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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM 10-K

           |X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                 For the fiscal year ended December 25, 1999,
                                      OR
           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from          to

                        Commission file number: 0-21068

                          SIGHT RESOURCE CORPORATION
            (Exact name of registrant as specified in its charter)

               Delaware                                       04-3181524
     (State or other jurisdiction                          (I.R.S. Employer
  of incorporation or organization)                       Identification No.)

    100 Jeffrey Avenue, Holliston, MA                             01746
(Address of principal executive offices)                        (Zip Code)

      Registrant's telephone number, including area code: (508) 429-6916

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

     Securities registered pursuant to Section 12(g) of the Exchange Act:
                     Common Stock, $.01 par value per share
                               (Title of Class)
                        Preferred Share Purchase Rights
                               (Title of Class)

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. |X|

The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant (without admitting that any person whose shares
are not included in such calculation


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is an affiliate) on March 20, 2000, was approximately $15,591,858, based on the
last sale price as reported by NASDAQ.

As of March 20, 2000, the registrant had 9,225,952 shares of common stock
outstanding, which does not include 30,600 shares held as treasury stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into
the following parts of this Form 10-K: Certain information required in Part III
of this Annual Report on Form 10-K is incorporated from the registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 25, 2000.


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                                     PART I

Item 1. Business

General

     Sight Resource Corporation (the "Company") manufactures, distributes and
sells eyewear and related products and services. As of December 25 1999, the
Company's operations consisted of 130 eye care centers, with two regional
optical laboratories and three distribution centers, making it one of the
fifteen largest providers in the United States' primary eye care industry based
upon sales. The Company's eye care centers operate primarily under the brand
names Cambridge Eye Doctors, E.B. Brown Opticians, Eyeglass Emporium, Vision
Plaza, Vision World, Shawnee Optical and Kent Optical. The Company also provides
or, where necessary to comply with applicable law, administers the business
functions of optometrists, ophthalmologists and professional corporations that
provide vision related professional services. In addition, during 1999 the
Company operated two laser vision correction ("LVC") centers. However, in
August, 1999, the Company closed one center and in December, 1999, closed the
other center.

Acquisition History and Strategy

     Effective January 1, 1995, the Company acquired the assets of Cambridge Eye
Associates, Inc. ("Cambridge Eye"), an optometric practice which, at December
25, 1999, operated 23 primary eye care centers, principally in Massachusetts.
The assets and liabilities of Cambridge Eye were acquired from a Company by the
same name (Cambridge Eye Associates, Inc.) owned by Elliot S. Weinstock, O.D. as
the sole stockholder. Following the acquisition, Cambridge Eye entered into a
management services contract with Optometric Providers, Inc. ("Optometric
Providers"), a corporation established to employ the optometrists previously
employed by the acquired company.

     Effective July 1, 1995, the Company acquired the assets of Douglas Vision
World, Inc. ("Vision World"), a company which, at December 25, 1999, operated
seven primary eye care centers in Rhode Island. The assets and liabilities of
Vision World were acquired from a company by the same name (Douglas Vision
World, Inc.) owned by Kathleen Haronian, Lynn Haronian and Shirley Santoro.
Following the acquisition, Vision World entered into a management services
contract with Optometric Care, Inc. ("Optometric Care"), a professional
corporation established to employ the optometrists previously affiliated with
the acquired company.

      Effective July 1, 1996, the Company acquired the assets and liabilities of
three companies, the E.B. Brown Optical Company, Brown Optical Laboratories,
Inc. and E.B. Brown Opticians, Inc. (collectively, "E.B. Brown"), all owned by
Gordon and Evelyn Safran. At December 25, 1999, E. B. Brown operated 36 eye care
centers in Ohio and western Pennsylvania. Independent optometrists are
associated with all E.B. Brown eye care centers; therefore, the Company does not
record revenue from the provision of vision related medical services at these
locations. The Company may add optometrists to the staffs of several of its eye
care centers in Ohio and Pennsylvania. To accomplish this, it may be necessary
to enter into management services contracts with professional corporations
established to employ these optometrists.


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     Effective July 1, 1997, the Company acquired all of the outstanding shares
of stock of Vision Holdings, Ltd. (formerly known as Dr. Greenberg, An Optometry
Corporation d/b/a Vision Plaza)("Vision Plaza"). At December 25, 1999, Vision
Plaza operated 15 primary eye care centers and two specialty eyewear centers in
Louisiana and Mississippi. Following the acquisition, Vision Plaza entered into
a management services contract with Dr. John Musselman, a Professional
Corporation ("Musselman"), a corporation established to employ the optometrists
previously employed by the acquired company.

     Effective April 1, 1998, the Company acquired all of the outstanding shares
of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). At December 25,
1999, Eyeglass Emporium operated nine primary eye care centers in northwest
Indiana. Independent optometrists are associated with all Eyeglass Emporium eye
care centers, therefore, the Company does not record revenue from the provision
of vision related medical services at these locations.

     Effective January 1, 1999, the Company acquired all of the outstanding
shares of stock of Shawnee Optical, Inc. ("Shawnee"). At December 25, 1999,
Shawnee operated nine primary eye care centers in western Pennsylvania and
central Ohio. Independent optometrists are associated with all Shawnee eye care
centers, therefore, the Company does not record revenue from the provision of
vision related medical services at these locations.

     Effective April 1, 1999, the Company acquired all of the outstanding shares
of Kent Optical, Inc. and its associated companies (collectively, "Kent"). At
December 25, 1999, Kent operated 29 eye care centers in Michigan. Kent leases
optometrists from a subcontractor and records revenue from the provision of
vision related medical services by these optometrists.

     The Company has an acquisition strategy to acquire and integrate the assets
of multi-site eye care centers and the practices of eye care professionals and
to employ or enter into management services contracts with these professionals.
This strategy includes both expanding existing regional markets and entering new
regional markets. The Company will also target acquisitions in strategic markets
that will serve as platforms from which the Company can consolidate a given
service area by making and integrating additional "in-market" acquisitions.

     In assessing potential acquisition candidates, the Company evaluates
qualitative issues such as the reputation of the eye care professional in the
local and national marketplace, the training and education of the eye care
professional, licensure and experience, Medicare and Medicaid compliance,
billing practices and operating history. Prior to entering any market, the
Company considers such factors as the local level of eye care competition,
networking and consolidation activity, the regulatory environment,
customer-provider ratios and the economic condition of the local market. The
Company from time to time also considers acquisitions of, or affiliations with,
ambulatory surgical centers, specialty eye hospitals and other complementary
practices and services that are consistent with its objective of being a leading
integrated provider of eye care products and services in select, regional
markets.


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Current Operations

   Eye Care Centers

     The Company's 130 eye care centers are located in major shopping malls,
strip shopping centers, urban locations and free-standing buildings and
generally are clustered within discrete market areas so as to maximize the
benefit of advertising strategies and to minimize the cost of supervising
operations. The Company's centers in Massachusetts, Rhode Island, Ohio and
Louisiana are leading providers of prescription and non-prescription eye care
products and services in those markets. In addition, the Company's eye care
centers in Indiana, New Hampshire, Pennsylvania, Mississippi and Michigan are
leading providers in their local markets.

     The eye care centers are substantially similar in appearance within each
region and are operated under certain uniform standards and operating
procedures. Each eye care center carries a selection of eyeglass frames, ranging
in price from value models to designer collections. Lens and frame selections
include a variety of materials and styles. The Company continually analyzes
sales of its frames to keep its eye care centers stocked with a wide selection
of the latest in eyewear fashion and a proper assortment of styles, colors, and
sizes. In addition to prescription eyewear, each eye care center also carries
fashion sunglasses and eyewear accessories. E.B. Brown's eye care centers also
offer hearing aids and audiology goods and services which are provided by
audiologists who service many of E.B. Brown's centers on a rotating schedule.

     Each eye care center in Massachusetts, New Hampshire, Rhode Island,
Indiana, Louisiana, Mississippi, Pennsylvania and Michigan is staffed by one or
more licensed optometrists, a manager and a number of trained eye care
technicians and/or licensed opticians. The Company intends to continue to add
optometrists to several of its eye care centers in Ohio and Pennsylvania.

   Centralized Optical Laboratories and Distribution Centers

     To meet the volume needs of the eye care centers for certain prescription
eyeglass lenses and the delivery needs of each center's customers, the Company
operates two regional optical laboratories and three distribution centers. The
regional optical laboratories provide complete laboratory services to the
Company's eye care centers, including polishing, cutting and edging, tempering,
tinting and coating of ophthalmic lenses. The distribution centers provide and
maintain an inventory of all accessories and supplies necessary to operate the
primary eye care centers in their regions, as well as "ready made" eye care
products, including contact lenses and related supplies. The inventory of
eyeglass lenses, frames, contact lenses, accessories and supplies is acquired
through a number of sources, domestic and foreign. The Company is not dependent
on any one supplier. Management believes that the regional optical laboratories
and distribution centers have the capacity to accommodate additional multi-site
eye care centers.


   Management Information and Financial Systems

     In 1998, the Company completed the first stage of testing and installation
of software associated with a new point of sale system and perpetual inventory
system for its primary eye


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care centers, regional optical laboratories and distribution centers. The
Company completed the installation of the new point of sale system in its New
England eye care chains in the Fall of 1998. In 1999, the Company completed the
installation of the system in all other chains except Shawnee and Kent and
anticipates the installation of the system to be completed in Shawnee and Kent
during 2000. The Company believes that the new system will facilitate the
processing of customer sales information and replenishment of inventory by
passing such information, including customer specific orders, to the Company's
home office, and its regional optical laboratories and distribution centers for
further processing. When the Company acquires additional eye care chains, it
intends to integrate those chains into the new system or a similar compatible
system.

   Managed Primary Eye Care

     The Company implemented its SightCare program to address the expanding
enrollment of patients in managed primary eye care programs and the resulting
customer flow to designated providers of these managed primary eye care
services. SightCare is responsible for developing programs for third party
payors, securing new contracts for providing managed primary eye care services,
and ensuring the consistency and quality of managed primary eye care products
and services delivered by the Company.

     As of December 25, 1999, the Company provided managed primary eye care
benefits to more than 50 organizations in the markets served by its chains,
including private companies, unions and leading health maintenance
organizations. The Company believes that its buying power, regional
laboratories, in-center optometrists, and broad outreach within its markets,
enable it to deliver consistent, quality eyewear and primary eye care at
competitive prices, thereby positioning the Company to achieve a leadership
position in managed primary eye care in its markets.

   Management Agreements

     Many states have laws which prohibit or restrict the practice of optometry
by non-licensed persons or entities. See "--Government Regulation." In states
which allow the Company to employ optometrists and ophthalmologists, the Company
plans on providing professional services directly. Otherwise, the Company will
enter into management agreements with optometrists, ophthalmologists and/or
professional corporations which will provide the professional eye care services.
The Company's wholly owned subsidiaries, Cambridge Eye, Vision World, and Vision
Plaza each entered into a management agreement with Optometric Providers,
Optometric Care, and Musselman (collectively the "PCs"), respectively.
Accordingly, Cambridge Eye operates as the management service organization
("MSO") for Optometric Providers, Vision World operates as the MSO for
Optometric Care, and Vision Plaza operates as the MSO for Musselman. Cambridge
Eye, Vision World, and Vision Plaza, as MSOs, have exclusive decision making
authority for the ongoing major operations of the PCs, with the exception of the
provision of professional eye care services. Pursuant to these management
agreements, the Company, among other things, (i) acts as the exclusive financial
manager, business manager and administrator of all business and administrative
functions and services associated with the provision of the professional
services, (ii) orders and purchases all professional and office inventory and
supplies and arranges for the availability of the same, (iii) maintains files
and records, (iv) provides or arranges for the provision of technical and
ancillary


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service and support personnel, (v) establishes, operates and maintains
bookkeeping, payroll, accounting, billing and collection systems, (vi) renders
advice concerning the marketing of services, (vii) develops and administers
benefit plans for the professionals and (viii) renders such other business and
financial management, consultation and advice as may reasonably be needed from
time to time by the practice in connection with its provision of professional
services. As a result, the Company is involved in the daily on-site financial
and administrative management of these optometric practices. The Company's goals
in providing such services are to (i) improve the performance of these
optometric practices in these non-professional activities, (ii) allow the
optometrists employed by or associated with these practices to more fully
dedicate their time and efforts toward their professional practice activities,
and (iii) afford the Company expanded service capabilities, and, for itself and
on behalf of the optometric practices, capitalize on opportunities for
contracting with third party payors and their intermediaries, including managed
care providers. The management fees payable to the Company by the affiliated
practices under the management agreements vary based on the cost, nature and
amount of services provided, and may be adjustable or subject to renegotiation
from time to time. Management fees payable under existing and future contracts
are subject to the requirements of applicable laws, rules and regulations and
negotiations with individual professional practices.

     Under the management agreements, the affiliated practices retain the
responsibility for, among other things, (i) hiring and compensating
professionals, (ii) ensuring that professionals have the required licenses,
credentials, approvals and other certifications needed to perform their duties
and (iii) complying with applicable federal and state laws, rules and
regulations. In addition, the affiliated practices exclusively control all
aspects of professional practice and the delivery of professional services.

   Stock Restrictions and Pledge Agreements

     The outstanding voting capital stock of each of the PCs is 100% owned by a
licensed optometrist (the "nominee shareholder") who has, in turn, executed a
Stock Restrictions and Pledge Agreement (a "Pledge Agreement") in favor of the
respective MSO. Set forth below is a chart identifying each PC, the nominee
shareholder for each PC and the total number of employees for each PC as of the
end of fiscal 1999:

<TABLE>
<CAPTION>
               Name of PC                                 Nominee Shareholder            No. of Employees
               ----------                                 -------------------            ----------------
<S>                                                       <C>                                  <C>
Optometric Providers, Inc. ..........................     Alerino Iacobbo, O.D.                31 persons

Optometric Care, Inc.................................     Alerino Iacobbo, O.D.                 9 persons

Dr. John Musselman, a Professional Corporation.......      John Musselman, O.D.                24 persons
</TABLE>

     Through each Pledge Agreement, the nominee has pledged all of the
outstanding voting capital stock of his PC to the respective MSO. The Company
requires that a nominee shareholder execute a Pledge Agreement in order to
provide security for the prompt payment, performance and observance by the PC of
all of its obligations, debts and covenants under its management agreement with
the MSO. The Pledge Agreement also contains restrictions on the nominee
shareholder's ability to transfer the stock of the PC, in order to provide that
the stockholder will at all times be a person eligible to hold such stock
pursuant to the provisions of


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applicable law, the PC's Articles of Organization and the PC's By-Laws. The
Pledge Agreement may be terminated only upon the written agreement of the
parties thereto or upon the termination of the management agreement and
satisfaction in full of all of the PC's obligations thereunder; a nominee
shareholder may not unilaterally terminate a Pledge Agreement.

     In order to provide for the orderly continuation of the PC's business and
affairs, each Pledge Agreement also enumerates several events or circumstances
that require or permit the MSO to effect a change of the nominee shareholder.
Upon the occurrence of any of the following events (each of which is enumerated
in the Company's form of Pledge Agreement), an MSO may require the nominee
stockholder to sell and transfer the stock of the PC to another person eligible
to serve as a new nominee shareholder: (i) the death or disability of the
nominee shareholder; (ii) the nominee shareholder's disqualification to practice
optometry in the relevant jurisdiction or any other event or circumstance the
effect of which is to cause the nominee shareholder to cease being eligible to
serve as the shareholder of the PC; (iii) the transfer, by operation of law or
otherwise, of the nominee shareholder's shares of stock in the PC to a person
who is not eligible to serve as the shareholder of the PC; (iv) the termination
of the nominee shareholder's employment by the PC or by the Company (including
its subsidiaries); (v) the occurrence of any other event or the existence of any
other condition which, in the reasonable opinion of the MSO (in its capacity as
exclusive business manager and administrator of the professional corporation),
impairs or renders less-than-optimal the Company's business management and
administration of all of the business and administrative functions and services
of the PC; or (vi) the occurrence of any other event or the existence of any
other condition which might require or otherwise result in the sale or transfer
by the nominee shareholder (or his estate or personal representative) of the
nominee shareholder's shares of stock in the PC. The purchase price for a sale
of the PC's stock is equal to the aggregate book value of the PC. The Company
believes that such book value will always be a nominal cost because each PC
operates and expects to continue to operate at an almost break-even level
generating a nominal profit, if any at all, and each PC does not own or hold or
plan to own or hold any significant assets of any nature.

