FORM 10-Q

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
    ACT OF 1934

For the quarterly period ended March 31, 2001

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from                 to                .
                               ---------------    ---------------

                         Commission file number 0-19835

                                DAY RUNNER, INC.

             (Exact name of registrant as specified in its charter)

        DELAWARE                                          95-3624280
 (State or other jurisdiction                           (I.R.S. Employer
 of incorporation or organization)                    Identification Number)

                             2750 WEST MOORE AVENUE

                           FULLERTON, CALIFORNIA 92833

              (Address and zip code of principal executive offices)

                                 (714) 680-3500

              (Registrant's telephone number, including area code)

     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 for such  shorter  period  that the
Registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes |X| No |_|

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of Common Stock, as of the latest practicable date:

           Class                   Number of Shares Outstanding at  May 15, 2001
------------------------------     ---------------------------------------------
Common Stock, $0.001 par value                  2,408,796

<PAGE>


<TABLE>
<CAPTION>


                        DAY RUNNER, INC. AND SUBSIDIARIES

                                      INDEX

                                                                                                          Page Reference

<S>                                                                                                           <C>
COVER PAGE.......................................................................................             1

INDEX    ........................................................................................             2

PART I -- FINANCIAL INFORMATION

         Item 1.     Condensed Consolidated Financial Statements

                     Condensed Consolidated Balance Sheets

                       March 31, 2001 and June 30, 2000..........................................             3

                     Condensed Consolidated Statements of Operations

                       Three and Nine Months Ended March 31, 2001 and 2000.......................             4

                     Condensed Consolidated Statements of Cash Flows

                       Nine Months Ended March 31, 2001 and 2000.................................             5

                     Notes to Condensed Consolidated Financial Statements........................             6

         Item 2.     Management's Discussion and Analysis of

                     Financial Condition and Results of Operations...............................            16

         Item 3.     Quantitative and Qualitative Disclosures About Market Risk..................            26

PART II -- OTHER INFORMATION

         Item 6.     Exhibits and Reports on Form 8-K............................................            27

SIGNATURES.......................................................................................            28

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                   DAY RUNNER, INC. AND SUBSIDIARIES

                                                 CONDENSED CONSOLIDATED BALANCE SHEETS

                                                        (DOLLARS IN THOUSANDS)

                                                                ASSETS

                                                                                                    MARCH 31,       JUNE 30,
                                                                                                      2001            2000
                                                                                                   ----------       --------
                                                                                                   (UNAUDITED)

Current assets:
<S>                                                                                                  <C>            <C>
    Cash and cash equivalents ...............................................................        $13,231        $ 3,960
    Accounts receivable (less allowance for doubtful accounts and
       sales returns and other allowances of $7,500 and $8,391 at
       March 31, 2001 and June 30, 2000, respectively) ......................................          5,432         18,563
    Inventories .............................................................................         20,587         34,046
    Prepaid expenses and other current assets ...............................................          3,668          6,098
    Income taxes receivable .................................................................          1,823
                                                                                                     -------        -------
       Total current assets .................................................................         42,918         64,490
Property and equipment, net .................................................................          6,635         10,972
Goodwill and other intangible assets (net of accumulated amortization of $4,394
    and $4,042 at March 31, 2001 and June 30, 2000, respectively) ...........................          5,175         20,422
Other assets (net of accumulated amortization of $266 and $727 at March 31,
     2001 and June 30, 2000, respectively) ..................................................            966          1,210
                                                                                                     -------        -------
 TOTAL.......................................................................................       $ 55,694       $ 97,094
                                                                                                     -------        -------


                                                LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
    Line of credit ..........................................................................       $ 91,498       $ 99,077
Accounts payable ............................................................................          5,438         12,373
    Accrued expenses ........................................................................         15,689         21,725
    Income taxes payable ....................................................................          2,230
    Current portion of loan notes ...........................................................                           194
                                                                                                    --------       --------
       Total current liabilities ............................................................        114,855        133,369
                                                                                                    --------       --------
Long-term liabilities:
    Loan notes ..............................................................................             43             45
                                                                                                    --------       --------
       Total long-term liabilities ..........................................................             43             45
                                                                                                    --------       --------
Commitments and contingencies
Stockholders' deficiency:

    Preferred stock (1,000,000 shares authorized; $0.001 par value; no shares
       issued or outstanding)................................................................
    Common stock (29,000,000 shares authorized; $0.001 par value; 2,537,719
       shares issued at March 31, 2001 and June 30, 2000; 2,408,796 and
       2,392,860 shares outstanding at March 31, 2001 and June 30, 2000,
       respectively).........................................................................             2                2
    Additional paid-in capital...............................................................        18,089           19,181
    Accumulated deficit......................................................................       (68,417)         (45,559)
    Accumulated other comprehensive income...................................................           803              833
    Treasury stock - At cost (128,923 and 144,859 shares at March 31, 2001
       and June 30, 2000, respectively)......................................................        (9,681)         (10,777)
                                                                                                   ---------        ---------
       Total stockholders' deficiency........................................................       (59,204)         (36,320)
                                                                                                   ---------        ---------
TOTAL  ......................................................................................      $ 55,694         $ 97,094
                                                                                                   ========         =========




                                 See accompanying notes to condensed consolidated financial statements.
<PAGE>

</TABLE>
<TABLE>
<CAPTION>
                                                   DAY RUNNER, INC. AND SUBSIDIARIES

                                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                              (UNAUDITED)

                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                  Three Months Ended            Nine Months Ended
                                                                       March 31,                     March 31,
                                                                ----------------------        ----------------------
                                                                    2001        2000             2001        2000
                                                                ----------  ----------        ---------   ----------

<S>                                                             <C>         <C>               <C>         <C>
Net sales....................................................   $  20,423   $  29,976         $ 110,680   $  139,312
Cost of goods sold...........................................      10,611      18,203            55,670       75,633
                                                                ---------   ---------         ---------   ----------
Gross profit.................................................       9,812      11,773            55,010       63,679
                                                                ---------   ---------         ---------   ----------

Operating expenses:
     Selling, marketing and distribution.....................       8,970      12,836            30,739       46,328
     General and administrative..............................       6,676       7,861            20,354       22,770
     Restructuring and impairment charges....................          74       3,030            15,005        3,030
                                                                ---------   ---------         ---------   ----------
     Total operating expenses................................      15,720      23,727            66,098       72,128
                                                                ---------   ---------         ---------   ----------

Loss from operations.........................................      (5,908)    (11,954)          (11,088)      (8,449)
Net interest expense.........................................       2,858       2,726            10,014        8,693
                                                                ---------   ---------         ---------   ----------

Loss before (benefit) provision for income taxes.............      (8,766)    (14,680)          (21,102)     (17,142)
(Benefit) provision for income taxes.........................        (498)     (2,305)            1,756       (2,674)
                                                                ----------  ----------        ---------   ----------
Net loss ....................................................   $  (8,268)  $ (12,375)        $ (22,858)  $  (14,468)
                                                                =========    =========        =========   ==========

Loss per common share:
     Basic...................................................   $   (3.43)  $   (5.20)        $  (9.53)   $   (6.08)
                                                                =========   =========         ========    =========
     Diluted.................................................   $   (3.43)  $   (5.20)        $  (9.53)   $   (6.08)
                                                                =========   =========         ========    =========

Weighted-average number of common shares outstanding:

     Basic...................................................       2,409       2,382             2,398        2,381
                                                                =========   =========         =========   ==========
     Diluted.................................................       2,409       2,382             2,398        2,381
                                                                =========   =========         =========   ==========








                                See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                   DAY RUNNER, INC. AND SUBSIDIARIES

                                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                              (UNAUDITED)

                                                        (DOLLARS IN THOUSANDS)

                                                                                            Nine Months Ended

                                                                                                 March 31,
                                                                                         ----------------------
                                                                                             2001        2000
                                                                                         ----------    --------
Cash flows from operating activities:

<S>                                                                                       <C>          <C>
    Net loss......................................................................        $(22,858)    $(14,468)
    Adjustments to reconcile net loss to net cash provided by
      operating activities:
       Depreciation and amortization..............................................           6,432       9,228
       Impairment charges.........................................................          14,895
       Provision for doubtful accounts and sales returns and other allowances.....           5,782      17,214
       Loss on disposal of property and equipment.................................             237         861
       Changes in operating assets and liabilities:
          Accounts receivable.....................................................           6,919      10,008
          Inventories.............................................................          12,832       1,617
          Prepaid expenses and other current assets...............................             179        (246)
          Income taxes receivable.................................................           1,823         452
          Accounts payable........................................................          (6,664)     (8,037)
          Accrued expenses........................................................          (6,342)      1,417
          Income taxes payable....................................................           2,385       1,101
                                                                                           -------     -------
          Net cash provided by operating activities...............................          15,620      19,147
                                                                                           -------     -------
Cash flows from investing activities:

   Proceeds on disposition of property and equipment..............................           2,040
   Acquisition of property and equipment..........................................            (824)     (3,230)
   Other assets...................................................................              74         (35)
                                                                                           -------     --------
          Net cash provided by (used in) investing activities.....................           1,290      (3,265)
                                                                                           -------     -------
Cash flows from financing activities:
   Net repayments under line of credit............................................          (6,367)    (12,815)
   Repayment of loan notes........................................................            (189)     (2,093)
   Financing fees.................................................................          (1,116)     (1,710)
   Net proceeds from issuance of common stock.....................................               4          33
                                                                                           -------     -------
          Net cash used in financing activities...................................          (7,668)    (16,585)
                                                                                           -------     -------
Effect of exchange rate changes in cash...........................................              29         169
                                                                                           -------     -------
Net increase (decrease) in cash and cash equivalents..............................           9,271        (534)
Cash and cash equivalents at beginning of period..................................           3,960       9,132
                                                                                           -------     -------
Cash and cash equivalents at end of period........................................         $13,231     $ 8,598
                                                                                           =======     =======

