EyeCity.com, Inc. ("EyeCity") in January 2001 refocused its business strategy and is currently engaged in the marketing, distribution and retail sale over the Internet of its EyeTools(R) computer glasses intended to relax the eyes and ameliorate visual discomfort, focus difficulties, headaches and other related problems associated with Computer Vision Syndrome (CVS) and Foggles(R) optical products for the aviation, hunting and shooting industries through distributors, catalogues, direct advertising, retail stores and the Internet.

In addition, EyeCity previously announced that it intends to establish a turnkey business-to-business ("B2B") and business -to-professional ("B2P") electronic exchange providing end-to-end B2B and B2P e-commerce solutions to the eyecare professional. In this regard, EyeCity expects to offer a suite of services, including, e-commerce store design and fulfillment services to professional eyecare providers including ophthalmologists, optometrists, and opticians who want to create their own customized online stores, providing full e-commerce capabilities for their patients and customers. Subject to obtaining appropriate financing, EyeCity plans to provide the tools and systems necessary for eyecare providers to function in e-commerce markets, including merchandise selection and sourcing, storefront creation, hosting, advertising, customer service, credit card processing and fulfillment services.

EyeCity's B2B and B2P e-commerce model is also intended to help such eye care providers retain customer relationships and increase sales. Unlike traditional affiliate programs that refer customers to other web sites to shop, EyeCity's B2B and B2P program is intended to enable eyecare providers to drive traffic to their own stores, thereby building loyalty and repeat sales. With EyeCity's planned suite of e-commerce service, such eye care providers will be able to customize their online store to the unique interests of their audience. Products offered for sale would be available through EyeCity's extensive database, with transaction processing that creates a single unified shopping experience that is seamless to the customer. See "Investment Considerations."

EyeCity markets its patented EyeTools computer eyeglasses, which were developed to relieve Computer Vision Syndrome ("CVS"), a potentially debilitating condition that results in headaches, blurred vision and eyestrain often associated with CVS under the website ergovision.com. EyeTools computer eyeglasses feature a patented lens technology that enables the computer user to focus more clearly by minimizing glare and equalizing all sources of ambient lighting, such as from windows and overhead sources.

From EyeCity's inception through December 1998, EyeCity's business strategy was to become a leading producer, distributor and marketer of ergonomic computer eyewear products designed to alleviate health-related problems associated with CVS.

EyeCity was incorporated in May 1996 in New York under the name Ergovision, Inc., and reincorporated in Delaware in April 1997 under the name Ergovision, Inc. In May 1999, Ergovision, Inc. changed its name to EyeCity.com, Inc. EyeCity's principal executive offices are located at 199 Lafayette Drive, Syosset, New York 11791, and its telephone number is 516-496-6070.

Industry Overview

During the 1980's and 1990's, there has been an unparalleled growth in the computer industry. The installed base of PCs currently exceeds 80 million in the U.S. and 200 million worldwide according to the January 1995 issue of Spectrum Magazine. Information Week magazine reports that 82 million personal computers were shipped worldwide in 1997 alone. According to IDC/LINK Research and Data Quest, 44%-47% of the 80 million American homes have computers.

As the demand for computers has significantly increased so has the rate of health problems believed to be related to the use of computers. "In fact nearly all surveys (NIOSH, CAL/OSHA, AMA) of computer workers show that vision related problems are the most frequently reported health concern by VDT operators [3 out of 4]," according to a report by VDT Solution entitled "Ergonomic Insights & Innovations for the Computer Workplace." Moreover, a news release from the American Optometric Association (1997) stated that Computer Vision Syndrome is an epidemic that costs American companies and employees $1.9 billion per year to diagnose and treat.

Anyone using a computer regularly for two hours or more a day is at risk, according to James Sheedy, OD, Ph.D., Chief of the VDT Eye Clinic at the University of California at Berkeley. According to the World Health Organization, while it appears that VDT's do not lead to permanent damage to the eyes, visual discomfort is so widespread among operators that it must be regarded as a health problem.

Work at a VDT causes visual discomfort from the glare reflected from the VDT as well as reflections off of the keyboard and all other surfaces or other sources of light directed at the eyes that are in the vicinity of the VDT. A variety of approaches have been used to create a less distracting and less stressful visual environment. Overhead luminares have been shielded or utilized with dimmers or diffusers. Windows have been covered with venetian blinds and the general level of overhead lighting has been lowered. In some instances, polarization filters, micromesh filters or color filters have been positioned in front of the viewing screen to minimize glare. However, such approaches have had less than a desirable result. For example, while the use of anti-glare screens has had an impact on relieving CVS, they simply filter light reflected off the monitor glass. Therefore, the effect of ambient lighting from multiple sources is not addressed by this technique. Whenever the eye's gaze is changed from an object of one luminance level to an object of a different luminance level, a period of time is required for adaptation to the second level. The greater the difference in these luminance levels, the longer the eye requires to effect this

adaptation. The sensitivity of the eye to detect and follow detail from a VDT is maximized when the eye is properly adapted to the luminance level at which it is looking and the eye is in a relaxed state.

