AMBASSADOR EYEWEAR GROUP INC, 424B4, 1998-03-20

AMBASSADOR EYEWEAR GROUP INC
424B4, 1998-03-20
PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES

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<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-31343

AMBASSADOR EYEWEAR GROUP, INC.

1,200,000 SHARES OF COMMON STOCK

$6.00 PER SHARE
------------------

Ambassador Eyewear Group, Inc., a Delaware corporation ("Ambassador" or the
"Company"), hereby offers 1,200,000 shares (the "Shares") of its Common Stock,
par value $.01 per share (the "Common Stock"). See "Description of Securities."

Prior to this offering of stock (the "Offering"), there has been no public
market for the Shares and there can be no assurance that an active market will
develop. The Shares will be listed on the Chicago Stock Exchange under the
symbol "AEY". See "Risk Factors--Uncertain Public Market for the Company's
Common Stock."

The offering price of the Shares have been determined by negotiation between
the Company and H.J. Meyers & Co., Inc., and National Securities Corporation,
the representatives (the "Representatives") of the several underwriters (the
"Underwriters") and is not necessarily related to the Company's asset value or
any other established criterion of value. For the method of determining the
public offering price of the Common Stock, see "Risk Factors" and
"Underwriting."
------------------------

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A SUBSTANTIAL
DEGREE OF RISK. PERSONS WHO PURCHASE THESE SECURITIES WILL INCUR IMMEDIATE AND
SUBSTANTIAL DILUTION. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS," AT PAGE 5.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1) PROCEEDS TO COMPANY (2)
<S> <C> <C> <C>
Per Share................... $6.00 $.60 $5.40
Total (3)................... $7,200,000 $720,000 $6,480,000
</TABLE>

(1) Does not reflect additional compensation to be received by the
Representatives in the form of (a) a non-accountable expense allowance of
$216,000 (or $248,400 if the Underwriters' over-allotment option described
in Footnote (3) is exercised in full) and other compensation payable to the
Representatives, and (b) warrants to purchase up to 120,000 shares of Common
Stock at a purchase price of $9.30 per share (that being 155% of the public
offering price) exercisable over a period of four years, commencing one year
from the date of this Prospectus (the "Representatives' Warrants"). In
addition, the Company has agreed to indemnify the Underwriters against
certain civil liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."

(2) Before deducting additional expenses of the Offering payable by the Company,
estimated at $650,000, and the Representative's non-accountable expense
allowance.

(3) The Company has granted the Underwriters an option, exercisable within 45
days, to purchase up to an additional 180,000 shares of Common Stock on the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If the over-allotment option is exercised in full,
the total "Price to Public," "Underwriting Discount" and "Proceeds to
Company" will be $8,280,000, $828,000 and $7,452,000, respectively. See
"Underwriting."

The Shares are being offered on a "firm commitment" basis by the
Underwriters, when, as, and if delivered to and accepted by the Underwriters and
subject to prior sale, withdrawal or cancellation of the offer without notice.
It is expected that delivery of certificates representing the Shares will be
made at the offices of H.J. Meyers & Co., Inc. ("H.J. Meyers"), 1895 Mount Hope
Avenue, Rochester, New York 14620, on or about March 25, 1998.
------------------------

H.J. MEYERS & CO., INC. NATIONAL SECURITIES CORPORATION
----------------

The date of this Prospectus is March 18, 1998
<PAGE>
KATHY IRELAND-TM-
EYEWEAR

* JOHN LENNON IS A REGISTERED TRADEMARK OF THE JOHN LENNON EYEWEAR COLLECTION
USED UNDER LICENSE FROM EAGLE EYEWEAR GROUP, INC. HALSTON IS A REGISTERED
TRADEMARK OF HALSTON INVESTMENTS, LTD. USED UNDER LICENSE GRANTED TO THE
COMPANY THROUGH STYL-RITE OPTICAL MFG. CO. HARVE BENARD IS A REGISTERED
TRADEMARK OF HARVE BENARD LTD. USED UNDER LICENSE GRANTED TO THE COMPANY.
THE "KATHY IRELAND" TRADEMARK, NAME AND LIKENESS ARE OWNED BY KATHY IRELAND
INC. AND ARE USED UNDER LICENSE GRANTED TO THE COMPANY. THE "KENNETH JAY
LANE" TRADEMARK IS OWNED BY KENNETH JAY LANE, INC. AND IS USED UNDER LICENSE
GRANTED TO THE COMPANY. THE "NINTENDO" TRADEMARK IS OWNED BY NINTENDO OF
AMERICA INC. AND IS USED UNDER LICENSE GRANTED TO THE COMPANY. THE
"PLAYSKOOL" TRADEMARK IS OWNED BY PLAYSKOOL, INC. AND IS USED UNDER LICENSE
GRANTED TO THE COMPANY.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
PURCHASES OF THE SHARES TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE SHARES
TO COVER SOME OR ALL OF A SHORT POSITION IN THE SHARES MAINTAINED BY THE
REPRESENTATIVES AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

This Prospectus refers to various registered trademarks that are owned by
parties other than the Company.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR SHOULD
READ THIS PROSPECTUS IN ITS ENTIRETY. EXCEPT AS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITER'S OVER-ALLOTMENT
OPTION IS NOT EXERCISED AND REFLECTS A 1,166.667-FOR-ONE STOCK SPLIT EFFECTED AS
OF JUNE 30, 1997. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER "RISK FACTORS."

THE COMPANY

The Company designs, sources, markets and distributes high quality
prescription eyeglass frames and non-prescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques throughout the United
States. The Company also provides integrated marketing, merchandising materials
and consulting support to assist its customers in the sales of the Company's
eyewear products. The Company distributes its eyewear products to a broad and
substantial customer base, including Wal-Mart, K-Mart, National Vision
Associates and U.S. Vision, as well as to many regional chain stores and local
outlets. The Company has established relationships with various fashion
designers, fashion celebrities and marketing organizations including Kathy
Ireland, Halston, and the John Lennon Estate and highly recognizable consumer
products brands such as Playskool, Nintendo and international jewelry designer
Kenneth Jay Lane. The Company intends to continue to identify and license trade
names and trademarks from various high profile brand sources in an effort to
target and capture additional segments of the eyewear market.

The Company utilizes a diverse team of experienced fashion eyewear designers
to work with fashion houses, celebrities, manufacturers and experienced members
of the optical industry to design eyewear styles that convey fashion, elegance
and sophistication. The Company's eyeglass frames and sunglasses are
manufactured at a variety of independent factories in the United States and
internationally. The Company distributes products through independent sales
representatives situated throughout the world and intends to increase the size
of its dedicated sales force, expand its sales and marketing capabilities and
develop additional alliances with fashion designers and licensors.

In 1996, approximately 60% of Americans used some form of corrective
eyewear. Retail sales of eyewear products totaled $14.6 billion in 1996, up from
$13.8 billion in 1995, representing a 5.8% increase. Furthermore, it is
generally accepted that vision deteriorates with age. As the American population
ages, demand for corrective eyewear is likely to continue to grow. In addition,
the growing medical and public concern with respect to exposure to harmful sun
rays has led to an increase in the sale of sunglasses, reaching $2.95 billion in
1996, representing an 8% increase from 1995.

The Company's business strategy is to become a leading source of eyewear in
the United States and globally. The Company intends to focus on: (i) growth
through the acquisition of businesses and companies that will complement its
business; (ii) the continued development of relationships with distributors
throughout the world; and (iii) expanding its products line by seeking and
negotiating licenses with high fashion and highly recognizable brand names and
licensors. In particular, the Company intends to increase its sales of
sunglasses by substantially expanding its sunglass product line and its sunglass
distribution network. The Company has accomplished a great deal of its growth
through the acquisition of other eyewear distributors that are similarly
situated. In June 1996, the Company acquired substantially all of the assets of
Windsor Optical, Inc. ("Windsor") and in February 1997, the Company acquired
substantially all of the assets of Renaissance Eyewear Group ("Renaissance")
from the secured creditor of Renaissance, thereby substantially increasing its
sales base and available resources. The Company also assumed certain liabilities
of Windsor. Renaissance had total sales of approximately $14 million during its
fiscal year ended October 31, 1996 of which approximately $3.5 million were
sunglass products. Through the acquisition of substantially all of the assets of
Renaissance and the establishment of licensing arrangements and employment
agreements as a result of such acquisition, the Company not only expanded its
sales base, but also its product lines to include additional designer product
lines and sunglasses. The Company intends to continue to seek strategic
acquisitions as a method of broadening its product lines and expanding its
potential market.
<PAGE>
The Company was incorporated in Delaware in May 1995 as Diplomat Ambassador
Inc. when it acquired the business of Chanuk, Inc. ("Chanuk"), a Pennsylvania
corporation. On July 10, 1997, the Company changed its name to Ambassador
Eyewear Group, Inc. The principal executive offices of the Company are located
at 3600 Marshall Lane, Bensalem, Pennsylvania 19020, and its telephone number is
(800) 523-4675.

THE OFFERING

<TABLE>
<S> <C>
Shares of Common Stock Offered............... 1,200,000 shares(1)

Shares of Common Stock to be Outstanding
after the Offering......................... 4,700,000 shares (1)(2)

Use of Proceeds.............................. The Company intends to use the estimated net
proceeds from the Offering of $5,614,000
($6,553,600 if the Underwriter's
over-allotment option is exercised in full)
for reduction of debt and general corporate
purposes, including working capital and to
finance potential acquisitions. See "Use of
Proceeds."

Risk Factors................................. Investment in the Common Stock offered hereby
involves a high degree of risk as well as
immediate and substantial dilution. See "Risk
Factors" and "Dilution".

Chicago Stock Exchange Symbol................ AEY
</TABLE>

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

(1) Assumes no exercise of the Underwriters' over-allotment option with respect
to shares of Common Stock that would be offered by the Company.

(2) Excludes (i) 529,333 shares of Common Stock issuable upon exercise of
outstanding options and warrants, (ii) 120,000 shares of Common Stock
issuable upon exercise of the Representatives' Warrants and (iii) 196,834
shares of Common Stock issuable to two officers, directors and principal
stockholders of the Company who are holders of $1,181,000 principal amount
8% Convertible Promissory Notes that are convertible at the option of the
holders at any time at a per share price equal to the initial public
offering price (the "Convertible Notes"). See "Certain Relationships and
Related Party Transactions" "Description of Securities" and "Underwriting."

2
<PAGE>
SUMMARY FINANCIAL INFORMATION

The following table presents summary historical, pro forma (condensed) and
as adjusted financial data for the Company derived from the Company's financial
statements which have been included elsewhere in this Prospectus. This
information should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and notes thereto each included elsewhere herein.

<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1995 PRO FORMA NINE MONTHS ENDED
(INCEPTION) (CONDENSED) DECEMBER 31,
THROUGH MARCH YEAR ENDED MARCH 31, 1997 ------------------------------
31, 1996 MARCH 31, 1997 (1) 1996 1997
-------------- -------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Net Sales................. $ 11,005 $ 16,455 $ 29,129 $ 11,722 $ 17,429
Gross profit.............. 4,179 7,903 14,038 5,619 9,597
Selling, general and
administrative
expenses................ 4,258 6,145 12,727 4,513 7,865(3)
Income (loss) from
operations.............. (79) 1,758 1,311 1,106 1,732
Net income (loss)......... (299) 680 136 368 489
Basic income (loss) per
share(2)................ (.09) .19 .04 .11 .14
Diluted income (loss) per
share(2)................ $ (.08) $ .18 $ .04 $ .10 $ .13
Weighted average number of
shares outstanding-basic
income (loss) per
share................... 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000
Weighted average number of
shares
outstanding-diluted
income (loss) per
share................... 3,590,000 3,836,000 3,836,000 3,826,000 3,864,000
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
AS ADJUSTED
ACTUAL (4)
--------- --------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital...................................................................... $ 1,580 $ 7,381
Total assets......................................................................... 23,570 24,320
Non-current notes payable--stockholders/officer(5)................................... 1,181 1,181
Long-term debt....................................................................... 370 370
Total liabilities.................................................................... 23,030 18,166
Stockholders' equity................................................................. 540 6,154
</TABLE>

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

(1) The pro forma unaudited condensed statement of operations reflects the
acquisitions of substantially all of the assets of Windsor and Renaissance
and the assumption of certain debt of Windsor as if such transactions had
occurred on April 1, 1996. The information contained herein should be read
in conjunction with the pro forma condensed statement of operations and the
notes thereto, the financial statements of the Company and of Renaissance
and the related notes thereto and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," each included elsewhere
in this Prospectus. The pro forma condensed statement of operations for the
year ended March 31, 1997 gives effect to the operations for each of the
Company, Renaissance and Windsor as if the acquisitions of substantially all
of the assets of Renaissance and Windsor had occurred on April 1, 1996, but
do not reflect the anticipated efficiencies of scale or other cost reduction
measures being implemented by the Company, the success of which cannot be
assured. However, no assurance can be given that any such efficiencies will
be achieved. The pro forma condensed statement of operations is presented
for informational purposes only, and is not necessarily indicative of what
the actual results of operations would have been had the transactions
occurred at April 1, 1996, nor do they purport to indicate the results of
future operations.

(2) See Note B(8) to the Company's Financial Statements.

3
<PAGE>
(3) Includes approximately $766,000 relating to redundant costs of operating
Renaissance in a separate facility through July 1997, consisting primarily
of duplicate overhead and personnel expenses incurred prior to the
consolidation of the Company's operations into one location as well as
actual costs related to the relocation.

(4) Adjusted to reflect the sale of the Shares offered by the Company hereby at
an initial public offering price of $6.00 per Share and the repayment of
$4,720,000 of debt with the proceeds therefrom, including $106,000 loaned to
the Company after December 31, 1997. See "Use of Proceeds" and
"Capitalization."

(5) Represents the Convertible Notes.

4
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND SHOULD NOT BE MADE BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT DECISION,
SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS (INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO), THE
FOLLOWING FACTORS. THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.

SUBSTANTIAL INDEBTEDNESS The Company has, from time to time, experienced
cash flow shortfalls and has been required to borrow substantial amounts from
banks. The Company had total liabilities of approximately $23.0 million at
December 31, 1997, approximately $20.6 million of which are current which
amounts have increased to date. Of such debt, approximately $13.1 million is
payable to CoreStates Bank (the "Bank") pursuant to the Company's revolving line
of credit. During the year ended March 31, 1997, and the nine months ended
December 31, 1997, the Company incurred $738,000 and $972,000, respectively, in
net interest expenses. The revolving line of credit is secured by substantially
all of the assets of the Company. The credit facility is represented by demand
notes payable to the Bank under which the Bank may demand repayment at any time.
The Company intends to reduce outstanding borrowings from the Bank by
approximately $4.1 million from the proceeds of this Offering. The Company
anticipates that even after the proposed repayment of a portion of the Company's
indebtedness from the proceeds of this Offering, the Company's outstanding
indebtedness and ongoing interest expense will continue to be signficant. In
addition, if the Bank were to demand repayment of the entire outstanding
borrowings under the facility, the Company would be required to identify
alternative financing to satisfy its repayment obligation and to continue its
operations. There can be no assurance that any such alternative funding sources
will be available on a commercially reasonable basis if at all. If it is
unsuccessful in so identifying such financing the Company may be required to
cease operations. The loan agreement with the Bank also contains provisions
which restrict certain activities of the Company, including the declaration of
dividends and also provides for various other restrictive covenants, including
the continuing participation of Rudy A. Slucker, the Chairman of the Board of
Directors and Barry Budilov, the President and Chief Executive Officer, in their
current management positions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Financial Statements.

RISKS RELATED TO SUBSTANTIAL INVENTORY AND ACCOUNTS RECEIVABLE BALANCES. As
of December 31, 1997, the Company had an inventory of approximately $11.7
million consisting principally of eyeglass frames and sunglasses held at its
warehouse for distribution and accounts receivable valued at approximately $9.7
million. The market for eyewear and accessories is subject to the risk of
changing consumer trends. In order to be able to promptly fill orders from
distributors, the Company maintains substantial inventories. In the event that a
significant number of models or accessories do not achieve widespread consumer
acceptance, the Company may be required to take significant price markdowns,
which could have a material adverse effect on the Company's business, prospects,
results of operations or financial condition. The Company's balance sheet as of
December 31, 1997 reflects a reserve against accounts receivable of
approximately $1.9 million which includes approximately $365,000 to cover
returns of goods sold. If the reserve is insufficient to cover the Company's
accounts receivable or if returns exceed the amounts reserved for, the Company
would be required to recognize additional expenses in the future to the extent
of such amounts.

CONTINUING LOSSES FROM RENAISSANCE OPERATIONS; POTENTIAL CLAIMS RELATING TO
PURCHASE OF ASSETS. The Company acquired substantially all of the assets of
Renaissance in February 1997 and only recently coordinated the integration of
the assets relating to the business of Renaissance into the business of the
Company. Renaissance has experienced substantial and increased losses in recent
years. For the Renaissance fiscal years ended October 31, 1996 and 1995,
Renaissance had net losses of approximately $5.6 million and $200,000,
respectively. In addition, net sales for Renaissance declined to approximately
$14.1 million in the Renaissance fiscal year 1996 from approximately $17.4
million in the Renaissance fiscal year

5
<PAGE>
1995. No assurance can be given that net sales of products relating to product
lines acquired from Renaissance will not continue to decline. Furthermore, there
can be no assurance that the Company will be able to integrate successfully the
assets of Renaissance into the Company's operations or that Renaissance's
operations will not continue to adversely affect the results of operations of
the Company. In connection with the acquisition of substantially all of the
assets of Renaissance from the secured creditor of Renaissance upon a default by
Renaissance of its loan to such creditor, no liabilities of Renaissance were
contractually assumed by the Company. A number of creditors of Renaissance have
instituted collection actions in court against Renaissance for amounts due to
them from Renaissance. The Company is not a party to any material actions of
this type. To the extent that any creditors of Renaissance seek recourse against
the Company as the purchaser of substantially all of the assets of Renaissance,
the Company may incur substantial expenses in connection with defending any such
actions. Furthermore, to the extent that any such creditors are successful in
asserting any claims against the Company as a successor to the business of
Renaissance or challenge the acquisition from the secured creditor, the Company
could be responsible for substantial liabilities and its business, prospects,
results of operations or financial condition could be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Financial Statements.

RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH, IMPLEMENTATION OF GROWTH
STRATEGY AND POTENTIAL INABILITY TO SUCCESSFULLY INTEGRATE ACQUISITIONS. The
successful implementation of the Company's expansion strategy will be dependent
on, among other things, the continued growth of the designer eyewear and premium
sunglass markets; the Company's ability to develop and introduce new products to
consumers and the marketplace; the Company's ability to identify and obtain
additional licenses for currently popular styles on a timely basis and on
favorable terms; the Company's ability to identify potential acquisition
prospects; the establishment of additional distribution arrangements; the hiring
and retaining of additional marketing, creative and other personnel; and the
successful management of such growth (including monitoring operations,
controlling costs and maintaining effective quality, inventory and service
controls). As the Company continues to grow, there will be additional demands on
the Company's financial, technical and administrative resources. The failure to
maintain and improve such resources or the occurrence of unexpected difficulties
relating to the Company's expansion strategy, could have a material adverse
effect on the Company's business, prospects, results of operations or financial
condition. There can be no assurance that the Company will be able to implement
successfully its business strategy or otherwise expand its operations. The
complete integration and consolidation into the Company of the product lines
acquired upon the acquisition of the assets of Renaissance as well as any future
corporate acquisitions and new product licensing arrangements will require
substantial management, financial and other resources, and could pose
significant pressure on the financial condition and operating results of the
Company. There can be no assurance that the Company's resources will be
sufficient to accomplish such integration, or that the Company will not
experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisitions and licensing arrangements
will enhance its competitive position and business prospects, there can be no
assurance that such benefits will be realized or that the combination of the
Company with other companies will be successful. Although the Company regularly
evaluates possible acquisition opportunities, the Company is not a party to any
agreements, commitments, arrangements or understanding with respect to any such
acquisition and there can be no assurance that any such acquisitions will be
effected. See "Use of Proceeds" and "Business--Strategy."

DEPENDENCE ON MAJOR CUSTOMERS. The Company's sales to its five largest
customers represented approximately 62% of its sales in fiscal 1996,
approximately 51% in fiscal 1997 (30% on a pro forma basis during fiscal 1997
giving effect to the acquisitions of substantially all of the assets of Windsor
and Renaissance) and approximately 48% during the nine months ended December 31,
1997. Sales to the Company's top customer, Wal-Mart, accounted for approximately
51% of the Company's sales in fiscal 1996, approximately 35% of its sales in
fiscal 1997 (20% on a pro forma basis during fiscal 1997 giving effect to the
acquisitions of substantially all of the assets of Windsor and Renaissance) and
approximately 37% for the nine months ended December 31, 1997. The Company
anticipates that sales to its top five

6
<PAGE>
customers will continue to account for a significant percentage of its sales.
The Company has no long term commitments or contracts with any of its customers.
The loss or decreased sales from one or more of these customers and in
particular, Wal-Mart, would have a material adverse effect on the Company's
business, prospects, results of operations or financial condition. Furthermore,
the inability of any of the Company's customers to satisfy any of their
obligations to the Company at any time or on a timely basis could have a
material adverse effect on the business, prospects, results of operations or
financial condition of the Company. See "Business--Marketing and Advertising."

DEPENDENCE ON LICENSES AND SIGNIFICANT CONTINUING ROYALTY OBLIGATIONS AND
ACQUISITION COSTS. Sales of eyewear under license agreements represented
approximately 35% and 30% of the pro forma sales of the Company and Renaissance
combined sales for fiscal 1996 and 1997, respectively, and 36% for the nine
months ended December 31, 1997. The Company's license agreements generally
require the Company to satisfy minimum purchase requirements or to make annual
royalty payments and advertising expenditures and maintain quality control and
retail distribution commensurate with the licensor's image. Accordingly, certain
licensors are entitled to receive payment from the Company whether or not
specified minimum levels of annual sales for licensed products are met. For the
years ending March 31, 1998 and 1999, the annual aggregate royalty obligations
of the Company under current license agreements will be no less than
approximately $1 million and $700,000, respectively, even if the Company were to
generate no sales under the agreements. The license agreements also generally
provide that the licensor has the right to approve products sold pursuant to the
license and to terminate the license if the Company does not satisfy its
contractual obligations in any material respect. Management believes that the
value of its licenses depends to a great extent upon the Company's ability to
anticipate, gauge and respond to changing consumer tastes and the popularity of
certain fashion trends and styles. The agreements licensing to the Company the
rights to use certain trademarks and trade names will terminate on various dates
through the year 2000. The Company's successful efforts in developing licensed
products and other factors may result in increased royalty requirements to the
Company for renewals. Although the Company has no reason to believe it will not
be able to renew its licenses upon their respective expiration dates on
favorable terms, the loss of one or more of the licenses, or the decline in
popularity of certain trade names, could have a material adverse effect on the
Company's business, prospects, results of operations or financial condition. The
Company's obligations under employment agreements and consulting agreements with
members of management and its Board of Directors aggregate approximately
$500,000 for the year ending March 31, 1998. In addition, payments under notes,
non-competition and other agreements relating to the acquisition of
substantially all of the assets of Chanuk, Windsor and Renaissance, will
aggregate approximately an additional $375,000 for each of the years ending
March 31, 1998 and March 31, 1999. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
attached hereto.

