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

                       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, 2002

                                       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 [ ]  No [X]

     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, 5,976,889 shares issued and outstanding as of May 31, 2003.

================================================================================
<PAGE>

                             SIGNATURE EYEWEAR, INC.

                               INDEX TO FORM 10-Q

PART I     FINANCIAL INFORMATION                                            PAGE
                                                                            ----
Item 1     Financial Statements                                               3
           Consolidated Balance Sheets                                        3
           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                              24
Item 3     Quantitative and Qualitative Disclosures about Market Risk        33

PART II    OTHER INFORMATION

Item 3     Defaults Upon Senior Securities                                   33
Item 6     Exhibits and Reports on Form 8-K                                  33









                                        2
<PAGE>

                                    PART I.
                              FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


                                                         SIGNATURE EYEWEAR, INC.
                                                     CONSOLIDATED BALANCE SHEETS
                                  July 31, 2002 (unaudited) and October 31, 2001
--------------------------------------------------------------------------------


                                     ASSETS

<TABLE><CAPTION>
                                                                         July 31          October 31,
                                                                          2002               2001
                                                                       -----------        -----------
                                                                       (unaudited)
<S>                                                                    <C>                <C>
CURRENT ASSETS
     Cash and cash equivalents, including restricted
         cash of $127,945 (unaudited) and $202,824                     $   638,532        $ 1,443,496
     Accounts receivable - trade, net of allowance for
         doubtful accounts of $258,866 (unaudited) and
         $574,096                                                        1,959,205          5,129,460
     Inventories, net of reserves for obsolete inventories
         of $2,140,779 (unaudited) and $2,450,000                        6,599,608         10,328,364
     Income taxes refundable                                               112,704            110,000
     Promotion products and material                                        56,087            164,548
     Prepaid expenses and other current assets                              88,267              8,952
                                                                       -----------        -----------

         Total current assets                                            9,454,403         17,184,820

PROPERTY AND EQUIPMENT, net                                              1,177,815          1,456,083
TRADEMARK, net of accumulated amortization of
     $16,882 (unaudited) and $16,882                                       130,897            130,897
DEPOSITS AND OTHER ASSETS                                                  135,588            133,772
                                                                       -----------        -----------

                TOTAL ASSETS                                           $10,898,703        $18,905,572
                                                                       ===========        ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                        3
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                                     CONSOLIDATED BALANCE SHEETS
                                  July 31, 2002 (unaudited) and October 31, 2001
--------------------------------------------------------------------------------

                   LIABILITIES AND SHAREHOLDERS' DEFICIT

<TABLE><CAPTION>
                                                                         July 31          October 31,
                                                                          2002               2001
                                                                       -----------        -----------
                                                                       (unaudited)
<S>                                                                    <C>                <C>
CURRENT LIABILITIES
     Accounts payable - trade                                          $ 6,567,098        $10,143,540
     Accrued expenses and other current liabilities                      1,915,889          2,752,281
     Line of credit                                                      2,302,061          3,228,358
     Current portion of long-term debt                                   5,564,511          6,265,773
                                                                       -----------        -----------

         Total current liabilities                                      16,349,559         22,389,952

LONG-TERM DEBT, net of current portion                                   1,377,991          1,461,456
                                                                       -----------        -----------

            Total liabilities                                           17,727,550         23,851,408
                                                                       -----------        -----------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
     Preferred stock, $0.001 par value
         5,000,000 shares authorized
         0 (unaudited) and 0 shares issued and outstanding                      --                 --
     Common stock, $0.001 par value
         30,000,000 shares authorized
         5,556,889 (unaudited) and 5,056,889 shares
            issued and outstanding                                           5,557              5,057
     Additional paid-in capital                                         14,432,621         14,368,121
     Accumulated deficit                                               (21,267,025)       (19,319,014)
                                                                       -----------        -----------

                Total shareholders' deficit                             (6,828,847)        (4,945,836)
                                                                       -----------        -----------

                     TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT       $10,898,703        $18,905,572
                                                                       ===========        ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        4
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                               CONSOLIDATED STATEMENTS OF INCOME
          For the Three and Nine Months Ended July 31, 2002 and 2001 (unaudited)
--------------------------------------------------------------------------------

<TABLE><CAPTION>
                                            For the Three Months Ended                For the Nine Months Ended
                                                     July 30,                                  July 30,
                                         ---------------------------------         ---------------------------------
                                             2002                 2001                 2002                 2001
                                         ------------         ------------         ------------         ------------
                                          (unaudited)          (unaudited)          (unaudited)         (unaudited)
<S>                                      <C>                  <C>                  <C>                  <C>
Net sales                                $  8,188,296         $ 11,821,152         $ 25,516,168         $ 34,180,560
Cost of sales                               3,665,934            4,656,634           10,937,117           12,845,920
                                         ------------         ------------         ------------         ------------

Gross profit                                4,522,362            7,164,518           14,579,051           21,334,640
                                         ------------         ------------         ------------         ------------

Operating expenses
    Selling                                 2,084,221            3,180,846            6,974,833            9,297,333
    General and administrative              2,923,541            3,254,500            8,706,662            9,703,297
    Depreciation and amortization             107,091              241,749              326,988              836,805
                                         ------------         ------------         ------------         ------------

Total operating expenses                    5,114,853            6,677,095           16,008,483           19,837,435
                                         ------------         ------------         ------------         ------------

Income (loss) from
    operations                               (592,491)             487,423           (1,429,432)           1,497,205
                                         ------------         ------------         ------------         ------------

Other income (expense)
    Sundry income (expense)                   (21,906)             (35,581)              31,173               17,651
    Interest expense, net                    (161,880)            (293,204)            (549,062)          (1,022,634)
                                         ------------         ------------         ------------         ------------

Total other income (expense)                 (183,786)            (328,785)            (517,889)          (1,004,983)
                                         ------------         ------------         ------------         ------------
Income before provision for
    income taxes                             (776,277)             158,638           (1,947,321)             492,222
Provision for income taxes                        800                4,838                  690                5,568
                                         ------------         ------------         ------------         ------------

Net income (loss)                        $   (777,077)        $    153,800         $ (1,948,011)        $    486,654
                                         ============         ============         ============         ============

Basic and diluted earnings
    (loss) per share                     $      (0.14)        $       0.03         $      (0.36)        $       0.10
                                         ============         ============         ============         ============

Weighted-average common
    shares outstanding                      5,556,889            5,056,889            5,465,314            5,056,889
                                         ============         ============         ============         ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        5
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                    For the Nine Months Ended July 31, 2002 and 2001 (unaudited)
--------------------------------------------------------------------------------

<TABLE><CAPTION>
                                                                          2002                2001
                                                                      -----------         -----------
                                                                      (unaudited)         (unaudited)
<S>                                                                   <C>                 <C>
Cash flows from operating activities
     Net income (loss)                                                $(1,948,011)        $   486,654
     Adjustments to reconcile net income (loss) to net cash
         provided by operating activities
            Depreciation and amortization                                 326,988             877,990
            Loss on disposal of property and equipment                         --              11,776
            Provision for bad debts                                            --              47,257
            (Increase) decrease in
                Accounts receivable - trade                             3,170,255             749,984
                Inventories, net of effect of sale of USA
                    Optical                                             3,228,756           3,860,032
                Income taxes refundable                                    (2,704)          1,262,154
                Promotional products and material                         108,461             796,217
                Prepaid expenses and other current assets                 (79,315)             13,405
                Deposits and other assets                                  (1,816)            239,939
            Decrease in
                Accounts payable - trade                               (3,576,442)         (5,253,906)
                Accrued expenses and other current liabilities           (836,392)         (1,240,775)
                                                                      -----------         -----------

Net cash provided by operating activities                                 389,780           1,850,727
                                                                      -----------         -----------

Cash flows from investing activities
     Purchase of property and equipment                                   (48,720)            (66,115)
     Cash received from sale of USA Optical                               500,000                  --
                                                                      -----------         -----------

Net cash provided by (used in) investing activities                       451,280             (66,115)
                                                                      -----------         -----------

Cash flows from financing activities
     Net decrease on line of credit                                      (861,297)         (1,379,820)
     Payments on long-term debt                                          (784,727)           (704,273)
                                                                      -----------         -----------