Business Strategy

The Company's short-term objective is to establish a strong brand name and corporate identity through retail distribution, internet alliances and sales, and direct mail. The Company's long-term business objective is to become a leading provider of ergonomic and computer accessory products that improve the health and safety of workers in the workplace and at home. When possible, the Company intends to introduce proprietary products, but may also market products produced by others. While the Company intends to emphasize the sale of products under its own branded label to foster name recognition and build brand loyalty, it may also sell products under private label to other companies with existing distribution systems.

Management has formulated a multifaceted marketing strategy for its EyeTools computer eyeglasses and EyeTools eyedrops products. The Company intends to:

o Gain brand name recognition and distribution into computer retailers by developing relationships with national computer distributors and manufacturers representatives. The Company will support its retail sales effort through co-op and market development funds, along with advertising, in-store product demonstrations, sales materials, public relations, bundling with other successful products, and other means to help achieve push-through. The promotional efforts will be spearheaded by a large strategic sales company.

o Gain direct sales to computer retailers and bookstores by developing response-oriented trade advertising and public relations campaigns.

o Gain direct sales to consumers by developing an Internet presence via advertising, listing opportunities on government and other sites, developing promotional relationships with other Internet companies, and by providing valuable information on the benefits of ergonomically designed computer products.

o Develop a consumer public relations campaign, a school educational campaign and a print advertising campaign for magazines and computer catalogs.

o Gain direct sales to corporations seeking to improve worker conditions and productivity by using mailings, a direct sales force and educational and testing programs.

o Market a second generation product to retail optical chains and optometrists and to file for patent protection where applicable on the second generation product.

    Websites                               Products
 ------------------------------- -----------------------------
 Ergovision.com                  Computer Glasses and eyedrops
 ------------------------------- -----------------------------
 Foggles.com                   Sports and lifestyle glasses
------------------------------- -----------------------------

EyeCity's principal merchandising strategy is to distinguish its websites by offering proprietary optical products. EyeCity currently carries the following merchandise lines:

o EyeTools Computer Eyewear Products. EyeCity offers three different styles of its patented EyeTools computer glasses. EyeTools are intended to relax the eyes and ameliorate visual discomfort, focus difficulties, headaches and other related problems associated with CVS. EyeCity also offers EyeTools computer eyedrops which are designed to treat dry eye syndrome caused by prolonged computer use.

o Foggles Sports And Lifestyle Glasses. EyeCity offers Foggles patented optical products for the aviation, hunting and shooting industries through distributors, catalogues, direct advertising, retail stores and the Internet.

o Accessories. EyeCity sells cords, cleaning cloths, eyeglass cases and other related optical accessories. EyeCity intends to increase its optical accessory sales by devoting additional resources to improve the quality, breadth and visual presentation of such merchandise.

Marketing and Promotion - see above "Business Strategy"

Distribution, Fulfillment and Inventory

Currently, EyeCity's websites operate as independent entities and orders are accumulated and processed. Under the present system, once an order is received, EyeCity checks the order against its inventory. Orders are shipped through one of several channels, as selected by the customer, including regular

U.S. mail, United Parcel Service, second-day air or overnight courier, with shipping charges varying by the carrier selected. Orders are shipped the same day that they are placed if the product is in stock. If the customer desires to order the currently out-of-stock product, it is back-ordered and is shipped to the customer as soon as it is available.

EyeCity's success depends, in part, on its ability to provide prompt, accurate and complete service to its customers on a competitive basis, and its ability to purchase and promote products, manage inventory, ship products, manage sales and marketing activities and maintain efficient operations. A significant disruption in EyeCity's management or websites could adversely affect EyeCity's relations with its customers and its ability to manage its operations and would have a material adverse effect on EyeCity's business, financial condition and results of operations. EyeCity's ability to compete effectively and to manage future growth, if any, will require EyeCity to continue to improve its financial and management controls and to expand, train and manage its employee base. EyeCity's failure or inability to accomplish any of these goals could have a material adverse effect on its business, financial condition and results of operations.

EyeCity fulfills orders for prescription eyeglasses through eyeglass grinding laboratories in the United States with whom EyeCity has non-contractual arrangements. When an order is placed with EyeCity, EyeCity provides the laboratory with the prescription information provided by the customer and the frames that have been selected by the customer. Lenses are usually manufactured by the laboratory within two to three business days if the necessary materials are in stock; otherwise, orders are processed as soon as possible after the materials become available.

EyeCity's success depends, in part, on its ability to provide prompt, accurate and complete service to its customers on a competitive basis, and its ability to purchase and promote products, manage inventory, ship products, manage sales and marketing activities and maintain efficient operations. A significant disruption in EyeCity's management or websites could adversely affect EyeCity's relations with its customers and its ability to manage its operations and would have a material adverse effect on EyeCity's business, financial condition and results of operations. EyeCity" ability to compete effectively and to manage future growth, if any, will require EyeCity to continue to improve its financial and management controls and to expand, train and manage its employee base. EyeCity's failure or inability to accomplish any of these goals could have a material adverse effect on its business, financial condition and results of operations.

