<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                 UNITED STATES
 
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                            ------------------------
 
                                  FORM 10-K/A

                                AMENDMENT NO. 1
 
   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934
 
                    FOR THE FISCAL YEAR ENDED JULY 31, 1998
 
                                       OR
 
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
                        COMMISSION FILE NUMBER 001-09630
 
                                CML GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                   <C>
              DELAWARE                                 04-2451745

    (STATE OR OTHER JURISDICTION                    (I.R.S. EMPLOYER
  OF INCORPORATION OR ORGANIZATION)                IDENTIFICATION NO.)
 
524 MAIN STREET, ACTON, MASSACHUSETTS                     01720

   (ADDRESS OF PRINCIPAL EXECUTIVE                     (ZIP CODE)
               OFFICES)
</TABLE>
 
      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (978) 264-4155
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
         COMMON STOCK, $.10 PAR VALUE                     NEW YORK STOCK EXCHANGE
</TABLE>
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE
                                (TITLE OF CLASS)
 
     Indicate by check mark whether the registrant (1) has 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 such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  Yes  [X]       No  [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]
 
     The approximate aggregate market value of the Common Stock held by
non-affiliates of the registrant was approximately $23,330,287 based on the
closing price of the Common Stock as reported on the New York Stock Exchange on
October 21, 1998.
 
     Number of shares of Common Stock outstanding as of October 21, 1998:
62,214,099.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
                                     None.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
     CML Group, Inc. (the "Company") hereby amends the following items of its
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
November 13, 1998 as set forth in the pages attached hereto:
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information required by this item is contained in part under the
caption "Executive Officers of the Company" in Part I of the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
November 13, 1998.
 
     The following table sets forth certain information with respect to the
directors of the Company:
 
DIRECTORS WHOSE TERMS EXPIRE IN 1998 (CLASS B DIRECTORS)
 
<TABLE>
<S>                             <C>
Warren J. Isabelle              President of Ironwood Capital Management, LLC, an investment
                                advisory company, since August 1997; Chief Investment
                                Officer of Equities at Keystone Investment Management Co.,
                                an investment management company, from February 1997 to May
                                1997; Senior Vice President, Head of Domestic Equities at
                                Pioneering Management Corp. from June 1984 to February 1997.
                                Age 46, director of the Company since September 1998.

Martin E. Welch, III            Senior Vice President and Chief Financial Officer of Kmart
                                Corporation, a national mass merchandise retailer, since
                                1995; Senior Vice President and Chief Financial Officer of
                                Federal-Mogul Corporation from 1991 to 1995. Age 50,
                                director of the Company since September 1998.
</TABLE>
 
DIRECTOR WHOSE TERM EXPIRES IN 1999 (CLASS C DIRECTOR)
 
<TABLE>
<S>                             <C>
John A.C. Pound                 Chairman of the Board of Directors of the Company since
                                January 1998, Acting Chief Executive Officer from February
                                1998 to April 1998 and Chief Executive Officer since April
                                1998; Consultant on business strategy and corporate
                                governance from January 1988 to January 1998; Lecturer,
                                Harvard Law School from September 1994 to June 1997; member
                                of the faculty at the Kennedy School of Government, Harvard
                                University from September 1987 to June 1994. Age 43,
                                director of the Company since 1997.
</TABLE>
 
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS A DIRECTORS)
 
<TABLE>
<S>                             <C>
Thomas H. Lenagh                Financial Consultant since 1986; director of Adams Express
                                Company, Clemente Global Growth Fund, Gintel Fund, Inc., ASD
                                Group, Inc., ICN Biomedicals, V-Band Corp., Franklin Covey
                                Co. and Styles on Video, Inc. Age 78, director of the
                                Company since 1976.

Kathleen Tierney                Chief Executive Officer of Smith & Hawken, Ltd. ("Smith &
                                Hawken") since February 1998 and President since 1993;
                                Executive Vice President of The Nature Company from 1986
                                until 1993. Age 53, director of the Company since September
                                1998.
</TABLE>
 
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Except as described below, and based solely
upon a review of reports submitted, and representations made, to the Company,
the Company believes that during the fiscal year ended July 31, 1998, its
executive officers, directors and holders of more than 10% of the Common Stock
complied with all Section 16(a) filing requirements.
 