Net cash used in financing activities                                  (1,646,024)         (2,084,093)
                                                                      -----------         -----------

Net decrease in cash and cash equivalents                                (804,964)           (299,481)

Cash and cash equivalents, beginning of period                          1,443,496           1,860,451
                                                                      -----------         -----------

Cash and cash equivalents, end of period                              $   638,532         $ 1,560,970
                                                                      ===========         ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                        6
<PAGE>


                                                         SIGNATURE EYEWEAR, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                    For the Nine Months Ended July 31, 2002 and 2001 (unaudited)
--------------------------------------------------------------------------------

<TABLE><CAPTION>
                                                                          2002                2001
                                                                      -----------         -----------
                                                                      (unaudited)         (unaudited)
<S>                                                                   <C>                 <C>
Supplemental disclosures of cash flow information

     Interest paid                                                    $   391,649         $   913,081
                                                                      ===========         ===========

     Income taxes paid                                                $     3,394         $     5,568
                                                                      ===========         ===========
</TABLE>


SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended July 31, 2002, the Company entered into a Stock
Issuance and Release Agreement on December 20, 2001, whereby the Company issued
500,000 shares of common stock and paid $3,000 to Springer Capital Corporation
in satisfaction of the purchase price adjustment relating to the Great Western
Optical acquisition. The fair value of the settlement amount of $68,000 was
included in accrued expense at October 31, 2001.

During the nine months ended July 31, 2001, the Company entered into an
agreement to modify an operating lease to reduce long-term debt by $674,699 by
applying prepaid expenses of $126,975 and other assets of $499,068 related to
the note holder against long-term debt and by increasing accrued expenses by
$48,656.










   The accompanying notes are an integral part of these financial statements.

                                        7
<PAGE>


                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

     Signature Eyewear, Inc. and subsidiary (the "Company") designs, markets,
     and distributes eyeglass frames throughout the United States and
     internationally. Primary operations are conducted from leased premises in
     Inglewood, California, with a warehouse and sales office in Belgium.

     Business Acquisition
     --------------------
     Effective August 1999, the Company acquired 100% of the capital stock of
     Great Western Optical ("GWO"), a privately-held corporation engaged
     primarily in the distribution of the Company's products (the "GWO
     Acquisition"). The purchase price for the GWO Acquisition was approximately
     $519,500, consisting of the issuance of 50,000 shares of the Company's
     common stock and warrants to purchase 50,000 shares of the Company's common
     stock valued at $252,000, a note payable for $250,000, and
     acquisition-related expenses of $17,500.

     The GWO Acquisition provided for a purchase price adjustment if the per
     share market value of the 50,000 shares of common stock issued at the
     initial GWO Acquisition date was below $7 on July 31, 2001. On July 31,
     2001, the Company's common stock was trading at $0.45 per share. In lieu of
     the purchase price adjustment, in December 2001, the Company issued 500,000
     shares of common stock and paid $3,000 to Springer Capital Corporation, the
     seller, in satisfaction of the purchase price adjustment (see Note 8).

     Sale of USA Optical
     -------------------
     In March 2002, the Company sold its USA Optical product line, including (i)
     all of the eyewear frame inventory under the brand name of Camelot or sold
     as part of the USA Optical line, (ii) all names, copyrights, logos,
     trademarks, computer software, and other intellectual property rights
     related to the trademarks or trade names Camelot or USA Optical, and (iii)
     all marketing materials, customer lists, and sales and vendor records to
     the trademarks or trade names of Camelot or USA Optical. Management
     believes the effect of the sale on its future operations will not be
     significant.

     The sales price for the USA Optical product line was $500,000, plus the
     assumption of certain obligations and liabilities related to the USA
     Optical line's outstanding purchase orders amounting to $70,000. The effect
     of the sale on the Company's operations for the nine months ended July 31,
     2002 is not significant. As such a gain or loss has not been recorded on
     the accompanying consolidated statement of operations. In addition, the
     Company agreed to supply the buyer with inventory for the existing models
     of eyeglass frames sold by the Company at a discount of 10% off the prices
     set forth by the buyer until the aggregate savings with respect to such
     purchases equals the total amount of Earned and Pending Premium
     Obligations, as defined.

                                        8
<PAGE>


                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS (CONTINUED)

     Sale of USA Optical (Continued)
     -------------------
     In connection with the sale of the USA Optical product line, the Company's
     former Chairman of the Board/Chief Executive Officer entered into a
     three-year consulting agreement with the buyer for a monthly consulting fee
     of $4,667. The monthly consulting fee was offset against the former
     officer's salary until his resignation in April 2003 (see Note 9).


NOTE 2 - GOING CONCERN

     The Company has received a report from its prior independent auditors that
     includes an explanatory paragraph describing the uncertainty as to the
     Company's ability to continue as a going concern as of October 31, 2001.
     These financial statements contemplate the ability to continue as such and
     do not include any adjustments that might result from this uncertainty.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation
     ---------------------
     The accompanying consolidated financial statements have been prepared in
     conformity with accounting principles generally accepted in the United
     States of America for interim financial information and with the
     instructions to Form 10-Q and Regulation S-X. Accordingly, they do not
     include all of the information and footnotes required by accounting
     principles generally accepted in the United States of America for complete
     financial statements. In the opinion of management, all normal, recurring
     adjustments considered necessary for a fair presentation have been
     included. These financial statements should be read in conjunction with the
     audited financial statements and notes thereto included in the Company's
     Annual Report on Form 10-K for the year ended October 31, 2001. The results
     of operations for the nine months ended July 31, 2002 are not necessarily
     indicative of the results that may be expected for the year ended October
     31, 2002.

                                        9
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Property and Equipment
     ----------------------
     Property and equipment are recorded at cost. Depreciation and amortization
     are provided using the straight-line method over the estimated useful lives
     of the assets as follows:

            Office furniture and equipment                      7 years
            Computer equipment                                  3 years
            Software                                            3 years
            Machinery and equipment                             5 years
            Machinery and equipment held under
              capital lease agreements                          5 years
            Leasehold improvements                    term of the lease

     Trademark
     ---------
     The Dakota Smith trademark is recorded at cost, less accumulated
     amortization. Amortization is provided using the straight-line method over
     the estimated useful life of the trademark of 20 years. The Company
     continually evaluates whether events or circumstances have occurred that
     indicate the remaining estimated value of the trademark may not be
     recoverable. When factors indicate that the value of the trademark may be
     impaired, the Company estimates the remaining value and reduces the
     trademark to that amount. Amortization expense was $0 (unaudited) and
     $404,210 (unaudited) for the nine months ended July 31, 2002 and 2001,
     respectively.

     Fair Value of Financial Instruments
     -----------------------------------
     For certain of the Company's financial instruments, including cash and cash
     equivalents, accounts receivable, accounts payable - trade, and line of
     credit, the carrying amounts approximate fair value due to their short
     maturities. The amounts shown for long-term debt also approximate fair
     value because current interest rates offered to the Company for debt of
     similar maturities are substantially the same.

     Certain of the Company's liabilities were settled subsequent to July 31,
     2002 for less than their carrying value at that date (see Note 9).

                                       10
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Earnings (Loss) per Share
     -------------------------

     The Company calculates earnings (loss) per share in accordance with
     Statement of Financial Accounting Standards No. 128, "Earnings per Share."
     Basic earnings (loss) per share is computed by dividing the income (loss)
     available to common shareholders by the weighted-average number of common
     shares outstanding. Diluted earnings (loss) per share is computed similar
     to basic earnings (loss) per share except that the denominator is increased
     to include the number of additional common shares that would have been
     outstanding if the potential common shares had been issued and if the
     additional common shares were dilutive. The Company did not have any
     dilutive shares for the nine months ended July 31, 2002 and 2001.

     The following potential common shares have been excluded from the
     computations of diluted earnings (loss) per share for the nine months ended
     July 31, 2002 and 2001 because the effect would have been anti-dilutive:

                                                 2002           2001
                                               -------        -------
                                             (unaudited)    (unaudited)

                  Stock options                410,800        479,000
                  Warrants                     230,000        230,000
                                               -------        -------
                      TOTAL                    640,800        709,000
                                               =======        =======

     Estimates
     ---------
     The preparation of financial statements requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the financial statements and the reported amounts of revenue and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Reclassifications
     -----------------
     Certain amounts included in the prior period financial statements have been
     reclassified to conform with the current period presentation. Such
     reclassifications did not have any effect on reported net income (loss) and
     are immaterial to the financial statements as a whole.

