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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended May 5, 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: 0-22834

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SUCCESSORIES, INC.(Exact name of registrant as specified in its charter)

ILLINOIS(State or other jurisdiction of
incorporation or organization)

36-3760230(I.R.S. Employer Identification No.)2520 Diehl Road
Aurora, Illinois(Address of principal executive offices)

60504(Zip Code)


(630) 820-7200

(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 / /

Registrant
had 9,212,019 shares of common stock, $.01 par value, outstanding as of May 31, 2001.

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SUCCESSORIES, INC.  INDEX TO FORM 10-Q

|                  |  |                       |  |                                                                                       |  | Page Number
|----------------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|PART I.           |  | FINANCIAL INFORMATION
|                  |  | Item 1.               |  | Financial Statements                                                                  |  |            
|                  |  |                       |  | Consolidated Balance Sheets                                                           |  | 3          
|                  |  |                       |  | Consolidated Statements of Operations and Comprehensive Loss                          |  | 4          
|                  |  |                       |  | Consolidated Statement of Stockholders' Equity                                        |  | 5          
|                  |  |                       |  | Consolidated Statements of Cash Flows                                                 |  | 6          
|                  |  |                       |  | Notes to Consolidated Financial Statements                                            |  | 7          
|                  |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 12         
|                  |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 15         
|PART II.          |  | OTHER INFORMATION    
|                  |  | Item 1.               |  | Legal Proceedings                                                                     |  | 16         
|                  |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                      |  | 16         
|SIGNATURES        |  | 17                   
|INDEX TO EXHIBITS |  |                      

2

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PART I. FINANCIAL INFORMATION

SUCCESSORIES, INC.
Consolidated Balance Sheets

|                                                |                                                                                                                                                                                                              | May 5,
2001
(unaudited) |            | February 3,
2001 |  
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------- | ---------- | ---------------- | -
|ASSETS                                          |                                                                                                                                                                                                              |                         |            |                  |  
|Current assets:                                 |                                                                                                                                                                                                              |                         |            |                  |  
|                                                | Cash and cash equivalents                                                                                                                                                                                    |                         | $          | 1,012,000        |  
|                                                | Accounts and notes receivable, net                                                                                                                                                                           |                         |            | 2,961,000        |  
|                                                | Inventories, net                                                                                                                                                                                             |                         |            | 6,167,000        |  
|                                                | Prepaid catalog expenses                                                                                                                                                                                     |                         |            | 2,085,000        |  
|                                                | Deferred income taxes and other prepaid expenses                                                                                                                                                             |                         |            | 709,000          |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Total current assets                            |                                                                                                                                                                                                              |                         | 12,934,000 |                  |  
|Restricted cash                                 |                                                                                                                                                                                                              |                         | 250,000    |                  |  
|Property and equipment, net                     |                                                                                                                                                                                                              |                         | 5,895,000  |                  |  
|Notes receivable                                |                                                                                                                                                                                                              |                         | 223,000    |                  |  
|Deferred financing costs and debt discount, net |                                                                                                                                                                                                              |                         | 277,000    |                  |  
|Deferred income taxes, net                      |                                                                                                                                                                                                              |                         | 4,626,000  |                  |  
|Intangibles and other assets, net               |                                                                                                                                                                                                              |                         | 1,214,000  |                  |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|TOTAL ASSETS                                    |                                                                                                                                                                                                              | $                       | 25,419,000 |                  | $
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY            |                                                                                                                                                                                                              |                         |            |                  |  
|Current liabilities:                            |                                                                                                                                                                                                              |                         |            |                  |  
|                                                | Current portion of long-term debt                                                                                                                                                                            |                         | $          | 2,113,000        |  
|                                                | Accounts payable                                                                                                                                                                                             |                         |            | 1,392,000        |  
|                                                | Accrued expenses and deferred income taxes                                                                                                                                                                   |                         |            | 1,414,000        |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Total current liabilities                       |                                                                                                                                                                                                              |                         | 4,919,000  |                  |  
|Long-term debt, net of current portion          |                                                                                                                                                                                                              |                         | 12,000     |                  |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Total liabilities                               |                                                                                                                                                                                                              |                         | 4,931,000  |                  |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Minority interest                               |                                                                                                                                                                                                              |                         | 18,000     |                  |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Stockholders' equity:                           |                                                                                                                                                                                                              |                         |            |                  |  
|                                                | Convertible preferred stock, $.01 par value; 1,000,000 shares authorized; 503,092 of Series A and 101,667 of Series B shares issued and outstanding; liquidation value $.01 per share plus accrued dividends |                         |            | 6,000            |  
|                                                | Common stock, $.01 par value; 20,000,000 shares authorized; 9,212,019 and 9,181,196 shares issued and outstanding, respectively                                                                              |                         |            | 92,000           |  
|                                                | Common stock warrants                                                                                                                                                                                        |                         |            | 2,324,000        |  
|                                                | Notes receivable from stockholders                                                                                                                                                                           |                         |            | (118,000         | )
|                                                | Additional paid-in capital                                                                                                                                                                                   |                         |            | 33,198,000       |  
|                                                | Accumulated deficit                                                                                                                                                                                          |                         |            | (14,973,000      | )
|                                                | Accumulated other comprehensive loss                                                                                                                                                                         |                         |            | (59,000          | )
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|Total stockholders' equity                      |                                                                                                                                                                                                              |                         | 20,470,000 |                  |  
|                                                |                                                                                                                                                                                                              |                         |            |                  |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      |                                                                                                                                                                                                              | $                       | 25,419,000 |                  | $
|                                                |                                                                                                                                                                                                              |                         |            |                  |  

The
accompanying notes are an integral part of these statements.

