitor of the company and the owner of the Vision One managed
vision care plan in which the company participates; the growth rate of our
revenue and market share; our ability to effectively manage our business
functions while growing the company's business in a rapidly changing
environment; and the quality of our plans and strategies, as well as our ability
to execute such plans and strategies.

          In addition, forward-looking statements concerning our expected
revenue or earnings levels are subject to many additional uncertainties
applicable to competitors generally and to general economic conditions over
which we have no control, such as the performance of our host stores. We do plan
to generally publicly update prior forward-looking statements for unanticipated
events or otherwise and, accordingly, prior forward-looking statements should
not be considered to be "fresh" simply because we have not made additional
comments on those forward-looking statements.

                                       16
<PAGE>   18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our earnings are affected by changes in interest rates due to the
impact those changes have on the interest expense payable by us under our
variable rate debt revolving line of credit, for which the outstanding balance
was $14,214,000 as of January 31, 2000. A 1.0% change in the underlying prime
rate or the thirty (30) day rate for United States Treasury Bills would result
in a $142,000 change in the annual amount of interest on such debt. This amount
is determined by considering the impact of the hypothetical interest rates on
our revolving line of credit outstanding as of January 31, 2000.

ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Financial Statements together with the report thereon of Ernst &
Young LLP, independent auditors, are included in this report commencing at Page
F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

         None.

                                       17
<PAGE>   19
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          The information set forth under the heading "Election of Directors"
and "Management of the Company" of the definitive proxy statement for our 2000
Annual Meeting of Stockholders is incorporated by reference in this Form 10-K
Annual Report.

ITEM 11.  EXECUTIVE COMPENSATION.

          The information set forth under the heading "Executive Compensation"
of the definitive proxy statement for our 2000 Annual Meeting of Stockholders is
incorporated by reference in this Form 10-K Annual Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

          The information set forth under the heading "Ownership of Common Stock
by Certain Beneficial Owners and Management" of the definitive proxy statement
for our 2000 Annual Meeting of Stockholders is incorporated by reference in this
Form 10-K Annual Report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          The information set forth under the headings "Management of the
Company -- Compensation of the Company's Directors" and "Executive Compensation
-- Certain Relationships and Related Transactions" of the definitive proxy
statement for our 2000 Annual Meeting of Stockholders is incorporated by
reference in this Form 10-K Annual Report.

                                       18
<PAGE>   20
                                     PART IV

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

FINANCIAL STATEMENTS

           The following financial statements of the company are filed as a part
of this report:
<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Auditors.......................................................   F-1
Consolidated Balance Sheets as of January 31, 2000 and 1999..........................   F-2
Consolidated Statements of Operations -- For the Fiscal Years Ended
  January 31, 2000, 1999 and 1998....................................................   F-3
Consolidated Statements of Stockholders' Equity -- For the Fiscal Years Ended
  January 31, 2000, 1999 and 1998 ...................................................   F-4
Consolidated Statements of Cash Flows --For the Fiscal Years Ended
  January 31, 2000, 1999 and 1998....................................................   F-5
Notes to Consolidated Financial Statements...........................................   F-6
</TABLE>

         All financial statement schedules have been omitted because they are
not applicable or the required information is shown in the consolidated
financial statements and notes thereto.

REPORTS ON FORM 8-K

         The company filed a Form 8-K dated November 23, 1999 to report earnings
for the third quarter and nine months ended October 31, 1999.

                                       19
<PAGE>   21
                                    EXHIBITS

The following exhibits are filed as a part of this report:

<TABLE>
<CAPTION>
Exhibit
Number            Exhibit
------            -------
<S>               <C>
3.1*              Restated Certificate of Incorporation of the Company
3.2*              Bylaws of the Company
10.1*             Loan and Security Agreement between the Company and Commerce Bank, as amended
10.2*             Stock Option Plan, including form of Stock Option Agreement
10.3**            Subordinated Note Purchase Agreement
10.4**            Amendment to Subordinated Note Purchase Agreement
10.5**            J.C. Penney License Agreement
10.6**            Vision Care Agreement
10.7***           Employment Agreement for William A. Schwartz, Jr.
10.8***           Form of Employment Severance Agreement
10.9**            Form of Non-Statutory Option Agreement
10.10**           Form of Indemnification Agreement
10.11**           Stockholders' Agreement
10.12**           Form of Sears Lease
10.13**           Commerce Bank Mortgages and Schedules
10.14**           DRPA Loan Documentation
21+               Subsidiaries of the Company
23+               Consent of Independent Auditors
27+               Financial Data Schedule
</TABLE>

*        Previously filed as an exhibit to the Form S-1 (Reg. No. 333-35819)
         filed with the Commission on September 17, 1997.

**       Previously filed as an exhibit to Amendment No. 1 to the Form S-1 (Reg.
         No. 333-35819) filed with the Commission on October 29, 1997.

***      Previously filed as an exhibit to the company's Form 10-K for the
         fiscal year ended January 31, 1998, which was filed with the Securities
         and Exchange Commission on April 30, 1999.

+        Filed herewith.

                                       20
<PAGE>   22
                                   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.

                                            U. S. VISION, INC.


April 28, 2000                              By: /s/ William A. Schwartz, Jr.
                                               --------------------------------
                                                William A. Schwartz, Jr.,
                                                President and Chief Executive
                                                Officer

     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities indicated on April 28, 2000.