                                        1
<PAGE>   3
 
     On January 9, 1998, John A.C. Pound, Chairman of the Board of Directors and
Chief Executive Officer of the Company, filed a corrected Form 3, Initial
Statement of Beneficial Ownership of Securities, to report his beneficial
ownership of 2,500 shares of Common Stock of the Company. Mr. Pound's original
Form 3 filing on December 22, 1997 had inadvertently reported the ownership of
only 2,000 shares.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION
 
     The following table sets forth certain information with respect to the
annual and long-term compensation of the two persons who served as the Company's
Chief Executive Officer during fiscal 1998 and each of the three other most
highly compensated executive officers of the Company (the "Named Executive
Officers").
 
                                        2
<PAGE>   4
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                            LONG-TERM COMPENSATION
                                                          ---------------------------
                                                                   AWARDS(2)
                                    ANNUAL COMPENSATION   ---------------------------
                                    -------------------    RESTRICTED     SECURITIES     ALL OTHER
                                     SALARY     BONUS        STOCK        UNDERLYING    COMPENSATION
NAME AND PRINCIPAL POSITION  YEAR     ($)       ($)(1)    AWARDS($)(3)   OPTIONS (#)       ($)(4)
---------------------------  ----   --------   --------   ------------   ------------   ------------
<S>                          <C>    <C>        <C>        <C>            <C>            <C>
John A.C. Pound(5)........   1998   $120,000   $150,000     $   -0-        $351,429       $    -0-
  Chairman of the Board and
  Chief Executive Officer
Charles M. Leighton(6)....   1998    267,500        -0-      71,831          50,000        979,896
  Chairman of the Board      1997    517,937        -0-         -0-          50,000         25,934
  and Chief Executive        1996    595,000        -0-         -0-             -0-         25,958
  Officer
G. Robert Tod(7)..........   1998    324,167        -0-      74,226          50,000        995,883
  President and Chief        1997    517,937        -0-         -0-          50,000         12,652
  Operating Officer          1996    595,000        -0-         -0-             -0-         12,536
Glenn E. Davis............   1998    185,000    100,000         -0-          95,000          5,120
  Executive Vice             1997    165,000        -0-         -0-          41,000          5,076
  President of Finance       1996    152,500        -0-         -0-          35,000          5,324
  and Administration, Chief
  Financial Officer,
  Treasurer and Secretary
Paul J. Bailey............   1998    100,500     30,000         -0-           6,000          3,331
  Vice President,
  Controller, Assistant
  Treasurer and Assistant
  Secretary
</TABLE>
 
---------------
(1) Amounts in this column represent bonuses earned under the Company's
    executive compensation program for the respective fiscal years.
 
(2) The Company does not have a long-term compensation program that includes
    long-term incentive payouts. No restricted stock awards or stock
    appreciation rights (SARs) were granted to any of the Named Executive
    Officers during fiscal 1998.
 
(3) The amounts shown in this column for fiscal 1998 represent the value of
    common stock distributed to Messrs. Leighton and Tod under the Company's
    Incentive Deferred Compensation Plan. These distributions were made earlier
    than otherwise provided for under the terms of the Company's Incentive
    Deferred Compensation Plan pursuant to severance agreements entered into by
    the Company with Messrs. Leighton and Tod.
 
(4) The amounts shown in this column for fiscal 1998 represent split-dollar life
    insurance premiums of $633 paid by the Company for Mr. Leighton and the
    Company's contributions under its 401(k) savings plan of $980, $2,820,
    $5,120 and $3,331 to each of Messrs. Leighton, Tod, Davis and Bailey,
    respectively. The amounts in this column for fiscal 1998 also include
    severance payments of $240,000 to be paid to each of Messrs. Leighton and
    Tod and $738,283 and $753,063 representing the cash surrender value of life
    insurance contracts delivered to Messrs. Leighton and Tod, respectively, in
    connection with their separation from the Company. See "Employment
    Agreements and Severance Arrangements," for a description of the timing of
    these severance payments.
 
