================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934.

       For the quarterly period ended April 30, 2001

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934.

       For the transition period from _______________ to _______________.


                         Commission file number 0-23001


                             SIGNATURE EYEWEAR, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


         CALIFORNIA                                              95-3876317
-------------------------------                               ----------------
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)


                              498 NORTH OAK STREET
                           INGLEWOOD, CALIFORNIA 90302
                    ----------------------------------------
                    (Address of Principal Executive Offices)


                                 (310) 330-2700
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


         Indicate by check whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days:

Yes   X         No
    -----          -----

         State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: Common Stock, par value
$0.001 per share, 5,056,889 shares issued and outstanding as of July 19, 2001.
================================================================================
<PAGE>


                             SIGNATURE EYEWEAR, INC.
                               INDEX TO FORM 10-Q




                                                                            PAGE
                                                                            ----
PART I   FINANCIAL INFORMATION


Item 1.  Financial Statements

         Independent Accountants' Review Report ............................  3

         Consolidated Balance Sheets .......................................  4

         Consolidated Statements of Operations .............................  5

         Consolidated Statements of Cash Flows .............................  6

         Notes to the Consolidated Financial Statements ....................  8


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ...............................  9

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ........ 17






PART II  OTHER INFORMATION


Item 1.  Legal Proceedings ................................................. 18

Item 3.  Defaults Upon Senior Securities ................................... 18

Item 6.  Exhibits and Reports on Form 8-K .................................. 19













                                       -2-
<PAGE>

                                     PART I.
                              FINANCIAL INFORMATION



ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS



                     INDEPENDENT ACCOUNTANT'S REVIEW REPORT


To the Board of Directors and Stockholders
Signature Eyewear, Inc.

We have reviewed the accompanying consolidated balance sheet of SIGNATURE
EYEWEAR, INC. AND SUBSIDIARY as of April 30, 2001 and the related consolidated
statements of operations and cash flows for the three-month and six-month
periods ended April 30, 2001 and 2000. These financial statements are the
responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope that an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the consolidated financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of October 31, 2000,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended (not presented herein), and in our report
dated January 29, 2001, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of October 31, 2000 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.



/s/ Altschuler, Melvoin and Glasser LLP

Los Angeles, California
June 11, 2001






                                       -3-
<PAGE>
                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
         ASSETS                                                                 April 30, 2001   October 31, 2000
         ------                                                                  ------------      ------------
                                                                                 (Unaudited)
<S>                                                                              <C>               <C>
Current Assets:
         Cash and cash equivalents .........................................     $  2,015,087      $  1,860,451
         Accounts receivable, trade (net) ..................................        9,394,107         8,744,254
         Inventories .......................................................       14,789,478        18,742,177
         Income taxes refundable ...........................................           10,480         1,262,154
         Promotion products and material ...................................        1,498,546         2,082,234
         Prepaid expenses and other current assets .........................          236,858           314,301
                                                                                 ------------      ------------
                                                                                   27,944,556        33,005,571
                                                                                 ------------      ------------
Property and Equipment (net of accumulated depreciation and amortization) ..        1,768,059         2,077,230
                                                                                 ------------      ------------
Other Assets:
         Goodwill and other intangibles (net of amortization) ..............        5,215,111         5,499,351
         Deposits and other assets .........................................          243,605           852,456
                                                                                 ------------      ------------
                                                                                    5,458,716         6,351,807
                                                                                 ------------      ------------
                                                                                 $ 35,171,331      $ 41,434,608
                                                                                 ============      ============
         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------
Current Liabilities:
         Accounts payable, trade ...........................................     $ 10,737,923      $ 14,751,544
         Note payable, bank ................................................        4,962,025         5,000,000
         Current portion of long-term debt .................................        4,366,842         4,603,203
         Accrued credits ...................................................          555,910           789,062
         Accrued expenses and other current liabilities ....................        1,975,173         3,042,872
                                                                                 ------------      ------------
                                                                                   22,597,873        28,186,681
                                                                                 ------------      ------------
Long-term Debt .............................................................        3,799,132         4,806,455
                                                                                 ------------      ------------
Commitments and Contingencies

Stockholders' Equity:
         Preferred stock (authorized 5,000,000 shares, $.001
            par value, none outstanding)
         Common stock (authorized 30,000,000 shares, $.001 par value,
            5,056,889 shares issued and outstanding at April 30, 2001 and
            October 31, 2000) ..............................................            9,188             9,188
         Paid-in capital ...................................................       14,363,990        14,363,990
         Retained earnings (accumulated deficit) ...........................       (5,598,852)       (5,931,706)
                                                                                 ------------      ------------
                                                                                    8,774,326         8,441,472
                                                                                 ------------      ------------
                                                                                 $ 35,171,331      $ 41,434,608
                                                                                 ============      ============
</TABLE>
         The accompanying notes are an integral part of this statement.
                                          -4-
<PAGE>
                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)




<TABLE><CAPTION>
                                                   Three Months Ended April 30,          Six Months Ended April 30,
                                                  ------------------------------      ------------------------------
                                                      2001              2000              2001              2000
                                                  ------------      ------------      ------------      ------------
<S>                                               <C>               <C>               <C>               <C>
Net Sales ...................................     $ 11,470,364      $ 12,389,749      $ 22,359,408      $ 24,393,158

Cost of Sales ...............................        4,428,323         5,058,436         8,189,286         9,865,884
                                                  ------------      ------------      ------------      ------------

Gross Profit ................................        7,042,041         7,331,313        14,170,122        14,527,274
                                                  ------------      ------------      ------------      ------------
Operating Expenses:
         Selling ............................        3,343,081         6,065,859         6,633,723         9,653,297
         General and administrative .........        2,851,042         4,429,321         5,931,561         7,940,627
         Depreciation and amortization ......          294,544           278,768           595,056           611,982
                                                  ------------      ------------      ------------      ------------
                                                     6,488,667        10,773,948        13,160,340        18,205,906
                                                  ------------      ------------      ------------      ------------

Income (Loss) from Operations ...............          553,374        (3,442,635)        1,009,782        (3,678,632)
                                                  ------------      ------------      ------------      ------------
Other Income (Expense):
         Interest, net ......................         (355,597)         (294,286)         (729,430)         (489,784)
         Sundry income ......................           31,254            28,930            53,232            39,996
                                                  ------------      ------------      ------------      ------------
                                                      (324,343)         (265,356)         (676,198)         (449,788)
                                                  ------------      ------------      ------------      ------------

Income (Loss) before Income Taxes ...........          229,031        (3,707,991)          333,584        (4,128,420)

Provision (Benefit) for Income Taxes ........                         (1,239,013)              730        (1,407,184)
                                                  ------------      ------------      ------------      ------------

Net Income (Loss) ...........................     $    229,031      $ (2,468,978)     $    332,854      $ (2,721,236)
                                                  ============      ============      ============      ============
Earnings (Loss) Per Share, Basic and Diluted:
         Earnings (Loss) per common share ...     $       0.05      $      (0.49)     $       0.07      $      (0.54)
                                                  ============      ============      ============      ============
         Weighted average number of common
             shares outstanding .............        5,056,889         5,056,889         5,056,889         5,060,952
                                                  ============      ============      ============      ============
</TABLE>



         The accompanying notes are an integral part of this statement.