<TABLE>
<CAPTION>
         SIGNATURE                                            CAPACITY
         ---------                                            --------
<S>                                                           <C>
    /s/ William A. Schwartz, Jr.                              President, Chief Executive Officer and Director
---------------------------------------                        (Principal Executive Officer)
William A. Schwartz, Jr.


    /s/ Kathy G. Cullen                                       Senior Vice President and Chief Financial Officer
---------------------------------------                         (Principal Financial and Accounting Officer)
Kathy G. Cullen


  /s/ Dennis J. Shaughnessy                                   Director
---------------------------------------
Dennis J. Shaughnessy


 /s/ J. Roger Sullivan, Jr.                                   Director
---------------------------------------
J. Roger Sullivan, Jr.


 /s/ Richard K. McDonald                                      Director
---------------------------------------
Richard K. McDonald


 /s/ G. Kenneth Macrae                                        Director
---------------------------------------
G. Kenneth Macrae


 /s/ Peter M. Troup                                           Director
---------------------------------------
Peter M. Troup
</TABLE>
<PAGE>   23
                         Report of Independent Auditors


Board of Directors and Stockholders
U.S. Vision, Inc.

We have audited the accompanying consolidated balance sheets of U.S. Vision,
Inc. as of January 31, 2000 and 1999, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period ended January 31, 2000. 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 consolidated financial position of U.S. Vision, Inc.
at January 31, 2000 and 1999, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended January 31, 2000,
in conformity with accounting principles generally accepted in the United
States.

As discussed in Note 2 to the financial statements, in the year ended January
31, 1999, the Company changed its method of accounting for costs of computer
software developed or obtained for internal use.


                                                    /s/Ernst & Young LLP


Philadelphia, Pennsylvania
March 22, 2000

                                       F-1
<PAGE>   24
                                U.S. Vision, Inc.

                           Consolidated Balance Sheets

           (Dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                            JANUARY 31,
                                                                       2000             1999
                                                                       ----             ----
<S>                                                                 <C>               <C>
ASSETS
Current assets:
     Cash                                                           $     454         $     693
     Accounts receivable                                               12,006            13,520
     Inventory                                                         23,785            22,818
     Prepaid expenses and other                                           542               847
                                                                    ---------         ---------
Total current assets                                                   36,787            37,878
Property, plant, and equipment, net                                    37,890            31,634
Goodwill, net of accumulated amortization
     of $868 and $570, respectively                                     6,705             5,565
Other                                                                   1,651               517
                                                                    ---------         ---------
Total assets                                                        $  83,033         $  75,594
                                                                    =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable-trade                                         $  10,094         $   7,894
     Accrued expenses                                                   5,834             5,238
     Current portion of obligations under capital lease                   646               660
     Current portion of long-term debt                                  1,087               934
                                                                    ---------         ---------
Total current liabilities                                              17,661            14,726
Obligations under capital lease                                         1,759             1,542
Long-term debt, less current portion                                   18,934            12,827
Other long-term liabilities                                                28                29
Stockholders' equity:
     Common stock, $0.01 par value:
        Authorized shares-15,000,000, issued and outstanding
        shares-7,793,807                                                   78                78
     Additional paid-in capital                                       115,766           115,766
     Accumulated deficit                                              (71,193)          (69,374)
                                                                    ---------         ---------
Total stockholders' equity                                             44,651            46,470
                                                                    ---------         ---------
Total liabilities and stockholders' equity                          $  83,033         $  75,594
                                                                    =========         =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>   25
                                U.S. Vision, Inc.

                      Consolidated Statements of Operations

                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                           YEAR ENDED JANUARY 31,
                                                   2000               1999            1998
                                                   ----               ----            ----
<S>                                              <C>               <C>              <C>
Net sales                                        $ 143,419         $ 131,491        $ 122,763
Cost of sales                                       45,516            40,648           38,584
                                                 ---------         ---------        ---------
Gross profit                                        97,903            90,843           84,179

Operating expenses:
     Selling, general, and administrative
       expenses                                     91,726            79,119           73,367
     Loss on closure of frame
       manufacturing facility                        2,835                --               --
     Depreciation and amortization                   4,670             3,879            3,390
     Store closings and disposals                       --                --             (389)
                                                 ---------         ---------        ---------
                                                    99,231            82,998           76,368
                                                 ---------         ---------        ---------

Operating income (loss)                             (1,328)            7,845            7,811
Interest expense, net                                  469                21            2,486
                                                 ---------         ---------        ---------

Income (loss) before income tax                     (1,797)            7,824            5,325
Income tax provision                                    22               355               --
                                                 ---------         ---------        ---------

Net income (loss)                                $  (1,819)        $   7,469        $   5,325
                                                 =========         =========        =========

Net income (loss) per share                      $    (.23)        $     .96        $     .90
                                                 =========         =========        =========
Net income (loss) per share - assuming
     dilution                                    $    (.23)        $     .94        $     .89
                                                 =========         =========        =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>   26
                                U.S. Vision, Inc.