Competition

While the Company is not aware of any other company selling computer eyeglasses designed to both facilitate the eye's adjustment to variations in ambient light and to reduce glare from VDTs, there are a number of companies which produce tinted computer eyeglasses and sunglasses which are marketed as products that help reduce glare from VDTs. The Company believes that sunglasses are not effective in the VDT environment because they block out too much light. EyeTools will also compete with several other existing products designed to reduce glare from VDTs, such as polarization filters, micromesh filters, color filters and hoods, as well as anti-reflection coatings applied to glare screens and prescription eyeglasses. These products are produced and sold to the consumer by several VDT original equipment manufacturers and by manufacturers of computer enhancement products, ranging from large corporations with significant resources to small privately-owned niche companies. Entry into the

non-prescription eyewear market is not capital intensive and the Company could face competition from large lens and eyeglass manufacturers should they choose to do so, as well as from others.

The Company's EyeTools computer eyedrops will compete with large and well financed manufacturers of ophthalmic eyedrops, which are marketed as solutions which relieve eye discomfort or produce artificial tears to moisten dry eyes. These manufacturers, which include Alcon Laboratories, Inc., Allergan, Inc., Bausch & Lomb and Pfizer, Inc., account for the vast majority of over-the-counter eye drop sales in the United States under such brands as Clear Eyes, Murine Plus and Visine (which are designed to relieve eye discomfort) and Hypotears, Refresh and Tears Naturale (which are designed to relieve dry eyes). While these products have not been specifically marketed to computer users in the past, Bausch & Lomb has recently introduced eyedrops expressly designed for the computer user market. All of such manufacturers have significantly more resources than the Company. The Company will seek to compete with Bausch & Lomb and others who may enter this market by entering into arrangements with computer manufacturers and computer retailers for inclusion of EyeTools computer eyedrops (with its EyeTools computer eyeglasses product) in the computer packaging and by packaging EyeTools computer eyedrops with its EyeTools computer eyeglasses (when EyeTools is otherwise sold) to develop name recognition.

Government Regulation

General. EyeCity is not currently subject to direct federal, state or local regulation or laws or regulations applicable to access to or commerce on the Internet, other than as discussed below and other than regulations applicable to businesses generally. However, due to the increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, freedom of expression, pricing, content, quality of products and services, taxation, advertising, intellectual property rights and information security. The adoption of any such laws or regulations might decrease the rate of growth of Internet use, which in turn could decrease the demand for EyeCity's products or increase its cost of doing business or in some other manner have a material adverse effect on EyeCity's business, results of operations and financial condition. In addition, applicability to the Internet of existing laws governing issues such as regulatory licensing or permit requirements, property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and personal privacy is uncertain. The vast majority of such laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies.

At present, EyeCity does not collect sales or other similar taxes in connection with the sale of its products to consumers located outside the state of New York. From time to time, various states have sought to impose state sales tax collection obligations on out-of-state direct marketing or internet-based companies such as EyeCity. A successful assertion by one or more states that EyeCity should have collected or should be collecting sales taxes on the sale of its products could result in additional costs and administrative expenses to EyeCity and corresponding price increases to its customers, which could adversely affect EyeCity's business, financial condition and results of operations.

Several states have also proposed legislation that would limit the uses of personal user information gathered online or require online services to establish privacy polices. The Federal Trade Commission has also initiated action against at least one online service regarding the manner in which personal information is collected from users and provided to third parties. Changes to existing laws or the passage of new laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace that could reduce demand for EyeCity's products or increase the cost of doing business as a result of litigation costs or increased costs, or could in some other manner have a material adverse effect on EyeCity's business, results of operations and financial condition.

Federal Regulation of Prescription Eyewear. Contact lenses and eyeglasses are separately regulated by the Federal government. Contact lenses are regulated by the Food and Drug Administration as "medical devices." The Food and Drug Administration classifies medical devices as Class I, Class II or Class III and regulates them to varying degrees, with Class I medical devices subject to the least amount of regulation and Class III medical devices subject to the most stringent regulations. Generally, contact lenses are classified as Class II medical devices if intended only for daily wear and as Class III medical devices if intended for extended wear. These regulations generally apply only to manufacturers of contact lenses, and therefore do not directly impact EyeCity. Federal regulations also require the labels on "medical devices" to contain adequate instructions for their safe and proper use. However, there is an exemption from this requirement for medical devices the use of which is not safe except under the supervision of a practitioner licensed by law to direct the use of such device. Devices which fall in this exception must contain as part of their labeling the statement "Caution: Federal law restricts this device to sale by or on the order of ," the blank to be filled in with the word physician or other practitioner authorized by the law of the state in which the practitioner practices to use or order the use of the device. EyeCity believes that this exception is often misconstrued as being a federal requirement that the device be sold only pursuant to a prescription. The Food and Drug Administration considers contact lenses to qualify for this labeling exemption; however, there is no federal law that requires that contact lenses be sold only pursuant to a prescription.

Federal law requires that all dress eyewear (i.e., sunglasses or prescription eyeglasses) be tested for impact resistance. This testing is generally conducted by the lens manufacturer, but eyewear must be retested if a protective or other coating is applied after initial manufacture. So long as a retailer or optician does not manufacture or coat the eyewear, the retailer or optician is entitled to rely on representations from the manufacturer or laboratory, as applicable, as to the completion of all necessary impact resistance tests on any given piece of eyewear. EyeCity's operating practice has been to rely on these types of representations from manufacturers or laboratories, as applicable.