                                       -5-
<PAGE>
                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<TABLE><CAPTION>
                                                                     Six Months Ended April 30,
                                                                  ------------------------------
                                                                      2001              2000
                                                                  ------------      ------------
<S>                                                               <C>               <C>
Cash Flows from Operating Activities:
       Net income (loss) ....................................     $    332,854      $ (2,721,236)
       Adjustments to reconcile net income (loss) to net cash
          provided by (used in) operating activities:
              Depreciation and amortization .................          595,056           611,982
              (Gain) loss on disposals of equipment .........           11,776              (547)
              Provision for bad debts .......................           49,404            14,609
              Deferred income taxes .........................                           (207,187)
              Changes in assets -- (increase) decrease:
                  Accounts receivable, trade ................         (699,257)       (3,698,690)
                  Inventories ...............................        3,952,699        (1,307,412)
                  Income taxes refundable ...................        1,251,674          (744,589)
                  Prepaid expenses and other assets .........          534,156           424,579
                  Deposits and other assets .................          109,783            23,621
              Changes in liabilities -- increase (decrease):
                  Accounts payable, trade ...................       (4,013,621)        3,079,053
                  Accrued credits ...........................         (233,152)       (1,055,667)
                  Accrued expenses and other liabilities ....       (1,116,355)          161,319
                                                                  ------------      ------------
       Net cash provided by (used in) operating activities ..          775,017        (5,420,165)
                                                                  ------------      ------------
 Cash Flows from Investing Activities:
       Purchases of property and equipment ..................          (13,422)         (433,523)
       Acquisition of businesses, net of cash acquired ......                             11,300
                                                                  ------------      ------------
       Net cash used in investing activities ................          (13,422)         (422,223)
                                                                  ------------      ------------
 Cash Flows from Financing Activities:
       Borrowings on notes payable, bank ....................                          7,540,833
       Repayments on notes payable, bank ....................          (37,975)       (3,357,833)
       Borrowings on long-term debt .........................                          3,500,000
       Principal payments on long-term debt .................         (507,377)         (746,833)
       Principal payments on capitalized lease obligations ..          (61,607)          (31,503)
       Repurchase of common stock ...........................                            (78,032)
                                                                  ------------      ------------

       Net cash provided by (used in) financing activities ..         (606,959)        6,826,632
                                                                  ------------      ------------

 Net Increase in Cash and Cash Equivalents ..................          154,636           984,244
 Cash and Cash Equivalents, Beginning of Period .............        1,860,451           463,023
                                                                  ------------      ------------

       End of period ........................................     $  2,015,087      $  1,447,267
                                                                  ------------      ------------
</TABLE>

                                       -6-
<PAGE>
                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
                                   (UNAUDITED)



<TABLE><CAPTION>
                                                                     Six Months Ended April 30,
                                                                  ------------------------------
                                                                      2001              2000
                                                                  ------------      ------------
<S>                                                               <C>               <C>

Supplementary Disclosures of Cash Flow Information:
         Cash paid during the period for:

                  Interest...................................     $    696,729      $    532,581
                                                                  ============      ============

                  Income taxes...............................     $        730      $    201,350
                                                                  ============      ============

</TABLE>



         The accompanying notes are an integral part of this statement.



























                                       -7-
<PAGE>
SIGNATURE EYEWEAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1   UNAUDITED INTERIM FINANCIAL STATEMENTS

         The consolidated financial statements should be read in conjunction
with the financial statements in the Annual Report on Form 10-K of Signature
Eyewear, Inc. (the "Company") for the year ended October 31, 2000. Significant
accounting policies disclosed therein have not changed. Certain
reclassifications of prior periods amounts have been made to conform to the
current presentation.

         The interim financial information in this report has not been audited.
In the opinion of management, all adjustments necessary for a fair presentation
of the consolidated financial position and the consolidated results of
operations for the interim periods have been made. All adjustments made were of
a normal, recurring nature. Results of operations reported for interim periods
are not necessarily indicative of results for the entire year.

         In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those
estimates.

NOTE 2   BASIS OF PRESENTATION

         A summary of significant accounting policies is as follows:

         Income Taxes --The Company's effective income tax rate varies from the
federal statutory tax rate for the six months ended April 30, 2001 due to the
utilization of net operating loss carryforwards and for the six months ended
April 30, 2000 principally due to state incomes taxes.

         Earnings Per Share --Financial Accounting Standards No. 128 establishes
standards for computing and presenting earnings per share. It also requires the
dual presentation of basic and diluted earnings per share on the face of the
income statement. Earnings per share is calculated as follows:

<TABLE><CAPTION>
                                Three Months Ended April 30,      Six Months Ended April 30,
                                   2001             2000             2001             2000
                               ------------     ------------     ------------     ------------
<S>                            <C>              <C>              <C>              <C>
Numerator
   Net income (loss) ........  $    229,031     $ (2,468,978)    $    332,854     $ (2,721,236)
                               ============     ============     ============     ============
Denominator
   Weighted average shares...     5,056,889        5,056,889        5,056,889        5,060,952
                               ============     ============     ============     ============
Basic and diluted earnings
   (loss) per share .........  $       0.05     $      (0.49)    $       0.07     $      (0.54)
                               ============     ============     ============     ============
</TABLE>

         Warrants and options issued by the Company are only included in the
computation of weighted average number of shares where their inclusion is not
anti-dilutive. For the six months and three months ended April 30, 2001, the
common stock equivalents are not included because the warrants' and options'
exercise prices were greater than the average market price of the common stock.
For the six months and three months ended April 30, 2000, the common stock
equivalents are not included because the Company reported a net loss and their
inclusion would be anti-dilutive.

