10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2011

OR

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

498 North Oak Street

Inglewood, California 90302

(Address of Principal Executive Offices)

(310) 330-2700

(Registrant’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.   ý Yes   ¨ No

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ¨ Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer   o	Accelerated Filer   ¨
Non-accelerated Filer   o (Do not check if a smaller reporting company)	Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes   ý No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,955,639 shares outstanding as of March 1, 2011.

SIGNATURE EYEWEAR, INC.

INDEX TO FORM 10-Q

PART I	FINANCIAL INFORMATION	Page
Item 1	Financial Statements	3
	Balance Sheets	3
	Statements of Income	5
	Statements of Cash Flows	6
	Notes to the Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4	Controls and Procedures	11
PART II	OTHER INFORMATION	12
Item 1	Legal Proceedings	12
Item 1A	Risk Factors	12
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3	Defaults upon Senior Securities	12
Item 4	Removed and Reserved	12
Item 5	Other Information	12
Item 6	Exhibits	12

References in this Report to the “Company,” “Signature,” “we” or “us” refer to Signature Eyewear, Inc.

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PART I.

FINANCIAL INFORMATION

Item 1.   Financial Statements

SIGNATURE EYEWEAR, INC.

BALANCE SHEETS

AT JANUARY 31, 2011 (UNAUDITED)

AT OCTOBER 31, 2010 (AUDITED)

ASSETS
	January 31,		October 31,
	2011		2010
Current assets
Cash and cash equivalents	$	387,462	$	429,824
Accounts receivable - trade, net of allowance for doubtful accounts of $42,163		2,616,393		2,503,331
Inventory		3,864,303		3,943,377
Promotional products and materials		158,263		171,185
Prepaid expenses and other current assets		410,422		290,230
Deferred income taxes		376,500		376,500
Total current assets		7,813,343		7,714,447
Property and equipment, net		228,652		261,096
Deposits and other assets		291,861		121,304
Deferred income taxes		2,600,700		2,600,700
Total assets	$	10,934,556	$	10,697,547

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

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SIGNATURE EYEWEAR, INC.

BALANCE SHEETS

AT JANUARY 31, 2011 (UNAUDITED)

AT OCTOBER 31, 2010 (AUDITED)

LIABILITIES AND SHAREHOLDERS’ EQUITY
	January 31,			October 31,
	2011			2010
Current liabilities
Accounts payable - trade	$	4,291,306		$	4,213,364
Accrued expenses and other current liabilities		326,086			447,851
Current portion of long-term debt		290,000			290,000
Total current liabilities		4,907,392			4,951,215
Long-term debt, net of current portion		3,914,000			3,720,360
Total liabilities		8,821,392			8,671,575
Commitments and contingencies
Shareholders’ equity
Preferred stock, $0.001 par value
5,000,000 shares authorized
Series A 2% convertible preferred stock, $0.001 par value; liquidation preference (approximately $938,000 and $933,000 at January 31, 2011 and October 31, 2010, respectively)
1,360,000 shares authorized
1,200,000 issued and outstanding		1,200			1,200
Common stock, $0.001 par value: 30,000,000 shares authorized, 6,955,639 shares issued and outstanding		6,956			6,956
Additional paid-in capital		15,656,812			15,656,812
Accumulated deficit		(13,551,804	)		(13,638,996	)
Total shareholders’ equity		2,113,164			2,025,972
Total liabilities and shareholders’ equity	$	10,934,556		$	10,697,547

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

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SIGNATURE EYEWEAR, INC.

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED JANUARY 31, 2011 (UNAUDITED)

AND JANUARY 31, 2010 (UNAUDITED)

	2011			2010
Net sales	$	4,734,635		$	5,168,880
Cost of sales		1,927,748			1,920,797
Gross profit		2,806,887			3,248,083
Operating expenses
Selling		1,513,177			1,905,636
General and administrative		1,115,194			1,108,591
Depreciation and amortization		55,426			44,929
Total operating expenses		2,683,797			3,059,156
Income from operations		123,090			188,927
Interest expense		(34,093	)		(45,835	)
Income before taxes		88,997			143,092
Income taxes		1,805			435
Net income		87,192			142,657
Preferred stock dividend	$	(4,646	)	$	(4,554	)
Net income available to common shareholders	$	82,546		$	138,103
Basic earnings per share	$	0.01		$	0.02
Diluted earnings per share	$	0.01		$	0.02
Weighted-average common shares
outstanding - Basic		6,955,639			6,955,639
Weighted-average common shares
outstanding - Diluted		8,355,289			8,327,761