3

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SUCCESSORIES, INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)

|                                                   |                                    | Three Months Ended |           
|-------------------------------------------------- | ---------------------------------- | ------------------ | ----------
|
|Net product sales                                  |                                    | $                  | 11,086,000
|Cost of goods sold                                 |                                    |                    | 5,200,000 
|                                                   |                                    |                    |           
|Gross profit on product sales                      |                                    |                    | 5,886,000 
|Fees, royalties and other income                   |                                    |                    | 226,000   
|                                                   |                                    |                    |           
|Gross margin                                       |                                    |                    | 6,112,000 
|Operating expenses                                 |                                    |                    | 7,365,000 
|                                                   |                                    |                    |           
|Loss from operations                               |                                    |                    | (1,253,000
|                                                   |                                    |                    |           
|Other income (expense):                            |                                    |                    |           
|                                                   | Interest expense                   |                    |           
|                                                   | Minority interests in subsidiaries |                    |           
|                                                   | Interest income                    |                    |           
|                                                   | Other, net                         |                    |           
|                                                   |                                    |                    |           
|Total other expense                                |                                    |                    | (90,000   
|                                                   |                                    |                    |           
|Loss before income tax and extraordinary item      |                                    |                    | (1,343,000
|Income tax                                         |                                    |                    |          
|                                                   |                                    |                    |           
|Loss before extraordinary item                     |                                    |                    | (1,343,000
|Extraordinary loss on early extinguishment of debt |                                    |                    | 219,000   
|                                                   |                                    |                    |           
|Net loss                                           |                                    | $                  | (1,562,000
|                                                   |                                    |                    |           
|Dividend to preferred shareholders                 |                                    |                    | 55,000    
|                                                   |                                    |                    |           
|Loss available to common stockholders              |                                    | $                  | (1,617,000
|                                                   |                                    |                    |           
|Foreign currency translation adjustment            |                                    |                    | (4,000    
|                                                   |                                    |                    |           
|Comprehensive loss                                 |                                    | $                  | (1,566,000
|                                                   |                                    |                    |           
|Loss per share (basic and diluted):                |                                    |                    |           
|                                                   | Loss before extraordinary item     |                    | $         
|                                                   |                                    |                    |           
|                                                   | Net loss                           |                    | $         
|                                                   |                                    |                    |           

The
accompanying notes are an integral part of these statements.

4

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SUCCESSORIES, INC.
Consolidated Statement Of Stockholders' Equity
(Unaudited)

|                                        |                                                 | Convertible
Preferred Stock |   |   |       |   |           |        |   |        |   |   |           |   |  
|--------------------------------------- | ----------------------------------------------- | --------------------------- | - | - | ----- | - | --------- | ------ | - | ------ | - | - | --------- | - | -
|
|
|
|Balance at February 3, 2001             |                                                 | 604,759                     |   | $ | 6,000 |   | 9,181,196 |        | $ | 92,000 |   | $ | 2,324,000 |   | $
|Net loss                                |                                                 |                            |   |   |      |   |          |        |   |       |   |   |          |   |  
|Foreign currency translation adjustment |                                                 |                            |   |   |      |   |          |        |   |       |   |   |          |   |  
|Notes receivable payments               |                                                 |                            |   |   |      |   |          |        |   |       |   |   |          |   |  
|Common stock transactions:              |                                                 |                             |   |   |       |   |           |        |   |        |   |   |           |   |  
|                                        | Sales of common shares                          |                             |  |   |       |  |           | 6,090  |   |        |  |   |           |  |  
|                                        | Preferred stock dividend issued as common stock |                             |  |   |       |  |           | 24,733 |   |        |  |   |           |  |  
|Preferred stock transactions:           |                                                 |                             |   |   |       |   |           |        |   |        |   |   |           |   |  
|                                        | Preferred stock dividends                       |                             |  |   |       |  |           |       |   |        |  |   |           |  |  
|                                        |                                                 |                             |   |   |       |   |           |        |   |        |   |   |           |   |  
|Balance at May 5, 2001                  |                                                 | 604,759                     |   | $ | 6,000 |   | 9,212,019 |        | $ | 92,000 |   | $ | 2,324,000 |   | $
|                                        |                                                 |                             |   |   |       |   |           |        |   |        |   |   |           |   |  

|                                        |                                                 | Accumulated
Other
Comprehensive
Loss |         | Total
Stockholders'
Equity |  
|--------------------------------------- | ----------------------------------------------- | ------------------------------------ | ------- | -------------------------- | -
|Balance at February 3, 2001             |                                                 | $                                    | (55,000 | )                          | $
|Net loss                                |                                                 |                                      |        |                            |  
|Foreign currency translation adjustment |                                                 |                                      | (4,000  | )                          |  
|Notes receivable payments               |                                                 |                                      |        |                            |  
|Common stock transactions:              |                                                 |                                      |         |                            |  
|                                        | Sales of common shares                          |                                      |         |                           |  
|                                        | Preferred stock dividend issued as common stock |                                      |         |                           |  
|Preferred stock transactions:           |                                                 |                                      |         |                            |  
|                                        | Preferred stock dividends                       |                                      |         |                           |  
|                                        |                                                 |                                      |         |                            |  
|Balance at May 5, 2001                  |                                                 | $                                    | (59,000 | )                          | $
|                                        |                                                 |                                      |         |                            |  

The
accompanying notes are an integral part of these statements.