           Consolidated Statements of Changes in Stockholders' Equity

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                  9% SERIES A                  9% SERIES C
                                                   CUMULATIVE                   CUMULATIVE
                                                 PREFERRED STOCK              PREFERRED STOCK
                                              ($100,000 FACE VALUE          ($63.50 FACE VALUE
                                                    PER SHARE)                   PER SHARE)
                                               SHARES       AMOUNT          SHARES        AMOUNT
                                               ------       ------          ------        ------
<S>                                           <C>          <C>            <C>            <C>
Balance at January 31, 1997                      158       $ 15,765        120,969        $ 7,682
Net income
Dividends on preferred stock                     11           1,088          8,417            534
Conversion of warrants                                                      (3,895)          (247)
Conversion of preferred stock
     to common stock                            (169)       (16,853)      (125,491)        (7,969)
Proceeds from initial public
     offering
Initial public offering costs                   -----      ---------      ---------       --------
Balance at January 31, 1998                        --             --             --             --
Net income
Additional initial public
     offering costs
Stock issuance in connection
     with acquisition
Stock issuance in connection
     with director stock
     compensation plan                          -----      ---------      ---------       --------
Balance at January 31, 1999                        --             --             --             --
                                                -----      ---------      ---------       --------
Net loss                                        -----      ---------      ---------       --------
Balance at January 31, 2000                        --             --             --             --
                                                =====      =========      =========       ========
</TABLE>

                                       F-4
<PAGE>   27
                                U.S. Vision, Inc.

     Consolidated Statements of Changes in Stockholders' Equity (continued)

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                             COMMON STOCK
                                         ($0.01 PAR VALUE PER           ADDITIONAL                             TOTAL
                                                SHARE)                    PAID-IN         ACCUMULATED       STOCKHOLDERS'
                                       SHARES            AMOUNT           CAPITAL           DEFICIT            EQUITY
                                       ------            ------           -------           -------            ------
<S>                                  <C>                <C>             <C>               <C>               <C>
Balance at January 31, 1997             895,765         $     9         $   70,683        $  (80,329)        $   13,810
Net income                                                                                     5,325              5,325
Dividends on preferred stock                                                                  (1,839)              (217)
Conversion of warrants                1,607,775              16                231
Conversion of preferred stock
     to common stock                  2,758,004              28             24,794
Proceeds from initial public
     offering                         2,500,000              25             22,475                               22,500
Initial public offering costs                                               (2,600)                              (2,600)
                                     ----------         -------         ----------        ----------         ----------
Balance at January 31, 1998           7,761,544              78            115,583           (76,843)            38,818
Net income                                                                                     7,469              7,469
Additional initial public
     offering costs                                                           (174)                                (174)
Stock issuance in connection
      with acquisition                   16,700              --                200                                  200
Stock issuance in connection
     with director stock
     compensation plan                   15,563              --                157                                  157
                                     ----------         -------         ----------        ----------         ----------
Balance at January 31, 1999           7,793,807              78            115,766           (69,374)            46,470
Net loss                                                                                      (1,819)            (1,819)
                                     ----------         -------         ----------        ----------         ----------
Balance at January 31, 2000           7,793,807         $    78         $  115,766        $  (71,193)        $   44,651
                                     ==========         =======         ==========        ==========         ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>   28
                                U.S. Vision, Inc.

                      Consolidated Statements of Cash Flows

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             YEAR ENDED JANUARY 31,
                                                                    2000             1999               1998
                                                                    ----             ----               ----
<S>                                                              <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                $  (1,819)        $   7,469         $   5,325
Adjustments to reconcile net income to net cash
 provided by operating activities:
     Depreciation and amortization                                   4,670             3,879             3,390
     Loss on closure of frame manufacturing facility                 2,835                --                --
     Store closings and lease termination payments                      --                --              (389)
   Changes in operating assets and liabilities, net of
    effect of acquisitions:
     Accounts receivable                                             1,104            (1,547)           (3,024)
     Inventory                                                      (2,918)           (4,275)              (30)
     Other                                                            (953)             (415)             (150)
     Accounts payable - trade                                        2,200             1,718            (1,173)
     Accrued expenses                                                  203              (396)           (2,151)
                                                                 ---------         ---------         ---------
Net cash provided by operating activities                            5,322             6,433             1,798

CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to property, plant, and equipment, net               (9,601)           (8,894)           (6,241)
     Disposal of Dallas facility                                        --                --             1,000
     Acquisitions                                                     (795)           (1,892)               --
                                                                 ---------         ---------         ---------
Net cash used in investing activities                              (10,396)          (10,786)           (5,241)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings:
   Revolving line of credit                                         75,570            29,265           117,094
   Other                                                               870               424             1,650
Repayments of borrowings:
   Revolving line of credit                                        (69,680)          (23,090)         (117,330)
   Term loans                                                         (355)             (524)          (16,825)
   Other                                                            (1,570)           (1,220)             (838)
Preferred stock dividend                                                --                --              (217)
Proceeds from initial public offering                                   --                --            22,500
1997 initial public offering costs                                      --              (174)           (2,600)
                                                                 ---------         ---------         ---------
   Net cash provided by financing activities                         4,835             4,681             3,434
                                                                 ---------         ---------         ---------
Net increase (decrease) in cash                                       (239)              328                (9)
Cash at beginning of period                                            693               365               374
                                                                 ---------         ---------         ---------
Cash at end of period                                            $     454         $     693         $     365
                                                                 =========         =========         =========

Supplemental disclosure of cash flow information:
Interest paid                                                    $   1,065         $     554         $   2,496
                                                                 =========         =========         =========
Income taxes                                                     $     863         $     235         $      --
                                                                 =========         =========         =========
Supplemental schedule of non-cash investing and financing
 activities:
Capital lease obligations incurred                               $      45         $      --         $     980
                                                                 =========         =========         =========
Note payable incurred in connection with acquisitions            $     758         $   1,206         $      --
                                                                 =========         =========         =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   29
                                U.S. Vision, Inc.