                                See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>

                        DAY RUNNER, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

              (THREE AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000)

1.  BASIS OF PRESENTATION AND ACCOUNTING POLICIES

     The accompanying  condensed consolidated balance sheet as of March 31, 2001
and  condensed  consolidated  statements  of  operations  for the three and nine
months ended March 31, 2001 and 2000 and the condensed  consolidated  statements
of cash flows for the nine  months  ended March 31, 2001 and 2000 of Day Runner,
Inc. and  subsidiaries  ("the  Company")  are  unaudited  but, in the opinion of
management,  include all adjustments  consisting of normal,  recurring  accruals
necessary for a fair  presentation of the financial  position and the results of
operations  for such  periods.  Certain  information  and  footnote  disclosures
normally included in financial statements prepared in conformity with accounting
principles  generally accepted in the United States of America have been omitted
pursuant to the  requirements  of the Securities and Exchange  Commission  ("the
Commission"), although the Company believes that the disclosures included in the
condensed consolidated financial statements included herein are adequate to make
the information  therein not misleading.  The condensed  consolidated  financial
statements  included  herein  should be read in  conjunction  with the Company's
audited consolidated  financial statements for the year ended June 30, 2000, and
the notes  thereto,  which are included in the  Company's  Annual Report on Form
10-K.

     The results of  operations  for the three and nine  months  ended March 31,
2001  are  not  necessarily  indicative  of the  results  for a full  year.  The
seasonality of the Company's  financial results and the  unpredictability of the
factors  affecting  such  seasonality  make the  Company's  quarterly and yearly
financial results difficult to predict and subject to significant fluctuation.

     Effective  November 1, 2000, the Company and its lenders  renegotiated  and
restructured  the Company's  debt and entered into a second amended and restated
loan agreement.  The Company entered into a waiver and amendment agreement as of
January 31, 2001,  waiving a requirement  for an  installment  payment on a term
loan and amending certain terms and conditions of the loan agreement. The waiver
provided in the waiver and amendment  agreement expired on February 28, 2001. As
the Company was not in compliance with its debt covenants at March 31, 2001, the
Company's  bank  debt  is  classified  as  short-term  in  its  March  31,  2001
consolidated  balance  sheet.  The  Company's  difficulties  in meeting its loan
agreement  covenants and financing  needs,  its recurring losses from operations
and its negative  working  capital  position raise  substantial  doubt about its
ability to continue as a going concern.  The Company is working with its lenders
and certain third  parties in an effort to modify its debt  structure and obtain
financing for its  operations.  The Company's  continued  existence is dependent
upon  several  factors  including  the  Company's  ability to obtain  sufficient
financing for its operations and there can be no assurance that the Company will
succeed in these attempts.

     The Company's  results have been  adversely  affected by lower sales levels
primarily to the Company's  customers in foreign  markets and secondarily to its
retail  customers in the U.S. The Company  believes that major  factors  causing
lower sales include the Company's decision to de-emphasize sales of certain less
profitable  products and to certain less profitable  channels,  the reduction of
certain kinds of promotional  activity,  increased  competition from substitutes
for  paper-based  organizers  and the  continuing  efforts of the Company's U.S.
retailers to minimize on-hand inventories and increase inventory turns.

     The  Company's  high  degree of leverage  coupled  with its lower sales and
profitability  could have important  consequences to the Company,  including but
not limited to the  following:  (i) the  Company's  ability to obtain  necessary
financing  may be  impaired  in the future,  (ii) a  substantial  portion of the
Company's  cash  flow from  operations  must be used for debt  service,  thereby
reducing  the funds  available  for other  purposes and (iii) the Company may be
more  vulnerable to economic or market  downturns,  be limited in its ability to
withstand  competitive  pressures  and be unable to  attract  and/or  retain key
personnel.

     The  Company's  near and  long-term  operating  strategies  are  focused on
stabilizing  profitable sales volume in its retail markets,  exploiting  product
innovation and  promotions  where  appropriate  profitability  is achieved,  and
aggressively  reducing  costs to better  position  the Company to compete  under
current  market  conditions.  The Company  remains  highly  focused on providing
products of recognizable  value to the consumer,  while removing any product and
service costs not recognized or valued by the ultimate consumer.  The Company is
continuing its  exploration  of possible  strategic  alternatives.  On April 25,
2001,  the Company sold its Filofax  operations  in exchange  for a  $30,000,000
reduction in its debt (see Note 5).

     These  business   conditions   have  been   considered  in  evaluating  the
recoverability and classification of recorded asset and liability accounts.  The
accompanying  condensed  consolidated  financial  statements  do not include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or to amounts and  classifications  of liabilities that may be necessary
should the entity be unable to continue as a going concern (see Note 5).

     NEW ACCOUNTING PRONOUNCEMENTS - Effective July 1, 2000, the Company adopted
Statement of Financial  Accounting  Standards  ("SFAS") No. 133,  ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which was amended by SFAS No. 137
and SFAS No. 138. SFAS No. 133  establishes  accounting and reporting  standards
for derivative instruments, including certain derivative instruments embedded in
other  contracts,  collectively  referred  to as  derivatives,  and for  hedging
activities.  SFAS No. 133 requires the  recognition of all derivatives as either
assets or liabilities in the statement of financial position and the measurement
of those  instruments  at fair value.  The  adoption of SFAS 133 did not have an
impact on the financial position or results of operations of the Company because
the Company does not have any derivative activity.

     In December 1999, the Commission  published Staff  Accounting  Bulletin No.
101 ("SAB 101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS,  effective for the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. SAB 101
provides  guidance in  applying  generally  accepted  accounting  principles  to
selected revenue recognition issues in financial statements. The Company adopted
SAB 101 effective April 1, 2001. The adoption of SAB 101 did not have a material
impact on the financial position or results of operations of the Company.

     On April 1, 2001,  the Company  adopted the  provisions of Emerging  Issues
Task Force  ("EITF")  00-10,  "Accounting  for Shipping  and  Handling  Fees and
Costs",  which  requires  that  amounts  billed to  customers  for  shipping and
handling fees be classified as revenues. The adoption of EITF 00-10 did not have
a material  impact on the  financial  position or results of  operations  of the
Company.


2.  INVENTORIES

         Inventories consist of the following (in thousands):

                                              March 31,             June 30,
                                                2001                  2000
                                         ------------------      -------------

         Raw materials...................  $    1,071             $    5,127
         Work in process.................         604                  2,016
         Finished goods..................      18,912                 26,903
                                           ----------             ----------
                  Total..................  $   20,587             $   34,046
                                           ==========             ==========

3.  LINE OF CREDIT

     On September 23, 1998, the Company  entered into a  $160,000,000  Revolving
Loan  Agreement  (the  "Loan   Agreement")  with  Wells  Fargo  Bank,   National
Association  ("Wells  Fargo")  as the  sole  bank and as  agent  (in its  agency
capacity, the "Agent"). The loan facility was syndicated with a group of lenders
in December 1998.

     On October 12,  1999,  the Company,  the Agent and the lenders  amended and
restated the Loan  Agreement  (the "First  Amended Loan  Agreement").  The First
Amended Loan Agreement  converted the entire revolving loan  availability into a
term loan portion of $90,444,000  and a maximum  revolving loan  availability of
$29,556,000.  The term  loan's  maturity  date was  September  30,  2001 and the
revolving credit loan facility matured on October 31, 2000. The maturity date of
the  revolving  credit  loan  facility  could have been  automatically  extended
through  September 30, 2001, if the Company,  as of June 30, 2000,  had complied
with certain  requirements,  including a minimum EBITDA,  a minimum fixed charge
coverage ratio and a maximum  funded senior debt ratio,  as defined in the First
Amended  Loan  Agreement.  The Company did not satisfy  these  conditions.  As a
result of entering into the First Amended Loan Agreement,  unamortized  deferred
financing fees incurred under the Loan Agreement of approximately  $955,000 were
charged to interest expense in October 1999.

     On December 8, 2000,  the  Company,  the Agent and the lenders  amended and
restated the First Amended Loan Agreement  effective as of November 1, 2000 (the
"Second  Amended  Loan  Agreement")  and waived  any Events of Default  that had
previously  occurred and not been waived.  The Second Amended Loan Agreement (i)
converted the $87,164,000  then outstanding  aggregate  principal amount of term
loans issued under the First Amended Loan Agreement  into three loans:  two term
loans (in the principal amounts of $20,000,000 and $40,000,000,  denoted as Term
Loan A and  Term  Loan B,  respectively)  and a  convertible  term  loan (in the
principal  amount of  $27,164,000);  and (ii)  provided  for a revolving  credit
facility that was initially  $25,000,000  and adjusts  periodically  as follows:
$25,000,000 to and including  December 8, 2000;  $19,500,000  from and including
December  9, 2000 to and  including  December  31,  2000;  $15,000,000  from and
including January 1, 2001 to and including March 31, 2002; and $0 from and after
April 1, 2002.  The  maximum  amount that can be  borrowed  under the  revolving
credit  facility is the lowest of (i) the amount of the revolving  facility then
in effect,  (ii) "Available  Amount," and (iii) from and after February 1, 2001,
the Borrowing Base as set forth in the most recent  Borrowing  Base  Certificate
submitted by the Company,  as adjusted by the Agent.  The "Available  Amount" is
defined  in the Second  Amended  Loan  Agreement  as:  October  1, 2000  through
December 8, 2000,  $25,000,000;  December 9, 2000  through  December  31,  2000,
$19,500,000;  January 1, 2001 through February 28, 2001,  $12,000,000;  March 1,
2001  through  April 30,  2001,  $8,000,000;  May 1, 2001 through June 30, 2001,
$10,000,000;  July 1, 2001 through  December 31, 2001,  $15,000,000;  January 1,
2002  through  March 31, 2002,  $10,000,000;  and April 1, 2002 through July 31,
2002,  $0. The maturity date for Term Loans A and B, the  convertible  term loan
and the revolving  loans issued under the Second  Amended Loan Agreement is July
31,  2002.  As a result of  entering  into the Second  Amended  Loan  Agreement,
unamortized  deferred  financing  fees  incurred  under the First  Amended  Loan
Agreement of approximately $762,000 were charged to interest expense in December
2000.  At March 31,  2001,  the Company had  $91,498,000  outstanding  under the
Second Amended Loan Agreement.