DEPENDENCE ON OFFERING PROCEEDS TO IMPLEMENT PROPOSED EXPANSION; NEED FOR
ADDITIONAL FINANCING. The Company intends to continue to expand by identifying
and acquiring the businesses or assets of companies with product lines and
distribution channels that are complementary to those of the Company. The
Company is dependent on the proceeds of this Offering or other financing to
implement its proposed expansion. Although the Company anticipates that the
proceeds of this Offering with the continuing availability of funds under its
line of credit will be sufficient to meet its cash needs for at least the next
12 months, in the event that the Company's plans change, its assumptions change
or prove to be inaccurate or the proceeds of this Offering and future cash flow
proves to be insufficient to fund the Company's expansion plans (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing sooner than anticipated
or curtail its expansion activities. The Company may determine, depending upon
the opportunities available to it, to seek additional debt or equity financing
to fund the cost of continuing expansion. To the extent the Company finances an
acquisition with a combination of cash and equity securities, any such issuance
of equity securities would result in dilution to the interests of the Company's
stockholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities in connection with any acquisition, the Company will
be subject to risks associated with incurring substantial indebtedness,
including the risks that interest

7
<PAGE>
rates may fluctuate and cash flow may be insufficient to pay principal and
interest on any such indebtedness. Other than its Bank line of credit, the
Company has no current arrangements with respect to, or sources of, additional
financing, and it is not anticipated that existing stockholders will provide any
portion of the Company's future financing requirements. There can be no
assurance that additional financing will be available to the Company on
reasonable terms, if at all. The Company has agreed that for a period of 18
months from the date of this Prospectus the Company will not sell or otherwise
dispose of any securities without the prior written consent of the
Respresentatives, which consent shall not be unreasonably withheld, with the
exception of shares of Common Stock issued pursuant to the exercise of options,
warrants or other convertible securities outstanding prior to the date of this
Prospectus. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain Relationships and
Related Party Transactions."

CONSUMER PREFERENCES AND INDUSTRY TRENDS. The fashion eyewear industry is
characterized by the frequent introduction of new products and services, and is
subject to changing consumer preferences and industry trends, which may
adversely affect the Company's ability to plan for future design, development
and marketing of its products and services. The Company's success will depend on
the Company's ability to anticipate and respond to these and other factors
affecting the industry. Moreover, if a downturn occurs in the economy, the
fashion industry including fashion eyewear, may be particularly vulnerable.
There can be no assurance that the Company will be able to anticipate and
respond quickly and effectively to changing consumer preferences and industry
trends or that competitors will not develop and commercialize new products that
render the Company's products and services obsolete or less marketable. See
"Business-- Industry Background" and "--Competition."

DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS. The Company is currently
dependent on a limited number of third-party manufacturers for its entire supply
of eyewear. The Company does not have agreements with any of such manufacturers
and purchases eyewear pursuant to purchase orders placed from time to time in
the ordinary course of business. The Company is substantially dependent on the
ability of its manufacturers to provide adequate inventories of quality eyewear
on a timely basis and on favorable terms. The Company's manufacturers also
produce eyewear for certain of the Company's competitors, as well as other large
customers, and there can be no assurance that such manufacturers will have
sufficient production capacity to satisfy the Company's inventory or scheduling
requirements during any period of sustained demand, or that the Company will not
be subject to the risk of price fluctuations and periodic delays. Although the
Company believes that its relationship with its manufacturers is satisfactory
and that numerous alternative sources for its eyewear are currently available,
the loss of services of such manufacturers or substantial price increases
imposed by such manufacturers, in the absence of readily available alternative
sources of supply, would have a material adverse effect on the Company's
business, prospects, results of operations or financial condition. See
"Business--Sources of Supply."

RISKS RELATING TO THE USE OF FOREIGN SUPPLIERS. The Company imports
substantially all of its frames from foreign suppliers located in Taiwan, Korea,
Japan, Germany and Italy, and, therefore, its prices for and supply of those
frames may be adversely affected by changing economic conditions
internationally. The Company may also be subject to other risks associated with
its international relationships, including tariff regulations and requirements
for export licenses, unexpected changes in regulatory requirements, potentially
adverse tax consequences, economic and political instability, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. In addition, the laws of certain countries may not protect the
Company's products and intellectual property rights to the same extent as do the
laws of the United States. There can be no assurance that such factors will not
have a material adverse effect on the Company's future sales or licenses and,
consequently, on the Company's business, prospects, results of operations or
financial condition as a whole.

USE OF PROCEEDS TO REPAY DEBT; BROAD DISCRETION IN APPLICATION OF PROCEEDS;
BENEFITS TO INSIDERS. Approximately $4,144,000 (74% of the estimated net
proceeds of this Offering) will be used for the repayment of bank indebtedness
by reducing the Company's debt under its line of credit and $894,000

8
<PAGE>
(16%) of the estimated net proceeds of this offering have been allocated to
working capital and general corporate purposes. Accordingly, the Company will
have broad discretion as to the application of the proceeds of the offering and
capital available under its revolving line of credit. Additionally,
approximately $576,000 (10%) of the proceeds will be used to repay indebtedness
to Rudy A. Slucker, the Company's Chairman of the Board of Directors, incurred
by the Company from February 1997 to February 1998 to assist the Company in
financing its costs relating to the acquisition of substantially all of the
assets of Renaissance and the integration of the business of Renaissance into
the business of the Company. The Company is also indebted to Mr. Slucker and
Barry Budilov, the President and Chief Executive Officer of the Company, to the
extent of approximately $1.2 million under the Convertible Notes, which bear
interest at the rate of 8% per annum. In addition, since Mr. Slucker and Mr.
Budilov have each guaranteed up to $1.1 million of such debt, the likelihood of
a default and a call on their guarantee is reduced to the extent of the
reduction in the amount of the debt. In addition, Messers. Slucker and Budilov
have agreed to increase their personal guarantees by $375,000 each if the
Company fails to complete this public offering by February 20, 1998.
Accordingly, upon the completion of this Offering, the personal obligations of
Messrs. Slucker and Budilov will be reduced further. Finally, the Company's
obligations under employment agreements and consulting agreements with members
of management and its Board of Directors, including Messrs. Slucker and Budilov,
aggregate approximately $470,000 (8%) over the next 12 months. See "Use of
Proceeds."

HIGHLY COMPETITIVE MARKET. The prescription and non-prescription eyewear
markets are highly competitive. The major competitive factors in the eyewear
market include, but are not limited to, fashion trends, brand recognition,
method of distribution, the number and range of products offered, an increase in
contact lens users and the increase acceptance of laser surgery as a viable
method to correct or assist poor vision. The Company competes with a number of
established companies, including Luxotica, Safilo, Marchon, and Bausch & Lomb,
which collectively control a substantial portion of the premium market segment,
other large companies and with several companies having smaller but significant
market shares. Several of these companies have substantially greater resources
and better name recognition than the Company and sell their products through
broader and more diverse distribution channels. In addition, several of these
competitors have their own manufacturing facilities. The Company could also face
competition from new competitors, including established branded consumer
products companies, such as Nike, Inc., that also have greater financial and
other resources than the Company. In addition, as the Company expands
internationally, it will face substantial competition from companies that have
already established their products in international markets and consequently
have significantly more experience in those markets than the Company. In
addition, to retain and increase its market share, the Company must continue to
be competitive in the areas of quality and performance, technology, obtaining
attractive licenses, customer service and price, of which there can be no
assurance. See "Business--Competition."

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS, TRADEMARKS AND TRADE NAMES.
Although a substantial portion of the Company's product lines are designed to be
"traditional" designs, that are not necessarily subject to changing fashion
trends, the eyewear industry is nevertheless subject to continuing broader as
well as often subtle shifts in consumer taste and preferences. The Company
offers in excess of 700 eyewear styles at any given time and may introduce up to
100 new styles in any given year. The sustainability of the Company's growth
will depend, in part, on its continued ability to develop, identify and
introduce innovative designs and products and on the acceptance of such designs
and products by consumers. Innovative designs are often not successful and
successful product designs can be displaced by other product designs introduced
by competitors that shift market preferences in their favor. Sunglasses are
particularly subject to shifting consumer tastes and may have relatively short
life cycles, thereby requiring the Company to introduce new products more
frequently. In addition, competitors may follow the Company's introduction of
successful products with similar product offerings, thereby decreasing the
Company's market share. If the Company misjudges the market for a particular
product, particularly its sunwear line of products, the Company's sales may be
adversely affected and it may be faced with excess inventories and there may be
an adverse effect on the Company's business, prospects, results of operations

9
<PAGE>
or financial condition. As a result of these and other factors, there can be no
assurance that the Company will successfully maintain or increase its market
share. In addition, the Company owns and has obtained licenses to various
domestic and international trademarks related to its products and business.
These licenses expire at various times through the year 2000. The loss of one or
more of the trademarks could have a material adverse effect on the Company's
business, prospects, results of operations or financial condition. Further, if
the Company had to defend against any litigation proceedings, suits or claims
relating to its intellectual property rights or to its intellectual property or
institute any action to protect such rights, the Company's involvement in such
action could have a material adverse effect on the Company's business,
prospects, results of operations or financial condition.

DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. The Company is dependent on
certain of its executive officers, including Barry Budilov, the Company's
President and Chief Executive Officer, and Rudy A. Slucker, the Company's
Chairman of the Board. The Company intends to obtain and become the beneficiary
of key person life insurance policies in the face amount of $1,000,000 on the
lives of each of Mr. Budilov and Mr. Slucker. The loss of the services of such
persons, or an inability to attract, retain and motivate additional highly
skilled management personnel, could materially adversely effect the Company's
business, prospects, results of operations or financial condition. There can be
no assurance that the Company will be able to retain its existing personnel or
attract and retain additional qualified employees. Mr. Slucker is employed on a
full time basis by another corporation and provides limited amounts of
consulting services to the Company's business, on an as needed basis. See
"Management."

SEASONALITY. The Company believes that its business is subject to seasonal
trends, resulting in lower sales of prescription eyewear during its third
quarter (the three months ended December 31) and higher sales of sunglass
products during the spring. Accordingly, sales and results of operations may
fluctuate from month to month throughout the year and quarterly results may not
always be indicative of the entire year.

CONTROL OF THE COMPANY BY OFFICERS AND DIRECTORS. Immediately following
this Offering, Rudy A. Slucker and Barry Budilov will beneficially own an
aggregate of approximately 77% of the outstanding shares of the Company's Common
Stock. As a result, such persons, acting together, have the ability to exercise
control over all matters requiring stockholder approval. In addition, the
Company's revolving line of credit includes a provision that requires the
continuing involvement and control of the Company by current management as a
condition to the continuing availability of the revolving line of credit. The
concentration of ownership could delay or prevent a change in control of the
Company. See "Management" and "Principal Stockholders."

DILUTION. Purchasers of the Shares offered hereby will suffer an immediate
and substantial dilution of $4.71 per Share (78.5%) from the initial public
offering price. In addition, investors purchasing Shares in the Offering will
incur additional dilution to the extent that stock options are exercised. See
"Dilution."

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 4,700,000 shares of Common Stock outstanding, as well as
options and warrants to purchase an additional 649,333 shares of Common Stock
(including the Representatives' Warrants). An additional 196,834 shares of
Common Stock are issuable upon the conversion of the Convertible Notes. The
1,200,000 Shares sold in the Offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"). The 3,500,000 shares of Common Stock owned by existing
stockholders are deemed to be "restricted securities," as that term is defined
in Rule 144 promulgated under the Securities Act, in that such shares were
issued in a private transaction not involving a public offering. All of the
3,500,000 shares of Common Stock held by existing stockholders will be eligible
for sale under Rule 144 ninety days after the Offering. The Company and each of
the Company's directors, officers and shareholders have agreed not to offer,
assign, issue, sell, hypothecate or otherwise dispose of any shares of Common
Stock or any securities exercisable for or convertible into shares of Common
Stock, other than with respect to up to 300,000 shares of Common Stock, for a
period of 18 months after the date of this Prospectus without the prior, written
consent of the Representatives. No prediction can be made as to the effect, if
any, that sales of securities or the availability of securities for sale will
have on the market

10
<PAGE>
price of the Shares prevailing from time to time. The holders of the
Representatives' Warrants will have certain demand and "piggyback" registration
rights with respect to such warrants and the shares of Common Stock underlying
such warrants commencing one year after the date hereof. If the Underwriter
should exercise their registration rights to effect a distribution of the
Representatives' Warrants or the Warrant Shares, the Representatives, prior to
and during such distribution, will be unable to make a market in the Company's
securities, which may therefore be limited. If the Representatives cease making
a market in the Common Stock, the Company could lose the ability to list the
Common Stock on the Chicago Stock Exchange because of such market's requirement
of at least two market makers, the market and market prices for the Common Stock
may be materially adversely affected, and holders thereof may be unable to sell
or otherwise dispose of shares of Common Stock. See "Shares Eligible For Future
Sale" and "Underwriting."

NO PRIOR MARKET; DETERMINATION OF OFFERING PRICE. Prior to the Offering,
there has been no public market for the Company's Common Stock. Although the
Common Stock has been approved for listing on the Chicago Stock Exchange, there
can be no assurance that an active public market will develop. The initial
public offering price has been determined by negotiation between the Company and
the Representatives. There can be no assurance that the initial public offering
price will correspond to the price at which the Common Stock will trade in the
public after the Offering or that an active trading market for the Common Stock
will develop and continue after the Offering. See "Underwriting."

DIFFICULTY OF TRADING "PENNY STOCKS." If the Common Stock is no longer
listed on the Chicago Stock Exchange and the bid price of the Company's Common
Stock falls below $5.00 per share, and under certain other circumstances, the
Company's Common Stock may be subject to rules that impose additional sales
practice and market making requirements on broker-dealers who sell or make a
market in lower-priced securities which constitute "penny stocks". The
additional requirements will generally apply if sales are made to persons other
than established customers (as defined in such rules) and accredited investors
(generally, institutions and, for individuals, an investor with assets in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 together with such
investors' spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchaser and must have
received the purchaser's written consent to the transaction prior to the
purchase. Consequently, many broker-dealers may be unwilling to sell or make a
market in the Company's securities because of the added disclosure requirements,
thereby making it more difficult for purchasers in this Offering to resell the
Common Stock in the secondary market.

UNCERTAIN PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK. Although the Common
Stock has been approved for listing on the Chicago Stock Exchange, there can be
no assurance that a market for the Common Stock will develop or be sustained.
The investment community could show little or no interest in the Company in the
future. As a result, purchasers of the Company's securities may have difficulty
in selling such securities should they desire to do so. In the event the
Company's Common Stock is delisted from the Chicago Stock Exchange, the Company
intends to use its best efforts to list its Common Stock on the OTC Bulletin
Board Service. It is substantially more difficult for investors to dispose of
securities or to obtain accurate quotations as to securities in the OTC Bulletin
Board Service.

POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
may be highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of new products by the Company or its competitors,
developments with respect to trademarks or proprietary rights, changes in stock
market analyst recommendations regarding the Company, other companies selling
similar products and general market conditions may have a significant effect on
the market price of the Common Stock. In addition, the stock market has
periodically experienced significant price and volume fluctuations unrelated to
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Underwriting."

11
<PAGE>
ABSENCE OF DIVIDENDS. The Company's current policy is to retain earnings
for use in its business and, accordingly, the Company does not intend to pay
cash dividends on its Shares in the foreseeable future. Furthermore, the
Company's credit facility with CoreStates Bank restricts the payment of cash
dividends while amounts are outstanding under the facility. See "Dividend
Policy."

ELIMINATION OF LIABILITY FOR DIRECTORS. The Company's Articles of
Incorporation limit the liability of a director of the Company to the Company
and its stockholders for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the Delaware General Corporate Law ("DGCL"). The
DGCL permits elimination of a director's personal liability for monetary damages
for breach of fiduciary duty, except: (i) for breach of the director's duty of
loyalty to a company or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(iii) for acts specified in Section 174, DGCL; and (iv) for transactions in
which the director directly or indirectly derived an improper personal benefit.
As a result of such provisions, the rights of Company stockholders to recover
monetary damages from directors of the Company for certain breaches of
directors' fiduciary duties may be significantly limited. See
"Management--Indemnification of Directors and Executive Officers and Limitation
of Liability."

BLANK CHECK PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS; ISSUANCE OF
SERIES A PREFERRED STOCK. The Company's Articles of Incorporation authorizes
the Board of Directors to issue up to 1,000,000 shares of Preferred Stock, $.01
par value per share. The Preferred Stock may be issued in one or more series,
the terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may include, among other
things, voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights, and sinking fund provisions. The issuance of any such preferred stock
could materially adversely affect the rights of holders of Common Stock and,
therefore, could reduce the value of the Common Stock. In addition, specific
rights granted to future holders of preferred stock could be used to restrict
the Company's ability to merge with, or sell its assets to a third party,
thereby preserving control of the Company's existing stockholders. The issuance
of the preferred stock may, in some circumstances, deter or discourage takeover
attempts and other changes in control of the Company, including takeovers and
changes in control which some holders of the Common Stock may deem to be in
their best interests and in the best interest of the Company, by making it more
difficult for a person who has gained a substantial equity interest in the
Company to obtain voting control or to exercise control effectively thereby
preserving control of the Company by the current controlling stockholders. See
"Description of Securities."

INVESTIGATIONS OF H.J. MEYERS. On July 16, 1996, the National Association
of Securities Dealers, Inc. issued a Notice of Acceptance, Waiver and Consent
(the "AWC") whereby H.J. Meyers was censured and ordered to pay fines and
restitution to retail customers in the amount of $250,000 and approximately
$1.025 million, respectively. The AWC was issued in connection with claims by
the NASD that H.J. Meyers charged excessive markups and markdowns in connection
with the trading of four securities originally underwritten by H.J. Meyers. The
activities in question occurred between December 1990 and October 1993. H.J.
Meyers has informed the Company that the fines and refunds will not have a
material adverse effect on H.J. Meyers' operations and H.J. Meyers has effected
remedial measures to help ensure that the subject conduct does not recur.
Additionally, the Company is aware that the Chicago office of the Securities and
Exchange Commission ("SEC") is conducting a private, nonpublic investigation of
H.J. Meyers pursuant to a Formal Order of Investigation issued by the SEC as to
whether H.J. Meyers may have violated applicable securities laws and the rules
and regulations thereunder, with respect to sales of certain securities.
Although any limitation on the ability of H.J. Meyers to make a market in the
Company's Common Stock could adversely affect the liquidity or trading price of
the Company's Common Stock, which could have a material adverse affect on the
market price of the Company's Common Stock, the Company is currently unable to
assess the potential impact of the SEC's investigation on H.J. Meyers' ability
to make a market in the Company's Common Stock after the Offering or on trading
in the Company's securities. H.J. Meyers has advised the Company that it
believes it has materially complied with the above-mentioned securities laws and
rules and regulations thereunder and that it has and will continue to cooperate
fully with the SEC with respect to such investigation.

12
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered by the
Company hereby are estimated to be $5,614,000 (or $6,553,600 if the Underwriters
over-allotment option is exercised in full), based on an assumed initial public
offering price of $6.00 per share and after deducting the estimated underwriting
discounts and offering expenses payable by the Company. The Company intends to
apply the proceeds of the Offering substantially as follows:

<TABLE>
<CAPTION>
USE OF PROCEEDS AMOUNT PERCENTAGE
- ---------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Repayment of indebtedness....................................... $ 4,720,000 84%
General corporate purposes...................................... 894,000 16%
Total......................................................... $ 5,614,000
</TABLE>

The Company intends to use the net proceeds from the Offering over the next
12 months for reduction of approximately $4,144,000 (74% of net proceeds) of the
Company's bank debt and repayment of approximately $576,000 (10% of net
proceeds) of indebtedness to Rudy A. Slucker, the Chairman of the Board of
Directors of the Company; and general corporate purposes, including for working
capital and to finance potential acquisitions ($894,000, 16% of net proceeds).
The Company intends to use the funds available upon the partial repayment of its
line of credit for the expansion of sales and marketing activities, for the
purchase of inventory and for general corporate purposes. A portion of the
Company's working capital will be used to satisfy the Company's obligations
under employment agreements and consulting agreements with members of management
and its Board of Directors which aggregate approximately $470,000 (8% of net
proceeds) over the next 12 months. In addition the Company will make interest
payments of an aggregate of approximately $94,400 over the next 12 months on the
Convertible Notes to Mr. Slucker and Barry Budilov, the Company's President. Any
proceeds from the exercise of the Underwriters' over-allotment option will be
added to working capital and may be used to finance potential acquisitions.

The debt that is being repaid from the proceeds of this Offering is
comprised of (i) $4,144,000 of principal, interest and fees to CoreStates Bank
which reflects a portion of the amounts outstanding to such bank and (ii)
$576,000 to Rudy A. Slucker. The CoreStates Bank debt is pursuant to a demand
note that bears interest at an annual rate equal to the prime rate (8.5% at
December 31, 1997). The debt to Mr. Slucker was incurred between February 4,
1997 and February 1, 1998 to assist the Company in financing its costs relating
to the acquisition of substantially all of the assets of Renaissance and the
integration of the business of Renaissance into the Company and for working
capital. The loan from Mr. Slucker is repayable upon demand and bears interest
at the rate of 8% per annum. The cash used by the Company from its loan
facilities has been used by the Company to fund working capital, including,
among other things, to pay salaries of management to pay for costs associated
with moving the Company's facilities, and to pay interest to the Company's
principal stockholders on outstanding debt. Interest on this indebtedness will
continue to be paid from the Company's working capital to the extent of
approximately $95,000 per year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain Relationships and
Related Party Transactions."

The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based upon the Company's currently
contemplated operations, business plans, as well as current economic and
industry conditions, and is subject to reapportionment among the categories
listed above or to new categories in response to, among other things, changes in
the Company's plans, unanticipated future revenues and expenditures, and
unanticipated industry conditions. The Company's management will maintain broad
discretion as to the allocation of proceeds. The amount and timing of
expenditures will vary depending on a number of factors, including, without
limitation, the results of operations and changing industry conditions. To the
extent deemed appropriate by management, the Company may

13
<PAGE>
acquire fully developed products or businesses that are complementary to the
Company's operations and which, in the opinion of management, facilitate the
growth of the Company and enhance the market penetration or reputation of its
products. To the extent that the Company identifies any such opportunities, an
acquisition may involve the expenditure of significant cash or the issuance of
Common Stock. Any expenditure of cash will reduce the amount of cash available
for working capital or marketing and advertising activities. Although the
Company has been engaged in discussions with a number of potential candidates,
the Company currently has no commitments, understandings or arrangements with
respect to any such acquisition. The Company's current corporate policy would
not prohibit any such transactions between the Company and any business or
company in which management or any affiliate or associate of any member of
management have an ownership interest, but would require that the terms of any
such transaction be on terms no less favorable to the Company as those that
could be obtained from an independent third party.

Pending application of the net proceeds, the Company intends to invest the
net proceeds in short-term investment grade, interest-bearing securities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and presently does not intend to do so in the foreseeable future.
Management intends to retain all available earnings to finance and expand its
business. Declaration of dividends in the future will be at the discretion of
the Board of Directors and will depend on the Company's future earnings, capital
requirements, financial position, contractual restrictions, and other factors
deemed relevant by the Company's Board of Directors. The Company's loan
agreement with CoreStates Bank contains restrictions on the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

14
<PAGE>
CAPITALIZATION

The following table sets forth the actual short-term debt and capitalization
of the Company at December 31, 1997 and as adjusted to give effect to the sale
of the Shares offered hereby at an initial public offering price of $6.00 per
Share and the repayment of certain indebtedness with the proceeds therefrom. See
"Use of Proceeds" and "Capitalization." This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and notes thereto appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(1)
---------- -------------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Short-term debt........................................................................ $ 13,771 $ 9,157
---------- -------------
---------- -------------
Long-term debt......................................................................... 370 370
Non-current notes payable--stockholders/officer(2)..................................... 1,181 1,181
Stockholders' equity:
Preferred Stock, $.01 per value; 1,000,000 shares authorized, none issued............ -- --
Common stock, $.01 par value; 20,000,000 shares authorized; 3,500,000 shares 35
outstanding 4,700,000 shares issued and outstanding
as adjusted (3).................................................................... 47
Additional paid-in capital........................................................... 187 5,789
Unearned portion of compensatory stock options....................................... (156) (156)
Retained earnings.................................................................... 474 474
---------- -------------
Total stockholders' equity......................................................... 540 6,154
---------- -------------
Total capitalization............................................................. $ 2,091 $ 7,705
---------- -------------
---------- -------------
</TABLE>

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

(1) Includes the repayment of $4,144,000 owed by the Company to CoreStates Bank
pursuant to a revolving line of credit agreement and $576,000 of
indebtedness ($106,000 of which was borrowed after December 31, 1997), to
Rudy A. Slucker, the Chairman of the Board of Directors of the Company.