                   Notes to Consolidated Financial Statements


1.       ORGANIZATION

U.S. Vision, Inc. (the "Company") was formed in March 1990 and incorporated in
the Commonwealth of Pennsylvania. In March 1997, the Company reincorporated in
the State of Delaware. The Company's principal business activity is the retail
sale and manufacturing of prescription eyewear through approximately 686 stores
located throughout the United States.

In December 1997, the Company completed an initial public offering of 2,500,000
shares of the Company's common stock. The initial public offering price was
$9.00 per share. The net proceeds to the Company were used to retire the
$8,837,000 outstanding balance of its 12% subordinated debentures which was
payable on March 1998, to repay $6,600,000 on its bank term loan due 2001, and
to repay $4,938,000 on its revolving line of credit which would have expired on
December 31, 1999. In conjunction with the sale of common stock, the Company
recapitalized its common stock and authorized a 64-for-1 stock dividend.
Additionally, in conjunction with the initial public offering described above,
the holders of the Series A cumulative preferred stock and Series C cumulative
preferred stock converted all the outstanding shares of preferred stock into
common stock at the public offering price. The liquidation values of the Series
A and the Series C preferred stock plus accumulated dividends at the date of the
conversion of $16,853,000 and $7,969,000, respectively, were converted for
1,872,592 and 885,412 shares of common stock, respectively. All references to
net income per share data in the financial statements have been restated to give
effect to the stock dividend and conversion of the preferred stock.

2.       SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
all of its wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

INVENTORY

Inventory, consisting principally of frames and lenses, is valued at the lower
of cost or market, determined by the first-in, first-out method.

                                       F-6
<PAGE>   30
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. Depreciation, which includes
assets under capital leases, is computed using the straight-line method. The
general range of useful lives is 10 to 30 years for buildings and improvements,
and 3 to 10 years for automobiles, machinery and equipment, computer equipment,
and furniture and fixtures. Depreciation expense totaled $4,349,000, $3,703,000,
and $3,297,000 in fiscal 1999, 1998, and 1997, respectively.

LONG-LIVED ASSETS

Long-lived assets, which principally includes property, plant, and equipment,
and goodwill arising from business acquisitions, are amortized on a
straight-line basis over the expected period to be benefitted from 15 to 40
years. In accordance with FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
periodically evaluates the realizability of long-lived assets as events or
circumstances indicate a possible inability to recover their carrying amounts.
Long-lived assets are grouped and evaluated on a per store basis by applying
various analyses, including undiscounted cash flows and profitability
projections.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expense was
$9,764,000, $8,035,000, and $7,594,000 in fiscal 1999, 1998, and 1997,
respectively.

STORE OPENINGS AND CLOSINGS

The noncapital expenditures incurred in opening new stores or remodeling
existing stores are expensed as incurred. When a store is closed, the remaining
investment in leasehold improvements and the amount estimated to terminate the
lease are expensed.

REVENUE RECOGNITION

Revenue is recognized when merchandise is delivered or shipped to the customer.

RECLASSIFICATION

Certain prior-year amounts have been reclassified to conform with the
current-year presentation.

                                       F-7
<PAGE>   31
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING FOR INTERNAL USE SOFTWARE

In March 1998, the AICPA issued Statement of Position (SOP) 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use". The SOP,
which was adopted as of February 1, 1998, requires the capitalization of certain
costs incurred in connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company capitalized all internal use
software related costs except for interest which was expensed as incurred. The
effect of adopting the SOP was to increase net income by $730,000 ($0.09 per
share diluted) and $528,000 ($0.07 per share diluted) for the year ended January
31, 2000 and 1999, respectively.

3.       INVENTORY

Inventory is as follows (In thousands):

<TABLE>
<CAPTION>
                             JANUARY 31,
                         2000           1999
                         ----           ----
<S>                    <C>            <C>
Finished goods         $21,341        $18,782
Work-in-process            870          1,230
Raw materials            1,574          2,806
                       -------        -------
                       $23,785        $22,818
                       =======        =======
</TABLE>

4.   PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment is as follows (In thousands):

<TABLE>
<CAPTION>
                                              JANUARY 31,
                                         2000            1999
                                         ----            ----
<S>                                     <C>            <C>
Land and buildings                      $ 7,303        $ 6,490
Leasehold improvements                   10,242          9,441
Machinery and equipment                  21,460         18,812
Data processing equipment and
   related capitalized costs             15,310         11,247
Furniture and fixtures                   14,684         12,475
                                        -------        -------
                                         68,999         58,465
   Less accumulated depreciation         31,109         26,831
                                        -------        -------
                                        $37,890        $31,634
                                        =======        =======
</TABLE>

                                       F-8
<PAGE>   32
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


5.       LONG-TERM DEBT

Long-term debt is as follows (In thousands):

<TABLE>
<CAPTION>
                                                                                              JANUARY 31,
                                                                                         2000             1999
                                                                                         ----             ----
<S>                                                                                    <C>               <C>
$20,000,000 Revolving Line of Credit which expires on December 31, 2001.
Interest is payable monthly at the lower of prime, as defined, or the thirty day
rate for U.S. Treasury Bills plus 250 basis points (6.96% at January 31, 2000).
The revolving line of credit is secured by substantially all the assets of the
Company.                                                                               $14,214           $ 8,324

DRPA Term Loan due February 1, 2010. Requires quarterly payments of $13,322,
which includes principal and interest at 2%. Final payment of $702,434 is due on
January 31, 2010. The term loan is secured by the land and building of the
Corporate headquarters.                                                                  1,054             1,078