     The Company believes that the events or circumstances identified in clauses
items (iv) and (v) are entirely within the Company's control. For example, as
there are no employment agreements between the Company and any nominee
shareholder, each nominee shareholder is an "at-will" employee of the MSO, whose
employment can be terminated at any time, with or without cause. Either of these
events are entirely within the Company's control and, therefore, these
provisions provide the Company with the ability at all times to cause a change
in the nominee shareholder and for an unlimited number of times, at nominal
cost. These provisions meet the criteria described in footnote 1 to EITF 97-2,
so that (i) the Company can at all times establish or effect a change in the
nominee shareholder, (ii) the Company can cause a change in the nominee
shareholder an unlimited number of times, that is, changing the nominee
shareholder one or more times does not affect the Company's ability to change
the nominee shareholder again and again, (iii) the Company has the sole
discretion without cause to establish or change the nominee shareholder, (iv)
the Company can name any qualified optometrist as a new nominee shareholder
(that is, the Company's choice of an eligible nominee is not materially
limited), (v) the Company and the nominally owned entity incur no more than a
nominal cost to cause a change in the nominee shareholder and (vi) neither the
Company nor the nominally owned entity is subject to any significant adverse
impact upon a change in the nominee shareholder. The Company effected the change
of the nominee shareholder for Optometric Providers in August of 1998, without
an adverse impact on the Company or the PC. The Company does not believe that
any future change in any nominee


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shareholder would have a significant adverse impact on it or any PC. To date,
the Company's experience with the nominee shareholders has been satisfactory.

   Laser Vision Correction Services

     During 1999, the Company operated two laser vision correction ("LVC")
centers in association with selected ophthalmic surgical providers. However, in
August 1999, the Company closed one center and in September 1999, sold the
excimer laser system that had been in use at that center. Then, in December
1999, the Company closed the other LVC center and in January 2000, sold the
excimer laser system that had been in use at that center.

     In order to continue providing refractive laser services to its patients,
the Company entered into a refractive laser access agreement with Laser Vision
Centers, Inc. ("LVCI") in October, 1999. The agreement calls for LVCI to provide
Company patients with refractive laser services in conjunction with affiliated
LVCI ophthalmologists in the Company's markets. The Company will provide patient
pretest screening and post procedural treatment and care.

     By affiliating with the Company, LVCI benefits from the Company's ability
to acquire, counsel, and refer customers for laser vision correction ("LVC")
services through its primary eye care centers. The Company benefits from its
affiliation with LVCI by having a convenient way of participating in LVC without
incurring substantial capital expenditures.

     The Company's obligations pursuant to the agreement includes: screening
patients, pre-procedural selection and workup, post procedural treatment and
diagnostic and recuperative care. LVCI's responsibilities pursuant to the
agreement include furnishing the laser system to be used for the delivery of
LVC, maintenance, repair and upgrade of the laser system and certain training
and oversight of medical, technical, and administrative personnel involved in
delivery of the services at the center. The Company and LVCI will jointly
participate in the selection of qualified ophthalmologists and certain marketing
activities.

Marketing and Merchandising

     The Company's marketing and merchandising strategy focuses on the following
key concepts: (i) selling quality, brand name and private-label eyewear at
competitive prices, (ii) offering a wide selection of eyewear products, (iii)
offering convenient locations and hours, and in-house optometric examinations by
licensed optometrists, (iv) using a variety of media, such as radio, newspaper,
direct mail, television and yellow pages advertising, to differentiate it from
competitors and to create general consumer awareness and traffic in its eye care
centers and (v) providing knowledgeable and personalized customer service. The
Company makes use of various tools to market its products and services:

    Advertising. The Company uses newspaper, magazine, television, radio, direct
mail and other advertising to reach prospective, as well as existing, customers.
Advertisements emphasize the Company's benefits to the eyewear public, such as
value pricing, product promotions, convenience of location, customer service and
knowledgeable salespersons. In-house optometric examinations by licensed
optometrists are also emphasized in advertising, subject to regulatory
requirements.

     In-center Marketing. The Company prepares and revises point-of-purchase
displays which convey promotional messages to customers upon arriving at its
centers. Visual merchandising


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techniques, educational videotapes, and take-home brochures are employed to draw
attention to products displayed in the eye care centers.

     Quarterly Catalogs. The Company mails a quarterly catalog to customers who
are in its marketing database. This database consists of individuals who have
utilized the services of the Company and its affiliated professionals over the
last several years. The catalog includes educational, promotional and marketing
information about the Company's products and services, including LVC.

     The Company markets its comprehensive and competitively priced primary eye
care programs to leading HMOs, insurance companies and other third party payors
in the Company's regional markets. The Company's marketing strategy towards
these organizations stresses its regional coverage, its complete range of eye
care products and services and its commitment to quality and service. Through
its SightCare programs the Company has upgraded and simplified its frame
collection available to managed care organizations in order to allow it to
compete more effectively for managed care contracts. Eventually, the Company
intends to offer its SightCare programs in all of its markets.

Competition

     The Company experiences competition regarding the acquisition of the assets
of, and the provision of management services to, eye care centers and practices.
Several companies, both publicly and privately held, that have established
operating histories and greater resources than the Company are pursuing the
acquisition of the assets of general and specialty practices and the management
of such practices.

     Eye care practices affiliated with the Company will compete with other
local eye care practices as well as managed care organizations. The Company
believes that changes in governmental and private reimbursement policies and
other factors have resulted in increased competition for consumers of eye care
services. The Company believes that cost, accessibility and quality of services
are the principal factors that affect competition.

     The optical industry is highly competitive and includes chains of retail
optical stores, multi-site eye care centers, and a large number of individual
opticians, optometrists, and ophthalmologists who provide professional services
and/or dispense prescription eyewear. Optical retailers generally serve
individual, local or regional markets, and, as a result, competition is
fragmented and varies substantially among locations and geographic areas. The
Company believes that the principal competitive factors affecting retailers of
prescription eyewear are location and convenience, quality and consistency of
product and service, price, product warranties, and a broad selection of
merchandise, and that it competes favorably in each of these respects.

     The Company and its affiliated practices compete with other providers for
managed primary eye care contracts. The Company believes that trends toward
managed primary eye care have resulted in increased competition for such
contracts.

     Competition in providing LVC comes from entities similar to the Company and
from hospitals, hospital-affiliated group entities, physician group practices
and private ophthalmologists that, in order to offer LVC to existing patients,
purchase refractive lasers.


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Suppliers of conventional vision correction alternatives (eyeglasses and contact
lenses), such as optometric chains, may also compete with the Company by
purchasing laser systems and training personnel to offer LVC to their customers.
In certain markets, competition to provide LVC has reduced and may continue to
reduce prices for LVC, as has happened in some countries where the treatment has
been available for several years.

Government Regulation

     The Company and its operations are subject to extensive federal, state and
local laws, rules and regulations affecting the healthcare industry and the
delivery of healthcare, including laws and regulations prohibiting the practice
of medicine and optometry by persons not licensed to practice medicine or
optometry, prohibiting control over optometrists or physicians in the practice
of optometry by parties not licensed to practice optometry or medicine,
prohibiting the unlawful rebate or unlawful division of fees and limiting the
manner in which prospective patients may be solicited. The Company attempts to
structure all of its operations so as to comply with the relevant state statutes
and regulations. The Company believes that its operations and planned activities
do not violate any applicable medical practice, optometry practice,
fee-splitting or other laws identified above. Laws and regulations relating to
the practice of medicine, the practice of optometry, fee-splitting or similar
laws vary widely from state to state and seldom are interpreted by courts or
regulatory agencies in a manner that provide guidance with respect to business
operations such as those of the Company. There can be no assurance that courts
or governmental officials with the power to interpret or enforce these laws and
regulations will not assert that the Company or certain transactions in which it
is involved are in violation of such laws and regulations. In addition, there
can be no assurance that future interpretations of such laws and regulations
will not require structural and organizational modifications of the Company's
business.

     Services that are reimbursed by third party payors may be subject to
provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) and similar state laws that impose criminal and civil
sanctions on persons who solicit, offer, receive, or pay any remuneration,
whether directly or indirectly, in return for inducing the referral of a patient
for treatment or the ordering or purchasing of items or services that are paid
for in whole or in part by Medicare, Medicaid or other specified federal or
state programs, or, in some states, private payors. The federal government has
promulgated regulations that create exceptions or "safe harbors" for certain
business transactions. Transactions that are structured in accordance with such
safe harbors will not be subject to prosecution under federal law. In order to
obtain safe harbor protection, the business arrangement must satisfy each of and
every requirement of the applicable safe harbor(s). Business relationships that
do not satisfy each element of a safe harbor do not necessarily violate the
anti-kickback statute but may be subject to greater scrutiny by enforcement
agencies. Many state anti-kickback statutes do not include safe harbors and some
state anti-kickback statutes apply to all third party payors. The Company is
concerned about federal and state anti-kickback statutes only to the extent that
it provides healthcare services that are reimbursed by federal, state and in
some states, private third party payors. The Company believes its business
relationships and operations are in material compliance with applicable laws.
Nevertheless, there can be no assurance that the Company will not be required to
change its practices or experience a material adverse effect as a result of a
challenge by federal or state enforcement authorities under the foregoing
statutes.

     Significant prohibitions against physician referrals have been enacted by
Congress. These prohibitions, commonly known as "Stark II," amended prior
physician self-referral legislation known as "Stark I" by dramatically enlarging
the field of physician-owned or physician-interested


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entities to which the referral prohibitions apply. Effective December 31, 1994,
Stark II prohibits a physician from referring Medicare or Medicaid patients to
an entity providing "designated health services" in which the physician has an
ownership or investment interest, or with which the physician has entered into a
compensation arrangement. The designated health services include prosthetic
devices, which under applicable regulations and interpretations include one pair
of eyeglasses or contact lenses furnished after cataract surgery and
intra-ocular lenses provided at ambulatory surgery centers. The penalties for
violating Stark II include a prohibition on payment by these government programs
and civil penalties of as much as $15,000 for each violative referral and
$100,000 for participation in a "circumvention scheme." The Company's current
business is not governed by Stark I or II. To the extent the Company or any
affiliated practice is deemed to be subject to the prohibitions contained in
Stark II for services, the Company believes its activities fall within the
permissible activities defined in Stark II, including, but not limited to, the
provision of in-office ancillary services.

     The FDA and other federal, state or local governmental agencies may amend
current, or adopt new, rules and regulations that could affect the use of
ophthalmic excimer lasers for LVC and therefore adversely affect the business of
the Company.

Environmental Regulation

     The Company's business activities are not significantly affected by
environmental regulations and no material expenditures are anticipated in order
for the Company to comply with environmental regulations. However, the Company
is subject to certain regulations promulgated under the Federal Environmental
Protection Act with respect to grinding, tinting, edging and disposing of
ophthalmic lenses and solutions.

Proprietary Property

     The Company has no licenses, patents or registered copyrights. The Company
does have various registered trademarks in the U.S., including "Sight Resource",
"Cambridge Eye Doctors", "E.B. Brown Opticians", "Eyeglass Emporium",
"Kidspecs", "Shawnee Optical", "Kent Optical", "SightCare" and "Vision Plaza".

Employees

     As of December 25, 1999, the Company had 815 employees. The Company intends
to hire additional key personnel it believes will be required for advancement
and expansion of the Company's activities.

     The success of the Company's future operations depends in large part on the
Company's ability to recruit and retain qualified personnel over time. There can
be no assurance, however, that the Company will be successful in retaining or
recruiting key personnel.


                                       12
<PAGE>

Business Risks and Cautionary Statements

     When used in this Form 10-K and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "estimate", "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from
historical results and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed below could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.

     The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

     There are a number of risks and uncertainties that could cause actual
results to differ materially from historical results and those presently
anticipated or projected. Such significant risks and uncertainties include but
are not limited to:

     1.    The Company has a limited operating history, entering the LVC market
           in 1993 and the primary eye care market in 1995.

     2.    The Company has a history of operating losses, has not yet
           demonstrated sustained profitability and may continue to incur
           significant operating losses for the foreseeable future.

     3.    The primary eye care market and LVC market are highly competitive.
           The Company's current and potential competitors include many larger
           companies with substantially greater financial, operating, marketing
           and support resources than the Company.

     4.    There can be no assurance that attractive acquisition candidates, or
           the financing necessary for any such acquisitions, will be available
           to the Company.

     5.    The Company has previously breached certain loan covenants and
           although waivers of such breaches have been granted, there can be no
           assurance that the Company will be able to obtain waivers of any
           future breaches of loan covenants; the failure to obtain such
           waivers could materially and adversely affect the Company's business
           and financial condition.

     6.    There can be no assurance that the Company will be able to realize
           any operating efficiencies from the purchase and consolidation of
           primary eye care centers or optical chains.


                                       13
<PAGE>

      7.    There can be no assurance that the Company will acquire new managed
            primary eye care contracts or that existing contracts will be
            expanded in any meaningful way.

      8.    The Company and its operations are subject to extensive federal,
            state and local regulation, which could materially affect the
            Company's operations.

Corporate Liability and Insurance

      The provision of professional eye care services entails an inherent risk
of professional malpractice and other similar claims. The Company does not
influence or control the practice of medicine or optometry by professionals or
have responsibility for compliance with certain regulatory and other
requirements directly applicable to individual professionals and professional
groups. As a result of the relationship between the Company and its affiliated
practices, the Company may become subject to some professional malpractice
actions under various theories. There can be no assurance that claims, suits or
complaints relating to professional services provided by affiliated practices
will not be asserted against the Company in the future. The Company believes
that the providers with which the Company enters into LVC center agreements or
other strategic affiliation agreements are covered by such providers'
professional malpractice or liability insurance. The Company may not be able to
purchase professional malpractice insurance, and may not be able to purchase
other insurance at reasonable rates, which would protect it against claims
arising from the professional practice conducted by providers. Similarly, the
use of laser systems in the Company's LVC centers may give rise to claims
against the Company by persons alleging injury as a result of the use of such
laser systems. The Company believes that claims alleging defects in the laser
systems it purchases from its suppliers are covered by such suppliers' product
liability insurance and that the Company could take advantage of such insurance
by adding such suppliers to lawsuits against the Company. There can be no
assurance that the Company's laser suppliers will continue to carry product
liability insurance or that any such insurance will be adequate to protect the
Company.

      The Company maintains insurance coverage that it believes will be adequate
both as to risks and amounts. The Company believes that such insurance will
extend to professional liability claims that may be asserted against employees
of the Company that work on site at affiliated practice locations. In addition,
pursuant to the management agreements, the affiliated practices are required to
maintain professional liability and comprehensive general liability insurance.
The availability and cost of such insurance has been affected by various
factors, many of which are beyond the control of the Company and its affiliated
practices.

      There can be no assurance that the Company will be able to retain adequate
liability insurance at reasonable rates, or that the insurance will be adequate
to cover claims asserted against the Company, in which event the Company's
business may be materially adversely affected.

Item 2. Description of Properties

      At December 25, 1999, the Company leased space for 128 of the Company's
eye care centers (which range in size from approximately 600 to 6,200 square
feet), under operating leases, which expire as follows, exclusive of renewal
options.


                                       14
<PAGE>

                                                            At 12/25/99
                                                            -----------
                         Year                             Number of leases
                         ----                             ----------------
                                                              expiring
                                                              --------
                2000 .....................................       29
                2001 .....................................       22
                2002 .....................................       16
                2003 .....................................       16
                2004 .....................................       23
                2005 and  thereafter .....................       22

     In addition, the Company is currently in lease negotiations or is an at
will tenant for three eye care centers.

     The Company's corporate headquarters, and distribution center occupy
approximately 22,000 square feet of space leased in an industrial complex in
Holliston, Massachusetts pursuant to a lease which expires in 2004. The Company
believes that its facilities are adequate for its present needs and that
suitable space will be available to the Company upon commercially reasonable
terms to accommodate future needs.