(2) Represents the Convertible Notes.

(3) Excludes (i) 529,333 shares of Common Stock issuable upon exercise of
outstanding options; (ii) 120,000 shares of Common Stock issuable upon
exercise of the Representatives' Warrants and (iii) 196,834 shares of Common
Stock issuable pursuant to the Convertible Notes. See "Certain Relationships
and Related Party Transactions" and "Underwriting."

15
<PAGE>
DILUTION

At December 31, 1997, the net tangible book value of the Company was
approximately $23,000, or $.01 per Share. "Net tangible book value per share"
represents the amount of total tangible assets of the Company less total
liabilities of the Company, divided by the number of shares of Common Stock then
outstanding. "Dilution per share" represents the difference between the price to
be paid by new investors and the net tangible book value per share of Common
Stock outstanding after the Offering. After giving effect to the receipt of the
net proceeds from the sale by the Company of the Shares offered hereby at an
initial public offering price of $6.00 per share, the net tangible book value of
the Company at December 31, 1997 would have been approximately $6,074,000, or
$1.29 per Share. This represents an immediate increase in net tangible book
value of $1.28 per share to existing stockholders and an immediate dilution of
$4.71 per share of Common Stock to new stockholders purchasing Shares offered
hereby at an assumed initial offering price of $6.00 per Share, as illustrated
in the following table:

<TABLE>
<S> <C> <C>
Initial public offering price................................. $ 6.00
Net tangible book value per share at December 31, 1997...... $ .01
Increase per share attributable to sale of Shares in the
Offering.................................................. $ 1.28
---------
Net tangible book value per share after the Offering.......... $ 1.29
---------
Dilution to new investors this Offering....................... $ 4.71
---------
---------
</TABLE>

The following table summarizes on a pro forma basis as of December 31, 1997
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and by new investors purchasing Shares in the Offering at
an initial offering price of $6.00 per Share (before deducting the estimated
underwriting discount and offering expenses payable by the Company).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.................................. 3,500,000 74.47% $ 1,000 .01% $ .0003
New Investors.......................................... 1,200,000 25.53% 7,200,000 99.99% $ 6.00
---------- --------- ------------- ---------
Total.................................................. 4,700,000 100.00% $ 7,201,000 100.00%
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>

The above discussion and tables assume no exercise of any outstanding stock
options. See "Capitalization" and "Underwriting."

If the over-allotment option is exercised in full, the net tangible book
value per share after the Offering would be approximately $1.44 per share,
resulting in dilution to new investors of $4.56 per share. See "Capitalization"
and "Underwriting".

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW. The Company designs, markets, sources and distributes high
quality prescription eyeglass frames and non-prescription sunglasses to
department and specialty stores, optical chains and eyewear boutiques throughout
the United States and the world. On May 3, 1995 (inception), the Company was
organized and on May 10, 1995, the Company acquired substantially all of the
assets and assumed certain of the liabilities of Chanuk. Chanuk was engaged in
substantially the same business as the Company and a majority stockholder of
Chanuk is the mother-in-law of the President of the Company. The Company has
expanded through the acquisition of other companies in related and complementary
businesses and through the increase of its sales base. On June 26, 1996 the
Company acquired substantially all of the assets and assumed certain of the
liabilities of Windsor and on February 26, 1997, the Company acquired from a
bank substantially all of the assets of Renaissance. The bank had foreclosed on
Renaissance upon default of its loan agreement. In connection with the
acquisition, the Company paid the bank $3,446,000. The Company also entered into
a consulting agreement with the former owner of Renaissance which provided for
annual aggregate payments of $200,000 per year for five years. In addition,
under a consulting agreement, the Company granted the former owner of
Renaissance options to purchase 180,833 shares of Common Stock of the Company
for $3.00 per share. Following the acquisition, the Company paid an aggregate of
approximately $400,000 to various creditors of Renaissance deemed to be
necessary to preserve the value of the acquired assets.

The results of operations for the Company for the period from inception to
March 31, 1996 ("Fiscal 1996") gives effect to the operations of the Company
independent of Windsor and Renaissance. The operations of the Company for the
year ended March 31, 1997 include the results of operations of the Company
during such period, including nine months of operations attributable to the
operations of Windsor as well as approximately one month of operations of
Renaissance. The pro forma condensed statement of operations for the year ended
March 31, 1997 gives effect to the operations for each of the Company,
Renaissance and Windsor as if the acquisitions of substantially all of the
assets of Renaissance and Windsor had occurred on April 1, 1996. The operations
of Renaissance give effect to its conduct as a stand-alone business and do not
reflect the anticipated efficiencies of scale or other cost reduction measures
being implemented by the Company. However, no assurance can be given that any
such efficiencies will be achieved. The discussion of the liquidity and capital
resources of the Company at March 31, 1997, includes information with respect to
the Company that gives effect to both the acquisition of Renaissance and Windsor
since the respective acquisitions occurred prior to such date.

The Company has, from time to time, experienced cash flow shortfalls and has
been required to borrow substantial amounts from banks. The Company had total
liabilities of approximately $23.0 million at December 31, 1997, approximately
$20.6 million of which are current which amounts have increased to date. Of such
debt, approximately $13.1 million is payable to CoreStates Bank (the "Bank")
pursuant to the Company's revolving line of credit. During the year ended March
31, 1997, and the nine months ended December 31, 1997, the Company incurred
$738,000 and $972,000, respectively, in net interest expenses. The revolving
line of credit is secured by substantially all of the assets of the Company. The
credit facility is represented by demand notes payable to the Bank under which
the Bank may demand repayment at any time. The Company intends to reduce
outstanding borrowings from the Bank by approximately $4.1 million from the
proceeds of this Offering. The Company anticipates that even after the proposed
repayment of a portion of the Company's indebtedness from the proceeds of this
Offering, the Company's outstanding indebtedness and ongoing interest expense
will continue to be significant. In addition, if the Bank were to demand
repayment of the entire outstanding borrowings under the facility, the Company
would be required to identify alternative financing to satisfy its repayment
obligation and to continue its operations. There can be no assurance that any
such alternative funding sources will be available on a commercially reasonable
basis if at all. If it is unsuccessful in so identifying such financing the
Company may be required to cease operations. The loan agreement with the Bank
also contains provisions which

17
<PAGE>
restrict certain activities of the Company, including the declaration of
dividends and also provides for various other restrictive covenants, including
the continuing participation of Rudy A. Slucker, the Chairman of the Board of
Directors and Barry Budilov, the President and Chief Executive Officer, in their
current management positions.

YEAR ENDED MARCH 31, 1997 ("FISCAL 1997") COMPARED TO FISCAL 1996. Net
sales for Fiscal 1997 were approximately $16.5 million as compared to
approximately $11.0 million for Fiscal 1996. The increase in sales was
attributable to the addition of the product lines and sales resulting from the
acquisition of Windsor in June 1996 as well as to increases in sales of existing
product lines of the Company. In addition, Fiscal 1996 reflects approximately
one less month of operations than Fiscal 1997.

Cost of sales for Fiscal 1997 were approximately $8.6 million (approximately
52% of net sales) as compared to approximately $6.8 million for Fiscal 1996
(approximately 62% of net sales) for Fiscal 1996. Cost of sales includes the
purchase price for eyeglass frames, in addition to the costs of the Company of
importing such frames. Cost of sales decreased from 1997 to 1996 as a percentage
of net sales because the Company was able to identify lower cost sources of
manufacturing as its sales volume increased and established efficiencies of
scale in connection with the distribution and maintenance of its inventories.

Selling, general and administrative expenses, consisting of advertising,
marketing, accounting and salaries of officers, increased from approximately
$4.3 million (approximately 39% of net sales) for Fiscal 1996 to approximately
$6.1 million (approximately 37% of net sales) for Fiscal 1997. Selling, general
and administrative expenses increased in aggregate dollar amounts reflecting
increased sales and marketing costs and increased administrative costs relating
to the acquisition of substantially all of the assets of Windsor and Renaissance
and the increase in accounting and overhead expense relating to the introduction
of new product lines.

Income from operations increased from a loss of approximately $79,000
(approximately .7% of net sales) for Fiscal 1996 to income of approximately $1.8
million (approximately 10.7% of net sales) during Fiscal 1997, reflecting the
increased sales by the Company from its pre-existing base of customers as well
as the addition of the Windsor operations and a decrease in cost of sales.

Interest expense increased from approximately $474,000 for Fiscal 1996 to
approximately $742,000 during Fiscal 1997, reflecting the increased borrowing by
the Company both to finance the acquisition of Windsor, to finance the growth of
the Company's operations and to finance the increase in the Company's inventory
necessary to allow the Company to provide improved delivery capabilities for its
increase in customer base.

NINE MONTHS ENDED DECEMBER 31, 1997 ("1997 NINE MONTHS") COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1996 ("1996 NINE MONTHS"). Net sales for the 1997
Nine Months were approximately $17.5 million as compared to approximately $11.7
million for the 1996 Nine Months. The increase in sales was attributable to the
addition of the product lines and sales resulting from the acquisition of
Windsor in June 1996 and Renaissance in February 1997, as well as to increases
in sales of existing product lines of the Company.

Cost of sales for the 1997 Nine Months were approximately $7.9 million
(approximately 45% of net sales) as compared to approximately $6.1 million for
the 1996 Nine Months (approximately 52% of net sales). Cost of sales includes
the purchase price for eyeglass frames, in addition to the costs to the Company
of importing such frames. Cost of sales decreased in 1997 compared to 1996 as a
percentage of net sales because the Company was able to identify lower cost
sources of manufacturing as its sales volume increased. The Company believes
that the gross profit percentage achieved during the 1997 Nine Months is
indicative of what it expects to achieve for the full fiscal year.

Selling, general and administrative expenses, consisting principally of
advertising, marketing, accounting and salaries of officers, increased from
approximately $4.5 million (approximately 39% of net sales) for the 1996 Nine
Months to approximately $7.9 million (approximately 45% of net sales) for the
1997 Nine

18
<PAGE>
Months. Selling, general and administrative expenses increased as a result of
increased sales and marketing costs and increased administrative costs relating
to the acquisition of substantially all of the assets of Windsor and Renaissance
and the increase in accounting and overhead expense relating to the introduction
of new product lines. Selling, general and administrative expenses during the
1997 Nine Months includes approximately $766,000 relating to redundant costs of
operating Renaissance in a separate facility through July 1997, consisting
primarily of duplicate overhead and personnel expenses incurred prior to the
consolidation of the Company's operations into one location as well as actual
costs related to the relocation. The Company expects that, in future quarters,
with the addition of Renaissance, its selling, general and administrative
expenses will decline as a percentage of net sales as it achieves increased
efficiencies of scale.

Income from operations increased from approximately $1.1 million
(approximately 9% of net sales) for the 1996 Nine Months to approximately $1.7
million (approximately 10% of net sales) during the 1997 Nine Months, reflecting
the increased sales by the Company from its pre-existing base of customers as
well as the addition of the Windsor and Renaissance operations and a decrease in
cost of sales partially offset by an increase in overhead costs.

Interest expense increased from approximately $442,000 for the 1996 Nine
Months to approximately $972,000 during the 1997 Nine Months, reflecting the
increased borrowing by the Company both to finance the acquisition of Windsor
and Renaissance, to finance the growth of the Company's operations and to
finance the increase in the Company's inventory necessary to allow the Company
to provide improved delivery capabilities for its increase in customer base.

LIQUIDITY AND CAPITAL RESOURCES. At December 31, 1997, the Company had
working capital of approximately $1.6 million. The Company's total current
assets at December 31, 1997 of approximately $22.2 million includes accounts
receivable of approximately $9.7 million and inventories of approximately $11.7
million. The Company's accounts receivable reflects an allowance for doubtful
accounts of approximately $1.9 million. The Company's inventories consist
principally of eyeglass frames and sunglasses held at its warehouse for
distribution. The market for eyewear and accessories is subject to the risk of
changing consumer trends. In order to be able to promptly fill orders from
distributors, the Company maintains a significant level of inventory. In the
event that a significant number of particular models or accessories does not
achieve widespread consumer acceptance, the Company may be required to take
significant price markdowns, which could have a material adverse effect on the
business, results of operations and financial condition of the Company. However,
the Company believes that current reserves adequately reflect the Company's
exposure for reduction in the value of its inventory and does not anticipate any
material write-downs of inventory in the near future.

The Company's current liabilities as of December 31, 1997 include
approximately $13.1 million relating to its revolving line of credit with
CoreStates Bank. The Company has used its line of credit to fund its continuing
operations, to fund its increased inventory and to fund the acquisitions of
Windsor and Renaissance. The revolving line of credit expires annually on June
1st and is automatically renewed for one year periods and provides for a maximum
borrowing amount of $13 million. Indebtedness under the line accrues interest at
the prime rate (8.5% at December 31, 1997) and, is collateralized by
substantially all of the assets of the Company. Rudy A. Slucker, the Chairman of
the Board of Directors of the Company, and Barry Budilov, the President of the
Company, have each provided personal guarantees for the line of credit for up to
$1.1 million of such debt. In addition, Messrs. Slucker and Budilov have agreed
to increase their present guarantees by $375,000 each if the Company fails to
complete this public offering by February 20, 1998. Accordingly, upon the
completion of this Offering, the personal obligations of Messrs. Slucker and
Budilov will be reduced further. The Company intends to repay approximately $4.1
million of this debt from the proceeds of this Offering, including a transaction
fee of $100,000 which relates to the acquisition of Renaissance, which is
payable to CoreStates Bank upon the closing of this Offering. The revolving line
of credit restricts the payment of dividends to stockholders and provides for
various restrictive covenants, including the continuing participation of Rudy A.
Slucker and Barry Budilov in their current management

19
<PAGE>
positions. The Company has also borrowed an aggregate of $576,000 from Mr.
Slucker from February 4, 1997 through February 1, 1998 to assist the Company in
financing its costs relating to the acquisition of substantially all of the
assets of Renaissance and the integration of the business of Renaissance into
that of the Company and for working Capital. The loan is payable on demand with
interest at the rate of 8% per annum. The Company will repay the debt upon the
closing of the Offering.

At December 31, 1997, the Company's current liabilities also include
approximately $4.4 million of accounts payable and $1.6 million accrued
expenses, payable in the ordinary course of its business. The Company's
long-term debt includes approximately $242,000 (which does not include current
portion of $101,000) of indebtedness in connection with the acquisition of
Windsor. The Company's non-current liabilities include approximately $761,000 of
net deferred credit, representing the excess value of net assets of Renaissance
acquired over cost. This amount is being amortized over a period of five years
from the date of acquisition.

The Company's indebtedness includes approximately $1.18 million, payable to
Mr. Slucker and Mr. Budilov under the 8% Convertible Notes. The Convertible
Notes are repayable subject to restrictions contained in the Company's loan
agreement with CoreStates Bank on March 31, 2000. Interest shall accrue and be
payable quarterly at the rate of 8% per annum. If the Company has earnings equal
to or in excess of $.60 per share for the year ending March 31, 1999, the
Convertible Notes may be prepaid at the option of the holder commencing on March
31, 1999. The Convertible Notes may be converted at any time into shares of
Common Stock at a rate equal to the initial public offering price per share.

Sales of eyewear under license agreements represented approximately 35% and
30% of the pro forma sales of the Company and Renaissance for fiscal 1996 and
1997, respectively. The Company's license agreements generally require the
Company to satisfy minimum purchase requirements or to make annual royalty
payments and advertising expenditures and maintain quality control and retail
distribution commensurate with the licensor's image. Accordingly, certain
licensors are entitled to receive payment from the Company whether or not
specified minimum levels of annual sales for licensed products are met. For the
year ending March 31, 1998 and 1999, the annual aggregate commission obligations
of the Company under current license agreements will be no less than
approximately $1,000,000 and $700,000, respectively, even if the Company were to
generate no sales under the agreements.

As of December 31, 1997, the Company's obligations under employment
agreements and consulting agreements with members of management and its Board of
Directors aggregate approximately $470,000 over the next 12 months. In addition,
payments under notes, non-competition and other agreements relating to the
acquisition of substantially all of the assets of Chanuk, Windsor and
Renaissance, will aggregate approximately an additional $375,000 for the years
ending March 31, 1998 and March 31, 1999.

The Company currently leases office, warehouse and showroom facilities and
equipment under operating leases, which expire at various times through the year
2002. Future minimum lease payments under non-cancelable leases at December 31,
1997 aggregate approximately $2.0 million through the year 2002.

The Company leased its prior principal offices in Philadelphia, Pennsylvania
under a lease that expires in the year 2000. Monthly rental payments under such
lease are approximately $11,000. The Company has since moved to an alternative
location in Pennsylvania for its management, inventory and distribution
operations for which it pays a base annual rent of approximately $300,000 per
year. The Company does not intend to use its Philadelphia facility and is
negotiating to sublet the facility. If the Company sublets the facility for less
than the full rental amount, if at all, the Company will be required to
recognize a charge to the extent of any shortfall.

In connection with the acquisitions of substantially all of the assets of
Renaissance in 1997, the Company satisfied certain obligations of that business
to particular creditors, the cooperation of which was deemed to be necessary to
continue conducting business. In connection with the acquisition of
substantially

20
<PAGE>
all of the assets of Renaissance, no liabilities of Renaissance were
contractually assumed by the Company. The Company has been provided with
estimates indicating that the net liabilities of Renaissance exceeded $3.0
million at the time the Company acquired the assets. A number of creditors of
Renaissance have instituted collection actions in court against Renaissance for
amounts due to them from Rennaissance. The Company is not a party to any
material actions relating to these matters, and has no knowledge of the amounts
involved in such proceedings. To the extent that any creditors of Renaissance
seek recourse against the Company as the purchaser of substantially all of the
assets of Renaissance, the Company may incur substantial expenses in connection
with defending any such actions. Furthermore, to the extent that creditors are
successful in asserting any claims against the Company as a successor to
Renaissance or challenge the acquisition from the secured creditor, the Company
could be responsible for substantial liabilities and its financial position
could be adversely affected.

PRO FORMA RESULTS OF OPERATIONS FOR THE COMPANY AND RENAISSANCE. The pro
forma unaudited condensed statement of operations for the Company reflects the
acquisitions of Windsor and Renaissance as if such transactions had occurred on
April 1, 1996. Pro forma net sales were approximately $29.1 million for Fiscal
1997, reflecting net sales for the Company of approximately $16.5 million, net
sales for Renaissance for the eleven months ended February 28, 1997 of
approximately $11.7 million and net sales for Windsor for the three months ended
June 30, 1996 (being the period during which Windsor's sales were not included
in those of the Company) of approximately $1.0 million. Cost of sales for
Renaissance for the eleven months ended February 28, 1997 were approximately
$6.1 million (approximately 52% of net sales), resulting in a gross profit of
approximately $5.6 million (approximately 48% of net sales). However, selling,
general and administrative expenses for Renaissance were approximately $6.5
million for the eleven months (approximately 56% of net sales), resulting in a
loss from operations for Renaissance of approximately $900,000. On a pro forma
basis, $332,000 of expenses for the Company are eliminated to reflect the
acquisition of Windsor and Renaissance as if they had taken place on April 1,
1996. Income from operations on a pro forma basis are approximately $1,311,000,
resulting in a pro forma income before taxes of approximately $205,000.

INFLATION. Management believes that there has been no significant impact on
the Company's operations as a result of inflation.

21
<PAGE>
BUSINESS

OVERVIEW

The Company designs, sources, markets and distributes high quality
prescription eyeglass frames and non-prescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques throughout the United
States and the world. The Company also provides integrated marketing,
merchandising materials and consulting support to its distributors and sales
force in the sale of the Company's eyewear products. The Company distributes its
eyewear products to a broad and substantial customer base including Wal-Mart,
K-Mart, National Vision Associates and U.S. Vision as well as many regional
chain stores and local outlets. The Company has established relationships with
various fashion designers, fashion celebrities and marketing organizations
including Kathy Ireland, Halston and the John Lennon Estate, and highly
recognizable consumer products brands such as Playskool, Nintendo and
international jewelry designer Kenneth Jay Lane. The Company intends to continue
to identify and license trade names and trademarks from various high profile
brand sources in an effort to target and capture additional segments of the
eyewear markets. As used in this Prospectus, the term "sources" means that the
Company retains third parties to manufacture products to the Company's
specifications.

The Company utilizes a diverse team of experienced fashion eyewear designers
to work with fashion houses, celebrities, manufacturers and experienced members
of the optical industry to design eyewear styles that convey fashion, elegance
and sophistication. The Company's eyeglass frames and sunglasses are
manufactured at a variety of independent factories throughout the world. The
Company distributes products through independent sales representatives situated
in the United States and internationally and intends to increase the size of its
dedicated sales force, expand its sales and marketing capabilities and develop
additional alliances with fashion designers and licensors. The Company was
incorporated in Delaware in May 1995 as Diplomat Ambassador Inc. when it
acquired the business of Chanuk, a Pennsylvania corporation. On July 10, 1997,
the Company changed its name to Ambassador Eyewear Group, Inc.

INDUSTRY BACKGROUND

In 1996 approximately 60% of the nation's population, used some form of
corrective eyewear. Retail sales of eyewear products totaled $14.6 billion in
1996. According to a recent study, this represents a 6% increase over $13.8
billion that was spent in 1995, when actual sales increased by 7% over 1994. The
market for corrective eyewear has grown steadily over the past five years and
the demographic trends of an aging population are expected to generate increased
demand for corrective eyewear and optical services in the immediate future.

Industry sources attribute growing retail sales of eyewear to the industry's
success in generating consumer interest in fashion eyewear. It has been reported
that American consumers are showing a distinct preference for high fashion and
high performance in eyewear frame styles. Frames accounted for $5.5 billion in
retail sales in 1996, up 7% over $5.1 billion in 1995. The average retail price
for frames also increased by about two dollars to nearly $59 in 1996. This
accounted for about 39% of an average sale of $150 for a complete set of
eyewear. It is reported that designers and brand names are leading the growth in
sales of eyewear. It has been estimated that 41% of all frame sales in 1996 were
designer/branded/licensed products, an increase of 1% from 1995. In addition,
premium materials are also being embraced by consumers, including light weight
stainless steel and titanium eyeglass frames. Metal frames are estimated to
account for 61% of all frames sold in 1996. It is estimated that in 1986,
plastic frames accounted for over two-thirds of all frames sold.

The Company believes that since the mid-1980s the sunglass market has
experienced significant growth, driven primarily by the expansion of the
premium-priced sunglass market segment. According to a 1996 sunwear survey in
the United States, retail sales of sun related eyewear grew to $2.95 billion in
1996, up 8% over 1995. The premium priced sunglass segment accounts for
approximately 53% of such sales.

22
<PAGE>
STRATEGY

The Company's business strategy for growth focuses on maintaining and
expanding its competitive position in the markets it currently serves and
establishing competitive market positions in other geographic areas, primarily
within the United States and, to a lesser extent, globally. The principal
elements of the Company's strategy include:

- TARGET MID-RANGE PRICE CONSUMERS. The Company has specifically targeted
and developed the market segment for high-quality designer eyewear sold at
retail price points below those of "designer" eyewear of comparable
quality. The Company identified in the early 1990's the potential that
mass market discount stores such as Wal-Mart and K-Mart had for marketing
eyewear and established its important supply relationships when such
retailers were only first entering the eyewear market. The Company
distributes eyewear and related products that are comparable in fashion
and quality to any product in the market and yet generally lower in cost.