                                       11
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Recently Issued Accounting Pronouncements
     -----------------------------------------
     In October 2002, the Financial Accounting Standards Board issued SFAS No.
     147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 removes
     the requirement in SFAS No. 72 and Interpretation 9 thereto, to recognize
     and amortize any excess of the fair value of liabilities assumed over the
     fair value of tangible and identifiable intangible assets acquired as an
     unidentifiable intangible asset. This statement requires that those
     transactions be accounted for in accordance with SFAS No. 141, "Business
     Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In
     addition, this statement amends SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets," to include certain financial
     institution-related intangible assets. This statement is not applicable to
     the Company.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation - Transition and Disclosure," an amendment of SFAS No. 123.
     SFAS No. 148 provides alternative methods of transition for a voluntary
     change to the fair value based method of accounting for stock-based
     employee compensation. In addition, SFAS No. 148 amends the disclosure
     requirements of SFAS No. 123 to require more prominent and more frequent
     disclosures in financial statements about the effects of stock-based
     compensation. This statement is effective for financial statements for
     fiscal years ending after December 15, 2002. SFAS No. 148 will not have any
     impact on the Company's financial statements as management does not have
     any intention to change to the fair value method.

                                       12
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 4 - PROPERTY AND EQUIPMENT

     Property and equipment at October 31, 2001 and July 31, 2002 consisted of
     the following:

<TABLE><CAPTION>
                                                                              July 31,        October 31,
                                                                                2002              2001
                                                                             ----------        ----------
                                                                             (unaudited)
<S>                                                                          <C>               <C>
            Office furniture and equipment                                   $  887,756        $  877,799
            Computer equipment                                                1,327,556         1,212,065
            Software                                                            821,288           821,288
            Machinery and equipment                                             164,414           158,817
            Machinery and equipment held under capital
                lease agreements                                                294,609           376,932
            Leasehold improvements                                            1,185,190         1,185,190
                                                                             ----------        ----------

                                                                              4,680,813         4,632,091
            Lessaccumulated depreciation and amortization (including
                accumulated depreciation and amortization of $218,543
                (unaudited) and $131,172 for equipment under capital
                lease agreement)                                              3,502,998         3,176,008
                                                                             ----------        ----------

                     TOTAL                                                   $1,177,815        $1,456,083
                                                                             ==========        ==========
</TABLE>

     Depreciation and amortization expense was $326,988 (unaudited) and $473,780
     (unaudited) for nine months ended July 31, 2002 and 2001, respectively,
     (including depreciation and amortization expense of $86,790 (unaudited) and
     $52,094 (unaudited), respectively, on machinery and equipment held under
     capital leases).

NOTE 5 - LINE OF CREDIT

     The Company had a credit facility with a commercial bank (the "Bank"),
     consisting of an accounts receivable and inventory revolving credit line
     and a term note payable (see Note 6), which were secured by substantially
     all of the assets of the Company. Under the credit line, the Company could
     obtain advances up to an amount equal to 60% of eligible accounts
     receivable and 30% of eligible inventories up to a maximum of $4,500,000.
     The advances on the line of credit bore interest at the Company's option at
     either the Bank's prime rate or 2.5% in excess of the London Inter-Bank
     Offering Rate ("LIBOR"). The credit facility matured on September 30, 2000.

                                       13
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 5 - LINE OF CREDIT (CONTINUED)

     The Company defaulted on the credit facility for various reasons, including
     the nonpayment of the line of credit at maturity as well as noncompliance
     with various covenants and conditions. Since September 30, 2000, the
     interest rate on the credit line has been 5% per annum in excess of the
     original rate. The Company entered into a forbearance agreement with the
     Bank in December 2000, which was extended many times. Amounts outstanding
     on the line of credit at October 31, 2001 and July 31, 2002 were $3,228,358
     and $2,302,061 (unaudited), respectively.

     In April 2003, the credit facility was repaid (see Note 9).


NOTE 6 - LONG-TERM DEBT

     Long-term debt at October 31, 2001 and July 31, 2002 consisted of the
     following:

<TABLE><CAPTION>
                                                                          July  31,          October 31,
                                                                            2002                2001
                                                                       --------------      --------------
                                                                         (unaudited)
<S>                                                                    <C>                 <C>
     Term  note payable to the Bank in the original amount of
           $3,500,000, secured by substantially all of the
           assets of the Company, payable in monthly
           installments of $72,917, plus interest at LIBOR,
           plus 7.5% per annum, which includes the 5% default
           penalty since September 2000. In April 2003, the
           term note payable was repaid (see Notes 5 and 9).           $    2,114,606      $    2,770,857

     Obligation to a frame vendor in the original amount of
           $4,195,847, less an unamortized discount of
           $639,043, unsecured, payable in monthly
           installments of $50,000, including interest imputed
           at 7.37% per annum. This obligation was in default
           at July 31, 2002. In April 2003, the Company paid
           $2,350,000 to settle this and other obligations to
           the frame vendor (see Note 9).                                   3,207,291           3,207,291
</TABLE>
                                       14
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 6 - LONG-TERM DEBT (CONTINUED)

<TABLE><CAPTION>
                                                                          July  31,          October 31,
                                                                            2002                2001
                                                                       --------------      --------------
                                                                         (unaudited)
<S>                                                                    <C>                 <C>
     Notepayable to lessor of the Company's principal offices
           and warehouse in the original amount of $240,000,
           unsecured, payable in monthly installments of
           $4,134, including interest at 10% per annum,
           maturing on May 1, 2005.                                    $      121,974      $      148,901

     Notepayable to California Design Studio, Inc. ("CDS"),
           unsecured, payable in monthly installments of
           between $8,333 and $17,042, with a final payment of
           any principal plus interest remaining in May 2007,
           including interest at 7% per annum, maturing on May
           23, 2007. In January 2003, the Company paid
           $500,000 to settle all liabilities with CDS,
           including this note and the obligation assumed in
           conjunction with the acquisition of CDS and
           extension of the consulting agreement (see Note 9).                947,234             972,422

     Obligation assumed in conjunction with acquisition of CDS
           and extension of consulting agreement, payable in
           monthly installments of $15,000, including interest
           imputed at 10% per annum, maturing on July 1, 2003.
           This obligation was settled in January 2003 (see
           Note 9).                                                           154,876             154,876

     Lumpsum liability for property and equipment associated
           with various operating lease agreements with Oliver
           Allen, secured by such property and equipment,
           payable in full in August 2004. The Company
           adjusted the liability in October 2002 in
           anticipation of the lease payoff and general
           release in February 2003 (see Note 9).                             221,855             221,855
</TABLE>
                                       15
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 6 - LONG-TERM DEBT (CONTINUED)

<TABLE><CAPTION>
                                                                          July  31,          October 31,
                                                                            2002                2001
                                                                       --------------      --------------
                                                                         (unaudited)
<S>                                                                    <C>                 <C>
     Liability for machinery and equipment under various
           capital lease agreements, secured by certain
           machinery and equipment, bearing interest ranging
           from 8.19% to 11.4% per annum, maturing through
           August 2004. In March and April 2003, the Company
           paid $58,162 in full settlement of $89,550 of this
           liability (see Note 9).                                     $      174,666      $      251,027
                                                                       --------------      --------------

                                                                            6,942,502           7,727,229
     Less current portion                                                   5,564,511           6,265,773
                                                                       --------------      --------------

                  LONG-TERM PORTION                                    $    1,377,991      $    1,461,456
                                                                       ==============      ==============
</TABLE>

     Future maturities of long-term debt at July 31, 2002 were as follows:

                   12 Months
                     Ending
                    July 31,
                  -----------
                  (unaudited)

                      2003                            $  5,564,511
                      2004                                 368,375
                      2005                                 381,258
                      2006                                 165,772
                      2007                                 462,586
                                                      ------------

                           TOTAL                      $  6,942,502
                                                      ============

                                       16
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 7 - COMMITMENTS AND CONTINGENCIES

     Frame Purchase Agreement
     ------------------------
     In conjunction with the asset acquisition of CDS, the Company entered into
     a purchase agreement with one of CDS' frame vendors, whereby the Company
     agreed to purchase the following amounts of eyeglass frames during the
     periods indicated: (i) $2,400,000 from the closing of the acquisition
     through July 31, 2000; (ii) $3,000,000 during the 12 months ending July 31,
     2001; and (iii) $3,000,000 during the 12 months ending July 31, 2002. The
     Company did not meet the minimum purchase requirement for the year ended
     July 31, 2002. In April 2003, the Company paid $2,350,000 to retire all
     obligations with this frame vendor and terminate this frame purchase
     agreement (see Note 9).