NOTE 3   BANK LOAN

         On June 8, 2001, the Company amended its forbearance agreement with
City National Bank to extend the expiration date to August 31, 2001.

                                       -8-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion and analysis, which should be read in
connection with the Company's Consolidated Financial Statements and accompanying
footnotes, contain forward-looking statements that involve risks and
uncertainties. Important factors that could cause actual results to differ
materially from the Company's expectations are set forth in "Factors That May
Affect Future Results" in this Item 2 of this Form 10-Q, as well as those
discussed elsewhere in this Form 10-Q. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by "Factors That May Affect
Future Results." Those forward-looking statements relate to, among other things,
the Company's plans and strategies, new product lines, and relationships with
licensors, distributors and customers, distribution strategies and the business
environment in which the Company operates.

         The following discussion and analysis should be read in connection with
the Company's Consolidated Financial Statements and related notes and other
financial information included elsewhere in this Form 10-Q.

OVERVIEW

         The Company derives revenues primarily through the sale of eyeglass
frames under licensed brand names, including Laura Ashley Eyewear, Eddie Bauer
Eyewear, Hart Schaffner & Marx Eyewear, bebe eyes and Nicole Miller Eyewear, and
under its proprietary brands Dakota Smith Eyewear, Camelot and Signature.

         The Company's best-selling product lines are Laura Ashley Eyewear and
Eddie Bauer Eyewear. Its most successful line is Laura Ashley Eyewear, which was
launched in 1992. Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear
together accounted for 77%, 75% and 60% of the Company's net sales in fiscal
1998, fiscal 1999 and fiscal 2000, respectively. Although the Company expects
the Laura Ashley Eyewear and Eddie Bauer lines to continue to be the Company's
leading sources of revenue for the near future, the Company expects that
increasing sales of its other licensed brands and its own proprietary brands
will reduce the percentage of total sales represented by sales of Laura Ashley
Eyewear and Eddie Bauer Eyewear in the future.

         The Company's cost of sales consists primarily of payments to foreign
contract manufacturers that produce frames and cases to the Company's
specifications. The complete development cycle for a new frame design typically
takes approximately twelve months from the initial design concept to the
release. Generally, at least six months are required to complete the initial
manufacturing process.

         As a result of the material net loss sustained by the Company in fiscal
2000, the Company has undertaken a turnaround strategy which encompasses the
following activities:

         REFINANCE CREDIT FACILITY. The Company defaulted under its secured bank
credit facility and is currently operating under a forbearance agreement with
the bank which expires August 31, 2001. The Company is attempting to refinance
its existing credit facility. The Company has received a written proposal from a
new lender to refinance the credit facility. See "Financial Condition, Capital
Resources and Liquidity."

         NEGOTIATE DISCOUNTS AND PAYMENT PLANS WITH VENDORS. The Company will
continue to negotiate discounts and/or extended payment plans and improved terms
with its vendors and other obligees. During the first six months of fiscal 2001,
the Company had negotiated over $550,000 of discounts of accounts payable and
other obligations and entered in extended payment programs with more than 20
vendors.

         INCREASE GROSS PROFIT. To increase its gross profit, the Company has
increased prices of most of its frames, will continue to negotiate lower prices
and will use lower cost manufacturers to the extent the Company believes such
manufacturers can meet the Company's quality requirements.

         REDUCE INVENTORY AND INCREASE INVENTORY TURNOVER RATES. The Company is
continuing to reduce its inventory to improve its cash position and will attempt
to improve inventory turnover by better matching frame purchases with customer
orders. Inventory has been reduced from $18.7 million at October 31, 2001 to
$14.8 million at April 30, 2001. The Company also intends to maintain a lower
on-hand number of days of selected

                                       -9-
<PAGE>
frames, cases and point-of-purchase materials. The reduction of inventory may
adversely affect the Company's gross profit margin if it sells inventory at
lower prices.

         STAFF REDUCTIONS. The Company has decreased the number of full-time
employees from a high of 288 in fiscal 2000 to 206 at April 30, 2001 and has
also decreased its use of temporary employees. These staff reductions have
resulted in a reduction of the average monthly payroll of between $250,000 and
$300,000.

         IMPROVE PERFORMANCE OF DIRECT SALES FORCE. The Company is attempting to
improve the performance of its direct sales force by reducing the sales
representatives' guaranteed draws and commission structure. The Company has also
terminated a number of less productive sales representatives since the end of
the fiscal year.

         REDUCE SELLING EXPENSES. The Company will reduce its selling expenses
by reducing trade and consumer advertising programs, promotional expenses and
trade show participation. The Company will spend the amounts necessary to comply
with any promotional expenditure requirements under its brand licenses.

         REDUCE OVERHEAD EXPENSES. The Company will attempt to reduce overhead
by subleasing excess space and eliminating sales support offices.

         IMPROVE ACCOUNTS RECEIVABLE COLLECTIONS. The Company will attempt to
shorten the time period for collecting accounts receivable by tightening its
credit policy, reducing credit terms to retailers and reducing the number of
retailer programs with extended credit terms.

         REDUCE NUMBER OF BRAND NAME LINES. In order to concentrate its
resources, the Company will have fewer brand name lines in 2001 due to the
termination of the Coach Eyewear line in December 2000.

         No assurance can be given the Company will be able to successfully
implement any or all of the components of its turnaround strategy, that it will
return to profitability or will be able to refinance its credit facility.

RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated selected
statements of operations data shown as a percentage of net sales.
<TABLE><CAPTION>
                                                      THREE MONTHS ENDED        SIX MONTHS ENDED
                                                           APRIL 30,                APRIL 30,
                                                    ---------------------     ---------------------
                                                      2000         2001         2000         2001
                                                    --------     --------     --------     --------
<S>                                                 <C>          <C>          <C>          <C>
Net Sales .....................................        100.0%       100.0%       100.0%       100.0%
Cost of sales .................................         40.8         38.6         40.4         36.7
                                                    --------     --------     --------     --------
Gross profit ..................................         59.2         61.4         59.6         63.3
                                                    --------     --------     --------     --------
Operating expenses:
   Selling ....................................         48.9         29.2         39.6         29.7
   General and administrative .................         35.8         24.9         32.6         26.6
   Depreciation and amortization ..............          2.3          2.6          2.5          2.7
                                                    --------     --------     --------     --------
        Total operating expenses ..............         87.0         56.6         74.7         58.9
                                                    --------     --------     --------     --------
Income (loss) from operations .................        (27.8)         4.9        (15.1)         4.6
                                                    --------     --------     --------     --------
Other income (expense), net ...................         (2.1)        (2.9)        (1.8)        (3.1)
                                                    --------     --------     --------     --------
Income (loss) before provision for income taxes        (29.9)         2.0        (16.9)         1.5
                                                    --------     --------     --------     --------
Provision (benefit) for income taxes ..........        (10.0)        10.0         (5.8)         0.0
                                                    --------     --------     --------     --------
Net income (loss) .............................        (19.9)         2.0%       (11.1)%        1.5%
                                                    ========     ========     ========     ========
</TABLE>

         NET SALES. Net sales decreased by 7.4% or $0.9 million from the quarter
ended April 30, 2000 (the "2000 second quarter") to the quarter ended April 30,
2001 (the "2001 second quarter"), and by 8.3% or $2.0 million from the six
months ended April 30, 2000 (the "2000 six months") to the six months ended
April 30, 2001 (the "2001 six months"). The following table shows certain
information regarding net sales for the periods indicated:

                                      -10-
<PAGE>
<TABLE><CAPTION>
                              THREE MONTHS ENDED APRIL 30,                   SIX MONTHS ENDED APRIL 30,
                          -----------------------------------           -----------------------------------
                                2001               2000        CHANGE         2001               2000        CHANGE
                          ----------------   ----------------  ------   ----------------   ----------------  ------
<S>                       <C>      <C>       <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
Laura Ashley Eyewear..... $ 3,580    31.3%   $ 4,320    34.9%  (3.6%)   $ 7,044    31.5%   $ 8,821    36.2%  (4.7%)
Eddie Bauer Eyewear......   2,758    24.0      3,216    26.0   (2.0%)     6,216    27.8      6,876    28.2    (.4%)
Other Sales (1)..........   5,117    44.7      4,854    39.1    5.6%      9,099    40.7      8,696    35.6    5.1%
                          -------  -------   -------  -------           -------  -------   -------  -------
Total.................... $11,455   100.0%   $12,390   100.0%     0%    $22,359   100.0%   $24,393   100.0%     0%
                          =======  =======   =======  =======           =======  =======   =======  =======
</TABLE>
---------------
(1)  Includes net sales of other designer eyewear (Hart Schaffner & Marx, Dakota
     Smith, Nicole Miller and bebe), private label frames, USA Optical and
     Optical Surplus, and other miscellaneous products.

         The decrease in the net sales in the 2001 second quarter was
substantially due to the discontinuation of sales of private label frames,
accessories and Coach Eyewear, which totaled $1.0 million in the 2000 second
quarter. Sales of the Company's other designer eyewear and other products were
$11.3 million and $11.4 million in the 2001 second quarter and the 2000 second
quarter, respectively. The decrease in the net sales in the 2001 six months was
due primarily to the discontinuation of sales of private label frames,
accessories and Coach Eyewear, which decrease by $1.2 million between periods.
Net sales of Laura Ashley Eyewear were lower in the 2001 periods due in part to
the higher returns. Net sales in the 2001 periods were positively impacted from
frame price increases effected during the first quarter of 2001 and were
adversely affected by industry-wide decreases in frame sales.

         GROSS PROFIT AND GROSS MARGIN. Gross profit decreased less than 4.0%
and 2.5% from the 2000 second quarter and 2001 six months, respectively,
notwithstanding the 7.4% and 8.3%, respectively, decrease in net sales, because
the gross margin increased from 59.2% to 61.4% between quarters and 59.6% to
63.3% between the six month periods. The increases in gross margin were due to
direct sales representing a higher percentage of net sales during the 2001
periods, to frame price increases implemented by the Company and to lower frame
costs negotiated by the Company as part of its turnaround strategy.

         SELLING EXPENSES. Selling expenses decreased 44.9% from the 2000 second
quarter to the 2001 second quarter and 31.3% from the 2000 six months to the
2001 six months. These decreases were due to: (i) lower compensation to sales
representatives as a result of reduction in the number of sales representatives
and their guaranteed draws and commission structure as part of the Company's
turnaround strategy; (ii) reduced variable sales expenses due to lower net
sales; (iii) reduced tradeshow expenses as the Company elected not to
participate in certain tradeshows; and (iv) reduced launch expenses, as the
Company launched Coach Eyewear and bebe eyes in the second quarter of 2000.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased $1,578,000 or 35.6% from the 2000 second quarter to the 2001
second quarter and $2,009,000 or 25.3% from the 2000 six months to the 2001 six
months. These decreases were due primarily to decreased compensation expense due
to a reduction in permanent and temporary employees, which was offset in part by
an increase in legal, accounting and other professional fees.

         OTHER INCOME (EXPENSE), NET. Other expenses included primarily interest
expense, which increased due to higher outstanding borrowings and higher
interest rates.

         PROVISION (BENEFIT) FOR INCOME TAXES. As of October 31, 2000 the
Company had a federal net operating loss carryforward of approximately $4
million through 2020. As a result, the Company had no provision for income taxes
for the 2001 second quarter and a $730 provision for the 2001 six months,
compared to income tax benefits of $1,239,000 for the 2000 second quarter and
$1,407,000 for the 2001 six months.

         NET INCOME (LOSS). The Company had net income in the 2001 second
quarter and 2001 six months of $229,000 and $333,000, respectively, compared to
net losses of $2,469,000 and $2,721,000 in the 2000 second quarter and 2000 six
months respectively. The net income in the 2001 second quarter and 2001 six
months included approximately $150,000 and $550,000, respectively, of vendor
discounts of outstanding accounts payable negotiated as part of the Company's
turnaround strategy.

                                      -11-
<PAGE>

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         The Company's accounts receivable increased from $8.7 million at
October 31, 2000 to $9.4 million at April 30, 2001 due to the Company's shift to
direct sales to optical retailers from distributor sales, as optical retailers
historically have paid more slowly than distributors.

         The Company's inventories decreased from $18.7 million at October 31,
2000 to $14.8 million at April 30, 2001 as part of the Company's turnaround
strategy to reduce inventory and improve inventory turnover by better matching
frame purchases with customer orders.