DRPA Term Loan due February 1, 2010. Requires quarterly payments of $25,313,
which includes principal and interest at 2%. Final payment of $1,334,625 is due
on January 31, 2010. The term loan is secured by the land and building of the
New Jersey manufacturing facility.                                                       2,004             2,049

DRPA Term Loan due on June 7, 2005. Requires quarterly payments of $33,175,
which includes principal and interest at 2%. The term loan is secured by certain
of the equipment located in the New Jersey manufacturing facility.                         660               778

Mortgage loan payable due October 2004. Requires monthly payments of $5,121,
which includes principal and interest at 8.5%. Final payment of $413,000 is due
on October 2004. The loan is secured by the land and building of the New Jersey
distribution facility.                                                                     516                 -

Note payable to stockholder due July 7, 2001. Requires quarterly payments of
$41,666 plus simple interest based on the prime rate at the first day of each
calendar quarter (8.50% at January 31, 2000).                                              249               416

Other                                                                                    1,324             1,116
                                                                                       -------           -------
                                                                                        20,021            13,761
Less current portion                                                                     1,087               934
                                                                                       -------           -------
                                                                                       $18,934           $12,827
                                                                                       =======           =======
</TABLE>

                                       F-9
<PAGE>   33
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


5.       LONG-TERM DEBT (CONTINUED)

The revolving credit agreement contains various financial covenants including
maintaining a specified net worth level, current ratio, and a fixed charge
ratio. The revolving credit agreement also prohibits the payment of dividends to
common stockholders. As of January 31, 2000, the company was not in compliance
with the fixed charge ratio, and the bank waived this covenant until January 31,
2001.

The carrying amounts of the Company's borrowings approximate their fair values.

Maturities of long-term debt for each of the next five years and thereafter are
as follows (In thousands):

<TABLE>
<CAPTION>
                                  YEAR ENDED JANUARY 31,
                                  ----------------------
<S>                                                       <C>
                           2001                           $ 1,087
                           2002                            14,664
                           2003                               372
                           2004                               365
                           2005                               723
                           Thereafter                       2,810
                                                          -------
                                                          $20,021
                                                          =======
</TABLE>

6.       LEASE COMMITMENTS

Capital lease obligations are machinery and equipment leases which expire on
various dates through 2004. Assets under capital leases at January 31, 2000 and
1999, were $3,232,000 and $3,381,000, net of accumulated amortization of
$795,000 and $576,000, respectively, and are included as a component of
property, plant, and equipment in the consolidated balance sheets.

                                      F-10
<PAGE>   34
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)

6.       LEASE COMMITMENTS (CONTINUED)

Future minimum payments required under noncancellable capital leases and
operating leases with lease terms in excess of one year as of January 31, 2000,
are as follows (In thousands):

<TABLE>
<CAPTION>
                                                               CAPITAL               OPERATING
           YEAR ENDED JANUARY 31,                              LEASES                  LEASES
           ----------------------                              ------                  ------
<S>                                                            <C>                   <C>
           2001                                                $  853                  $1,326
           2002                                                   743                     796
           2003                                                   564                     437
           2004                                                   230                     184
           2005                                                   135                      85
           Thereafter                                              -                       58
                                                               ------                  ------
           Total lease payments                                 2,525                  $2,886
                                                                                       ======
           Less amount representing interest                      120
                                                               ------
           Present value of minimum capitalized
               lease payments                                   2,405
           Less current portion                                   646
                                                               ------
           Long-term portion                                   $1,759
                                                               ======
</TABLE>

At January 31, 2000, the Company operated 46 of its retail stores under
operating leases with varying terms. The leases expire at various dates from
fiscal 2000 to fiscal 2006, and many have renewal options for up to five
additional years. The leases provide for minimum lease payments and, in many
cases, require payment of additional rents if sales exceed stipulated levels.
These additional rents are not significant. The leases also require, in most
cases, payment of taxes and common area expenses such as maintenance, security,
and other expenses.

The Company also operated 640 licensed optical departments under leases with
expiration dates ranging from 60-days to 5-years. These leases provide for
monthly lease payments calculated as a percentage of sales. Rent expense under
these leases was $17,378,000, $15,537,000, and $14,212,000 in fiscal 1999, 1998,
and 1997, respectively. Approximately 70% of these leases are with one large
national retailer. The Company's master lease provides that only a limited
number of the Company's optical centers with this retailer may be closed in any
calendar year without cause.

The Company also operates other facilities under operating leases. Rent expense
for all operating leases, including those on its retail stores and licensed
optical departments described above, was $19,867,000, $18,270,000, and
$17,010,000 in fiscal 1999, 1998, and 1997, respectively.

The Company has commitments from Commerce BankLease, a unit of Commerce Bank,
N.A., for a $2,000,000 five-year equipment lease financing facility. During
fiscal 1999, the Company executed the agreement and leased approximately
$922,000 of laboratory equipment, which will be paid for over a period of 60
months. The leased laboratory equipment has been recorded as a capital lease on
the consolidated balance sheet.