- TARGET ADDITIONAL DISTRIBUTORS, COORDINATE AND MANAGE DISTRIBUTION. The
Company is pursuing additional relationships with distributors throughout
the world and globally. The Company believes that by continually
establishing such relationships, it will be able to increase its share of
the eyewear market in the United States as well as abroad. Currently, the
Company distributes its products through a coordinated network of Company
employed and independent sales representatives. The Company maintains
strict control over its sales network by employing a substantial
percentage of its sales representatives on a full-time basis, and by
monitoring pricing policy and participating in advertising and promotional
activities.

- PURSUE ACQUISITIONS TO INCREASE PENETRATION IN EXISTING AND NEW
MARKETS. The Company seeks to increase its penetration in new and existing
markets by acquiring businesses and product lines that are complementary
to that of the Company. The Company expects to pursue selective
acquisitions of customer bases or businesses, companies that complement
the Company's current operations or expand its services or network
capabilities. The Company believes that such acquisitions, investments and
strategic alliances are an important means of increasing sales volume.
Through the acquisition of substantially all of the assets of Windsor in
1996, the Company acquired eight new lines of eyewear including licenses
for Kenneth Jay Lane and John Lennon. Through the acquisition of
substantially all of the assets of Renaissance, the Company significantly
enhanced its sunglass product lines as well as its channels of
distributions for sunglass products. In addition, following the
acquisition, the Company negotiated licenses to use additional trade
names, including Oscar de la Renta and Nintendo. Renaissance had sales of
approximately $14 million for the year ended October 31, 1996 and
distributed five different lines of eyeglass frames and sunglasses. The
Company intends to continue to expand its sales of sunglasses by
increasing its sales and efforts and identifying and acquiring additional
sunwear product lines.

PRODUCTS

The Company offers hundreds of models of prescription eyeglass frames and
sunglasses in a wide range of styles under the Kathy Ireland, Halston,
Playskool, Menrad, Atrio, John Lennon, Kenneth Jay Lane, Harve Bernard, Sarah
Coventry, Nintendo, Georgio de Marco trademarks and trade names, among others,
and under the Company's proprietary Phoenix, Da Vinci, Tarelli, Details,
Landolfi trademarks and/ or trade names. The Company has not applied for
trademark protection of its product lines. The Company's prescription eyeglass
frames and sunglasses, which are characterized by high quality and design and
are often intricately detailed, are affordable, and are priced less than
"designer" eyewear of comparable quality sold by other manufacturers. The
Company's products generally are sold at retail price points between $80 and
$150, while the Company believes that eyewear of comparable quality sold by
other distributors is generally sold at retail price points between $130 and
$300. The following describes certain of the Company's licensing and
distribution arrangements:

23
<PAGE>
KATHY IRELAND. The Company, in association with Kathy Ireland, has designed
a line of eyeglass frames and sunglasses for men and women. Kathy Ireland,
actress, model, and executive in the combined industries of fitness and fashion,
continues to run her businesses with the same integrity and success that first
launched her Signature collections. She directs every aspect of her products
including design, self testing and production. The styles, sold exclusively by
the Company, are designed to be stylish, contemporary and casual. The eyeglasses
are designed using a variety of materials, including the latest metal alloys and
plastic colorations. All are available in either ophthalmic or sun styles.
Shapes include cat-eye, rectangles, ovals and "preppie-designs." The Company has
entered into a four year exclusive (sunglasses, eyeglasses, readers and
ophthalmic frames and accessories) and non-exclusive agreement with Kathy
Ireland, Inc. under which the Company has been granted a worldwide license to
use certain licensed products (the "Ireland Agreement"). In addition, Ms.
Ireland has agreed to endorse the Company's line of eyeglasses and provide
limited marketing assistance including attending various marketing events. The
Ireland Agreement expires on January 30, 2000. The Ireland Agreement provides
for guaranteed minimum royalties to Kathy Ireland for the term of the Ireland
Agreement. The Company is required to pay a royalty fee based on net sales.

HALSTON. Halston is a world renowned designer of sophisticated and elegant
fashion. Halston eyewear is designed for men and women and is intended to serve
the moderate to upper price market. Each frame is airbrushed with a lacquer to
provide a stylish long-lasting finish. The Company entered into a Supply
Agreement (the "Halston Agreement") with Styl-Rite Optical Mfg. Co.
("Styl-Rite") under which the Company has been granted a right to purchase from
Styl-Rite certain ophthalmic frames bearing the Halston trademark for resale to
retail outlets and specialty shops. The Halston Agreement expires on December
31, 1998. The Company has an option to renew the agreement for an additional
three year period provided that it meets certain minimum purchase requirements
and that Styl-Rite renews its license agreement with Halston Investments, Ltd.,
the successor-in-interest by assignment from Halston Trademarks, Inc., owner of
the "Halston" trademark.

PLAYSKOOL. The Company has developed a children's line of eyewear that is
marketed under the Playskool brand name. Playskool is one of the most recognized
names in children's products and produces the largest number of frames in the
industry exclusively for children. The Playskool styles are designed in
consultation with pediatric specialists to insure proper fit for a child's face
and comfort for a child's unique requirements. The frames are designed with
bright colors and light designs, include spring hinges and silicon nosepads to
maintain fit and which contain hypo-allergenic coatings. Frames carry an
unconditional guarantee. The Company has entered into a non-exclusive license
agreement with Playskool under which the Company has been granted a license to
use certain licensed products in the United States (the "Playskool Agreement").
The Playskool Agreement expires on December 31, 1998 pursuant to the second
renewal term. Additional renewal of the Playskool agreement is at the discretion
of the licensor and no assurance can be given that the agreement will be
renewed. The Playskool Agreement provides for guaranteed minimum royalties to
the licensor for the term of the Playskool Agreement. The Company is required to
pay a royalty fee based on net sales.

NINTENDO. The Nintendo Eyewear collection is intended to be a functional
children to teen line of eyeglass frames and to be fashionable with quality
features such as dual action spring hinges and double lacquer coatings to add
strength and durability. Nintendo is one of the largest video game companies in
the world and its products are in millions of households in the United States.
The Nintendo Eyewear collection is targeted to the six to fourteen year old age
group, mirroring Nintendo's most heavily penetrated video game market. The
Company entered into a merchandise license agreement with Nintendo of America,
Inc. under which the Company has been granted a non-exclusive license to
manufacture and sell prescription eyewear, sunglasses and non-prescription
sunglasses in the United States, Canada, Mexico, Panama, and Guatemala (the
"Nintendo Agreement"). The Nintendo Agreement expires on December 31, 2000. The
Company has an option to renew the Nintendo Agreement for one additional three
year term. The

24
<PAGE>
Nintendo Agreement provides for guaranteed minimum royalties to the licensor for
the term of the agreement. The Company is also required to pay a royalty fee
based on net sales.

THE MENRAD GRUPPE. The Company's high end lines of eyewear, including its
Menrad, Atrio and Jaguar line are manufactured by the Menrad Gruppe, a 100
year-old German manufacturer of high-quality precision metal eyeglass frames.
The Menrad line of eyeglasses are intended to exhibit superb anatomical fit,
comfort, optical precision and durability. Menrad frames are made with rare and
fine precious metals. The base metal in many of their frames are nickel-free and
every frame is coated with a plastic film that insures complete protection from
metal induced allergies, while providing the added benefit of scratch and
corrosion resistance. The Menrad eyewear, which includes sunglasses, is marketed
under the Atrio and Menrad names. The Company distributes these products on a
non-exclusive basis. The Company is subject to certain minimum purchase
requirements. The Company is not required to pay a royalty in connection with
its use of the trademarks.

JOHN LENNON. John Lennon's round, wire framed glasses became an
unmistakable part of his image and a symbol for his time. John Lennon frames
vary from high-end to moderate-priced and include designs for men and women. The
Company is negotiating to renew its distribution agreement with Eagle Eyewear,
Inc. in order to be the exclusive distributor of adult optical frames and adult
sunglasses for Eagle Eyewear, Inc. in the United States and Canada. If the
distribution agreement is renewed, the Company would order and purchase John
Lennon products solely from Eagle Eyewear, Inc. Further, Eagle Eyewear, Inc.
would retain final approval of the use of John Lennon's name or likeness by the
Company. The Company would be subject to certain minimum purchase requirements.
The Company is required to pay a royalty fee on a weekly basis. The Company
distributes John Lennon frames on a non-exclusive basis.

KENNETH JAY LANE. Kenneth Jay Lane is a world-famous designer of costume
jewelry. The Company's Kenneth Jay Lane collection was designed to emulate his
elegant, luxurious designs. The collection features unique metal trims, temples,
bridges and colors with colored stones and pearls integrated into the frame
designs to achieve a high-fashion appearance. The sunwear collection includes
frames adorned with colored stones and gold and silver points intended to
emulate Kenneth Jay Lane's jewelry designs. The license to Kenneth Jay Lane was
acquired at the time of the Windsor acquisition under a license agreement
between Windsor and Kenneth Jay Lane (the "Lane Agreement") The license provides
the Company with an exclusive right to use the Kenneth Jay Lane name in the
United States, Canada, Puerto Rico, the Caribbean Islands, Central America and
Mexico. The Lane Agreement was renewed in September 1997. The Lane Agreement
provided for guaranteed minimum royalties to the licensor and for the payment by
the Company of a royalty fee based on net sales. In addition, the Company was
required to spend a certain percentage of net sales for advertising and
promotional purposes.

HARVE BENARD LTD. Harve Benard is an upscale women's clothing designer that
has had a significant name brand recognition for many years. The Harve Benard
eyewear collection is designed to be sophisticated yet practical, designed in a
glamorous, wearable, daytime look. The frame styles feature exceptional fashion
in a finely crafted product. The license to Harve Benard was acquired at the
time of the Chanuk acquisition under a license agreement between Chanuk and
Harve Benard Ltd. The license gives the Company an exclusive right to use the
Harve Benard mark in connection with the manufacture, distribution and sale of
men's and women's sunglasses and ophthalmic spectacle frames in the United
States and Canada. The Agreement expires on December 31, 1998. The Company has
an option to renew this agreement after the expiration date. The Agreement
provides for guaranteed minimum royalties to the licensor for the term of the
Agreement. The Company is required to pay a royalty fee based on net sales.

SARAH COVENTRY. The Company believes that the Sarah Coventry label
represents classic feminine styling with mass appeal. Sarah Coventry products
appear in national advertising in consumer magazines such as Redbook and
Glamour. Targeted to the value conscious customer, the Sarah Coventry eyewear
collection is intended to offer a quality image at an excellent value. The
Company has entered into two separate exclusive license agreements with
Lifestyle Brands, Ltd., owner of the Sarah Coventry trade

25
<PAGE>
name, under which the Company has been granted a license to manufacture and sell
sunglasses, sunglass cases, accessories, ophthalmic frames, and cases under the
Sarah Coventry trade name (the "Lifestyle Agreements"). The Lifestyle Agreements
expire on June 30, 1998. With respect to the license related to sunglasses,
sunglass cases and related accessories, the Lifestyle Agreements shall renew
automatically for an additional three year term if the Company achieves certain
minimum net sales. The Lifestyle Agreements also provide for guaranteed minimum
royalties to the licensor for the term of the Lifestyle Agreements. The Company
is required to pay a royalty fee based on net sales.

FLEX SPECS. Flex Specs are flexible eyeglass frames with a mechanism at the
temple hinge that maintains constraint and strong pressure on the eyeglass
frame. In addition, the Flex-Specs frame has no screws at the hinge. The Company
has licensed exclusively the right to distribute Flex-Specs eyeglass frames in
the United States.

OTHER BRANDS. The Company has also entered into license agreements with
other brand names that provide for the payment of guaranteed minimum royalties
to licensors and additional royalty fees. Additionally, the Company has arranged
for the manufacture of a variety of proprietary brands, including agreements
with Tarelli Eyewear and Landolfi, Phoenix and DaVinci, intended to provide
European styling at moderate prices to its consumers. The Company has not
applied for trademark protection for these brands.

MARKETING AND ADVERTISING

The Company markets its eyewear products primarily to independent retailers,
mass merchandisers, chain stores, department stores and international
distributors. The Company's sales efforts include the direct channels of a
dedicated sales force and telephone sales. The Company advertises primarily
through print trade journals and the distribution of catalogs. The Company
intends to expand its print advertising to include consumer oriented media. In
addition, through promotions, the Company assists the retailers in enhanced
distribution of the Company's products to consumers. Promotional incentives to
sell-through the Company's eyewear plus cooperative advertising to the retailers
clientele will generate additional distribution for the Company.

CHAIN STORES, DEPARTMENT STORES AND MASS MERCHANDISERS. Chain stores and
superstores have begun to be a factor in the market share of eyewear. In 1995,
chain stores and superstores comprised 18% of the retail market or $2.5 billion.
Further, according to Jobson Optical Group Data Base, in 1995, the top 100 chain
stores held over 29% of the retail market. A substantial majority of the
Company's sales during fiscal 1996 included sales to customers in this category.

INDEPENDENT RETAILERS. Independent optical shops and eyecare professionals,
including franchises; comprised over 60% of the retail eyewear market during
1996. The Company employs direct sales efforts to identify and market to
independent retailers this market through a dual sales force, promoting distinct
product lines. Although this constitutes a large part of the eyeglass market,
this category accounts for a lesser part of the Company's sales during fiscal
1996 included sales to customers in this category.

INTERNATIONAL DISTRIBUTORS. The Company believes that substantial sales
opportunities may be exploited outside of the United States. Although the
Company has limited sales abroad it intends to expand its international business
to markets outside the United States. Sales during fiscal 1996 to customers in
this category were not material, although the Company has identified foreign
sales as a source of possible expansion.

The Company's sales to its five largest customers represented over 62% of
its sales in fiscal 1996 and 51% in fiscal 1997 (30% on a pro forma basis giving
effect to the acquisitions of the assets of Windsor and Renaissance) and
approximately 48% for the nine months ended December 31, 1997. Sales to the
Company's top customer, Wal-Mart accounted for approximately 51%, of the
Company's sales in fiscal 1996, and approximately 35%, of its sales in fiscal
1997 (20% on a pro forma basis giving effect to the acquisitions of the assets
of Windsor and Renaissance) and approximately 37% for the nine months ended
December 31, 1997. The Company anticipates that sales to its top five customers
will continue to account

26
<PAGE>
for a significant percentage of its sales. The Company has no long term
commitments or contracts with any of its customers. The loss or decreased sales
from one or more of these customers and in particular, Wal-Mart, would have a
material adverse effect on the Company's financial condition. The inability of
any of the Company's significant customers to satisfy any of their bills at any
time or on a timely basis for any reason could have a material adverse effect on
the financial condition of the Company.

The Company makes use of a dedicated and independent sales force of an
aggregate of approximately 30 sales representatives. This direct sales force
targets small, medium, and large-sized retailers from high-end boutiques to
discount frame outlets. The sales force is equipped to provide sales training,
support, and management consulting to the retailer. In addition, sales
representatives are equipped to assist with retail window displays, designer
boutique creating, and eyewear promotions.

National trade shows and international conventions have become the sounding
boards for the global eyewear industry. New products are launched and designers
showcase their creations and themselves during these events. The Company plans
to exhibit its products to an increasing number of distributors, retailers, and
consumers worldwide. The four most popular shows occur annually and include
Silmo in Paris, Mido in Milan, the Vision Expo in New York and the Vision Expo
in California.

The Company develops point of purchase materials that feature the Company's
products and brands which are provided to individual retail accounts. Original
display materials are periodically constructed to help design boutique
atmospheres within the retail accounts and properly display the Company's
products in the account's showroom and window display. Some of these products
include actual record albums to display the John Lennon Collection, Playskool
figurines and toys to complement the children's line, designer scarves, hats and
accessories to cross-merchandise designer eyewear. The Company believes that
advertising a designer's eyewear adjacent to other products also created by the
designer is a valuable method for creating name recognition and demand for the
Company's product.

SOURCES OF SUPPLY

The Company arranges for the production of its products primarily with
foreign suppliers on a purchase order basis on standard commercial terms,
secured in each case by the Company's general credit. At the present time, the
Company secures its supplies in three ways. First, the Company enters into
arrangements with certain suppliers whereby the Company provides such suppliers
with, among other things, specifications, materials and designs pursuant to
which certain products requested by the Company are made. Second, the Company
enters into arrangements with certain suppliers whereby such specifications and
designs are provided to the Company who then has the option of having products
made pursuant to such specifications and designs. Finally, the Company enters
into arrangements whereby certain finished products are presented to the Company
and the Company then chooses from the selections presented. These arrangements
have worked well for the Company and the Company intends to continue such
relationships in the future.

The Company imports substantially all of its frames from international
suppliers located in Taiwan, Korea, Italy, Germany and Japan, and, therefore,
its prices for and supply of those frames may be adversely affected by changing
economic conditions in foreign countries and fluctuations in currency exchange
rates. The Company may also be subject to other risks associated with
international operations, including tariff regulations and requirements for
export licenses, unexpected changes in regulatory requirements, receivable
requirements, difficulties in managing international operations, potentially
adverse tax consequences, economic and political instability, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. In addition, the laws of certain countries may not protect the
Company's products and intellectual property rights to the same extent as do the
laws of the United States. There can be no assurance that such factors will not
have a material adverse effect on the Company's future international sales or
licenses and, consequently, on the Company's business and operations as a whole.

27
<PAGE>
COMPETITION

The eyewear industry is highly competitive and fragmented. The Company
competes with different companies in different markets. The prescription and
non-prescription eyewear markets are highly competitive. The Company competes
with a number of established companies, including Luxotica, Safilo, Marchon and
Bausch & Lomb, which together control a substantial portion of the premium
market. In the sunglass market, the Company competes with a variety of
competitors with substantially greater financial and other resources than the
Company including Bausch & Lomb, the manufacturer of Ray-Ban, Oakley and
Gangoyles sunglasses. All of the aforementioned companies have substantially
greater resources and better name recognition than the Company and sell their
products through broader and more diverse distribution channels. In addition,
several of these competitors have their own manufacturing facilities. The
Company could also face competition from new market entrants, including
established branded consumer products companies, such as Nike, Inc., that also
have greater financial and other resources than the Company. In addition, as the
Company expands internationally, it will face substantial competition from
companies that have already established their products in international markets
and consequently have significantly more experience in those markets than the
Company. The Company also faces competition from the expanded use of contact
lenses and expanding laser surgery to correct vision. The major competitive
factors in the eyewear market include fashion trends, brand recognition, method
of distribution and the number and range of products offered. In addition, to
retain and increase its market share, the Company must continue to be
competitive in the areas of price, quality and performance, technology,
intellectual property protection and customer service.

LICENSES AND TRADEMARKS

The Company owns and has obtained licenses to various domestic and
international trademarks related to its products and business. These licenses
expire at various times through the year 2000. While these trademarks in the
aggregate are important to the Company's competitive position, no single
trademark or license thereof is material to the Company. The trade names
Halston, Kathy Ireland, Playskool and others and certain trademarks are owned by
various third parties and licensed to the Company for limited purposes on a
royalty basis. The Company has not applied for trademark protection of its
product lines.

EMPLOYEES

At February 1, 1997, the Company had 107 full-time employees and one
part-time employee. Approximately 26 of such employees are engaged in
administrative positions, 28 in sales management, seven in management and 35
provide warehouse and distribution support. The Company considers its relations
with its employees to be good. None of the Company's employees are represented
by labor unions. See "Legal Proceedings."

PROPERTY

In September 1995, the Company leased its former principal offices occupying
30,000 square feet in Philadelphia, Pennsylvania, which were used to house all
the Company's management, inventory and distribution operations. Pursuant to the
lease relating to such facility, the Company is obligated to make monthly rental
payments of approximately $11,000. Such lease expires in 2000. In July 1997, the
Company moved to a new location in Bensalem, Pennsylvania, for its management,
inventory and distribution operations. The new facility has 64,000 square feet.
The lease expires in August 2002 and provides for rent of $25,000 per month.
Barry Budilov and Rudy Slucker, the Company's Chairman and President,
respectively, have agreed to purchase the leased property from the landlord for
$2,465,540. In anticipation of such purchase, Messrs Slucker and Budilov have
entered into an agreement with the Company pursuant to which they have agreed to
rent to the Company the property at substantially the same terms and conditions
as are set forth on the current lease. The Company is negotiating to sublease
the Philadelphia facility, although no assurance can be given that it will be
successful in such negotiations.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

28
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --------- ------------------------------------------
<S> <C> <C>
Rudy A. Slucker........................... 48 Chairman of the Board of Directors
Barry Budilov............................. 42 President, Chief Executive Officer and
Director
Kenneth B. Kitnick........................ 35 Executive Vice President
Raymond Green............................. 35 Treasurer
Jay Rice(1)............................... 45 Director
Jeffrey Seiken(1)......................... 44 Director
</TABLE>

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

(1) Member of the Compensation and Audit Committees.

In connection with the Offering, the Company intends to increase the size of
the Board of Directors to accommodate two additional directors who will not be
officers or employees of the Company.

The business experience of each of the executive officers and directors is
set forth below.

RUDY A. SLUCKER has served as Chairman of the Board of Directors of the
Company since May 1995. Mr. Slucker also serves on a full time basis as Chairman
of the Board of Directors, President and Chief Executive Officer of the TearDrop
Golf Company, a Nasdaq-listed company, which position he has held since
September 1996 and of the Tommy Armour Golf Company, a wholly-owned subsidiary
of TearDrop Golf Company, since November 1997. Mr. Slucker was the Chief
Executive Officer of the Atlas Group of Companies, Inc. ("Atlas"), which
imported and marketed hardware and consumer products, from 1978 until 1990, when
it was sold. Since 1990, Mr. Slucker has been a venture capital investor. He
currently serves on the board of directors and/or is a principal stockholder of
Major League Fitness, a chain of fitness centers associated with Major League
Baseball through a licensing agreement and Babylon Enterprises and Beacon
Concessions, which, together, currently own and operate the Beacon Theater in
Manhattan. Mr. Slucker graduated from the University of Cincinnati with a
Bachelors Degree in 1971.

BARRY BUDILOV has been President and Chief Executive Officer of the Company
and has served as a Director since the Company's inception in 1995. From 1989 to
1995, Mr. Budilov served as the President of Chanuk, the predecessor of the
Company. Prior thereto and since 1987, Mr. Budilov served as Chief Financial
Officer of Eco-Med, Inc, which was sold in 1989 to Avicare, Inc., a
publicly-traded company. Mr. Budilov is a certified public accountant. Mr.
Budilov graduated magna cum laude from George Washington University with a
Bachelor's Degree in accounting in 1977.

KENNETH B. KITNICK has served as Executive Vice President of the Company
since June 1996. Prior to joining the Company he spent sixteen years in the
optical industry as Vice President and Chief Operating Officer of Windsor, which
the Company acquired in January 1997. Mr. Kitnick graduated from Franklin &
Marshall College with a Bachelor's Degree in mathematics in 1983.

RAYMOND GREEN has served as Treasurer of the Company since the Company's
inception in 1995. From 1992 to 1994 he served as the controller for The Backe
Group, Inc., a holding company in the communications field. Prior thereto and
since 1990, he was the Controller for Water-Jel Technologies, Inc., a
manufacturing company with securities traded on Nasdaq. Prior thereto and since
1987, he was employed as a staff accountant for Abo, Uris & Altenburger, a
certified public accounting firm. Mr. Green graduated from Iona College in 1983
with a Bachelor's Degree in finance.