Item 3. Legal Proceedings

     From time to time the Company's subsidiaries may be defendants in certain
lawsuits alleging various claims incurred in the ordinary course of business.
These claims are generally covered by various insurance policies, subject to
certain deductible amounts and maximum policy limits. In the opinion of
management, the resolution of existing claims should not have a material adverse
effect, individually or in the aggregate, upon the Company's business or
financial condition.

     There can be no assurance that future claims against the Company or any of
its subsidiaries will not have a material adverse effect on the Company, its
operations or financial condition.

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

     No matters were submitted to a vote of security holders during the quarter
ended December 25, 1999.


                                       15
<PAGE>

                                     PART II

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

Market for Company's Common Equity

     The Company's Common Stock began trading on NASDAQ on March 31, 1993 under
the symbol "VISN". The Company also issued Warrants which began trading on
NASDAQ on August 25, 1994 under the symbol "VISNZ". The warrants expired and
closed trading on August 25, 1999. The following table sets forth for the
periods indicated, the high and low sales prices for the Common Stock and
Warrants as reported by NASDAQ:

                                  Common Stock                    Warrants
                                  ------------                    --------

                               High           Low             High        Low
                               ----           ---             ----        ---

        1999:

   First Quarter............$   3 1/4      $ 2                  1/4        3/32

   Second Quarter...........  4 15/16        2   1/2           7/16        3/32

   Third Quarter............  4   7/8        2   1/2            1/4        1/32

   Fourth Quarter...........  3   3/8        1   7/8            N/A         N/A

       1998:

   First Quarter............$ 5  1/16      $ 3   1/4       $ 1  3/8    $ 1 1/16

   Second Quarter...........  4   1/2        3   5/8         1 5/32         5/8

   Third Quarter............  3 21/32        1 15/16            3/4         1/8

   Fourth Quarter...........  3 11/16        1   5/8           9/16        1/16

     The Common Stock and Warrants have been quoted on the NASDAQ National
Market System since August 25, 1994. Prior to that time, the Common Stock was
quoted on the NASDAQ SmallCap Market.

     The Company has not paid dividends to its common stockholders since its
inception and does not plan to pay cash dividends in the foreseeable future. The
Company currently intends to retain earnings, if any, to finance the growth of
the Company. As of March 20, 2000, there were 216 holders of record of the
Company's Common Stock. There are approximately 3,500 beneficial owners of the
Company's Common Stock.


                                       16
<PAGE>

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                                    Year ended December 31
                                                                    ----------------------
                                            1999 (1,2)      1998 (3)    1997 (4,5,6)       1996 (6,7)    1995 (8)
                                            ----------      --------    ------------       ----------    --------
                                                             (In thousands, except per share amounts)
<S>                                          <C>           <C>              <C>             <C>         <C>
Statement of Operations Data:
     Net revenues ........................   $ 67,034      $ 54,971         $ 44,576        $ 29,987    $ 18,240

     Net loss ............................     (2,854)         (985)          (2,004)         (5,850)     (4,888)

     Net loss per common share ...........      (0.30)        (0.11)           (0.46)          (0.78)      (0.89)

     Weighted average number of common
     shares outstanding ..................      9,181         8,867            8,669           7,523       5,488

Balance Sheet Data:

     Working capital .....................   $  1,088      $  3,176         $  4,243        $  7,774    $  5,325

     Total assets ........................     40,754        32,145           34,507          31,430      23,249

     Non-current liabilities .............      6,989           348              101           1,876       1,703

     Stockholders' equity ................     17,349        18,959           19,446          22,766      16,445
</TABLE>

----------
1.   Effective April 1, 1999, the Company acquired all of the outstanding shares
     of stock of Kent Optical, Inc. and its associated companies (collectively,
     "Kent"). The purchase price paid in connection with this acquisition was
     $5,209 in cash, $1,000 in notes payable over three years and 160,000 shares
     of common stock. At December 25, 1999, Kent operated 29 eye care centers in
     Michigan.

2.   Effective January 1, 1999, the Company acquired all of the outstanding
     shares of stock of Shawnee Optical, Inc. ("Shawnee"). The purchase price
     paid in connection with this acquisition was $1,750 in cash, $300 in notes
     payable over three years and 70,000 shares of common stock. At December 25,
     1999, Shawnee operated nine eye care centers in Pennsylvania and Ohio.

3.   Effective April 1, 1998, the Company acquired all of the outstanding shares
     of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). The purchase
     price paid in connection with this acquisition was $2,309 in cash, $350 in
     notes payable in twelve equal quarterly installments commencing June 30,
     1998 and 87,940 shares of common stock. At December 25, 1999, Eyeglass
     Emporium operated nine eye care centers in Indiana.

4.   Effective July 1, 1997, the Company acquired all of the outstanding shares
     of stock of Vision Holdings, Ltd. (formerly known as Dr. Greenberg, An
     Optometry Corporation d/b/a/ Vision Plaza) ("Vision Plaza"). At December
     25, 1999, Vision Plaza operated 15 primary eye care centers and two
     specialty eyewear centers in Louisiana and Mississippi. Following the
     acquisition, Vision Plaza entered into a management services contract with
     Dr. John Musselman, a Professional Corporation ("Musselman"), a corporation
     established to employ the optometrists previously employed by the acquired
     company.


                                       17
<PAGE>

5.   The net loss per share in 1997 includes a $1,953 dividend to the preferred
     stockholders as discussed in Note 8 of the Notes To Consolidated Financial
     Statements.

6.   Includes a $110 provision for store closings and $400 write off of software
     development costs in 1997 and a $2,622 provision for impairment of
     ophthalmic equipment in 1996.

7.   Effective July 1, 1996, the Company purchased certain assets and assumed
     certain liabilities of The E.B. Brown Optical Company and Brown Optical
     Laboratories, Inc. and acquired by merger E.B. Brown Opticians, Inc.
     (collectively, "E.B. Brown"). At December 25, 1999, E.B. Brown operated 36
     eye care centers located throughout Ohio and western Pennsylvania which
     provide optometric and audiology goods and services to persons with vision
     and hearing disorders.

8.   Effective January 1, 1995 and July 1, 1995, the Company purchased
     substantially all the assets of Cambridge Eye Associates, Inc. and Douglas
     Vision World, Inc., respectively. At December 25, 1999, these companies
     combined had a practice of 30 optometric offices throughout New England
     providing comprehensive vision care services to residents of this region.

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

Overview

     Sight Resource Corporation (the "Company") manufactures, distributes and
sells eyewear and related products and services. As of December 25, 1999, the
Company's operations consisted of 130 eye care centers, two regional optical
laboratories and three distribution centers, making it one of the fifteen
largest providers in the United States' primary eye care industry based upon
sales. The Company's eye care centers operate primarily under the brand names
Cambridge Eye Doctors, E.B. Brown Opticians, Eyeglass Emporium, Vision Plaza,
Vision World, Shawnee Optical, and Kent Optical. The Company also provides, or
where necessary to comply with applicable law administers the business functions
of optometrists, ophthalmologists and professional corporations that provide,
vision related professional services.

     The Company operates two regional optical laboratories and three
distribution centers. The regional optical laboratories provide complete
laboratory services to the Company's eye care centers, including polishing,
cutting and edging, tempering, tinting and coating of ophthalmic lenses. The
distribution centers provide and maintain an inventory of all accessories and
supplies necessary to operate the primary eye care centers in their regions, as
well as "ready made" eye care products, including contact lenses and related
supplies. The inventory of eyeglass lenses, frames, contact lenses, accessories
and supplies is acquired through a number of sources, domestic and foreign.
Management believes that the regional optical laboratories and distribution
centers have the capacity to accommodate additional multi-site eye care centers.

     The Company's results of operation include the accounts of the Company, its
wholly-owned subsidiaries and three professional corporation's ("PCs") in which
the Company's subsidiaries assume the financial risks and rewards of such
entities. The Company has no direct equity


                                       18
<PAGE>

ownership in the PCs since the outstanding voting capital stock of each of the
PCs is 100% owned by a licensed optometrist (the "nominee shareholder") who has,
in turn, executed a Stock Restrictions and Pledge Agreement (a "Pledge
Agreement") in favor of a subsidiary of the Company. Each Pledge Agreement
contains provisions that provide the Company with the ability at all times to
cause a change in the nominee shareholder and for an unlimited number of times,
at nominal cost. For example, if (i) the employment of the nominee shareholder
is terminated by the PC or by the Company (including its subsidiaries) or (ii)
the Company determines that the nominee shareholder is impairing or rendering
less-than-optimal the Company's business management and administration of the
PC, then the Company has the right to require the existing nominee shareholder
to sell all of the outstanding stock of the PC to another person eligible to
serve as a new nominee shareholder. The purchase price for a sale of the PC's
stock is equal to the aggregate book value of the PC, which will always be a
nominal cost because each PC operates and expects to continue to operate at an
almost break-even level generating a nominal profit, if any at all. See
"Business--Stock Restrictions and Pledge Agreements."

Results of Operations 1999 as compared with 1998

     Net Revenue. The Company generated net revenue of approximately $67.0
million during the year ended December 25, 1999 from the operation of its 130
eye care centers and two laser vision correction centers in the United States as
compared to net revenue of approximately $55.0 million from the operation of its
93 eye care centers and two laser vision correction centers in the United States
for the same period in 1998. Of the $12.0 million (or 21.8%) increase in net
revenue for the year ended December 25, 1999 as compared to the year ended
December 31, 1998, $4.2 million (or 7.6%) relates to the additional nine eye
care centers acquired effective January 1, 1999. The remaining increase of $7.8
million (or 14.2%) relates primarily to the additional 29 Kent Optical Eye Care
Centers acquired effective April 1, 1999. Sales in eye care centers, excluding
acquisitions, were essentially flat compared to the prior year.

     Cost of Revenue. Cost of revenue increased to approximately $22.8 million
for the year ended December 25, 1999, as compared to $19.0 million for the year
ended December 31, 1998. Cost of revenue decreased as a percentage of net
revenue from 34.5% for the year ended December 31, 1998, to 34% for the year
ended December 25, 1999. The improvement as a percentage of net revenue
primarily reflects the realization of purchase economics, less sales price
discounting, and, to a lesser extent, some small retail price increases
partially offset by promotional discounts. Cost of revenue for the years ended
December 25, 1999 and December 31, 1998 principally consisted of (i) the cost of
manufacturing, purchasing and distributing optical products to its customers and
(ii) the cost of delivering LVC, including depreciation and maintenance on
excimer lasers.

     In December 1999, the Company discontinued the operations of an optical
laboratory operated by Cambridge Eye Doctors in Holliston, Massachusetts and an
optical laboratory operated by Vision Plaza in Metairie, Louisiana and
consolidated those operations with Cleveland, Ohio and Muskegon, Michigan in
order to reduce the cost of revenue.

     Selling, General and Administrative Expense. Selling, general and
administrative expenses were approximately $46.1 million and $37.0 million for
the years ended December 25, 1999 and December 31, 1998, respectively. The
increase primarily relates to payroll and facility


                                       19
<PAGE>

costs incurred in operating additional eye care centers acquired effective
January 1, 1999 and April 1, 1999. Selling, general and administrative expense,
as a percentage of net revenue, increased to 68.8% for the year ended December
25, 1999, as compared to 67.3% for the year ended December 31, 1998. This
increase is primarily a result of our Vision Plaza and E.B. Brown operations,
and a charge for allowance of doubtful accounts of $1.23 million primarily for
older receivables taken during the year as compared to the prior year allowance
for doubtful accounts of $0.458 million.

     Other Income and Expense. Interest income decreased to approximately
$82,000 from $184,000 for the years ended December 25, 1999 and December 31,
1998, respectively. This decrease resulted from the investment of a lower
average cash and cash equivalents balance during 1999 as compared to 1998.
Interest expense increased to approximately $641,000 from $201,000 for the years
ended December 25, 1999 and 1998, respectively. The increase is associated with
a higher average balance of debt outstanding during 1999 as compared to 1998.
The sale of certain ophthalmic equipment during 1998 generated a gain of
approximately $158,000. Disposal of equipment during 1999 generated a gain of
$16,000. The Company sold one excimer laser system in 1999 and sold two excimer
laser systems in 1998. At December 25, 1999, the Company owned one laser system
and no longer operated any laser vision correction centers, having closed its
last two remaining centers in August and December, 1999. At December 31, 1998,
the Company owned two laser systems and operated two laser vision correction
centers. In 1999, the Company incurred a $323,000 non-cash write-off of deferred
financing costs associated with the Company's prior credit facility.

     Net Loss. The Company realized a net loss of approximately $2.9 million
($0.30 per share) and $1.0 million ($0.11 per share) for the years ended
December 25, 1999 and December 31, 1998, respectively.

Results of Operations 1998 as compared with 1997

     Net Revenue. The Company generated net revenue of approximately $55.0
million during the year ended December 31, 1998 from the operation of its 93 eye
care centers and two laser vision correction centers in the United States as
compared to net revenue of approximately $44.6 million from the operation of its
86 eye care centers and four laser vision correction centers in the United
States for the same period in 1997. Of the $10.4 million (or 23.3%) increase in
net revenue for the year ended December 31, 1998 as compared to the year ended
December 31, 1997, $3.2 million (or 7.2%) relates to the additional nine eye
care centers acquired effective April 1, 1998. The remaining increase of $7.2
million (or 16.1%) relates primarily to recognition of a full year revenue from
the Vision Plaza acquisition.

     Cost of Revenue. Cost of revenue increased to approximately $19.0 million
for the year ended December 31, 1998 as compared to $16.1 million for the year
ended December 31, 1997. Cost of revenue decreased as a percentage of net
revenue from 36.1% for the year ended December 31, 1997 to 34.5% for the year
ended December 31, 1998. The improvement as a percentage of net revenue is
primarily due to the improved gross profit margin resulting from sales from both
the additional 17 eye care centers acquired July 1, 1997 and the nine eye care
centers acquired effective April 1, 1998. Cost of revenue for the years ended
December 31, 1998 and 1997 principally consisted of (i) the cost of
manufacturing, purchasing, and distributing optical products to its customers
and (ii) the cost of delivering LVC, including depreciation and maintenance on
excimer lasers.


                                       20
<PAGE>

     In February 1997, the Company discontinued the operations of an optical
laboratory and distribution facility operated by E.B. Brown in Cleveland, Ohio,
and consolidated its operations with those at its Holliston, Massachusetts
facility in order to reduce the cost of revenue. In August 1997, the Company
elected to re-open a smaller version of the Cleveland facility to improve the
quality and timeliness of product delivery. The closing and subsequent reopening
of the smaller Cleveland facility did not have a material affect on the
Company's cost of revenue.

     Selling, General and Administrative Expense. Selling, general and
administrative expenses were approximately $37.0 million and $30.7 million for
the years ended December 31, 1998 and 1997, respectively. The increase primarily
relates to payroll and facility costs incurred in operating the additional nine
eye care centers acquired effective April 1, 1998 and costs incurred for a full
year of operations of the 17 eye care centers acquired in the Vision Plaza
acquisition. Selling, general and administrative expense, as a percentage of net
revenue, declined from 68.9% for the year ended December 31, 1997, as compared
to 67.3% for the year ended December 31, 1998. This decrease is primarily a
result of (i) the nine eye care centers acquired effective April 1, 1998, which
operate with a level of selling, general and administrative expenses as a
percentage of net revenue that is lower than that of the Company and its other
subsidiaries, and (ii) the Company's ability to better leverage its fixed
expenses in connection with the acquisition of multi-site eye care centers.

     Provision for Store Closings. The Company had a $110,000 provision for 1997
for the estimated costs to close one store in early 1998. The provision was
primarily for estimated future lease payments of $64,135 and to write-off the
net book value of fixed assets of $27,137. In 1998, the Company closed two
additional stores whose leases had expired and accordingly, no provisions were
provided.

     Provision for Write Off of Software Development Costs. In 1996, the Company
selected a vendor and began the testing and installation of software associated
with a new point of sale system and perpetual inventory system for its primary
eye care centers, regional optical laboratories and distribution centers. By
late 1997 the Company, after testing the software system in selected eye care
centers, elected to utilize an alternative software vendor whose product is
better suited to the needs of the Company. As a result, the Company wrote off
$400,000 of capitalized costs associated with the original point of sale system.
The Company believes that the new system will facilitate the processing of
customer sales information and replenishment of inventory by passing such
information, including customer specific orders, to the Company's home office,
and its regional optical laboratories and distribution centers for further
processing. In 1998, the Company began operating the new point of sale system.