(5) Mr. Pound has served as the Company's Chief Executive Officer since April
    14, 1998.
 
(6) Mr. Leighton served as the Company's Chief Executive Officer until February
    20, 1998.
 
(7) Mr. Tod served as the Company's President and Chief Operating Officer until
    June 30, 1998.
 
                                        3
<PAGE>   5
 
STOCK OPTIONS
 
     The following table summarizes certain information regarding options
granted during fiscal 1998 to the Named Executive Officers. No SARs were granted
during fiscal 1998.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                            INDIVIDUAL GRANTS                       POTENTIAL REALIZABLE
                          -----------------------------------------------------       VALUE AT ASSUMED
                          NUMBER OF      PERCENT OF                                ANNUAL RATES OF STOCK
                          SECURITIES       TOTAL                                   PRICE APPRECIATION FOR
                          UNDERLYING      OPTIONS       EXERCISE                       OPTION TERM(4)
                           OPTIONS       GRANTED TO      OR BASE                   ----------------------
                           GRANTED      EMPLOYEES IN      PRICE      EXPIRATION       5%           10%
NAME                         (#)        FISCAL YEAR     ($/SHARE)       DATE          ($)          ($)
----                      ----------    ------------    ---------    ----------    ---------    ---------
<S>                       <C>           <C>             <C>          <C>           <C>          <C>
John A.C. Pound.........   300,000(1)        23%         $1.4375      2/10/08      $271,211     $687,301
                            51,429(2)         4           3.50        12/4/07       113,202      286,876
Charles M. Leighton.....    50,000(3)         4           3.125       8/20/07        98,265      249,022
G. Robert Tod...........    50,000(3)         4           3.125       8/20/07        98,265      249,022
Glenn E. Davis..........    75,000(1)         6           1.50        2/11/08        70,751      179,296
                            20,000(3)         2           3.125       8/20/07        39,306       99,609
Paul J. Bailey..........     6,000(3)       -0-           3.125       8/20/07        11,792       29,883
</TABLE>
 
---------------
(1) Options become exercisable on a cumulative basis under the following
    schedule: 50% of the shares covered thereby becoming exercisable on the date
    of grant, 25% of the shares exercisable on July 31, 1998 and 25% of the
    shares exercisable on December 31, 1998.
 
(2) Options granted on December 5, 1997 under the 1996 Director Option Plan and
    become exercisable on a cumulative basis under the following schedule:
    33.33% of the shares covered thereby becoming exercisable on December 5,
    1998, 33.33% of the shares exercisable on December 5, 1999 and 33.33%
    becoming exercisable on December 5, 2000.
 
(3) Options become exercisable on a cumulative basis, with 20% of the shares
    covered thereby becoming exercisable on the date of grant and an additional
    20% of the shares becoming exercisable on each successive anniversary date,
    with full vesting occurring on the fourth anniversary date.
 
(4) Amounts represent hypothetical gains that could be achieved for the options
    if exercised at the end of the option terms. These gains are based on
    assumed rates of stock appreciation of 5% and 10% compounded annually from
    the date the respective options were granted. This table does not take into
    account the actual change in the price of the Common Stock. Actual gains, if
    any, on stock option exercises will depend on the future performance of the
    Common Stock and the date on which the options are exercised. The gains
    shown are net of the option exercise price, but do not reflect taxes or
    other expenses associated with the exercise.
 
YEAR-END OPTION TABLE
 
     The following table summarizes certain information regarding stock options
held as of July 31, 1998 by the Named Executive Officers. No SARs were held
during fiscal 1998.
 
