================================================================================
                       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 July 31, 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 August 31,
2001.
================================================================================
<PAGE>

                             SIGNATURE EYEWEAR, INC.
                               INDEX TO FORM 10-Q

PART I   FINANCIAL INFORMATION                                              PAGE
                                                                            ----
Item 1.  Financial Statements                                                 3
         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                                               10
Item 3.  Quantitative and Qualitative Disclosures about Market Risk          18
PART II  OTHER INFORMATION
Item 1.  Legal Proceedings                                                   19
Item 3.  Defaults Upon Senior Securities                                     19
Item 6.  Exhibits and Reports on Form 8-K                                    19




























                                      -2-
<PAGE>

1.          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 July 31, 2001 and the related consolidated
statements of operations and cash flows for the three-month and nine-month
periods ended July 31, 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
August 30, 2001

                                      -3-
<PAGE>

                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                         July 31, 2001    October 31, 2000
                                                                          ------------      ------------
                                                                           (Unaudited)
<S>                                                                       <C>               <C>
ASSETS

Current Assets:
       Cash and cash equivalents ....................................     $  1,560,970      $  1,860,451
       Accounts receivable, trade (net) .............................        7,947,013         8,744,254
       Inventories ..................................................       14,882,145        18,742,177
       Income taxes refundable ......................................             --           1,262,154
       Promotion products and material ..............................        1,286,017         2,082,234
       Prepaid expenses and other current assets ....................          173,921           314,301
                                                                          ------------      ------------
                                                                            25,850,066        33,005,571
                                                                          ------------      ------------
Property and Equipment (net of accumulated depreciation and
       amortization) ................................................        1,657,789         2,077,230
                                                                          ------------      ------------
Other Assets:
       Goodwill and other intangibles (net) .........................        5,095,141         5,499,351
       Deposits and other assets ....................................          113,449           852,456
                                                                          ------------      ------------
                                                                             5,208,590         6,351,807
                                                                          ------------      ------------
                                                                          $ 32,716,445      $ 41,434,608
                                                                          ============      ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
       Accounts payable, trade ......................................     $  9,479,638      $ 14,751,544
       Note payable, bank ...........................................        3,620,180         5,000,000
       Current portion of long-term debt ............................        3,994,302         4,603,203
       Accrued credits ..............................................          474,910           789,062
       Accrued expenses and other current liabilities ...............        2,164,905         3,042,872
                                                                          ------------      ------------
                                                                            19,751,935        28,186,681
                                                                          ------------      ------------
Long term liabilities
       Long-term debt ...............................................        3,659,653         4,806,455
       Other ........................................................          376,731
                                                                          ------------      ------------
                                                                             4,036,384         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 July 31,
           2001 and October 31, 2000) ...............................            9,188             9,188
       Paid-in capital ..............................................       14,363,990        14,363,990
       Retained earnings (accumulated deficit) ......................       (5,445,052)       (5,931,706)
                                                                          ------------      ------------
                                                                             8,928,126         8,441,472
                                                                          ------------      ------------
                                                                          $ 32,716,445      $ 41,434,608
                                                                          ============      ============
</TABLE>

                             See accompanying notes

                                      -4-
<PAGE>

                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE><CAPTION>
                                                    Three Months Ended July 31,         Nine Months Ended July 31,
                                                  ------------------------------      ------------------------------
                                                      2001              2000              2001              2000
                                                  ------------      ------------      ------------      ------------
<S>                                               <C>               <C>               <C>               <C>
Net Sales ...................................     $ 11,821,152      $ 17,441,961      $ 34,180,560      $ 41,835,119

Cost of Sales ...............................        4,656,634         7,075,932        12,845,920        16,941,816
                                                  ------------      ------------      ------------      ------------

Gross Profit ................................        7,164,518        10,366,029        21,334,640        24,893,303
                                                  ------------      ------------      ------------      ------------

Operating Expenses:
Selling .....................................        2,663,610         6,858,007         9,297,333        16,511,304
General and administrative ..................        3,771,736         4,735,232         9,703,297        12,675,859
Depreciation and amortization ...............          241,749           278,829           836,805           890,811
                                                  ------------      ------------      ------------      ------------
                                                     6,677,095        11,872,068        19,837,435        30,077,974

Income (Loss) from Operations ...............          487,423        (1,506,039)        1,497,205        (5,184,671)
                                                  ------------      ------------      ------------      ------------