     Other Income and Expense. Interest income decreased to approximately
$184,000 from $360,000 for the years ended December 31, 1998 and 1997,
respectively. This decrease resulted from the investment of a lower average cash
and cash equivalents balance during 1998 as compared to 1997. Interest expense
decreased from approximately $344,000 to $201,000 for the years ended December
31, 1997 and 1998, respectively. The decrease is associated with a lower average
balance of debt outstanding during 1998 as compared to 1997. The sale of certain
ophthalmic equipment during 1998 generated a gain of approximately $158,000
compared to a gain of approximately $738,000 from similar sales in 1997. In
1998, the Company sold two of the excimer laser systems which it owned, reducing
the number of operating systems in place at the end of the year to two, both of
which operated in New


                                       21
<PAGE>

England and primarily serviced customers referred from the Company's primary eye
care centers.

     Net Loss. The Company realized a net loss of approximately $1.0 million
($0.11 per share) and $2.0 million ($.46 per share, including the $1,953,000
dividend to the preferred stock holders as discussed in Note 8 of the Notes To
Consolidated Financial Statements), for the years ended December 31, 1998 and
1997, respectively. The decrease in net loss is attributable to the increased
income generated by a full year of operations of the 17 eye care centers
acquired in the Vision Plaza acquisition in 1997, the additional nine eye care
centers acquired effective April 1, 1998, improvements in gross profit margins,
sales volume gain, and, to a lesser extent, the non-recurrence of the $110,000
provision for store closings in 1997 and the $400,000 provision for the
writedown of software development costs. The reduction in net loss was partially
offset by a reduction of $580,000 in gain from the sale of equipment in 1998
versus 1997.

Liquidity and Capital Resources

     At December 25, 1999, the Company had approximately $0.2 million in cash
and cash equivalents and working capital of approximately $1.0 million in
comparison to approximately $1.9 million in cash and cash equivalents and
working capital of approximately $3.2 million as of December 31, 1998.

     Effective January 1, 1999, the Company acquired one hundred percent of the
outstanding shares of stock of Shawnee Optical, Inc. ("Shawnee Optical"). The
purchase price paid in connection with this acquisition was $1.75 million in
cash, the payment of notes payable in the aggregate amount of $0.3 million and
70,000 shares of common stock. Shawnee Optical operated nine eye care centers in
Ohio and western Pennsylvania. The acquisition was accounted for using the
purchase method of accounting.

     Effective April 1, 1999, the Company acquired one hundred percent of the
outstanding shares of stock of Kent Optical, Inc. and its associate companies
(collectively, "Kent"). The purchase price paid in connection with this
acquisition was $5.209 million in cash, $1.0 million in notes payable over three
years and 160,000 shares of common stock. Kent operated 28 eye care centers in
Michigan. The acquisition was accounted for using the purchase method of
accounting.

     As of December 25, 1999, the Company had securities outstanding which
provide it with potential sources of financing as outlined below:

                Securities                                             Potential
                ----------                               Number        Proceeds
                                                         ------        --------
Class II Warrants..................................      290,424      $2,032,968
Bank Austria AG, f/k/a Creditanstalt, Warrants.....      150,000         694,000
Representative Warrants............................      170,000       1,400,000
                                                                      ----------
                                                                      $4,126,968
                                                                      ==========

     The Company also has outstanding 398,097 Class I Warrants. The Class I
Warrants entitle the holder to purchase an amount of shares of the Company's
common stock equal to an aggregate of up to 19.9% of the shares of common stock
purchasable under the Company's


                                       22
<PAGE>

outstanding warrants and options on the same terms and conditions of existing
warrant and option holders. The purchaser is obligated to exercise these
warrants at the same time the options and warrants of existing holders are
exercised, subject to certain limitations. The amount of proceeds from the
exercise of these warrants cannot be estimated at this time.

     There can be no assurance that the Company will obtain any of the proceeds
from the exercise of the above securities.

     On February 20, 1997, the Company entered into a Credit Agreement (the
"1997 Agreement") with a bank pursuant to which the Company could borrow up to
$5.0 million on a term loan basis and up to $5.0 million on a revolving credit
basis subject to certain performance criteria. As part of the Agreement, the
Company issued to the bank warrants to purchase 150,000 shares of the Company's
common stock at a purchase price of $4.625 per share. The warrants expire on
December 31, 2003. As noted in the following paragraph, the Company has entered
into a new credit facility and retired the 1997 Agreement.

     On April 15, 1999, the Company entered into a credit agreement (the "1999
Agreement") with a bank pursuant to which the Company can borrow $10.0 million
on an acquisition line of credit, $7.0 million on a term loan basis and $3.0
million on a revolving line of credit basis, subject to certain performance
criteria and an asset-related borrowing base for the revolver. The performance
criteria include, among others, financial condition covenants such as net worth
requirements, indebtedness to net worth ratios, debt service coverage ratios,
funded debt coverage ratios, and pretax profit, net profit and EBITDA
requirements. Amounts borrowed under the 1999 Agreement will be used to finance
future acquisitions, retire existing bank debt, provide ongoing working capital
and/or for other general corporate purposes. As of December 25, 1999, $6.8
million was borrowed on the term loan and $0.975 million was borrowed on the
revolving credit facility.

     At December 25, 1999, the Company was not in compliance with the following
financial covenants of the 1999 agreement: minimum net worth, minimum debt
service coverage, maximum funded debt service coverage and minimum net profit.
However, the Company has received an agreement from the bank dated March 31,
2000 to amend the 1999 Agreement. The amended agreement provides, among other
things, a waiver of the Company's default, adjusts certain covenants to which
the Company is subject and terminates the acquisition line of credit. In
addition, the amended agreement limits the revolving line note to $2.5 million
and the term loan to $6.75 million and establishes the maturity date for each of
these credit lines as March 31, 2001. Also, the amended agreement establishes
the following interest rates for both the revolving line note and term loan: 1)
from closing date of the agreement through August 31, 2000 - prime rate + 1.0%;
2) from September 1, 2000 through October 31, 2000 - prime rate + 2.0%; and 3)
from November 1, 2000 through March 31, 2001 - prime rate + 3.0%. The scheduled
monthly principal payments for the term loan are adjusted to $83,333.33 from
April, 2000 through July, 2000, $100,000.00 from August, 2000 through December,
2000 and $125,000.00 from January, 2001 through March, 2001. The Company intends
to consider and pursue alternative lenders to refinance this agreement on a
long-term basis.

     The Company has an acquisition strategy to acquire and integrate the assets
of multi-site eye care centers and the practices of eye care professionals and
to employ or enter into management services contracts with these professionals.
This strategy includes both


                                       23
<PAGE>

expanding existing regional markets and entering new regional markets. The
Company will also target acquisitions in strategic markets that will serve as
platforms from which the Company can consolidate a given service area by making
and integrating additional "in-market" acquisitions. The Company from time to
time will evaluate potential acquisition candidates. Without additional funding,
the Company's rate of acquisition and size of acquisition could be limited.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June, 1998, the Financial Accounting Standards Board issued SFAS 133
("Accounting for Derivative Instruments and Hedging Activities,") which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities, and
required adoption in periods beginning after June 15, 1999. SFAS 133 was
subsequently amended by Statement of Financial Accounting Standards No. 137
("Accounting for Derivative Instruments and Hedging Activities"). SFAS 137 will
now be effective for fiscal years beginning after June 15, 2000. SFAS 137, which
becomes effective for the Company in its year ending December of 2001 is not
expected to have a material impact on the Consolidated Financial Statements of
the Company

YEAR 2000 ISSUE

     The Company did not experience any difficulties related to the Year 2000
problem on December 31, 1999, and we are not aware of any such difficulties
since that date. The Company's operations have not, to date, been adversely
affected by any difficulties experienced by suppliers or customers in connection
with the Year 2000 problem. The Company's Year 2000 Compliance Plan also
addressed issues related to the date February 29, 2000, and management will
continue to monitor systems for potential difficulties through the remainder of
calendar year 2000.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

     The Company has not entered into any transactions using derivative
financial instruments or derivative commodity instruments and believes that its
exposure to market risk associated with other financial instruments (such as
investments) are not material.


                                       24
<PAGE>

Item 8. Financial Statements and supplementary Data

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Sight Resource Corporation:

     We have audited the consolidated balance sheets of Sight Resource
Corporation and its subsidiaries as of December 25, 1999 and December 31, 1998,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 25,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sight
Resource Corporation and its subsidiaries at December 25, 1999 and December 31,
1998, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 25, 1999 in conformity with
generally accepted accounting principles.


                                           /S/ KPMG LLP

                                           KPMG LLP

Boston, Massachusetts
March 10, 2000, except as to Note 15,
which is as of March 31, 2000


                                       25
<PAGE>

                           SIGHT RESOURCE CORPORATION

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               1999         1998
                                                                                               ----         ----
                                                                                              (in thousands except
                                                                                                for share amounts)
<S>                                                                                           <C>         <C>
                                         ASSETS
Current assets:
     Cash and cash equivalents ............................................................   $    166    $  1,860
     Accounts receivable, net of allowance of $1,881 and $748, respectively ...............      3,583       2,658
     Inventories ..........................................................................      6,875       4,584
     Prepaid expenses and other current assets ............................................        344         377
                                                                                              --------    --------
          Total current assets ............................................................     10,968       9,479
                                                                                              --------    --------
Property and equipment, net (note 3) ......................................................      5,734       6,140
                                                                                              --------    --------
Other assets:
     Intangible assets (note 4) ...........................................................     23,131      15,337
     Other assets .........................................................................        921       1,189
                                                                                              --------    --------
          Total other assets ..............................................................     24,052      16,526
                                                                                              --------    --------
                                                                                              $ 40,754    $ 32,145
                                                                                              ========    ========
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Revolver notes payable ...............................................................   $    975       $  __
     Current portion of long term debt (note 6) ...........................................      1,682         146
     Current portion of capital leases (note 7) ...........................................         28          34
     Accounts payable .....................................................................      4,606       2,870
     Accrued expenses (note 5) ............................................................      2,673       3,253
                                                                                              --------    --------
          Total current liabilities .......................................................      9,964       6,303
                                                                                              --------    --------
Non-current liabilities:
     Long term debt, less current maturities (note 6) .....................................      6,882         184
     Capital leases (note 7) ..............................................................          2          13
     Other liabilities ....................................................................         22         151
                                                                                              --------    --------
          Total non-current liabilities ...................................................      6,906         348
                                                                                              --------    --------
     Series B redeemable convertible preferred stock 1,452,119 shares issued (note 8) .....      6,535       6,535
                                                                                              --------    --------
Stockholders' equity (note 9):
     Preferred Stock, $.01 par value. Authorized 5,000,000 shares; no shares of Series A
     issued and outstanding ...............................................................         --          --
     Common stock, $.01 par value. Authorized 20,000,000 shares; issued 9,256,552
     and 8,936,330 shares in 1999 and 1998, respectively ..................................         93          90
     Additional paid-in capital ...........................................................     38,500      36,847
     Common stock issuable, 71,181 shares in 1998 (note 1(b)) .............................         --         432
     Treasury stock at cost (30,600 shares in 1999 and 1998) ..............................       (137)       (137)
     Unearned compensation ................................................................         (2)        (22)
     Accumulated deficit ..................................................................    (21,105)    (18,251)
                                                                                              --------    --------
          Total stockholders' equity ......................................................     17,349      18,959
                                                                                              --------    --------
                                                                                              $ 40,754    $ 32,145
                                                                                              ========    ========
</TABLE>

           See accompanying notes to consolidatedfinancial statements.


                                       26
<PAGE>

                           SIGHT RESOURCE CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                              Years Ended December
                                                                    1999              1998              1997
                                                                  --------          --------          --------
                                                                  (in thousands except for per share amounts)
<S>                                                               <C>               <C>               <C>
Net revenue ...................................................   $ 67,034          $ 54,971          $ 44,576
Cost of revenue ...............................................     22,823            18,991            16,096
                                                                  --------          --------          --------
          Gross margin ........................................     44,211            35,980            28,480
Selling, general and administrative expense ...................     46,122            37,036            30,703
Provision for store closings ..................................         --                --               110
Provision for write off of software development costs .........         --                --               400
     Total operating expenses .................................     46,122            37,036            31,213
                                                                  --------          --------          --------
          Loss from operations ................................     (1,911)           (1,056)           (2,733)
                                                                  --------          --------          --------
Other income (expense):
     Interest income ..........................................         82               184               360
     Interest expense .........................................       (641)             (201)             (344)
     Gain on sale of assets ...................................         16               158               738
     Write-off of deferred financing cost .....................       (323)               --                --
                                                                  --------          --------          --------
          Total other income (expense) ........................       (866)              141               754
                                                                  --------          --------          --------
          Loss before income tax expense ......................     (2,777)             (915)           (1,979)
Income tax expense ............................................         77                70                25
                                                                  --------          --------          --------
          Net loss ............................................   ($ 2,854)         $   (985)         $ (2,004)
                                                                  ========          ========          ========
Dividends on redeemable convertible preferred stock (note 8) ..        142                --            (1,953)
                                                                  --------          --------          --------
Net loss attributable to common shareholders ..................     (2,712)         $   (985)         $ (3,957)
                                                                  ========          ========          ========
Basic and Diluted loss per common share (note 2) ..............   $  (0.30)         $  (0.11)         $  (0.46)
                                                                  ========          ========          ========
Weighted average number of common shares outstanding ..........      9,181             8,867             8,669
                                                                  ========          ========          ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       27
<PAGE>

                           SIGHT RESOURCE CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                    Years Ended December 25, 1999 and December 31, 1998 and 1997
                                                    ------------------------------------------------------------

                                       Common Stock
                                       ------------
                                                        Additional               Common                                Total
                                                        ----------               ------                                -----
                                                  Par     Paid-in     Accum.      Stock       Treasury    Unearned     Stock
                                                  ---     -------     ------      -----       --------    --------     -----
                                     Shares      Value    Capital     Deficit    Issuable       Stock       Comp.      Equity
                                     ------      -----    -------     -------    --------       -----       -----      ------
                                                                           (in thousands)
<S>                                   <C>          <C>   <C>         <C>         <C>            <C>           <C>     <C>
Balance, December 31, 1996 .....      8,649         86   $ 37,510    $(15,262)   $    432          --          --     $22,766

Exercise of stock options
(notes 9 & 12) .................        138          2        592          --          --          --          --         594

Acquisition of treasury stock
(note 9) .......................         --         --         --          --          --        (137)         --        (137)

Dividend to preferred
shareholders (note 8) ..........         --         --     (1,953)         --          --          --          --      (1,953)

Issuance of warrants under
Credit Agreement (note 6) ......         --         --        180          --          --          --          --         180

Net loss .......................         --         --         --      (2,004)         --          --          --      (2,004)
                                   --------   --------   --------    --------    --------    --------    --------    --------

Balance, December 31, 1997 .....      8,787         88     36,329     (17,266)        432        (137)         --      19,446

Exercise of stock options
(notes 9 & 12) .................         20         --          9          --          --          --          --           9

Issuance of Common Stock for
acquisitions ...................         88          1        349          --          --          --          --         350

Issuance of Common Stock .......         41          1        160          --          --          --         (40)        121

Amortization of unearned
compensation ...................         --         --         --          --          --          --          18          18

Net loss .......................         --         --         --        (985)         --          --          --        (985)
                                   --------   --------   --------    --------    --------    --------    --------    --------
Balance, December 31, 1998 .....      8,936         90     36,847     (18,251)        432        (137)        (22)     18,959

Exercise of stock options
(notes 9 & 12) .................          5         --          2          --          --          --          --           2

Issuance of Common Stock for
acquisitions ...................        316          3      1,509          --        (432)         --          --       1,080

Adjustment to cost of
preferred stock issuance .......         --         --        142          --          --          --          --         142

Amortization of unearned
compensation ...................         --         --         --          --          --          --          20          20

Net loss .......................         --         --         --      (2,854)         --          --          --      (2,854)
                                   ------------------------------------------------------------------------------------------

Balance, December 25, 1999 .....      9,257        $93    $38,500    $(21,105)         $0       $(137)        $(2)    $17,349
                                   ==========================================================================================
</TABLE>