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

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SIGNATURE EYEWEAR, INC

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JANUARY 31, 2011 (UNAUDITED)

AND JANUARY 31, 2010 (UNAUDITED)

	2011			2010
Cash flows from operating activities
Net income	$	87,192		$	142,657
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		55,426			44,929
(Increase) decrease in:
Accounts receivable - trade		(113,063	)		(223,765	)
Inventories		79,072			2,575
Promotional products and materials		12,922			29,705
Prepaid expenses and other current assets		(120,192	)		(81,839	)
Increase (decrease) in:
Accounts payable - trade		77,942			26,539
Accrued expenses and other current liabilities		(105,625	)		(87,343	)
					.
Net cash used in operating activities		(26,326	)		(146,542	)
Cash flows from investing activities
Purchase of property and equipment		(22,197	)		(59,833	)
Deposits and other assets		(171,339	)		146,500
Net cash (used in) provided by investing activities		(193,536	)		86,667
Cash flows from financing activities
Net increase in line of credit		250,000			100,000
Payments on long-term debt		(72,500	)		(72,500	)
Net cash provided by financing activities		177,500			27,500
Net decrease in cash and cash equivalents		(42,362	)		(32,375	)
Cash and cash equivalents, beginning of period		429,824			431,037
Cash and cash equivalents, end of period	$	387,462		$	398,662
Supplemental disclosures of cash
flow information
Interest paid	$	17,357		$	23,542
Income taxes paid	$	1,805		$	435

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

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NOTES TO FINANCIAL STATEMENTS

(Information as of January 31, 2011 and for the three months ended January 31, 2011 and 2010 is unaudited)

Note 1.   Organization and Line of Business

Signature Eyewear, Inc. (the “Company”) designs, markets and distributes eyeglass frames, sunwear and footwear throughout the United States and internationally.  The Company conducts its operations primarily from its principal executive offices and a warehouse in Inglewood, California.

Note 2.   Summary of Significant Accounting Policies

Basis of Presentation

The accompanying 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, 2010.  The results of operations for the three months ended January 31, 2011 are not necessarily indicative of the results that may be expected for the year ending October 31, 2011.

Inventory

Inventory consists of finished goods, which are valued at the lower of cost or market.  Cost is computed using the weighted-average cost, which approximates actual cost on a first-in, first-out basis.

The Company regularly and periodically evaluates its inventory to ensure that it is valued at the lower of cost or market based on current market trends, product history, and turnover.

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
Leasehold improvements	Term of the lease or the estimated life of the related improvements, whichever is shorter

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized.

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-term 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.

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Income per Share

Basic income per share is computed by dividing the income available to common shareholders by the weighted-average number of common shares outstanding.  Diluted income per share is computed similar to basic income 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 following data show the amounts used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock:

Three months ended January 31, 2011	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per share	$	82,546	6,955,639	$	0.01
Conversion of preferred stock		4,646	1,399,650		0.00
Diluted earnings per share	$	87,192	8,355,289	$	0.01

Three months ended January 31, 2010	Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings per share	$	138,103		6,955,639	$	0.02
Conversion of preferred stock		4,554		1,372,122		0.00
Diluted earnings per share	$	142,657		8,327,761	$	0.02

The following potential common shares have been excluded from the computations of diluted income per share for the three months ended January 31, 2011 and 2010 because the effect would have been anti-dilutive:

	2011		2010
Warrants		—		300,000

Estimates

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

Note 3.   Long-Term Debt

Long-term debt (including accrued and unpaid interest of $871,500 and $855,360 as of January 31, 2011 and October 31, 2010, respectively) consisted of the following at the dates indicated:

	January 31, 2011			October 31, 2010
Revolving line of credit from Comerica Bank	$	2,100,000		$	1,850,000
Credit facility from Bluebird Finance Limited		2,104,000			2,160,360
		4,204,000			4,010,360
Less current portion		(290,000	)		(290,000	)
Long-term portion	$	3,914,000		$	3,720,360

Note 4.   Income Taxes

As of January 31, 2011, the Company had net operating loss carry-forwards for federal and state income tax purposes of approximately $15,267,000 and $4,230,000, respectively, which expire at various times from 2021 through 2029.