Other Income (Expense):
Interest, net ...............................         (293,204)         (280,207)       (1,022,634)         (769,991)
Sundry ......................................          (35,582)          (39,453)           17,651               543
                                                  ------------      ------------      ------------      ------------
                                                      (328,786)         (319,660)       (1,004,983)         (769,448)
                                                  ------------      ------------      ------------      ------------

Income (Loss) before Income Taxes ...........          158,637        (1,825,699)          492,222        (5,954,119)

Provision (Benefit) for Income Taxes ........            4,838          (808,132)            5,568        (2,215,316)
                                                  ------------      ------------      ------------      ------------

Net Income (Loss) ...........................     $    153,799      $ (1,017,567)     $    486,654      $ (3,738,803)
                                                  ============      ============      ============      ============

Earnings (Loss) Per Share, Basic and Diluted:
Earnings (Loss) per common share ............     $       0.03      $      (0.20)     $       0.10      $      (0.74)
                                                  ============      ============      ============      ============
Weighted average number of common
shares outstanding ..........................        5,056,889         5,056,889         5,056,889         5,059,588
                                                  ============      ============      ============      ============
</TABLE>

                             See accompanying notes

                                       -5-
<PAGE>

                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE><CAPTION>
                                                                  Nine Months Ended July 31,
                                                                ------------------------------
                                                                    2001              2000
                                                                ------------      ------------
<S>                                                             <C>               <C>
Cash Flows from Operating Activities:
     Net income (loss) ....................................     $    486,654      $ (3,738,803)
     Adjustments to reconcile net income (loss) to net cash
            provided by (used in) operating activities:
           Depreciation and amortization ..................          836,805           890,811
           Loss (gain) on disposal of equipment ...........           11,776            (1,989)
           Provision for bad debts ........................           47,257           106,130
           Provision for inventory reserve ................         (161,004)             --
           Deferred income taxes ..........................             --          (1,015,319)
           Other ..........................................          (13,940)
           Changes in assets -- (increase) decrease:
                 Accounts receivable, trade ...............          749,984        (7,079,950)
                 Inventories ..............................        4,021,036        (2,974,626)
                 Income taxes refundable ..................        1,262,154          (584,599)
                 Prepaid expenses and other assets ........          809,622            83,851
                 Deposits and other assets ................          239,939            16,003
           Changes in liabilities - increase (decrease):
                 Accounts payable, trade ..................       (5,253,907)        7,289,883
                 Accrued credits ..........................         (314,152)         (869,123)
                 Accrued expenses and other liabilities ...         (926,622)        1,521,418
                 Other liabilities ........................          221,855              --
                                                                ------------      ------------

     Net cash provided by (used in) operating activities ..        2,017,457        (6,356,583)
                                                                ------------      ------------

Cash Flows from Investing Activities:
     Purchases of property and equipment ..................          (66,115)         (828,115)
     Acquisition of businesses, net of cash acquired ......             --              11,300
                                                                ------------      ------------

     Net cash used in investing activities ................          (66,115)         (816,815)
                                                                ------------      ------------

Cash Flows from Financing Activities:
     Checks issued in excess of deposits ..................             --             306,828
     Borrowings on notes payable, bank ....................             --          11,570,833
     Repayments on notes payable, bank ....................       (1,379,820)       (4,425,833)
     Principal payments on long-term debt .................         (777,336)         (814,764)
     Capital lease obligations ............................             --             230,701
     Principal payments on capitalized lease obligations ..          (93,667)          (51,594)
     Repurchase of common stock ...........................             --             (78,032)
                                                                ------------      ------------

     Net cash provided by (used in) financing activities ..       (2,250,823)        6,738,139
                                                                ------------      ------------

Net Decrease in Cash and Cash Equivalents .................         (299,481)         (435,259)
Cash and Cash Equivalents, Beginning of Period ............        1,860,451           463,023
                                                                ------------      ------------

Cash and Cash Equivalents, End of period ..................     $  1,560,970      $     27,764
                                                                ============      ============
</TABLE>

                                      -6-
<PAGE>


                     SIGNATURE EYEWEAR, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                                   (UNAUDITED)

<TABLE><CAPTION>
                                                                              Nine Months Ended July 31,
                                                                                ----------------------
                                                                                   2001         2000
                                                                                ---------     --------
<S>                                                                             <C>           <C>
Supplementary Disclosures of Cash Flow Information:
       Cash paid during the period for:
             Interest .....................................................     $ 943,640     $782,649
                                                                                =========     ========

             Income taxes .................................................     $   5,568     $201,350
                                                                                =========     ========

Supplemental Schedule of Non Cash Investing and Financing
       Activity:
             Exchange of note payable for future consulting obligation ....     $ 154,876     $   --
                                                                                =========     ========
             Covenant not to compete and related obligation ...............     $    --       $ 60,000
                                                                                =========     ========

             Consulting obligation ........................................     $    --       $785,967
                                                                                =========     ========
</TABLE>

                             See accompanying notes.