JAY RICE has been the managing partner of the law firm of Nagel Rice &
Dreifuss since 1983 and has served as a Director of the Company since June 1997.
He served as a member of the advisory board to Summit Bank from 1989 to 1991.
Since 1990, he has served as a trustee and is now the President of the Jewish
Community Housing Corp. and has been a member of the Board of Trustees of the
United Jewish Federation of Metrowest since 1995. Prior to joining Nagel Rice &
Dreifuss, Mr. Rice served as a law clerk to the Honorable Baruch S. Seidman of
the New Jersey Superior Court, Appellate Division from 1977 to 1978. Mr. Rice
has authored several legal articles and has served as a lecturer. Mr. Rice is a
member of the Essex County Bar Association, the New Jersey State Bar Association
(serving as Chairman of the Equity

29
<PAGE>
Jurisprudence Committee from 1989 to 1991) and the American Bar Association. Mr.
Rice received his Juris Doctorate from Rutgers University in 1977.

JEFFREY SEIKEN practices law in Philadelphia, Pennsylvania in the law
offices of Jeffrey Seiken and has served as a Director of the Company since June
1997. From 1988 through 1996, Mr. Seiken was a partner with the law firm of Rush
& Seiken. He was one of the initial founders and investors in American Health
Care, a corporation formed in 1988. American Health Care provides nursing home
care to elderly individuals with facilities in New Jersey, Alabama, Indiana and
Oregon. In addition, Mr. Seiken has been involved in real estate development
since 1985. Mr. Seiken has also served as a member of the Whitemarsh Township,
Pennsylvania Sewer Authority and the Whitemarsh Township Planning Commission.

For a period of 36 months, the Representatives have the right to appoint
either a member to the Company's Board of Directors or an observer to attend all
meetings of the Board of Directors. The observer will have no right to vote on
any matters before the Board. See "Underwriting--Observer to the Board of
Directors."

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of the Company has appointed an Audit Committee and a
Compensation Committee. The members of both the Audit Committee and Compensation
Committee consist of Jeffrey Seiken and Jay Rice. The Audit Committee
periodically reviews the Company's auditing practices and procedures, makes
recommendations to management or to the Board of Directors as to any changes to
such practices and procedures deemed necessary from time to time to comply with
applicable auditing rules, regulations and practices, and recommends independent
auditors for the Company to be elected by the stockholders. The Compensation
Committee meets periodically to make recommendations to the Board of Directors
concerning the compensation and benefits payable to the Company's executive
officers and other senior executives. The Company reimburses directors for their
out-of-pocket expenses incurred in attending Board and Committee meetings.

EMPLOYMENT AND CONSULTING AGREEMENTS

The Company intends to enter into an employment agreement with Barry
Budilov, effective on the effective date of this Offering, pursuant to which he
will serve on a full-time basis as President and Chief Executive Officer of the
Company for a period of three years. The agreement will provide for an annual
base salary of $200,000 subject to annual increases at the discretion of the
Board of Directors. The agreement will also contain a confidentiality provision
and a provision prohibiting Mr. Budilov from competing with the Company for a
period of six months subsequent to the termination of his employment. The
Company has agreed to pay to Mr. Budilov an amount equal to six months salary in
the event of a change of control or in the event his agreement is not renewed.
In the event Mr. Budilov is terminated without cause, the Company breaches the
terms of the agreement or upon the relocation of the Company to a place outside
of the Philadelphia metropolitan area, which leads to Mr. Budilov's resignation,
the Company will also pay to Mr. Budilov his basic salary unpaid through the
greater of the term date or a period of six months. The agreement also provides
for the payment of additional benefits of approximately $41,000 annually.

The Company intends to enter into a consulting agreement with Rudy Slucker,
effective on the effective date of this Offering, pursuant to which he will
serve as Chairman of the Board of the Company for a period of three years. The
agreement will provide for an annual consulting fee of $100,000, subject to
annual increases at the discretion of the Board of Directors. Mr. Slucker will
not be required to devote any minimum amount of time to the affairs of the
Company and is subject to an employment agreement with another company. The
consulting agreement will also contain a confidentiality provision and a
provision prohibiting Mr. Slucker from competing with the Company for a period
of six months subsequent to the termination of his employment. The Company has
agreed to pay to Mr. Slucker an amount equal to six months fee in the event of a
change of control or in the event his agreement is not renewed. In the event Mr.
Slucker is terminated without cause the Company breaches the terms of the
agreement or upon the relocation of the Company to a place outside of the
Philadelphia metropolitan area, which leads to Mr. Slucker's resignation, the
Company will also pay to Mr. Slucker his basic fee unpaid through the greater of

30
<PAGE>
the term date or a period of six months. The agreement also provides for the
payment of additional benefits of approximately $41,000 annually.

Upon consummation of the acquisition of substantially all of the assets of
Windsor, the Company entered into an employment agreement with Kenneth Kitnick,
who became the Executive Vice President of the Company and into a consulting
agreement with Jay Kitnick, Kenneth Kitnick's father. The employment agreement
with Kenneth Kitnick became effective on June 26, 1996, pursuant to which he is
serving on a full-time basis as a Vice President of the Company for a period of
four years. The agreement provides for an initial base salary of $105,000, plus
an automobile allowance and provides for annual minimum increases through the
year 1999 to a maximum of $120,000. The agreement has been amended, as of June
30, 1997, to provide for the grant as of the date of the agreement to Kenneth
Kitnick of options to purchase 151,667 shares of Common Stock at an exercise
price of $1.50 per share, vesting over a period of five years. The agreement
contains a non-compete provision which prohibits Kenneth Kitnick from directly
or indirectly competing with the Company for a period of one year upon
termination. For a description of the Consulting Agreement with Jay Kitnick, see
"Certain Relationships and Related Party Transactions."

The Company has entered into a five-year employment agreement with Edward
Kauz which became effective on February 27, 1997. The agreement provides for
aggregate annual payments to Mr. Kauz of $200,000, subject to certain conditions
set forth in a supplemental agreement, dated February 27. In addition, under an
amendment to the consulting agreement dated as of June 30, 1997, Mr. Kauz agreed
to waive his right to serve as Vice Chairman of the Board of Directors and was
granted as of February 27, 1997 an option to purchase 180,833 shares of Common
Stock for five years at an exercise price of $3.00 per share.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), the Certificate of Incorporation includes a provision that eliminates
personal liability for its directors for monetary damages for breach of
fiduciary duty as a director except for liability: (i) for any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the DGCL; and (iv) for any
transaction from which the director derived an improper personal benefit.

As permitted by Section 145 of the DGCL, the Company's Amended Certificate
of Incorporation and By-Laws provide that: (i) the Company is required to
indemnify its directors and officers to the fullest extent permitted by the
DGCL; (ii) the Company may indemnify other persons as set forth in the DGCL;
(iii) rights conferred in the By-Laws are not exclusive; and (iv) the Company is
authorized to enter into indemnification agreements with its directors,
officers, employees and agents. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted for directors, officers and
controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore, unenforceable.

The Company, intends to apply for, and expects to obtain, directors and
officers liability insurance with an annual aggregate coverage limit of at least
$1 million.

DIRECTOR COMPENSATION

At present, no separate cash compensation or fees are payable to directors
of the Company, other than reimbursement of expenses incurred in connection with
attending meetings. The Company expects, however, that new non-employee
directors not otherwise affiliated with the Company or its stockholders will be
paid $500 per meeting and reimbursement for reasonable out-of-pocket costs for
attending meetings.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for named executive officers of
the Company who received compensation in excess of $100,000 during the period
from inception to March 31, 1996 and the year ended March 31, 1997.

31
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER LONG TERM
-------------------------- ANNUAL COMPENSATION AWARDS ALL OTHER
FISCAL SALARY COMPENSATION SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($) OPTIONS (#) ($)
- --------------------------- ----------- --------- --------------- ------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rudy A. Slucker, Chairman
of the Board of
Directors................ 1997(1) $ 260,000 0 $ 32,742(3) 0 $ 8,473(4)
1996(2) $ 172,000 0 $ 32,742(3) 54,833 $ 8,473(4)
Barry Budilov, President
and Chief Executive
Officer.................. 1997(1) $ 250,000 0 $ 32,742(3) 0 $ 8,473(4)
1996(2) $ 169,900 0 $ 32,742(3) 54,833 $ 8,473(4)
</TABLE>

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

(1) Messrs. Slucker and Budilov will be compensated at annual rates of $100,000
and $200,000, respectively, under agreements that are effective as of the
effective date of this Offering.

(2) Fiscal 1996 consisted of approximately 11 months.

(3) Include payments for medical insurance, disability insurance and auto
insurance. Also includes $17,106 for automobile allowance.

(4) Represents payment for life insurance.

No options were deemed to be granted to the Chief Executive Officer or other
named executive officers of the Company during the period from April 1, 1996
through March 31, 1997.

No stock options were exercised by the Chief Executive Officer or other
named executive officers of the Company. The following table sets forth certain
information regarding unexercised options held by the Chief Executive Officer
and other named executive officers of the Company at March 31, 1997.

AGGREGATED OPTION EXERCISES THROUGH MARCH 31, 1997

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
OPTIONS AT MARCH 31, 1997 MARCH 31, 1997($)(1)
---------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------- ---------------------------- -------------------------
<S> <C> <C>
Rudy A. Slucker, Chairman of the Board of Directors..... 54,833/0 $ 315,290/0(2)
Barry Budilov, President and Chief Executive Officer.... 54,833/0 $ 315,290/0
</TABLE>

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

(1) Assuming a value of $6 per share.

(2) Does not include an option to purchase 500,000 shares of Common Stock for
$6.00 per share granted personally by Mr. Budilov to Mr. Slucker.

STOCK OPTION PLAN

On November 12, 1997, the Board of Directors and the stockholders of the
Company adopted the 1997 Employee Stock Option Plan ("Plan") and reserved
150,000 shares of Common Stock for issuance thereunder. The Plan provides for
the granting to employees (including employees who are also directors and
officers) of options intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), and for the granting of nonstatutory stock options to employees,
consultants and independent contractors. The Plan is currently administered by
the entire Board of Directors of the Company. The Plan terminates on June 5,
2007 unless terminated earlier by the Company's Board of Directors.

32
<PAGE>
The exercise price per share of incentive stock options granted under the
Plan must be at least equal to the fair market value of the Common Stock on the
date of grant. In addition, in accordance with the Underwriting Agreement
relating to this Offering, the Company has agreed not to grant any options under
the Plan with an exercise price per share less than the initial public offering
price of the Common Stock. With respect to any participant who owns shares
representing more than 10% of the voting power of all classes of the Company's
outstanding capital stock, the exercise price of any incentive or nonstatutory
stock option must be equal to at least 110% of the fair market value on the
grant date, and the maximum term of the option must not exceed five years. The
terms of all other options granted under the Plan may not exceed ten years. Upon
a merger of the Company, the options outstanding under the Plan will terminate
unless assumed or substituted by the successor corporation. To date, no options
have been granted under the Plan.

33
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

On May 3, 1995, the Company was formed by Rudy A. Slucker, the Company's
current Chairman of the Board of Directors, and Barry Budilov, the current
President and Chief Executive Officer of the Company, at which time each of Mr.
Slucker and Budilov were issued 1,750,000 (giving effect to the 1,166.667 for
one stock split) shares of Common Stock for $.0003 per share and, as of such
date, were each granted options to acquire 54,833 shares of Common Stock at an
exercise price of $.25 per share.

On May 10, 1995, the Company acquired from Chanuk, the predecessor to the
Company, substantially all of the assets of Chanuk valued at approximately $6
million and assumed an aggregate of approximately $5.7 million of liabilities of
the business of Chanuk. The Company acquired Chanuk for approximately $700,000,
which amount was determined by negotiation between the shareholders of Chanuk
and the Company based primarily on the perceived net asset value of Chanuk at
the time. The assumed liabilities included indebtedness of Chanuk to Mr. Slucker
of approximately $508,000. In addition, Daniel Messinger, an uncle of Mr.
Budilov's wife, was repaid $250,000 in debt from the proceeds of the sale.
Chanuk, a company engaged in the wholesale sale and distribution of eyewear, was
a company owned approximately 10% by a partnership controlled by Rudy A. Slucker
and 74% by the mother-in-law of Barry Budilov. Chanuk was incorporated in
Pennsylvania on December 3, 1965 and commenced its eyewear business in 1980. The
above $700,000 purchase price was represented by the issuance by Messrs. Budilov
and Slucker of promissory notes in the principal amount of $343,500 each to
Chanuk.

In consideration of the issuance of promissory notes to Chanuk, the Company
issued promissory notes for $343,500 to each of Rudy A. Slucker and Barry
Budilov. In addition, on May 8, 1995, the $508,000 in debt previously owed from
Chanuk to Mr. Slucker was assumed by the Company and took the form of a
promissory note. All three obligations are represented by demand promissory
notes that bear interest at 8% per annum.

The Company's indebtedness includes approximately $1.18 million in principal
and interest, payable to Mr. Slucker and Mr. Budilov under the 8% Convertible
Notes. The Convertible Notes are repayable at 8% per annum, subject to
restrictions contained in the Company's loan agreement with CoreStates Bank, on
March 31, 2000. Interest accrues and is payable quarterly at the rate of 8% per
annum. If the Company has earnings equal to or in excess of $.60 per share for
the year ending March 31, 1999, the Convertible Notes may be prepaid at the
option of the holder commencing on March 31, 1999. The Convertible Notes may be
converted at any time into shares of Common Stock at the initial public offering
price per share. The Company's revolving line of credit with CoreStates Bank
restricts the payment of dividends to stockholders and provides for a variety of
conditions of default, including the continuing participation of Rudy A. Slucker
and Barry Budilov in their current management positions.

Upon consummation of the acquisition of Chanuk, in May 1995, the Company
entered into a Consulting Agreement with Chanuk. The agreement became effective
on May 10, 1995 and terminates on May 9, 2005. Pursuant to the agreement, two
prior officers of Chanuk who are relatives of Mr. Budilov provided advisory and
consulting services to the Company on behalf of Chanuk, for which Chanuk
received the sum of $26,000 per year, which was to be payable over a ten year
period in installments of $500 per week. The time and effort devoted to the
Company on a weekly basis did not exceed five hours per week. The Company also
entered into a consulting agreement with Central City Optical, Inc. ("Central
City"), a company owned by Daniel Messinger (one of the relatives referred to
above) pursuant to the same terms as set forth above, which agreement will
continue in effect until May 9, 2005. In addition, in November 1997, Chanuk
assigned its rights and obligations under its consulting agreement to Central
City. Mr. Messinger provides consulting services to the Company on behalf of
Central City.

In June 1996, the Company acquired substantially all of the assets of
Windsor (the "Windsor Acquisition"). In connection with the Windsor Acquisition,
the Company acquired trademark licenses with Kenneth Jay Lane and John Lennon,
among others. The aggregate consideration for the Windsor Acquisition was
$550,000, including $100,000 in cash and two promissory notes, payable to
Windsor, in the

34
<PAGE>
aggregate principal amount of $450,000. Kenneth Kitnick, who subsequently became
an officer of the Company, was an officer and principal shareholder of Windsor.

Upon consummation of the Windsor Acquisition, the Company entered into an
employment agreement with Kenneth Kitnick and a consulting agreement with Jay
Kitnick. Jay Kitnick is the father of Kenneth Kitnick. The three-year consulting
agreement with Jay Kitnick provides for 36 monthly payments of $6,944 commencing
on June 20, 2004. The agreement contains a non-compete provision prohibiting Jay
Kitnick from directly or indirectly competing with the Company for a period of
three years from June 26, 1996. See "Management--Executive Compensation"

In February 1997, the Company acquired from Summit Bank (the "Bank"),
pursuant to a Collateral Sale Agreement (the "Renaissance Acquisition"),
substantially all of the assets of Renaissance. The Bank had acquired the assets
of Renaissance in a foreclosure proceeding instituted by the Bank. The aggregate
consideration paid to the Bank for Renaissance was $3,446,000. Edward Kauz, who
had a right to become a Vice Chairman of the Board of the Company was an
officer, principal stockholder and significant shareholder of a debtor to
Renaissance.

Mr. Kauz remains the sole stockholder of Renaissance. At the time that the
Company acquired the assets of Renaissance, a company 50% owned by Mr. Kauz owed
Renaissance $2.8 million which receivable had been written down to no value at
the time of the acquisition of Renaissance. The Company has entered into a
five-year consulting agreement with Edward Kauz which became effective on
February 27, 1997. The agreement provides for aggregate payments to Mr. Kauz of
$200,000 subject to certain conditions set forth in a supplemental agreement,
dated February 27, 1997. In addition, under an amendment to such agreement dated
as of June 30, 1997, Mr. Kauz waived his right to serve as Vice Chairman of the
Board of Directors and was granted as of February 27, 1997 a five-year option to
purchase 180,833 shares of Common Stock for five years for $3.00 per share.

In connection with the revolving loan facility from CoreStates Bank to the
Company, each of Rudy Slucker and Barry Budilov, and their respective spouses,
have provided personal guarantees of no more than $1.1 million each, securing
the Company's indebtedness which amounts may be increased by $375,000 each on
February 20, 1998, under certain circumstances.

From February 4, 1997 through February 1, 1998, in connection with, and to
assist the Company in financing its costs related to the acquisition of
substantially all of the assets of Renaissance and the integration of the
business of Renaissance into the business of the Company and for working
capital, Rudy A. Slucker loaned the Company $576,000, payable upon demand with
interest at 8% per annum. This loan will be repaid from the proceeds of this
Offering.

In July 1997, Messrs. Budilov and Slucker entered into an agreement with the
landlord of the Company's facility to purchase such facility. In anticipation of
such purchase, Messrs. Budilov and Slucker have also entered into an agreement
to rent such facility to the Company at substantially the same terms and
conditions set forth in the Company's current lease.

In January 1998, Mr. Budilov granted to Mr. Slucker an option to purchase
500,000 shares of Common Stock owned by Mr. Budilov for $6.00 per share.

Management believes that each of the above transactions was made pursuant to
terms no less favorable than the terms reasonably expected in third-party,
unaffiliated transactions.

35
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 1997, and
as adjusted to reflect the sale of the Shares offered hereby, by: (i) each of
the Company's directors and executive officers; (ii) each person who is known to
the Company to own beneficially more than 5% of the Company's shares of Common
Stock; and (iii) all directors and executive officers of the Company as a group.
Unless otherwise indicated, the persons named in this table have sole voting and
investment power with respect to the shares of Common Stock shown as
beneficially owned by them and have an address, care of the Company, of 3600
Marshall Lane, Bensalem, Pennsylvania 19020. Under the rules of the Securities
and Exchange Commission, a person is deemed to be a "beneficial" owner of
securities if he or she has or shares the power to vote or direct the voting of
such securities or the power to dispose or direct the disposition of such
securities. A person is also deemed to be a beneficial owner of any securities
of which that person has the right to acquire beneficial ownership within 60
days. More than one person may be deemed to be a beneficial owner of the same
securities.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------- ---------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Rudy A. Slucker(1)(2)(3)............................... 2,444,500 66.17% 2,444,500 49.94%
Barry Budilov(3)....................................... 1,862,000 51.55% 1,862,000 38.69%
Kenneth Kitnick(4)..................................... 151,667 4.15% 151,667 3.13%
Raymond Green.......................................... 0 -- 0 --
Jay Rice............................................... 0 -- 0 --
Jeffrey Seiken......................................... 0 -- 0 --
All directors and executive officers as a group
(6 persons)(1)(3)(4)................................. 3,958,167 100.00% 3,958,167 76.74%
</TABLE>

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

(1) Includes 225,000 shares of Common Stock held in the names of Mr. Slucker's
wife and two children over which Mr. Slucker disclaims beneficial ownership.

(2) Also includes an option to purchase 500,000 shares granted to Mr. Slucker
from Barry Budilov.

(3) Includes (i) options to acquire 54,833 shares of Common Stock held by each
of Mr. Slucker and Mr. Budilov and (ii) 57,167 shares of Common Stock for
Mr. Budilov and 139,667 shares of Common Stock for Mr. Slucker issuable upon
the conversion of the Convertible Notes. See "Description of Securities."

(4) Includes options to acquire 151,667 shares of Common Stock of the Company.

Commencing 90 days after the completion of this Offering each of Mr. Slucker
and Mr. Budilov intend to donate up to 47,000 shares of Common Stock each, every
90 days (not to exceed 150,000 shares of Common Stock each), to the Slucker
Family Foundation, a charitable foundation over which Mr. Slucker will be a
controlling person. The Common Stock donated to the foundation will not be
subject to a lock-up agreement with the Underwriters.

36
<PAGE>
DESCRIPTION OF SECURITIES

The authorized capital stock of the Company is 21,000,000 consisting of
20,000,000 shares of Common Stock, $.01 par value and 1,000,000 shares of
Preferred Stock, $.01 par value. As of the date of this Prospectus, 3,500,000
shares of Common Stock are outstanding and held of record by five stockholders.
Upon the completion of this Offering there will be 4,700,000 shares of Common
Stock outstanding (4,880,000 if the Underwriter's over-allotment option is
exercised in full).

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock without further stockholder approval. The
Preferred Stock may be divided into such classes or series as the Board of
Directors may determine by resolution. The Board of Directors is authorized to
determine and fix the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock , including
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices and liquidation preferences and to fix the number of shares of
any series of Preferred Stock and the designation of any such series of
Preferred Stock. Currently no shares of Preferred Stock are outstanding.

COMMON STOCK

The holders of the shares of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Subject
to preferences that may be applicable to any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of the funds
legally available for the payment of dividends. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, subject to the
liquidation preferences of Preferred Stock, the holders of Common Stock are
entitled to receive any declared and unpaid dividends, in addition to being
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences of any then outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights to convert their Common Stock
into any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock.

All outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable, and the shares of Common Stock
issued upon completion of this Offering have been duly authorized and, when
issued, will be fully paid and non-assessable.

TRANSFER AGENT AND REGISTRAR

The transfer agent registrar for the Shares is the Continental Stock
Transfer & Trust Company, Two Broadway, New York, New York 10004.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made as to the effect, if any, that
market sales of Shares or the availability of such Shares will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market price of the Common Stock and
the ability of the Company to raise capital through a sale of equity securities.

Upon the closing of the Offering, the Company will have 4,700,000 (4,880,000
if the Underwriters' over allotment option is exercised in full) shares of
Common Stock outstanding. Of those shares, the 1,200,000 Shares sold in the
Offering (1,380,000 Shares if the Underwriters' over-allotment option is

37
<PAGE>
exercised in full) will be freely tradable without restriction, except as to
affiliates of the Company, or further registration under the Securities Act. The
remaining Shares held by existing stockholders are "restricted securities"
within the meaning of Rule 144 promulgated under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption contained in
Rule 144. Rule 701 under the Securities Act provides that Common Stock acquired
on the exercise of options granted under a written compensatory plan of the
Company or contract with the Company prior to the date of this Prospectus may be
resold by persons, other than Affiliates, beginning 90 days after the date of
this Prospectus, subject only to the manner of sale provisions of Rule 144, and
by affiliates, as such term is defined under Rule 144, without compliance with
the one-year minimum holding period contained in Rule 144, subject to certain
limitations. There are 529,333 shares of Common Stock issuable upon the exercise
of outstanding options (the "Option Shares"). Beginning 90 days after the date
of this Prospectus, all of the Option Shares would be eligible for sale in
reliance on Rule 701.

In general, under Rule 144(e), as currently in effect, a stockholder (or
stockholders whose shares are aggregated), including an affiliate, who has
beneficially owned for at least one year shares of Common Stock that are treated
as "restricted securities," would be entitled to sell publicly, within any
three-month period, up to the greater of 1% of the then outstanding shares of
Common Stock (47,000 shares immediately after the completion of this offering)
or the average weekly reported trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of sale is given,
provided certain requirements are satisfied. In addition, affiliates of the
Company must comply with additional requirements of Rule 144 in order to sell
shares of Common Stock (including shares acquired by affiliates in this
Offering). Under Rule 144, a stockholder deemed not to have been an affiliate of
the Company at any time during the 90 days preceding a sale by him, and who has
beneficially owned for at least two years shares of Common Stock that are
treated as "restricted securities," would be entitled to sell those shares
without regard to the foregoing requirements. Since all outstanding shares of
Common Stock have been held for at least one year and are not subject to the
above described restriction on sale, they will be eligible for immediate sale
without restriction in the public market.