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The Company has recorded a partial benefit for income taxes based on its net operating loss carryforwards.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not a portion of deferred tax assets will not be realized.

Realization of this deferred tax asset is dependent on the Company’s ability to generate future taxable income.  Management believes that it is more likely than not that the Company will generate taxable income to utilize some of the tax carry-forwards before their expiration.  However, there can be no assurance that the Company will meet its expectation of future income.  As a result, the amount of the deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income are reduced.  Such occurrence could materially adversely affect the Company’s results of operations and financial condition.

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 our financial statements and accompanying footnotes, contains forward-looking statements that involve risks and uncertainties.  Important factors that could cause actual results to differ materially from our expectations are set forth in Item 1 – Business – Factors That May Affect Our Future Operating Results” in our Form 10-K for the year ended October 31, 2010 as well as those discussed elsewhere in this Form 10-Q.  Those forward-looking statements may relate to, among other things, our plans and strategies, new product lines, and relationships with licensors, distributors and customers, distribution strategies and the business environment in which we operate.

Overview

We generate revenues through the sale of eyeglass frames, sunwear and footwear under licensed brand names, including bebe, Carmen Marc Valvo, Cutter & Buck, Dakota Smith, Hart Schaffner Marx, Laura Ashley, Michael Stars and Nicole Miller, and under our proprietary Rough Justice and Signature brands.  Our cost of sales consists primarily of purchases from foreign contract manufacturers that produce eyewear and footwear to our specifications.

We reported net income of $87,000 on net sales of $4.7 million for the three months ended January 31, 2011 (the “2011 Quarter”) compared to net income of $143,000 on net sales of $5.2 million for the three months ended January 31, 2010 (the “2010 Quarter”).  The decrease in net sales was due primarily to the expiration of our bebe license in June 2010 and the continuing recession.  The decrease in net sales of bebe eyewear was offset in part by increased net sales of other eyewear lines and our initial revenues from private label sales of our newly launched footwear business.

The decrease in net income was due primarily to lower sales and lower gross margin.  The gross margin decreased from 62.8% in the 2010 First Quarter to 59.3% in the 2011 First Quarter because of competitive conditions in the optical sector and the impact of private label footwear sales, which have lower gross margins than our eyewear lines.

Results of Operations

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

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	Three Months Ended
	January 31,
	2011			2010
Net sales		100.0	%		100.0	%
Cost of sales		40.7			37.2
Gross profit		59.3			62.8
Operating expenses:
Selling		32.0			36.8
General and administrative		23.5			21.4
Depreciation and amortization		1.2			0.9
Total operating expenses		56.7			59.1
Income from operations		2.6			3.7
Interest expense		0.7			0.9
Income before taxes		1.9			2.8
Income taxes		0.0			0.0
Net income		1.9	%		2.8	%

Net Sales.  Net sales decreased by 8.4% or $434,000 from the 2010 Quarter to the 2011 Quarter.  The decrease in net sales was due primarily to the expiration of our bebe eyewear license in June 2010, which resulted in a $1.7 million decrease in net sales of bebe eyewear.  Net sales were also adversely affected by the continuing recession.  Net sales were positively affected in the 2011 First Quarter by increases in net sales of the Company’s other eyewear lines and through private label sales of footwear through the Signature Fashion Group division launched in November 2010.

Net sales of eyewear to independent optical retailers and distributors decreased $596,000 in the 2011 Quarter.  Net sales of eyewear to optical and retail chains decreased $354,000 in the 2011 Quarter.  International sales increased $187,000 in the 2011 Quarter.

Net sales reflect gross sales less a reserve for product returns established by us based on products that we are aware will be returned as of that date.  We had $890,000 and $760,000 in product returns for the 2011 Quarter and 2010 Quarter, respectively, resulting in a product returns percentage of 16.2% and 13.2%, respectively.