5

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SUCCESSORIES, INC.
Consolidated Statements of Cash Flows
(Unaudited)

|                                                    |                                                                                         | Three Months Ended                                 |           
|--------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------
|
|Cash flows from operating activities:               |                                                                                         |                                                    |           
|                                                    | Net loss                                                                                |                                                    | $         
|                                                    | Adjustments to reconcile net loss to net cash from operating activities:                |                                                    |           
|                                                    |                                                                                         | Depreciation and amortization                      |           
|                                                    |                                                                                         | Amortization of debt discount                      |           
|                                                    |                                                                                         | Minority interests in subsidiaries                 |           
|                                                    |                                                                                         | Extraordinary loss on early extinguishment of debt |           
|                                                    |                                                                                         |                                                    |           
|                                                    |                                                                                         |                                                    | (575,000  
|                                                    | Changes in operating assets and liabilities:                                            |                                                    |           
|                                                    |                                                                                         | Accounts and notes receivable                      |           
|                                                    |                                                                                         | Inventories                                        |           
|                                                    |                                                                                         | Prepaid catalog expenses                           |           
|                                                    |                                                                                         | Other prepaid expenses                             |           
|                                                    |                                                                                         | Accounts payable                                   |           
|                                                    |                                                                                         | Accrued expenses                                   |           
|                                                    |                                                                                         | Other assets                                       |           
|                                                    |                                                                                         |                                                    |           
|Net cash provided by (used in) operating activities |                                                                                         |                                                    | 167,000   
|                                                    |                                                                                         |                                                    |           
|Cash flows from investing activities:               |                                                                                         |                                                    |           
|                                                    | Proceeds from notes receivable issued in connection with sale of property and equipment |                                                    |           
|                                                    | Purchase of property and equipment                                                      |                                                    |           
|                                                    |                                                                                         |                                                    |           
|Net cash (used in) provided by investing activities |                                                                                         |                                                    | (69,000   
|                                                    |                                                                                         |                                                    |           
|Cash flows from financing activities:               |                                                                                         |                                                    |           
|                                                    | Proceeds from sale of common stock                                                      |                                                    |           
|                                                    | Net borrowings on revolving credit loan                                                 |                                                    |           
|                                                    | Repayments of long-term debt                                                            |                                                    |           
|                                                    | Distributions to joint venture partners                                                 |                                                    |           
|                                                    | Proceeds from notes receivable issued to stockholders                                   |                                                    |           
|                                                    |                                                                                         |                                                    |           
|Net cash used in financing activities               |                                                                                         |                                                    | (1,554,000
|                                                    |                                                                                         |                                                    |           
|Net decrease in cash                                |                                                                                         |                                                    | (1,456,000
|Cash and cash equivalents, beginning of period      |                                                                                         |                                                    | 2,468,000 
|                                                    |                                                                                         |                                                    |           
|Cash and cash equivalents, end of period            |                                                                                         | $                                                  | 1,012,000 
|                                                    |                                                                                         |                                                    |           

The
accompanying notes are an integral part of these statements.

6

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SUCCESSORIES, INC.
Notes To Consolidated Financial Statements
(Unaudited)

NOTE 1. DESCRIPTION OF THE BUSINESS

Successories, Inc. and its subsidiaries (collectively the "Company") design, manufacture, and market a diverse range of motivational and
self-improvement products, many of which are the Company's own proprietary designs. The Company considers itself a single line of business with products that are marketed primarily under
theSuccessoriesname through direct marketing (catalog, electronic commerce and telemarketing), retail (Company-owned stores), sales to franchisees and
wholesale distribution channels. The Company operates a chain of Successories retail stores located in the United States and Canada. The Company also operates a franchising program whereby it sells
franchises to market the Company's products under theSuccessoriestrademark.

NOTE 2. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared, without audit, in accordance with generally accepted accounting principles for interim
financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring matters) considered necessary for a fair
presentation have been included. Certain prior year amounts have been reclassified to conform with the current year presentation.

The
Company's fiscal year ends on the Saturday closest to January 31. References to the three months ended May 5, 2001, and April 29, 2000, refer to the thirteen
weeks ended on the dates indicated.

The
results of operations for the three months ended May 5, 2001 are not necessarily indicative of the results to be expected for the full year. These financial statements
should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2001.