     Term Loan B had a  $30,000,000  installment  due January 31, 2001 (to which
installment any asset sales proceeds were to be applied). The Company was unable
to make  this  installment  payment  and  entered  into a waiver  and  amendment
agreement with its lenders that waived this payment  requirement  until February
28, 2001. The convertible  term loan is convertible by the lenders,  in whole or
in part, into common stock of the Company from and after February 1, 2001 at the
rate of $1.15 of the  principal  amount  of the  convertible  term loan for each
share of the  Company's  common  stock.  The  maximum  number  of  shares of the
Company's  common stock into which the convertible term loan can be converted is
23,200,000 shares.

     The rate of interest on the loans under the Second  Amended Loan  Agreement
is as follows: on revolving credit loans and Term Loan A, the Agent's prime rate
(8.0% at March 31,  2001) plus two percent  per annum;  on Term Loan B, prior to
June 30, 2001,  the Agent's  prime rate plus four percent per annum  (except for
cash  interest  paid on the  portion of Term Loan B denoted as Foreign  Currency
Loans),  and on and  following  June 30,  2001,  and for cash  interest  paid on
Foreign  Currency  Loans,  the Agent's prime rate plus two percent per annum; on
the  convertible  term loan, the Agent's prime rate plus four percent per annum.
Interest is payable  monthly in cash except that,  at the option of the Company,
through and including June 30, 2001, interest accrued on Term Loan B may be paid
in the form of a note having terms identical to Term Loan B (except for interest
on the  portion of Term Loan B denoted as Foreign  Currency  Loans which must be
paid in cash), and interest accrued on the convertible term loan may at any time
be paid in the form of a note having  terms  identical to the  convertible  term
loan.  There is a commitment  fee of 0.675 percent  (67.5 basis points)  payable
quarterly on the average daily amount by which the Available  Amount exceeds the
average daily principal amount of outstanding  revolving loans.  During the nine
months ended March 31, 2001, the  weighted-average  interest rate was 11.5%. The
weighted-average interest rate at March 31, 2001 was 11.1%.

     The Second  Amended Loan  Agreement is secured by the Company's  assets and
includes, among other things, financial covenants requiring maintenance of (i) a
minimum fixed charge  coverage  ratio (which  becomes  operative June 30, 2001),
(ii) a minimum EBITDA (which became  operative  December 31, 2000),  and a (iii)
maximum  funded senior debt coverage  ratio (which  becomes  operative  June 30,
2001),  all as defined in the Second Amended Loan Agreement.  The Second Amended
Loan  Agreement  also limits,  among other things,  the  incurrence of liens and
other  indebtedness,   mergers,  consolidations,  the  sales  of  assets,  lease
obligations, annual capital expenditures, advances, investments and loans by the
Company  and  its  subsidiaries,   dividends,   stock  repurchases  and  certain
transactions with affiliates.

     The Company and its lenders  entered into a waiver and amendment  agreement
as of January 31, 2001, that waived, until February 28, 2001, the requirement in
the  Second   Amended  Loan  Agreement  that  the  Company  make  a  $30,000,000
installment payment on Term Loan B on January 31, 2001. The waiver and amendment
agreement also amended  certain other terms and conditions of the Second Amended
Loan  Agreement,  including a reduction in the "Available  Amount" to $8,000,000
for the period  February 1, 2001 through  February 28, 2001. The waiver provided
in the waiver and amendment  agreement  expired and the Company is currently not
in compliance  with the EBITDA  covenant at March 31, 2001.  The Company's  bank
debt is  classified as  short-term  on its March 31, 2001  consolidated  balance
sheet.

     On April 25, 2001, the Company sold its Filofax  operations for $30,000,000
in debt reduction to entities  affiliated  with the Company's  lenders (see Note
5).  As a result  of these  transactions,  the  Company  was  released  from all
obligations  with  respect  to the  Foreign  Currency  Loans  in the  amount  of
(pound)12,420,210  ($17,636,699) and the balance of Term Loan B debt was reduced
by $12,363,301.

     The Company is  negotiating  with its lenders and third  parties to further
restructure its debt and/or obtain alternative financing.

4.  LOAN NOTES

     In  November  1998,  loan  notes  in the  amount  of  (pound)1,477,000  (US
$2,097,000) were issued in connection with the Filofax  acquisition.  These loan
notes are  unsecured  obligations  of the  Company's  U.K.  subsidiary  and bear
interest at LIBOR (6.8% at March 31,  2001) less 1%.  Interest on the Loan Notes
is paid annually in arrears  beginning  September  30, 1999.  The Loan Notes are
redeemable, in whole or in part, at the holder's option on each interest payment
date. Unless they have previously been redeemed, all Loan Notes will be redeemed
on September 30, 2003. As of March 31, 2001, (pound)1,447,000 (US $2,054,000) of
the Loan  Notes  had  been  redeemed.  The Loan  Notes  are  obligations  of the
Company's  U.K.  subsidiary  which  was  sold on  April  25,  2001 to an  entity
affiliated with the Company's lenders and,  therefore,  as of such date they are
no longer obligations of the Company (see Note 5).


5.  RESTRUCTURING AND IMPAIRMENT CHARGES AND RELATED ACCRUALS

     In response to disappointing results over a number of quarters, the Company
implemented a  restructuring  plan in fiscal 2000. As part of its  restructuring
plan,  the  Company (i) reduced  headcount;  (ii) closed its Irvine,  California
headquarters  and consolidated  those activities into its Fullerton,  California
distribution  center;  (iii)  closed its  manufacturing  facility  in the United
Kingdom and moved those  activities  to  subcontractors;  (iv) closed its Little
Rock, Arkansas manufacturing plant and sold certain of the operating assets; (v)
retained  Crossroads,   LLC,  an  interim  management  firm;  (vi)  discontinued
approximately  600 products;  (vii) closed its  Australian  subsidiary and began
distributing its products through a third party distributor in Australia; (viii)
closed its Mexican  manufacturing  plant and moved those activities to its Asian
vendors;  (ix)  discontinued  its  Timeposters  board  products and the Canadian
manufacturing operations related thereto; and (x) on April 25, 2001, the Company
also sold its Filofax  operations.  The Company is continuing its  restructuring
plan.

     During  the  nine  months  ended  March  31,  2001,  the  Company  recorded
$18,437,000 in restructuring and impairment charges.  Included in such charge is
$3,542,000 in  restructuring  charges,  recorded during the quarters ended March
31,  2001 and  December  31,  2000,  relating  primarily  to the  closure of the
Company's Mexican  manufacturing plant and secondarily to the discontinuation of
the  Timeposters  board products and the Canadian  operations  related  thereto,
which consist of  $2,703,000 in facilities  closure costs and related write down
of inventories and $839,000 in severance  costs. Of the  restructuring  charges,
$3,432,000  is  included  in cost of goods  sold and  $110,000  is  included  in
restructuring  and impairment  charges for the nine months ended March 31, 2001.
The severance cost recorded  during the nine months ended March 31, 2001 was the
result of 288  terminations.  The following table  summarizes the  restructuring
activity that flowed through accrued expenses during the nine months ended March
31, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                                                                    FACILITIES
                                                                             SEVERANCE               CLOSURE
                                                                               COSTS                  COSTS                 TOTAL
                                                                               -----                  -----                 -----

<S>                                                                           <C>                    <C>                    <C>
Accrued restructuring expenses
  at June 30, 2000 ............................................               $ 1,064                $   156                $ 1,220
Restructuring charges .........................................                   839                  2,703                  3,542
Noncash inventory and fixed asset
 write offs ...................................................                (2,252)                (2,252)
Restructuring charge payments .................................                (1,741)                  (469)                (2,210)
                                                                               ------                   ----                 ------
Accrued restructuring expenses
     arch 31, 2001 ............................................                $  162                 $  138                $   300
                                                                              =======                =======                =======
</TABLE>

     In addition,  during the fourth quarter of fiscal 2000, the Company decided
to pursue the sale of substantial assets including its Filofax operations.  As a
result,  the Company  performed an impairment  analysis and  concluded  that the
carrying value of certain of these assets was in excess of their fair value. Due
to a change in  circumstances  during the quarter ended  December 31, 2000,  the
Company updated its impairment  analysis on its Filofax operations and concluded
that the carrying  value of its Filofax  operations  had been further  impaired.
Fair value was estimated based on estimated proceeds less related selling costs.
As a result of the  impairment  analyses  performed by the  Company,  impairment
charges of $14,895,000  and  $59,337,000  were recorded during the quarter ended
December 31, 2000 and the fiscal year ended June 30, 2000, respectively.