Gross Profit and Gross Margin.  Gross profit decreased $441,000 from the 2010 Quarter to the 2011 Quarter due to decreased sales and increased cost of sales.  Gross margin decreased to 59.3% in the 2011 Quarter from 62.8% in the 2010 Quarter due to competitive conditions and the impact of private label footwear sales, which have lower gross margins than our eyewear lines.

Selling Expenses.  Selling expenses decreased $392,000 from the 2010 Quarter to the 2011 Quarter primarily due to decreases in net sales, resulting in decreases of $216,000 in royalty expense and $126,000 in compensation expense.

General and Administrative Expenses.  General and administrative expenses for the 2011 Quarter remained level with general and administrative expenses in the 2010 Quarter.

Interest Expense. Interest expense consists of interest expense offset by other income.  Interest expense decreased $12,000 in the 2011 Quarter primarily due to reduction in the weighted average rate on our borrowings.

Income Taxes.  As a result of our net loss carryforward, we had no income tax expense other than franchise taxes in various states in the 2011 Quarter or the 2010 Quarter.

Financial Condition, Liquidity and Capital Resources

Our accounts receivable (net of allowance for doubtful accounts)were $2.6 million at January 31, 2011 compared to $2.5 million at October 31, 2010.

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Our inventories (at lower of cost or market) were $3.9 million at both January 31, 2011 and October 31, 2010.

Current liabilities were $4.9 million at January 31, 2011 as compared to $5.0 million at October 31, 2010.

Our long-term debt (including current portion) was $4.0 million and $4.2 million at October 31, 2010 and January 31, 2011, respectively.  See Note 3 of Notes to Financial Statements for further information regarding our long-term debt.  At January 31, 2011, the interest rate on our Comerica Bank revolving line of credit was 3.5% per annum and we had $1.2 million of additional borrowing capacity available under that line.

Of the Company’s accounts payable at January 31, 2011, approximately $177,000 were payable in foreign currency.  To monitor risks associated with currency fluctuations, the Company periodically 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.

We believe that, at least through fiscal 2011, assuming that there are no unanticipated material adverse developments, we continue to be in compliance with our credit facilities and we maintain current sales levels, our cash flows from operations and through credit facilities will be sufficient to enable us to pay our debts and obligations as they mature.

Inflation

We do not believe our business and operations have been materially affected by inflation.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.  Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide reasonable assurance only of achieving the desired control objectives, and management necessarily is required to apply its judgment in weighing the costs and benefits of possible new or different controls and procedures.  Limitations are inherent in all control systems, so no evaluation of controls can provide absolute assurance that all control issues and any fraud within the company have been detected.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (the same person has both titles), evaluated the effectiveness of our disclosure controls and procedures.  Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of that date.

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

Nothing to report.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Nothing to report.

Item 3. Defaults upon Senior Securities

Nothing to report.

Item 4. (Removed and Reserved)

Item 5. Other Information

Nothing to report.

Item 6. Exhibits

See Exhibit Index Attached

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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: March 11, 2011 SIGNATURE EYEWEAR, INC. By:  /s/ Michael Prince Michael Prince Chief Executive Officer Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.1	Amendment No. 2 dated December 13, 2009 to Loan and Security Agreement between Signature Eyewear, Inc. and Comerica Bank.
31.1	Certification Pursuant to SEC Rule 13a-14(a)/15d-14(a)
32.1	Certification Pursuant to 18 U.S.C. § 1350

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EX-10.1

EXHIBIT 10.1

AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT

This Amendment No. 2 to Loan and Security Agreement (this “Amendment”) is made on December 13, 2010 (“Effective Date”) by and among COMERICA BANK, a Texas banking association (“Bank”), and SIGNATURE EYEWEAR, INC., a California corporation (“Borrower”).

Borrower and Bank entered into a Loan and Security Agreement dated September 14, 2007, as amended by Amendment No. 1 to Loan and Security Agreement dated December 15, 2009 (“Loan Agreement”) providing terms and conditions governing certain loans and other credit accommodations extended by Bank to Borrower (“Indebtedness”).  Borrower and Bank have agreed to amend the terms of the Loan Agreement as provided in this Amendment.