NOTE 3. INVENTORIES

Inventories are comprised of the following:

May 5,
2001

February 3,
2001Finished goods

$
4,538,000

$
5,461,000Raw Materials


2,126,000


2,092,0006,664,000


7,553,000Less: reserve for obsolescence


(497,000
)

(497,000
)$
6,167,000

$
7,056,000


7

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NOTE 4. DEBT

Debt consists of the following:

May 5,
2001

February 3,
2001Bank borrowings:Term loan

$


$
3,090,000Revolving credit loan


2,106,000


Fixed rate loan





500,000Capital lease obligations


19,000


20,0002,125,000


3,610,000Less: current portion


(2,113,000
)

(3,597,000
)Long-term debt

$
12,000

$
13,000


On
June 20, 1997, the Company entered into a credit facility agreement with The Provident Bank (the "Bank"), which is comprised of a revolving credit loan, term
loan and fixed rate loan. The revolving credit loan provides for maximum borrowings of $9 million for each succeeding July 1 through December 31. The maximum borrowings at all
other times is $6 million. Borrowings under the revolving credit loan are limited to 85% of eligible receivables plus 57% of eligible inventory, as defined. A commitment fee of 0.5% is payable
on the daily unused amount of the maximum revolving credit commitment. The facility expires in June 2003, and all borrowings under the facility are secured by substantially all the assets of
the Company. The interest rates on the term loan and revolving credit loan borrowings generally fluctuate based on the margin ratio, as defined, from a minimum of prime plus 0.50% to a maximum of
prime plus 3.00% on the term loan, and a minimum of prime to a maximum of prime plus 3.00% on the revolving credit loan. The fixed rate loan bears interest at 12%. Interest is payable monthly. The
interest rate on the outstanding revolving credit loan was 7.5% at May 5, 2001. As of May 5, 2001, available borrowings on the revolving credit loan were $3,894,000.

In
the current year first quarter 2001, the Company pre-paid the entire outstanding Bank term loan and fixed rate loan balance in the amount of $3,590,000. The above noted
loans had payment terms through June 2003. The Company recorded an extraordinary loss of $219,000 related to the early debt extinguishment in the current year quarter ended May 5, 2001.
The extraordinary loss represents the write-off of the unamortized debt discount associated with the term loan and fixed rate loan.

The
credit facility agreement contains, among other provisions, requirements for maintaining certain earnings levels and financial ratios, limits on capital expenditures and
additional indebtedness, and use of proceeds from certain equity offerings. At May 5, 2001, the Company was in compliance with the debt covenant requirements of the credit facility agreement.

The
weighted average interest rates on cash interest expense for borrowings outstanding as of May 5, 2001 and April 29, 2000 were 8.6% and 11.3%, respectively.

NOTE 5. INCOME TAXES

Realization of the net deferred tax asset is largely dependent upon the Company generating sufficient taxable income prior to the expiration of the net
operating loss carryforwards. However, the amount of such realization could change in the near term if estimates of future taxable income during the carryforward period are increased or decreased. To
the extent the net operating loss carryforwards and existing deductible temporary differences are not offset by existing taxable temporary differences reversing within the carryforward period, the
remaining loss carryforwards are expected to be realized by achieving future profitable operations. The realization of the net deferred tax asset is not assured, however, management believes that it
is more likely than not that the net deferred tax asset will be realized.

8

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NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures to the statements of cash flows are as follows:

Three Months EndedMay 5,
2001

April 29,
2000Cash paid during the period for:Income taxes

$
87,000

$
18,000Interest


48,000


212,000Non-cash investing and financing activities:Preferred stock dividends

$
55,000

$
55,000Revaluation of stock warrants





33,000


NOTE 7. LOSS PER SHARE

The computations of basic and diluted loss per share were as follows:

Three Months EndedMay 5,
2001

April 29,
2000Numerator for loss before extraordinary item per share:Loss before extraordinary item

$
(1,343,000
)
$
Less: Preferred stock dividends


(55,000
)

Numerator for loss before extraordinary item per share

$
(1,398,000
)
$
Numerator for net loss per share:Net loss

$
(1,562,000
)
$
(361,000
)Less: Preferred stock dividends


(55,000
)

(55,000
)Numerator for net loss per share

$
(1,617,000
)
$
(416,000
)Denominator for loss per share:Weighted average common stock shares


9,183,826


6,936,296Basic and diluted loss per share:Loss before extraordinary item

$
(0.15
)
$
(0.06
)Net loss

$
(0.18
)
$
(0.06
)


Stock
options, warrants, and convertible preferred stock were not included in the computation of the diluted loss per share, due to their antidilutive effect on the loss per share.

NOTE 8. SEGMENT AND RELATED INFORMATION

The Company has adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." This Statement establishes standards for
the way public business enterprises report
information about operating segments in annual financial statements and in interim financial reports issued to shareholders.

The
Company's reportable segments are the various distribution channels used to market its products. The Company's products have similar purposes and uses in each channel of
distribution, but profitability varies among the channels. The Company considers itself a single line of business with products that are marketed through direct marketing (catalog, electronic commerce
and telemarketing), retail (Company-owned stores), sales to franchisees and other channels. In addition, the Company generates revenue from providing framing services to outside corporate businesses
on a contract fee

9

---

basis. The Company has four reportable segmentsDirect MarketingSuccessories, Retail Company-owned stores, Sales to Franchisees
and other segments (Direct MarketingGolf, Wholesale and Contract framing).

The
accounting policies of the reportable segments are the same as those described in Note 2 of Notes to Consolidated Financial Statements in the Company's 10-K.
The Company evaluates the performance of its operating segments based on income (loss) before other income (expense), income taxes and extraordinary item.