     On April 25, 2001, the Company sold its Filofax  operations for $30,000,000
in debt reduction.  The Filofax operations were sold to entities affiliated with
the  Company's   lenders  after  the  Company  had  pursued   alternative   sale
possibilities  for these  operations.  This sale and related debt reduction were
accounted for as a troubled debt  restructuring  in accordance with Statement of
Financial  Accounting Standards No. 15, "Accounting by Debtors and Creditors for
Troubled  Debt  Restructurings  ("SFAS 15").  Under SFAS 15, in a troubled  debt
restructuring  involving partial settlement of a payable through the transfer of
assets,  the new  obligation  should be recorded at the  carrying  amount of the
prior obligation at the time of the restructuring, less the fair value of assets
transferred,   unless  the  net  carrying   amount   exceeds  the  total  future
undiscounted  cash  payments  specified by the new terms.  The Company is in the
process of renegotiating  the line of credit with the lenders,  and as a result,
the amount of future cash payments is  indeterminate  at this time. As such, the
amount of the debt reduction,  less the value of the assets  transferred will be
recorded as a debt restructuring adjustment.  Once the terms of the new line are
finalized,  and the amount of total future cash payments is known, any resulting
gain from the troubled debt restructuring will be recognized.

     The sale of the Filofax  operations was made in two  transactions:  one for
the  operations  in the  United  States  and the  other  for  the  international
operations.  The  sale  of the  Filofax  operations  in the  United  States  was
accomplished  through  the sale of the  outstanding  shares of stock of Filofax,
Inc., a wholly-owned subsidiary of the Company, to DRBG, LLC, a Delaware limited
liability  company  (the  "U.S.  Buyer").  The  consideration  for the  stock of
Filofax,  Inc. was  $1,004,702 in the form of a release of debt owed to the U.S.
Buyer by the  Company.  Subsidiaries  of the Company  were  released  from their
obligations as guarantors of this debt.

     The sale of the  international  Filofax  operations  was made pursuant to a
share purchase  agreement for all the outstanding  shares of stock of Day Runner
UK Plc ("DR UK")  among the  Company,  certain of its  subsidiaries  and DRBG UK
Limited, a company organized under the laws of England and Wales ("U.K. Buyer").
The  Company  and  its  subsidiaries  party  to  the  share  purchase  agreement
collectively  owned all of the outstanding shares of DR UK that in turn owns all
of the outstanding shares of stock of Filofax Group Limited, the holding company
for the Filofax operations  worldwide.  The consideration for the shares sold to
the U.K.  Buyer was  $11,358,599 in reduction of debt owed by the Company to the
U.K.  Buyer and the release of all the  Company's  obligations  with  respect to
(pound)12,420,210  ($17,636,699)  in  debt  owed  by DR UK to the  lenders.  The
Company's  subsidiaries  that sold their shares of DR UK to the U.K.  Buyer were
also  released  from all  obligations  as  guarantors  of this  debt.  The share
purchase  agreement further provides that in the event the U.K. Buyer or Filofax
Group is sold to a third party on or before April 25, 2002 for an amount greater
than  the  consideration   provided  in  the  share  purchase   agreement,   the
consideration paid for the shares of DR UK shall be increased by an amount equal
to the additional  consideration  paid by the third party.  Any such  additional
consideration  would  be in the  form  of  additional  reduction  of debt of the
Company and the release of  guaranties  by the  Company's  subsidiaries  of such
debt. Despite the sale of the Filofax  operations,  the parties have agreed that
DR UK, Filofax Group, Filofax Limited and one of its subsidiaries are continuing
to guaranty $10,000,000 of the Company's remaining debt.

     Operations that will be eliminated due to the Company's sale of its Filofax
operations as part of the restructuring of operations, which are included in the
condensed  consolidated financial statements as of and for the nine months ended
March 31, are as follows (in thousands):

                                                            2001          2000
                                                          --------     ---------
Net sales ......................................         $35,432         $49,253
Income from operations
    before restructuring charges ...............           3,875           5,140
Income from operations .........................           3,875           2,171
Working capital ................................          13,970          10,937
Long-term assets ...............................           3,682          81,431

6.  EARNINGS PER SHARE

     Basic  earnings  per  share  are  computed  by  dividing  net  loss  by the
weighted-average  number of common shares  outstanding  for the period.  Diluted
earnings  per  share  is  computed  by  dividing  net  loss  by  the  sum of the
weighted-average  number of common  shares  outstanding  for the period plus the
assumed exercise of all dilutive securities. As the Company's stock price during
the periods ended March 31, 2001 and 2000, was below the exercise  prices of all
options   and   warrants,   basic   weighted-average   shares   equals   diluted
weighted-average shares.

7.   COMPREHENSIVE LOSS

     Comprehensive loss is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED                            NINE MONTHS ENDED

                                                       MARCH 31,                                    MARCH 31,
                                         ---------------------------------------    --------------------------------------
                                                2001                  2000                 2001                  2000
                                         -----------------      ----------------    -----------------     ----------------

     <S>                                <C>                     <C>                 <C>                    <C>
      Net loss                           $    (8,268)            $  (12,375)        $   (22,858)           $   (14,468)
      Foreign currency
        translation adjustment                    57                    (70)                (30)                  (469)
                                          ----------             -----------         ----------            -----------
      Comprehensive loss                 $    (8,211)            $  (12,445)        $   (22,888)           $   (14,937)
                                         ============            ===========        ============           ============
</TABLE>

8.  SEGMENT INFORMATION

     The Company's operating segments have similar economic characteristics and,
as such, the Company has aggregated five (six during the nine months ended March
31, 2000) operating segments into a single reportable segment in conformity with
SFAS  No.  131,   DISCLOSURES  ABOUT  SEGMENTS  OF  AN  ENTERPRISE  AND  RELATED
INFORMATION.  During  the  nine  months  ended  March  31,  2001,  the  business
activities   of  the   Company's   operating   segment  were  the   development,
manufacturing  and marketing of paper-based  organizers  and related  organizing
products including  telephone/address books, business accessories,  products for
students and organizing and other wall boards for the retail market. In December
2000,  the  Company  closed  its  primary  manufacturing  plant and moved  those
activities to its Asian vendors. In February 2001, the Company  discontinued its
Timeposters  board products and the Canadian  manufacturing  operations  related
thereto.
<PAGE>

     The Company  groups its  products  into three  categories:  organizers  and
planners;  their refills, which include calendars,  other pages and accessories;
and related organizing products. The following table sets forth, for the periods
indicated, approximate net sales by product category (in thousands):
<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                       MARCH 31,                            MARCH 31,
                                         ---------------------------------------   --------------------------------------
                                                2001                  2000                2001                  2000
                                         -----------------      ----------------   -----------------     ----------------

<S>                                        <C>                    <C>                  <C>                     <C>

Organizers and planners ................   $  9,984                $ 13,124           $ 48,328                $ 60,996
Refills ................................      7,202                   9,023             43,437                  51,884
Related organizing products ............      3,237                   7,829             18,915                  26,432
                                           --------                --------           --------               ---------
   Total ...............................   $ 20,423                $ 29,976           $110,680                $139,312
                                           ========                ========           =========               =========
</TABLE>
<TABLE>
<CAPTION>

9.  OPERATIONS IN FOREIGN COUNTRIES

         The following is a summary of the financial activity of the Company by geographical area (in thousands):

                                                           THREE MONTHS ENDED MARCH 31, 2001
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL

<S>                                  <C>                  <C>            <C>                 <C>             <C>
Net sales to unaffiliated entities   $   14,062           $  3,964       $    2,451          $      (54)     $   20,423
Transfers between geographic areas          207                                  40                (247)
                                      ---------           --------       ----------          -----------     ----------
Net sales                            $   14,269           $  3,964       $    2,491          $     (301)     $   20,423
                                     ==========           ========       ==========          ===========     ==========



                                                           NINE MONTHS ENDED MARCH 31, 2001
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL

Net sales to unaffiliated entities   $   75,241           $ 26,836       $    8,808          $     (205)     $  110,680
Transfers between geographic areas          924                                 290              (1,214)
                                      ---------           --------       ----------          -----------     ----------
Net sales                            $   76,165           $ 26,836       $    9,098          $   (1,419)     $  110,680
                                     ==========           ========       ==========          ===========     ==========

Long-lived assets                    $   76,771           $  3,553       $      489          $  (68,037)     $   12,776
                                     ==========           ========       ==========          ===========     ==========


                                                           THREE MONTHS ENDED MARCH 31, 2000
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL

Net sales to unaffiliated entities   $   19,862           $  4,722       $    5,392                          $   29,976
Transfers between geographic areas          307                                 124          $     (431)
                                     ----------           --------       ----------          ----------      ----------
Net sales                            $   20,169           $  4,722       $    5,516          $     (431)     $   29,976
                                     ==========           ========       ==========          ==========      ==========


                                                           NINE MONTHS ENDED MARCH 31, 2000
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL

Net sales to unaffiliated entities   $   86,695           $ 37,233       $   15,384                          $  139,312
Transfers between geographic areas        1,885                                 677          $   (2,562)
                                     ----------           --------       ----------          ----------      ----------
Net sales                            $   88,580           $ 37,233       $   16,061          $   (2,562)     $  139,312
                                     ==========           ========       ==========          ==========      ==========

Long-lived assets                    $   86,658           $ 81,202       $    3,268          $  (70,710)     $  100,418
                                     ==========           ========       ==========          ==========      ==========

</TABLE>

10.  CONTINGENCIES

     The  Company  is not a party to any  litigation  that,  in the  opinion  of
management,  would reasonably be expected to have a materially adverse effect on
the consolidated financial statements.
<PAGE>

11.  STATEMENTS OF CASH FLOWS

     Supplemental disclosure of cash flow information (in thousands):
                                                     NINE MONTHS ENDED MARCH 31,
                                                        2001               2000
                                                        ----               ----
Cash paid (received) during the period for:
  Interest ...................................         $ 6,607          $ 6,374
  Income taxes, net of refunds
     received ................................         $(2,571)         $(4,111)



<PAGE>



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

     THE  FOLLOWING  DISCUSSION  SHOULD  BE READ  IN  CONJUNCTION  WITH,  AND IS
QUALIFIED IN ITS ENTIRETY BY, THE CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
AND NOTES  THERETO  INCLUDED  ELSEWHERE  IN THIS  QUARTERLY  REPORT.  HISTORICAL
RESULTS  AND  PERCENTAGE   RELATIONSHIPS  AMONG  ANY  AMOUNTS  INCLUDED  IN  THE
CONSOLIDATED  FINANCIAL  STATEMENTS ARE NOT NECESSARILY  INDICATIVE OF TRENDS IN
OPERATING RESULTS FOR ANY FUTURE PERIOD.