              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                         FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                      NUMBER OF SHARES            VALUE OF UNEXERCISED
                                                                   UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                                                                 OPTIONS AT FISCAL YEAR-END        AT FISCAL YEAR-END
                           SHARES ACQUIRED ON   VALUE REALIZED   (EXERCISABLE/UNEXERCISABLE)   (EXERCISABLE/UNEXERCISABLE)
          NAME                EXERCISE(#)            ($)                     (#)                         ($)(1)
          ----             ------------------   --------------   ---------------------------   ---------------------------
<S>                        <C>                  <C>              <C>                           <C>
John A.C. Pound..........           -0-            $    -0-           225,000/126,429                  $  -0-/-0-
Charles M. Leighton......       149,400             114,665                   -0-/-0-                     -0-/-0-
G. Robert Tod............           -0-                 -0-            429,081/82,177                     -0-/-0-
Glenn E. Davis...........           -0-                 -0-            169,958/75,963                     -0-/-0-
Paul J. Bailey...........           -0-                 -0-             47,400/18,800                     -0-/-0-
</TABLE>
 
---------------
(1) Value based on the last sale price per share ($.875) of the Common Stock on
    July 31, 1998, as reported on the New York Stock Exchange, less the exercise
    price.
 
                                        4
<PAGE>   6
 
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
 
     On February 12, 1998, the Governance Committee of the Board of Directors
(the "Governance Committee") approved the following compensation arrangements
for John A.C. Pound: a salary of $20,000 per month, a signing bonus of $50,000,
and an incentive payment of $100,000, to be awarded if the Board, in its
discretion, was satisfied with Mr. Pound's performance through the end of fiscal
1998. The Governance Committee also granted Mr. Pound options for the purchase
of 300,000 shares of Common Stock, of which 50% would vest at the time of grant,
25% on July 31, 1998 and the remaining 25% on December 31, 1998 (or sooner in
the event of a change in control). On August 10, 1998, the Board authorized the
payment of a performance bonus of $100,000 to Mr. Pound for services rendered to
the Company in fiscal 1998. At a meeting on September 15, 1998, the Board
approved a resolution increasing Mr. Pound's salary to $295,000, effective
August 1, 1998.
 
     On February 12, 1998, the Governance Committee authorized the Company to
pay Glenn E. Davis an incentive payment of $75,000 on July 31, 1998 if the Board
determined, in its discretion, that Mr. Davis' performance warranted such
payment and to grant Mr. Davis a stock option for the purchase of 75,000 shares.
On August 10, 1998, the Board authorized the payment of a performance bonus of
$100,000 to Mr. Davis.
 
     On June 19, 1998, the Company entered into an agreement relating to the
continued employment of Kathleen Tierney as President and Chief Executive
Officer of Smith & Hawken. This agreement, which was subsequently amended on
September 1, 1998, provides for Ms. Tierney to receive: (i) a base salary of
$300,000, (ii) a bonus of 10-100% of base salary, (iii) stock options for up to
350,000 shares exercisable at current market value when approved by the Board
(two-year vesting), (iv) severance payments for 30 months, (v) sale
participation if Smith & Hawken is sold and (vi) retention benefits to be
addressed as part of the fiscal 1998 bonus.
 
     On April 14, 1998, G. Robert Tod was appointed to the position of Vice
Chairman of the Board of Directors with an annual salary of $90,000.
 
     On August 10, 1998, the Company executed a severance agreement with Mr. Tod
in connection with Mr. Tod's separation from the Company, effective June 30,
1998. Under the agreement, the Company agreed to distribute to Mr. Tod life
insurance policies held in a Rabbi Trust and pay Mr. Tod $240,000, including
nine equal monthly installments of $20,000 beginning August 15, 1998 and a final
payment of $60,000 on May 1, 1999. In addition, the Company would continue to
make available a currently leased auto until the lease terminated in December
1998. Mr. Tod agreed to reimburse the Company for lease payments at the rate of
$200 per month until the Rabbi Trust was made available to him. After this had
occurred, and until December 1998, Mr. Tod would be responsible for all auto
expenses (lease plus insurance payments).
 