Summarized
financial information concerning the Company's reportable segments is shown in the following table. The "Corporate" row includes general corporate related items not
allocated to reportable segments.

|                                   |              | Net
Sales |           | Segment
Profit (Loss) |   | Total
Assets |            | Capital
Expenditures |            | Depreciation
and Amortization
|---------------------------------- | ------------ | --------- | --------- | --------------------- | - | ------------ | ---------- | -------------------- | ---------- | -----------------------------
|Three Months Ended May 5, 2001:    |              |           |           |                       |   |              |            |                      |            |                              
|Direct MarketingSuccessories       |              | $         | 7,672,000 |                       | $ | 530,000      |            | $                    | 4,134,000  |                              
|Retail Company-owned stores        |              |           | 2,106,000 |                       |   | (280,000     | )          |                      | 3,289,000  |                              
|Sales to Franchisees               |              |           | 927,000   |                       |   | 38,000       |            |                      | 1,168,000  |                              
|Other segments                     |              |           | 381,000   |                       |   | 71,000       |            |                      | 347,000    |                              
|Corporate                          |              |           |          |                       |   | (1,921,000   | )          |                      | 16,481,000 |                              
|                                   |              |           |           |                       |   |              |            |                      |            |                              
|                                   | CONSOLIDATED |           | $         | 11,086,000            |   | $            | (1,562,000 | )                    | $          | 25,419,000                   
|Three Months Ended April 29, 2000: |              |           |           |                       |   |              |            |                      |            |                              
|Direct MarketingSuccessories       |              | $         | 8,558,000 |                       | $ | 1,150,000    |            | $                    | 3,692,000  |                              
|Retail Company-owned stores        |              |           | 2,408,000 |                       |   | 9,000        |            |                      | 4,292,000  |                              
|Sales to Franchisees               |              |           | 1,164,000 |                       |   | 255,000      |            |                      | 1,410,000  |                              
|Other segments                     |              |           | 189,000   |                       |   | 54,000       |            |                      | 504,000    |                              
|Corporate                          |              |           |          |                       |   | (1,829,000   | )          |                      | 20,121,000 |                              
|                                   |              |           |           |                       |   |              |            |                      |            |                              
|                                   | CONSOLIDATED |           | $         | 12,319,000            |   | $            | (361,000   | )                    | $          | 30,019,000                   

The
Company utilizes its facilities and the majority of its assets interchangeably among each distribution channel. Assets that relate specifically to a reportable segment have been
included in the above table. Assets identified to the reportable segments are primarily cash, receivables, inventory, prepaid catalogs, property and equipment, and intangibles.

The
following table presents the details for "Corporate":

Three Months EndedMay 5,
2001

April 29,
2000Corporate expenses

$
1,116,000

$
1,095,000Unallocated depreciation and amortization expense


496,000


405,000Other expenses


90,000


329,000Extraordinary loss on early debt extinguishment


219,000


$
1,921,000

$
1,829,000


Corporate
administrative expenses are primarily charges for those functions not specifically attributable to any specific segment; these functions include the product development,
merchandising, information systems, accounting, legal, human resource and executive departments. Included in the expenses associated with these functions are payroll and related costs, professional
fees, information system maintenance costs, office occupancy costs, and property and casualty insurance.

10

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The Company's operations are principally in North America. No single foreign country or geographic area is significant to the consolidated operations. Long-lived assets
are all located in North America.

The
Company's products include distinctive lines of wall decor, desktop accessories, books and stationery, personalized gifts and awards. In addition, the Company sells other
motivational products supplied by third parties.

For
the three months ended May 5, 2001 and April 29, 2000, net product sales by product categories were as follows:

Three Months EndedMay 5,
2001

April 29,
2000Wall décor

43
%
48
%Desktop accessories

20
%
18
%Books and stationery

18
%
16
%Personalized gifts and awards

17
%
16
%Other

2
%
2
%


NOTE 9. NEW ACCOUNTING PRONOUNCEMENT

The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (hereinafter referred to as Statement) which is applicable to the Company beginning on February 4, 2001. Under this Statement, all derivative instruments are to be recorded
at their fair values. If the derivative instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are to be included in current earnings.
Fair value adjustments related to cash flow hedges are to be recorded in other comprehensive income and reclassified to earnings when hedged transaction is reflected in earnings. Ineffective portions
of hedges are reflected in income currently. This Statement did not have a significant impact on the Company's financial statements since it currently does not use derivative instruments in its
business.

11

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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 Consolidated Financial Statements and Notes thereto
included elsewhere in this Report.

Successories
(the "Company") designs, manufactures and markets a diverse range of motivational and self-improvement products, many of which are the Company's own
proprietary designs. The Company's products include distinctive lines of wall decor, desktop accessories, books and stationery, and personalized gifts and awards. In addition, the Company sells other
motivational products supplied by third parties. In-house designers create proprietary art work and designs that can be used in conjunction with a wide variety of products. The Company
will also customize products to fulfill customers' special needs.

The
Company's products are marketed primarily under itsSuccessoriesname through direct marketing (catalog, electronic commerce and
telemarketing), retail channel (Company-owned stores), sales to franchisees and other channels. Although the Company utilizes multiple distribution channels for its products, the Company's products
have similar purposes and uses in each channel of distribution. The profitability varies among products and distribution channels. The Company utilizes its facilities interchangeably for each
distribution channel. Furthermore, the marketing channels are directed at a single customer base located primarily in North America. In addition, the Company generates revenue from providing framing
services to outside corporate businesses on a contract fee basis. These operations allow better utilization of personnel and facilities mostly during the Company's seasonally slower production
periods.