     Since the Company's  introduction of the first Day Runner System  organizer
in 1982,  the  Company's  revenues  have been  generated  by sales  primarily of
organizers and planners and secondarily of refills.  For a number of years,  the
Company  focused the majority of its product  development,  sales and  marketing
efforts on the U.S.  office  products  channel and the U.S. mass market channel.
With the October  30, 1998  acquisition  of Filofax,  the Company  substantially
increased its emphasis on markets outside the U.S. The office products  channel,
the mass market  channel  and sales to foreign  customers  accounted  for 27.0%,
29.1% and 31.4%, respectively,  and 38.1%, 20.9% and 32.1%, respectively, of net
sales for the three and nine months  ended March 31,  2001,  respectively.  As a
result of the sale of its Filofax operations on April 25, 2001, the Company will
refocus its sales and marketing  efforts primarily on the North American markets
(see Note 5 to Condensed Consolidated Financial Statements).

     Effective  November 1, 2000, the Company and its lenders  renegotiated  and
restructured  the Company's  debt and entered into a second amended and restated
loan agreement.  The Company entered into a waiver and amendment agreement as of
January 31, 2001,  waiving a requirement  for an  installment  payment on a term
loan and amending certain terms and conditions of the loan agreement. The waiver
provided in the waiver and amendment  agreement expired on February 28, 2001. As
the Company was not in compliance with its debt covenants at March 31, 2001, the
Company's  bank  debt  is  classified  as  short-term  in  its  March  31,  2001
consolidated  balance  sheet.  The  Company's  difficulties  in meeting its loan
agreement  covenants and financing  needs,  its recurring losses from operations
and its negative  working  capital  position raise  substantial  doubt about its
ability to continue as a going concern.  The Company is working with its lenders
and certain third  parties in an effort to modify its debt  structure and obtain
financing for its  operations.  The Company's  continued  existence is dependent
upon  several  factors  including  the  Company's  ability to obtain  sufficient
financing for its operations and there can be no assurance that the Company will
succeed in these attempts.

     The Company's  results have been  adversely  affected by lower sales levels
primarily to the Company's  customers in foreign  markets and secondarily to its
retail  customers in the U.S. The Company  believes that major  factors  causing
lower sales include the Company's decision to de-emphasize sales of certain less
profitable  products and to certain less profitable  channels,  the reduction of
certain kinds of promotional  activity,  increased  competition from substitutes
for  paper-based  organizers  and the  continuing  efforts of the Company's U.S.
retailers to minimize on-hand inventories and increase inventory turns.

     The  Company's  high  degree of leverage  coupled  with its lower sales and
profitability  could have important  consequences to the Company,  including but
not limited to the  following:  (i) the  Company's  ability to obtain  necessary
financing  may be  impaired  in the future,  (ii) a  substantial  portion of the
Company's  cash  flow from  operations  must be used for debt  service,  thereby
reducing  the funds  available  for other  purposes and (iii) the Company may be
more  vulnerable to economic or market  downturns,  be limited in its ability to
withstand  competitive  pressures  and be unable to  attract  and/or  retain key
personnel.

     The  Company's  near and  long-term  operating  strategies  are  focused on
stabilizing  profitable sales volume in its retail markets,  exploiting  product
innovation and  promotions  where  appropriate  profitability  is achieved,  and
aggressively  reducing  costs to better  position  the Company to compete  under
current  market  conditions.  The Company  remains  highly  focused on providing
products of recognizable  value to the consumer,  while removing any product and
service costs not recognized or valued by the ultimate consumer.  The Company is
continuing its  exploration  of possible  strategic  alternatives.  On April 25,
2001,  the Company sold its Filofax  operations  in exchange  for a  $30,000,000
reduction  in its  debt  (see  Note 5 to the  Condensed  Consolidated  Financial
Statements.)

     These  business   conditions   have  been   considered  in  evaluating  the
recoverability and classification of recorded asset and liability accounts.  The
accompanying  condensed  consolidated  financial  statements  do not include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or to amounts and  classifications  of liabilities that may be necessary
should the entity be unable to  continue as a going  concern  (see Note 5 to the
Condensed Consolidated Financial Statements).

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated,  the percentages
that selected statement of operations items bear to net sales and the percentage
change in the dollar amounts of such items.
<TABLE>
<CAPTION>


                                                                                               Percentage Change
                                                                                               -----------------
                                                            Percentage of Sales               Three       Nine
                                                   -----------------------------------       Months       Months
                                                          Three               Nine            Ended       Ended
                                                      Months Ended        Months Ended      March 31,    March 31,
                                                        March 31,           March 31,         2000         2000
                                                   ---------------      --------------
                                                   2001       2000      2001      2000       to 2001      to 2001
                                                   ----       ----      ----      ----       -------      -------

<S>                                                <C>       <C>        <C>      <C>          <C>         <C>
Net sales........................................  100.0%    100.0%     100.0%   100.0%       (31.9)      (20.6)
Cost of goods sold...............................   52.0      60.7       50.3     54.3        (41.7)      (26.4)
                                                   -----     -----      -----    -----
Gross profit.....................................   48.0      39.3       49.7     45.7        (16.7)      (13.6)
                                                   -----     -----      -----    -----
Operating expenses:
   Selling, marketing and distribution...........   43.9      42.8       27.8     33.3        (30.1)      (33.6)
   General and administrative....................   32.7      26.3       18.4     16.3        (15.1)      (10.6)
   Restructuring and impairment charges..........    0.3      10.1       13.5        2.2      (97.6)      395.2
                                                   -----     -----      -----    -------
     Total operating expenses....................   76.9      79.2       59.7     51.8        (33.7)       (8.4)
                                                   -----     -----      -----    -----
Loss from operations.............................  (28.9)    (39.9)     (10.0)    (6.1)        50.6       (31.2)
Net interest expense.............................   14.0       9.1        9.1      6.2          4.8        15.2
                                                   -----     -----      -----    -----
Loss before (benefit) provision for income taxes.  (42.9)    (49.0)     (19.1)   (12.3)        40.3       (23.1)
(Benefit) provision for income taxes.............   (2.4)     (7.7)       1.6     (1.9)        78.4       165.7
                                                   ------    -----      -----    ------
Net loss.........................................  (40.5)%   (41.3)%    (20.7)%  (10.4)%       33.2       (58.0)
                                                   =====     =====      ======   ======



</TABLE>


     The following  tables set forth, for the periods  indicated,  the Company's
approximate  net sales by product  category  and  distribution  channel and as a
percentage of total net sales.
<TABLE>
<CAPTION>

DISTRIBUTION CHANNEL:

                                       Three Months Ended March 31,                 Nine Months Ended March 31,
                                 ----------------------------------------    ----------------------------------------
                                         2001                 2000                  2001                 2000
                                 -------------------  -------------------    ------------------  --------------------
                                                            (Unaudited; dollars in thousands)

<S>                                 <C>        <C>     <C>          <C>       <C>          <C>     <C>          <C>
Office products.................    $ 5,518    27.0%   $ 10,088     33.6%     $ 42,188     38.1%   $ 47,561     34.1%
Mass market.....................      5,940    29.1       6,616     22.1        23,031     20.8      27,833     20.0
Foreign customers...............      6,421    31.4       9,941     33.2        35,538     32.1      52,044     37.4
Other...........................      2,544    12.5       3,331     11.1         9,923      9.0      11,874      8.5
                                    -------  ------    --------   ------        ------   ------    --------   ------
   Total........................    $20,423   100.0%   $ 29,976    100.0%     $110,680    100.0%   $139,312    100.0%
                                    =======   =====    ========    =====      ========    =====    ========   ======

</TABLE>
<TABLE>
<CAPTION>

PRODUCT CATEGORY:

                                       Three Months Ended March 31,                 Nine Months Ended March 31,
                                 ----------------------------------------    ----------------------------------------
                                         2001                 2000                  2001                 2000
                                 -------------------  -------------------    ------------------  --------------------
                                                            (Unaudited; dollars in thousands)

<S>                                 <C>        <C>     <C>          <C>        <C>         <C>     <C>          <C>
Organizers and planners.........    $ 9,984    48.9%   $ 13,124     43.8%      $48,328     43.7%   $ 60,996     43.8%
Refills ........                      7,202     35.3      9,023     30.1        43,437     39.2      51,884     37.2
Related organizing products.....      3,237    15.8       7,829     26.1        18,915     17.1      26,432     19.0
                                    -------  ------    --------   ------      --------    -----    --------    -----
   Total........................    $20,423   100.0%    $29,976    100.0%     $110,680    100.0%   $139,312    100.0%
                                    =======   =====     =======    =====      ========    =====    ========    =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 2001 COMPARED WITH
THE THREE MONTHS ENDED MARCH 31, 2000

     NET SALES.  Net sales consist of revenues from gross product  shipments net
of allowances for returns,  rebates and credits.  In the third quarter of fiscal
2001,  net sales  decreased by  $9,553,000,  or 31.9%,  compared  with the third
quarter  of fiscal  2000 due to a  reduction  of  certain  kinds of  promotional
activity,   the  Company's  decision  to  de-emphasize  sales  of  certain  less
profitable  products and to certain less profitable  customers and a decrease in
net sales to foreign customers. Net sales to office products customers decreased
by $4,570,000, or 45.3%, net sales to foreign customers decreased by $3,520,000,
or 35.4%,  net sales to  miscellaneous  customers  grouped  together  as "other"
decreased  by  $787,000,  or  23.6%,  and net  sales  to mass  market  customers
decreased  by  $676,000,  or 10.2%.  Net sales of  related  organizing  products
decreased  by  $4,592,000,  or  58.7%,  net  sales of  organizers  and  planners
decreased  by  $3,140,000,  or 23.9%  and net  sales  of  refills  decreased  by
$1,821,000, or 20.2%.

