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, 2000

                                       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 September 18,
2000.


<PAGE>



<TABLE>
                             SIGNATURE EYEWEAR, INC.
                               INDEX TO FORM 10-Q


<CAPTION>
PART I  FINANCIAL INFORMATION                                                                    PAGE
                                                                                                 ----

<S>            <C>                                                                                 <C>
Item 1.        Financial Statements:

               Independent Accountant's Review Report..............................................3

               Balance Sheets as of July 31, 2000 (Unaudited) and October 31, 1999.................4

               Statements of Operations (Unaudited) for the Three Months and Nine Months Ended
                  July 31, 2000 and 1999...........................................................5

               Statements of Cash Flows (Unaudited) for the Nine Months Ended
                  July 31, 2000 and 1999...........................................................6

               Notes to 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.........................21

PART II OTHER INFORMATION

Item 6.        Exhibits and Reports on Form 8-K...................................................23
</TABLE>


                                     Page 2
<PAGE>



                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements

                     INDEPENDENT ACCOUNTANTS' 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 SUBSIDIARIES as of July 31, 2000 and the related consolidated
statements of operations and cash flows for the three-month and nine-month
periods ended July 31, 2000. These financial statements are the responsibility
of the Company's management.

We conducted our review 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 than 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 review, 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, 1999,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the year then ended (not presented herein), and in our report
dated February 8, 2000, 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, 1999 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.

The consolidated statements of operations and cash flows for the three-month and
nine-month periods ended July 31, 1999 were not audited or reviewed by us and,
accordingly, we do not express as opinion or any other form of assurance on
them.


/S/ ALTSCHULER, MELVOIN AND GLASSER LLP

Los Angeles, California
September 7, 2000, except as to Note 3, which is dated as of September 18, 2000


                                     Page 3
<PAGE>



<TABLE>
                             SIGNATURE EYEWEAR, INC.
                                 BALANCE SHEETS

<CAPTION>
                                                                     July 31,         October 31,
     ASSETS                                                            2000              1999
                                                                 ---------------    --------------
                                                                    (Unaudited)
<S>                                                             <C>                 <C>
Current Assets:
     Cash and cash equivalents.............................     $        27,764       $   463,023
     Accounts receivable, trade (net of allowance for
           doubtful accounts)..............................           13,523,877         6,550,057
     Inventories...........................................           19,611,100        16,636,474
     Income taxes refundable...............................            1,584,419           999,820
     Deferred tax asset....................................              516,000           392,000
     Prepaid expenses and other current assets.............            2,485,955         2,432,915
                                                                 ---------------    --------------

                                                                      37,749,115        27,474,289

Property and Equipment (net of accumulated
   depreciation and amortization)..........................            2,076,249         1,711,203
                                                                 ---------------    --------------
Other Assets:
     Goodwill and other intangibles (net of amortization)..            5,658,137         6,035,190
     Deferred tax asset....................................              927,319            36,000
     Deposits and other assets.............................              850,745           217,402
                                                                  --------------    --------------
                                                                       7,436,201         6,288,592
                                                                 ---------------    --------------

                                                                 $    47,261,565    $   35,474,084
                                                                 ===============    ==============

       LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Checks issued in excess of deposits...................      $       306,828    $            0
     Accounts payable, trade...............................           13,575,373         6,285,490
     Notes Payable, bank...................................            8,900,000         1,750,000
     Current portion of long-term debt.....................            1,210,560           873,505
     Accrued distributor credits...........................              858,847         1,727,970
     Accrued expenses and other current liabilities........            3,218,119         1,696,701
                                                                 ---------------    --------------
                                                                      28,069,727        12,333,666

Long-term Debt.............................................            5,005,448         5,137,193
                                                                 --------------     --------------

Commitments and Contingencies..............................

Stockholders' Equity:
     Preferred stock.......................................                    0                 0
     Common stock (authorized 30,000,000 shares,
        $.001 par value, 5,056,889 and 5,082,389
        shares issued and outstanding at July 31, 2000
        and October 31, 1999)..............................                9,188             9,214
     Paid-in capital.......................................           14,363,990        14,441,996
     Retained earnings (accumulated deficit)...............             (186,788)        3,552,015
                                                                 ---------------    --------------
                                                                      14,186,390         18,003,225


                                                                 $    47,261,565    $   35,474,084
                                                                 ===============    ==============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                     Page 4
<PAGE>




<TABLE>
                             SIGNATURE EYEWEAR, INC.