Accordingly, Borrower and Bank agree as follows:

1.Capitalized Terms.  In this Amendment, capitalized terms that are used without separate definition shall have the meanings given to them in the Loan Agreement.

2.Amendments.  The Loan Agreement is amended as follows:

(a)The reference to CREDIT LIMIT $4,000,000 appearing at the top of the first page of the Loan Agreement shall be deleted and replaced with CREDIT LIMIT $3,500,000.

(b)The following terms, which are defined in the Loan Agreement, are given the following amended definitions:

“Borrowing  Base" shall mean the sum of: (1) the Account Advance Rate of the net amount of Eligible Accounts after deducting therefrom the reserve for authorized returns not yet credited and all payments, adjustments and credits applicable thereto; (2) the Inventory Advance Formula; and (3) one hundred percent (100%) of the stated amount of the Support Letter of Credit.  Anything contained in the foregoing to the contrary notwithstanding, Bank may adjust the Borrowing Base percentages and the definition of Eligible Accounts and Eligible Inventory, in each case as provided for under subsection 6.7 hereof.

"Credit Limit" shall mean Three Million Five Hundred Thousand Dollars ($3,500,000).

“Eligible Inventory” shall mean Borrower’s Inventory that (a) consists of finished goods (i.e., frames or eyeglass cases), (b) is less than 365 days old, (c) is located in the United States of America and (d) is designated by Borrower in a Designation of Inventory or Certification of Borrowing Base, in form customarily used by Bank, executed and delivered by Borrower concurrently with any request for an Advance; provided, however, that no Bebe Inventory shall be included in Eligible Inventory after June 29, 2011.

“Inventory Advances” shall mean Advances that are based upon Eligible Inventory.

“LIBOR” shall mean the rate per annum (rounded upward if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

LIBOR =                      LIBOR Base

100% - LIBOR Reserve Percentage

provided, however, in no event and at no time shall LIBOR be less than three quarters of one percent (0.75%) percent per annum.

“LIBOR Option” shall mean a rate equal to two and three quarters (2.75%) percent above Bank’s LIBOR.

“Prime Referenced Rate Option” shall mean a rate equal to three quarters of one percent (0.75%) above the Prime Referenced Rate.

(c)The following terms and their respective definitions are hereby added to Section 1 of the Loan Agreement in their respective alphabetical order:

“Bebe Inventory” means Borrower’s Inventory licensed to Borrower (or formerly licensed to Borrower) by Bebe Stores, Inc.

“Inventory Advance Formula” shall mean the lesser of (a) the Inventory Advance Maximum and (b) thirty five percent (35%) of the lower of cost or market value of Borrower's Eligible Inventory, and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of the Eligible Inventory.

“Inventory Advance Maximum” shall mean Seven Hundred and Fifty Thousand Dollars ($750,000).

“Pre-Tax Income (Quarterly)” shall mean the Pre-Tax Income for Borrower calculated as of the end of each fiscal quarter of Borrower.

“Pre-Tax Income (Rolling)” shall mean the Pre-Tax Income for Borrower calculated on a rolling two quarter basis.

(d)The following term and its definition are deleted from Section 1 of the Loan Agreement:

“Inventory Sublimit”

(e)Section 2.4 of the Loan Agreement is amended and restated in its entirety as follows:

“Borrower shall pay to Bank:

(a)   an unused fee in an amount equal to 0.15% per annum on the average daily excess of (i) the unused Credit Limit over (ii) the sum of Letter of Credit Obligations and the principal amount of Advances outstanding, which shall be due and payable in arrears on the last day of each fiscal quarter of Borrower during the effectiveness of this Agreement, and which shall be fully earned and non-refundable on the date for payment thereof. In the event that this Agreement is terminated prior to any such payment date, Borrower shall pay to Bank the ratable portion of the unused commitment fee accrued since the last payment date through any such termination date; and

(b)   a non-refundable renewal fee equal to 0.15% per annum of the Credit Limit, which shall be due and payable in arrears on the last day of each fiscal quarter of Borrower during the effectiveness of this Agreement and at maturity for any amounts accrued but unpaid and which shall be fully earned and non-refundable on the date for payment thereof.”

(f)The first sentence of Section 3.1 of the Loan Agreement is amended and restated in its entirety as follows:

“3.1           This Agreement shall remain in full force and effect until December 1, 2012 unless earlier terminated by notice by Borrower or by Bank pursuant to Section 8.1.”