     GROSS PROFIT.  Gross profit is net sales less cost of goods sold,  which is
comprised of materials,  labor and manufacturing  overhead.  Gross profit may be
affected by, among other  things,  product mix,  production  levels,  changes in
vendor and customer  prices and discounts,  sales volume and growth rate,  sales
returns  and  other  allowances,   purchasing  and  manufacturing  efficiencies,
tariffs,  duties and inventory  carrying costs.  Gross profit as a percentage of
net sales  increased  from 39.3% in the third quarter of fiscal 2000 to 48.0% in
the third  quarter of fiscal  2001.  Included in cost of goods sold in the third
quarter of fiscal 2001 is $572,000 in restructuring charges related primarily to
the discontinuation of the Company's Timeposters board products and the Canadian
manufacturing  related  thereto.  Without such costs, the Company's gross profit
for the  third  quarter  of fiscal  2001  would  have  increased  to 50.8%.  The
improvement in the Company's gross margin, without the restructuring charges, is
due primarily to a reduction in product  returns and  secondarily  to a shift in
the product  mix.  The  decrease in product  returns is due  primarily to a more
conservative  sell-in  approach and  secondarily to the reduction in promotional
activities.  The shift in the  product  mix is due  primarily  to the  Company's
decision to de-emphasize  less profitable  promotional sales and focus on higher
margin product sales.

     OPERATING  EXPENSES.  Total operating expenses decreased by $8,007,000,  or
33.7%,  in the third  quarter of fiscal 2001  compared with the third quarter of
fiscal  2000 and  decreased  as a  percentage  of net sales from 79.2% to 76.9%,
respectively.  The  decrease  in  operating  expenses  is due  primarily  to the
decrease  in net sales and  secondarily  to the  decrease in  restructuring  and
impairment charges.

     Selling,  marketing  and  distribution  expenses  decreased  by  $3,866,000
primarily  because of the  decrease in sales and  secondarily  to a reduction in
promotional  activity.  As a percentage  of net sales,  selling,  marketing  and
distribution   expenses   increased   from  42.8%  to  43.9%  as  the  Company's
international  operations  were unable to cut costs as quickly as its decline in
net sales.  General and  administrative  expenses  decreased by  $1,185,000  due
primarily to the Company's  ability to control costs and  secondarily due to the
downsizing of the Company's  operations.  However,  as a percentage of net sales
general and administrative  expenses increased from 26.3% to 32.7% due primarily
to the  increase  in  consulting,  legal and  related  costs which is due to the
Company's  ongoing  performance  problems  and the  negotiations  related to its
credit facility. Consulting, legal and related costs for the quarter ended March
31, 2001 were $1,738,000  compared with $265,000 for the quarter ended March 31,
2000.

     Restructuring  and  impairment  charges  totaled  $74,000  during the third
quarter of fiscal 2001  compared to  $3,030,000  for the third quarter of fiscal
2000.  During the third quarter of fiscal 2000, the Company began the process of
restructuring  its  operations.  At that time,  the Company began the process of
closing its Filofax  subsidiary's  two  manufacturing  facilities  in the United
Kingdom and its Irvine  headquarters.  Such closures resulted in a restructuring
charge of  $3,030,000.  During the third  quarter of fiscal  2001,  the  Company
discontinued  its  Timeposters  board  products and the  Canadian  manufacturing
operations related thereto which resulted in a restructuring  charge of $646,000
of which  $74,000 is  included  in  restructuring  and  impairment  charges  and
$572,000 is included in cost of goods sold.

     NET INTEREST EXPENSE. Net interest expense increased by $132,000,  or 4.8%,
in the third  quarter of fiscal 2001  compared  with the third quarter of fiscal
2000 due to an increase in the average  interest rate.  During the quarter ended
March 31, 2001, the weighted-average interest rate was 11.7% compared with 10.6%
for the quarter ended March 31, 2000.

     INCOME TAXES.  The Company's  third quarter  fiscal 2001 effective tax rate
was (5.7%), compared with (15.7%) for the third quarter of fiscal 2000. Although
the  Company's  U.S.  income  will be offset by net  operating  losses,  the tax
provision  represents taxes based on income earned in foreign tax  jurisdictions
and state minimum  taxes.  The effective tax rate is higher than may be expected
due to the Company's inability to utilize these taxes as foreign tax credits.


<PAGE>


NINE MONTHS ENDED MARCH 31, 2001 COMPARED WITH
THE NINE MONTHS ENDED MARCH 31, 2000

     NET SALES. During the nine months ended March 31, 2001, net sales decreased
by  $28,632,000,  or 20.6%,  primarily due to a decrease in net sales to foreign
customers,  a  reduction  of  certain  kinds  of  promotional  activity  and the
Company's decision to de-emphasize sales of certain less profitable products and
to certain less profitable  customers.  Net sales to foreign customers decreased
by $16,506,000,  or 31.7%,  net sales to office products  customers  declined by
$5,373,000,   or  11.3%,  net  sales  to  mass  market  customers  decreased  by
$4,802,000,  or 17.3% and net sales to miscellaneous  customers grouped together
as "other"  decreased  by  $1,951,000,  or 16.4%.  Net sales of  organizers  and
planners  decreased by $12,668,000,  or 20.8%, net sales of refills decreased by
$8,447,000,  or 16.3%, and net sales of related organizing products decreased by
$7,517,000, or 28.4%.

     GROSS  PROFIT.  Gross profit as a percentage  of net sales  increased  from
45.7% in the first nine  months of fiscal 2000 to 49.7% in the first nine months
of fiscal  2001.  Included  in cost of goods  sold in the first  nine  months of
fiscal 2001 is $3,432,000 in restructuring charges related to the closure of the
Company's Mexican manufacturing plant and its Canadian manufacturing operations.
Without such costs, the Company gross profit for the first nine months of fiscal
2001 would have  increased to 52.8%.  The  improvement  in the  Company's  gross
margin,  without the restructuring  charges,  is due primarily to a reduction in
product  returns and  secondarily to a shift in the product mix. The decrease in
product  returns is due primarily to a more  conservative  sell-in  approach and
secondarily to the reduction in promotional activities. The shift in the product
mix is due primarily to the Company's  decision to de-emphasize  less profitable
promotional sales and focus on higher margin product sales.

     OPERATING  EXPENSES.  Total operating expenses decreased by $6,030,000,  or
8.4%,  in the first  nine  months of fiscal  2001  compared  with the first nine
months of fiscal 2000 but  increased as a percentage  of net sales from 51.8% to
59.7%.  The  decrease in  operating  expenses is due  primarily to a decrease in
selling,  marketing and  distribution  expenses and secondarily to a decrease in
general and administrative expenses.  Partially offsetting these decreases is an
increase in restructuring and impairment charges.

     Selling,  marketing and distribution  expenses decreased by $15,589,000 and
from  33.3%  to 27.8% as a  percentage  of net  sales,  primarily  because  of a
reduction  in  promotional  activity and  secondarily  to the decrease in sales.
General and  administrative  expenses decreased by $2,416,000 but increased from
16.3% to 18.4% as a  percentage  of net  sales.  The  increase  in  general  and
administrative  expenses as a percentage  of net sales is due to the increase in
consulting,  legal  and  related  costs  which is due to the  Company's  ongoing
performance  problems  and the  negotiations  related  to its  credit  facility.
Consulting,  legal and  related  costs for the first nine  months of fiscal 2001
were $4,849,000 compared with $680,000 for the first nine months of fiscal 2000.

     Restructuring and impairment  charges totaled  $15,005,000 during the first
nine  months  of  fiscal  2001.  As a  result  of  the  Company's  restructuring
activities in fiscal 2001,  the Company  recorded  $3,542,000  in  restructuring
charges, which consist of $2,703,000 in facilities closure costs and the related
write down of inventories and $839,000 in severance costs. Of the  restructuring
charges,  $110,000 is  included  in  restructuring  and  impairment  charges and
$3,432,000 is included in cost of goods sold.

     Due to a change in  circumstances  during the quarter  ended  December  31,
2000, the Company updated its impairment  analysis on its Filofax operations and
concluded  that the carrying  value of its Filofax  operations  had been further
impaired.  Fair value was  estimated  based on estimated  proceeds  less related
selling costs. As a result of the impairment  analyses  performed by the Company
impairment  charges of  $14,895,000  and  $59,337,000  were recorded  during the
quarter  ended  December  31,  2000 and the fiscal  year  ended  June 30,  2000,
respectively.  On April 25, 2001, the Company  announced the sale of its Filofax
operations for $30,000,000 in debt reduction.  The Filofax  operations were sold
to entities  affiliated with the Company's lenders after the Company had pursued
alternative  sale  possibilities  for  these  operations.  (See  Note  5 to  the
Condensed Consolidated Financial Statements).