     License Agreements
     ------------------
     In July 2002, the Company extended its license agreement with Eddie Bauer,
     Inc. through December 31, 2005. The license can be renewed for a two-year
     term provided that specified minimum sales are achieved and the Company is
     not in material default under the license agreement.

     The Company had a license agreement with Coach, a division of Sara Lee
     Corporation, which granted the Company certain rights to use the "Coach"
     and related trademarks in connection with the distribution, marketing, and
     sale of Coach eyewear products. In December 2000, Coach terminated the
     license agreement due to alleged breaches of the agreement by the Company
     and filed an action seeking recovery for unpaid royalties and advertising
     costs pursuant to the license agreement. On March 7, 2002, the Company
     entered into a settlement agreement with Coach, in which Coach agreed to
     release the Company from all actions and debts for $250,000 payable over
     the 90-day period following the date of the settlement agreement. The
     Company has paid this settlement in full.

     Litigation
     ----------
     In December 2000, Coach terminated the eyewear license agreement with the
     Company due to alleged breaches of the agreement by the Company and filed
     an action seeking recovery for unpaid royalties and advertising costs
     pursuant to the license agreement. In March 2002, the Company entered into
     a settlement agreement with Coach, whereby Coach agreed to release the
     Company from all actions and debts for $250,000, payable over the 90-day
     period following the date of the settlement agreement. The Company has paid
     this settlement in full.

                                       17
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 8 - SHAREHOLDERS' DEFICIT

     Common Stock
     ------------
     In December 2001, the Company issued 500,000 shares of its common stock and
     paid $3,000 to Springer Capital Corporation in satisfaction of the purchase
     price adjustment relating to the GWO Acquisition. The fair value of the
     settlement amount, $68,000, had been accrued as a liability at October 31,
     2001.

     Warrants
     --------
     In January 2002, warrants to purchase 100,000 shares of the Company's
     common stock held by Coach, a division of Sara Lee Corporation, were
     canceled 30 days following the termination of the Company's eyewear license
     with Coach.


NOTE 9 - SUBSEQUENT EVENTS

     License Agreements
     ------------------
     In December 2002, the Company extended its license agreement with Hart
     Schaffner & Marx for a period of three years until December 31, 2005. The
     license agreement requires specified minimum net sales and royalties per
     annum.

     In December 2002, the Company extended its license agreement with Nicole
     Miller until March 31, 2006. Under the terms of the extension agreement,
     the Company will have the option to renew the license agreement for an
     additional term of three years, if and only if (i) the Company is in
     compliance with the terms and conditions of the license agreement at the
     time of this extension and on March 31, 2006 and (ii) the Company pays the
     guaranteed minimum royalty for each of the three years ended March 31,
     2006.

     Note Payable to Lessor of the Company's Principal Offices and Warehouse
     -----------------------------------------------------------------------
     In November 2002, the Company executed an unsecured promissory note for
     $89,405 with the lessor of the Company's principal offices and warehouse.
     This amount consisted of amounts related to the base rent and common area
     operating expenses payable per the operating lease due October 1, 2002 and
     the October payment of principal and interest with respect to the $240,000
     unsecured promissory note dated June 23, 1998. Late charges and other
     penalties totaling $12,761 owed by the Company with respect to the October
     rent were forgiven. The promissory note bears interest at 8% per annum and
     is repayable in 26 equal monthly installments of $3,757 each beginning
     April 1, 2003 and ending May 1, 2005.

                                       18
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)

     Settlement Agreement and General Release with CDS
     -------------------------------------------------
     In January 2003, the Company entered into a settlement agreement with CDS
     and the sole shareholder of CDS, settling all remaining obligations between
     the parties emanating from the Company's purchase of all of the assets of
     CDS in 1999. The remaining obligations included those under a consulting
     agreement with the sole shareholder of CDS for $154,876 (unaudited) at July
     31, 2002 (see Note 6) and the promissory note given as part of the purchase
     price for $947,234 (unaudited) at July 31, 2002 (see Note 6). In the
     settlement, the Company paid $500,000 to CDS and the sole shareholder of
     CDS, and the parties executed a mutual general release.

     Sale and License Back of Dakota Smith Trademark and Inventory
     -------------------------------------------------------------
     In February 2003, the Company sold all of its rights to its Dakota Smith
     eyewear trademark for $600,000 and the related inventory for $400,000.
     Concurrently, the Company entered into a three-year exclusive license
     agreement, with a two-year renewal option, with the purchaser to use the
     trademark for eyeglass frames sold and distributed in the United States and
     certain other countries. The license agreement specifies certain guaranteed
     minimum royalties per annum. The Company also repurchased the Dakota Smith
     inventory for a non-interest-bearing note in the amount of $400,000. The
     note is secured by the inventory and payable in monthly installments
     through March 2004.

     Oliver Allen Lease Payoff
     -------------------------
     In February 2003, the Company entered into an agreement with Oliver Allen
     to purchase certain property and equipment rented under various operating
     leases for $750,000. These leases were entered into during the period from
     March 1, 1999 through July 1, 2000 and expire from September 1, 2002
     through January 1, 2004.

     To fund this lease payoff, the Company obtained a $750,000 loan from a
     commercial bank. The loan bears interest at 4% per annum, is repayable in
     59 monthly installments of $13,812 commencing March 31, 2003, with the
     remaining principal and accrued interest being due and payable in full on
     February 28, 2008, and is secured by the property and equipment purchased.
     The Company has the option to pay down the principal balance at any time
     during the course of the agreement.

     Credit Facilities
     -----------------

     HLIC CREDIT FACILITY
     In April 2003, the Company obtained a $3,500,000 credit facility from HLIC.
     The credit facility is secured by all of the assets of the Company and
     includes a $3,000,000 term loan and a $500,000 revolving line of credit.

                                       19
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)

     Credit Facilities (Continued)
     -----------------

     HLIC CREDIT FACILITY (Continued)
     The term loan bears interest at 10% per annum, is payable interest only for
     the first year of payments, with payments of principal and interest on a
     10-year amortization commencing in the second year, and is due and payable
     in April 2008. The revolving credit facility bears interest at a rate of 1%
     per month, payable monthly, with all advances subject to approval of HLIC,
     and is due and payable in April 2008. The Company may prepay the credit
     facility without premium or penalty at any time.

     As additional security for the credit facility, an irrevocable letter of
     credit must be issued in favor of HLIC by a commercial bank in the amount
     of $1,250,000, subject to reduction if the credit facility is less than
     $1,250,000. The letter of credit delivered to obtain the credit facility
     was secured by a related party. Furthermore, the Company purchased a
     $250,000 debenture from HLIC as additional security. This debenture will
     earn interest at 3% per annum, adjusted annually to the one-year debenture
     rate offered by HLIC, and will remain as collateral until the credit
     facility is paid in full.

     The terms of the agreement include certain financial and non-financial
     covenants, which include that the Company must maintain inventories,
     accounts receivable, and cash of not less than $7,000,000; and that the
     Company cannot incur any additional debt, engage in any merger or
     acquisition, or pay any dividends or make any distributions to shareholders
     other than stock dividends without the consent of HLIC.

     As further consideration for the credit facility, the Company also granted
     HLIC warrants to purchase 100,000 shares of common stock. The warrants vest
     immediately, expire on April 30, 2008, and have an exercise price of $0.67
     per share.