           See accompanying notes to consolidated financial statements


                                       28
<PAGE>

                           SIGHT RESOURCE CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     1999       1998       1997
                                                                                    -------    -------    -------
<S>                                                                                 <C>        <C>        <C>
Operating activities:
Net loss ........................................................................   $(2,854)   $  (985)   $(2,004)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization ..............................................     3,828      2,596      2,183
     Amortization and write off of deferred financing costs .....................       353         --         --
     Amortization of unearned compensation ......................................        20         18         --
     Gain on sale of assets .....................................................       (16)      (158)      (738)
     Provision for store closings and write off of software developments costs ..        --         --        510
Changes in operating assets and liabilities:
     Accounts receivable ........................................................       448       (746)       138
     Inventories ................................................................    (1,012)       289     (1,027)
     Prepaid expenses and other current assets ..................................        65         47        (78)
     Accounts payable and accrued expenses ......................................    (1,204)      (829)    (1,349)
                                                                                    -------    -------    -------
          Net cash provided by (used in) operating activities ...................      (372)       232     (2,365)
                                                                                    -------    -------    -------
Investing activities:
     Purchases of property and equipment ........................................    (1,513)    (1,612)    (1,948)
     Payments for acquisitions, net of cash acquired ............................    (6,419)    (2,201)    (2,075)
     Proceeds from sale of assets ...............................................       115        235      1,747
     Other assets ...............................................................       362         88       (240)
                                                                                    -------    -------    -------
          Net cash used in investing activities .................................    (7,455)    (3,490)    (2,516)
                                                                                    -------    -------    -------
Financing activities:
     Principal payments on debt .................................................    (2,961)    (1,087)    (2,754)
     Debt financing costs .......................................................        --         --       (320)
     Proceeds from issuance of stock ............................................        --        129         --
     Proceeds from exercise of warrants and stock options .......................         2         --         --
     Proceeds from bank loans ...................................................     9,234         --         --
     Net proceeds from offerings ................................................        --         --      4,582
     Purchase of treasury stock .................................................        --         --       (137)
     Payment of other liabilities ...............................................      (142)        --       (338)
                                                                                    -------    -------    -------
          Net cash provided by (used in) financing activities ...................     6,133       (958)     1,033
                                                                                    -------    -------    -------
Net increase (decrease) in cash and cash equivalents ............................    (1,694)    (4,216)    (3,848)
Cash and cash equivalents, beginning of period ..................................     1,860      6,076      9,924
                                                                                    -------    -------    -------
Cash and cash equivalents, end of period ........................................   $   166    $ 1,860    $ 6,076
                                                                                    =======    =======    =======

</TABLE>

              See note 12 for supplementary cash flow information.
          See accompanying notes to consolidated financial statements.


                                       29
<PAGE>

                           SIGHT RESOURCE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  December 25, 1999, December 31, 1998 and 1997

(1) The Company

   (a) Nature of Business

     Sight Resource Corporation (the "Company") manufactures, distributes and
sells eyewear and related products and services.

   (b) Acquisitions

     During 1995, the Company acquired two primary eye care chains, effective
January 1, 1995 and July 1, 1995, respectively. The aggregate purchase price
paid in connection with the acquisitions consisted of (i) $2,660,000 in cash,
(ii) 555,525 shares of common stock, (iii) the assumption of approximately
$1,600,000 of net liabilities, and (iv) $660,000 paid over a 3 year period and
$250,000 paid over 18 months. The transactions were accounted for using the
purchase method of accounting.

     Effective July 1, 1996, the Company purchased certain assets and assumed
certain liabilities of The E.B. Brown Optical Company and Brown Optical
Laboratories, Inc. as well as entered into a merger with E.B. Brown Opticians,
Inc. (collectively, "E.B. Brown") for approximately $7,733,000, consisting of:
$4,000,000 in cash, 521,997 shares of common stock issued, 71,181 shares of
common stock issued within 3 years and $1,400,000 in notes paid over an 18 month
period. When the common stock was issued, the $432,000 of common stock issuable
was reclassed into common stock and additional paid-in capital. As of July 1,
1996, E.B. Brown operated 42 eye care centers located throughout Ohio and
Western Pennsylvania which provide optometric and audiology goods and services
to persons with vision and hearing disorders. The transaction was accounted for
using the purchase method of accounting.

     Effective July 1, 1997, the Company acquired all of the outstanding shares
of stock of Vision Holdings, Ltd. (formerly known as Dr. Greenberg, An Optometry
Corporation, d/b/a Vision Plaza ("Vision Plaza")). The purchase price paid in
connection with this acquisition was $2,000,000 in cash and the assumption and
payment of notes payable outstanding as of July 1, 1997 of approximately
$800,000. Vision Plaza operated 17 eye care centers in Southeast Louisiana and
Mississippi. The acquisition was accounted for using the purchase method of
accounting.

     Effective April 1, 1998, the Company acquired all of the outstanding shares
of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). The purchase price
paid in connection with this acquisition was $2,309,000 in cash, the assumption
and payment of notes payable outstanding as of April 1, 1998 of approximately
$350,000 and 87,940 shares of common stock. Eyeglass Emporium operated nine eye
care centers in northwest Indiana. The acquisition was accounted for using the
purchase method of accounting.


                                       30
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Effective January 1, 1999, the Company acquired all of the outstanding
shares of stock of Shawnee Optical, Inc. ("Shawnee"). The purchase price paid in
connection with this acquisition was $1,750,000 in cash, $300,000 in notes
payable over three years and 70,000 shares of common stock. Shawnee operated
nine eye care centers in Pennsylvania and Ohio. The acquisition was accounted
for using the purchase method of accounting. In connection with the acquisition,
the Company recorded purchase accounting adjustments to increase liabilities and
establish reserves for the closing of facilities and related restructuring
costs, including lease commitments and severance costs. The Company
preliminarily recorded $450,000 in acquisition reserves, of which the Company
provided a reserve of $400,000 for the potential closing of two stores and one
laboratory, and a reserve of $50,000 for costs to sever administrative, store
and laboratory personnel. During 1999, the Company further revised its plan and
determined that no stores or laboratories would be closed. The Company reduced
these reserves by $450,000 against goodwill as an adjustment to the cost of the
acquired enterprise. No amounts have been charged against the acquisition
reserves. At December 25, 1999, there were no purchase accounting reserves for
this acquisition.

     Effective April 1, 1999, the Company acquired all of the outstanding shares
of stock of Kent Optical, Inc. and its associated companies (collectively
"Kent"). The purchase price paid in connection with this acquisition was
$5,209,000 in cash, $1,000,000 in notes payable over three years and 160,000
shares of common stock. Kent operated 28 eye care enters in Michigan. The
acquisition was accounted for using the purchase method of accounting. In
connection with the acquisition, the Company recorded purchase accounting
adjustments to increase liabilities and establish reserves for the closing of
facilities and related restructuring costs, including lease commitments and
severance costs. Total preliminary acquisition reserves at December 25, 1999 are
$91,500, which provided a reserve for the potential costs to sever
administrative or store personnel. At December 25, 1999, no amounts have been
charged against the acquisition reserves. The Company intends to finalize its
plan by March 31, 2000.

     The results of operations of the seven acquisitions have been included in
the consolidated financial statements from their respective dates of
acquisition. The excess of the purchase price and expenses associated with each
acquisition over the estimated fair value of the net assets acquired has been
recorded as goodwill.

     As a result of the acquisitions, the Company has also recorded adjustments
to increase liabilities and establish reserves for the closing of stores and
related restructuring costs, including lease commitments and severance costs.

A summary of the activity follows:


                                       31
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                Store and Laboratory Closing Costs
                                                ----------------------------------

                                                                    Eyeglass
                                    E.B. Brown     Vision Plaza     Emporium           Total
                                    ----------     ------------     --------           -----
<S>                                 <C>              <C>            <C>             <C>
Balance, January 1, 1997 ....       $  15,557        $       0      $      0        $    15,557
Additions (1997) ............         518,281          781,000             0          1,229,281
Charges (1997) ..............         (89,595)         (10,604)            0           (100,199)
                                    ---------        ---------      --------        -----------
Balance, December 31, 1997 ..       $ 444,243        $ 770,396      $      0        $ 1,214,639
Additions (1998) ............               0                0        32,000             32,000
Charges (1998) ..............               0                0       (32,000)           (32,000)
Adjustments to Goodwill .....        (444,243)        (770,396)            0         (1,214,639)
                                    ---------        ---------      --------        -----------
Balance, December 31, 1998 ..       $       0        $       0      $      0        $         0
                                    ---------        ---------      --------        -----------

<CAPTION>
                                                         Severance Costs
                                                         ---------------

                                                                    Eyeglass
                                    E.B. Brown     Vision Plaza     Emporium           Total
                                    ----------     ------------     --------           -----
<S>                                 <C>              <C>            <C>             <C>
Balance, January 1, 1997 ....       $  24,912        $       0      $      0        $    24,912
Additions (1997) ............          67,588          156,410             0            233,998
Charges (1997) ..............         (42,500)               0             0            (42,500)
                                    ---------        ---------      --------        -----------
Balance, December 31, 1997 ..       $  50,000        $ 156,410      $      0        $   206,410
Additions (1998) ............               0                0        21,087             21,087
Charges (1998) ..............               0           37,584       (21,087)           (58,671)
Adjustments to Goodwill .....          50,000)        (118,826)            0           (168,826)
                                    ---------        ---------      --------        -----------
Balance, December 31, 1998 ..       $       0        $       0      $      0        $         0
                                    ---------        ---------      --------        -----------

<CAPTION>
                                                                     Store and Laboratory Closings
                                                                     -----------------------------

                                                                     Shawnee       Kent       Total
                                                                     -------       ----       -----
<S>                                                                <C>          <C>       <C>
Balance, December 31, 1998 .....................................   $       0    $     0   $       0
Additions (1999) ...............................................     400,000     30,000     430,000
Charges (1999) .................................................           0          0           0
Adjustment to Goodwill .........................................    (400,000)   (30,000)   (430,000)
                                                                   ---------   --------   ---------
Balance December 25, 1999 ......................................   $       0   $      0   $       0
                                                                   ---------   --------   ---------

<CAPTION>
                                                                            Severance Costs
                                                                            ---------------

                                                                     Shawnee       Kent       Total
                                                                     -------       ----       -----
<S>                                                                <C>          <C>       <C>
Balance, December 31, 1998 .....................................   $       0    $     0   $       0
Additions (1999) ...............................................      50,000     91,500     141,500
Charges (1999) .................................................           0          0           0
Adjustment to Goodwill .........................................     (50,000)         0     (50,000)
                                                                   ---------    -------   ---------
Balance December 25, 1999 ......................................   $       0    $91,500   $  91,500
                                                                   =========    =======   =========
</TABLE>
                                       32
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In 1997, the Company provided a reserve of $518,281 to close 7 stores in
the Cleveland area and 4 mini labs and the Cleveland central lab for E.B. Brown
and a reserve of $781,000 to close one store in the Boston area and a kiosk for
Vision Plaza. The reserve was established for the estimated future rental
payments of stores and to write-off furniture and equipment and lease components
that the Company intended to close.

     The Company charged $89,595 and $10,604 in 1997 for E.B. Brown and Vision
Plaza, respectively. These charges were for the closing of 4 stores at E.B.
Brown and a kiosk at Vision Plaza. Nothing was charged in 1998 against these
reserves.

     In addition, in 1997, the Company provided costs of $67,588 and $156,410,
respectively to sever 22 and 10 people at E.B. Brown and Vision Plaza,
respectively. During 1997, the Company charged $42,500 against the E.B. Brown
reserves for costs to sever an administrative person and nothing against Vision
Plaza reserves.

     In 1998, the Company charged $37,584 against the Vision Plaza reserves for
severance costs of 5 accounting and administrative employees.

     In 1998, the Company acquired Eyeglass Emporium and established a $32,000
reserve for lease payments associated with vacating the Eyeglass Emporium home
office and a reserve of $21,087 for costs to sever an administrative person at
Eyeglass Emporium. These reserves were fully utilized in 1998 as the Company
executed its plan.

     Delays were experienced in finalizing the plans for E.B. Brown and Vision
Plaza principally due to the failure of the plan to consolidate the E.B. Brown
laboratories with the Company's main facility in Holliston, Massachusetts, the
inability to negotiate reasonable economic lease terminations, and delays in
automating administrative, distribution and accounting functions. In late 1997
and early 1998, the Company experienced considerable change in its management.
Under new management, all operations were evaluated and priorities assigned. The
plans to exit stores at E.B. Brown and Vision Plaza were not given high priority
by the new leadership. Accordingly, the Company reversed its accrued liabilities
against goodwill and no reserves exist at December 25, 1999 as the Company
believes its plan is completed.

     In early 1999, the Company provided a purchase accounting reserve of
$400,000 for the closing of two stores and one laboratory in Erie for Shawnee
and a reserve of $50,000 to sever administrative, store laboratory personnel.
During 1999, the Company revised the plan and determined no stores or
laboratories would be closed. At December 25, 1999, the Company finalized its
plan and also determined that no employees would be severed. The entire $450,000
acquisition reserve was reversed against goodwill and no reserves for Shawnee
exist at December 25, 1999. No amounts were charged against acquisition
reserves.

     In 1999, the Company recorded a purchase accounting reserve of $91,500 to
sever administrative or store personnel the Company intends to finalize its plan
by March 31, 2000 closing of two stores in Michigan for Kent.

                                       33
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 25, 1999, no amounts have been charged against the acquisition
reserves. The Company intends to finalize its plan by March 25, 2000.

     The following unaudited pro forma financial information gives effect to the
acquisitions as if:

      i)    the acquisition of Vision Plaza was effective January 1, 1996

      ii)   the acquisition of Eyeglass Emporium was effective January 1, 1997

      iii)  the acquisition of Shawnee was effective January 1, 1998

      iv)   the acquisition of Kent was effective January 1, 1998

     These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which actually
would have resulted had the acquisitions occurred on the date indicated, or
which may result in the future.

<TABLE>
<CAPTION>
                                                                       1999          1998        1997
                                                                   ------------   ----------   --------
                                                                 (in thousands except for per share data)

<S>                                                                <C>            <C>          <C>
Revenue ........................................................   $     69,589   $   70,350   $ 54,741
                                                                   ============   ==========   ========
Net loss .......................................................   $     (3,227)  $   (1,718)  $ (4,073)
                                                                   ============   ==========   ========
Basic and Diluted loss per share ...............................   $      (0.37)  $    (0.19)  $  (0.47)
                                                                   ============   ==========   ========
Weighted average number of common shares outstanding ...........          9,341        9,119      8,757
                                                                   ============   ==========   ========
</TABLE>

     The above unaudited pro forma financial information reflects certain
adjustments, including amortization of goodwill, and an increase in the weighted
average shares outstanding. This pro forma information does not necessarily
reflect the results of operations that would have occurred had the acquisitions
taken place at the beginning of 1997, 1998 and 1999 and is not necessarily
indicative of results that may be obtained in the future.

(2) Summary of Significant Accounting Policies

   (a) Principles of Consolidation

     The Company's results of operation include the accounts of the Company, its
wholly-owned subsidiaries and three professional corporation's ("PCs") in which
the Company's subsidiaries assume the financial risks and rewards of such
entities. The Company has no direct equity ownership in the PCs since the
outstanding voting capital stock of each of the PCs is 100% owned by a licensed
optometrist (the "nominee shareholder") who has, in turn, executed a Stock
Restrictions and Pledge Agreement (a "Pledge Agreement") in favor of a
subsidiary of the Company. Each Pledge Agreement contains provisions that
provide the Company with the


                                       34
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ability at all times to cause a change in the nominee shareholder and for an
unlimited number of times, at nominal cost. The purchase price for a sale of the
PC's stock is equal to the aggregate book value of the PC, which will always be
a nominal cost because each PC operates at an almost break-even level generating
a nominal profit, if any at all. All significant intercompany balances and
transactions have been eliminated.

     In preparation of these consolidated financial statements in conformity
with generally accepted accounting principles, management of the Company has
made estimates and assumptions that affect the reported amounts of assets and
liabilities, such as accounts receivable, inventory, impairment of property and
equipment and intangibles. Actual results could differ from those estimates.

   (b) Statement of Cash Flows

     Cash and cash equivalents consist of cash in banks and short-term
investments with original maturities of three months or less.