         The Company had goodwill of $5.2 million at April 30, 2001 resulting
primarily from the acquisition of California Design Studio, Inc. (the "CDS
Acquisition") in 1999.

         In June 2000, the Company restructured its credit facility from its
commercial bank into an accounts receivable and inventory revolving credit line
and a term loan which are secured by substantially all of the assets of the
Company. Under the credit line, the Company may obtain advances up to an amount
equal to 60% of eligible accounts receivable and 35% of eligible inventories, up
to a maximum of $5,000,000, which advances bear interest at the bank's prime
rate or 2.5% in excess of the London Interbank Offered Rate ("LIBOR"), at the
Company's option. The term loan was in the amount of $3,500,000, is payable in
monthly installments of $72,917 plus interest at the rate of 8.52% per annum.
The credit facility matured on September 30, 2000.

         The Company has defaulted under its bank credit facility for various
events of default including non-payment at maturity as well other non-compliance
with various covenants and conditions. Since the default, the Company has been
charged a default interest rate equal to the bank's prime rate of interest plus
5%. The Company entered into a forbearance agreement with its bank in December
2000, which was amended in February, May and June 2001. Under the forbearance
agreement, the bank has agreed to refrain from exercising any rights under the
loan agreement for defaults existing at the time of default until the earliest
of August 31, 2001, the closing of a recapitalization or sale of the Company
which in each case results in the full repayment of the bank loan (a
"Transaction") or a default under the forbearance agreement or default under the
loan agreement other than an existing default. Among other things, under the
forbearance agreement, the Company must provide the bank draft documentation for
a Transaction by August 15, 2001 and definitive documentation for a Transaction
by August 31, 2001. The failure to comply with the forbearance agreement could
result in the bank exercising some or all of its remedies under the loan
agreement, including foreclosing on the assets of the Company.

         The Company is actively attempting to refinance the credit facility.
The Company has received a written proposal from the new lender to refinance the
credit facility with a two-year revolving line of credit for up to $13.5
million. The line of credit would be secured by the assets of the Company with
availability tied to eligible accounts receivable and inventory. Closing of the
line of credit is subject to satisfactory completion of due diligence and other
conditions. No assurance can be given that the Company will obtain this or any
other line of credit facility to refinance its existing bank credit facility.

         Long-term debt at April 30, 2001 included: (1) a $0.9 million note
payable to California Design Studio, Inc. in connection with the CDS
Acquisition; and (2) an obligation to a frame vendor of California Design
Studio, Inc. (present value of $3.3 million) assumed in connection with the CDS
Acquisition.

         Of the Company's accounts payable at April 30, 2001, $1.8 million were
payable in foreign currency. To monitor risks associated with currency
fluctuations, the Company on a weekly basis assesses the volatility of certain
foreign currencies and reviews the amounts and expected payment dates of its
purchase orders and accounts payable in those currencies. Based on those
factors, the Company may from time to time mitigate some portion of that risk by
purchasing forward commitments to deliver foreign currency to the Company. The
Company held forward commitments for foreign currencies in the amount of $43,000
at April 30, 2001.

         The Company's bad debt write-offs were less than 0.2% of net sales for
the 2000 and 2001 six months. As part of the Company's management of its working
capital, the Company performs most customer credit functions internally,
including extensions of credit and collections.

                                      -12-
<PAGE>

         Commencing the fourth quarter of fiscal 2000 the Company experienced a
lack of liquidity. Through implementation of its turnaround strategy in fiscal
2001, its liquidity has improved. Under its bank forbearance agreement, it
cannot increase its borrowings from its commercial bank and must refinance the
credit facility. Assuming the Company can refinance the credit facility and
continue to successfully implement its turnaround strategy, the Company believes
it will have adequate liquidity for the next twelve months. However, because of
the uncertainties in being able to successfully implement the turnaround
strategy, the Company may also attempt to secure debt or equity financing in
addition to refinancing its bank credit facility. Such financing could involve
the sale of control of the Company.

INFLATION

         The Company does not believe its business and operations have been
materially affected by inflation.

FACTORS THAT MAY AFFECT FUTURE RESULTS

         The following is a discussion of certain factors that may affect the
Company's financial condition and results of operations.

         NEED TO REFINANCE BANK CREDIT FACILITY

         The Company's bank credit facility matured on September 30, 2000. The
Company has defaulted under its bank credit facility by reason of various events
of default, including non-payment at maturity and breach of other covenants .
The Company entered into a forbearance agreement with its bank regarding the
defaults. Under the forbearance agreement, as amended, the bank has agreed to
refrain from exercising any rights under the loan agreement for defaults
existing at the time of default until the earliest of August 31, 2001, the
closing of a recapitalization or sale of the Company which in each case results
in the full repayment of the bank loan (a "Transaction") or a default under the
forbearance agreement or default under the loan agreement other than an existing
default. Among other things, under the forbearance agreement, the Company must
provide the bank draft documentation for a Transaction by August 15, 2001 and
definitive documentation for a Transaction by August 31, 2001. The Company has
received a written proposal from the new lender to refinance the credit facility
with a two-year revolving line of credit for up to $13.5 million. The line of
credit would be secured by the assets of the Company with availability tied to
eligible accounts receivable and inventory. Closing of the line of credit is
subject to satisfy to completion of due diligence and other conditions. No
assurance can be given that the Company will obtain this or any other line of
credit facility to refinance its existing bank credit facility. The failure to
comply with the forbearance agreement could result in the bank exercising some
or all of its remedies under the loan agreement, including foreclosing on the
assets of the Company.

         LIQUIDITY REQUIREMENTS

         Commencing the fourth quarter of fiscal 2000 the Company experienced a
lack of liquidity. Under the forbearance agreement with its commercial bank, it
cannot increase its borrowings from the bank and must refinance the credit
facility. Assuming the Company can refinance the credit facility, reduce its
inventory levels, maintain current sales levels and generally implement the
other parts of its turnaround strategy, the Company believes it will have
adequate liquidity for the next twelve months. However, because of the
uncertainties in being able to successfully implementing the turnaround
strategy, the Company may also attempt to secure debt or equity financing in
addition to refinancing its bank credit facility. Such financing could involve
the sale of control of the Company.