                             STATEMENTS OF OPERATION
                                   (UNAUDITED)



<CAPTION>

                                     THREE MONTHS ENDED JULY 31,     NINE MONTHS ENDED JULY 31,
                                   ------------------------------  ------------------------------
                                        2000            1999            2000            1999
                                   --------------  --------------  --------------  --------------

<S>                                <C>             <C>              <C>               <C>
Net Sales                          $   17,441,961  $   12,961,638   $  41,835,119     $33,995,899

Cost of Sales                           7,075,932       5,786,687      16,941,816      15,302,835
                                   --------------  -------------   -------------   -------------

Gross Profit                           10,366,029       7,174,951      24,893,303      18,693,064
                                   --------------  --------------  --------------  --------------

Operating Expenses:
      Selling                           6,858,007       3,188,108      16,511,304       9,277,797
      General and administrative        4,735,232       2,812,894      12,675,859       6,717,123
      Depreciation and amortization       278,829         214,596         890,811         531,431
                                   --------------  --------------  --------------  --------------
                                       11,872,068       6,215,598      30,077,974      16,526,351
                                   --------------  --------------  --------------  --------------

Income (Loss) from Operations          (1,506,039)        959,353      (5,184,671)      2,166,713
                                   --------------  --------------  --------------  --------------

Other Income (Expense):
      Interest, net                      (280,207)          6,072        (769,991)         72,700
      Sundry income                       (39,453)         11,757             543          17,969
                                   --------------  -------------   --------------  -------------
                                         (319,660)         17,829        (769,448)         90,669
                                   --------------  --------------  --------------  -------------

Income (Loss) before Income Taxes      (1,825,699)        977,182      (5,954,119)      2,257,382

Provision (Benefit) for
Income Taxes                             (808,132)        401,000      (2,215,316)        896,000
                                   --------------  --------------  --------------  --------------

Net Income (Loss)                  $  (1,017,567)  $      576,182  $   (3,738,803) $    1,361,382
                                   ==============  ==============  ==============  ==============

Earnings (Loss) Per Share, Basic
and Diluted:
      Earnings (Loss) per
      common share                 $        (0.20) $         0.11  $        (0.74) $         0.27
                                   ==============  ==============  ==============  ==============

      Weighted average number of
      common shares outstanding         5,056,889       5,084,689       5,059,588       5,092,079
                                   ==============  ==============  ==============  ==============
</TABLE>


         The accompanying notes are an integral part of this statement.


                                     Page 5
<PAGE>



<TABLE>
<CAPTION>
                             SIGNATURE EYEWEAR, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<CAPTION>
                                                                       NINE MONTHS ENDED JULY 31,
                                                                 ---------------------------------
                                                                       2000              1999
                                                                 ---------------    --------------

<S>                                                              <C>                <C>
Cash Flows from Operating Activities:
     Net income (Loss)                                           $    (3,738,803)   $    1,361,382
     Adjustments to reconcile net income (loss) to
     net cash provided by (used in) operating activities:
         Depreciation and amortization                                   890,811           531,431
         Provision for bad debts                                         106,130            34,812
         Deferred income taxes                                        (1,015,319)          (83,463)
         (Gain) Loss on sale of equipment                                 (1,989)            5,842
         Changes in assets -- (increase) decrease:
             Accounts receivable, trade                               (7,079,950)        (1,912,059)
             Inventories                                              (2,974,626)         (554,664)
             Income taxes refundable                                    (584,599)          186,481
             Prepaid expenses and other assets                            83,581          (396,616)
             Deposits and other assets                                    16,003                 0
         Changes in liabilities--increase (decrease):
             Accounts payable, trade                                   7,289,883         1,384,879
             Income taxes payable                                              0           630,383
             Accrued distributor credits                                (869,123)                0
             Accrued expenses and other current liabilities            1,521,418           560,702
                                                                 ---------------    --------------

     Net cash provided by (used in) operating activities              (6,356,583)        1,749,110
                                                                 ---------------    --------------

Cash Flows Used in Investing Activities:
     Purchases of property and equipment                                (828,115)         (665,020)
     Proceeds from sale of equipment                                      11,300            21,700
     Acquisition of business, net of cash acquired                             0        (1,310,771)
                                                                 ---------------    --------------

     Net cash used in investing activities                              (816,815)       (1,954,091)
                                                                 ---------------    --------------

Cash Flows from Financing Activities:
     Checks issued in excess of deposits                                 306,828                 0
     Borrowings on notes payable, bank                                11,570,833                 0
     Repayments on notes payable, bank                                (4,425,833)                0
     Borrowings on long-term debt                                              0           500,000
     Principal payments on long-term debt                               (814,764)           (9,750)
     Capital lease obligations                                           230,701                 0
     Principal payments on capital lease obligations                     (51,594)           (3,745)
     Repurchase of common stock                                          (78,032)         (154,310)
                                                                 ---------------    --------------

     Net cash provided by financing activities                        6,738,139            332,195
                                                                 ---------------    --------------

Net Increase (Decrease) in Cash and Cash Equivalents                  (435,259)           127,214
                                                                 ---------------    --------------

Cash and Cash Equivalents, Beginning of Period                          463,023          4,256,655
                                                                 ---------------    --------------

Cash and Cash Equivalents, End of Period                         $        27,764    $    4,383,869
                                                                 ===============    ==============
</TABLE>


                                     Page 6
<PAGE>



<TABLE>



                             SIGNATURE EYEWEAR, INC.