     On March 17, 1998, the Company executed a severance agreement with Charles
M. Leighton in connection with Mr. Leighton's separation from the Company,
effective March 31, 1998. Under the agreement, the Company agreed to distribute
to Mr. Leighton life insurance policies held in a Rabbi Trust and pay Mr.
Leighton $240,000 in three equal payments on August 1, 1998, November 1, 1998
and January 1, 1999.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     During the 1998 fiscal year, the members of the Governance Committee were
Lauren M. Tyler, Howard H. Callaway, Thomas H. Lenagh, John A.C. Pound, and
Ralph F. Verni, as Chairman. Current members of the Governance Committee include
Mr. Lenagh, Warren J. Isabelle and Martin E. Welch, III. No Governance Committee
interlocks or insider participation existed during fiscal 1998.
 
                                        5
<PAGE>   7
 
DIRECTOR COMPENSATION AND STOCK OPTIONS
 
  Compensation for Directors
 
     From the beginning of the 1998 fiscal year until August 10, 1998, directors
who were not officers or employees of the Company were entitled to $3,000 for
each Board of Directors' meeting attended ($750 for each telephonic meeting),
plus expenses. Members of the Audit Committee of the Company and the Governance
Committee received $750 for each committee meeting attended and the chairman of
each of these committees received $2,000 for services as chairman. Until his
resignation on June 25, 1998, Mr. Callaway was paid an additional $2,000 as lead
director of the Board of Directors.
 
     On August 10, 1998, the Board of Directors adopted a resolution, effective
August 11, 1998, that all fees paid to non-employee directors for attending
meetings of the Board of Directors and committees thereof would be reduced 50%
and that no director would receive any fees for participating in telephonic
meetings of the Board or any committee thereof.
 
  Deferred Compensation Plan
 
     The Company's Incentive Deferred Compensation Plan provides for the grant
of incentive compensation awards in the form of shares of Common Stock to senior
executive employees of the Company and its subsidiaries. These shares (the
"Deferred Shares") will be issued to the participants and distributed to them no
later than one year after their retirement, disability or death, or their 65th
birthday, whichever occurs first. Messrs. Leighton and Tod were issued the
Deferred Shares in connection with their termination arrangements. See "Summary
Compensation Table." As of October 23, 1998, there were no Deferred Shares
credited to the accounts of any of the executive officers.
 
  1987 Employees' Severance Benefit Plan
 
     The Board of Directors believes that it is in the best interest of the
Company and its stockholders to foster the continuous employment of personnel of
the Company and its subsidiaries. The Board of Directors recognizes that, as is
the case with many corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among employees, may result in the departure or distraction
of employees to the detriment of the Company and its stockholders. Thus, in
October 1987, the Board of Directors adopted an Employees' Severance Benefit
Plan (the "Severance Plan"), which provides for the lump sum cash payment to a
participant of his or her annual base salary upon a change in control of the
Company, as defined in the Severance Plan, and termination of the participant's
employment within one year of such change in control. The Severance Plan may be
terminated or amended at any time by a vote of two thirds of the Board of
Directors of the Company, unless a change of control has occurred.
 
     All employees who have been full-time employees of the Company or any of
its subsidiaries for a period of at least two consecutive years prior to the
date of a change in control of the Company, or who have been designated by the
Company's Chief Executive Officer or Chief Operating Officer, or their
authorized designees, are eligible to participate in the Severance Plan, except
that no employee of the Company or its subsidiaries who is or has been a
director of the Company is eligible to participate in the Severance Plan.
 
     The Severance Plan's term commenced on October 7, 1987 and will continue
through July 31, 1999 and thereafter, unless the Board of Directors takes
affirmative action to terminate the Severance Plan at least six months prior to
the beginning of any succeeding fiscal year. The Severance Plan is administered
by the Governance Committee.
 