   (c) Financial Instruments

     The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short maturity of these items. The carrying amount of other long-term maturities
approximates fair value. The carrying amount of the Company's revolving line of
credit and bank term loan approximates fair value because the borrowing rate
changes with market interest rates.

   (d) Revenue Recognition

     Revenue and the related costs from the sale of eyewear are recognized at
the time an order is complete. Revenue from eye care services is recognized when
the service is performed. The Company has fee for service arrangements with most
of its third party payors. Revenue is reported net of contractual allowances.

     Under revenue sharing arrangements for refractive surgery where the Company
is not responsible for patient billing, the Company receives a specified payment
from the hospital or center for each refractive surgical procedure performed.
Accordingly, the Company recognizes revenue on a per procedure basis at the time
procedures are performed. Under revenue-sharing arrangements for refractive
surgery where the Company is responsible for the collection from the patient and
payment to the ophthalmologist and other operating costs, the total patient
charge is recorded as revenue with the corresponding expenses recorded in cost
of revenue.


                                       35
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

   (e) Inventories

     Inventories primarily consist of the costs of eyeglass frames, contact
lenses, ophthalmic lenses, sunglasses and other optical products and are valued
at the lower of cost (using the first-in, first-out method) or market.

   (f) Property, Equipment and Long-Lived Assets

     Property, equipment and long-lived assets are stated at cost. The Company
provides for depreciation at the time the property, equipment and long-lived
assets are placed in service. The straight-line method is used over the
estimated useful life of the assets. In accordance with SFAS 121, the Company
assesses the recoverability of the undepreciated property, equipment and
long-lived assets on an ongoing basis by comparing anticipated operating profits
and future, undiscounted cash flows to net book value. In performing this
analysis, management considers such factors as current results, trends, and
future prospects, in addition to other economic factors.

   (g) Advertising

     Advertising costs are expensed when incurred.

   (h) Intangible Assets

     Intangible assets resulting from the business acquisitions consist of
customer lists, trademarks, non-compete agreements, workforce in place,
database/records and the excess cost of the acquisition over the fair value of
the net assets acquired (goodwill). Certain values assigned are based upon
independent appraisals and are amortized on a straight line basis over a period
of 5 to 25 years. The Company assesses the recoverability of unamortized
intangible assets on an ongoing basis by comparing anticipated operating profits
and future, undiscounted cash flows to net book value. In performing this
analysis, management considers such factors as current results, trends, and
future prospects, in addition to other economic factors.

   (i) Income Taxes

     The Company follows the asset and liability method of accounting for income
taxes and records deferred tax assets and liabilities based on temporary
differences between the tax bases of assets and liabilities and their carrying
amounts for financial statement purposes.

   (j) Deferred Revenue

     The Company offers a contact lens purchasing program in which, for a set
fee, customers may purchase contacts at discounted rates for a 12 month period.
The Company recognizes


                                       36
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

revenue from the sales of its contact lens purchasing program on a monthly basis
over the life of the program.

   (k) Net Loss Per Share

     Earnings per share are computed based on Statement of Financial Accounting
Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings per
share ("Diluted EPS") by all entities that have publicly traded common stock or
potential common stock (options, warrants, convertible securities or contingent
stock arrangements). Basic EPS is computed by dividing income attributable to
common stockholders by the weighted average number of common shares outstanding
during the period. The computation of Diluted EPS does not assume conversion,
exercise or contingent exercise of securities that would have an antidilutive
effect on earnings.

     The following table provides a reconciliation of the numerators and
denominators of the basic and diluted earnings (loss) per share computations for
the years ended December:

<TABLE>
<CAPTION>
                                                                           Years Ended December
                                                                           --------------------

                                                                  1999             1998             1997
                                                                -------          -------          -------
                                                               (in thousands except for per share amounts)

<S>                                                             <C>              <C>              <C>
Basic and Diluted Loss Per Share
Net loss ....................................................   $(2,854)         $  (985)         $(2,004)
Less: dividends on redeemable convertible preferred stock ...       142               --           (1,953)
                                                                -------          -------          -------
Net loss attributable to common stockholders ................   $(2,712)         $  (985)         $(3,957)
                                                                =======          =======          =======
Weighted average common shares outstanding ..................     9,181            8,867            8,669
Net loss per share ..........................................   $ (0.30)         $ (0.11)         $ (0.46)
                                                                =======          =======          =======
</TABLE>

     The options, warrants and convertible preferred stock discussed in Notes 8
and 9 were not included in the computation of diluted Earnings Per Share because
the effect would be antidilutive.


                                       37
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(3) Property and Equipment

    Property and equipment consists of the following:

                                                  Years Ended December
                                                  --------------------

                                            1999          1998       Estimated
                                            ----          ----       ---------
                                                                    Useful Life
                                                                    -----------
                                                     (in thousands)
Land and building.................         $  118       $    87        40 years

Equipment.........................          4,016         5,195       3-5 years
Computer equipment................          1,082         1,143         3 years
Furniture and fixtures............          1,889         1,751         3 years
Leasehold improvements............          4,967         4,731   Life of lease
Construction-in-progress..........            324           310
                                           ------       -------
                                           12,396        13,217
Less accumulated depreciation.....          6,662         7,077
                                           ------       -------
Property and equipment, net.......         $5,734       $ 6,140
                                           ======       =======

(4) Intangible Assets

    Intangible assets consists of the following:

                                                  Years Ended December
                                                  --------------------

                                            1999          1998       Estimated
                                            ----          ----       ---------
                                                                    Useful Life
                                                                    -----------
                                                     (in thousands)
Goodwill......................            $ 16,537      $ 14,331          20-25
Customer lists................               5,932         2,662          11-15
Workforce in place............               1,970            --            6-8
Trademarks....................               1,773           713          15-20
Non-compete...................                 380           120           5-10
Database/records.............                  310            --             12
                                          --------      --------
                                            26,902        17,826
Accumulated amortization......               3,771         2,489
                                          --------      --------
     Total....................            $ 23,131      $ 15,337
                                          ========      ========


                                       38
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The useful lives of the above intangible assets are estimated based upon,
among other things, independent appraisals, history of operations acquired,
terms of agreements and industry standards.

(5) Accrued Expenses

    Accrued expenses consists of the following:

                                              Years Ended December
                                             ----------------------
                                                 (in thousands)
                                               1999          1998
                                             --------       -------
Payroll and related cost.............        $  1,393       $ 1,505
Other................................           1,280         1,748
                                             --------       -------
                                             $  2,673       $ 3,253
                                             ========       =======

(6) Debt

<TABLE>
<CAPTION>
                                                                                        Years Ended December
                                                                                       ----------------------
                                                                                            (in thousands)
                                                                                        1999             1998
                                                                                       ------            -----
      <S>                                                                              <C>               <C>
      Short-term borrowings consist of the following:

      Bank revolver loan payable, variable interest rate (8.455 % at
      12/25/99), interest due monthly (see Note 15)                                    $  975            $   0
                                                                                       ======            =====
      Long-term debt consists of the following:

      Bank term loan payment, variable interest rate (8.42% at 12/25/99),
      principal and interest due monthly beginning October, 1999 (see
      Note 15)                                                                          6,833              $ 0

      Unsecured notes payable, 7.5% interest rate, principal due annually
      and interest due quarterly until April, 2002                                      1,000                0

      Unsecured notes payable, 7.5% interest rate, principal due annually
      and interest due quarterly until January, 2002                                      300                0

      Unsecured notes payable, with interest rates of between 8 and 9%,
      principal and interest due monthly until June, 2010                                 219                0

      Unsecured note payable, 7% interest rate, principal and interest due
      quarterly until March 31, 2001                                                      175              263

      Unsecured note payable, 12% interest rate, principal and interest due
      monthly until January, 2001                                                          36               67
                                                                                       ------            -----
                                                                                       $8,563            $ 330

      Less current maturities                                                           1,682              146
                                                                                       ------            -----
      Long term debt, less current maturities                                          $6,881            $ 184
                                                                                       ======            =====
</TABLE>


                                       39
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     On April 15, 1999, the Company entered into a Credit Agreement (the "1999
Agreement") with a bank pursuant to which the Company can borrow $10,000 on an
acquisition line of credit, $7,000 on a term loan basis and $3,000 on a
revolving line of credit basis, subject to certain performance criteria and an
asset-related borrowing base for the revolver. The performance criteria include,
among others, financial condition covenants such as net worth requirements,
indebtedness to net work ratios, debt service coverage ratios, funded debt
coverage ratios, and pretax profit, net profit and EBITDA requirements. The
acquisition line facility bears interest at either the bank's prime rate, or
LIBOR plus 2.25%, or at a comparable interest swap rate at the Company's
election.

     The term loan facility bears interest at LIBOR plus 2.25% or at a
comparable interest swap rate at the Company's election. The revolving credit
facility bears interest at the bank's prime rate or LIBOR plus 2.0% at the
Company's election. Amounts borrowed under the 1999 Agreement was used to
finance acquisitions, retire existing bank debt, provide ongoing working capital
and/or for other general corporate purposes. As of December 25, 1999, $6,833 was
borrowed on the term loan and $975 was borrowed on the revolving credit
facility. At December 25, 1999, the Company was not in compliance with certain
covenants. The Company received a waiver of these covenants and has agreed to a
revised credit agreement with its lender (see Note 15).

(7) Lease Obligations

     The Company has operating leases primarily for its primary eye care
centers, distribution center, corporate offices and certain equipment. The
leases are generally for periods of up to 10 years with renewal options at fixed
rentals. Certain of the leases provide for additional rentals based on sales
exceeding specified amounts. Capitalized leases consists of various office and
optometric equipment at multiple locations.

     Future minimum annual lease commitments for facilities and equipment for
the five years subsequent to December 25, 1999 and in the aggregate are as
follows:

<TABLE>
<CAPTION>
                                                                      Capital         Operating
                                                                      -------         ---------
                                                                       Leases           Leases
                                                                       ------           ------
                                                                            (in thousands)
<S>                                                                     <C>            <C>
2000........................................................            $ 31           $ 5,806
2001........................................................               2             4,689
2002........................................................              --             3,691
2003........................................................              --             2,959
2004........................................................              --             2,038
Thereafter..................................................              --             4,535
                                                                        ----           -------
Total minimum lease obligations.............................              33           $23,718
                                                                                       =======
Less amount representing interest...........................               3
                                                                        ----
Present value of net minimum capital lease obligations......              30
Less current maturities.....................................              28
                                                                        ----
                                                                        $  2
                                                                        ====
</TABLE>


                                       40
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Rental expenses charged to operations, including real estate taxes, common area
maintenance and other expenses related to the leased facilities and equipment,
were $6,296,000, $5,335,000 and $4,500,000 for fiscal years 1999, 1998 and 1997,
respectively.

(8) Redeemable Convertible Preferred Stock

On November 25, 1997, the Company issued 1,452,119 shares of Series B
Convertible Preferred Stock (the "Series B"), Class I and Class II Warrants to
an outside investor (the"Purchaser") for a net purchase price of $4,582,000. The
Series B was purchased with a conversion price into common stock that was lower
than market value of the common stock, and as a result, the difference of
$1,953,000 was reflected as a dividend to the preferred stockholders to reflect
the preferred stock at its fair value. Each share of Series B is convertible
into one share of Common Stock at $3.50 per share, subject to adjustment, at the
Purchaser's option at any time and at the Company's option if the price per
share of Common Stock during any period of thirty consecutive trading days
equals or exceeds $7.00 at any time during the first three years or $9.00 at any
time thereafter. The holders of the Series B have the right to appoint two
directors to the Company's Board of Directors.

     The Class I (Mirror) Warrants entitle the Purchaser to purchase an amount
of shares of the Company's Common Stock equal to an aggregate of up to 19.9% of
the shares of Common Stock purchasable under the Company's outstanding warrants
and options on the same terms and conditions of existing warrant and option
holders. The Purchaser is obligated to exercise these warrants at the same time
the options and warrants of existing holders are exercised, subject to certain
limitations.

     The Class II Warrants entitle the Purchaser to purchase an aggregate of
290,424 shares of the Company's Common Stock at an exercise price of $7.00 for a
term of five years.

     The Purchaser is entitled to "shelf" registration rights and "piggyback"
registration rights with respect to the shares of Common Stock underlying the
Series B, the Class I Warrants and the Class II Warrants.

     Upon a change of control of the Company, defined as (i) a change in any
person or group obtaining a majority of the securities ordinarily having the
right to vote in an election of Directors; (ii) during any two year period, the
individuals who at the beginning of the period constituted the Company's Board
of Directors no longer constitute a majority of the Board of Directors; (iii)
any merger, consolidation, recapitalization, reorganization, dissolution or
liquidation of the Company which results in the current stockholders no longer
owning more than 50% of the voting securities or the Company; (iv) any sale,
lease, exchange or other transfer of all, or substantially all, of the assets of
the Company; or (v) the adoption of a plan leading to the liquidation or
dissolution of the Company, at the option of the Purchaser, the Company would
have to redeem the Series B at a price of 105% of the offering price, subject to
certain adjustments, plus accrued and unpaid dividends. The redemption value at
December 25, 1999 and December 26, 1998 was $5,337,000.


                                       41
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(9) Stockholders' Equity

   Preferred Stock

     As of December 25, 1999 and December 31, 1998, the Company has authorized
5,000,000 shares of preferred stock at $.01 par value of which 1,452,119 shares
of Series B are issued and outstanding (see Note 8), and 200,000 shares have
been designated Series A Junior Participating Preferred Stock pursuant to a
certificate of designation filed with the State of Delaware on May 12, 1997, of
which no shares are issued and outstanding. The terms and conditions of any
other series of preferred stock, including any preferences and dividends, will
not be established until such time, if ever, as such shares are in fact issued
by the Company.

Common Stock

     As of December 25, 1999 and December 31, 1998, the Company has authorized
20,000,000 shares of common stock at $.01 par value. Common stock is entitled to
dividends if declared by the Board of Directors, and each share carries one
vote.

   Warrants

     In connection with the Company's private placement of Bridge Notes, the
Company issued 110,000 Class A Warrants. Each Class A Warrant entitles the
holder to purchase one share of common stock at a price of $6.00 and is
exercisable at any time through March 25, 1999. During 1995, 25,000 Class A
Warrants were exercised providing the Company with net proceeds of $150,000.

     In connection with the Company's second public offering, the Company issued
2,472,500 redeemable common stock purchase warrants ("Z Warrant"). Each Z
Warrant entitles the holder to purchase one share of common stock at a price of
$6.00 and terminated on August 25, 1999, unless previously redeemed. The Z
Warrants are redeemable at the option of the Company at a price of $.05 per
warrant, upon 30 days written notice, provided that the closing price of the
common stock exceeds $9.50 for a period of 20 consecutive business days. During
fiscal 1995, 300 Z Warrants were exercised providing the Company with $1,800 in
proceeds. During the year ended December 31, 1996, 100 Z Warrants were exercised
providing the Company with $600 in proceeds.

    In connection with the Company's second public offering, the Company sold to
its underwriter and a finder, 215,000 Unit Purchase Options ("UPOs") at a price
of $.001 per UPO. Each UPO consists of one share of common stock and one
redeemable common stock purchase warrant, which entitles the holder to purchase
one share of common stock at a price of $7.20. The UPOs are exercisable for a
period of four years commencing August 25, 1995, at a price of $9.90. No UPOs
have been exercised.

    In connection with its third public offering in 1996, the Company sold to
its underwriter warrants to purchase an aggregate of 170,000 shares of the
Company's common stock at $8.45. No underwriter warrants have been exercised.


                                       42
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    In connection with the Company issuing 1,452,119 shares of Series B
Convertible Preferred Stock , Class I and Class II Warrants were issued to an
outside investor (the "Purchaser"). The Class I (Mirror) Warrants entitle the
Purchaser to purchase an amount of shares of the Company's Common Stock equal to
an aggregate of up to 19.9% of the shares of Common Stock purchasable under the
Company's outstanding warrants and options on the same terms and conditions of
existing warrant and option holders. The Purchaser is obligated to exercise
these warrants at the same time the options and warrants of existing holders are
exercised, subject to certain limitations. The Class II Warrants entitle the
Purchaser to purchase an aggregate of 290,424 shares of the Company's Common
Stock at an exercise price of $7.00 for a term of five years. No Class I or
Class II Warrants have been exercised.