                       STATEMENTS OF CASH FLOWS, CONTINUED
                                   (UNAUDITED)



<CAPTION>
                                                                     NINE MONTHS ENDED JULY 31,
                                                                 ---------------------------------
                                                                       2000              1999
                                                                 ---------------    --------------

<S>                                                              <C>                <C>
     Supplementary Disclosures of Cash Flow Information:
         Cash paid during the period for:
             Interest                                            $      782,649     $       46,963
                                                                 ===============    ==============


             Income taxes                                        $       201,350    $       91,502
                                                                 ===============    ==============


       Supplemental Schedule of Non Cash Investing and
         Financing Activity:
           Covenant not to compete and related obligation        $        60,000    $            0
                                                                 ===============    ==============

                Consulting obligation                            $       785,967    $            0


       Acquisitions:


       Fair value of assets acquired                             $             0    $    2,550,749

             Liabilities assumed                                 $             0    $    4,743,774

             Liabilities incurred                                $             0    $    1,601,091
</TABLE>



         The accompanying notes are an integral part of this statement.


                                     Page 7
<PAGE>


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, 1999. Significant accounting
policies disclosed therein have not changed. Certain reclassifications of prior
period 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 at July 31, 2000 and 1999
varies from the federal statutory tax rate of 34% principally due to state
income 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>
                                                    FOR THE THREE MONTHS ENDED JULY 31, 2000

                                                      NET LOSS        SHARES         PER-SHARE
                                                     (NUMERATOR)   (DENOMINATOR)       AMOUNT
                                                    -------------   ----------      ----------
<S>                                                 <C>              <C>              <C>
Basic and diluted EPS loss available
        to common stockholders                      $  (1,017,567)   5,056,889        $  (0.20)
                                                    =============    =========      ==========
</TABLE>


<TABLE>
<CAPTION>

                                                    FOR THE THREE MONTHS ENDED JULY 31, 2000

                                                      NET LOSS        SHARES         PER-SHARE
                                                     (NUMERATOR)   (DENOMINATOR)       AMOUNT
                                                    -------------  -------------    ----------
<S>                                                 <C>              <C>              <C>

Basic and diluted EPS loss available
        to common stockholders                       $ (3,738,803)   5,059,588        $ (0.74)
                                                     =============   =========       ===========
</TABLE>

        For the three and nine months ended July 31, 2000, there was no
difference between basic and diluted EPS. The outstanding warrants and options
were not included in the computation of diluted EPS because the Company
sustained a loss and their inclusion would be anti-dilutive. At July 31, 2000,
the Company had outstanding warrants to purchase 330,000 shares of common stock
at exercise prices ranging from $6.50 to $12.00 per share and options to
purchase 666,000 shares of common stock at exercise prices ranging from $1.80 to
$10.00 per share.


                                     Page 8
<PAGE>


        For the three and nine months ended July 31, 1999, there was no
difference between basic and diluted EPS. The outstanding warrants and options
were not included in the computation of diluted EPS because the exercise prices
were greater than the average market price of the common stock during the three
and nine months ended July 31, 2000. At July 31, 1999, the Company had
outstanding warrants to purchase 180,000 shares at an exercise price of $12.00
per share and options to purchase 633,300 shares of common stock at exercise
prices ranging from $4.00 to $10.00 per share.

NOTE 3--BANK LOANS

In June 2000 the Company restructured its existing debt with its commercial
bank. Prior to the restructuring, the Company was indebted to its commercial
bank under the terms of a Credit Agreement, as amended, which included a secured
revolving credit loan, a term loan and unsecured note aggregating $8,900,000
which were due on June 15, 2000.

Under the restructuring, the Company entered into an new credit agreement with
the same commercial lender providing for a credit facility aggregating up to
$8,900,000 as follows: (i) a revolving credit loan in the amount of $5,000,000
bearing interest at the LIBOR interest rate plus 2.50% or the bank's prime rate;
(ii) a term loan in the amount of $3,500,000 bearing interest at 8.52% per
annum; and (iii) a secured note in the amount of $400,000 bearing interest at
the prime rate. This credit facility, as amended, is secured by substantially
all of the assets of the Company and is due on September 30, 2000.

The credit facility includes certain covenants. The Company was not in
compliance with some of these covenants as of July 31, 2000, but received a
waiver of these covenant violations.

As of September 18, 2000, the Company is in the final negotiations for a credit
facility with a finance company which would be used in part to pay off the
existing bank credit facility. The loan would be in the amount of up to
$12,500,000 and would be secured by substantially all of the assets of the
Company. The maximum amount of the loan at any one time would be limited to (i)
75% of eligible accounts receivable (as defined) and accounts receivable
collections for the preceding 60-day period, plus (ii) the lowest of 40% of the
eligible inventory (as defined), 85% of the liquidation value of the inventory
(as defined), or 100% of the amount available under the provision of (i),
limited to $7,000,000 minus (iii) reserves established by the lender. The loan
would bear interest at the prime rate plus .75% per annum, but not less than 8%,
and would mature in September 2002. The Company believes that it will
complete negotiation of the credit facility and sign the loan agreement by
September 30, 2000.