State Regulation of Prescription Eyewear. Because there is no applicable federal law that regulates the distribution of prescription eyewear, the sale and delivery of prescription eyewear to the consumer is subject to state laws and regulations. EyeCity intends to sell prescription eyewear to customers in all 50 states and each sale may be subject to the laws of the state where the customer is located. The laws and regulations governing the sale and delivery of prescription eyewear vary from state to state, but generally can be classified in four categories: (i) laws that require prescription eyewear only be dispensed pursuant to a prescription; (ii) laws that require the dispenser to be licensed by the state as an optician, optometrist, ophthalmologist or other

professional authorized to dispense prescription eyewear; (iii) laws that require prescription eyewear be dispensed only in a face-to-face transaction and
(iv) laws with requirements that are unclear or do not specifically address the sale and delivery of prescription eyewear. Many of the states requiring that prescription eyewear be dispensed in face-to-face meetings or by a person licensed by such state to dispense prescription eyewear also require that prescription eyewear only be dispensed pursuant to a valid prescription.

The laws and regulations in a significant number of states require that prescription eyewear only be sold to a consumer pursuant to a valid prescription. In some states, satisfying this prescription requirement obligates the dispenser only to verify the customer's prescription with the customer's prescriber, while other states specifically require that a written prescription (which, in some states, must be an original) be obtained before providing the prescription eyewear to the customer or that the prescription must have been written within a specified period (e.g., two years) prior to fulfillment. EyeCity's operating practice will be to attempt to obtain a valid prescription from each of its customers or his/her eyecare practitioner. If the customer does not have a copy of his/her prescription, EyeCity will attempt to contact the customer's doctor to obtain a copy of, or verify the customer's prescription. With respect to contact lenses, if EyeCity is unable to obtain a copy of or verify the customer's prescription, EyeCity intends to complete the sale and ship the lenses to the customer based on the prescription information provided by the customer. EyeCity intends to retain copies of the written prescriptions that it will receive and maintain records of its communications with the customer's prescriber.

EyeCity expects that its ability to comply with state laws and regulations requiring a valid prescription will be hampered because EyeCity's customers will often be unable to get a copy of their prescription. EyeCity believes that optometrists, ophthalmologists and other contact lens prescribers have historically refused to release copies of a patient's contact lens prescription to the patient. In addition, such providers have refused to release or verify prescriptions at the request of mail order companies. Federal law requires prescribers to release prescriptions for eyeglasses to a patient, but the issue of whether or not a prescriber must release a contact lens prescription to the patient, or at the patients request, is currently governed by state law. There are approximately 22 states that require contact lens prescribers to release the prescriptions for contact lenses to the patient. However, even in states with a mandatory release law, EyeCity believes that many prescribers will continue to refuse to release prescriptions to their patients or to online or mail order contact lens distributors, including EyeCity.

In addition to requiring a valid prescription, a substantial number of states also require that prescription eyewear only be dispensed by a person licensed to do so under that state's laws. A dispenser may be required to be licensed as an optometrist, ophthalmologist, optician, ophthalmic dispenser or prescription eyewear dispenser, depending on the state in which the customer is located. Also, certain states require that prescriptions only be filled in facilities registered with such states. EyeCity formerly employed an optician at its Duluth, Minnesota facility; however, neither EyeCity nor any of its employees is a licensed or registered dispenser of contact lenses in any of the other states in which EyeCity expects to do business nor are any of EyeCity's facilities registered with any state in connection with the dispensing of prescription eyewear. EyeCity has not initiated the application or registration process in any jurisdiction, but it intends to do so where appropriate. The laws in a number of states effectively prohibit the sale of prescription eyewear through the mail by requiring that a person licensed under that state's law to dispense prescription eyewear be in personal attendance at the place of sale.

Lastly, there are several states in which the laws and regulations do not specifically address the issue of who may dispense prescription eyewear or are unclear with respect to the requirements for dispensing prescription eyewear. For many of the laws described in this paragraph, it is not clear whether some or all of these laws would be applicable to EyeCity or whether the states that have enacted these laws would have jurisdiction over EyeCity.

Any action brought against EyeCity based on its failure to comply with applicable state laws and regulations could result in significant fines or criminal penalties to EyeCity, EyeCity being prohibited from making sales in a particular state and/or EyeCity being required to comply with such laws. Such required compliance could result in: (i) increased costs to EyeCity; (ii) the loss of a substantial portion of customers for whom EyeCity is unable to obtain or verify their prescription; and (iii) the inability to sell to customers at all in a particular state if EyeCity cannot comply with such state's laws. The occurrence of any of the above results could have a material adverse effect on EyeCity's ability to sell prescription eyewear and continue to operate profitably. Furthermore, there can be no assurance that states will not enact or impose laws or regulations that prohibit mail order or online dispensing of prescription eyewear or otherwise impair EyeCity's ability to sell prescription eyewear and continue to operate profitably. EyeCity has not obtained an opinion of counsel with regard to its compliance with applicable state laws and regulations, and information contained herein regarding EyeCity's compliance with applicable state laws and regulations should not be construed as being based on an opinion of counsel.