     BLUEBIRD CREDIT FACILITY
     In April 2003, the Company obtained from Bluebird Finance Limited
     ("Bluebird") a credit facility of up to $4,150,000 secured by the assets of
     the Company. The credit facility includes a revolving credit line in the
     amount of $2,900,000 and support for the $1,250,000 letter of credit
     securing the HLIC credit facility. The loan bears interest at 5% per annum,
     payable annually for the first two years, with payments of principal and
     interest on a 10-year amortization schedule commencing in the third year,
     and is due and payable in April 2013.

     Bluebird's loan commitment will be reduced by $72,000 in July 2005 and by
     the same amount every three months thereafter. This loan is subordinate to
     the HLIC credit facility. The Company must comply with certain financial
     and non-financial covenants, which include that without the consent of
     Bluebird it may not make any acquisition or investment in excess of an
     aggregate of $150,000 each fiscal year outside the ordinary course of
     business or enter into any merger or similar reorganization.

                                       20
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)

     Designation and Issuance of Series A 2% Convertible Preferred Stock
     -------------------------------------------------------------------
     In April 2003, the Company designated a new series of preferred stock,
     designated "Series A 2% Convertible Preferred Stock" (the "Series A
     Preferred"), authorizing 1,360,000 shares. In addition, in April 2003, the
     Company issued 1,200,000 shares to Bluebird for $800,000, or $0.6667 per
     share. The Series A Preferred provides for cumulative dividends at the rate
     of 2% per annum payable in cash or additional shares of Series A Preferred
     and has a liquidation preference equal to its original purchase price plus
     accrued and unpaid dividends. The Company has the right to redeem the
     Series A Preferred, commencing April 2005 at the liquidation preference,
     plus accrued and unpaid dividends, plus a premium of $450,000.

     The Company must redeem the Series A Preferred upon certain changes of
     control, as defined in the agreement, to the extent the Company has the
     funds legally available at the same redemption price, unless the change of
     control occurs before April 2005, in which event the premium is 10% of
     either the consideration received by the Company's shareholders or the
     market price, as applicable. The Series A Preferred is convertible into
     common stock on a share-for-share basis, subject to adjustments for stock
     splits, stock dividends, and similar events, at any time commencing May
     2005.

     The holders of the Series A Preferred do not have voting rights, except as
     required by law, provided, however, that at any time two dividend payments
     are not paid in full, the Board of Directors will be increased by two and
     the holders of the Series A Preferred, voting as a single class, will be
     entitled to elect the additional directors. Bluebird received demand and
     piggyback registration rights for the shares of common stock into which
     Series A Preferred may be converted.

     Retirement of Bank Credit Facility
     ----------------------------------
     In April 2003, the Company utilized the proceeds from the Home Loan
     Investment Company ("HLIC") credit facility to retire its bank credit
     facility, which consisted of a line of credit and term note payable that
     had been in default, for a payment of $3,125,000. This transaction will
     result in the Company recording a gain of approximately $700,000 in the
     statement of operations for the year ended October 31, 2003.

     Retirement of Obligations to Frame Vendor
     -----------------------------------------
     In April 2003, the Company used a portion of the proceeds from the Bluebird
     credit facility to retire its obligations to a frame vendor in the
     aggregate amount of approximately $5,800,000 for a payment of $2,475,000 to
     Dartmouth Commerce of Manhattan, Inc. ("Dartmouth Commerce"), a related
     party. Dartmouth Commerce had purchased this obligation from the frame
     vendor for $2,350,000. The payment also terminated the purchase agreement
     (see Note 7).

                                       21
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)

     Reduction in Trade Payables
     ---------------------------
     In April 2003, the Company used a portion of the proceeds from the Bluebird
     credit facility to retire approximately $775,000 of trade payables for an
     aggregate payment of approximately $327,000.

     Reduction in Capital Lease Obligations
     --------------------------------------
     In April 2003, the Company used a portion of the proceeds from the Bluebird
     credit facility to settle $89,550 of a liability for machinery and
     equipment under various capital leases for a payment of $58,162.

     Sale of Stock by Principal Shareholder
     --------------------------------------
     In April 2003, the Weiss Family Trust, the principal shareholder of the
     Company, sold its entire shareholding in the Company of 2,075,337 shares of
     common stock, representing approximately 37% of the outstanding common
     stock of the Company, for $0.012 per share. Dartmouth Commerce purchased
     1,600,000 shares, and Michael Prince, the Company's Chief Executive
     Officer/Chief Financial Officer, purchased 475,337 shares. Dartmouth
     Commerce, which is wholly owned by the Company's new Chairman of the Board,
     is now the largest shareholder of the Company, holding approximately 28.7%
     of the outstanding common stock of the Company as of April 2003. Dartmouth
     Commerce has agreed with Bluebird that until April 2008, it will not sell
     or transfer any of these shares without Bluebird's prior consent.

     Consulting Agreements
     ---------------------
     In April 2003, the Company entered into a three-year consulting agreement
     with Dartmouth Commerce, a related party wholly owned by the Company's new
     Chairman of the Board, Richard M. Torre, for compensation of $55,000 per
     year.

     In April 2003, the Company entered into an 18-month consulting agreement
     with the former Chairman of the Board/Chief Executive Officer for total
     compensation of $20,000.

     Changes in Management
     ---------------------
     In April 2003, Bernard L. Weiss resigned as Chairman of the Board, Chief
     Executive Officer, and Director, positions he held since founding the
     Company in 1983, and Seth Weiss resigned as an Executive Vice President.
     Richard M. Torre was appointed as Chairman of the Board and Director, and
     Ted Pasternack, Edward Meltzer, and Drew Miller were appointed as
     Directors. In addition, Michael Prince was named Chief Executive Officer
     and President. Michael Prince will continue to occupy the position of Chief
     Financial Officer until a replacement is hired.

                                       22
<PAGE>

                                                         SIGNATURE EYEWEAR, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  OCTOBER 31, 2001 AND JULY 31, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)

     Employment Agreement
     --------------------
     In April 2003, the Company entered into a new five-year employment
     agreement with Michael Prince, the Company's President/Chief Executive
     Officer/Chief Financial Officer, which superseded his existing employment
     agreement. Under the new employment agreement, he receives a salary of
     $240,000 per year, subject to annual review for increase. He also received
     420,000 shares of common stock, which he must forfeit if certain conditions
     are not met as follows:

     (i)    210,000 shares must be forfeited if the Company has not achieved
            positive net income from ordinary operations in at least one fiscal
            year in the period 2003 to 2006 and

     (ii)   210,000 shares must be forfeited if the Company does not have net
            income from ordinary operations of at least $250,000 in at least one
            of the three fiscal years following the fiscal year it achieves
            positive net income.

     If prior to March 31, 2008, Mr. Prince's employment is terminated without
     cause or he terminates his employment for "good reason":

     (i)    he will be entitled to a lump sum payment of all salary to which he
            would have been entitled under the employment agreement from the
            date of termination through March 31, 2008 and

     (ii)   any of the 420,000 shares which have not vested will vest and be
            free of the risk of forfeiture.







                                       23
<PAGE>

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

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

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

SUBSEQUENT EVENTS

     This Form 10-Q has been filed after a recapitalization completed by the
Company in April 2003 which materially impacted its financial condition. The key
elements of the recapitalization and certain other material transactions
subsequent to the period covered by this Form 10-Q were:

     Credit Facility with Home Loan and Investment Company. As part of the
recapitalization in April 2003, the Company obtained a $3.5 million credit
facility from Home Loan and Investment Company ("HLIC"). The credit facility
includes a $3,000,000 term loan and a $500,000 revolving line of credit and is
secured by all of the assets of the Company. The term loan bears interest at a
rate of 10% per annum, is payable interest only for the first year with payments
of principal and interest on a 10-year amortization schedule commencing the
second year, and is due and payable in April 2008. The revolving credit facility
bears interest at a rate of 1% per month, payable monthly, with all advances
subject to approval of HLIC, and is due and payable in April 2008. The Company
must maintain inventory, accounts receivable and cash of not less than
$7,000,000. In addition, the Company must comply with certain other covenants,
including that it may not, without the consent of HLIC, incur any additional
debt, engage in any merger or acquisition, or pay any dividends or make any
distributions to shareholders other than stock dividends. The Company may prepay
the credit facility without premium or penalty. The Company also purchased a
$250,000 debenture issued by HLIC which is additional collateral for the credit
facility. The debenture bears interest at 3% per annum, adjusted annually to the
one-year debenture rate offered by HLIC. Additional credit enhancement for the
credit facility is a $1,250,000 letter of credit issued in favor of HLIC by a
commercial bank. As further consideration for the credit facility, the Company
issued to HLIC five-year warrants to purchase 100,000 shares of Common Stock for
$0.67 per share.