NOTE 4--CONSULTING AGREEMENT

In June 2000 the Company entered into a noncancelable consulting agreement with
an individual (the "Consultant") to provide consulting services regarding the
distribution and sale of the Company's products. The consulting agreement
terminates on the earlier of June 14, 2005 or the death of the Consultant. The
consulting services are being paid in 60 equal monthly payments of $16,667,
which commenced June 15, 2000. The total obligation of $1,000,000 has been
discounted to a net present value of $785,967 at July 31, 2000.


                                     Page 9
<PAGE>


NOTE 5--CAPITAL LEASES

In July 2000, the Company entered into two capital leases for computer
equipment. The leases require 36 monthly payments of $7,244 and purchase option
payments totaling $15,899. Aggregate future minimum lease payments at July 31,
2000 are as follows:

<TABLE>
<CAPTION>
     <S>                                                                <C>
     2001                                                               $ 88,913
     2002                                                                 86,931
     2003                                                                 95,585
                                                                        --------
                                                                         271,429
     Less imputed interest thereon                                        45,214
                                                                        --------
                                                                        $226,215
                                                                        ========
</TABLE>


NOTE 6--INCOME TAXES

The components of the income tax benefit for the three and nine months ended
July 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                             3 months ended     9 months ended
                                              JULY 31, 2000       JULY 31, 2000
                                              -------------     ----------------
<S>                                              <C>                <C>
Net operating loss carryback .............       $         0        $ 1,251,674
Net operating loss carrryforward .........           420,524            635,319
Deferred income taxes ....................           403,000            412,000
Other ....................................           (15,392)           (83,677)
                                                 -----------        -----------
                                                 $   808,132        $ 2,215,316
                                                 ===========        ===========
</TABLE>


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 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"
below as well as those discussed elsewhere in this Form 10-Q. All subsequent
written or 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."

OVERVIEW

        The Company derives revenues primarily through the sale of eyeglass
frames under brand names pursuant to exclusive licenses (including Laura Ashley
Eyewear, Eddie Bauer Eyewear, Hart Schaffner & Marx Eyewear, Nicole Miller
Eyewear, Coach Eyewear and bebe eyes) and which the Company owns, including
Dakota Smith Eyewear.


                                    Page 10
<PAGE>


        The Company's best-selling product lines are Laura Ashley Eyewear and
Eddie Bauer. Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear together
accounted for 53.0% and 75.5% of the Company's net sales in the quarter ended
July 31, 2000 (the "2000 third quarter") and the quarter ended July 31, 1999
(the "1999 third quarter"), respectively. Although the Company expects the Laura
Ashley Eyewear and Eddie Bauer Eyewear lines to continue to be the Company's
leading sources of revenue for the near future, the Company expects to continue
to reduce its dependence on these two lines through increasing sales of other
lines of eyewear in its product line.

        Before October 1, 1999, the Company distributed its products to
independent optical retailers in the United States primarily through exclusive
distributors. During the nine months ended July 31, 1999, sales through United
States distributors accounted for approximately 37% of the Company's total net
sales. Effective as of October 1, 1999, the Company terminated all but two of
its 24 United States distributors and hired its own national direct sales force,
which numbered 91 sales representatives at July 31, 2000. The Company made this
conversion to stimulate sales growth by enabling the Company to work more
closely with the sales representatives selling its products, who are dedicated
to selling only the Company's products, and to require its sales representatives
to implement the Company's marketing plans.

        The Company's conversion to a direct sales force in the United States
has resulted in both an increase in the sales price the Company receives for
products previously sold through distributors and a substantial increase in the
selling expenses associated with the sale of these products. Unit sales prices
to optical retailers are typically 60% to 70% greater than sales prices to
distributors. In addition, selling expenses per unit sold are greater primarily
as a result of commissions payable to sales representatives.

RESULTS OF OPERATIONS

        The following table sets forth, for the indicated periods, selected
statement of income data shown as a percentage of net sales.