EyeCity has received a marketing clearance (as a device substantially equivalent to an existing category of ophthalmic device) for its EyeTools(R) line of computer glasses from the Federal Food and Drug Administration following a "Section 510(k) Submission."

Intellectual Property

EyeCity holds rights, title and interest to six U.S. patents for various specialized eyeglasses, as set forth in Table I below.

EyeCity holds rights, title and interest in the United States to three registered trademarks (Beamblockers and Design #1,196,550, filed October 13, 1998; Foggles #1,210,355 filed September 18, 1982 and EyeTools # 2,350,708 filed July 29, 1998), and to certain trademark applications pending in the U.S. Patent and Trademark Office, used or intended to be used in connection with its products and services, or for which it has obtained rights at common-law, based on use in interstate commerce, (see Table II below). EyeCity believes that such marks represent significant value and goodwill to the company in marketing its products and services. EyeCity has entered into confidentiality and invention assignment agreements with its employees and contractors, and nondisclosure agreements with parties with whom it conducts business, in order to limit access to and disclosure of its proprietary information. However, there can be no assurance that these contractual arrangements or the other steps taken by EyeCity will prove sufficient to prevent misappropriation of EyeCity's technology or to deter independent third-party development of similar technologies.

EyeCity has rights in various domain names, certain of which it presently uses to market its services, as set forth below in Table III. EyeCity believes that such domain names represent significant value and goodwill to the company in marketing its products and services. If third parties obtain rights to use similar domain names, these third parties may confuse EyeCity's customers

and cause its customers to inadvertently place orders with these third parties, which could result in lost sales for EyeCity and could damage its brand. Due to the unique nature of domain names, EyeCity may have only limited proprietary rights in its domain names, except to the extent greater protection is granted under trademark or tradename law. As a result, EyeCity cannot assure you that it will be able to retain the use of certain of its domain names, which could have a material adverse affect on EyeCity's business.

The following tables set forth a list of EyeCity's material intellectual properties:

                                                           TABLE I
                                                           -------

                                                           PATENTS
                                                           -------
                 Title                            Issued                   Expiration                  Patent Number
Eyewear With Translucent Superior                9/11/84                    1/11/02                      4,470,673
field of view

Eyewear With Translucent Superior                9/24/85                    9/24/02                      4,542,964
Field of View

Visual Occlusion Apparatus For Pilot             10/6/87                    10/6/04                      4,698,022
Training

Eyewear Having Translucent Superior              7/11/95                    1/10/14                      5,432,568
And Inferior Fields of View

Night Driving Glasses                            6/27/95                    6/27/12                      5,428,409

Translucent Eyewear Lenses and Method            12/12/00                   11/18/18                     6,159,397
Of Manufacture Therefor

Mark Name                    App #                       App. Date
---------                    -----                       ---------

ABEAM                        75/777533                  August 16, 1999
EYECITY                      75/673817                  April 05, 1999
EYECITY.COM                  75/673816                  April 05, 1999
EYETOOLS                     75/459288                  March 30, 1998
ICITY                        75/673815                  April 05, 1999
ICITY.COM                    75/673814                  April 05, 1999
OPTICALSITE                  75/721891                  June 4, 1999
SUNGLASSSITE                 75/777534                  August 16, 1999

TABLE III

DOMAIN NAMES PRESENTLY USED

foggles.com
Ergovision.com
eyecity.com

Employees

As of March 23, 2002, EyeCity employed 0 full-time employees. None of EyeCity's employees are covered by collective bargaining agreements and EyeCity believes that its relations with its employees are good. EyeCity is dependent to a large degree on the services of its management team, Mark H. Levin, its President and Chief Executive Officer. The loss of EyeCity's key executive could have a material adverse effect on EyeCity. EyeCity does not maintain key man insurance coverage on any of its employees.

Investment Considerations Relating To Our Business

In analyzing an investment in the Company, one should carefully consider the investment considerations described below. If any of the matters contemplated by the following investment considerations occur, our business, financial condition or results of operations could be materially adversely affected.

We may not be able to continue operating as a "going concern" without additional capital through public or private offerings.

Investment Considerations Relating To Our Business

As of December 31, 2001, EyeCity had negative working capital of approximately $1,716,000.

The Company has incurred significant losses from operations for the years ended December 31, 1998, 1999, 2000 and 2001 ($1,410,324, $4,130,832, $5,488,329 and $1,168,293, respectively), and there can be no assurance the Company will not continue to incur such losses or will ever generate revenues at levels sufficient to support profitable operations. The Company's working capital deficit was approximately $166,000, $2,092,000, $1,973,000 and $1,716,000 as of December 31, 1998, 1999, 2000 and 2001, respectively.

As of December 31, 2000, EyeCity had negative working capital of approximately $1,973,000. We believe that our currently available funds will be sufficient to meet our anticipated working capital needs through the end of April 2001. Thereafter, we need to raise additional funds. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current stockholders will be reduced, our stockholders may experience additional dilution and such securities may have rights, preferences and privileges senior to those of our Common Stock. There can be no assurance that additional financing will be available on terms favorable to us or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to continue to implement our business plan. This inability could have a material adverse effect on our business, results of operations and financial condition.