                                      -7-
<PAGE>

NOTES TO 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 nine months ended July 31, 2001 due to
the utilization of net operating loss carryforwards and for the nine months
ended July 31, 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 July 31            Nine Months Ended July 31,
                                  -----------------------------------      ------------------------------
                                       2001                2000                 2001              2000
                                  --------------     ----------------      --------------     -----------
<S>                               <C>                <C>                   <C>                <C>
Numerator
      Net income (loss)           $      153,799     $     (1,017,567)     $      486,654     $(3,738,803)
                                  ==============     ================      ==============     ===========
Denominator
      Weighted average shares          5,056,889            5,056,889           5,056,889       5,056,588
                                  ==============     ================      ==============     ===========
Basic and diluted earnings
      (loss) per share            $         0.03     $          (0.20)     $         0.10     $     (0.74)
                                  ==============     ================      ==============     ===========
</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 nine months and three months ended July 31, 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 nine months and three months ended July 31, 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

            In August 2001, the Company amended its forbearance agreement with
its bank to extend the expiration date to October 31, 2001.

                                      -8-
<PAGE>

NOTE 4--NEW ACCOUNTING PRONOUNCEMENT

            In July 2001, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standards Nos. 141 and 142 ("FAS 141" and "FAS
142"), Business Combinations" and "Goodwill and Other Intangible Assets". FAS
141 replaces APB 16 and eliminates pooling-of-interest accounting prospectively.
It also provides guidance on purchase accounting related to the recognition of
intangible assets and accounting for negative goodwill. FAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Under FAS 142, goodwill will be tested annually and whenever events or
circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS
142 are effective for all business combinations initiated after June 30, 2001.

            Upon adopting of FAS 142, amortization of goodwill recorded for
business combinations consummated prior to July 1, 2001 will cease, and
intangible assets acquired prior to July 1, 2001 that do not meet the criteria
for recognition under FAS 141 will be reclassified to goodwill. Companies are
required to adopt FAS 142 for fiscal years beginning after December 15, 2001. In
connection with the adoption of FAS 142, the Company will be required to perform
a transitional goodwill impairment assessment. The Company has not yet
determined the impact, it may, these standards will have on its results of
operations and financial position.












                                      -9-
<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.

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 October 31, 2001. The Company is attempting to
refinance its existing credit facility. The Company has received a written
proposals from, and is currently under negotiations with, two new lenders to
refinance the credit facility. See "Financial Condition, Capital Resources and
Liquidity."

            NEGOTIATE DISCOUNTS AND PAYMENT PLANS WITH VENDORS. The Company will
attempt to negotiate discounts and/or extended payment plans and improved terms
with its vendors and other obligees. During the first nine months of fiscal
2001, the Company had negotiated approximately $700,000 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 maintain a reduced 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, 2000 to $14.9 million at July 31, 2001. The Company also intends to maintain
a lower on-hand number of days of selected

                                      -10-
<PAGE>

frames, cases and point-of-purchase materials. The reduction of inventory may
adversely affect the Company's gross profit margin to the extent it sells
inventory at close-out prices and may result in lost sales and delays in
deliveries of customer orders.

            STAFF REDUCTIONS. The Company has decreased the number of full-time
employees from a high of 288 in fiscal 2000 to 207 at July 31, 2001, resulting
in a reduction of the average monthly payroll of between $250,000 and $300,000
per month. In addition, the Company has reduced its use of temporary employees,
resulting in a savings of approximately $1.0 million during the nine months
ended July 31, 2001 from the comparable period in fiscal 2000.