                                      F-11
<PAGE>   35
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


7.      INCOME TAXES

The components of the income tax provision are as follows (In thousands):

<TABLE>
<CAPTION>
                                  YEAR ENDED JANUARY 31,
                             2000          1999          1998
                             ----          ----          ----
<S>                         <C>           <C>           <C>
Current provision           $  48         $ 476         $  85
Deferred benefit              (26)         (121)          (85)
                            -----         -----         -----
Income tax provision        $  22         $ 355         $  --
                            =====         =====         =====
</TABLE>

Deferred income tax liabilities and assets result from differences in the tax
basis of assets and liabilities and their reported amounts in the consolidated
financial statements. Significant components of the Company's deferred income
taxes are as follows (In thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED JANUARY 31,
                                                     2000            1999            1998
                                                     ----            ----            ----
<S>                                                <C>             <C>             <C>
Deferred tax liability:
Depreciation                                       $ 1,962         $ 1,548         $ 1,280
Deferred tax assets:
      Store closing reserves                           171             199             289
      Inventory costs                                1,262             414             483
      Alternative Minimum Tax Credit                   232             206              85
      Other                                            124             170             190
Net operating loss carryover                         5,856           5,730           8,766
                                                   -------         -------         -------
                                                     7,645           6,719           9,813
Valuation allowance for deferred tax assets         (5,451)         (4,965)         (8,448)
                                                   -------         -------         -------
Total deferred tax assets                            2,194           1,754           1,365
                                                   -------         -------         -------
Net deferred tax assets                            $   232         $   206         $    85
                                                   =======         =======         =======
</TABLE>

The deferred tax valuation reserve increased by $486,000 and decreased by
$3,483,000 for fiscal 1999 and 1998, respectively. The valuation reserve has
been established to eliminate the benefit of all net deferred tax assets except
for the credit on the Alternative Minimum Tax.

                                      F-12
<PAGE>   36
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


7.       INCOME TAXES (CONTINUED)

A reconciliation of the income tax provision with amounts determined by applying
the U.S. Statutory rate to income before income tax is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED JANUARY 31,
                                                    2000            1999            1998
                                                    ----            ----            ----
<S>                                               <C>             <C>             <C>
Income tax provision at the statutory rate        $  (611)        $ 2,660         $ 1,810
Amortization of goodwill                               83              54              28
Nontaxable income                                      --              --             (57)
Nondeductible expenses                                121              47              32
Increase (decrease) in deferred tax
      asset valuation reserve                         486          (2,691)         (2,030)
State income tax provision                             76             136              --
Other taxes                                          (133)            149             217
                                                  -------         -------         -------
Income tax provision                              $    22         $   355         $    --
                                                  =======         =======         =======
</TABLE>

As of January 31, 2000, the Company had net operating loss carry forwards of
approximately $15,400,000 which will begin to expire in the year 2006.
Approximately $5,700,000 of these carry forwards are available to offset future
taxable income without limitation and approximately $9,700,000 of these carry
forwards (the "Restricted NOLs") are significantly limited due to ownership
changes. Approximately $780,000 of the Restricted NOLs will become available for
use each year through the year 2008. Approximately $3,400,000 of the Restricted
NOLs are expected to expire unutilized.

                                      F-13
<PAGE>   37
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


8.       NET INCOME PER SHARE

The following table (In thousands except per share data) presents the
calculation of earnings per share for the periods indicated.

<TABLE>
<CAPTION>
                                                            YEAR ENDED JANUARY 31,
                                                     2000            1999           1998
                                                     ----            ----           ----
<S>                                                <C>             <C>            <C>
Net income (loss)                                  $(1,819)        $ 7,469        $ 5,325
Preferred stock dividends                               --              --            217
                                                   -------         -------        -------
Net income available to common stockholders        $(1,819)        $ 7,469        $ 5,108
                                                   -------         -------        -------
Basic average common shares outstanding              7,794           7,780          5,652
Effect of dilutive securities:
      Options                                           --             175            106
                                                   -------         -------        -------
Diluted average common shares outstanding            7,794           7,955          5,758
                                                   -------         -------        -------
Net income per share applicable to common
         stockholders                              $ (0.23)        $  0.96        $  0.90
                                                   =======         =======        =======
Net income per share - assuming dilution
         applicable to common stockholders         $ (0.23)        $  0.94        $  0.89
                                                   =======         =======        =======
</TABLE>

Options to purchase shares of common stock have no impact on earnings per share
for the year ended January 31, 2000, as their effect was antidilutive.

9.       STORE CLOSINGS AND GOODWILL WRITE-OFF

In fiscal 1995, the company recorded a charge of $10,473,000 relating to the
closing of approximately 139 retail stores. All such stores were closed prior to
January 31, 1996. Sales and operating losses for these 139 stores totaled
$10,554,000 and $2,737,000 for fiscal 1995. The charge included $6,500,000 for
estimated lease termination liabilities, $1,483,000 of property and equipment
write-offs for leasehold improvements and other equipment located in the closed
stores, $1,600,000 of inventory previously stocked in these stores, and $890,000
in other costs associated with the closings.

Additionally, in fiscal 1995, the company wrote-off goodwill of $8,067,000 which
reduced the remaining unamortized balance to $3,083,000 at January 31, 1996. A
significant portion of goodwill was attributable to assets that were closed or
otherwise liquidated prior to January 31, 1996, including 194 stores over the
prior three fiscal periods and the closing of the company's Dallas lab facility.
Consequently, the company determined that the cumulative effect of store
closings and the closing of the Dallas facility was indicative of a significant
impairment of goodwill.

                                      F-14
<PAGE>   38
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)

9.       STORE CLOSINGS AND GOODWILL WRITE-OFF (CONTINUED)

In fiscal 1995, the company further evaluated inventory determined to be slow
moving and, as a result, wrote off an additional $1,500,000 of inventory. This
charge was recorded as a component of cost of sales.