Losses.

The Company has incurred significant losses from operations for the years ended December 31, 1998, 1999 and 2000 ($1,410,324, $4,130,832 and $5,488,329, respectively), and there can be no assurance the Company will not continue to incur such losses or will ever generate revenues at levels sufficient to support profitable operations. The Company's working capital deficit was approximately $166,000, $2,092,000 and $1,973,000 as of December 31, 1998, 1999 and 2000, respectively.

Our sales growth will not continue at historical rates.

Since our formation in May 1996, and especially since our acquisitions effected in the second quarter of 1999, we have experienced net sales growth increasing from approximately $26,000 in 1997 to approximately $96,000 in 1998 and approximately $2,633,000 in 1999. Net sales were approximately $2,544,000 in 2000. However, with the disposition in January 2001 of substantially all of its business-to-consumer websites, sales will materially decrease.

There is no assurance that our prior or future acquisitions will have a positive effect on our business, or that we will not experience future unforeseen difficulties in connection with these acquisitions.

If appropriate opportunities present themselves from time to time, we intend to acquire businesses, technologies, services or products that we believe are strategic to our business. There can be no assurance that we will be able to identify, negotiate or finance future acquisitions successfully, or to integrate the acquisitions with our current business. The process of integrating an acquired business, technology, service or product into EyeCity may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of our business. Moreover, there can be no assurance that the anticipated benefits of any acquisition will be realized. Future acquisitions could involve our issuance of additional equity securities which could have a dilutive effect on current stockholders, the incurrence of debt, contingent liabilities and/or

amortization expenses related to goodwill and other intangible assets, which could materially adversely affect our business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or products might require us to obtain additional equity or debt financing, which might not be available on terms favorable to us, or at all, and such financing, if available, might dilute those shares of common stock currently held by our stockholders.

A portion of our sales may not comply with applicable state laws and regulations governing the delivery and sale of prescription eyewear.

The sale and delivery of contact lenses and prescription eyewear are generally governed by state laws and regulations. We sell to customers in all 50 states and each sale may be impacted by the laws of the state where the customer is located. The laws and regulations relating to the delivery and sale of contact lenses and prescription eyewear vary from state to state, but can generally be classified into five categories:

laws that require contact lenses and prescription eyewear to be dispensed only pursuant to a valid prescription;

laws that require the dispenser to be licensed by the state as an optometrist, ophthalmologist or other professional authorized to dispense lenses;

laws that require contact lenses and prescription eyewear be dispensed only in a face-to-face transaction;

laws with requirements that are unclear or do not specifically address the sale and delivery of contact lenses or prescription eyewear; and

laws that we believe place no restrictions on the dispensing of contact lenses or prescription eyewear.

Many of the states requiring that contact lenses and prescription eyewear be dispensed in face-to-face meetings or by a person licensed by such state to dispense contact lenses and prescription eyewear also require that such products only be dispensed pursuant to a valid prescription.

Our operating practice is to attempt to obtain a valid prescription from each customer or his/her eyecare practitioner. If we are unable to obtain a copy of or verify the customer's prescription, it is our practice to ship the product to the customer based on the information that the customer has provided.

Any action brought against us based on our failure to comply with applicable state laws and regulations could result in us being subject to significant fines, being prohibited from making sales in a particular state and/or being required to comply with such laws. Such required compliance could result in:

increased costs to us;

the loss of a substantial portion of our customers for whom we are unable to obtain or verify their prescription; and

the inability to sell to customers at all in a particular state if we cannot comply with such state's laws.

The occurrence of any of the above results could have a material adverse effect on our ability to sell contact lenses and prescription eyewear and to operate profitably. Furthermore, we cannot assure you that states will not enact or impose laws or regulations that prohibit online dispensing of contact lenses and prescription eyewear or otherwise impair our ability to sell contact lenses and prescription eyewear and continue to operate profitably. We have not obtained an opinion of counsel with regard to our compliance with applicable state laws and regulations, and information contained herein regarding our compliance with applicable state laws and regulations should not be construed as being based on an opinion of counsel.

We cannot assure you that third parties will not infringe on our intellectual property rights or that third parties will not claim we infringe on their intellectual property rights.

We regard the protection of our intellectual property rights as critical to our future success and we rely on a combination of copyright, trademark, service mark and trade secret laws and contractual restrictions to establish and protect our intellectual property rights in products and services. We have entered into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information. There can be no assurance that these contractual arrangements or the other steps taken by us will prove sufficient to prevent misappropriation of our technology or to deter independent third-party development of similar technologies.

Third parties have commenced legal proceedings alleging that certain of our tradenames and URL's infringe on the proprietary rights of third parties. See "Legal Proceedings."

We are dependent to a large degree on the services of our management team.