For
the three months ended May 5, 2001 and April 29, 2000, net product sales for the various distribution channels, as a percentage of total net product sales, were as
follows:

Three Months EndedMay 5,
2001

April 29,
2000Direct marketingSuccessories

69.2
%
69.5
%Retail Company-owned stores

19.0
%
19.5
%Sales to franchisees

8.4
%
9.4
%Other channels

3.4
%
1.6
%


The
gross profit margins for direct marketing and retail vary due to differences in product mix and volume discounts taken by customers based on order size. The gross profit margin
for sales to franchisees is lower than direct marketing and retail channels since these sales are generally made at a significant discount from retail price.

As
previously announced, the Company has suspended its efforts to sell the remaining Company-owned retail stores and is focused on developing a new model targeted to reach businesses
residing in a store's community. While testing this new retail model, the Company will not be adding new franchisees to the system.

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RESULTS OF OPERATIONS

The following table sets forth the results of operations for the three months ended May 5, 2001 and April 29, 2000.

(Dollars
in thousands)

|                                 |  | Three Months Ended |        | Increase (Decrease) |      
|-------------------------------- |  | ------------------ | ------ | ------------------- | -----
|
|
|Net product sales                |  | $                  | 11,086 |                     | 100.0
|Cost of goods sold               |  |                    | 5,200  |                     | 46.9 
|                                 |  |                    |        |                     |      
|Gross profit on product sales    |  |                    | 5,886  |                     | 53.1 
|Fees, royalties and other income |  |                    | 226    |                     | 2.0  
|                                 |  |                    |        |                     |      
|Gross margin                     |  |                    | 6,112  |                     | 55.1 
|Operating expenses               |  |                    | 7,365  |                     | 66.4 
|                                 |  |                    |        |                     |      
|Loss from operations             |  |                    | (1,253 | )                   | (11.3
|Interest and other expenses      |  |                    | 90     |                     | 0.8  
|                                 |  |                    |        |                     |      
|Loss before income taxes         |  |                    | (1,343 | )                   | (12.1
|Income tax expense               |  |                    |       |                     |     
|                                 |  |                    |        |                     |      
|Loss before extraordinary item   |  |                    | (1,343 | )                   | (12.1
|Extraordinary loss               |  |                    | 219    |                     | 2.0  
|                                 |  |                    |        |                     |      
|Net loss                         |  | $                  | (1,562 | )                   | (14.1
|                                 |  |                    |        |                     |      

Three Months Ended May 5, 2001 (First Quarter 2001), Compared To Three Months Ended April 29, 2000 (First Quarter 2000)

Net product sales were $11,086,000 for the three months ended May 5, 2001 in the current year, compared to $12,319,000 for the corresponding three
months ended April 29, 2000 in the prior year. The $1,233,000 or 10.0% decrease in sales was comprised of direct marketing-Successoriessales of
$886,000 or 10.4%, sales to franchises of $237,000 or 20.4%, and retail Company-owned store sales of $302,000 or 12.5%, offset by an increase in other channel sales of $192,000 or 101.6%.

The
decrease in net product sales in the current year in direct marketingSuccessories,retail Company-owned stores and
sales to franchisees can be mainly attributed to the current economic slow-down. The Company's customers are predominantly mid to large size businesses, who appear to remain cautious with
their spending in light of the current economic conditions. In addition, the decline in sales can also be attributed to the change in net product sales mix from higher selling price wall
décor items to lower selling price non-wall décor items. The comparable same store sales in retail Company-owned stores decreased by 9.2% in the current year
in comparison to the prior year. The total number of retail Company-owned stores in operation is 25 in the current and prior year. Internet sales, which are included in the direct
marketingSuccessorieschannel, as a percentage of the direct marketing sales increased to 21.4% in the current year from 13.5% in the prior
year. Customer interest in the website continues to grow with the increase in marketing efforts and website content. The increase in net product sales in the other channels can be attributed to the
growth in contract framing business in the current year. In the prior year first quarter, the Company had just started its contract framing business marketing efforts.

Gross
margin, as a percentage of net product sales, was 55.1% in the current year in comparison to 58.2% in the prior year. Gross margin decreased in the current year to $6,112,000
from $7,177,000 in the prior year. The decrease in gross margin can be primarily attributed to the decline in net product

13

---

sales and gross profit percentage in the current year in comparison to the prior year. The decline in gross profit, as a percentage of net product sales, is due to changes in product sales mix and
production costs per unit being higher due to lower sales volume in the current year.

Operating
expenses were comparable between the years and increased slightly to $7,365,000 in the current year from $7,209,000 in the prior year. Operating expenses, as a percentage of
net product sales, increased to 66.4% in the current year in comparison to 58.5% in the prior year. The variable operating expenses decreased with the decline in net product sales in the current year.
However, the fixed operating expenses were comparable between the years, but increased as a percentage of net product sales due to a lower sales volume base in the current year. With the decline in
sales as a result of the current economic conditions, the Company continues to evaluate its marketing efforts and plans to institute reduction in certain operating expenses for the remainder of the
fiscal year, which will primarily impact the third and fourth quarter.