(g)The last sentence of Section 6.6 of the Loan Agreement is amended and restated as follows:

“Notwithstanding anything to the contrary in this Section 6.6, Borrower may make Capital Expenditures in an aggregate amount that is not greater than One Hundred Thousand Dollars ($100,000) in any fiscal year.”

(h)Section 6.17 a. of the Loan Agreement is amended and restated in its entirety as follows:

2

“a.          as of the end of each fiscal quarter during the periods specified below, Pre-Tax Income (Quarterly) of not less than:

(A)          $1 as of October 31, 2010 and January 31, 2011; and

(B)          $75,000 as of April 30, 2011 and the last day of each fiscal quarter thereafter.”

(i)Section 6.17 c of the Loan Agreement is amended and restated in its entirety as follows:

“c.           a Leverage Ratio of not more than 2.85:1.00 as of the last day of each fiscal quarter, commencing with the fiscal quarter ending October 31, 2010.”

(j)The following provision is added as new Section 6.17 d:

“a.          as of the end of each fiscal quarter during the periods specified below, Pre-Tax Income (Rolling) of not less than:

(A)          $75,000 as of April 30, 2011

(B)          $150,000 as of July 31, 2011 and October 31, 2011;

(C)          $175,000 as January 31, 2012; and

(D)          $200,000 as of April 30, 2012 and the last day of each fiscal quarter thereafter.

(k)Exhibit A to the Loan Agreement (Form of Compliance Certificate) shall be amended and replaced with Exhibit A attached to this Amendment.

3.Representations.  Borrower represents and agrees that:

(a)Except as expressly modified in this Amendment, (i) the representations and warranties set forth in the Loan Agreement and in each related document, agreement, and instrument remain true and correct in all respects, except to the extent that they expressly speak as of a specific prior date, and (ii) the covenants set forth in the Loan Agreement continue to be satisfied in all respects, and are legal, valid and binding obligations with the same force and effect as if entirely restated in this Amendment.

(b)When executed, this Amendment will be a duly authorized, legal, valid, and binding obligation of Borrower enforceable in accordance with its terms.

(c)The Articles of Incorporation, Bylaws and Corporate Resolutions and Incumbency Certificate delivered to Bank on or about September 14, 2007 remain in full force and effect, have not been amended, repealed or rescinded in any respect and may continue to be relied upon by Bank until written notice to the contrary is received by Bank, and Borrower continues to be in good standing under the laws of the State of California.

(d)There is no default continuing under the Loan Agreement, or any related document, agreement, or instrument, and no event has occurred or condition exists that is or, with the giving of notice or lapse of time or both, would be such a default.

4.Conditions Precedent.  The effectiveness of this Amendment is subject to Bank’s receipt of all of the following:

(a)this Amendment and such other agreements and instruments reasonably requested by Bank pursuant hereto (including such documents as are necessary to create and perfect Bank’s interest in the Collateral), each duly executed by Borrower;

(b)payment of all bank fees and expenses incurred through the date of this Amendment; and

3

(c)such other documents and completion of such other matters as Bank may reasonably deem necessary or appropriate.

5.No Other Changes.  Except as specifically provided in this Amendment, it does not vary the terms and provisions of any note, mortgage, security agreement, or other document, instrument, or agreement evidencing, securing or relating to the Indebtedness or the Loan Agreement (“Loan Documents”).  This Amendment shall not impair the rights, remedies, and security given in and by the Loan Documents.  The terms of this Amendment shall control any conflict between its terms and those of the Loan Agreement.

6.Ratification.  Except for the modifications under this Agreement, the parties ratify and confirm the Loan Agreement and the Loan Documents and agree that they remain in full force and effect.

7.Further Modification; No Reliance.  This Amendment may be altered or modified only by written instrument duly executed by Borrower and Bank.  In executing this Amendment, Borrower is not relying on any promise or commitment of Bank that is not in writing signed by Bank.

8.Successors and Assigns.  This Amendment shall inure to the benefit of and be binding upon the parties and their respective successors and assigns.