We are dependent to a large degree on the services of our management team, particularly Mark H. Levin, our President and Chief Executive officer, and Mark R. Suroff, our Chief Operating Officer, Executive Vice President, Secretary and Treasurer. In July 1998, Messrs. Levin and Suroff each entered into employment agreements with us which were amended in July 2000. The loss of any of our key executives could have a material adverse effect on us. Our ability to manage our anticipated growth will depend on our ability to identify, hire and retain highly skilled management and technical personnel. Competition for such personnel is intense. As a result, we cannot assure you that we will be successful in attracting and retaining such personnel, and the failure to attract and retain such personnel could have a material adverse effect on our business, financial condition and results of operations.

Our executive officers and directors have the ability to effectively control substantially all actions taken by our stockholders.

As of December 31, 2001, Messrs. Mark H. Levin, Nikos P. Mouyiaris and Ms. Barbara Novick (each directors of the Company) own, in the aggregate, 14,191,000 shares of our common stock and control approximately 17.68% of the aggregate voting power of all outstanding shares. Acting together, these stockholders can effectively control substantially all actions taken by our stockholders, including the election of directors. Such concentration of ownership could also have the effect of delaying, deterring or preventing a change in control of EyeCity that might otherwise be beneficial to stockholders and may also discourage acquisition bids for EyeCity and limit the amount certain investors may be willing to pay for shares of Common Stock.

We conduct our operations through off site facilities.

The Company presently has substantially all of our inventory stored and shipped from distribution centers controlled by third parties. We depend in large part on the orderly operation of the receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of the distribution centers by third parties. We cannot assure you that we have anticipated all of the changing demands that our operations will impose on these receiving and distribution systems or that events beyond our control, such as disruptions in operations due to labor disagreements, shipping problems, fires or natural disasters, will not result in a material adverse effect on our business, results of operations and financial condition.

Increases in the cost of shipping, postage or credit card processing could adversely affect our business.

Orders are shipped through one of several channels, as selected by the customer, including regular U.S. mail, United Parcel Service, second-day air or overnight courier, with shipping charges varying by the carrier selected. We generally invoice the costs of delivery and parcel shipments directly to customers as separate shipping and handling charges. In addition, we receive a majority of our payments from customers using credit cards. Any increases in shipping, postal or credit card processing rates could have an adverse effect on our operating results as we may not be able to effectively pass such increases on to our customers. Similarly, strikes or other service interruptions by these shippers could adversely affect our ability to market or deliver our products on a timely basis.

Our business could be adversely affected if we are required to collect state sales tax on the sale of products.

At present, we do not collect sales or other similar taxes in connection with the sale of our products to consumers located outside the state of New York. From time to time, various states have sought to impose state sales tax collection obligations on out-of-state companies such as ours conducting direct marketing activities. A successful assertion by one or more states that we should have collected or should be collecting sales taxes on the sale of our products could result in additional costs and administrative expenses to us and corresponding price increases to our customers, which could adversely affect our business, financial condition and results of operations.

Legislation limiting the ability of the states to impose taxes on Internet-based transactions recently has been enacted by the United States Congress. However, this legislation, known as the Internet Tax Freedom Act, imposes only a three-year moratorium, which commenced October 1, 1998 and ends on October 21, 2001, on state and local taxes on (1) e-commerce where such taxes are discriminatory and (2) Internet access unless such taxes were generally imposed and actually enforced prior to October 1, 1998. It is possible that the tax moratorium could fail to be renewed prior to October 21, 2001. Failure to renew this legislation would allow various states to impose taxes on Internet-based commerce. The imposition of such taxes could adversely affect our ability to become profitable.

We face an inherent risk of exposure to product liability claims in the event that the use of the products we sell results in personal injury.

We face an inherent risk of exposure to product liability claims in the event that the use of the products we sell results in personal injury. Although

we have not experienced any losses due to product liability claims, we cannot assure you that we will not experience such losses in the future. A successful claim brought against us, or any claim that results in significant adverse publicity against us, could have a material adverse effect on our business, financial condition and results of operations.

Our results of operations may be subject to seasonal fluctuations

We believe that our results of operations are somewhat seasonal in nature. Our limited operating history, however, makes it difficult to fully assess the impact of these seasonal factors or whether or not our business is susceptible to cyclical fluctuations in the U.S. economy. There can be no assurance that seasonal or cyclical variations in our operations will not become more pronounced over time or that they will not materially adversely affect our results of operations in the future.

We intend to expense all advertising costs, including all direct-mail advertising costs, when the advertising first takes place. As a result, quarter-to-quarter comparisons will be impacted by the timing of advertisements and related expenses within and between quarters. Our operating results for any particular quarter may not be indicative of future operating results. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

Investment Considerations Relating To The Internet

Our success is dependent, in part, on continued growth in use of the Internet.

The Internet is new and rapidly evolving. A decrease in the growth of Internet usage would adversely affect our business, results of operations and financial condition. The following factors may inhibit growth in Internet usage, limit visits to our Internet addresses or limit orders placed through our website:

inadequate Internet infrastructure;

security and privacy concerns;

inconsistent quality of service; and

unavailability of low cost, high-speed service.