The holders of the Representatives' Warrant will also have certain demand
and incidental registration rights with respect to the Representatives' Warrant
and the 120,000 shares of Common Stock underlying the Warrants commencing after
the date of this Prospectus.

The Company and each of its directors, officers and stockholders have agreed
with the Underwriter that they will not offer, assign, issue, sell, hypothecate
or otherwise dispose of any Shares or any securities exercisable for or
convertible into shares of Common Stock, other than with respect to up to
300,000 shares of Common Stock, for a period of 18 months after the date of this
Prospectus without the prior written consent of the Representatives. See
"Underwriting."

38
<PAGE>
UNDERWRITING

The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement between the Company, H.J. Meyers & Co.,
Inc. and National Securities Corporation, as Representatives of the
Underwriters, to purchase from the Company the number of Shares set forth
opposite their names on a "firm commitment" basis. The 10% underwriting discount
set forth on the cover page of this Prospectus will be allowed to the
Underwriters at the time of delivery to the Underwriters of the Shares so
purchased

<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME OF UNDERWRITER PURCHASED
- --------------------------------------------------------------------------------- ----------
<S> <C>
H.J. Meyers & Co., Inc........................................................... 500,000
National Securities Corporation.................................................. 400,000
Frederick & Company, Inc......................................................... 75,000
LaSalle St. Securities, Inc...................................................... 75,000
Redwine & Company Inc............................................................ 75,000
Smith, Moore & Co................................................................ 75,000
----------
TOTAL.................................................................... 1,200,000
----------
----------
</TABLE>

The Underwriters have advised the Company that they propose to offer the
Shares to the public at the initial public offering price set forth on the front
cover page of this Prospectus, and at such price less a concession not in excess
of $.30 per share of Common Stock to certain dealers who are members of the
National Association of Securities Dealers, Inc., of which the Underwriters may
allow and such dealers may reallow concessions not in excess of $.10 per share
of Common Stock to certain other dealers. The public offering price and
concession and discount may be changed by the Underwriters after the initial
public offering.

The Company has granted to the Underwriters an over-allotment option
expiring at the close of business on the 45th day subsequent to the date of this
Prospectus, to purchase up to an additional 180,000 Shares at the public
offering price, less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to satisfy
over-allotments in the sale of the Shares.

The Company has agreed to pay to the Representatives a non-accountable
expense allowance equal to 3% of the total proceeds of this Offering, or
$216,000 (and 3% of the total proceeds from the sale of any shares of Common
Stock pursuant to the exercise of the over-allotment option, or $248,400 if the
Underwriters exercise the over-allotment option in full). In addition to the
Underwriters' commissions and the Representatives' expense allowance, the
Company is required to pay the costs of qualifying the shares of Common Stock
under federal and state securities laws, together with legal and accounting
fees, printing and other costs in connection with this Offering.

At the closing of this Offering, the Company will issue to the
Representatives, for nominal consideration, the Representatives' Warrant to
purchase up to 120,000 shares of Common Stock of the Company (also referred to
herein as the "Representatives' Warrants"). The shares of Common Stock subject
to the Representatives' Warrant are identical to the shares of Common Stock sold
to the public, except for the purchase price and certain registration rights.
The Representatives' Warrants will be exercisable for a four-year period
commencing one year from the date of this Prospectus, at an exercise price of
$9.30 per share of Common Stock (that being 155% of the initial public offering
price per share of Common Stock). The Representatives' Warrants will be
restricted from sale, assignment, pledge or hypothecation prior to their initial
exercise date except to successors in interest to the Representatives and/or one
or more officers of the Representatives.

39
<PAGE>
The Representatives' Warrants will contain anti-dilution provisions
providing for appropriate adjustment in the event of any recapitalization,
reclassification, stock dividend, stock split or similar transactions. The
Representatives' Warrants does not entitle the Representatives to any rights as
stockholders of the Company until such warrants are exercised and the shares of
Common Stock are purchased thereunder.

The Representatives' Warrants and the shares of Common Stock issuable
thereunder may not be offered for sale to the public except in compliance with
the applicable provisions of the Securities Act. The Company has agreed that if
it causes a post-effective amendment to the Registration Statement of which this
Prospectus is a part, or a new registration statement or offering statement
under Regulation A, to be filed with the Securities and Exchange Commission
("Commission"), the Representatives shall have the right during the life of the
Representatives' Warrant to include therein for registration the
Representatives' Warrants and/or the shares of Common Stock issuable upon their
exercise at no expense to the Representatives. Additionally, the Company has
agreed that, upon demand by the holder(s) of at least 50% of the (i) total
unexercised Representatives' Warrants and (ii) shares of Common Stock issued
upon the exercise of the Representatives' Warrants, made on no more than two
separate occasions during the exercise period of the Representatives' Warrants,
the Company shall use its best efforts to register the Representatives' Warrants
and/or any of the shares of Common Stock issuable upon the exercise thereof,
provided that the Company has available current financial statements, the
initial such registration to be at the Company's expense and the second at the
expense of the holder(s).

For the period during which the Representatives' Warrants are exercisable,
the holder(s) will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other stockholders of the Company. The holder(s) of the Representatives'
Warrants can be expected to exercise the warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital from an offering
of its unissued Common Stock on terms more favorable to the Company than those
provided for in the Representatives' Warrants. Such facts may materially
adversely affect the terms on which the Company can obtain additional financing.

The Company has agreed to enter into a one year consulting agreement with
H.J. Meyers, pursuant to which H.J. Meyers will act as financial consultant to
the Company, commencing upon the closing date of this Offering. Under the terms
of this agreement, H.J. Meyers, to the extent reasonably required in the conduct
of the business of the Company and at the prior written request of the President
of the Company, has agreed to evaluate the Company's managerial and financial
requirements, assist in the preparation of budgets and business plans, advise
with regard to sales planning and sales activities, and assist in financial
arrangements. H.J. Meyers will make available qualified personnel for this
purpose. The non-refundable consulting fee of $60,000 will be payable, in full,
on the closing date of this Offering.

The Company has agreed that it will engage a public relations firm
acceptable to the Representatives and the Company. The Company also has agreed
to maintain a relationship with such public relations firm for minimum period of
two years and on such other terms as are acceptable to the Reprsentatives.

The Company has also agreed that, for a period of two years from the closing
of this Offering, if it participates in any merger, consolidation or other
transaction which H.J. Meyers has brought to the Company (including an
acquisition of assets or stock for which it pays, in whole or in part, with
shares of the Company's Common Stock or other securities), which transaction is
consummated within three years of the closing of this Offering, then it will pay
for H.J. Meyers' services an amount equal to 5% of the first $3 million of value
paid or value received in the transaction, 3% of any consideration above $3
million and less than $5 million and 2% of any consideration in excess of $5
million. The Company has also agreed that if, during this two-year period,
someone other than H.J. Meyers brings such a merger, consolidation, or other
transaction to the Company, and if the Company in writing retains H.J. Meyers
for consultation or other services in connection therewith, than upon
consummation of the transaction the Company will pay to H.J. Meyers as a fee the
appropriate amount as set forth above or as otherwise agreed to between the
Company and H.J. Meyers.

40
<PAGE>
The Company has agreed that for a period of 18 months from the date of this
Prospectus the Company will not sell or otherwise dispose of any securities
without the prior written consent of the Respresentatives, which consent shall
not be unreasonably withheld, with the exception of shares of Common Stock
issued pursuant to the exercise of options, warrants or other convertible
securities outstanding prior to the date of this Prospectus. The Company will
not sell or issue any securities pursuant to Regulation S under the Securities
Act without the Respresentatives' prior written consent.

The Company's officers, directors and 5% shareholders have agreed that for a
period of 18 months from the date of this Prospectus they will not offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock acquired
prior to this Offering, other than up to 300,000 shares of Common Stock, without
the prior written consent of the Representatives.

For a period of 36 months from the closing of this Offering, the
Representatives are entitled to designate one member as a nominee for election
to the Company's Board of Directors. Rudy A. Slucker and Barry Budilov have
agreed to vote their shares in favor of such nominee. If the Representatives
elect not to nominate a Board of Directors Member, then they shall have the
right to select a person to act as an observer to attend all meetings of the
Board of Directors. The Company has agreed to hold at least four meetings and to
indemnify the Representatives' observer against any claims arising out of his
participating at meetings.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Act.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

The offering price of the securities being offered hereby was determined by
negotiation between the Company and the Representatives. Factors considered in
determining such price include the history of and the prospects for the industry
in which the Company competes, the past and present operations of the Company,
the future prospects of the Company, the ability of the Company's management,
the earnings, net worth and financial condition of the Company and the general
condition of the securities markets at the time of this Offering.

The Company previously paid a non-refundable fee of $35,000 to another
underwriter which is no longer participating in the Offering.

On July 16, 1996, the NASD issued a Notice of Acceptance, Waiver and Consent
(the "AWC") whereby H.J. Meyers was censured and ordered to pay fines and
restitution to retail customers in the amount of $250,000 and approximately
$1.025 million, respectively. The AWC was issued in connection with claims by
the NASD that H.J. Meyers charged excessive markups and markdowns in connection
with the trading of four securities originally underwritten by H.J. Meyers. The
activities in question occurred between December 1990 and October 1993. H.J.
Meyers has informed the Company that the fines and refunds will not have a
material adverse effect on H.J. Meyers' operations and that H.J. Meyers has
effected remedial measures to help ensure that the subject conduct does not
recur. Additionally, the Chicago office of the Securities and Exchange
Commission is conducting a private, nonpublic investigation of H.J. Meyers
pursuant to a Formal Order of Investigation issued by the SEC as to whether H.J.
Meyers may have violated applicable securities laws and the rules and
regulations thereunder, with respect to sales of certain securities.

41
<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock will be passed upon by Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, a Professional Corporation, Newark, New
Jersey. Certain legal matters in connection with this Offering will be passed
upon for the Underwriters by Harter, Secrest & Emery, LLP, Rochester, New York.

EXPERTS

The financial statements of the Company as at March 31, 1997 and for the
period from May 3, 1995 (Inception) to March 31, 1996 and for the year ended
March 31, 1997, and the financial statements of Renaissance as at October 31,
1996 and for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Richard A. Eisner & Company, LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

The financial statements of Renaissance for the year ended October 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
J.H. Cohn LLP, independent public accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
SB-2 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Shares offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to herein are not necessarily complete and, where
such contract or other document is filed as an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions in
such exhibit, to which reference is hereby made. Copies of the Registration
Statement may be inspected without charge at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or at the
Regional Offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60604 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of all or any portion of the
Registration Statement can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission.

Prior to the date of this Prospectus, the Company was not subject to the
information requirements of the Exchange Act. Upon the effectiveness of the
Registration Statement, the Company will be subject to certain of the
informational requirements of the Exchange Act and, in accordance therewith,
will file periodic reports and other information with the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of the reports and
information so filed can be obtained from the Public Reference Section of the
Commission upon payment of certain fees prescribed by the Commission.

The Commission maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission that can be electronically examined. The address of the Commission's
Web site is http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and with such other periodic reports as
the Company may from time to time deem appropriate or as may be required by law.

42
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PRO FORMA:
Pro Forma Unaudited Condensed Statement of Operations for the Year Ended March 31,
1997............................................................................. F-2
HISTORICAL:
AMBASSADOR EYEWEAR GROUP, INC.
Report of Independent Auditors..................................................... F-3
Balance Sheet as at March 31, 1997 and December 31, 1997 (unaudited)............... F-4
Statements of Operations for the Period from May 3, 1995 (Inception) through March
31, 1996, for the Year Ended March 31, 1997 and for the nine-month periods
(unaudited) ended December 31, 1996 and 1997..................................... F-5
Statements of Changes in Stockholders' Equity for the Period from May 3, 1995
(Inception) through March 31, 1996, for the Year Ended March 31, 1997 and for the
nine months ended December 31, 1997 (unaudited).................................. F-6
Statements of Cash Flows for the Period from May 3, 1995 (Inception) through March
31, 1996, for the Year Ended March 31, 1997 and for the nine-month periods
(unaudited) ended December 31, 1996 and 1997..................................... F-7
Notes to Financial Statements...................................................... F-8
RENAISSANCE EYEWEAR, INC.
Report of Independent Auditors..................................................... F-20
Report of Independent Public Accountants........................................... F-21
Statement of Assets, Liabilities and Capital Deficiency Preceding the Bank Taking
Possession of the Assets as at October 31, 1996.................................. F-22
Statements of Operations Preceding the Bank Taking Possession of the Assets for the
Years Ended October 31, 1995 and October 31, 1996................................ F-23
Statements of Changes in Stockholders' Equity (Capital Deficiency) for the Years
Ended October 31, 1995 and October 31, 1996...................................... F-24
Statements of Cash Flows Preceding the Bank Taking Possession of the Assets for the
Years ended October 31, 1995 and October 31, 1996................................ F-25
Notes to Financial Statements...................................................... F-26
</TABLE>

F-1
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED MARCH 31, 1997

(IN THOUSANDS EXCEPT PER SHARE DATA)

The following pro forma unaudited condensed statement of operations reflects
the acquisitions of Windsor Optical, Inc. ("Windsor") and Renaissance Eyewear
Inc. ("Renaissance") as if such transactions had occurred on April 1, 1996. The
acquisitions have been accounted for as purchases in accordance with Accounting
Principles Board Opinion No. 16. In the opinion of management of the Company,
all adjustments necessary to present fairly such pro forma statements of
operations have been made.

This pro forma condensed statement of operations should be read in
conjunction with the notes thereto, the financial statements of the Company and
of Renaissance and the related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," each included
elsewhere in this Prospectus. The pro forma condensed statement of operations is
presented for informational purposes only and is not necessarily indicative of
what the actual results of operations would have been had the transactions
occurred at April 1, 1996, nor do they purport to indicate the results of future
operations.

The Ambassador column presents results of operations of Ambassador for the
full year ended March 31, 1997 which includes the operations of Windsor and
Renaissance from their respective dates of acquisition, June 26, 1996 and
February 26, 1997. The Windsor and Renaissance columns present respectively,
their separate unaudited results of operations for the portion of the year ended
March 31, 1997 prior to their dates of acquisition.

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------
<S> <C> <C> <C> <C> <C>
RENAISSANCE WINDSOR PRO FORMA
AMBASSADOR ELEVEN MONTHS THREE MONTHS RESULTS
YEAR ENDED ENDED ENDED YEAR ENDED
MARCH 31, FEBRUARY 28, JUNE 30, PRO FORMA MARCH 31,
1997 1997 1996 ADJUSTMENTS 1997
------------- -------------- ----------------- ----------- -----------
Net sales................................. $ 16,455 $ 11,705 $ 969 $ 29,129
Cost of sales............................. 8,552 6,060 479 15,091
------------- -------------- ----- -----------
Gross profit.............................. 7,903 5,645 490 14,038
Selling, general and administrative
expenses................................ 6,145 6,522 392 $ (332)(A) 12,727
------------- -------------- ----- ----------- -----------
Income (loss) from operations............. 1,758 (877) 98 332 1,311
Interest expense (net).................... 738 337 23 8(A) 1,106
Writedown in connection with bank taking
possession of assets.................... 7,054 (7,054)(B) -0-
------------- -------------- ----- ----------- -----------
Income (loss) before taxes................ 1,020 (8,268) 75 7,378 205
Income tax expense (benefit).............. 340 (475) 25 179(A) 69
------------- -------------- ----- ----------- -----------
NET INCOME (LOSS)......................... $ 680 $ (7,793) $ 50 $ 7,199 $ 136
------------- -------------- ----- ----------- -----------
------------- -------------- ----- ----------- -----------
Basic income per share.................... $ .19 $ .04
------------- -----------
------------- -----------
Diluted income per share (C).............. $ .18 $ .04
------------- -----------
------------- -----------
Weighted average shares outstanding--basic
income per share........................ 3,500 3,500
------------- -----------
------------- -----------
Weighted average shares
outstanding--diluted income per share
(D)..................................... 3,836 3,836
------------- -----------
------------- -----------
</TABLE>

- ------------------------
Notes:

(A) Expense adjustments (for depreciation and amortization of deferred credit)
for the period ended March 31, 1997 to reflect the acquisitions as if they
had taken place April 1, 1996 and the related tax effect.

(B) Elimination of loss resulting from bank taking possession of and selling all
of the assets of Renaissance. The bank took possession of assets with a book
value of $10,500 in connection with a default on bank debt of $3,446.

(C) Pursuant to the Commission's Staff Accounting Bulletin No. 98, potential
common shares issued at prices below the anticipated public offering price
during the twelve months preceding the initial filing date of the
registration statement have been included in the calculation of diluted
income per share in a manner similar to a stock split or stock dividend.

(D) See calculation of weighted average number of shares outstanding in the
Statement of Operations for the year ended March 31, 1997.

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Ambassador Eyewear Group, Inc.
Bensalem, Pennsylvania

We have audited the accompanying balance sheet of Ambassador Eyewear Group,
Inc. as at March 31, 1997 and the related statements of operations, changes in
stockholders' equity and cash flows for the period from May 3, 1995 (inception)
through March 31, 1996 and for the year ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Ambassador Eyewear Group, Inc.
at March 31, 1997 and the results of its operations and its cash flows for the
period from May 3, 1995 (inception) through March 31, 1996 and for the year
ended March 31, 1997 in conformity with generally accepted accounting
principles.

Richard A. Eisner & Company, LLP

New York, New York
June 12, 1997

With respect to
Notes G and I[1]
June 30, 1997

F-3
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash............................................................................. $ 75,000 $ 90,000
Accounts receivable, less allowance for returns and doubtful accounts of
$2,394,000 and $1,866,000...................................................... 7,403,000 9,732,000
Inventories...................................................................... 11,508,000 11,749,000
Prepaid expenses................................................................. 175,000 103,000
Deferred taxes................................................................... 586,000 526,000
Other current assets............................................................. 4,000 19,000
------------- -------------
Total current assets........................................................... 19,751,000 22,219,000
Fixed assets, net of accumulated depreciation of $276,000 and $447,000............. 744,000 792,000
Deferred financing cost............................................................ 119,000 80,000
Deferred offering costs............................................................ 437,000
Other assets....................................................................... 42,000 42,000
------------- -------------
TOTAL........................................................................ $ 20,656,000 $ 23,570,000
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--banks............................................................. $ 12,098,000 $ 13,095,000
Notes payable--stockholders/officers............................................. 280,000 470,000
Loans from stockholders/officers................................................. 63,000
Current portion of long-term debt................................................ 96,000 101,000
Accounts payable................................................................. 4,242,000 4,358,000
Accrued expenses................................................................. 808,000 1,579,000
Income taxes payable............................................................. 544,000 868,000
Current portion of capital leases payable........................................ 69,000 105,000
------------- -------------
Total current liabilities...................................................... 18,137,000 20,639,000
Consulting payable................................................................. 29,000 61,000
Long-term debt, less current portion............................................... 319,000 242,000
Notes payable--stockholders/officers............................................... 1,181,000 1,181,000
Capital leases payable, less current portion....................................... 90,000 128,000
Deferred taxes..................................................................... 41,000 18,000
Deferred credit, net............................................................... 836,000 761,000
------------- -------------
Total liabilities.............................................................. 20,633,000 23,030,000
------------- -------------
Commitments, contingencies and other matters
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 1,000,000 shares; none
issued
Common stock, par value $.01 per share; authorized 10,000,000 shares; issued and
outstanding 3,500,000 shares................................................... 35,000 35,000
Additional paid-in capital....................................................... 187,000 187,000
Unearned portion of compensatory stock options................................... (184,000) (156,000)
Retained earnings (accumulated deficit).......................................... (15,000) 474,000
------------- -------------
Total stockholders' equity..................................................... 23,000 540,000
------------- -------------
TOTAL........................................................................ $ 20,656,000 $ 23,570,000
------------- -------------
------------- -------------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-4
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------
1996 1997 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Net sales........................................... $ 11,005,000 $ 16,455,000 $ 11,722,000 $ 17,492,000
Cost of sales....................................... 6,826,000 8,552,000 6,103,000 7,895,000
------------- ------------- ------------- -------------
Gross profit........................................ 4,179,000 7,903,000 5,619,000 9,597,000
Selling, general and administrative expenses........ 4,258,000 6,145,000 4,513,000 7,865,000
------------- ------------- ------------- -------------
Income (loss) from operations....................... (79,000) 1,758,000 1,106,000 1,732,000
Interest income..................................... 4,000 4,000
Interest (expense).................................. (474,000) (742,000) (442,000) (972,000)
------------- ------------- ------------- -------------
Income (loss) before provision for income taxes..... (553,000) 1,020,000 668,000 760,000
Income tax provision (benefit)...................... (254,000) 340,000 300,000 271,000
------------- ------------- ------------- -------------
NET INCOME (LOSS)................................... $ (299,000) $ 680,000 $ 368,000 $ 489,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic income (loss) per share....................... $ (.09) $ .19 $ .11 $ .14
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted income (loss) per share..................... $ (.08) $ .18 $ .10 $ .13
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding--basic income (loss) per share........ 3,500,000 3,500,000 3,500,000 3,500,000
Effect of potential common shares................... 90,000 336,000 326,000 364,000
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding--diluted income (loss) per share...... 3,590,000 3,836,000 3,826,000 3,864,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-5
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNEARNED
COMMON STOCK PORTION OF RETAINED
-------------------------- ADDITIONAL COMPENSATORY EARNINGS TOTAL
NUMBER OF PAID-IN STOCK (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL OPTIONS DEFICIT) EQUITY
------------ ------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>

Issuance of common stock............. 3,500,000 $ 35,000 $ (34,000) $ 1,000

Acquisition of Chanuk................ (362,000) (362,000)

Net loss for the period May 3, 1995
(inception) through March 31,
1996............................... (299,000) (299,000)

Balance--March 31, 1996.............. 3,500,000 35,000 (695,000) (660,000)

Fair value of options granted........ $ 187,000 $ (184,000) 3,000

Net income for the year.............. 680,000 680,000
------------ ------------ ---------- ------------- ------------ ------------

Balance--March 31, 1997.............. 3,500,000 $ 35,000 $ 187,000 $ (184,000) $ (15,000) $ 23,000

Amortization of unearned portion of
compensatory stock options......... 28,000 28,000

Net income for the nine months....... 489,000 489,000
------------ ------------ ---------- ------------- ------------ ------------

BALANCE--DECEMBER 31, 1997
(unaudited)........................ 3,500,000 $ 35,000 $ 187,000 $ (156,000) $ 474,000 $ 540,000
------------ ------------ ---------- ------------- ------------ ------------
------------ ------------ ---------- ------------- ------------ ------------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-6
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------------
1996 1997 1996 1997
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)........................................... $ (299,000) $ 680,000 $ 368,000 $ 489,000
Adjustments to reconcile net income (loss) to net cash (used
in) operating activities:
Depreciation............................................ 110,000 175,000 120,000 160,000
Amortization of deferred financing costs................ 127,000 71,000 36,000 39,000
Amortization of deferred credit......................... (8,000) (75,000)
Deferred taxes.......................................... (372,000) 173,000 (133,000) 36,000
Compensatory stock option............................... 3,000 28,000
Loss on disposal of assets.............................. 94,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............ 57,000 (3,992,000) (2,212,000) (2,329,000)
(Increase) in inventories............................. (1,550,000) (1,364,000) (1,239,000) (241,000)
Decrease in prepaid expenses.......................... 222,000 98,000 172,000 72,000
(Increase) decrease in other assets................... (153,000) 173,000 172,000 (15,000)
Increase (decrease) in accounts payable............... 28,000 252,000 (80,000) 116,000
Increase in consulting payable........................ 29,000 19,000 32,000
Increase in accrued expenses.......................... 302,000 106,000 343,000 521,000
Increase in income taxes payable...................... 119,000 425,000 359,000 324,000
----------- ----------- ----------- -------------
Net cash (used in) operating activities............. (1,365,000) (3,525,000) (2,075,000) (749,000)
----------- ----------- ----------- -------------
Cash flows from investing activities:
Fixed asset acquisitions.................................... (199,000) (136,000) (95,000) (167,000)
Cash obtained through acquisitions.......................... 2,000 59,000 59,000
Deferred financing costs acquired........................... (127,000)
Proceeds from insurance claim............................... 30,000
----------- ----------- ----------- -------------
Net cash (used in) investing activities............. (294,000) (77,000) (36,000) (167,000)
----------- ----------- ----------- -------------
Cash flows from financing activities:
Net borrowings from bank--line of credit.................... 1,667,000 3,575,000 2,229,000 997,000
Payments of financing costs................................. (90,000) (55,000)
Payments of registration costs.............................. (187,000)
Proceeds from stockholder/officer........................... 15,000 265,000 15,000 283,000
Payments of notes payable--stockholders/officer............. (13,000) (12,000) (30,000)
Payments of notes payable--Windsor.......................... (35,000) (72,000)
Payments on capital leases.................................. (48,000) (39,000) (60,000)
----------- ----------- ----------- -------------
Net cash provided by financing activities........... 1,669,000 3,667,000 2,138,000 931,000
----------- ----------- ----------- -------------
NET INCREASE IN CASH.......................................... 10,000 65,000 27,000 15,000
Cash--beginning of period..................................... -0 - 10,000 10,000 75,000
----------- ----------- ----------- -------------
CASH--END OF PERIOD........................................... $ 10,000 $ 75,000 $ 37,000 $ 90,000
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Supplementary cash flow information:
Income taxes paid (net of refunds received)................. $ 88,000 $ 48,000 $ (90,000)
Interest paid............................................... $ 300,000 629,000 418,000 934,000
Supplementary schedule of noncash investing and financing
activities:
Deferred financing fee.................................... 100,000
Acquisitions (see Note C)
Accrued offering costs.................................... 250,000
Equipment acquired under capital leases................... 189,000 51,000 7,000 134,000
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-7
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE A)--THE COMPANY AND BASIS OF PRESENTATION:

Ambassador Eyewear Group, Inc. (the "Company", formerly Diplomat Ambassador,
Inc.), designs, markets and distributes prescription eyeglass frames and
nonprescription sunglasses to department and specialty stores, optical chains
and eyewear boutiques worldwide. On May 3, 1995 the Company was organized and on
May 10, 1995, acquired substantially all of the assets and assumed certain of
the liabilities of Chanuk Inc. ("Chanuk") and became the business successor. On
June 26, 1996 the Company acquired substantially all of the assets and assumed
certain of the liabilities of Windsor Optical, Inc. ("Windsor"). On February 26,
1997 the Company acquired from a bank substantially all of the assets of
Renaissance Eyewear Inc. ("Renaissance") and incurred certain other obligations
(see Note C and L [7]).