            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 long-term 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      NINE MONTHS ENDED
                                                                JULY 31,              JULY  31,
                                                           -----------------       ----------------
                                                            2001        2000        2001       2000
                                                           -----       -----       -----      -----
<S>                                                        <C>         <C>         <C>        <C>
Net sales ..........................................       100.0%      100.0%      100.0%     100.0%
Cost of sales ......................................        39.4        40.6        37.6       40.5
                                                           -----       -----       -----      -----
Gross profit .......................................        60.6        59.4        62.4       59.5
                                                           -----       -----       -----      -----
Operating expenses:
      Selling ......................................        22.5        39.3        27.2       39.5
      General and administrative ...................        31.9        27.1        28.4       30.3
      Depreciation and amortization ................         2.1         1.6         2.4        2.1
                                                           -----       -----       -----      -----
            Total operating expenses ...............        56.5        68.0        58.0       71.9
                                                           -----       -----       -----      -----
Income (loss) from operations ......................         4.1        (8.6)        4.4      (12.4)
                                                           -----       -----       -----      -----
Other income (expense), net ........................        (2.8)       (1.8)       (3.0)      (1.8)
                                                           -----       -----       -----      -----
Income (loss) before provision for income taxes ....         1.3       (10.4)        1.4      (14.2)
                                                           -----       -----       -----      -----
Provision (benefit) for income taxes ...............         --         (4.6)        --        (5.3)
                                                           -----       -----       -----      -----
Net income (loss) ..................................         1.3%       (5.8)%       1.4%      (8.9)%
                                                           =====       =====       =====      =====
</TABLE>
                                      -11-
<PAGE>

            NET SALES. Net sales decreased by 32.2% or $5.6 million from the
quarter ended July 31, 2000 (the "2000 third quarter") to the quarter ended July
31, 2001 (the "2001 third quarter"), and by 18.3% or $7.7 million from the nine
months ended July 31, 2000 (the "2000 nine months") to the nine months ended
July 31, 2001 (the "2001 nine months"). The following table shows certain
information regarding net sales for the periods indicated:

<TABLE><CAPTION>
                                  THREE MONTHS ENDED JULY 31,                         NINE MONTHS ENDED JULY 31,
                            --------------------------------------             --------------------------------------
                                  2001                  2000         CHANGE          2001                 2000         CHANGE
                            -----------------    -----------------   -----     -----------------    -----------------   -----
<S>                         <C>          <C>     <C>          <C>    <C>       <C>          <C>     <C>          <C>    <C>
Laura Ashley Eyewear ....   $ 3,131      26.5%   $ 4,726      27.1%  (33.7%)   $10,175      29.7%   $13,545      32.4%  (24.9%)
Eddie Bauer Eyewear .....     3,626      30.7      4,520      25.9   (19.8%)     9,841      28.8%    11,396      27.2   (13.6%)
Other Sales (1) .........     5,064      42.8      8,196      47.0   (38.2%)    14,165      41.5%    16,894      40.4   (16.1%)
                            -------     -----    -------     -----   -----     -------     -----    -------     -----   -----
Total ...................   $11,821     100.0%   $17,442     100.0%  (32.2%)   $34,181     100.0%   $41,835     100.0%  (18.3%)
                            =======     =====    =======     =====   =====     =======     =====    =======     =====   =====
</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 decreases in net sales in the 2001 third quarter and nine months
were substantially due to decreases in net sales of the Company's principal
product lines (Laura Ashley Eyewear and Eddie Bauer Eyewear) and the
discontinuation of sales of Coach Eyewear, accessories and private label frames.
The Company attributes declines in sales of Laura Ashley Eyewear and Eddie Bauer
Eyewear primarily to the industry downturn in optical frame sales and the
reduction in size of its sales force as part of its turnaround strategy.
Products discontinued in 2001 accounted for $1.9 million and $4.5 million of
sales in the 2000 third quarter and nine months, respectively, compared to $0.0
million and $1.0 million, respectively, in the comparable 2001 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. The percentage decrease in gross
profit from the 2000 periods to the 2001 periods was less than the percentage
decrease in net sales because the gross margin increased from 59.4% to 60.6%
between quarters and from 59.5% to 62.4% between the nine 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 $4.2 million (61.2%)
from the 2000 third quarter to the 2001 third quarter and $7.2 million (43.7%)
from the 2000 nine months to the 2001 nine 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 and third quarters of fiscal 2000.

            GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased $1.0 million (20.3%) from the 2000 third quarter to the 2001
third quarter and $3.0 million (23.5%) from the 2000 nine months to the 2001
nine 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. Interest expense increased notwithstanding a decrease in the
principal amount due to default interest paid on the bank's credit facility
since September 30, 2000.

                                      -12-
<PAGE>

            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 provisions for income taxes
of $4,838 and 5,568 for the three and nine months ended July 31, 2001,
respectively, compared to income tax benefits of $0.8 million and $2.2 million
for the three and nine months ended July 31, 2000, respectively.