     NET INTEREST  EXPENSE.  Net interest  expense  increased by $1,321,000,  or
15.2%,  in the first nine  months of fiscal  2001  compared  with the first nine
months of fiscal 2000 due to an increase in the average  interest  rate.  During
the nine  months  ended March 31, 2001 the  weighted-average  interest  rate was
11.5% compared with 9.3% for the nine months ended March 31, 2000.

     INCOME TAXES.  The Company's first nine months of fiscal 2001 effective tax
rate was 8.3%  compared  with  (15.6%) for the first nine months of fiscal 2000.
Although the Company's U.S. income will be offset by net operating  losses,  the
tax  provision   represents   taxes  based  on  income  earned  in  foreign  tax
jurisdictions and state minimum taxes. The effective tax rate is higher than may
be expected due to the Company's inability to utilize these taxes as foreign tax
credits.

SEASONAL FLUCTUATIONS

     The  Company  has  historically  experienced  and  expects to  continue  to
experience  significant  seasonal  fluctuations in its sales and other financial
results that it believes  have  resulted and will  continue to result  primarily
from its  customers'  and users'  buying  patterns.  These buying  patterns have
typically  adversely affected orders for the Company's products in the March and
June quarters of each fiscal year.

     Although it is difficult to predict the future  seasonality  of sales,  the
Company believes that future  seasonality  should be influenced at least in part
by customer  and user buying  patterns  similar to those that have  historically
affected  the  Company.  Quarterly  financial  results are also  affected by new
product introductions and line extensions,  the timing of large orders,  changes
in product  sales or  customer  mix,  vendor and  customer  pricing,  production
levels,  supply and manufacturing  delays, large customers' inventory management
and general industry and economic  conditions.  The seasonality of the Company's
financial  results  and  the  unpredictability  of the  factors  affecting  such
seasonality make the Company's  quarterly and yearly financial results difficult
to predict and subject to significant fluctuation.

LIQUIDITY AND CAPITAL RESOURCES

     GENERAL.  The  Company's  cash  and cash  equivalents  at  March  31,  2001
increased to  $13,231,000  from  $3,960,000  at June 30,  2000.  During the nine
months ended March 31, 2001, net cash of  $15,620,000  was provided by operating
activities and net cash of $1,290,000 was provided by investing activities which
amounts  were  partially  offset  by net cash of  $7,668,000  used in  financing
activities.

     Of  the  $15,620,000  net  amount  provided  by  the  Company's   operating
activities,  $14,895,000  was provided by impairment  charges,  $12,832,000  was
provided by a decrease in inventories,  $6,919,000 was provided by a decrease in
accounts  receivable,  $6,432,000 was provided by depreciation and amortization,
$5,782,000 was provided by the provision for doubtful accounts and sales returns
and other  allowances,  $2,385,000  was  provided by an increase in income taxes
payable and  $1,823,000  was provided by a decrease in income taxes  receivable.
These  amounts were  partially  offset by a decrease of  $6,664,000  in accounts
payable and a decrease of $6,342,000 in accrued expenses.

     Accounts  receivable  (net) at March 31, 2001  decreased  by 70.7% from the
fiscal 2000  year-end  amount and by 66.3% from the quarter ended March 31, 2000
amount due  primarily to a decrease in net sales for the quarter ended March 31,
2001 compared  with the fiscal 2000 year-end  amount and the quarter ended March
31, 2000 amount.

     Inventories  at March 31,  2001  decreased  by 39.5% from the  fiscal  2000
year-end amount and by 49.5% from the March 31, 2000 amount primarily because of
a reduction  in the number of products  offered and  secondarily  because of the
Company's   concentrated   efforts  to  control  and  manage   inventories  more
efficiently.

     The $1,290,000 provided by the Company's investing  activities was provided
by  proceeds  of  $2,040,000  received  upon the  disposition  of  property  and
equipment which amount was partially offset by $824,000 used to acquire property
and equipment.

     Of the  $7,668,000 net amount used in the Company's  financing  activities,
$6,367,000 was used to repay  borrowings under the line of credit and $1,116,000
was used for the payment of financing fees in connection  with the  renegotiated
and amended loan agreement.

     BANK LOANS.  On September 23, 1998, the Company entered into a $160,000,000
Revolving Loan Agreement (the "Loan Agreement") with Wells Fargo Bank,  National
Association  ("Wells  Fargo")  as the  sole  bank and as  agent  (in its  agency
capacity, the "Agent"). The loan facility was syndicated with a group of lenders
in December 1998.

     On October 12,  1999,  the Company,  the Agent and the lenders  amended and
restated the Loan  Agreement  (the "First  Amended Loan  Agreement").  The First
Amended Loan Agreement  converted the entire revolving loan  availability into a
term loan portion of $90,444,000  and a maximum  revolving loan  availability of
$29,556,000.  The term  loan's  maturity  date was  September  30,  2001 and the
revolving credit loan facility matured on October 31, 2000. The maturity date of
the  revolving  credit  loan  facility  could have been  automatically  extended
through  September 30, 2001, if the Company,  as of June 30, 2000,  had complied
with certain  requirements,  including a minimum EBITDA,  a minimum fixed charge
coverage ratio and a maximum  funded senior debt ratio,  as defined in the First
Amended  Loan  Agreement.  The Company did not satisfy  these  conditions.  As a
result of entering into the First Amended Loan Agreement,  unamortized  deferred
financing fees incurred under the Loan Agreement of approximately  $955,000 were
charged to interest expense in October 1999.

     On December 8, 2000,  the  Company,  the Agent and the lenders  amended and
restated the First Amended Loan Agreement  effective as of November 1, 2000 (the
"Second  Amended  Loan  Agreement")  and waived  any Events of Default  that had
previously  occurred and not been waived.  The Second Amended Loan Agreement (i)
converted the $87,164,000  then outstanding  aggregate  principal amount of term
loans issued under the First Amended Loan Agreement  into three loans:  two term
loans (in the principal amounts of $20,000,000 and $40,000,000,  denoted as Term
Loan A and  Term  Loan B,  respectively)  and a  convertible  term  loan (in the
principal  amount of  $27,164,000);  and (ii)  provided  for a revolving  credit
facility that was initially  $25,000,000  and adjusts  periodically  as follows:
$25,000,000 to and including  December 8, 2000;  $19,500,000  from and including
December  9, 2000 to and  including  December  31,  2000;  $15,000,000  from and
including January 1, 2001 to and including March 31, 2002; and $0 from and after
April 1, 2002.  The  maximum  amount that can be  borrowed  under the  revolving
credit  facility is the lowest of (i) the amount of the revolving  facility then
in effect,  (ii) "Available  Amount," and (iii) from and after February 1, 2001,
the Borrowing Base as set forth in the most recent  Borrowing  Base  Certificate
submitted by the Company,  as adjusted by the Agent.  The "Available  Amount" is
defined  in the Second  Amended  Loan  Agreement  as:  October  1, 2000  through
December 8, 2000,  $25,000,000;  December 9, 2000  through  December  31,  2000,
$19,500,000;  January 1, 2001 through February 28, 2001,  $12,000,000;  March 1,
2001  through  April 30,  2001,  $8,000,000;  May 1, 2001 through June 30, 2001,
$10,000,000;  July 1, 2001 through  December 31, 2001,  $15,000,000;  January 1,
2002  through  March 31, 2002,  $10,000,000;  and April 1, 2002 through July 31,
2002,  $0. The maturity date for Term Loans A and B, the  convertible  term loan
and the revolving  loans issued under the Second  Amended Loan Agreement is July
31,  2002.  As a result of  entering  into the Second  Amended  Loan  Agreement,
unamortized  deferred  financing  fees  incurred  under the First  Amended  Loan
Agreement of approximately $762,000 were charged to interest expense in December
2000.  At March 31,  2001,  the Company had  $91,498,000  outstanding  under the
Second Amended Loan Agreement.

     Term Loan B had a  $30,000,000  installment  due January 31, 2001 (to which
installment any asset sales proceeds were to be applied). The Company was unable
to make  this  installment  payment  and  entered  into a waiver  and  amendment
agreement with its lenders that waived this payment  requirement  until February
28, 2001. The convertible  term loan is convertible by the lenders,  in whole or
in part, into common stock of the Company from and after February 1, 2001 at the
rate of $1.15 of the  principal  amount  of the  convertible  term loan for each
share of the  Company's  common  stock.  The  maximum  number  of  shares of the
Company's  common stock into which the convertible term loan can be converted is
23,200,000 shares.

     The rate of interest on the loans under the Second  Amended Loan  Agreement
is as follows: on revolving credit loans and Term Loan A, the Agent's prime rate
(8.0% at March 31,  2001) plus two percent  per annum;  on Term Loan B, prior to
June 30, 2001,  the Agent's  prime rate plus four percent per annum  (except for
cash  interest  paid on the  portion of Term Loan B denoted as Foreign  Currency
Loans),  and on and  following  June 30,  2001,  and for cash  interest  paid on
Foreign  Currency  Loans,  the Agent's prime rate plus two percent per annum; on
the  convertible  term loan, the Agent's prime rate plus four percent per annum.
Interest is payable  monthly in cash except that,  at the option of the Company,
through and including June 30, 2001, interest accrued on Term Loan B may be paid
in the form of a note having terms identical to Term Loan B (except for interest
on the  portion of Term Loan B denoted as Foreign  Currency  Loans which must be
paid in cash), and interest accrued on the convertible term loan may at any time
be paid in the form of a note having  terms  identical to the  convertible  term
loan.  There is a commitment  fee of 0.675 percent  (67.5 basis points)  payable
quarterly on the average daily amount by which the Available  Amount exceeds the
average daily principal amount of outstanding  revolving loans.  During the nine
months ended March 31, 2001, the  weighted-average  interest rate was 11.5%. The
weighted-average interest rate at March 31, 2001 was 11.1%.