  Agreement Concerning Qualified Termination
 
     On June 3, 1997, the Board of Directors approved a form of "Agreement
Concerning Qualified Termination," providing for severance payments and health
and life insurance and long-term disability benefits to the Company's executive
officers and corporate staff in the event of a "Major Company Event." A Major
Company Event is defined as the acquisition of the Company's business by a third
party or the
 
                                        6
<PAGE>   8
 
disposition by the Company of one or more principal business assets or segments,
or the formation of a strategic alliance or similar business arrangement. In
such case, if the employment of the executive officer or corporate staff member
is terminated, such person would be entitled to a severance payment equal to his
or her monthly salary times the number of years of service (not to exceed 24),
as well as continued health and life insurance and long-term disability benefits
for a period of between 6 and 24 months, depending on the length of service.
 
  Retirement Income and Survivor Security Program
 
     The Company maintains a Retirement Income and Survivor Security Program
(the "Program") which covers certain former executive officers of the Company
and certain former officers of the Company's subsidiaries. The Program is funded
by permanent life insurance policies covering each of these former officers. The
policies are owned by the Company and purchased at its expense. The right to
receipt of benefits under the Program is fully vested. Vesting was contingent on
continued employment by the Company. Retirement benefits are payable for a
period of ten years in equal monthly installments generally after the employee
reaches age 65.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
BENEFICIAL OWNERSHIP OF COMMON STOCK
 
     The following table sets forth certain information, as of October 23, 1998,
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each director and director nominee of the Company; (iii)
each named executive officer of the Company named in the Summary Compensation
Table set forth in this Proxy Statement; and (iv) all directors and executive
officers of the Company as a group.
 
<TABLE>
<CAPTION>
                                                               NUMBER OF SHARES      PERCENTAGE OF
                                                                 BENEFICIALLY        COMMON STOCK
BENEFICIAL OWNER                                                   OWNED(1)           OUTSTANDING
----------------                                              -------------------    -------------
<S>                                                           <C>                    <C>
Principal Stockholders:

DDJ Capital Management, LLC.................................      12,800,004(2)          20.6%
141 Linden Street, Suite 4
Wellesley, MA 02482-7910

State of Wisconsin Investment Board.........................      10,093,000(3)          15.0
P.O. Box 7842
Madison, WI 53702

Directors and Nominees(4)

Thomas H. Lenagh............................................         114,055(5)             *

Warren J. Isabelle..........................................          44,200                *

John A. C. Pound............................................         244,643                *

Kathleen Tierney............................................         146,895                *

Martin E. Welch, III........................................             -0-                *

Named Executive Officers(4)

Charles M. Leighton.........................................             310                *

G. Robert Tod...............................................             -0-(6)             *

Glenn E. Davis..............................................         177,373                *

Paul J. Bailey..............................................          56,240                *

All directors, director nominees and executive officers as a
  group (9 persons)(4)......................................         783,716              1.2
</TABLE>
 
---------------
 *  Percentage is less than 1% of the total number of outstanding shares of
    Common Stock.
 
(1) The inclusion herein of any shares deemed beneficially owned does not
    constitute an admission of beneficial ownership of those shares. Unless
    otherwise indicated, each stockholder referred to above has sole voting and
    investment power with respect to the shares listed.
 
                                        7
<PAGE>   9
 
(2) DDJ Capital Management, LLC ("DDJ") may be deemed to beneficially own the
    shares of Common Stock as investment manager to certain affiliated companies
    (collectively, the "Funds"), including B III Capital Partners, L.P. ("B III
    Capital"), a Delaware Limited Partnership, and The Copernicus Fund, L.P.
    ("Copernicus"), a Delaware Limited Partnership, and as investment manager to
    General Motors Domestic Group Pension Trust (the "Account"). DDJ's share
    ownership assumes conversion of a 5 1/2% Subordinated Convertible Debenture
    due 2003 (38,586 shares). This information is based on a Form 13D filed by
    DDJ with the Securities and Exchange Commission (the "Commission") on August
    7, 1998. See "Certain Transactions."
 
(3) The State of Wisconsin Investment Board ("SWIB") is a government agency that
    manages public pension funds. This information is based on a Form 13G/A
    filed by SWIB with the Commission on August 10, 1998. See "Certain
    Transactions."
 