<TABLE>
<CAPTION>
                                                  THREE MONTHS        NINE MONTHS
                                                 ENDED JULY 31,      ENDED JULY 31,
                                                ------------------ ------------------
                                                  2000      1999     2000      1999
                                                --------  -------- -------- ---------
<S>                                                  <C>       <C>      <C>      <C>
Net Sales ...................................     100.0%    100.0%   100.0%    100.0%
Cost of sales ...............................      40.6      44.6     40.5      45.0
                                                  -----     -----    -----     -----
Gross profit ................................      59.4      55.4     59.5      55.0
                                                   -----     -----    -----     -----
Operating expenses:
   Selling ..................................      39.3      24.6     39.5      27.3
   General and administrative ...............      27.1      21.7     30.3      19.7
   Depreciation and amortization ............       1.6       1.7      2.1       1.6
                                                  -----     -----    -----     -----
        Total operating expenses ............      68.0      48.0     71.9      48.6
                                                  -----     -----    -----     -----
 Income (loss) from operations ..............      (8.6)      7.4    (12.4)      6.4
                                                  -----     -----    -----     -----
 Other income (expense), net ................      (1.8)      0.1     (1.8)      0.2
                                                  -----     -----    -----     -----
 Income (loss) before provision (benefit) for
 income taxes ...............................     (10.4)      7.5    (14.2)      6.6
                                                  -----     -----    -----     -----
 Provision (benefit) for income taxes .......      (4.6)      3.1     (5.3)      2.6
                                                  -----     -----    -----     -----
 Net income (loss) ..........................      (5.8)%     4.4%    (8.9)%     4.0%
                                                  =====     =====    =====     =====
</TABLE>


                                    Page 11
<PAGE>


        NET SALES. The following table sets forth, for the indicated periods,
selected net sales data in thousands, as a percentage of net sales and as a
percentage change in net sales from the 1999 to the 2000 periods:

<TABLE>
<CAPTION>
                          THREE MONTHS ENDED JULY 31,               NINE MONTHS ENDED JULY 31,
                       -------------------------------------    --------------------------------------
                             2000           1999     CHANGE           2000              1999         CHANGE
                             ----           ----     ------           ----              ----         ------

<S>                    <C>      <C>     <C>    <C>   <C>        <C>       <C>     <C>        <C>     <C>
Laura Ashley Eyewear   $ 4,726  27.1%   5,569  43.0% (15.1)%    $13,547   32.4%   $16,081    47.3%   (15.8)%
Eddie Bauer Eyewear      4,520  25.9%   4,212  32.5%    7.3%     11,396   27.2%    10,937    32.2%     4.2 %
Other (1)                8,196  47.0%   3,181  24.5%  157.7%     16,892   40.4%     6,978    20.5%   142.1 %
                        ------ -----  ------- -----             ------  ------    -------   -----
Total                  $17,442 100.0% $12,962 100.0%   34.6%    41,835  $100.0%   $33,996   100.0%    23.1 %
                        ====== =====  ======= =====             ======  ======    =======   =====
<FN>
---------------
Includes net sales of other designer eyewear (Hart Schaffner & Marx, Dakota
Smith, Nicole Miller, Coach, bebe and Eddie Bauer Performance Sunwear), private
label frames, USA Optical and Optical Surplus, and other miscellaneous products.
</FN>
</TABLE>

        Net sales were $4,480,000 greater in the 2000 third quarter compared to
the 1999 third quarter and $7,839,000 million greater in the 2000 nine months
compared to the 1999 nine months. These sales increases were primarily the
result of an increase in per unit sales price due to the change in distribution
strategy from distributors to direct sales and to the launch of Coach Eyewear,
bebe Eyewear and Eddie Bauer Performance Sunwear. Direct sales and domestic
distributor sales constituted 47.6% and 1.9%, respectively, of net sales in the
2000 third quarter as compared to 7.8% and 39.2%, respectively, in the 1999
third quarter, and 47.4% and 2.0%, respectively, of net sales in the 2000 nine
months as compared to 7.6% and 37.7%, respectively, in the 1999 nine months.

        International sales increased to 9.2% and 11.0% of net sales in the
three and nine months ended July 31, 2000 as compared to 5.8% and 7.8% of net
sales in the comparable periods of 1999. This was due primarily to expanded
international sales efforts resulting from adding a European sales office and
warehouse as part of the acquisition of California Design Studios, Inc. ("CDS")
in the third fiscal quarter of 1999.

        Domestic unit sales were lower in the 2000 periods compared to the 1999
periods. This was due primarily to a decrease in unit sales to independent
optical retailers, as the Company's direct sales force has not generated sales
comparable to those previously generated by its distributors. The Company's
direct sales have also been adversely affected by logistical problems in its
warehouse and continuing problems with its new computer systems.

        GROSS PROFIT. Gross profit increased from $7,175,000 in the 1999 third
quarter to $10,366,000 for the 2000 third quarter and from $18,693,000 in the
1999 nine months to $24,893,000 for the 2000 nine months. These increases were
due principally to the increase in net sales associated with direct sales.

        The Company's gross margin increased in the 2000 periods from the 1999
periods as a result of selling directly rather than through distributors. The
Company's gross margin was adversely affected during the 2000 periods because of
its total net sales during the 2000 periods, a lower percentage consisted of
sales to independent optical retailers, which historically are at higher margins
than sales to optical retail chains.