Approximately $3,459,000 of unpaid lease liabilities recorded in fiscal 1995
remained at January 31, 1997, of which $1,825,000 was recorded as a current
liability and $1,634,000 was classified in other long-term liabilities. At
January 31, 1998, approximately $762,000 of these liabilities remained unpaid,
of which $407,000 was recorded as a current liability and $355,000 as other
long-term liabilities. In fiscal 1997, the company realized a $689,000 gain as a
result of favorable settlements of certain of its freestanding store leases.
This gain was offset by a $300,000 loss the company realized from the sale of
its Dallas facility in fiscal 1997.

In fiscal 1998, the company incurred $462,000 of lease termination payments and
at January 31, 1999, the remaining balance of the accrued liability was
approximately $300,000. Since April 30, 1999, the balance of the accrued
liability has been incurred and, accordingly, the balance of the accrued
liability was eliminated as of July 31, 1999.

10.      COMMITMENTS AND CONTINGENCIES

The Company, in the normal course of business, is involved in various legal
proceedings. Management of the Company believes that, in all cases, the outcome
of such legal proceedings will not have a material effect on the Company's
results of operations or financial condition.

11.      ACQUISITIONS

On July 31, 1999, the Company acquired ten licensed optical retail stores
located within The Bay and Zeller's full line stores in the Quebec province. On
September 20, 1999, the Company acquired all of the assets and inventory of
twenty-four licensed optical departments from a regional department store
retailer. Both acquisitions were accounted for under the purchase method of
accounting. The operating results of these acquisitions are included in the
consolidated financial statements since the date of the acquisitions. The total
cost of these acquisitions was $1.5 million, and the excess of the purchase
price over the fair market value of the acquired assets and liabilities assumed
has been recorded as goodwill. The total goodwill recorded on these acquisitions
was $1.2 million, which is being amortized on a straight line basis from the
respective date of each acquisition. Pro forma results of operations have not
been included for these acquisitions as the effect is not material.

On July 7, 1998, the Company acquired nine licensed optical retail stores
located within Sears full line stores and two medical center locations. On
October 4, 1998, the Company acquired all of the assets and inventory of sixteen
licensed optical departments from a department store division of a national
retailer. Both acquisitions were accounted for under the purchase method of
accounting. The operating results of these acquisitions are included in the
consolidated financial statements since the date of the acquisitions. The total
cost of these acquisitions was $3.2 million, and the excess of the purchase
price over the fair market value of the acquired assets and liabilities assumed
has been recorded as goodwill. The total

                                      F-15
<PAGE>   39
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)

11.      ACQUISITIONS (CONTINUED)

goodwill recorded on these acquisitions was $2.8 million which is being
amortized on a straight line basis from the respective date of each acquisition.
Pro forma results of operations have not been included for these acquisitions as
the effect is not material.

12.      CLOSURE OF FRAME MANUFACTURING FACILITY

In fiscal 1999 the company's board of directors approved a plan whereby its
plastic frame manufacturing facility, located in Florida, will close by June 30,
2000. The company will relocate the importing and distribution of frames,
previously manufactured or imported in Florida, to its Glendora, NJ distribution
facility. In connection with this plan, the company recorded a charge of
$2,835,000, which was comprised of $2,224,000 in write-offs of inventory used
solely in the manufacturing process, $161,000 in machinery and equipment,
$250,000 in buildings and $200,000 for uncollectible receivables. The write-offs
associated with the buildings and machinery and equipment were intended to
reduce their carrying costs to their estimated net realizable value. The company
also will incur approximately $250,000 in additional payroll costs between
February 1 and June 30, 2000, which will be expensed when paid.

13.      SEGMENT INFORMATION

The Company operates exclusively in the business of marketing, distribution, and
production of optical products through retail optical stores. On January 31,
2000, the Company operated in 48 states and in Canada. Approximately 66% of the
Company's sales were in licensed departments of one retailer for fiscal 1999,
1998 and 1997. Sales in licensed departments of another retailer were
approximately 12% for fiscal 1999 and 1998 and 10% for fiscal 1997. A
termination of either of these licenses could cause a loss of sales, which would
affect operating results adversely.

The Company's sales to customers, operating income and net property, plant and
equipment are summarized by geographical areas below. Sales to customers are
attributed to the geographical areas based on the point of sale.
<TABLE>
<CAPTION>
                                         UNITED STATES       CANADA        CONSOLIDATED
                                         -------------       ------        ------------
                                                        (In thousands)
<S>                                      <C>                <C>           <C>
YEAR ENDED JANUARY 31, 2000
Sales to customers                        $ 140,463         $ 2,956         $ 143,419
Operating loss                                 (333)           (995)           (1,328)
Property, plant and equipment, net           37,010             880            37,890

YEAR ENDED JANUARY 31, 1999
Sales to customers                          131,491              --           131,491
Operating income                              7,845              --             7,845
Property, plant and equipment, net           31,634              --            31,634

YEAR ENDED JANUARY 31, 1998
Sales to customers                          122,763              --           122,763
Operating income                              7,811              --             7,811
</TABLE>

                                      F-16
<PAGE>   40
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


14.      STOCK BASED COMPENSATION PLANS

In February 1996, the Board of Directors authorized the formation of an
incentive stock option plan. The total amount of Common Stock for which options
may be granted under this plan may not exceed in the aggregate 1,300,000 shares.
The price at which shares may be purchased pursuant to options granted under the
plan may not be less than the fair market value of the shares of Common Stock on
the date the option is granted. In March 1996, 639,665 options were issued to
various members of management. The majority of these options vested immediately,
are exercisable at $7.69 per share (fair market value on date of grant), and
expire on October 1, 2004.