In
the current year first quarter 2001, the Company recorded an extraordinary loss of $219,000 related to early debt extinguisment. As a result of pre-payment of the term
loan and fixed rate loan with the bank, the Company had to record an additional expense to write-off the unamortized debt discount associated with the term loan and fixed rate loan.

The
net loss of ($1,562,000) in the current year first quarter 2001 was higher than the net loss of ($361,000) in the prior year first quarter 2000. The increase in net loss in the
current year can be primarily attributed to the increase in loss from operations as a result of decrease in net product sales, decline in gross profit percentage and extraordinary loss recorded for
the early extinguishment of debt, offset by a decrease in interest expense due to lower outstanding debt balance.

LIQUIDITY AND CAPITAL RESOURCES

The Company's ongoing cash requirements are for working capital, capital expenditures and debt service. The Company expects to rely on cash generated from its
operations, supplemented by borrowings available on the revolving credit loan, to fund its cash requirements.

Operating
activities provided cash of $167,000 for the three months ended May 5, 2001 (first quarter 2001), compared to cash used of $82,000 for the three months ended
April 29, 2000 (first quarter 2000). The improvement in cash flow in the first quarter 2001 in comparison to the first quarter 2000 can be attributed to decline in accounts receivable and
inventory, offset by increase in net loss and net decrease in accounts payable and accrued expenses. The decrease in accounts receivable and inventory is the result of a decline in net product sales
and improved management of assets in the current year. The decrease in liabilities in the current year is due to strengthened cash position of the Company.

Investing
activities used cash of $69,000 in the first quarter 2001, compared to cash provided of $4,000 in the first quarter 2000. The principal use of cash in investing activities
is capital expenditures and the source of cash is proceeds from sales of property and equipment. The Company's current credit facility limits capital expenditures to $1 million for the fiscal
year.

Financing
activities used cash of $1,554,000 in the first quarter 2001 and $83,000 in the first quarter 2000. Scheduled debt repayments on the term note and net repayments on the
revolving credit loan were the principal uses of cash. Proceeds from net borrowings on the revolving credit loan were the primary source of cash. In the current year first quarter 2001, the Company
prepaid its term loan and fixed rate loan with the bank as planned, in an effort to strengthen the Company's balance sheet and debt to equity leverage. The above noted loans had payment terms through
June 2003.

The
Company believes that internally generated funds and the credit facility will be sufficient to meet its current operating needs, fund debt service and make anticipated capital
expenditures.

14

---

SEASONALITY

The Company's business is subject to seasonal variations in demand. Historically, a significant portion of the Company's sales and net income have been
realized during the period from October through January. The effects of seasonality are greater in the Company's retail operations than the other segments of its business. Most operating expenses are
incurred evenly throughout the year, although some selling and administrative expenses are variable depending on sales, and direct marketing catalog advertising expenses as a percentage of sales are
higher in the first calendar quarter. The Company's quarterly operating results may also vary depending upon such factors as catalog mailings and the timing of new product introductions and promotions
by the Company. The Company's cash requirements generally reach a seasonal peak in the second half of the year to finance increased inventory levels needed to meet the third and fourth quarter sales
demand.

INFLATION

The Company does not believe that inflation has had a material impact on its operations.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q report contains forward-looking statements which the Company believes are within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be deemed to include, among other things, statements relating to anticipated
financial performance, the management team, management's long-term performance goals, programs to reduce the Company's costs and enhance asset utilization, the Company's generation of
funds sufficient to meet its current operating needs and to fund anticipated capital expenditures, realization of deferred tax assets, as well as statements relating to the Company's operational and
growth strategies. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be
accurate, and actual results could differ materially from those addressed in forward-looking statements contained in this Form 10-Q. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk associated with adverse changes in interest rate and foreign currency exchange rates, but does not hold any market risk
sensitive instruments for trading purposes. The Company uses both fixed and variable rate debt, as described in Note 3 of the Notes to Consolidated Financial Statements. Principal exposed to
interest rate risk is limited to $2,106,000 in variable rate debt. The impact of a 1% change in interest rates on the variable rate debt is approximately $21,000. The Company's exposure to foreign
currency exchange rate risk relates
primarily to the financial position and results of operations in Canada. The Company's exposure to foreign currency exchange rate risk is difficult to estimate due to factors such as balance sheet
accounts, and the existing economic uncertainty and future economic conditions in the international marketplace. The Company does not expect significant impact from foreign currency exchange rate
risk. The Company's Canadian operation annual sales range around $3,294,000.