                                    Page 12
<PAGE>


        OPERATING EXPENSES. Operating expenses increased from $6,216,000 in the
1999 third quarter to $11,872,000 in the 2000 third quarter due to an increase
of $3,670,000 in selling expenses, an increase of $1,922,000 in general and
administrative expenses and an increase of $64,000 in depreciation and
amortization expenses. Selling expenses increased due to commissions paid in
connection with direct sales, additional convention expenses incurred in
connection with the launch of new licenses and increased freight costs. General
and administrative expenses for the 2000 third quarter increased primarily as a
result of $1,172,000 in additional compensation and other expenses related to
the Company hiring additional mid-level managers and other personnel to prepare
for the Company's planned expansion and $437,000 due to the upgrade of the
Company's warehouse and operating systems. The increase in depreciation and
amortization expense was due primarily to amortization of goodwill and the
covenant not to compete recorded in the Acquisition of CDS.

        Operating expenses increased from $16,526,000 in the 1999 nine months to
$30,078,000 in the 2000 nine months due to an increase of $7,234,000 in selling
expenses, and an increase of $5,959,000 in general and administrative expenses
and $359,000 in depreciation and amortization expenses. Selling expenses
increased due to commissions paid in connection with direct sales, additional
convention expenses incurred in connection with the launch of new licenses and
increased freight costs. General and administrative expenses for the 2000 nine
months increased primarily as a result of $3,634,000 in additional compensation
and other expenses related to the Company hiring additional mid-level managers
and other personnel to prepare for the Company's planned expansion and
$1,056,000 due to the upgrade of the Company's warehouse and operating systems.
The increase in depreciation and amortization expense was due primarily to
amortization of goodwill and the covenant not to compete recorded in the
acquisition of CDS.

        NET OTHER INCOME (EXPENSE). Net other expense in the 2000 third quarter
and the 2000 nine months of $320,000 and $769,000, respectively, represents
mainly interest expense resulting from higher levels of borrowing. Net other
income in the 1999 third quarter and the 1999 nine months of $18,000 and
$91,000, respectively, relates primarily to interest income.

        PROVISION (BENEFIT) FOR INCOME TAXES. The Company's income tax benefit
was $808,000 and $2,215,000, for the 2000 third quarter and 2000 nine months,
respectively, compared with a tax provision of $401,000 and $896,000 for the
1999 third quarter and 1999 nine months, respectively. The changes in income
taxes reflect the changes in pretax income (loss).

        NET INCOME (LOSS). Net income was $576,000 in the 1999 third quarter and
net loss was $1,018,000 in the 2000 third quarter. Net income was $1,361,000 in
the 1999 nine months and net loss was $3,739,000 in the 2000 nine months.

LIQUIDITY AND CAPITAL RESOURCES

        In June 2000 the Company restructured its credit facility with its
commercial bank. In the restructuring, the Company entered into an new credit
agreement with the same commercial bank which provides for a credit facility
aggregating up to $8,900,000 (the same aggregate amount as under the prior
facility), as follows: (i) a revolving credit loan in the amount of $5,000,000
bearing interest at the LIBOR interest rate plus 2.50% or the bank's prime rate;
(ii) a term loan in the amount of $3,500,000 bearing interest at 8.52% per
annum; and (iii) a secured note in the amount of $400,000 bearing interest at
the prime rate. This credit facility, as amended, is secured by substantially
all of the assets of the Company and is due on September 30, 2000. The credit
facility includes certain covenants. The Company was not


                                    Page 13
<PAGE>


in compliance with some of these covenants as of July 31, 2000, but received a
waiver of these covenant violations.

        The Company is in the final stages of negotiations for a credit facility
with a finance company which would be used in part to pay off the existing bank
credit facility. The loan would be in the amount of up to $12,500,000, with
available credit limited to (i) 75% of eligible accounts receivable (as defined)
and accounts receivable collections for the preceding 60-day period, plus (ii)
the lowest of 40% of the eligible inventory (as defined), 85% of the liquidation
value of the inventory (as defined), or 100% of the amount available under the
provision of (i), limited to $7,000,000 minus (iii) reserves established by the
lender. The loan would be secured by substantially all of the assets of the
Company, would bear interest at the prime rate plus .75% per annum, but not less
than 8%, and would mature in September 2002. While the Company believes that it
will complete negotiation of the credit facility and sign the loan agreement by
September 30, 2000, no assurance can be given that such actions will be
completed by that date or at all.

        If the Company does not complete a new credit facility by September 30,
2000, it will seek an extension of the maturity date of the existing credit
facility. No assurance can be given that the bank would agree to an extension.

        The Company's accounts receivable and inventories increased from $6.6
million and $16.6 million at October 31, 2000 to $13.5 million and $19.6
million, respectively, at July 31, 2000 as a result of the Company's increasing
sales and expanding product lines. A significant portion of this growth was
funded by an increase in accounts payable from $6.3 million at October 31, 1999
to $13.6 million at July 31, 2000 and bank loans from $2.0 million at October
31, 1999 to $8.9 million at July 31, 2000.