         NEED TO GENERATE INCREASED REVENUES

         The Company's conversion in October 1999 from selling to independent
optical retailers in the United States through a direct national sales force
instead of distributors was not successful. The Company believed that it needed
to expand its direct sales force to approximately 130 sales representatives by
the end of fiscal 2000 to generate unit sales commensurate with unit sales
through its distributor network. The Company was unable to

                                      -13-
<PAGE>

attract that number of qualified sales representatives, and the domestic direct
sales force did not exceed 88 during the year. That number had decreased to
approximately 55 at April 30, 2001 due to attrition and terminations by the
Company. While the Company's turnaround strategy provides for significant
reductions in costs and expenses, the Company must also generate sufficient
sales to become profitable.

         SUBSTANTIAL DEPENDENCE UPON LAURA ASHLEY AND EDDIE BAUER LICENSES

         Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear accounted for
75% and 60% of the Company's net sales in fiscal 1999 and fiscal 2000,
respectively, and 59% in the first six months of fiscal 2001. While the Company
intends to continue reducing its dependence on the Laura Ashley Eyewear and
Eddie Bauer Eyewear lines through the development and promotion of Nicole Miller
Eyewear, Dakota Smith Eyewear and bebe eyes, as well as its own house brands,
the Company expects the Laura Ashley and Eddie Bauer Eyewear lines to continue
to be the Company's leading sources of revenue for the near future. The Company
markets Laura Ashley Eyewear through an exclusive license which terminates in
2001, but may be renewed by the Company at least through January 2006 so long as
the Company is not in breach of the license agreement and meets certain minimum
net sales requirements. The Company markets Eddie Bauer Eyewear through an
exclusive license which terminates in December 2002, but may be renewed by the
Company at least through 2008 so long as the Company is not in material default
and meets certain minimum net sales and royalty requirements. Each of Laura
Ashley and Eddie Bauer may terminate its respective license before its term
expires under certain circumstances, including a material default by the Company
or certain defined changes in control of the Company.

         APPROVAL REQUIREMENTS OF BRAND-NAME LICENSORS

         The Company's business is predominantly based on its brand-name
licensing relationships. Each of the Company's licenses requires mutual
agreement of the parties for significant matters. Each of these licensors has
final approval over all eyeglass frames and other products bearing the
licensor's proprietary marks, and the frames must meet the licensor's general
design specifications and quality standards. Consequently, each licensor may, in
the exercise of its approval rights, delay the distribution of eyeglass frames
beating its proprietary marks. The Company expects that each future license it
obtains will contain similar approval provisions. Accordingly, there can be no
assurance that the Company will be able to continue to maintain good
relationships with each licensor, or that the Company will not be subject to
delays resulting from disagreements with, or an inability to obtain approvals
from, its licensors. These delays could materially and adversely affect the
Company's business, operating results and financial condition.

         LIMITATIONS ON ABILITY TO DISTRIBUTE OTHER BRAND-NAME EYEGLASS FRAMES

         Each of the Company's licenses limits the Company's right to market and
sell products with competing brand names. The Laura Ashley license prohibits the
Company from selling any range of designer eyewear that is similar to Laura
Ashley Eyewear in price and any of style, market position and market segment.
The Eddie Bauer license and the bebe license prohibit the Company from entering
into license agreements with companies which Eddie Bauer and bebe, respectively,
believe are its direct competitors. The Hart Schaffner & Marx license prohibits
the Company from marketing and selling another men's brand of eyeglass frames
under a well-known fashion name with a wholesale price in excess of $40. The
Company expects that each future license it obtains will contain some
limitations on competition within market segments. The Company's growth,
therefore, will be limited to capitalizing on its existing licenses in the
prescription eyeglass market, introducing eyeglass frames in other segments of
the prescription eyeglass market, and manufacturing and distributing products
other than prescription eyeglass frames such as sunglasses. In addition, there
can be no assurance that disagreements will not arise between the Company and
its licensors regarding whether certain brand-name lines would be prohibited by
their respective license agreements. Disagreements with licensors could
adversely affect sales of the Company's existing eyeglass frames or prevent the
Company from introducing new eyewear products in market segments the Company
believes are not being served by its existing products.

         DEPENDENCE UPON CONTRACT MANUFACTURERS; FOREIGN TRADE REGULATION

         The Company's frames are manufactured to its specifications by a number
of contract manufacturers located outside the United States, principally in Hong
Kong/China, Japan and Italy. The manufacture of high

                                      -14-
<PAGE>

quality metal frames is a labor-intensive process which can require over 200
production steps (including a large number of quality-control procedures) and
from 90 to 180 days of production time. These long lead times increase the risk
of overstocking, if the Company overestimates the demand for a new style, or
understocking, which can result in lost sales if the Company underestimates
demand for a new style. While a number of contract manufacturers exist
throughout the world, there can be no assurance that an interruption in the
manufacture of the Company's eyeglass frames will not occur. An interruption
occurring at one manufacturing site that requires the Company to change to a
different manufacturer could cause significant delays in the distribution of the
styles affected. This could cause the Company to miss delivery schedules for
these styles, which could materially and adversely affect the Company's
business, operating results and financial condition.

         In addition, the purchase of goods manufactured in foreign countries is
subject to a number of risks, including foreign exchange rate fluctuations,
economic disruptions, transportation delays and interruptions, increases in
tariffs and duties, changes in import and export controls and other changes in
governmental policies. For frames purchased other than from Hong Kong/China
manufacturers, the Company pays for its frames in the currency of the country in
which the manufacturer is located and thus the costs (in United States dollars)
of the frames vary based upon currency fluctuations. Increases and decreases in
costs (in United States dollars) resulting from currency fluctuations generally
do not affect the price at which the Company sells its frames, and thus currency
fluctuations can impact the Company's gross margin and results of operations. In
fiscal 2000, Signature used manufacturers principally in Hong Kong/China, Japan
and Italy.

         INTERNATIONAL SALES

         International sales accounted for approximately 8.7%, 12.8% and 11.5%
of the Company's net sales in fiscal 1999, fiscal 2000 and first six months of
fiscal 2001, respectively. These sales were primarily in England, Canada,
Australia, New Zealand, Holland and Belgium. The Company's international
business is subject to numerous risks, including the need to comply with export
and import laws, changes in export or import controls, tariffs and other
regulatory requirements, the imposition of governmental controls, political and
economic instability, trade restrictions, the greater difficulty of
administering business overseas and general economic conditions. Although the
Company's international sales are principally in United States dollars, sales to
international customers may also be affected by changes in demand resulting from
fluctuations in interest and currency exchange rates. There can be no assurance
that these factors will not have a material adverse effect on the Company's
business, operating results and financial condition.