9.Governing Law.  The parties agree that the terms and provisions of this Amendment shall be governed by and construed in accordance with the internal laws of the State of California, without regard to principles of conflicts of law.

10.No Defenses.  Borrower acknowledges, confirms, and warrants to Bank that as of the date hereof Borrower has absolutely no defenses, claims, rights of set-off, or counterclaims against Bank under, arising out of, or in connection with, this Amendment, the Loan Agreement, the Loan Documents and/or the individual advances under the Indebtedness, or against any of the indebtedness evidenced or secured thereby.

11.Expenses.  Borrower shall promptly pay all out-of-pocket fees, costs, charges, expenses, and disbursements of Bank incurred in connection with the preparation, execution, and delivery of this Amendment, and the other documents contemplated by this Amendment.

12.Counterparts.  This Amendment may be executed in one or more counterparts, and by separate parties on separate counterparts, all of which shall constitute one and the same agreement.

[end of amendment – signature page follows]

4

This Amendment No. 2 to Loan and Security Agreement is executed and delivered as of the Effective Date.

SIGNATURE EYEWEAR, INC.

By:          /s/ Michael Prince                    

Michael Prince

Its:           Chief Executive Officer

COMERICA BANK

By:           /s/ Richard D. Maestas             

      Richard D. Maestas

Its:           First Vice President

5

EXHIBIT A

COMPLIANCE CERTIFICATE

Please send all Required Reporting to: Comerica Bank 301 E. Ocean Blvd. Ste. 1800  MC 4444 Long Beach, CA  90802 Attn.: _______________

FROM:   SIGNATURE EYEWEAR, INC.

The undersigned authorized Officer of SIGNATURE EYEWEAR, INC. (“Borrower”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the Agreement), (i) Borrower is in complete compliance for the period ending ________________ with all required covenants, except as noted below, and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof.  Attached herewith are the required documents supporting the above certification.  The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under “Complies” column.

REPORTING COVENANTS	REQUIRED	COMPLIES
Consolidated Financial Statements	Monthly, within 35 days	YES	NO
Consolidated Financial Statements	Quarterly, within 45 days	YES	NO
Audited Consolidated Financial Statements	Annually, within 120 days	YES	NO
A/R Aging	20th day of each calendar month	YES	NO
A/P Aging	20th day of each calendar month	YES	NO
Inventory Report	20th day of each calendar month	YES	NO
Borrowing Base Certificate	20th day of each calendar month	YES	NO
Financial Projections	Annually, within 60 days after FYE	YES	NO

FINANCIAL COVENANTS	REQUIRED	ACTUAL	COMPLIES
TO BE TESTED QUARTERLY
Minimum  Pre-Tax Income (Quarterly)	$_____________	$_____________	YES	NO
Minimum  Pre-Tax Income (Rolling)	$_____________	$_____________	YES	NO
Maximum Leverage Ratio	2.85:1.00	__________:1.00	YES	NO
Minimum Quick Ratio	0.33:1.00	__________:1.00	YES	NO
YTD Capital Expenditures	$100,000 annually	$_____________	YES	NO

Please Enter Below Comments Regarding Covenant Violations:

The Officer further acknowledges that at any time Borrower is not in compliance with all the terms set forth in the Agreement, including, without limitation, the financial covenants, no credit extensions will be made.

Very truly yours,

SIGNATURE EYEWEAR, INC.	BANK USE ONLY
	Rec’d by:
Authorized Signer	Date:
	Reviewed By:
	Date:
Name:	Financial Compliance Status:       YES / NO
Title:

6

EX-31.1

EXHIBIT 31.1

Certification Pursuant to SEC Rule 13a-14(a)/15d-14(a)

I, Michael Prince, certify that:

1.   I have reviewed this Form 10-Q of Signature Eyewear, Inc.;

2.   Based on my knowledge, this 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 report;

3.   Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.   The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 11, 2011	/s/ Michael Prince
	Name:   Michael Prince
	Title:    Chief Executive Officer and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §  1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Signature Eyewear, Inc. (the “Company”) on Form 10-Q for the quarter ended January 31, 2011, as filed with the Securities and Exchange Commission (the “Report”), I, Michael Prince, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)       The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael Prince

Chief Executive Officer

Chief Financial Officer

March 11, 2011