            NET INCOME (LOSS). The Company had net income in the 2001 third
quarter and 2001 nine months of $153,799 and $486,654, respectively, compared to
net losses of $1.0 million and $3.7 million in the 2000 third quarter and 2000
nine months respectively. The net income in the 2001 third quarter and 2001 nine
months included approximately $115,000 and $700,000, respectively, of vendor
discounts of outstanding accounts payable negotiated as part of the Company's
turnaround strategy.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

            The Company's accounts receivable decreased from $8.7 million at
October 31, 2000 to $7.9 million at July 31, 2001 due to the Company's plan 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.

            The Company's inventories decreased from $18.7 million at October
31, 2000 to $14.9 million at July 31, 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 and other intangibles of $5.1 million at
July 31, 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 8.5% per annum. The
credit facility matured on September 30, 2000. Since that date, the Company has
paid interest at the default rate of 5% per annum in excess of the original
rate.

            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. The Company entered into a forbearance
agreement with its bank in December 2000, which was amended in February, May,
June and August 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 October 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 October 15, 2001 and
definitive documentation for a Transaction by October 31, 2001. The bank has
also required continuing principal paydowns of the facility. As a result, the
outstanding balance under the credit facility was $6.6 million at July 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 written proposals from, and is in negotiations with,
two new lenders to refinance the credit facility with a revolving line of credit
for up to approximately $13 million. Each line of credit would be secured by the
assets of the Company with availability tied to eligible accounts receivable and
inventory. Closing of either line of

                                      -13-
<PAGE>

credit is subject to satisfactory completion of due diligence and other
conditions. No assurance can be given that the Company will obtain one of these
or any other line of credit facility to refinance its existing bank credit
facility.

            Long-term debt at July 31, 2001 included (including current
portion): (1) a $1.0 million note payable to California Design Studio, Inc. in
connection with the CDS Acquisition; (2) an obligation to a frame vendor of
California Design Studio, Inc. (present value of $3.2 million) assumed in
connection with the CDS Acquisition; and (3) capital lease obligations. Other
long-term liabilities of $0.4 million include a future consulting obligation and
deferred lease obligations.

            Of the Company's accounts payable at July 31, 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 $51,000
at July 31, 2001.

            The Company's bad debt write-offs were less than 0.2% of net sales
for the 2000 and 2001 nine 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.

            Commencing in 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 October 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 October
15, 2001 and definitive documentation for a Transaction by October 31, 2001. The
Company has received written proposals from, and is in negotiations with, two
new lenders to refinance the credit facility with a revolving line of credit for
up to approximately $13 million. Each line of credit would be secured by the
assets of the Company with availability tied to eligible accounts receivable and
inventory. Closing of either line of credit is subject to

                                      -14-
<PAGE>

satisfactory completion of due diligence and other conditions. No assurance can
be given that the Company will obtain one of these 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 in 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 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 55 at July 31, 2001 due
to attrition and terminations by the Company. The Company's long-term
profitability will depend on its ability to maintain and increase revenues,
notwithstanding the decrease in the number of its sales representatives and the
current downturn in the optical industry generally.

            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 nine months ended July 31, 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

                                      -15-
<PAGE>

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 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
13.6% of the Company's net sales in fiscal 1999, fiscal 2000 and first nine
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

                                      -16-
<PAGE>

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.

            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.


                                      -17-
<PAGE>

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.

            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 July 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

                                      -18-
<PAGE>

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 first nine
months of fiscal 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 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 July 31, 2001.

            International sales accounted for approximately 12.8% and 13.6% of
the Company's net sales in fiscal 2000 and the first nine months of fiscal 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.

                                      -19-
<PAGE>

            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 8.5% per annum. At July 31,
2001, approximately $6.6 million was outstanding 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.

            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.

2.          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 September 10, 2001, the aggregate
outstanding principal and accrued and unpaid interest on the credit facility was
$6.8 million. The Company entered into a forbearance agreement in December 2000
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 October 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 October 15, 2001 and
definitive documentation for a Transaction by October 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 written proposals from, and is in negotiations with,
two new lenders to refinance the credit facility with a revolving line of credit
for up to approximately $13 million. Each line of credit would be secured by the
assets of the Company with availability tied to eligible accounts receivable and
inventory. Closing of either line of credit is subject to satisfactory
completion of due diligence and other conditions. No assurance can be given that
the Company will obtain one of these or any other line of credit facility to
refinance its existing bank credit facility.

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

              Exhibits:

              10.1   Fourth Amendment to Forbearance Agreement dated as of
                     August 22, 2001 between Signature Eyewear, Inc. and City
                     National Bank

                                      -20-
<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: September 14, 2001                  SIGNATURE EYEWEAR, INC.



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































                                      -21-