The Company imports substantially all of its frames and nonprescription
sunglasses from a limited number of international suppliers, principally in the
Far East.

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

[1] USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

[2] INVENTORIES:

Inventories, consisting principally of eyeglass frames and sunglasses, are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method.

[3] FIXED ASSETS:

Fixed assets, including assets held under capital leases, are stated at cost
and depreciation is computed by the straight line method over the estimated
useful lives of 5 to 7 years. Leasehold improvements are stated at cost and are
amortized over the shorter of the lease term or the estimated useful lives of
the related assets.

[4] AMORTIZATION OF INTANGIBLE ASSETS:

Deferred financing costs are being amortized on a straight line basis over
the remaining term of the revolving credit facility. (See Note F[1]).
Accumulated amortization was $71,000 and $110,000, respectively at March 31,
1997 and December 31, 1997.

[5] DEFERRED CREDIT:

The deferred credit represents the excess value of net assets of Renaissance
acquired over cost, which is being amortized over a period of five years.
Accumulated amortization was $8,000 and $83,000, respectively at March 31, 1997
and December 31, 1997.

[6] INCOME TAXES:

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
which requires the use of the liability method of accounting for income taxes.
The Company reports on a calendar year end for income tax purposes.

F-8
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[7] REVENUE RECOGNITION:

Revenue is recognized when merchandise is shipped to customers. The Company
accrues a sales return allowance in accordance with its return policy for
estimated returns of inventory subsequent to the balance sheet date that relate
to sales prior to the balance sheet date. Estimated sales returns are provided
for and at March 31, 1997 and December 31, 1997 the allowance for returns was
$555,000 and $365,000, respectively.

[8] INCOME (LOSS) PER SHARE:

The Company adopted SFAS No. 128, "Earnings Per Share," in the period ended
December 31, 1997 and has retroactively applied the effects thereof for all
periods presented. Accordingly, the presentation of per share information
includes calculations of basic and diluted income (loss) per share. The impact
on the per share amounts previously reported was not significant for any of the
periods presented.

Potential common shares, consisting of 166,833 options, were not included in
the calculation of diluted loss per share for the period from May 3, 1995 thru
March 31, 1996 since their effect would be antidilutive.

Additionally, pursuant to the Commission's Staff Accounting Bulletin No. 98,
potential common shares issued at prices below the anticipated public offering
price during the twelve months preceding the initial filing date of the
registration statement have been included in the calculations of diluted income
(loss) per share in a manner similar to a stock split or stock dividend.

[9] CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of accounts receivable. The
Company extends credit to a substantial number of its customers and performs
ongoing credit evaluations of the customers' financial condition while requiring
no collateral.

[10] FAIR VALUES OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the Company to disclose estimated fair
values for its financial instruments. The carrying amounts reported in the
balance sheet for cash, accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity period of those
instruments. In addition the carrying amounts reported for notes payable
approximate fair value based on recent market rates of interest for similar
instruments.

[11] STOCK-BASED COMPENSATION:

During the year ended March 31, 1997 the Company adopted Statement of
Financial Accounting Standards Board No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). The provisions of SFAS No. 123 allow companies
to either expense the estimated fair value of stock options or other awards
granted to employees or to continue to follow the intrinsic value method set
forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") but disclose the pro forma effects on net income
(loss) had the fair value of the options been expensed. The Company has elected
to continue to apply APB No.25 to its stock-based compensation awards to
employees and will disclose pro forma net income (loss) and basic and diluted
income (loss) per share in accordance with

F-9
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SFAS No. 123. Accordingly, the Company accounts for the difference between the
exercise price of compensatory stock options and the fair value of the stock as
"Unearned Compensatory Stock Options," which the Company charges to operations
over the vesting period.

[12] FOREIGN CURRENCY TRANSACTIONS:

Foreign currency transaction gain and losses are recognized as incurred.
During the period from May 3, 1995 (inception) through March 31, 1996, the year
ended March 31, 1997 and the nine months ended December 31, 1997 gains/losses
were not material.

[13] ADVERTISING:

The costs of advertising are expensed when incurred or the first time the
advertising takes place. Advertising expense for the period from May 3, 1995
(inception) through March 31, 1996, for the year ended March 31, 1997 and the
nine months ended December 31, 1997 was approximately $155,000, $277,000 and
$160,000, respectively.

[14] RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure", No. 130, "Reporting Comprehensive Income", and No. 131, "Disclosure
about Segments of an Enterprise and Related Information". The Company believes
that the above pronouncements will not have a significant effect on the
information presented in the financial statements.

[15] UNAUDITED INTERIM FINANCIAL STATEMENTS:

In the opinion of management, the unaudited financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the Company's financial position at December 31, 1997 and
results of operations and cash flows for the nine-month periods ended December
31, 1997 and 1996. The financial statements as of December 31, 1997 and for the
nine months ended December 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1998.

(NOTE C)--ASSET ACQUISITIONS:

[1] CHANUK:

In May 1995 the Company acquired substantially all of the assets and assumed
certain of the liabilities of Chanuk, an eyewear distributor and a predecessor
entity. The majority stockholder (74 percent) of Chanuk is the mother-in-law of
one of the Company's 50% stockholders. Such 50% stockholder is the President and
Chief Executive Officer of the Company and was the President of Chanuk. The
Company's other 50% stockholder owned a minority interest (approximately 10%) in
Chanuk. The Company became the business successor to Chanuk and the transaction
is considered a recapitalization rather than a business combination. The
acquisition was recorded at Chanuk's historical cost basis which approximates
fair value. The Company issued two notes payable aggregating $687,000, for the
value of the net assets acquired, to its two stockholders as consideration for a
note issued by the stockholders to Chanuk for the same amount

F-10
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE C)--ASSET ACQUISITIONS: (CONTINUED)
(see Note F). The excess ($362,000) of the notes payable over the historical
basis of the net assets acquired has been accounted for as a reduction of
stockholders' equity. The cost was recorded as follows:

<TABLE>
<S> <C>
Cash............................................................ $ 2,000
Accounts receivable, net........................................ 2,089,000
Inventory....................................................... 2,995,000
Prepaid expenses & other assets................................. 442,000
Fixed assets.................................................... 468,000
Note payable--bank.............................................. (2,288,000)
Accounts payable................................................ (2,875,000)
Loans payable--stockholders..................................... (508,000)
Deficit......................................................... 362,000
----------
Notes payable--stockholders..................................... $ 687,000
----------
----------
</TABLE>

[2] WINDSOR:

In June 1996 the Company acquired substantially all of the assets and
assumed certain of the liabilities of Windsor, an eyewear distributor. In
addition, the Company paid $100,000 cash and issued two notes payable to Windsor
aggregating $450,000. This acquisition was treated for accounting purposes as a
purchase. Accordingly, the various assets acquired and liabilities assumed were
recorded at their respective estimated fair values as of the date of
acquisition. The cost of the acquisition was allocated as follows:

<TABLE>
<S> <C>
Cash............................................................ $ 59,000
Accounts receivable, net........................................ 448,000
Inventory....................................................... 1,937,000
Fixed assets.................................................... 45,000
Other assets.................................................... 66,000
Loan payable--bank (including $100,000 borrowed in connection
with the purchase)............................................ (1,022,000)
Accounts payable................................................ (1,083,000)
----------
Notes payable--Windsor.......................................... $ 450,000
----------
----------
</TABLE>

The Company entered into a three year employment agreement with one of the
principal stockholders of Windsor, who is currently an officer of the Company
(see Note L[2]). The Company also granted options to purchase 151,667 shares of
common stock at $1.50 per share to this individual. In addition the Company
entered into a consulting agreement with another principal stockholder of
Windsor (see Note L[3]).

[3] RENAISSANCE:

In February 1997 the Company purchased substantially all of the assets of
Renaissance, an eyewear distributor, from Summit Bank after Summit Bank had
passively foreclosed on Renaissance upon default of its loan agreement. The
Company also satisfied certain obligations aggregating $400,000 and entered into
a noncompete agreement and a consulting agreement with the former owner of
Renaissance which provide for annual aggregate payments of $200,000 per year for
five years (see Note L[3]). In addition the

F-11
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE C)--ASSET ACQUISITIONS: (CONTINUED)
Company granted the former owner options to purchase 180,833 shares of common
stock at $3 per share. The Company valued the option at $187,000 representing
the fair value at date of grant which is being charged to operations over five
years. The excess of the fair value of the net assets acquired over the purchase
price was first applied as a reduction of noncurrent assets and the remaining
balance is treated for accounting purposes as a deferred credit. The cost of the
acquisition was allocated as follows:

<TABLE>
<S> <C>
Accounts receivable, net........................................ $ 975,000
Inventory....................................................... 3,662,000
Prepaid expenses................................................ 53,000
Note payable--bank.............................................. (3,446,000)
Deferred credit................................................. (844,000)
Accrued expenses................................................ (400,000)
</TABLE>

The Company's financial statements include the operations of the acquired
entities from the respective dates of such acquisitions.

[4] PRO FORMA RESULTS OF OPERATIONS:

The following unaudited pro forma summary of results of operations has been
prepared as if each of the acquisitions had occurred on May 3, 1995 (inception)
after giving effect to all purchase price adjustments and the elimination of
nonrecurring items:

<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) YEAR ENDED
TO MARCH 31, MARCH 31,
PRO FORMA 1996 1997
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Net revenue.................................................... $ 28,172,000 $ 29,129,000
Net income (loss).............................................. (475,000) 136,000
Basic income (loss) per share.................................. $ (.14) $ .04
Diluted income (loss) per share................................ $ (.13) $ .04
</TABLE>

The pro forma results do not purport to be indicative of the results that
would have actually been achieved if the respective acquisitions had taken place
as of May 3, 1995 (inception) or of results which may occur in the future.

(NOTE D)--ACCOUNTS RECEIVABLE:

The Company has recorded allowances of $2,394,000 and $1,866,000 as of March
31, 1997 and December 31, 1997, respectively, against accounts receivable.
Management believes, based on information available at the financial statement
dates, that such allowances are adequate valuation reserves against potential
uncollectable accounts and returns. Management does not believe that there
exists presently a substantial risk that receivable recovery will be materially
less than the net carrying amount of its accounts receivable. Additionally,
receivables over 180 days have been substantially reserved.

F-12
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE E)--FIXED ASSETS:

Fixed assets are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1997
------------ -------------
<S> <C> <C>
Furniture, fixtures and displays................................. $ 232,000 $ 262,000
Equipment........................................................ 636,000 829,000
Leasehold improvements........................................... 152,000 148,000
------------ -------------
Total........................................................ 1,022,000 1,239,000
Accumulated depreciation......................................... 276,000 447,000
------------ -------------
Balance...................................................... $ 744,000 $ 792,000
------------ -------------
------------ -------------
</TABLE>

(NOTE F)--BANK LOANS AND LONG-TERM DEBT:

[1] BANK LOANS:

The Company has entered into a revolving line of credit agreement with a
bank which expires annually on June 1, is automatically renewed for one year and
provides for borrowings of up to a maximum of $12,000,000 based on specified
percentages, described in the agreement, of eligible accounts receivable and
inventories. Borrowings under the agreement bear interest at the prime rate
(8.5% at March 31, 1997 and December 31, 1997). The credit facility is
collateralized by substantially all of the assets of the Company and contains
certain restrictive covenants including the payment of dividends. The credit
facility is represented by demand notes payable to the bank under which the bank
may demand repayment at any time. During the nine months ended December 31, 1997
the Company entered into an overadvance line of credit of $1,000,000 pursuant to
an agreement which is due on the earlier of February 20, 1998 or the closing of
the proposed public offering. $2.2 million under the revolving line of credit is
guaranteed by the stockholders/officers of the Company which amount is subject
to an increase of $750,000 if the proposed offering does not close by February
20, 1998. At March 31, 1997 and December 31, 1997 $11,998,000 and $12,995,000,
respectively was outstanding under the credit facility.

Upon the closing of the Company's anticipated initial public offering, a fee
of $100,000 will be due to the bank. This fee was recorded as a deferred
financing cost and is being amortized over the remaining term of the credit
facility.

[2] LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1997 1997
--------- -----------
<S> <C> <C>
Notes payable--Windsor(a)............................ $ 415,000 $ 343,000
Less amounts due within one year..................... 96,000 101,000
--------- -----------
Amounts due after one year........................... $ 319,000 $ 242,000
--------- -----------
--------- -----------
</TABLE>

(a) In connection with the acquisition of Windsor in June 1996, the Company
issued two notes aggregating $450,000 to Windsor which bear interest at the rate
of 7% per annum. The notes are payable in aggregate monthly installments of
principal and interest of approximately $10,000 through January 2000 and
approximately $5,000 thereafter through July 2003.

F-13
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE F)--BANK LOANS AND LONG-TERM DEBT: (CONTINUED)
Long-term debt is payable as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 96,000
1999.............................................................................. 103,000
2000.............................................................................. 58,000
2001.............................................................................. 45,000
2002.............................................................................. 48,000
Thereafter........................................................................ 65,000
----------
TOTAL......................................................................... $ 415,000
----------
----------
</TABLE>

(NOTE G)--NOTES PAYABLE--STOCKHOLDERS/OFFICER:

In connection with the acquisition of Chanuk in May 1995 the Company assumed
a note payable to a stockholder/officer of the Company in the amount of
$508,000. The note bears interest at the rate of 8% per annum and is payable on
demand. At March 31, 1997 and December 31, 1997 the balance due on the note was
$495,000.

Two stockholders/officers personally satisfied a portion of the purchase
price and the Company issued notes payable of $343,500 to each of the officers
for such amounts. The notes payable bear interest at a rate of 8% per annum and
are due on demand but no later than January 1, 2000 and are subordinate to the
bank debt. At March 31, 1997 and December 31, 1997 the balance on these notes
aggregated $686,000.

In February 1997, stockholders/officers loaned the Company $280,000 in
connection with the acquisition of substantially all of the assets of
Renaissance. The loan is payable on demand and bears interest at the rate of 8%
per annum. During the nine months ended December 31, 1997 the Company repaid
$30,000 of this loan and borrowed an additional $220,000 under the same terms.

Subsequent to December 31, 1997, the Company agreed to issue convertible
notes in exchange for $1,181,000 of the outstanding balance of these notes. Such
notes are convertible, at the holder's option, into Common Shares at the initial
public offering price.

(NOTE H)--CAPITAL LEASES PAYABLE:

The Company leases equipment under various agreements with terms of 32 to 60
months and accounts for these leases as capital leases. Equipment purchases
under these leases for the period from May 3, 1995 (inception) through March 31,
1996, for the year ended March 31, 1997 and for the nine months ended December
31, 1997 were $189,000, $51,000 and $134,000, respectively. The net book value
of equipment held under capital leases was approximately $183,000 and $257,000,
respectively at March 31, 1997 and December 31, 1997.

F-14
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE H)--CAPITAL LEASES PAYABLE: (CONTINUED)
Future lease payments as of March 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 91,000
1999.............................................................................. 69,000
2000.............................................................................. 29,000
2001.............................................................................. 5,000
----------
Total......................................................................... 194,000
Less amounts representing interest................................................ 35,000
----------
Present value of future lease payments............................................ 159,000
Less amount due within one year................................................... 69,000
----------
Amounts due after one year........................................................ $ 90,000
----------
----------
</TABLE>

(NOTE I)--STOCKHOLDERS' EQUITY:

[1] COMMON STOCK:

In May 1995 the Company issued 1,500 shares of its common stock to each of
its two stockholders, both of whom are officers of the Company.

In June 1997 the Company effected a 1,166.67 for 1 stock split. The
financial statements give retroactive effect to this transaction as if it
occurred on May 3, 1995 (inception).

In June 1997 the Company amended its certificate of incorporation to
increase the authorized capital stock to 11,000,000 shares, of which 10,000,000
are common stock and 1,000,000 preferred stock. The accompanying financial
statements reflect this increase retroactively.

[2] STOCK OPTIONS:

The Company applies APB 25 in accounting for stock-based compensation to
employees and, accordingly, recognizes compensation expense for the difference
between the fair value of the underlying common stock and the exercise price of
the option at the date of grant. The effect of applying SFAS No. 123 on fiscal
1996 and 1997 pro forma net income (loss) is not necessarily representative of
the effects on reported net income (loss) for future years due to, among other
things, (1) the vesting period of the stock options and (2) the fair value of
additional stock options that may be granted in future years. Had compensation
cost for the Company's stock options granted to employees been determined based
upon the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123, the Company's net income (loss), basic income (loss) per
share and diluted income (loss) per share would have been approximately (i)
$(302,000), $(.09) and $(.08), respectively, for the period May 3, 1995
(inception) through March 31, 1996 and (ii) $661,000, $.19 and $.17,
respectively, for the year ended March 31, 1997. The weighted average fair value
of the options granted during fiscal 1996 and 1997 are estimated at $.09 and
$.80, respectively, on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: dividend yield of 0%, volatility of 30%,
risk-free interest rate of 6.74%, and expected life of four years.

During the nine months ended December 31, 1997, the Company adopted a stock
option plan (the "Plan") pursuant to which options to purchase up to 150,000
shares of the Company's common stock may be granted to employees (including
employees who are also directors and officers), consultants and independent
contractors. The Plan is currently administered by the Board of Directors. At
December 31, 1997 no options had been granted under the Plan.

F-15
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE I)--STOCKHOLDERS' EQUITY: (CONTINUED)

THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT STOCK OPTIONS OUTSTANDING
AT MARCH 31, 1997 AND DECEMBER 31, 1997 (ALL EXERCISABLE):

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING CONTRACTUAL AVERAGE
EXERCISE NUMBER LIFE (IN YEARS) EXERCISE
PRICE OUTSTANDING AT MARCH 31, 1997 PRICE
- -------------------------------------- ----------- ------------------------- -----------
<S> <C> <C> <C>
$ .25................................. 166,833 2 $ .25
1.50................................. 151,667 3 1.50
3.00................................. 180,833 5 3.00
-----------
Total................................. 499,333 1.63
-----------
-----------
</TABLE>

Subsequent to December 31, 1997 one of the Company's two
stockholders/executive officers agreed to grant the other stockholder/executive
officer an option to purchace up to 500,000 of his shares of the Company's
common stock at $6.00 per share. None of the proceeds upon exercise of the
options will be received by the Company. The option was granted as consideration
for services rendered to the Company. The Company will account for this
transaction as an employee stock option and accordingly no expense will be
recognized.

(NOTE J)--PROPOSED PUBLIC OFFERING:

The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering of the Company's securities. There is no assurance
that such offering will be consummated. In connection therewith, the Company
anticipates incurring substantial costs, which, if the offering is not
consummated, will be charged to expense.

(NOTE K)--INCOME TAXES:

The provisions for federal and state income taxes for the period from May 3,
1995 (inception) through March 31, 1996, for the year ended March 31, 1997 and
for the nine-month periods ended December 31, 1996 and 1997 are comprised of the
following:

<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------
1996 1997 1996 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Current:
Federal.................................. $ 75,000 $ 325,000 $ 274,000 $ 149,000
State.................................... 43,000 188,000 159,000 86,000
----------- ----------- ---------- ----------
118,000 513,000 433,000 235,000
----------- ----------- ---------- ----------
Deferred:
Federal.................................. (238,000) (111,000) (85,000) 23,000
State.................................... (134,000) (62,000) (48,000) 13,000
----------- ----------- ---------- ----------
(372,000) (173,000) (133,000) 36,000
----------- ----------- ---------- ----------
Total.............................. $(254,000) $ 340,000 $ 300,000 $ 271,000
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>

F-16
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE K)--INCOME TAXES: (CONTINUED)
The deferred tax asset of $586,000 and liability of $41,000 at March 31,
1997 and the deferred tax asset of $526,000 and liability of $18,000 at December
31, 1997 represent the anticipated future tax consequences attributable to
temporary differences between the basis of assets and liabilities for financial
and tax reporting purposes and consists of the following components:

<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1997
----------------------- -----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Accounts receivable........................ $ 283,000 $ 210,000
Inventory valuation........................ 252,000 252,000
Depreciation............................... $ (41,000) $ (18,000)
Accounts payable........................... 12,000 28,000
Other...................................... 36,000 36,000
---------- ----------- ---------- -----------
Total.............................. $ 586,000 $ (41,000) $ 526,000 $ (18,000)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>

Expected tax expense based on the statutory rate is reconciled with actual
tax expense as follows:

<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995 NINE MONTHS ENDED
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------
1996 1997 1996 1997
--------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Federal statutory rate............................. 34.0% 34.0% 34.0% 34.0%
State income tax, net of federal benefit........... 10.8% 8.1% 10.9% 8.5%
Recognition of liability for tax purposes.......... (8.6)% (6.3)%
Other.............................................. 1.1% (.2)% (.5)%
--- --- --- ---------
Effective tax rate................................. 45.9 % 33.3 % 44.9% 35.7%
--- --- --- ---------
--- --- --- ---------
</TABLE>

(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:

[1] OPERATING LEASES:

The Company currently leases office, warehouse, showroom facilities and
equipment under operating leases, which expire at various times through 2002.