        Of the Company's accounts payable at July 31, 2000, $3,745,000 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
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
$821,000 in foreign currency forward commitments at July 31, 2000.

        While during the nine months ended July 31, 2000 the Company had a
significant increase in working capital, its cash position has diminished. In
order to generate cash, in the near term the Company intends to reduce
inventories and attempt to accelerate collection of accounts receivable. The
Company has also implemented staff reductions, principally in commissioned
sales, international and advertising personnel, which reductions will impact
operating costs commencing in the fourth quarter of fiscal 2000.

        The Company's cash requirements will depend on, among other things, its
sales levels and corresponding increase or reduction in accounts receivable and
inventories. Assuming it can make the intended reductions in inventory and
accounts receivable and it maintains a credit facility (either with its existing
or a new lender) at least at current levels, based on current operating levels
the Company believes that cash generated from operations, borrowings under the
credit facility and credit from its suppliers will be sufficient to fund its
working capital requirements in the short term. If the Company determines that
cash from operations will not be sufficient to fund its operations, it will seek
additional financing and/or implement additional cost-cutting measures.


                                    Page 14
<PAGE>


YEAR 2000

        The Company has not experienced any difficulties resulting from the Year
2000 problem, which is the processing of date-sensitive information by the
information technology systems used by the Company and its key customers and
vendors. The Year 2000 problem is the result of computer programs being written
using two digits to define the applicable year, which could result in computer
programs recognizing a date using "00" as the year 1900 rather than 2000,
thereby causing miscalculations or system failures. The Company does not
currently anticipate any future Year 2000 problems.

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.

        MATURITY OF EXISTING BANK CREDIT FACILITY

        This Company's existing $8.9 million credit facility with its commercial
bank, which is secured by substantially all of the assets of the Company,
matures on September 30, 2000. The Company is in the final stages of
negotiations for a credit facility with a finance company which would be used in
part to pay off the existing bank credit facility. If the Company does not
complete the new credit facility by September 30, 2000, it will seek an
extension of the maturity date of the existing credit facility. No assurance can
be given that the bank would agree to an extension.

        POSSIBLE NEED FOR ADDITIONAL FINANCING

        While during the nine months ended July 31, 2000 the Company had a
significant increase in working capital, its cash position has diminished. In
order to generate cash, in the near term the Company intends to reduce
inventories and attempt to accelerate collection of accounts receivable. The
Company has also implemented staff reductions, principally in commissioned
sales, international and advertising personnel, which reductions will impact
operating costs commencing in the fourth quarter of fiscal 2000.

        The Company's cash requirements will depend on, among other things, its
sales levels and corresponding increase or reduction in accounts receivable and
inventories. Assuming it can make the intended reductions in inventory and
accounts receivable and it maintains a credit facility (either with its existing
or a new lender) at least at current levels, based on current operating levels
the Company believes that cash generated from operations, borrowings under the
credit facility and credit from its suppliers will be sufficient to fund its
working capital requirements in the short term. If the Company determines that
cash from operations will not be sufficient to fund its operations, it will seek
additional financing and/or implement additional cost-cutting measures.

        CONVERSION TO DIRECT SALES FORCE

        Historically, the Company distributed its eyeglass frames to independent
optical retailers in the United States (other than California and Arizona)
through distributors. Sales through domestic distributors accounted for
approximately 37% of the Company's total net sales during the nine months ended
July 31, 1999. Effective October 1, 1999, the Company replaced all but two of
its 24 domestic distributors with its own direct national sales force. The
Company's conversion to a direct sales force results in both an increase in the
sales price the Company receives for products previously sold through
distributors and an increase in the selling expenses associated with the sale of
these products. Unit sales prices to optical retailers are 60% to 70% greater
than sales prices to distributors. In addition, based on the same number of unit
sales as in prior periods, the Company anticipates that its selling expenses
will increase as a percentage of net sales, primarily as a result of commissions
payable to sales representatives. The Company believes it must expand its
domestic direct sales force to approximately 130 sales representatives to
generate unit sales volumes commensurate with unit sales volumes through its
prior distributor network and the increased volume due to the introduction of
new product lines in fiscal 2000. At July 31, 2000, the Company had 91 sales
representatives. The Company has been unable to expand its direct sales force to
the desired number within the time periods originally contemplated. While the
Company is aggressively seeking qualified sales representatives, no assurance
can be given as to when, if ever, the


                                    Page 15
<PAGE>


Company will be able to employ those additional representatives or that the
number of representatives will generate the unit sales volumes which could have
been generated through its distributor network.

        There can be no assurance that the Company will be successful in making
the transition to a national direct sales force. Failure to do so could have a
material adverse impact on the Company's business, operating results and
financial condition.

        SUBSTANTIAL DEPENDENCE UPON LAURA ASHLEY AND EDDIE BAUER LICENSES

        Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear accounted for
77%, 75% and 53% of the Company's net sales in fiscal 1998, fiscal 1999 and the
2000 third quarter, respectively. 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 COACH Eyewear, 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 April 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.