     The Second  Amended Loan  Agreement is secured by the Company's  assets and
includes, among other things, financial covenants requiring maintenance of (i) a
minimum fixed charge  coverage  ratio (which  becomes  operative June 30, 2001),
(ii) a minimum EBITDA (which became  operative  December 31, 2000),  and a (iii)
maximum  funded senior debt coverage  ratio (which  becomes  operative  June 30,
2001),  all as defined in the Second Amended Loan Agreement.  The Second Amended
Loan  Agreement  also limits,  among other things,  the  incurrence of liens and
other  indebtedness,   mergers,  consolidations,  the  sales  of  assets,  lease
obligations, annual capital expenditures, advances, investments and loans by the
Company  and  its  subsidiaries,   dividends,   stock  repurchases  and  certain
transactions with affiliates.

     The Company and its lenders  entered into a waiver and amendment  agreement
as of January 31, 2001, that waived, until February 28, 2001, the requirement in
the  Second   Amended  Loan  Agreement  that  the  Company  make  a  $30,000,000
installment payment on Term Loan B on January 31, 2001. The waiver and amendment
agreement also amended  certain other terms and conditions of the Second Amended
Loan  Agreement,  including a reduction in the "Available  Amount" to $8,000,000
for the period  February 1, 2001 through  February 28, 2001. The waiver provided
in the waiver and amendment  agreement  expired and the Company is currently not
in compliance  with the EBITDA  covenant at March 31, 2001.  The Company's  bank
debt is  classified as  short-term  on its March 31, 2001  consolidated  balance
sheet.

     On April 25, 2001, the Company sold its Filofax  operations for $30,000,000
in debt reductions to entities affiliated with the Company's lenders (see Note 5
to  Condensed  Consolidated   Financial  Statements).   As  a  result  of  these
transactions,  the Company was released from all obligations with respect to the
Foreign Currency Loans in the amount of (pound)12,420,210  ($17,636,699) and the
balance of Term Loan B debt was reduced by $12,363,301.

     The Company is  negotiating  with its lenders and third  parties to further
restructure its debt and/or obtain alternative financing.

     FOREIGN  CURRENCY.   Certain  of  the  Company's  international  operations
conducted  business  in whole  or in part in  foreign  currencies,  and this can
result in  significant  gains or losses as a result of  fluctuations  in foreign
currency  exchange rates.  With the sale of the Filofax  operations on April 25,
2001, the Company's  exposure to foreign currency  fluctuations going forward is
expected to be minimal.  Included in general and administrative  expenses in the
condensed consolidated  statements of operations is $186,000 and $784,000 of net
foreign  exchange  losses for the nine  months  ended  March 31,  2001 and 2000,
respectively.

     ADEQUACY  OF  CAPITAL.  As a result of its  losses  in the last two  fiscal
years,  the Company  required waiver  agreements to certain terms of the Amended
Loan Agreement which led to the  renegotiation  and restructuring of its debt in
the Second  Amended  Loan  Agreement.  The Second  Amended  Loan  Agreement  was
effective  as of November 1, 2000.  The Company and its lenders  entered  into a
waiver and  amendment  agreement  as of January 31,  2001 for certain  terms and
conditions of Second Amended Loan Agreement, including an installment payment on
a term loan.  The waiver  agreement  expired on February 28, 2001. The Company's
liquidity  is dependent  upon its ability to  renegotiate  or obtain  waivers of
certain terms and  conditions of the Second  Amended Loan  Agreement  and/or its
ability to obtain  financing from  alternative  sources.  The Company is working
with its lenders and certain  third parties to obtain  sufficient  financing for
its operations and  restructure  its debt but has no commitment from its lenders
or a third party at this time.  There can be no assurance  that the Company will
be able to  renegotiate  its loan  agreement  or  obtain  financing  from  other
sources.  The failure to obtain future  financing would have a material  adverse
effect on the Company's business, financial condition, results of operations and
cash flow.

FORWARD-LOOKING STATEMENTS

     With  the  exception  of  actual  reported   financial  results  and  other
historical  information,  the statements  contained in this Quarterly  Report on
Form 10-Q ("Quarterly  Report") constitute  "forward-looking  statements" within
the  meaning of the  federal  securities  laws and involve a number of risks and
uncertainties that may cause actual events and results to differ materially from
those described in the forward-looking  statements. Such statements are based on
current  expectations and involve known and unknown risks and  uncertainties and
certain  assumptions,  referred to below,  and are indicated by words or phrases
such as  "anticipate,"  "estimate,"  "project,"  "expect,"  "believes,"  "will,"
"intends" and similar words or phrases.  These  forward-looking  statements  are
based on  management's  expectations  as of the date set forth on the  signature
page of this  document,  and the Company does not  undertake  any  obligation to
update any of these statements.

     There can be no assurance that the Company's actual future performance will
meet its  expectations.  The  Company  is  subject  to a number of risks and its
future  operating  results are  difficult to predict and subject to  significant
fluctuations.  These include but are not limited to: (1) the Company's liquidity
is dependent upon its ability to successfully  renegotiate the terms of its bank
loan agreement,  obtain waivers of such agreement  and/or obtain  financing from
third  parties and there can be no  assurance  that the Company  will succeed in
renegotiating  and/or obtaining waivers of such agreement or obtaining financing
from third  parties;  (2) the Company has reported  substantial  losses over the
last  two  fiscal  years  and  there  can be no  assurance  that  the  Company's
substantial  restructuring  plans will be successful in returning the Company to
profitability;  (3) the  Company's  efforts  to  control  costs  may  not  prove
sufficient to prevent future increases in operating  expenses in dollars or as a
percentage of sales;  (4) the Company may not be able to counteract  the effects
of large customers' inventory tightening in any significant way which may result
in lower than expected sales and/or higher than expected  product  returns;  (5)
the  Company  may  not  correctly  anticipate  the  product  mix  of  retailers'
"just-in-time"  inventory demands,  resulting in the temporary unavailability of
the  products in demand by retailers  and lower  sales;  and (6) there can be no
assurance that the Company's new products will meet with market acceptance.

     Additional  factors  that may cause  future  events  and  results to differ
materially from the Company's current  expectations  include,  among others: the
timing and size of orders  from large  customers;  timing and size of orders for
new products;  competition from both paper-based and technology-based organizing
products and  services;  consumer  demand;  market  acceptance  of new products;
general  economic  conditions;  the  health of the retail  environment;  foreign
exchange  rate  fluctuations;  supply and  manufacturing  constraints;  supplier
performance;  and changes in the Company's effective tax rate. Among the effects
of these factors may be: lower than anticipated  sales;  higher than anticipated
product returns and/or excess inventory; negative effects on consumer purchases;
lower than anticipated gross profit; higher than anticipated operating expenses;
and lower than anticipated net income.

     For  additional  risks and more detailed  explanations  of factors that may
cause the  Company's  results of  operations  to vary  materially  from  current
expectations, see the Company's Form 10-K for the year ended June 30, 2000 filed
with the Commission.

FOREIGN CURRENCY EXPOSURE

     The  Company's  reporting  currency is the U.S.  dollar,  and  interest and
principal  payments on its short-term  debts has been in U.S. dollars and pounds
Sterling. A portion of revenues and operating costs have been derived from sales
and  operations  outside the United States and have been incurred in a number of
different  currencies.  As a result of the April  25,  2001 sale of its  Filofax
operations,  the  Company's  debt  will  consist  of U.S.  dollars  only and the
percentage  of revenues  derived  from sales and  operations  outside the United
States will be significantly  reduced.  The Company will continue to do business
outside the U.S.,  however,  and virtually all its manufacturing  activities are
performed  by third  parties  outside  the  U.S.  Accordingly,  fluctuations  in
currency  exchange rates may have a significant  effect on the Company's results
of operations and balance sheet data.

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material  changes  regarding the  Company's  market risk
position  from the  information  provided in Form 10-K for the fiscal year ended
June 30, 2000.


<PAGE>


PART II --OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         3.1      Certificate of Incorporation of the Registrant, as amended(1)

         3.2      Bylaws of the Registrant(2)

        10.1     Amended and Restated Officer Severance Plan, effective
                 March 19, 2001(3)


(b)      Reports on Form 8-K

         No reports on Form 8-K were filed by the Company during the quarter
        ended March 31, 2001.


     (1)  Incorporated  by reference to the  Registrant's  Annual Report on Form
10-K (File No. 0-19835) filed with the Commission on September 27, 2000.

     (2)  Incorporated by reference to the  Registrant's  Current Report on Form
8-K (File No. 0-19835) filed with the Commission on August 5, 1993.

     (3) Constitutes a management  contract or compensatory  plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of this Quarterly
Report.




<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:  May 15 , 2001

                                         DAY RUNNER, INC.

                                 By:     /s/ John F. Ausura
                                         ------------------------
                                         John F. Ausura
                                         Chief Executive Officer

                                 By:     /s/ David A. Werner
                                          ------------------------
                                          David A. Werner
                                          Executive Vice President &
                                           Chief Financial Officer