     Issuance of Preferred Stock. As part of the recapitalization in April 2003,
the Company created a new series of preferred stock, designated "Series A 2%
Convertible Preferred Stock" (the "Series A Preferred"), and issued 1,200,000
shares to Bluebird Finance Limited, a British Virgin Islands corporation
("Bluebird"), for $800,000, or $0.67 per share. The Series A Preferred provides
for cumulative dividends at the rate of 2% per annum payable in cash or
additional shares of Series A Preferred and has a liquidation preference equal
to its original purchase price plus accrued and unpaid dividends. The Company
has the right to redeem the Series A Preferred commencing April 2005 at the
liquidation preference plus accrued and unpaid dividends plus a premium of
$450,000. The Company must redeem the Series A Preferred upon certain changes of
control to the extent the Company has the funds legally available therefor, at
the same redemption price, unless the change of control occurs before April
2005, in which event the premium is 10% of either the consideration received by
the Company's shareholders or the market price, as applicable. The Series A
Preferred is convertible into Common Stock on a share-for-share basis (subject
to adjustment for stock splits, stock dividends and similar events) at any time
commencing May

                                       24
<PAGE>

2005. The holders of the Series A Preferred have no voting rights except as
required by law, provided, however, that at any time two dividend payments are
not paid in full, the Board of Directors will be increased by two and the
holders of the Series A Preferred, voting as a single class, will be entitled to
elect the additional directors. Bluebird received demand and piggyback
registration rights for the shares of Common Stock into which Series A Preferred
may be converted.

     Bluebird Credit Facility. As part of the recapitalization in April 2003,
the Company obtained from Bluebird a credit facility of up to $4,150,000 secured
by the assets of the Company. The credit facility includes a revolving credit
line in the amount of $2,900,000 and support for the $1,250,000 letter of credit
securing the HLIC credit facility. The loan bears interest at the rate of 5% per
annum, payable annually for the first two years, with payments of principal and
interest on a 10-year amortization schedule commencing in the third year, and is
due and payable in April 2013. Bluebird's loan commitment will be reduced by
$72,000 in July 2005 and by the same amount every three months thereafter. This
loan is subordinate to the HLIC credit facility. The Company must comply with
certain covenants including among others that without the consent of Bluebird it
may not make any acquisition or investment in excess of an aggregate of $150,000
each fiscal year outside the ordinary course of business, or enter into any
merger or similar reorganization.

     Retirement of Bank Credit Facility. As part of the recapitalization in
April 2003, the Company retired its bank credit facility with City National Bank
which had been in default since September 30, 2000.

     Retirement of Obligations to Frame Vendor. As part of the recapitalization
in April 2003, the Company retired its obligations to a frame vendor in the
aggregate amount of approximately $5.8 million (some of which were assumed in
connection with the Company's acquisition of California Design Studio, Inc.
("CDS") in 1999) for a payment of $2,475,000 to Dartmouth Commerce of Manhattan,
Inc. ("Dartmouth"). Dartmouth had purchased this obligation from the frame
vendor for $2,350,000. The Company recognized a net gain of approximately $3.3
million in connection with this transaction.

     Reduction in Trade Payables and Restructuring of Equipment Lease. As part
of the recapitalization in April 2003, the Company retired $775,000 of trade
payables for approximately $372,000, resulting in a gain of approximately
$400,000. In addition, the Company purchased certain leased property and
equipment, including its computer system, for $750,000, thereby terminating the
lease with aggregate future obligations of approximately $1.7 million. To fund
this payment, the Company obtained a $750,000 loan from a commercial bank
secured by the purchased assets and bearing interest at 4% per annum payable in
monthly installments of approximately $14,000 with the balance due in February
2008.

     Sale of Stock by Weiss Family Trust. As part of the recapitalization in
April 2003, the Weiss Family Trust, the principal shareholder of the Company,
sold all of the shares of the Common Stock of the Company which it held
(2,075,337 shares, representing approximately 37% of the outstanding Common
Stock of the Company) for $0.012 per share. Dartmouth purchased 1,600,000 shares
and Michael Prince purchased 475,337 shares. Dartmouth, which is wholly owned by
Richard M. Torre, is now the largest shareholder of the Company holding
approximately 28.7% of the outstanding Common Stock of the Company. Dartmouth
has agreed with Bluebird that until April 2008 it will not sell or transfer any
of these shares without the prior consent of Bluebird.

     Management and Board Changes. As part of the recapitalization in April
2003, Bernard L. Weiss resigned as Chairman of the Board, Director and Chief
Executive Officer, positions he held since founding the Company in 1983. Richard
M. Torre was appointed as Director and Chairman of the Board and Ted Pasternack,
Edward Meltzer and Drew Miller were appointed as Directors. In addition, Michael
Prince was named Chief Executive Officer and President. The Company has also
entered into a three-year consulting agreement with Dartmouth for compensation
of $55,000 per year.

     In April 2003 the Company entered into a new five-year employment agreement
with Mr. Prince which superseded his existing employment agreement. Under the
new employment agreement, he receives salary of $240,000 per year, subject to
annual review for increase. He also received 420,000 shares of Common Stock,
which he must forfeit if certain conditions are not met, as follows: (i) 210,000
shares must be forfeited if Signature has not achieved positive net income from
ordinary operations in at least one fiscal year in the period 2003 to 2006, and
(ii) 210,000 shares must be forfeited if Signature does not have net income from
ordinary operations of at least $250,000 in at least one of the three fiscal
years following the fiscal year it achieves positive net income. If prior to
March 31, 2008 Mr. Prince's employment is terminated without cause or he
terminates his employment for "good reason": (i) he will be entitled to a lump
sum payment of all salary to which he would have been entitled under the
employment agreement from the date of termination through March 31, 2008; and
(ii) any of the 420,000 shares which have not vested will vest and be free of
the risk of forfeiture.

                                       25
<PAGE>

     Sale/License Back of Dakota Smith Trademark. In February 2003, the Company
completed a "sale/license back" of its "Dakota Smith" trademark. In the
transaction, the Company sold to an unaffiliated entity all of its rights to the
"Dakota Smith" trademark and its Dakota Smith Eyewear inventory for $1,000,000.
Concurrently, the Company entered into a three-year exclusive license agreement,
with a two-year renewal option, to use the trademark for eyeglass frames sold
and distributed in the United States and certain other countries. Signature also
repurchased the Dakota Smith inventory for a non-interest bearing promissory
note in the amount of $400,000 payable in monthly installments though March 2004
and secured by the Company's Dakota Smith inventory.

     Settlement with CDS. In February 2003, the Company entered into a
settlement agreement with CDS and CDS's sole shareholder of all remaining
obligations between the parties emanating from the Company's purchase in 1999 of
all the assets of CDS. The remaining obligations included obligations under a
consulting agreement with the CDS shareholder and the promissory note given as
part of the purchase price. The Company's net book value for these obligations
was approximately $1.1 million as of the closing. In the settlement, the Company
paid $500,000 to CDS and the CDS shareholder and the parties executed a mutual
general release. The Company recognized a gain of approximately $600,000 in
connection with this settlement.

     The recapitalization significantly improved the Company's financial
condition and liquidity through decreasing the shareholders deficit by
approximately $5.7 million, increasing capital, reducing liabilities and
replacing current obligations with long-term obligations. Although following the
recapitalization the Company continues to have a stockholders' deficit, the
Company believes that for at least the following 12 months, assuming there are
no unanticipated material adverse developments, no material decrease in revenues
and continued compliance with its credit facilities, it will be able pay its
debts and obligations as they mature. However, the Company's long-term viability
will depend on its ability to return to profitability on a consistent basis,
which will depend in part on its ability to increase revenues.

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, Nicole Miller Eyewear, Dakota Smith
Eyewear and under its proprietary brands Signature.