         PRODUCT RETURNS

         The Company has a product return policy which it believes is standard
in the optical industry. Under that policy, the Company generally accepts
returns of non-discontinued product for credit, upon presentment and without
charge. The Company's product returns for fiscal 1999 and fiscal 2000 amounted
to 22.4% and 30.4% of gross sales (sales before returns), excluding distributor
returns of $4.4 million in fiscal 1999 in connection with the Company's decision
to terminate its relationship with domestic distributors, respectively. The
Company has experienced returns at a rate significantly exceeding its historical
levels since commenced selling to United States independent optical retailers
directly rather than through distributors. The Company maintains reserves for
product returns which it considers adequate; however, an increase in returns
that significantly exceeds the amount of those reserves could have a material
adverse impact on the Company's business, operating results and financial
condition.

         AVAILABILITY OF VISION CORRECTION ALTERNATIVES

         The Company's future success could depend to a significant extent on
the availability and acceptance by the market of vision correction alternatives
to prescription eyeglasses, such as contact lenses and refractive (optical)
surgery, including a procedure named LASIK. While the Company does not believe
that contact lenses, refractive surgery or other vision correction alternatives
materially and adversely impact its business at present, there can be no
assurance that technological advances in, or reductions in the cost of, vision
correction alternatives will not occur in the future, resulting in their more
widespread use. Increased use of vision correction alternatives could result in
decreased use of the Company's eyewear products, which would have a material
adverse impact on the Company's business, operating results and financial
condition.

                                      -15-
<PAGE>

         ACCEPTANCE OF EYEGLASS FRAMES; UNPREDICTABILITY OF DISCRETIONARY
         CONSUMER SPENDING

         The Company's success will depend to a significant extent on the
market's acceptance of the Company's brand-name eyeglass frames. If the Company
is unable to develop new, commercially successful styles to replace revenues
from older styles in the later stages of their life cycles, the Company's
business, operating results and financial condition could be materially and
adversely affected. The Company's future growth will depend in part upon the
effectiveness of the Company's marketing and sales efforts as well as the
availability and acceptance of other competing eyeglass frames released into the
market place at or near the same time, the availability of vision correction
alternatives, general economic conditions and other tangible and intangible
factors, all of which can change and cannot be predicted. The Company's success
also will depend to a significant extent upon a number of factors relating to
discretionary consumer spending, including the trend in managed health care to
allocate fewer dollars to the purchase of eyeglass frames, and general economic
conditions affecting disposable consumer income, such as employment business
conditions, interest rates and taxation. Any significant adverse change in
general economic conditions or uncertainties regarding future economic prospects
that adversely affect discretionary consumer spending generally, and purchasers
of prescription eyeglass frames specifically, could have a material adverse
effect on the Company's business, operating results and financial condition.

         COMPETITION

         The markets for prescription eyewear are intensely competitive. There
are thousands of styles, including hundreds with brand names. At retail, the
Company's eyewear styles compete with styles that do and do not have brand
names, styles in the same price range, and styles with similar design concepts.
To obtain board space at an optical retailer, the Company competes against many
companies, both foreign and domestic, including Luxottica Group S.p.A.
(operating in the United States through a number of its subsidiaries), Safilo
Group S.p.A. (operating in the United States through a number of its
subsidiaries) and Marchon Eyewear, Inc., as well as Signature's former
distributors. Signature's largest competitors have significantly greater
financial, technical, sales, manufacturing and other resources than the Company.
They also employ direct sales forces that are significantly larger than the
Company's, and are thus able to realize a higher gross profit margin. At the
major retail chains, the Company competes not only against other eyewear
suppliers, but also against the chains themselves, which license some of their
own brand names for design, manufacture and sale in theft own stores. Luxottica,
one of the largest eyewear companies in the world, is vertically integrated in
that it manufactures frames, distributes them through direct sales forces in the
United States and throughout the world, and owns LensCrafters, one of the
largest United States retail optical chains.

         The Company competes in its target markets through the quality of the
brand names it licenses, its marketing, merchandising and sales promotion
programs, the popularity of its frame designs, the reputation of its styles for
quality, and its pricing policies. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competitive pressures faced by the Company will not materially and
adversely affect its business, operating results and financial condition.

         DEPENDENCE ON KEY PERSONNEL

         The Company's success has and will continue to depend to a significant
extent upon its executive officers, including Bernard Weiss (Chief Executive
Officer), Michael Prince (Chief Financial Officer), Robert Fried (Senior Vice
President of Marketing) and Robert Zeichick (Vice President of Advertising and
Sales Promotion). The loss of the services of one or more of these key employees
could have a material adverse effect on the Company. These officers may
terminate their employment at any time. The Company maintains and is the sole
beneficiary of "key person" life insurance on Messrs. Weiss, Prince, Fried and
Zeichick in the amount of $750,000 each. There can be no assurance that the
proceeds of these policies will be sufficient to offset the loss to the Company
due to the death of that executive officer. In addition, the Company's future
success will depend in large part upon its ability to attract, retain and
motivate personnel with a variety of creative, technical and managerial skills.
There can be no assurance that the Company will be able to retain and motivate
its personnel or attract additional qualified members to its management staff.
The inability to attract and retain the necessary managerial personnel could
have a material adverse effect on the Company's business, operating results and
financial condition.

                                      -16-
<PAGE>

         CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of the Company owned approximately
51.7% of the Company's outstanding shares at May 31, 2001. As a result, the
directors and executive officers control the Company and its operations,
including the approval of significant corporate transactions and the election of
at least a majority of the Company's Board of Directors and thus the policies of
the Company. The voting power of the directors and executive officers could also
serve to discourage potential acquirors from seeking to acquire control of the
Company through the purchase of the Common Stock, which might depress the price
of the Common Stock.

         QUARTERLY AND SEASONAL FLUCTUATIONS

         The Company's results of operations have fluctuated from quarter to
quarter and the Company expects these fluctuations to continue in the future.
Historically, the Company's net sales in the quarter ending January 31 (its
first quarter) have been lower than net sales in other fiscal quarters. The
Company attributes lower net sales in the first fiscal quarter in part to low
consumer demand for prescription eyeglasses during the holiday season and
year-end inventory adjustments by distributors and independent optical
retailers. A factor which may significantly influence results of operations in a
particular quarter is the introduction of a brand-name collection, which results
in disproportionate levels of selling expenses due to additional advertising,
promotions, catalogs and in-store displays, introduction of a new brand may also
generate a temporary increase in sales due to initial stocking by retailers.
Other factors which can influence the Company's results of operations include
customer demand, the mix of distribution channels through which the eyeglass
frames are sold, the mix of eyeglass frames sold, product returns, delays in
shipment and general economic conditions.