   Treasury Stock

     From time to time, the Company's Board of Directors has authorized the
repurchase of shares of the Company's common stock in the open market. During
the year ended December 31, 1997, the Company repurchased 30,600 shares of
common stock at a cost of $137,000. There were no repurchases of shares of
common stock during the years ended December 25, 1999, and December 31, 1998.

   Stock Option Plan

     On November 30, 1992, the Company's Board of Directors and the stockholders
approved the Company's 1992 Employee, Director and Consultant Stock Option Plan
(the "Plan"). On April 26, 1994, the Board of Directors and the stockholders
approved an increase in shares of common stock reserved for issuance under the
Plan to an aggregate of 1,000,000 shares. In March, 1996, the Board recommended
and the stockholders subsequently approved, that an additional 500,000 shares of
common stock be reserved for issuance under the Plan. In December, 1998, the
Board recommended, and the stockholders subsequently approved, that an
additional 350,000 shares of common stock be reserved for issuance under the
Plan.

     Under the Plan, incentive stock options may be granted to employees of the
Company. Non-qualified stock options may be granted to consultants, directors,
employees or officers of the Company. Most options vest after two or three years
from date of grant with a maximum term of ten years.

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Plan and as a result no compensation expense has been
recorded for granted options. Had compensation costs been determined consistent
with FASB Statement No. 123, the Company's net loss and loss per share would
have been as follows:


                                       43
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                          1999           1998           1997
                                       ----------     ----------     ----------
                                        (in thousands except for per share data)

Net loss.............. as reported     $   (2,854)    $     (985)    $   (2,004)
                                       ==========     ==========     ==========
                       pro forma       $   (3,370)    $   (1,863)    $   (2,370)
                                       ==========     ==========     ==========
Net loss per share.... as reported     $    (0.30)    $    (0.11)    $    (0.46)
                                       ==========     ==========     ==========
                       pro forma       $    (0.36)    $    (0.21)    $    (0.50)
                                       ==========     ==========     ==========

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants as follows:

                                          1999           1998           1997
                                       ----------     ----------     ----------
Dividend Yield ......................        0.00%          0.00%          0.00%
Volatility ..........................        90.4%          91.1%          93.9%
Interest Rate .......................        6.60%          5.50%          5.73%
Expected Life .......................  6.49 years     8.12 years     7.97 years

     A summary of the stock option transactions follows:

                                                        Number of      Weighted
                                                        ---------      --------
                                         Shares          Shares        Average
                                         ------          ------        -------
                                        Available         Under        Price per
                                        ---------         -----        ---------
                                                         Option          Share
                                                         ------          -----
Balance, December 31, 1996 ..........     653,967        823,233     $     5.25
Canceled ............................     154,600       (154,600)          4.67
Granted .............................    (298,395)       298,395           4.13
Exercised ...........................          --       (138,332)          4.29
                                       ----------     ----------     ----------
Balance, December 31, 1997 ..........     510,172        828,696           5.11
Canceled ............................     218,966       (218,966)          5.08
Granted .............................    (613,999)       613,999           3.43
Exercised ...........................          --        (20,000)          0.43
                                       ----------     ----------     ----------
Balance, December 25, 1998  .........     115,139      1,203,729           4.16
Increase to the plan ................     350,000             --             --
Canceled ............................      97,667        (97,667)          5.04
Granted .............................    (289,000)       289,000           2.25
Exercised ...........................          --         (5,000)          0.43
                                       ----------     ----------     ----------
Balance, December 25, 1999 ..........     273,806      1,390,062     $     3.71
                                       ==========     ==========     ==========

     There were 737,371 and 557,200 shares exercisable under the Plan at
December 25, 1999 and December 31, 1998, respectively.

     The weighted average fair value of options granted under the Plan was $1.79
and $2.90 for the years ended December 25, 1999 and December 31, 1998,
respectively.


                                       44
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The following table summarizes information about options outstanding as of
December 25, 1999:

<TABLE>
<CAPTION>
                                Options Outstanding                      Options exercisable
                                -------------------                      -------------------
                                     Weighted
                                     --------
                                      average        Weighted         Number
                                      -------        --------         ------
  Range of             Number         remaining       average       exercisable     Weighted
  --------             ------         ---------       -------       -----------     --------
  Exercise          outstanding      contractual      exercise          at           Average
  --------          -----------      -----------      --------          --           -------
   Prices           at 12/25/99         life           price         12/25/99     Exercise price
   ------           -----------         ----           -----         --------     --------------
<S>                     <C>                 <C>   <C>                 <C>         <C>
$0.00-$0.95 ...          10,000             2.9   $        0.43          10,000   $        0.43
$1.90-$2.85 ...         358,500             9.6   $        2.04          35,172   $        2.00
$2.85-$3.80 ...         235,999             8.4   $        3.25          83,333   $        3.31
$3.80-$4.75 ...         575,563             7.3   $        4.10         398,866   $        4.13
$4.75-$5.70 ...          48,900             5.2   $        5.00          48,900   $        5.00
$5.70-$6.65 ...         121,100             6.2   $        6.44         121,100   $        6.44
$6.65-$7.60 ...          37,000             5.6   $        6.82          37,000   $        6.82
$7.60-$8.55 ...           3,000             5.9   $        7.81           3,000   $        7.81
                  -------------                                   -------------
                      1,390,062                                         737,371
                  =============                                   =============
</TABLE>

(10) Employee Benefit Plans

      The Company maintains a 401(k) Retirement Savings Plan. The Company
matches 50% of every dollar contributed by employees, limited to the first 5% of
salary. Contributions made by the Company in 1999, 1998, and 1997 were $247,000,
$191,000 and $171,000, respectively.

(11) Income Taxes

     Income tax benefit attributable to loss from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 34 percent as a
result of the following:


                                       45
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
                                                                                      Years Ended December
                                                                                   -------------------------
                                                                                    1999      1998     1997
                                                                                   -------    -----    -----
                                                                                          (in thousands)
<S>                                                                                <C>        <C>      <C>
Computed "expected" tax benefit ................................................   $   954    $ 305    $ 680

Increase in tax benefit resulting from:

     State net operating loss and State tax deductions .........................       142      137      111

Decrease in tax benefit resulting from:

     Other .....................................................................      (158)    (104)     (78)

     Increase in valuation allowance for deferred tax assets allocated to
     income tax expense ........................................................    (1,015)    (408)    (738)
                                                                                   -------    -----    -----
                                                                                   $   (77)   $ (70)   $ (25)
                                                                                   =======    =====    =====
</TABLE>

     The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:

                                                                 Years Ended
                                                                 -----------
                                                                   December
                                                                   --------

                                                               1999       1998
                                                             -------    -------
                                                               (in thousands)
Deferred tax assets:
     Net operating loss carryforwards ....................   $ 8,110    $ 7,513

     Plant and equipment .................................       639        720
     Vacation accrual ....................................        41        201
     Bad debt reserve ....................................       680        259
     Other reserves ......................................       184        117
                                                             -------    -------
          Gross deferred tax assets ......................     9,654      8,810
     Valuation allowance under SFAS 109 ..................    (7,115)    (8,810)
                                                             -------    -------
          Deferred tax assets ............................     2,539         --
                                                             -------    -------
Deferred tax liabilities:
     Intangible assets ...................................    (2,539)        --
                                                             -------    -------
          Net deferred tax assets ........................   $    --    $    --
                                                             ==================

     A valuation allowance in the amount of $7,115,000 and $8,810,000 was
established at December 25, 1999 and December 31, 1998, respectively. The
valuation allowance was reduced in 1999 due to acquisitions that resulted in the
recognition of net deferred tax liabilities of approximately $2,800,000. This
allowance has been established due to the uncertainty of the Company to benefit
from the federal and state operating loss carryforwards.


                                       46
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    Subsequently recognized tax benefit relating to the valuation allowance for
deferred tax assets will be allocated as follows:

<TABLE>
<CAPTION>
                                                                                      Years Ended
                                                                                      -----------
                                                                                        December
                                                                                       --------
                                                                                    1999       1998
                                                                                   -------    -------
                                                                                     (in thousands)
<S>                                                                                <C>        <C>
Income tax benefit that would be reported in the statement of operations ...       $ 6,644    $ 8,171
Charge to goodwill for recognition of acquired tax assets...................           471        639
                                                                                   -------    -------
                                                                                   $ 7,115    $ 8,810
                                                                                   =======    =======
</TABLE>

The net operating loss carryforwards ("NOLs") for federal and state tax purposes
at December 25, 1999 are approximately $20,455,000 and $18,901,000, respectively
and expire through 2019 and 2004, respectively.

(12) Supplementary Cash Flow Information

     The following represents supplementary cash flow information:

<TABLE>
<CAPTION>
                                                         Years Ended December
                                                         --------------------
                                                      1999       1998        1997
                                                    --------    -------    -------
                                                           (in thousands)

<S>                                                 <C>         <C>        <C>
Interest paid ...................................   $    538    $   222    $   343
Non-cash financing activities:
Equity issued associated with Credit Agreement ..         --         --        180
Acquisitions:
Assets acquired .................................     12,632      3,949      5,623
Net liabilities assumed .........................     (4,371)    (1,247)    (3,548)
Notes payable ...................................     (1,300)      (350)        --
Common stock issued .............................         (2)        (1)        --
                                                    --------    -------    -------
Cash paid .......................................      6,959      2,351      2,075
Less cash acquired ..............................       (540)      (150)        --
                                                    --------    -------    -------
Net cash paid for acquisition ...................   $  6,419    $ 2,201    $ 2,075
                                                    ========    =======    =======
</TABLE>

(13) Related Party Transactions

     In connection with the exercise of stock options during 1997, the Company's
former Executive Vice President and Director (the "Borrower") issued a
promissory note (the "Promissory Note") to the Company for $594,000. The
Promissory Note is due the earlier of September 2, 2007 or the date upon which
the Borrower receives the proceeds of the sale of not less than 20,000 shares of
the shares acquired by the exercise of the stock options. Interest


                                       47
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

accrues at the rate of 6.55%, compounding annually, and is payable on the
earlier of the maturity date of the Promissory Note or upon certain defined
Events of Default. The Borrower may prepay all or any part of the Note without
penalty or premium.

(14)   Operating Segment and Related Information

     The following table presents certain operating segment information.

<TABLE>
<CAPTION>
                                                                        1999
                                                                   (in thousands)
                                                         Laser Vision                        Consolidated
                                                         ------------                        ------------
                                    Eye Care Centers       Correction         All Other         Totals
                                    ----------------       ----------         ---------         ------
<S>                                         <C>               <C>              <C>               <C>
Revenues:
  External customers ..............         $ 64,964          $ 2,070          $     --          $ 67,034
Interest:
  Interest revenue ................                1               --                81                82
  Interest expense ................              (39)              (5)             (597)             (641)
                                            --------          -------          --------          --------
Net interest revenue (expense) ....              (38)              (5)             (516)             (559)

Depreciation and amortization .....            3,549              125               154             3,828

Profit (loss) from operations .....            2,021              773            (4,705)           (1,911)
Identifiable assets ...............           29,875              231            10,648            40,754
Capital expenditures ..............            1,282                2               229             1,513

<CAPTION>
                                                                         1998
                                                                   (in thousands)
                                                         Laser Vision                        Consolidated
                                                         ------------                        ------------
                                    Eye Care Centers       Correction         All Other         Totals
                                    ----------------       ----------         ---------         ------
<S>                                         <C>               <C>              <C>               <C>
Revenues:
  External customers ..............         $ 53,100          $ 1,871          $     --          $ 54,971
Interest:
  Interest revenue ................                1               --               183               184
  Interest expense ................              (98)             (34)              (69)             (201)
                                            --------          -------          --------          --------
Net interest revenue (expense) ....              (97)             (34)              114               (17)

Depreciation and amortization .....            2,426              113                57             2,596

Profit (loss) from operations .....            1,423              253            (2,732)           (1,056)
Identifiable assets ...............           28,644              587             2,914            32,145
Capital expenditures ..............            1,316              296                --             1,612
</TABLE>


                                       48
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
                                                                        1997
                                                                   (in thousands)
                                                         Laser Vision                        Consolidated
                                                         ------------                        ------------
                                    Eye Care Centers       Correction         All Other         Totals
                                    ----------------       ----------         ---------         ------
<S>                                         <C>               <C>               <C>              <C>
Revenues:
  External customers .................      $ 42,510          $ 2,066           $    --          $ 44,576
Interest:
  Interest revenue ...................            20               --               340               360
  Interest expense ...................           (54)              --              (290)             (344)
                                            --------          -------           -------          --------
Net interest revenue (expense) .......           (34)              --                50                16

Depreciation and amortization ........         1,971              164                48             2,183

Profit (loss) from operations ........          (122)             (97)           (2,514)           (2,733)
Identifiable assets ..................        26,700              624             7,183            34,507
Capital expenditures .................         1,808              140                --             1,948
</TABLE>

     Each operating segment is individually managed and has separate financial
results that are reviewed by the Company's chief operating decision-makers. Each
segment contains closely related products that are unique to the particular
segment.

     The principal products of the Company's eye care centers are eyeglasses,
frames, ophthalmic lenses and contact lenses.

     Profit from operations is net sales less cost of sales and selling, general
and administrative expenses, but is not affected by non-operating charges/income
or by income taxes.

     Non-operating charges/income consists principally of net interest expense.

     In calculating profit from operations for individual operating segments,
certain administrative expenses incurred at the operating level that are common
to more than one segment are not allocated on a net sales basis.

     All intercompany transactions have been eliminated, and intersegment
revenues are not significant.

(15) Subsequent Event

      On March 31, 2000, the Company and its primary lender agreed to enter into
a revised financing agreement. This agreement includes provisions and financial
covenants which supercede the provisions in the 1999 agreement (see Note 6),
including the following:


                                       49
<PAGE>

                           SIGHT RESOURCE CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

a)    Limits the credit facility amounts to the following maximums:
      i.    revolving line note - $2.5 million,
      ii.   term loan - $6.75 million.

b)    Terminates the Company's acquisition line of credit of $10.0 million.

c)    The maturity date of the revolving line note and term loan becomes March
      31, 2001.

d)    Interest rates on the revolving line note and term loan are as follows:
         Closing date through August 31, 2000                  Prime rate + 1.0%
         From September 1, 2000 through October 31, 2000       Prime rate + 2.0%
         From November 1, 2000 through March 31, 2001          Prime rate + 3.0%

e)    Monthly scheduled principal payments amended as follows:
         April, 2000 through July, 2000                           $83,333.33
         August, 2000 through December, 2000                     $100,000.00
         January, 2001 through March, 2001                       $125,000.00

f)   The Company must pay the following amendment fees, unless in the event that
     a full refinance of the existing obligations occurs on or before August 31,
     2000, then the Company shall receive a $30,000.00 repayment of the
     $80,000.00 amendment fee:
         Closing date                   $80,000.00
         September 1, 2000              $50,000.00
         November 1, 2000               $30,000.00

g)   Unless all obligations of the Company to its primary lender are satisfied
     in full prior to the dates noted below, the Company shall grant its primary
     lender stand alone warrants exercisable for equivalent shares of the
     Company's common stock as follows:
         50,000 shares on August 31, 2000
         50,000 shares on December 31, 2000

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     None.


                                       50
<PAGE>

                                    PART III

Item 10. Directors and Officers of the Registrant

     The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Management" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Company's Proxy Statement
for the 1999 Annual Meeting of Stockholders.

Item 11. Executive Compensation

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Executive Compensation" in the Company's
Proxy Statement for the 1999 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Share Ownership" in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Certain Transactions" in the Company's
Proxy Statement for the 1999 Annual Meeting of Shareholders.

                                     PART IV

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

Item 14(a)(1). Index to Consolidated Financial Statements Covered by Report of
Independent Auditors

The Consolidated Financial Statements of Sight Resource Corporation are included
in Item 8:

     --  Independent Auditors' Report

     --  Consolidated Balance Sheets as of December 25, 1999 and December 26,
         1998

     --  Consolidated Statements of Operations for the Years Ended December 25,
         1999, 1998 and 1997

     --  Consolidated Statements of Stockholders' Equity for the Years Ended
         December 25, 1999, 1998 and 1997


                                       51
<PAGE>

     --  Consolidated Statements of Cash Flows for the Years Ended December 25,
         1999, 1998 and 1997

     --  Notes to Consolidated Financial Statements

Item 14(a)(2). Index to Consolidated Financial Statement Schedules


                                       52
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
   Sight Resource Corporation:

     Under dates of March 10, 2000 and March 31, 2000, we reported on the
consolidated balance sheets of Sight Resource Corporation and its subsidiaries
as of December 25, 1999 and December 31, 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 25, 1999, which are included in
the annual report on Form 10-K for the year 1999. In connection with our audits
of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule in the annual report on Form
10-K. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

     In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.