     The Company's best-selling product lines are Laura Ashley Eyewear and Eddie
Bauer Eyewear. Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear
together accounted for 60% and 61% of the Company's net sales in fiscal 2000 and
fiscal 2001, respectively.

     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.

     Following many years of profitability, the Company incurred operating
losses in each of its last three fiscal years and for the nine months ended July
31, 2002. The principal reason for these losses was the change in October 1999
by the Company in its method of distributing its products to independent optical
retailers in the United States from distributors to a direct sales force. In
addition, in fiscal 2001 and the first quarter of fiscal 2002, the Company's
revenues were adversely affected by a general downturn in the optical frame
business, the aftermath of the September 11th World Trade Center tragedy, the
reluctance of retailers to purchase large inventories of the Company's products
due to concerns about the Company's viability and the discontinuation of certain
product lines. The aftermath of the September 11 tragedy included reduced sales
orders resulting in inventory build-up, slowed collection of accounts receivable
and higher return rates due to the uncertain future retail environment.

RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated selected
statements of operations data shown as a percentage of net sales.

                                       26
<PAGE>
<TABLE><CAPTION>
                                                      THREE MONTHS ENDED              NINE MONTHS ENDED
                                                            JULY 31                        JULY 31
                                                  --------------------------     --------------------------
                                                      2002           2001            2002           2001
                                                  --------------------------     --------------------------
<S>                                                   <C>            <C>             <C>            <C>
Net sales.......................................       100.0%         100.0%          100.0%         100.0%
Cost of sales...................................        44.8           39.4            42.9           37.6
                                                  -----------    -----------     -----------    -----------
Gross profit....................................        55.2           60.6            57.1           62.4
                                                  -----------    -----------     -----------    -----------
Operating expenses:
    Selling.....................................        25.5           26.9            27.3           27.2
    General and administrative..................        35.7           27.5            34.1           28.4
    Depreciation and amortization...............         1.3            2.0             1.3            2.4
                                                  -----------    -----------     -----------    -----------
         Total operating expenses...............        62.5           56.4            62.7           58.0
                                                  -----------    -----------     -----------    -----------
 Income (loss) from operations..................        (7.3)           4.2            (5.6)           4.4
                                                  -----------    -----------     -----------    -----------
 Other income (expense), net....................        (2.2)          (2.8)           (2.0)          (2.9)
                                                  -----------    -----------     -----------    -----------
 Income (loss) before provision for income taxes        (9.5)           1.4            (7.6)           1.5
                                                  -----------    -----------     -----------    -----------
 Provision (benefit) for income taxes...........         0.0            0.0             0.0            0.0
                                                  -----------    -----------     -----------    -----------
 Net income (loss)..............................        (9.5)%          1.4%           (7.6)%          1.5%
                                                  ===========    ===========     ===========    ===========
</TABLE>

     NET SALES. Net sales decreased by $3.6 million or 30.7% from the quarter
ended July 31, 2001 (the "2001 Quarter") to the quarter ended July 31, 2002 (the
"2002 Quarter") and $8.7 million or 25.3% from the nine months ended July 31,
2001 (the "2001 Nine Months") to the nine months ended July 31, 2002 (the "2002
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
                              ---------------------------------            -----------------------------------
                                     2002             2001        CHANGE          2002              2001         CHANGE
                              ---------------- ----------------  --------  ----------------- -----------------  --------
<S>                             <C>      <C>     <C>      <C>      <C>        <C>      <C>     <C>       <C>     <C>
Laura Ashley Eyewear.......     $2,965   36.2%   $3,131   26.5%    (5.3)%     $8,765   34.4%   $10,175   29.8%   (13.9)%
Eddie Bauer Eyewear........      2,302   28.1     3,626   30.7    (36.5)%      6,960   27.3      9,917   29.0    (29.8)%
Other Sales (1)............      2,921   35.7     5,064   42.8    (42.3)%      9,791   38.4     14,089   41.2    (30.5)%
                              ---------------- ----------------            ----------------- -----------------
Total......................     $8,188  100.0%  $11,821  100.0%   (30.9)%    $25,516  100.0%   $34,181  100.0%   (25.4)%
                              ================ ================            ================= =================
---------------
(1) Includes net sales of other designer eyewear and private label frames.
</TABLE>

     Net sales in the 2002 Nine Months were adversely affected by a general
downturn in the optical frame business, the aftermath of the September 11th
World Trade Center tragedy, and the reluctance of retailers to purchase large
inventories of the Company's products due to concerns about the Company's
viability.

     GROSS PROFIT AND GROSS MARGIN. Gross profit decreased $2.6 million or 36.9%
from the 2001 Quarter to the 2002 Quarter and $6.8 million or 31.2% from the
2001 Nine Months to the 2002 Nine Months due to lower net sales. The gross
margin declined from 62.4% in the 2001 Nine Months to 57.1% in the 2002 Nine
Months due to write downs of obsolete inventory and close out sales representing
a higher percentage of net sales.

     SELLING EXPENSES. Selling expenses decreased $1.1 million or 34.5% from the
2001 Quarter to the 2002 Quarter and $2.3 million or 25.0% from the 2001 Nine
Months to the 2002 Nine Months due to lower net sales and decreases of $0.5
million and $1.0 million in salaries and commissions, $0.1 million and $0.8
million in point of purchase materials in the respective three and nine month
periods, offset in part by increases in advertising expenses of $0.1 million and
$0.2 million in the respective three and nine month periods.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.3 million or 10.2% from the 2001 Quarter to the 2002 Quarter and
$1.0 million or 10.3% from the 2001 Nine Months to the 2002 Nine Months due to
reductions in salaries, equipment leasing costs, legal and professional fees,
consulting fees and temporary help costs. General and administrative expenses
did not decrease as rapidly as decreases in net sales because many of the cost
cutting measures implemented by the Company were effected prior to and at the
beginning of fiscal 2001.

                                       27
<PAGE>

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased in the 2002 Nine Months because at the end of fiscal 2001 the Company
wrote down the remaining goodwill relating to two acquisitions.

     OTHER INCOME (EXPENSE), NET. Other expenses included primarily interest
expense, which decreased due to declining market interest rates and principal
paydowns and cessation of interest due on an obligation to a frame vendor
following a standstill agreement with the vendor.

     PROVISION (BENEFIT) FOR INCOME TAXES. As a result of the Company's net loss
in the 2002 Quarter, it had no income tax expense.

FINANCIAL CONDITION , LIQUIDITY AND CAPITAL RESOURCES

     The Company's accounts receivable (net of allowance for doubtful accounts)
decreased from $5.1 million at October 31, 2001 to $2.0 million at April 30,
2002 due to the increase in the reserve for returns and the reduction in net
sales.

     The Company's inventories (net of obsolescence reserve) decreased from
$10.3 million at October 31, 2001 to $6.6 million at July 31, 2002 as part of
implementation of the Company's turnaround strategy to reduce inventory and
improve inventory turnover by better matching frame purchases with customer
orders, and the sale of the USA Optical product line. The obsolescence reserve
decreased by $0.3 million because of reduced inventory due to close-out sales.

     The Company had a credit facility with a commercial bank consisting of an
accounts receivable and inventory revolving credit line and a term loan which
were secured by substantially all of the assets of the Company. The credit
facility matured on September 30, 2000, and the Company defaulted under its bank
credit facility for various events of default including non-payment at maturity
as well as other non-compliance with various covenants and conditions. This
credit facility was repaid in April 2003.

     In addition to the term loan included as part of its bank credit facility,
long-term debt (including the current portion) at July 31, 2002 included
principally a $1.0 million note payable to CDS in connection with the CDS
Acquisition and an obligation to a frame vendor (present value of $3.2 million
at July 31, 2002) assumed in connection with the CDS Acquisition. As discussed
above, the Company settled its obligation to CDS in February 2003 and with the
frame vendor in April 2003. See Notes 6 and 9 of Notes to Consolidated Financial
Statements.

     Of the Company's accounts payable at July 31, 2002, $1.3 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 no forward commitments for foreign currencies at July 31, 2002.