F-17
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS: (CONTINUED)
Future minimum lease payments under noncancelable leases at March 31, 1997
are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998........................................................................ $ 231,000
1999........................................................................ 150,000
2000........................................................................ 150,000
2001........................................................................ 47,000
2002........................................................................ 13,000
Thereafter.................................................................. 3,000
----------
Total................................................................... $ 594,000
----------
----------
</TABLE>

During the nine months ended December 31, 1997 the company entered into a
lease and moved to a new facility. The lease agreement provides for aggregate
minimum rental payments of approximately $1.6 million through December 2002. In
connection therewith the Company wrote off certain assets which will no longer
be utilized, resulting in a charge to operations of $79,000 during the nine
months ended December 31, 1997.

Rent expense for the period from May 3, 1995 (inception) through March 31,
1996, for the year ended March 31, 1997 and for the nine months ended December
31, 1997 was approximately $76,000, $140,000 and $265,000, respectively.

[2] EMPLOYMENT AGREEMENTS:

The Company has entered into an employment agreement with the
President/Chief Executive Officer which provides for an annual salary of
$175,000. The Agreement was amended by oral agreement to increase the annual
salary to $250,000. The agreement shall continue so long as the President
remains a stockholder of the Company, unless the agreement is terminated as
defined in the agreement. The Company has an employment agreement with one of
the former principal stockholders of Windsor. The employment agreement provides
for annual salaries ranging from $105,000 to $120,000 through the year 2000 and
a minimum bonus of 5% of the bonuses granted to the principal stockholders of
the Company.

[3] CONSULTING AND NONCOMPETE AGREEMENTS:

The Company has entered into an agreement with an affiliate of one of the
officers/stockholders to provide consulting, advisory and other supportive
services for an annual fee of $208,000. In March 1997 the agreement was orally
amended to increase payments to $5,000 per week. The agreement shall continue as
long as the officer remains a stockholder of the Company, unless the agreement
is terminated as defined in the agreement.

In May 1995 in connection with the Chanuk acquisition the Company entered
into two separate ten year consulting agreements to provide consulting, advisory
and support services to the Company for $500 per week each.

In connection with the acquisition of Renaissance the Company entered into a
noncompete agreement and consulting agreement with the stockholder of
Renaissance which provide for annual aggregate payments of $200,000 per year
through February 2002.

F-18
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)

(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS: (CONTINUED)
In addition the Company entered into a three year consulting agreement,
which began in June 1996, with a principal stockholder of Windsor which provides
for 36 monthly payments of $6,944 commencing June 2004. The Company has present
valued the payments and has recorded an expense of approximately $29,000 and a
corresponding liability for the year ended March 31, 1997.

[4] MAJOR CUSTOMER:

One major customer accounted for approximately 51%, 35% and 37%of net sales
for the period May 3, 1995 (inception) through March 31, 1996, for the year
ended March 31, 1997 and for the nine months ended December 31, 1997,
respectively.

[5] ROYALTY AND LICENSING AGREEMENTS:

The Company has entered into various license agreements which provide for
the payment of royalties ranging from 6% to 8% of net selling price of products
sold, as defined.

The Company is obligated under these agreements to make future minimum
payments as follows:

<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- --------------------------------------------------------------------------------
<S> <C>
1998...................................................................... $ 944,000
1999...................................................................... 528,000
2000...................................................................... 269,000
2001...................................................................... 97,000
------------
Total................................................................. $ 1,838,000
------------
------------
</TABLE>

[6] LETTERS OF CREDIT:

At March 31, 1997 and December 31, the Company had outstanding irrevocable
letters of credit in the amount of $52,000 and $0, respectively.

[7] SUCCESSOR LIABILITIES:

In connection with the acquisition of all of the assets of Renaissance in
February 1997 no liabilities of Renaissance were assumed by the Company. To the
extent that any creditors of Renaissance seek recourse against the Company as
the purchaser of substantially all of the asssets of Renaissance, the Company
may incur substantial expenses in connection with defending any such actions.
Additionally, to the extent that creditors are successful on asserting any
claims against the Company as successor to Renaissance, the Company would be
required to charge its operations.

(NOTE M)--RELATED PARTY TRANSACTIONS:

During the nine months ended December 31, 1997, the Company's two
stockholders, who are also executive officers, entered into an agreement with
the Company's landlord to purchase the Company's facility. The
stockholders/executive officers have also entered into an agreement to rent the
facility to the Company at substantially the same terms and conditions set forth
in the Company's current lease.

F-19
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Renaissance Eyewear, Inc.
Cranford, NJ

We have audited the accompanying statement of assets, liabilities and
capital deficiency of Renaissance Eyewear, Inc. (the "Company") as at October
31, 1996 and the related statements of operations, changes in capital deficiency
and cash flows all preceding the bank taking possession of the assets (Note A)
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Renaissance Eyewear, Inc. at
October 31, 1996 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

As discussed in Notes A and K to the financial statements, the Company
defaulted on its bank loan. In February 1997, the bank took possession of all of
the Company's assets.

Richard A. Eisner & Company, LLP

New York, New York
June 12, 1997

F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
Renaissance Eyewear, Inc.

We have audited the accompanying combined statements of operations, changes
in stockholders' equity and cash flows of Renaissance Eyewear, Inc. and
Affiliate for the year ended October 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the 1995 combined financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Renaissance Eyewear, Inc. and Affiliate for the year ended October 31,
1995, in conformity with generally accepted accounting principles.

J. H. Cohn LLP

Roseland, New Jersey
December 22, 1995

F-21
<PAGE>
RENAISSANCE EYEWEAR, INC.

STATEMENT OF ASSETS, LIABILITIES AND CAPITAL DEFICIENCY
PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)

AS AT OCTOBER 31, 1996

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 8,000
Accounts receivable, net of allowance for returns and doubtful accounts of
$967,000.................................................................... 2,268,000
Other receivables............................................................. 87,000
Inventories................................................................... 3,705,000
Prepaid expenses.............................................................. 90,000
----------
Total current assets...................................................... 6,158,000
Other assets.................................................................... 273,000
----------
TOTAL..................................................................... $6,431,000
----------
----------
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Loan payable--bank............................................................ $2,663,000
Long-term debt................................................................ 638,000
Accounts payable and accrued expenses......................................... 3,597,000
Bank acceptances payable...................................................... 219,000
Due to related party.......................................................... 180,000
----------
Total current liabilities................................................. 7,297,000
----------
Commitments and contingencies
Capital deficiency:
Preferred stock, $1,000 par value, nonvoting; 5,000 shares authorized;
1,970.915 shares issued..................................................... 1,971,000
Common stock, no par value; 15,000 shares authorized, issued and
outstanding................................................................. 81,000
Additional paid-in capital.................................................... 2,124,000
(Accumulated deficit)......................................................... (4,844,000)
Treasury stock, 198 shares of preferred stock at cost......................... (198,000)
----------
Total capital deficiency.................................................. (866,000)
----------
TOTAL..................................................................... $6,431,000
----------
----------
</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-22
<PAGE>
RENAISSANCE EYEWEAR, INC.

STATEMENTS OF OPERATIONS

PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS

(NOTE A)

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
Revenue:
Net sales........................................................................ $ 14,097,000 $ 17,382,000
Other income, including interest................................................. 469,000 446,000
------------- -------------
Total.......................................................................... 14,566,000 17,828,000
------------- -------------
Costs and expenses:
Cost of sales.................................................................... 7,497,000 8,162,000
Selling expenses................................................................. 5,541,000 6,773,000
General and administrative expenses.............................................. 3,018,000 2,946,000
Interest expense................................................................. 478,000 523,000
------------- -------------
Total.......................................................................... 16,534,000 18,404,000
------------- -------------
Loss from operations before write off of receivable from affiliate, impairment of
fixed assets and income tax benefit.............................................. (1,968,000) (576,000)
Income tax (benefit)............................................................... (19,000) (389,000)
Write off of uncollectible receivable from affiliate............................... 2,810,000
Loss on Impairment of fixed assets................................................. 876,000
------------- -------------
NET LOSS........................................................................... $ (5,635,000) $ (187,000)
------------- -------------
------------- -------------
</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-23
<PAGE>
RENAISSANCE EYEWEAR, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)

<TABLE>
<CAPTION>
PROFESSIONAL
RENAISSANCE EYEWEAR, INC. TECHNOLOGY
------------------------------------ CONSULTANTS ADDITIONAL RETAINED
PREFERRED COMMON TREASURY COMMON PAID-IN EARNINGS
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) TOTAL
------------ --------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--November 1, 1994... $ 1,971,000 $ 81,000 $ (167,000) $ 1,000 $ 2,124,000 $ 977,000 $ 4,987,000
Purchase of treasury
stock..................... -- -- (15,000) -- -- -- (15,000)
Dissolution of affiliate.... -- -- -- (1,000) -- 1,000 -0 -
Net loss.................... -- -- -- -- -- (187,000) (187,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
Balance--October 31, 1995... 1,971,000 81,000 (182,000) -0 - 2,124,000 791,000 4,785,000
Purchase of treasury
stock..................... -- -- (16,000) -- -- -- (16,000)
Net loss.................... -- -- -- -- -- (5,635,000) (5,635,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
BALANCE-- OCTOBER 31, 1996.. $ 1,971,000 $ 81,000 $ (198,000) $ -0 - $ 2,124,000 $ (4,844,000) $ (866,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
------------ --------- ----------- ----------- ------------ ------------- -------------
</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-24
<PAGE>
RENAISSANCE EYEWEAR, INC.

STATEMENTS OF CASH FLOWS

PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
Cash flows from operating activities:
Net loss.......................................................................... $ (5,635,000) $ (187,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................. 216,000 241,000
Provision for bad debts....................................................... 770,000 239,000
Write off of affiliate receivable............................................. 2,810,000
Loss on impairment of fixed assets............................................ 876,000
Gain on sale of fixed assets.................................................. (72,000)
Deferred income taxes......................................................... 134,000 (120,000)
Changes in operating assets and liabilities:
Accounts receivable......................................................... 1,068,000 (980,000)
Inventories................................................................. 809,000 (22,000)
Prepaid expenses and other current assets................................... 273,000 230,000
Due from related parties.................................................... (486,000) (381,000)
Other assets................................................................ 3,000 (2,000)
Bank acceptances payable.................................................... (99,000)
Accounts payable and accrued expenses....................................... 641,000 940,000
Income taxes payable........................................................ (150,000) (195,000)
------------- -------------
Net cash provided by (used in) operating activities....................... 1,257,000 (336,000)
------------- -------------
Cash flows from investing activities:
Proceeds from sale of fixed assets................................................ 72,000
Capital expenditures.............................................................. (5,000) (26,000)
------------- -------------
Net cash provided by (used in) investing activities....................... 67,000 (26,000)
------------- -------------
Cash flows from financing activities:
Net (payments) proceeds under line of credit agreement............................ (457,000) 943,000
Proceeds of long-term debt........................................................ 1,250,000
Payments of long-term debt........................................................ (853,000) (1,824,000)
Purchase of preferred stock for treasury.......................................... (16,000) (15,000)
------------- -------------
Net cash (used in) provided by financing activities....................... (1,326,000) 354,000
------------- -------------
NET DECREASE IN CASH................................................................ (2,000) (8,000)
Cash--beginning of year............................................................. 10,000 18,000
------------- -------------
CASH--END OF YEAR................................................................... $ 8,000 $ 10,000
------------- -------------
------------- -------------
Supplementary disclosures of cash flow information:
Interest paid................................................................... $ 442,000 $ 495,000
</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-25
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE A)--THE COMPANY:

Renaissance Eyewear, Inc. (the "Company") markets and distributes
prescription eyeglass frames and nonprescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques worldwide.

In February 1997, the Company defaulted on its credit facility and the bank
took possession of all of the Company's assets, which were acquired from the
bank by a third party, Ambassador Eyewear Group, Inc. ("Ambassador"). In
connection therewith, Ambassador paid off the remaining balance due under bank's
credit facility. As a result, the Company has no assets remaining with which to
pay its creditors (see Note K). The Company's current operations are limited to
leasing its employees to and being reimbursed for expenses by Ambassador.

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

[1] Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. Concentrations of credit risk with respect to trade
receivables, other than trade receivables from an affiliate, are limited due to
the large number of customers comprising the Company's customer base and their
dispersion across different geographic areas. In addition, the Company routinely
assesses the financial strength of its customers.

[2] Inventories:

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

[3] Depreciation and amortization:

Provision is made for depreciation and amortization of equipment and
improvements principally on the straight-line method over the estimated useful
lives of the related assets as follows:

<TABLE>
<CAPTION>
RANGE OF
ESTIMATED
CATEGORY USEFUL LIVES
- -------------------------------------------------------------------------------- ------------
<S> <C>
Machinery and equipment......................................................... 5-10 years
Furniture and fixtures.......................................................... 5-10 years
Vehicles........................................................................ 3 years
Leasehold improvements.......................................................... 3-15 years
</TABLE>

[4] Advertising:

The Company expenses the cost of advertising and promotions as incurred.
Advertising costs charged to operations amounted to $397,000 and $550,000 in
1996 and 1995, respectively.

[5] Reclassifications:

Certain accounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.

F-26
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[6] Income taxes:

The Company applies Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes", which requires deferred income tax assets
and liabilities to be computed for differences between the financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.

[7] Long lived assets:

The Company has adopted the provisions of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in
1996. SFAS 121 requires impairment losses to be recorded on long-lived assets
(i.e. property and equipment and patent and trademarks) used in operations when
impairment indicators are present and undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying amount. Based on
current circumstances, the adoption of SFAS 121 has a material effect on the
Company's financial statements for the year ended October 31, 1996.

[8] Use of estimates in the preparation of financial statements:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

(NOTE C)--INVENTORIES:

Inventories consist of the following at October 31, 1996:

<TABLE>
<S> <C>
Raw material.................................................... $ 99,000
Work in process................................................. 37,000
Finished goods.................................................. 3,569,000
---------
Total..................................................... $3,705,000
---------
---------
</TABLE>

(NOTE D)--NOTE PAYABLE--BANK:

At October 31, 1996, the Company has a $5,295,000 credit facility with a
bank which, in addition to the term loans discussed in Note E, provides for a
revolving line of credit. Borrowings under the facility bear interest at rates
ranging from 1% to 1 3/4% over the prime rate, are collateralized by
substantially all of the Company's assets and are personally guaranteed by the
principal stockholder. Subsequent to October 31, 1996 the Company defaulted on
this credit facility (see Notes A and K).

F-27
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE E)--LONG-TERM DEBT:

Long-term debt consists of the following at October 31, 1996:

<TABLE>
<S> <C>
Bank term loans (see Note D):
Payable in monthly installments of $35,000 plus
interest through January 31, 1997........................... $ 535,000
Payable in monthly installments of $4,416 plus
interest through January 31, 1997........................... 53,000
Payable in monthly installments of $4,167 plus
interest through January 31, 1997........................... 17,000
Mortgage--payable in monthly installments through July 2006 with
interest at 9%. Secured by a condominium held for sale (included
in other assets) with a book value of $65,323................... 33,000
---------
Current maturities................................................ $ 638,000
---------
---------
</TABLE>

The minimum payment on notes required to be made through October 31, 1997 is
approximately $605,000.

An investment in real estate, which acted as security on the mortgage was
sold in January 1997 and the remaining debt was paid off at that time.
Therefore, the amount due during the year ending October 31, 1997 only includes
payments on the mortgage through the date of the sale.

(NOTE F)--INCOME TAXES:

The income tax (benefit) consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
--------------------------
<S> <C> <C>
1996 1995
------------- -----------
Current:
Federal....................................................... $ (1,635,000) $ (270,000)
State......................................................... (192,000)
------------- -----------
(1,827,000) (270,000)
------------- -----------
Deferred:
Federal....................................................... 1,601,000 (92,000)
State......................................................... 207,000 (27,000)
------------- -----------
1,808,000 (119,000)
------------- -----------
Total....................................................... $ (19,000) $ (389,000)
------------- -----------
------------- -----------
</TABLE>

At October 31, 1996 the Company has available net operating loss
carryforwards to reduce future federal and state taxable income of approximately
$6,246,000 and $7,812,000, respectively, which expire in various amounts through
2011.

Deferred tax assets result primarily from allowances for bad debts that are
not deductible for tax purposes until losses are identified and written off,
certain costs which are capitalized to inventory for tax

F-28
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE F)--INCOME TAXES: (CONTINUED)
purposes and become deductible when the inventory is sold and federal and state
net operating loss carryforwards ("NOL's"). Deferred tax liabilities result from
certain expense items (primarily rent) being treated differently for financial
and tax reporting purposes. A valuation allowance which increased by
approximately $2,253,000 during the year ended October 31, 1996, has been
established for the full amount of the deferred tax assets which would otherwise
have been recorded due to management's uncertainty regarding the Company's
ability to generate taxable income in future periods. The Company's deferred tax
assets (liabilities) at October 31, 1996 consist of the following:

<TABLE>
<CAPTION>
CURRENT NONCURRENT TOTAL
----------- ------------ -------------
<S> <C> <C> <C>
Allowance for bad debts............................. $ 372,000 $ 372,000
Inventory capitalized............................... 120,000 120,000
Depreciation........................................ $ 108,000 108,000
NOL's............................................... 2,468,000 2,468,000
Other............................................... (100,000) (100,000)
----------- ------------ -------------
$ 392,000 $ 2,576,000 2,968,000
----------- ------------
----------- ------------
Valuation allowance................................. (2,968,000)
-------------
$ -0 -
-------------
-------------
</TABLE>

The difference between the statutory federal income tax rate and the
effective income tax rate based on net loss before taxes stated in the statement
of operations for the year ended October 31, 1996 is due to (i) state income tax
benefit net of federal expense, (ii) an income tax refund and (iii) an increase
in the valuation allowance on deferred tax assets.

(NOTE G)--PREFERRED STOCK:

The Company's cumulative preferred stock has a minimum dividend rate of 9%
and a maximum rate of 16%. Dividends of approximately $2,069,000 were in arrears
on the preferred stock at October 31, 1996. These dividends are payable in cash
or by the issuance of additional shares of preferred stock having a par value
equal to the amount of the dividends declared. Such dividends are payable at the
sole discretion of the Board of Directors or upon the liquidation of the
Company.

(NOTE H)--BENEFIT PLANS:

[1] Profit sharing plan:

Prior to June 30, 1995, the Company maintained a qualified employee stock
ownership plan ("ESOP") covering all eligible salaried and hourly employees.
Annual contributions were determined by the Board of Directors and made in the
form of the Company's preferred stock. No contribution was made during 1996 and
1995.

Upon an employee's death or retirement at age 65, the Company is required to
redeem, at par value, all of the shares of preferred stock previously issued to
the employee. During 1996 and 1995, 15.79 and 15.08 shares of preferred stock,
respectively, were redeemed by the Company and are being held in the treasury.

F-29
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE H)--BENEFIT PLANS: (CONTINUED)
Effective July 1, 1995, the Board of Directors approved the restatement of
the ESOP to a profit sharing plan. Annual contributions by the Company are made
at the discretion of the Board of Directors. No contributions were made during
fiscal 1996.

[2] 401(k) plan:

The Company has a 401(k) plan for the benefit of substantially all
employees. Annual contributions are made at the discretion of the Board of
Directors. The Company did not make a contribution to the 401(k) plan for the
years ended October 31, 1996 and October 31, 1995.

(NOTE I)--RELATED PARTY TRANSACTIONS:

Transactions with a Canadian entity, which is 50% owned by the principal
stockholder of the Company, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Sales to.............................................................. $ 248,000 $ 449,000
Management fees charged to............................................ 75,000 75,000
</TABLE>

At October 31, 1996 and October 31, 1995, amounts due related party consist
of a note payable to the wife of the principal stockholder, which was originally
due on demand, but has been subordinated to the bank debt described in Notes D
and E. Interest on the note (9% per annum) amounted to $16,000 in 1996 and 1995.
In addition, the Company leases various facilities from its sole stockholder
(see Note J).

(NOTE J)--COMMITMENTS AND CONTINGENCIES:

[1] Leases:

The Company leases various office facilities from the sole stockholder under
noncancelable operating leases expiring through 2004. Rent expense amounted to
approximately $249,000 in both 1996 and 1995.

The Company also leased a showroom under a noncancelable operating lease
which expired in July 1996. The Company entered into a new showroom lease
effective July 1996. This lease expires in July 1999. Rent expense amounted to
approximately $24,000 and $25,000 in 1996 and 1995, respectively.

F-30
<PAGE>
RENAISSANCE EYEWEAR, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(NOTE J)--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Minimum future lease payments under noncancelable operating leases in years
subsequent to October 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING PRINCIPAL NEW YORK
OCTOBER 31, STOCKHOLDER SHOWROOM TOTAL
- ------------------------------------------------------ ------------ ----------- ------------
<S> <C> <C> <C>
1997.................................................. $ 177,000 $ 11,000 $ 188,000
1988.................................................. 231,000 21,000 252,000
1999.................................................. 223,000 16,000 239,000
2000.................................................. 215,000 215,000
2001.................................................. 207,000 207,000
Thereafter............................................ 537,000 537,000
------------ ----------- ------------
Total........................................... $ 1,590,000 $ 48,000 $ 1,638,000
------------ ----------- ------------
------------ ----------- ------------
</TABLE>

The future minimum lease payments have been adjusted to reflect Ambassador's
assumption of various operating leases effective March 1, 1997.

[2] Royalties:

The Company has entered into various royalty agreements with licensers,
expiring through 1998, which require royalty payments based on sales volume.
Royalties charged to operations amounted to $530,000 and $644,000 in 1996 and
1995, respectively. The minimum royalty payment due under these agreements in
the year ending October 31, 1997 is $100,000.

The minimum royalty payment disclosed above has been adjusted to reflect
payments due through February 28, 1997. Subsequent to this date, Ambassador will
continue to make payments on any continuing license agreements.

[3] Letters of credit:

At October 31, 1996, the Company is contingently liable for letters of
credit aggregating $80,000 to be used for future inventory purchases.

(NOTE K)--SUBSEQUENT EVENTS:

As described in Note A, in February 1997 the Company defaulted on its bank
loan and the bank seized all of the Company's assets, which were acquired from
the bank by Ambassador, who paid off the remaining balance of the bank loan.

The following proforma unaudited summary financial information gives effect
to the bank taking possession of the Company's assets as if it had occurred on
October 31, 1996:

<TABLE>
<S> <C>
Total assets.................................................... $ -0 -
----------
----------
Total liabilities............................................... $4,634,000
Capital deficiency.............................................. (4,634,000)
----------
Total liabilities and capital deficiency........................ $ -0 -
----------
----------
</TABLE>

F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 5
Use of Proceeds................................. 13
Dividend Policy................................. 14
Capitalization.................................. 15
Dilution........................................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business........................................ 22
Management...................................... 29
Certain Relationships and Related Party
Transactions.................................. 34
Principal Stockholders.......................... 36
Description of Securities....................... 37
Shares Eligible for Future Sale................. 37
Underwriting.................................... 39
Legal Matters................................... 42
Experts......................................... 42
Available Information........................... 42
Index to Financial Statements................... F-1
</TABLE>

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

UNTIL APRIL 13, 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,200,000 SHARES

AMBASSADOR EYEWEAR
GROUP, INC.
COMMON STOCK

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

PROSPECTUS

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

H.J. MEYERS & CO., INC.
NATIONAL SECURITIES CORPORATION

MARCH 18, 1998

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