                                                           /s/ KPMG LLP

                                                           KPMG LLP

Boston, Massachusetts
March 31, 2000


                                       53
<PAGE>

                           SIGHT RESOURCE CORPORATION

                 Schedule II--Valuation and Qualifying Accounts

                             (dollars in thousands)

                  FOR THE TWELVE MONTHS ENDED DECEMBER 25,1999

<TABLE>
<CAPTION>
                                                                   Additions
                                                                   ---------
                                                                 (Deductions)
                                                                 ------------

                                                                                  Charged
                                                                                  -------
                                                                   Balance at   (Credited) to                  Balance at
                                                                   ----------   ------------                   ----------
                                                                   Beginning      Costs and                     End of
                                                                   ---------     ----------                     ------
                         Description                                of Year       Expenses     Other Net        Period
                         -----------                                -------       --------     ---------        ------
<S>                                                                   <C>          <C>           <C>            <C>
Valuation and qualifying accounts deducted from assets:
Allowances for accounts receivable..........................          $  748       $ 1,233       $ (100)        $1,881
Valuation allowance for deferred tax assets.................           8,810         1,015       (2,710)         7,115
</TABLE>

                  FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                                                                   Additions (Deductions)
                                                                                   ---------------------

                                                                                  Charged
                                                                                  -------
                                                                   Balance at   (Credited) to                  Balance at
                                                                   ----------   ------------                   ----------
                                                                   Beginning      Costs and                     End of
                                                                   ---------     ----------                     ------
                         Description                                of Year       Expenses     Other Net        Period
                         -----------                                -------       --------     ---------        ------
<S>                                                                   <C>           <C>           <C>          <C>
Valuation and qualifying accounts deducted from assets:
Allowances for accounts receivable..........................          $  478        $  215        $  55        $  748
Valuation allowance for deferred tax assets.................           8,869           408         (467)        8,810
</TABLE>

                  FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997


<TABLE>
<CAPTION>
                                                                                   Additions (Deductions)
                                                                                   ---------------------

                                                                                  Charged
                                                                                  -------
                                                                   Balance at   (Credited) to                  Balance at
                                                                   ----------   ------------                   ----------
                                                                   Beginning      Costs and                     End of
                                                                   ---------     ----------                     ------
                         Description                                of Year       Expenses     Other Net        Period
                         -----------                                -------       --------     ---------        ------
<S>                                                                   <C>           <C>           <C>          <C>
Valuation and qualifying accounts deducted from assets:
Allowances for accounts receivable..........................          $  353        $  97         $  28        $  478
Valuation allowance for deferred tax assets.................           7,600          738          (531)        8,869
</TABLE>


                                       54
<PAGE>

Item 14(a)(3) Exhibits

     The exhibits listed on the Exhibit Index below are filed or incorporated by
reference as part of this report and such Exhibit Index is hereby incorporated
herein by reference.

                                  EXHIBIT INDEX

    Exhibit
    -------
     Number                                Description
     ------                                -----------

   (2.1)        Stock Purchase and Sale Agreement by and among Kent Optical
                Company, Custom Optics, Inc., Kent-N.W. Grand Rapids, Inc.,
                Kent-Hackley, Inc., Source Optical Supply, Inc., the
                stockholders of such companies, Kent Acquisition Corporation and
                Sight Resource Corporation, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 2.1 of the
                Company's Report on Form 8-K filed with the Securities Exchange
                Commission on May 6, 1999)

   (3.1)        Certificate of Incorporation of the Company (incorporated herein
                by reference to Exhibit 3.1 of the Company's Registration
                Statement filed with the Securities and Exchange Commission on
                Form SB-2 File No. 33-56668)

   (3.2)        By-Laws of the Company, as amended (incorporated herein by
                reference to Exhibit 3.2 of the Company's Registration Statement
                filed with the Securities Exchange Commission on Form SB-2 File
                No. 33-56668)

   (3.3)        Certificate of Designation for Series A Junior Participating
                Preferred Stock (incorporated herein by reference to Exhibit 1
                of the Company's Report on Form 8-K filed with the Securities
                and Exchange Commission on May 13, 1997)

   (3.4)        Certificate of Designation, Preferences and Rights of Series B
                Convertible Preferred Stock (incorporated herein by reference to
                Exhibit 4.1 of the Company's Report on Form 8-K filed with the
                Securities and Exchange Commission on December 9, 1997)

   (4.1)        Article 4 of the Certificate of Incorporation (incorporated
                herein by reference to Exhibit 3.1 of the Company's Registration
                Statement filed with the Securities and Exchange Commission on
                Form SB-2 File No. 33-56668)

   (4.2)        Form of Common Stock Certificate (incorporated herein by
                reference to Exhibit 4.2 of the Company's Registration Statement
                filed with the Securities and Exchange Commission on Form SB-2
                File No. 33-56668)


                                       55
<PAGE>

   (4.3)        Warrant Agreement dated August 24, 1994 between the Registrant
                and American Stock Transfer and Trust Company (incorporated
                herein by reference to Exhibit 4.5 of the Company's Registration
                Statement filed with the Securities and Exchange Commission on
                Form S-1 File No. 33-77030)

   (4.4)        Form of Redeemable Warrant Certificate (included in 4.3 above)

   (4.5)        Form of Class A Warrant (incorporated herein by reference to the
                Company's Form 10-K for the year ended December 31, 1994 filed
                with the Securities and Exchange Commission as Exhibit 4.7)

   (4.6)        Form of Class 1 (Mirror) Warrants (incorporated herein by
                reference to Exhibit 4.2 of the Company's Report on Form 8-K
                filed with the Securities and Exchange Commission on December 9,
                1997)

   (4.7)        Form of Class II Warrants (incorporated herein by reference to
                Exhibit 4.3 of the Company's Report on Form 8-K filed with the
                Securities and Exchange Commission on December 9, 1997)

   (10.1)*      Employment Agreement, dated as of December 1, 1992, between the
                Registrant and William G. McLendon, as amended (incorporated by
                reference herein to Exhibit 10.5 of the Company's Registration
                Statement filed with the Securities and Exchange Commission on
                Form S-1 File No. 33-77030)

   (10.2)*      1992 Employee, Director and Consultant Stock Option Plan, as
                amended

   (10.3)*      Employment Agreement for Stephen M. Blinn, as amended
                (incorporated by reference herein to Exhibit 10.18 of the
                Company's Registration Statement filed with the Securities and
                Exchange Commission on Form S-1 File No. 33-77030)

   (10.4)*      Employment Agreement, dated as of February 24, 1995, between the
                Registrant and Elliot S. Weinstock, O.D. (incorporated herein by
                reference to the Company's Form 10-K for the year ended December
                31, 1994 filed with the Securities and Exchange Commission as
                Exhibit 10.9)

   (10.5)*      Amendment Number 1 to Employment Agreement, dated as of January
                2, 1997, between the Registrant and Elliot S. Weinstock, O.D.
                (incorporated herein by reference to Exhibit 10.1 of the
                Company's Form 10-Q filed with the Securities and Exchange
                Commission on May 6, 1997)


                                       56
<PAGE>

   (10.6)*      Employment Agreement, dated as of January 26, 1998, between the
                Registrant and William T. Sullivan (incorporated herein by
                reference to Exhibit 10.6 of the Company's Form 10-K for the
                year ended December 31, 1998 filed with the Securities Exchange
                Commission)

   (10.7)*      Amendment No. 1 to Employment Agreement, dated as of December 4,
                1998, between the Registrant and William T. Sullivan
                (incorporated herein by reference to Exhibit 10.7 of the
                Company's Form 10-K for the year ended December 31, 1998 filed
                with the Securities Exchange Commission)

   (10.8)*      Letter Agreement, dated as of July 27, 1998, between the
                Registrant and William G. McLendon (incorporated herein by
                reference to Exhibit 10b of the Company's Report on Form 10-Q
                filed with the Securities and Exchange Commission on November
                12, 1998)

   (10.9)*      Letter Agreement, dated as of August 3, 1998, between the
                Registrant and Stephen M. Blinn (incorporated herein by
                reference to Exhibit 10c of the Company's Report on Form 10-Q
                filed with the Securities and Exchange Commission on November
                12, 1998)

   (10.10)*     Employment Agreement, dated as of August 17, 1998, between the
                Registrant and James W. Norton (incorporated herein by reference
                to Exhibit 10a of the Company's Report on Form 10-Q filed with
                the Securities and Exchange Commission on November 12, 1998)

   (10.11)      Form of Management Agreement between certain of the Registrant's
                subsidiaries and their related optometric professional
                corporations (incorporated herein by reference to Exhibit 10.11
                of the Company's Form 10-K for the year ended December 31, 1998
                filed with the Securities Exchange Commission)

   (10.12)      Form of Stock Restrictions and Pledge Agreement between certain
                of the Registrant's subsidiaries, their related optometric
                professional corporations and the nominee shareholders
                (incorporated herein by reference to Exhibit 10.12 of the
                Company's Form 10-K for the year ended December 31, 1998 filed
                with the Securities Exchange Commission)

   (10.13)      Asset Purchase Agreement dated February 24, 1995 between the
                Registrant, CEA Acquisition Corporation, Cambridge Eye
                Associates, Inc. and Elliot S. Weinstock, O.D. (incorporated
                herein by reference to Exhibit 2.1 of the Company's Form 8-K
                filed with the Securities and Exchange Commission on March 8,
                1995)


                                       57
<PAGE>

   (10.14)      Credit Agreement, dated February 20, 1997, between the Company
                and Creditanstalt Corporate Finance Corporation, Inc.
                (incorporated herein by reference to Exhibit 10.1 of the
                Company's Form 8-K filed with the Securities Exchange Commission
                on March 7, 1997)

   (10.15)      Asset Purchase Agreement dated August 24, 1995 between the
                Registrant, Douglas Vision World, Inc., S.J. Haronian, Kathleen
                Haronian, Lynn Haronian, Shirley Santoro and Tri-State Leasing
                Company (incorporated herein by reference to Exhibit 2.1 of the
                Company's Form 8-K filed with the Securities and Exchange
                Commission on September 8, 1995)

   (10.16)      Asset Transfer and Merger Agreement dated as of July 1, 1996 by
                and among Sight Resource Corporation, E.B. Acquisition Corp.,
                The E.B. Brown Optical Company, Brown Optical Laboratories,
                Inc., E.B. Brown Opticians, Inc., Gordon Safran and Evelyn
                Safran (incorporated herein by reference to Exhibit 2.1 of the
                Company's Form 8-K filed with the Securities and Exchange
                Commission on October 3, 1996.)

   (10.17)      Form of Rights Agreement dated as of May 15, 1997 between the
                Company and American Stock Transfer & Trust Company
                (incorporated herein by reference to Exhibit 1 of the Company's
                Form 8-K filed with the Securities and Exchange Commission on
                May 13, 1997)

   (10.18)      Stock Purchase Agreement dated as of July 1, 1997 by and among
                Marjory O. Greenberg, As Testamentary Executrix of the
                Succession of Tom I. Greenberg, Peter Brown, and Vision Plaza
                Corp. (incorporated herein by reference to Exhibit 10.1 of the
                Company's Form 10-Q filed with the Securities and Exchange
                Commission on November 12, 1997)

   (10.19)      Promissory Note dated as of September 2, 1997 between Sight
                Resource Corporation and Mr. Stephen Blinn (incorporated herein
                by reference to Exhibit 10.2 of the Company's Form 10-Q filed
                with the Securities and Exchange Commission on November 12,
                1997)

   (10.20)      Series B Convertible Preferred Stock Agreement (incorporated
                herein by reference to Exhibit 10.1 of the Company's Form 8-K
                filed with the Securities and Exchange Commission on December 9,
                1997)

   (21)         Subsidiaries of the Company

   (27)         Financial Data Schedule


                                       58
<PAGE>

   (99.1)       Loan Agreement by and between Sight Resource Corporation and
                Fleet National Bank, dated as of April 1, 1999 (incorporated
                herein by reference to Exhibit 99.1 of the Company's Report on
                Form 8-K filed with Securities Exchange Commission on May 6,
                1999)

   (99.2)       $7,000,000 Term Loan Note between Sight Resource Corporation and
                Fleet National Bank, dated as of April 1, 1999 (incorporated
                herein by reference to Exhibit 99.2 of the Company's Report on
                Form 8-K filed with Securities Exchange Commission on May 6,
                1999)

   (99.3)       $3,000,000 Secured Revolving Line Note between Sight Resource
                Corporation and Fleet National Bank, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 99.3 of the
                Company's Report on Form 8-K filed with Securities Exchange
                Commission on May 6, 1999)

   (99.4)       $10,000,000 Secured Acquisition Term Note between Sight Resource
                Corporation and Fleet National Bank, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 99.4 of the
                Company's Report on Form 8-K filed with Securities Exchange
                Commission on May 6, 1999)

   (99.5)       Borrower Security Agreement by and between Sight Resource
                Corporation and Fleet National Bank, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 99.5 of the
                Company's Report on Form 8-K filed with Securities Exchange
                Commission on May 6, 1999)

   (99.6)       Borrower Stock Pledge Agreement by and between Sight Resource
                Corporation and Fleet National Bank, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 99.6 of the
                Company's Report on Form 8-K filed with Securities Exchange
                Commission on May 6, 1999)

   (99.7)       Trademark Security Agreement by and between Sight Resource
                Corporation and Fleet National Bank, dated as of April 1, 1999
                (incorporated herein by reference to Exhibit 99.7 of the
                Company's Report on Form 8-K filed with Securities Exchange
                Commission on May 6, 1999)

----------
* Management contract or compensatory plan, contract or arrangement.

Item 14(b) Reports on Form 8-K


                                       59
<PAGE>

     No reports on Form 8-K were filed during the quarter ended December 25,
1999.


                                       60
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Holliston,
Massachusetts on March 24, 2000.


                                SIGHT RESOURCE CORPORATION


                                By: /s/   WILLIAM T. SULLIVAN
                                    -------------------------------------
                                          William T. Sullivan
                                   President and Chief Executive Officer

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

<TABLE>
<CAPTION>
                 Signature                                 Title                                Date
                 ---------                                 -----                                ----
        <S>                                 <C>                                              <C>


                                            President (principal executive
                                            officer), Chief Executive
          /s/ WILLIAM T. SULLIVAN           Officer and Director                            March 31, 2000
        ----------------------------
            William T. Sullivan


          /s/ WILLIAM T. MCLENDON           Chairman                                        March 31, 2000
        ----------------------------
            William G. McLendon


            /s/ STEPHEN M. BLINN            Director                                        March 31, 2000
        ----------------------------
              Stephen M. Blinn


           /s/ RICHARD G. DARMAN            Director                                        March 31, 2000
        ----------------------------
             Richard G. Darman
</TABLE>


                                       61
<PAGE>

<TABLE>
<CAPTION>
                 Signature                                 Title                                Date
                 ---------                                 -----                                ----
        <S>                                 <C>                                              <C>

          /s/ GARY JACOBSON, M.D.           Director                                        March 31, 2000
        ----------------------------
            Gary Jacobson, M.D.


          /s/ CHRISTIAN E. CALLSEN          Director                                        March 31, 2000
        ----------------------------
            Christian E. Callsen


           /s/ J. MITCHELL REESE            Director                                        March 31, 2000
        ----------------------------
             J. Mitchell Reese


           /s/ RUSSELL E. TASKEY            Director                                        March 31, 2000
        ----------------------------
             Russell E. Taskey


            /s/ GEORGE CLAIRMONT            Director                                        March 31, 2000
        ----------------------------
              George Clairmont

                                            Chief Financial Officer
                                            (principal financial and
            /s/ JAMES W. NORTON             accounting officer)                             March 31, 2000
        ----------------------------
              James W. Norton
</TABLE>


                                       62