15

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There were and are no material pending legal proceedings against the Company. The Company is, however, involved in routine litigation arising in the ordinary
course of its business and, while the results of the proceedings cannot be predicted with certainty, the Company believes that the final outcome of any such matters will not have a materially adverse
effect on the Company's consolidated financial position or results of operations.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



16

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                    |  | SUCCESSORIES, INC.(Registrant)
|------------------- |  | ------------------------------
|Date: June 15, 2001 |  | By:                           
|Date: June 15, 2001 |  | By:                           

17

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INDEX TO EXHIBITS

|Exhibits No. |  | Description                                                                                                                                                                                                                                                                                                                                        
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1          |  | Articles of Incorporation of Registrant - Amended and Restated as of October 28, 1999(21)                                                                                                                                                                                                                                                          
|3.3          |  | By-laws of Registrant(1)                                                                                                                                                                                                                                                                                                                           
|3.4          |  | Amended and Restated Certificate of Designation of Series A and Series B Convertible Preferred Stock(19)                                                                                                                                                                                                                                           
|4.1          |  | Specimen Common Stock Certificate(18)                                                                                                                                                                                                                                                                                                              
|4.2          |  | Specimen Series A Cumulative Convertible Preferred Stock Certificate(20)                                                                                                                                                                                                                                                                           
|4.3          |  | Specimen Series B Cumulative Convertible Preferred Stock Certificate(20)                                                                                                                                                                                                                                                                           
|10.1         |  | Form of Franchising Agreement(18)                                                                                                                                                                                                                                                                                                                  
|10.2         |  | Stock Option Instrument for Arnold M. Anderson dated November 19, 1991(1)*                                                                                                                                                                                                                                                                         
|10.3         |  | Successories, Inc. Stock Option Plan(24)                                                                                                                                                                                                                                                                                                           
|10.4         |  | Joint Venture Agreement with Morrison DFW, Inc. and related documents(4)                                                                                                                                                                                                                                                                           
|10.5         |  | Indemnification Agreement dated April 7, 1999 between the Company and Arnold M. Anderson(17)*                                                                                                                                                                                                                                                      
|             |  | Indemnification Agreements in the form filed were also entered into by the Messrs. Seamas T. Coyle, Timothy C. Dillon, C. Joseph LaBonte, Steven B. Larrick, Michael H. McKee, Mervyn C. Phillips, Jr., Guy E. Snyder, Gary J. Rovansek, R. Scott Morrison,
 Jr., Jack Miller, Howard I. Bernstein, Lawrence A. Hodges, and Leslie Nathanson Juris.
|10.6         |  | Form of Subordinated Note, Common Stock Purchase Warrant and Subordination Agreement relating to issuance of $1,500,000 Subordinated Notes and Warrants to purchase 120,000 shares of the Company's Common Stock(9)                                                                                                                                
|10.7         |  | Common Stock Option Agreement granted to Arnold M. Anderson and Incentive Stock Option Agreement granted to Arnold M. Anderson(9)*                                                                                                                                                                                                                 
|10.8(a)      |  | Employment Agreement with Arnold M. Anderson dated March 1, 1996(10)*                                                                                                                                                                                                                                                                              
|10.8(b)      |  | Employment Agreement with Arnold M. Anderson dated January 14, 1997(21)*                                                                                                                                                                                                                                                                           
|10.8(c)      |  | Addendum to Employment Agreement with Arnold M. Anderson dated February 16, 2000(21)*                                                                                                                                                                                                                                                              
|10.9         |  | Employment Agreement with Michael H. McKee dated June 1, 1999(18)*                                                                                                                                                                                                                                                                                 
|10.10        |  | Form of Subordinated Note Extensions, Stock Options and Subordination Agreement relating to the extension of $1,250,000 of Subordinated Notes, and options to purchase 125,000 shares of the Company's Common Stock(2)                                                                                                                             
|10.11        |  | Credit Agreement between the Company and The Provident Bank dated as of June 20, 1997(13)                                                                                                                                                                                                                                                          
|10.12        |  | First Amendment to Credit Agreement between the Company and The Provident Bank dated as of July 16, 1997(13)                                                                                                                                                                                                                                       
|10.13        |  | Lease Agreement between LaSalle National Trust, N.A. as Trustee under Trust No. 120358 and Celex Group, Inc.(14)                                                                                                                                                                                                                                   
|10.14        |  | Second Amendment to Credit Agreement between the Company and The Provident Bank dated as of May 14, 1998(14)                                                                                                                                                                                                                                       

---

|10.15 |  | Third Amendment to Credit Agreement between the Company and The Provident Bank dated as of September 1, 1998(15)
|----- |  | ----------------------------------------------------------------------------------------------------------------
|10.16 |  | Employment Agreement with Gary Rovansek dated October 29, 1998(15)*                                             
|10.17 |  | Fourth Amendment to Credit Agreement between the Company and The Provident Bank dated as of April 28, 1999(17)  
|10.18 |  | Warrants to Purchase Common Stock of the Company granted to The Provident Bank dated as of April 29, 1999(17)   
|10.19 |  | Preferred Stock Purchase Agreement, dated as of May 28, 1999, by and among the Company and the investors(16)    
|10.20 |  | Registration Rights Agreement, dated as of May 28, 1999, by and among the Company and the investors(16)         
|10.21 |  | Preferred Stock Purchase Agreement, dated as of October 18, 1999, by and among the Company and the investors(19)
|10.22 |  | Registration Rights Agreement, dated as of October 18, 1999, by and among the Company and the investors(19)     
|10.23 |  | Fifth Amendment to Credit Agreement between the Company and The Provident Bank dated as of April 6, 2000(22)    
|10.24 |  | Sixth Amendment to Credit Agreement between the Company and The Provident Bank dated as of August 28, 2000(23)  
|10.25 |  | Joint Venture Agreement with Celebrating Excellence of Minnesota, Inc. and related documents(24)                
|21.1  |  | Subsidiaries of the Registrant(4)                                                                               

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