In December 1997, 33,333 non-qualified options were issued to various directors
with an exercise price of $9.00 per share (fair market value on date of grant).
One third of these options vested immediately upon grant, and the remaining
options vest one third per year for the next two years from the date of grant.
These options expire in December 2007.

In May 1998, 317,000 options were issued to various members of management with
an exercise price of $12.00 per share (estimated fair market value on date of
grant). Twenty-five percent of these options vested immediately upon grant, and
the remaining options vest twenty-five percent per year for the next three years
from the date of grant. These options expire in May 2008.

The following table summarizes the Company's stock option activity:

<TABLE>
<CAPTION>
                                                         YEAR ENDED JANUARY 31,
                                      2000                       1999                    1998
                                            Weighted                 Weighted                Weighted
                                            Average                  Average                 Average
                               Number       Exercise      Number     Exercise      Number    Exercise
                               of shares    Price        of shares   Price       of shares   Price
                               ---------    -----        ---------   -----       ---------   -----
<S>                           <C>           <C>         <C>          <C>         <C>         <C>
Options outstanding at
      beginning of year        1,086,523    $ 8.99        769,523    $  7.75       736,190   $ 7.69
Granted                               --        --        317,000      12.00        33,333     9.00
Exercised                             --        --             --         --            --       --
Forfeited                         76,050    $ 7.69             --         --            --       --
                              --------------------      ---------------------    -------------------
Options outstanding
      at end of year           1,010,473    $ 9.09      1,086,523    $  8.99       769,523   $ 7.75
                              ====================      =====================       ================
Exercisable at end of year       851,973    $ 8.54         832,440   $  8.14       736,858   $ 7.71
Available for future grants      419,385                   343,335                 660,335
</TABLE>

                                      F-17
<PAGE>   41
                                U.S. Vision, Inc.

             Notes to Consolidated Financial Statements (continued)


14.      STOCK BASED COMPENSATION PLANS (CONTINUED)

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. If the Company had
recognized compensation costs based upon the fair value of the stock options at
the date of the grant, as prescribed by FAS 123, the Company's pro forma net
loss and net loss per share would have been $2.3 million and $0.29,
respectively, for the year ended January 31, 2000 and pro forma net income and
pro forma net income per share would have been $6.7 million and $0.85,
respectively, for the fiscal year ended January 31, 1999. The effect of applying
Statement 123's fair value method to the Company's stock-based awards results in
pro forma net income per share that are not different from amounts reported for
the fiscal year ended January 31, 1998.

The fair value of options granted in fiscal 1998 was $5.54 per share. The fair
value of the options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 5.75%, dividend yield of 0%, expected volatility of the market
price of the common stock of 43.5%, and weighted average expected life of the
options of 5 years. The estimated fair value of the options was amortized to
expense over the vesting period of the options for the purposes of determining
pro forma net income and pro forma net income per share. The effects of applying
FAS 123 for purposes of providing pro forma disclosures are not likely to be
representative of the effects on reported net income in future years.

During 1998, the Company issued 15,563 shares of common stock to directors.
Compensation expense, based on the fair market value of the stock at the date of
grant, of $158,000 has been included in the statement of income for fiscal 1998.

15.      EMPLOYEE BENEFIT PLAN

The Company implemented an employee savings plan (the "plan") during fiscal 1995
pursuant to Section 401(k) of the Internal Revenue Code. All employees who have
been credited with at least 250 hours of service within three consecutive months
are eligible to participate in the plan. Employees may elect to contribute to
the plan through payroll deductions in an amount not to exceed the amount
permitted under the Internal Revenue Code. The Company has the discretion to
make matching contributions on behalf of the participants. Employees are fully
vested in their contributions. Company contributions vest at a rate of 20% on
each participant's anniversary date in the plan provided that the participant
has completed 1,000 hours of service with the Company as of such date. During
fiscal 1999, 1998 and 1997, the Company contributed $135,000, $104,000 and
$98,000, respectively to the plan.

                                      F-18
<PAGE>   42
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER                                           EXHIBIT
         ------                                           -------
<S>                        <C>
         3.1*              Restated Certificate of Incorporation of the Company
         3.2*              Bylaws of the Company
         10.1*             Loan and Security Agreement between the Company and Commerce Bank, as
                           amended
         10.2*             Stock Option Plan, including form of Stock Option Agreement
         10.3**            Subordinated Note Purchase Agreement
         10.4**            Amendment to Subordinated Note Purchase Agreement
         10.5**            J.C. Penney License Agreement
         10.6**            Vision Care Agreement
         10.7***           Employment Agreement for William A. Schwartz, Jr.
         10.8***           Form of Employment Severance Agreement
         10.9**            Form of Non-Statutory Option Agreement
         10.10**           Form of Indemnification Agreement
         10.11**           Stockholders' Agreement
         10.12**           Form of Sears Lease
         10.13**           Commerce Bank Mortgages and Schedules
         10.14**           DRPA Loan Documentation
         21+               Subsidiaries of the Company
         23+               Consent of Independent Auditors
         27+               Financial Data Schedule
</TABLE>

*        Previously filed as an exhibit to the Form S-1 (Reg. No. 333-35819)
         filed with the Commission on September 17, 1997.

**       Previously filed as an exhibit to Amendment No. 1 to the Form S-1 (Reg.
         No. 333-35819) filed with the Commission on October 29, 1997.

***      Previously filed as an exhibit to the company's Form 10-K for the
         fiscal year ended January 31, 1998, filed with the Securities and
         Exchange Commission on April 30, 1999.

+        Filed herewith.