         NO DIVIDENDS ANTICIPATED

         The Company is unable to pay any dividends for so long as it is in
default under its bank credit facility. In addition, the Company does not
currently intend to declare or pay any cash dividends and intends to retain
earnings, if any, for the future operation and expansion of the Company's
business.

         POSSIBLE ANTI-TAKEOVER EFFECTS

         The Company's Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the shareholders. The Preferred
Stock could be issued with voting, liquidation, dividend and other rights
superior to those of the Common Stock. The Company has no present intention to
issue any shares of Preferred Stock. However, the rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, which may depress the market value of
the Common Stock. In addition, each of the Laura Ashley, Hart Schaffner & Marx,
Eddie Bauer and bebe licenses allows the licensor to terminate its license upon
certain events which under the license are deemed to result in a change in
control of the Company. The licensors' rights to terminate their licenses upon a
change in control of the Company could have the effect of discouraging a third
party from acquiring or attempting to acquire a controlling portion of the
outstanding voting stock of the Company and could thereby depress the market
value of the Common Stock.

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risks, which include foreign exchange
rates and changes in U.S. interest rates. The Company does not engage in
financial transactions for trading or speculative purposes.

         FOREIGN CURRENCY RISKS. During fiscal 2000, at any month-end a maximum
of $3.4 million and a minimum of $1.8 million of the Company's accounts payable
were payable in foreign currency. At any month-end during the six months ended
April 30, 2001, a maximum of $2.5 million were payable in foreign currency.
These foreign currencies included Japanese Yen, Italian Lire and French Francs.
Any significant change in foreign currency

                                      -17-
<PAGE>

exchange rates could therefore materially affect the Company's business,
operating results and financial condition. To monitor risks associated with
currency fluctuations, the Company on a weekly basis assesses the volatility of
certain foreign currencies and reviews the amounts and expected payment dates of
its purchase orders and accounts payable in those currencies. Based on those
factors, the Company may from time to time mitigate some portion of that risk by
purchasing forward commitments to deliver foreign currency to the Company. The
Company held forward commitments for foreign currencies in the amount of $43,000
at April 30, 2001.

         International sales accounted for approximately 12.8% and [13.6%] of
the Company's net sales in fiscal 2000 and the six months ended April 30, 2001,
respectively. Although the Company's international sales are principally in
United States dollars, sales to international customers may also be affected by
changes in demand resulting from fluctuations in interest and currency exchange
rates. There can be no assurance that these factors will not have a material
adverse effect on the Company's business, operating results and financial
condition. For frames purchased other than from Hong Kong/China manufacturers,
the Company pays for its frames in the currency of the country in which the
manufacturer is located and thus the costs (in United States dollars) of the
frames vary based upon currency fluctuations. Increases and decreases in costs
(In United States dollars) resulting from currency fluctuations generally do not
affect the price at which the Company sells its frames, and thus currency
fluctuation can impact the Company's gross margin.

         INTEREST RATE RISK. The Company's bank credit facility includes an
accounts receivable and inventory revolving credit line and a term loan which
are secured by substantially all of the assets of the Company. Under the credit
line, the Company may obtain advances up to an amount equal to 60% of eligible
accounts receivable and 35% of eligible inventories, up to a maximum of
$5,000,000, which advances bear interest at the bank's prime rate or 2.5% in
excess of the London Interbank Offered Rate ("LIBOR"), at the Company's option.
The term loan was in the amount of $3,500,000, is payable in monthly
installments of $73,000 plus interest at the rate of 8.52% per annum. At April
30, 2001, approximately $8.2 million was due to the bank under the Credit
Agreement. Any interest which may in the future become payable on the Company's
bank line of credit will be based on variable interest rates and will therefore
be affected by changes in market interest rates.  Since September 30, 2000, the
Company has been charged a default rate of interest equal to the bank's prime
rate plus 5%.

         In addition, the Company has fixed income investments consisting of
cash equivalents, which are also affected by changes in market interest rates.
The Company does not use derivative financial instruments in its investment
portfolio. The Company places its cash equivalents with high-quality financial
institutions, limits the amount of credit exposure to any one institution and
has established investment guidelines relative to diversification and maturities
designed to maintain safety and liquidity.


                                    PART II.
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         No material changes from prior disclosure.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         The Company has defaulted under its bank credit facility for various
events of default including non-payment at maturity as well other non-compliance
with various covenants and conditions. As of July 10, 2001, the aggregate
outstanding principal and accrued and unpaid interest on the credit facility was
$6,909,778. The Company entered into a forbearance agreement in December 2000,
amended in February, May and June 2001, with its bank. Under the forbearance
agreement, as amended, the bank has agreed to refrain from exercising any rights
under the loan agreement for defaults existing at the time of default until the
earliest of August 31, 2001, the closing of a recapitalization or sale of the
Company which in each case results in the full repayment of the bank loan (a
"Transaction") or a default under the forbearance agreement or default under the
loan agreement other than an existing default. Among other things, under the
forbearance agreement, the Company must provide the bank draft documentation for
a Transaction by August 15, 2001 and definitive documentation for a Transaction
by August 31,

                                      -18-
<PAGE>


2001. The failure to comply with the forbearance agreement could result in the
bank exercising some or all of its remedies under the loan agreement, including
foreclosing on the assets of the Company.

         The Company is actively attempting to refinance the credit facility.
The Company has received a written proposal from the new lender to refinance the
credit facility with a two-year revolving line of credit for up to $13.5
million. The line of credit would be secured by the assets of the Company with
availability tied to eligible accounts receivable and inventory. Closing of the
line of credit is subject to satisfactory completion of due diligence and other
conditions. No assurance can be given that the Company will obtain this or any
other line of credit facility to refinance its existing bank credit facility.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         None.


































                                      -19-
<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date: July 22, 2001                             SIGNATURE EYEWEAR, INC.


                                                By: /s/ Michael Prince
                                                    -----------------------
                                                    Michael Prince
                                                    Chief Financial Officer































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