     The Company's bad debt write-offs, net of recoveries, were $119,139 and
$(2,146) during the 2002 Quarter and 2001 Quarter, respectively, and $106,185
and $46,223 during the 2002 Nine Months and 2001 Nine Months, respectively. 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

     In March 2002 the Company sold its USA Optical product line, including the
trademark Camelot and related inventory, for $500,000 plus the assumption of
certain obligations and liabilities amounting to approximately $70,000. The
effect of this sale was not significant for fiscal 2002, and no material gain or
loss was recorded by the Company.

     As part of the Company's recapitalization in April 2003, the Company
obtained two long-term credit facilities. See "Subsequent Events."

     Historically, the Company has generated cash primarily through product
sales in the ordinary course of business, its bank credit facility and sales of
equity securities. Following the default on its bank credit facility in
September 2000, and as a condition to numerous forbearances extended by its
bank, the Company had to regularly reduce its aggregate borrowings under its
bank credit facility, from $ 6.0 million at October 31, 2001 to $3.1 million
when the facility was repaid in April 2003. This, coupled with declining sales
and corresponding inability to raise equity capital, materially adversely
affected the

                                       28
<PAGE>

Company's liquidity and working capital. To address this problem, the Company
reduced operating expenses through reduction in personnel and subletting office
space, negotiated vendor discounts and deferred payments of trade payables, sold
obsolete inventory at a deep discount, sold its USA Optical product line and
completed a sale/license back of its Dakota Smith trademark and inventory.

     The recapitalization materially improved the Company's liquidity by
replacing current obligations to its bank and a frame vendor with long-term
indebtedness and through discounted payoffs of trade payables. The Company
believes that for at least the next twelve months, assuming there are no
unanticipated material adverse developments, no material decrease in revenues
and continued compliance with its credit facilities, it will be able pay its
debts and obligations as they mature. However, the Company's current sources of
funds are not sufficient to provide the working capital for material growth, and
it would be required to obtain additional debt or equity financing to support
such growth.

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, and takes into account
the recapitalization described under "Subsequent Events".

     NEED TO INCREASE REVENUES AND TO RETURN TO PROFITABILITY; GOING CONCERN
QUALIFICATION

     The Company suffered material operating losses in its last three fiscal
years, causing a significant deterioration in its financial condition. At July
31, 2002, the Company's stockholders' deficit was $6.8 million. The report of
the independent auditors of the Company's financial statements for fiscal year
2001 contained an explanatory paragraph describing the uncertainty of the
Company's ability to continue as a going concern as of October 31, 2001. The
Company's recapitalization in April 2003 significantly improved the Company's
financial condition and liquidity through increasing capital, reducing
liabilities and replacing current obligations and debts with long-term
obligations. However, following the recapitalization the Company continues to
have a stockholders' deficit, and the Company's long-term viability will depend
on its ability to return to profitability on a consistent basis.

     During the past several years, the Company has significantly reduced its
general, administrative and other expenses to the extent that it does not
believe further material reductions are possible short of further downsizing in
the Company through termination of one or more product lines. Accordingly, the
ability of the Company to return to profitability will depend most significantly
on its ability to increase its revenues. The Company's revenues during the past
several years have been adversely affected by the significant downturn in the
optical frame industry and its inability to hire a direct sales force sufficient
to replace its distributor network following its conversion to direct sales in
2000. This problem has been exacerbated by the Company's impaired financial
condition. In addition, since the fourth quarter of fiscal 2001, the Company's
revenues were adversely impacted by the September 11, 2001 tragedy and the
reluctance of retailers to purchase large inventories of the Company's products
due to concerns about the Company's viability. While the Company is hopeful that
the recapitalization will generate greater customer confidence and increase its
ability to hire qualified sales personnel, no assurance can be given that this
will occur or that the Company will be able to generate materially greater
revenues or to return to consistent profitability.

     SUBSTANTIAL DEPENDENCE UPON LAURA ASHLEY AND EDDIE BAUER LICENSES

     Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear accounted for 60%
and 61% of the Company's net sales in fiscal years 2000 and 2001, 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 Nicole Miller Eyewear, Dakota Smith Eyewear, bebe eyes and its
Signature line, 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 Laura Ashley license is automatically renewed through January 2008
so long as the Company is not in breach of the license agreement and the royalty
payment for the prior two contract years exceeds the minimum royalty for those
years. The Company markets Eddie Bauer Eyewear through an exclusive license
which terminates in December 2005, but may be renewed by the Company at least
through 2007 so long as

                                       29
<PAGE>

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.

     DEPENDENCE UPON SALES TO RETAIL OPTICAL CHAINS

     Net sales to major optical retail chains, including Eyecare Centers of
America, Cole Vision Corp. and its subsidiary, LensCrafters, and U.S. Vision,
amounted to 33% and 29% of net sales in fiscal years 2000 and 2001,
respectively. Net sales to Eyecare Centers of America in fiscal 2001 amounted to
12% of the Company's net sales for such fiscal year. The loss of one or more
retail chains as a customer would have a material adverse affect on the
Company's business.

     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 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 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

                                       30
<PAGE>

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 2001, Signature used manufacturers principally in Hong Kong/China, Japan
and Italy.

     INTERNATIONAL SALES

     International sales accounted for approximately 12.8% and 11.3% of the
Company's net sales in fiscal years 2000 and 2001, respectively. These sales
were primarily in England, Canada Australia, New Zealand, Holland and Belgium.
The Company's international business is subject to numerous risks, including the
need to comply with export and import laws, changes in export or import
controls, tariffs and other regulatory requirements, the imposition of
governmental controls, political and economic instability, trade restrictions,
the greater difficulty of administering business overseas and general economic
conditions. Although the Company's international sales are principally in United
States dollars, sales to international customers may also be affected by changes
in demand resulting from fluctuations in interest and currency exchange rates.
There can be no assurance that these factors will not have a material adverse
effect on the Company's business, operating results and financial condition.

     PRODUCT RETURNS

     The Company has a product return policy which it believes is standard in
the optical industry. Under that policy, the Company generally accepts returns
of non-discontinued product for credit, upon presentment and without charge. The
Company's product returns for fiscal years 2000 and 2001 amounted to 22% and 23%
of gross sales (sales before returns). The Company anticipates that product
returns may increase as a result of the downturn in the optical frame industry
and general economic conditions. The Company maintains reserves for product
returns which it considers adequate; however, an increase in returns that
significantly exceeds the amount of those reserves would 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. 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 marketplace 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.

                                       31
<PAGE>

     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. 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.

     CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

     As of June 15, 2003, the directors and executive officers of the Company
owned beneficially approximately 51% of the Company's outstanding shares of
Common Stock. 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.

     NO DIVIDENDS ALLOWED

     In light of the Company's current financial condition, it may not pay
dividends under the California General Corporation Law. In addition, payments of
dividends are restricted under the Company's credit facilities.

     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 issued 1,200,000 shares of Series A Preferred in
the recapitalization, and has no present intention to issue any other 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
unless the change of control is approved by the licensor. 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.

                                       32
<PAGE>

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. At any month-end during the quarter ended July 31,
2002, a maximum of $1.3 million were payable in foreign currency. These foreign
currencies included Japanese yen. 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 no forward commitments for foreign currencies at July 31, 2002.

     International sales accounted for approximately 10% of the Company's net
sales in the nine months ended April 30, 2002. 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 facilities existing at May 31,
2003 had fixed interest rates. See "Subsequent Events." Accordingly, the Company
does not believe it is subject to material interest rate risk.

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


                                    PART II.
                                OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

The Company was in default under its bank credit facility during the quarter
ended July 31, 2002. This credit facility was paid off in April 2003 and, as of
May 31, 2003, the Company was not in default under any credit facility.


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

        Reports on Form 8-K

        None


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<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: June 26, 2003                       SIGNATURE EYEWEAR, INC.


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












                                       34
<PAGE>

                          CERTIFICATIONS FOR FORM 10-Q

     I, Michael Prince, certify that:

     1. I have reviewed this quarterly report on Form 10-Q for the quarter ended
July 31, 2002 of Signature Eyewear, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.




                                               /s/ Michael Prince
Date: June 26, 2003                            ------------------------------
                                       Name:   Michael Prince
                                       Title:  Chief Executive Officer and
                                               Chief Financial Officer




                                       35
<PAGE>

                                  EXHIBIT INDEX
Exhibit
Number   Exhibit Description
------   -------------------

 99.1    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


























                                       36