        MANAGEMENT OF GROWTH

        The Company has grown rapidly in recent years, with net sales increasing
from $20 million in fiscal 1994 to $44 million in fiscal 1999, and the number of
employees increasing from approximately 50 at October 31, 1994 to 239 at October
31, 1999. During fiscal 1999, the Company entered into license agreements for
COACH Eyewear, Eddie Bauer Performance Sunwear (with Oakley's patented XYZ lens
technology), and bebe eyes, and acquired the license for Nicole Miller Eyewear
and the brand name Dakota Smith, thereby making possible growth in the Company's
net sales. Further, in fiscal 1999 the Company added a new national direct sales
force, which it continues to expand, and upgraded its management information
systems, as well as its warehouse and other operations. The Company's ability to
manage its growth effectively and address its recent operational difficulties
will require it to continue to improve its operational, financial and management
information systems and controls and to train, motivate and manage a larger
number of employees. There can be no assurance that the Company will be able to
sustain its historic rate of revenue growth or manage future growth
successfully.

        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
bearing 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


                                    Page 16
<PAGE>


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

        Certain 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, the COACH license and the bebe license prohibit the
Company from entering into license agreements with companies which Eddie Bauer,
COACH 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 may 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, Italy and France. 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 1999, Signature used manufacturers principally in Japan,


                                    Page 17
<PAGE>


Hong Kong/China, Italy and France, which accounted for 37.3%, 35.2%, 11.8% and
3.5%, respectively, (in cost) of the frames purchased by the Company.

        INTERNATIONAL SALES

        International sales accounted for approximately 8.4%, 8.7% and 9.2% of
the Company's net sales in fiscal 1998, fiscal 1999 and the 2000 third quarter,
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 1998, fiscal 1999 and the 2000 third
quarter amounted to 14%, 19% and 19% 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 anticipates that it will likely experience returns at
a rate significantly exceeding its historical levels, due to the Company's
decision to sell directly to United States independent optical retailers, 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


                                    Page 18
<PAGE>


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 their 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 and President), 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. The
Company has entered into employment agreements with each of Messrs. Weiss,
Prince, Fried and Zeichick, pursuant to which they have agreed to render
services to the Company until October 31, 2000. The Company maintains and is the
sole beneficiary of "key person" life insurance on Messrs. Weiss, Prince, Fried
and Zeichick in the amount of $1,500,000 each. In the event of the death of an
executive officer, a portion of the proceeds of the applicable policy would be
used to pay the Company's obligation under the officer's employment agreement.
There can be


                                    Page 19
<PAGE>


no assurance that the remaining 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 own approximately
56.8% of the Company's outstanding shares. 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 acquirers 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 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


                                    Page 20
<PAGE>


the Company, which may depress the market value of the Common Stock. In
addition, each of the Laura Ashley, Hart Schaffner & Marx, Eddie Bauer, COACH
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 1999, a maximum of $2,700,000 and
a minimum of $469,000 of the Company's accounts payable were payable in foreign
currency. During the 2000 third quarter, a maximum of $5,292,000 and a minimum
of $1,841,000 of the Company's accounts payable 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 $56,000 at October 31, 1999
and $821,000 at July 31, 2000. International sales accounted for approximately
8.7% and 9.2% of the Company's net sales in fiscal 1999 and the 2000 third
quarter, 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 credit facility, which matures on
September 30, 2000, includes: (i) a revolving credit loan in the amount of
$5,000,000 bearing interest at the LIBOR interest rate plus 2.50% or the bank's
prime rate; (ii) a term loan in the amount of $3,500,000 bearing interest at
8.52% per annum; and (iii) a secured note in the amount of $400,000 bearing
interest at the prime rate. As of September 18, 2000, the Company is in the
final negotiations for a credit facility with a finance company which would be
used in part to pay off the existing bank credit facility. This credit facility
would bear interest at a variable rate of the prime rate plus .75%. Any interest
which may in the future become payable on the Company's credit facility which
has a variable interest rate will therefore be affected by changes in market
interest rates.


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<PAGE>


        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.


                                    Page 22
<PAGE>


                                     PART II

                                OTHER INFORMATION

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

        (a)    Exhibits:

               Exhibit 15    Letter re: Unaudited Interim Financial Information.

               Exhibit 27    Financial Data Schedule.

        (b)    Reports on Form 8-K.

               None.


                                    Page 23
<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 19, 2000                 SIGNATURE EYEWEAR, INC.


                                          By:  /S/ MICHAEL PRINCE
                                               -----------------------------
                                               Michael Prince
                                               Chief Financial Officer


                                               /S/ MICHAEL PRINCE
                                               -----------------------------
                                               Michael Prince
                                               Chief Financial Officer
                                               (Principal Financial and
                                               Accounting Officer)


                                    Page 24