(4) Includes shares of Common Stock which may be acquired pursuant to stock
    options exercisable within 60 days after October 23, 1998. The following
    persons have the right to acquire within such 60-day period the number of
    shares set forth after their respective names: Mr. Pound, 242,143 shares;
    Ms. Tierney, 145,175 shares; Mr. Lenagh, 74,388 shares; Mr. Isabelle, -0-
    shares; Mr. Welch, -0- shares; Mr. Davis, 166,439 shares; Mr. Bailey, 54,500
    shares; and all directors and executive officers as a group, 682,645 shares.
 
(5) Does not include 40,000 shares of Common Stock held by Mr. Lenagh's wife, as
    to which Mr. Lenagh disclaims beneficial ownership.
 
(6) Does not include 5,000 shares of Common Stock held by Mr. Tod's wife on her
    own behalf and as custodian for their children, as to which Mr. Tod
    disclaims beneficial ownership.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     On July 27, 1998, the Company sold a Secured Convertible Redeemable
Subordinated Note Due 2003 in the principal amount of $20,000,000 ("Note 1") to
the State of Wisconsin Investment Board ("SWIB") at par, and established a
senior credit facility (the "Senior Credit Facility") of up to $65,000,000 with
a maturity date of August 1, 1999 with certain funds managed by DDJ Capital
Management LLC (the "Funds") and BankBoston, N.A. ("BankBoston"). On October 14,
1998, SWIB assigned a $16,004,600 interest in Note 1 to SWIB, as trustee of the
Fixed Retirement Investment Trust of the Wisconsin Retirement Board (the "Fixed
Trust") ("Note 2") and a $3,995,400 interest to SWIB, as trustee of the Variable
Retirement Investment Trust of the Wisconsin Retirement Board (the "Variable
Trust") ("Note 3").
 
     Notes 2 and 3 are (i) due July 27, 2003, (ii) convertible, at the option of
the holders, into Common Stock at a price of $4.00 per share, (iii) bear
interest at the rate of 15% per annum, (iv) are prepayable at any time by the
Company and (v) must be redeemed in full at the election of the holders after
September 1, 2000. The Company's obligations under Notes 2 and 3 are secured by
a junior lien in substantially all the assets of the Company and its
subsidiaries. The Company also granted the holders a right of first refusal in
connection with future issuances of equity by the Company.
 
     In addition to the issuance of equity to the Funds and BankBoston, the
terms of the Senior Credit Facility include (i) the payment of annual interest
equal to the base rate (as defined in the Senior Credit Facility) plus 4%, and,
in the event of the Company's failure to reduce its Senior Credit Facilities to
specified levels by April 1, 1999 through cash generated from operations, the
sale of assets or the raising of equity, additional interest payable in the form
of a payment-in-kind ("PIK") note accruing interest at the rate of 1.5% per
month, and all PIK notes shall bear interest at the rate of 1.5% compounded
monthly, (ii) a maturity date of August 1, 1999, (iii) a senior security
interest in all the assets of the Company and its subsidiaries and (iv) the
payment of letters of credit and commitment fees plus certain additional fees
and expenses. The Funds and BankBoston were granted anti-dilution protection in
order to enable them to maintain their equity position in the Company while the
Senior Credit Facility is outstanding.
 
                                        8
<PAGE>   10
 
     On July 27, 1998, the Company entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with B III Capital Partners, L.P. ("B III Capital")
and Mellon Bank, N.A. ("Mellon"), solely in its capacity as Trustee for General
Motors Employees Domestic Group Pension Trust as directed by DDJ Capital
Management, LLC. Under the terms of the Stock Purchase Agreement, Mellon and B
III Capital purchased 1,905,600 and 9,909,118 shares of Common Stock,
respectively, for a purchase price of $.10 per share.
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
Date: November 30, 1998                   CML GROUP, INC.
 
                                          By: /s/ GLENN E. DAVIS
                                          --------------------------------------
                                          Glenn E. Davis
                                          Executive Vice President of Finance
                                          and Administration, Chief Financial
                                          Officer, Treasurer and Secretary
 
                                        9