Our success is dependent, in part, upon the ability of the Internet infrastructure to support increased use. The performance and reliability of the Internet may decline as the number of users increases or the bandwidth requirements of users increase, or if "viruses" and other attacks on the integrity of the Internet infrastructure continue to cause widespread interruptions in service. The Internet has experienced a variety of outages due to damage to portions of its infrastructure. If outages or delays occur frequently in the future, Internet usage, including usage of our website, could grow slowly or decline. Even if the necessary infrastructure or technologies are developed, we may have to spend considerable amounts to adapt our solutions accordingly.

We do not have any property rights in the Internet addresses that we use.

We have obtained the rights to various Internet addresses, including, but not limited to, www.eyecity.com, www.foggles.com, and www.ergovision.com. If third parties obtain rights to use similar addresses, these third parties may

confuse our customers and cause our customers to inadvertently place orders with these third parties, which could result in lost sales for us and could damage our brand. As with telephone numbers, we do not have and cannot acquire any property rights in Internet addresses. As a result, we cannot assure you that we will be able to retain the use of our addresses. The loss of our ability to use our Internet addresses could have a material adverse effect on our business, financial condition and results of operations.

Government regulation and legal uncertainties relating to the Internet and online commerce could negatively impact our business operations.

Online commerce is new and rapidly changing, and federal and state regulation relating to the Internet and online commerce is evolving. Currently, there are few laws or regulations directly applicable to the Internet or online commerce on the Internet, and the laws governing the Internet that exist remain largely unsettled. Due to the increasing popularity of the Internet, it is possible that additional laws and regulations may be enacted with respect to the Internet, covering issues such as user privacy, pricing, taxation, content, copyrights, distribution, antitrust and quality of products and services. The adoption or modification of laws or regulations applicable to the Internet could adversely affect our business operations.

In addition, several telecommunications carriers have requested the Federal Communications Commission to regulate telecommunications over the Internet. Due to the increasing use of the Internet and the burden it has placed on the current telecommunications infrastructure, telephone carriers have requested the FCC to regulate Internet service providers and impose access fees on those providers. If the FCC imposes access fees, the costs of using the Internet could increase dramatically. This could result in the reduced use of the Internet as a medium for commerce, which could adversely affect our business operations.

Investment Considerations Related To Ownership Of EyeCity's Common Stock

The price of our Common Stock has been volatile and could continue to fluctuate in the future.

The market price for shares of our Common Stock has been volatile and could fluctuate substantially based on a number of factors, including quarter-to-quarter variations in our results of operations, news announcements, changes in general market conditions for optical products, regulatory actions, adverse publicity regarding us or the industry in general, changes in financial estimates by securities analysts and other factors. In addition, broad market fluctuations and general economic and political conditions may adversely affect the market price of the Common Stock, regardless of our actual performance.

Privately held shares of our Common Stock will be available for sale in the public markets in the future and may dilute the value of publicly traded shares.

Sales of substantial amounts of our Common Stock (including shares issued upon the exercise of outstanding options) in the public market in the future could adversely affect the market price of our Common Stock. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we think appropriate. As of March 23, 2002, there were 80,227,714 shares of Common Stock outstanding, of which 75,728,484 were restricted securities under the Securities Act of 1933, as amended (the "Securities Act"). As of March 23, 2002, 60,072,181 restricted securities were eligible for sale in the public market. The remaining restricted securities will be eligible for sale from time to time thereafter upon expiration of applicable holding periods under Rule 144 under the Securities

Act. Further, holders of 3,621,000 of these restricted shares have so-called "piggy-back" registration rights which require these shares of Common Stock to be registered for sale in our future registrations, subject to certain restrictions. In addition, as of March 23, 2001, there were outstanding options to purchase 2,958,000 shares of our Common Stock. Substantially, all of the shares issuable upon exercise of such options will be restricted securities under the Securities Act and not eligible for sale in the public markets until the underlying securities are registered on a Form S-8.

You should be aware that we do not anticipate paying cash dividends on our Common Stock.

We intend to retain all future earnings for use in our business and, therefore, do not anticipate paying any cash dividends on the Common Stock in the foreseeable future.

Certain provisions in our charter documents could delay or prevent a change in control.

Certain provisions of our certificate of incorporation and our Bylaws may inhibit changes in control of us not approved by our board of directors. These provisions include the authority of the board of directors to issue without stockholder approval preferred stock with such terms as the board of directors may determine. We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which could have similar effects.

Certain provisions of our charter documents provide for limited personal liability of members of our board of directors.

Our certificate of incorporation and Bylaws contain provisions which reduce the potential liability of members of our board of directors for certain monetary damages and provide for indemnity of directors and other persons. We are unaware of any pending or threatened litigation against us or our directors that would result in any liability for which any of our directors would seek indemnification or similar protection.

Exercise of Warrants.

The price which the Company may receive for the Common Stock issued upon exercise of any outstanding warrants may be less than the market price of the Common Stock at the time such warrants are exercised. For the life of such warrants, the holders thereof are given, at little or no cost, the opportunity to profit from a rise in the market price of the Common Stock, if any, without assuming the risk of ownership. So long as such warrants remain unexercised, the terms under which the Company could obtain additional equity financing may be adversely affected. Moreover, the holders of such warrants may be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favorable than those provided by such warrants. To the extent of any exercise of the warrants, the interests of the Company's shareholders will be diluted proportionately.