---

---

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

---

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 November 3, 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

---

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

ILLINOIS

36-3760230(State or other jurisdiction of
incorporation or organization)

(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 9,313,884 shares of common stock, $.01 par value, outstanding as of December 7, 2001.

---

---

---

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 |  | 14         
|                  |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19         
|PART II.          |  | OTHER INFORMATION     |  |                                                                                      
|                  |  | Item 1.               |  | Legal Proceedings                                                                     |  | 20         
|                  |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                      |  | 21         
|SIGNATURES        |  | 22                   
|INDEX TO EXHIBITS |  |                      

2

---



PART I. FINANCIAL INFORMATION

SUCCESSORIES, INC.  Consolidated Balance Sheets

|                                                |                                                                                                                                                                                                              | November 3,
2001 |            | February 3,
2001 |  
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------- | ---------- | ---------------- | -
|
|ASSETS                                          |                                                                                                                                                                                                              |                  |            |                  |  
|Current assets:                                 |                                                                                                                                                                                                              |                  |            |                  |  
|                                                | Cash and cash equivalents                                                                                                                                                                                    |                  | $          | 572,000          |  
|                                                | Accounts and notes receivable, net                                                                                                                                                                           |                  |            | 2,761,000        |  
|                                                | Inventories, net                                                                                                                                                                                             |                  |            | 6,067,000        |  
|                                                | Prepaid catalog expenses                                                                                                                                                                                     |                  |            | 1,785,000        |  
|                                                | Deferred income taxes and other prepaid expenses                                                                                                                                                             |                  |            | 503,000          |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|Total current assets                            |                                                                                                                                                                                                              |                  | 11,688,000 |                  |  
|Restricted cash                                 |                                                                                                                                                                                                              |                  | 250,000    |                  |  
|Property and equipment, net                     |                                                                                                                                                                                                              |                  | 4,367,000  |                  |  
|Notes receivable                                |                                                                                                                                                                                                              |                  | 156,000    |                  |  
|Deferred financing costs and debt discount, net |                                                                                                                                                                                                              |                  | 213,000    |                  |  
|Deferred income taxes, net                      |                                                                                                                                                                                                              |                  | 3,626,000  |                  |  
|Intangibles and other assets, net               |                                                                                                                                                                                                              |                  | 998,000    |                  |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|TOTAL ASSETS                                    |                                                                                                                                                                                                              | $                | 21,298,000 |                  | $
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY            |                                                                                                                                                                                                              |                  |            |                  |  
|Current liabilities:                            |                                                                                                                                                                                                              |                  |            |                  |  
|                                                | Current portion of long-term debt                                                                                                                                                                            |                  | $          | 1,922,000        |  
|                                                | Accounts payable                                                                                                                                                                                             |                  |            | 1,993,000        |  
|                                                | Accrued expenses and deferred income taxes                                                                                                                                                                   |                  |            | 1,504,000        |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|Total current liabilities                       |                                                                                                                                                                                                              |                  | 5,419,000  |                  |  
|Long-term debt, net of current portion          |                                                                                                                                                                                                              |                  |           |                  |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|Total liabilities                               |                                                                                                                                                                                                              |                  | 5,419,000  |                  |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|Minority interest                               |                                                                                                                                                                                                              |                  | 4,000      |                  |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|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; 9,313,884 and 9,181,196 shares issued and outstanding, respectively                                                                              |                  |            | 93,000           |  
|                                                | Common stock warrants                                                                                                                                                                                        |                  |            | 2,324,000        |  
|                                                | Notes receivable from stockholders                                                                                                                                                                           |                  |            | (118,000         | )
|                                                | Additional paid-in capital                                                                                                                                                                                   |                  |            | 33,321,000       |  
|                                                | Accumulated deficit                                                                                                                                                                                          |                  |            | (19,687,000      | )
|                                                | Accumulated other comprehensive loss                                                                                                                                                                         |                  |            | (64,000          | )
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|Total stockholders' equity                      |                                                                                                                                                                                                              |                  | 15,875,000 |                  |  
|                                                |                                                                                                                                                                                                              |                  |            |                  |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      |                                                                                                                                                                                                              | $                | 21,298,000 |                  | $
|                                                |                                                                                                                                                                                                              |                  |            |                  |  

The
accompanying notes are an integral part of these statements.

3

---

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

|                                                       |                                         | Three Months Ended |            | Nine Months Ended |  
|------------------------------------------------------ | --------------------------------------- | ------------------ | ---------- | ----------------- | -
|
|Net product sales                                      |                                         | $                  | 9,882,000  |                   | $
|Cost of goods sold                                     |                                         |                    | 5,176,000  |                   |  
|                                                       |                                         |                    |            |                   |  
|Gross profit on product sales                          |                                         |                    | 4,706,000  |                   |  
|Fees, royalties and other income                       |                                         |                    | 286,000    |                   |  
|                                                       |                                         |                    |            |                   |  
|Gross margin                                           |                                         |                    | 4,992,000  |                   |  
|Operating expenses                                     |                                         |                    | 6,672,000  |                   |  
|                                                       |                                         |                    |            |                   |  
|(Loss) income from operations                          |                                         |                    | (1,680,000 | )                 |  
|                                                       |                                         |                    |            |                   |  
|Other income (expense):                                |                                         |                    |            |                   |  
|                                                       | Interest expense                        |                    |            | (62,000           | )
|                                                       | Minority interests in subsidiaries      |                    |            | (60,000           | )
|                                                       | Interest income                         |                    |            | 20,000            |  
|                                                       | Other, net                              |                    |            | 11,000            |  
|                                                       |                                         |                    |            |                   |  
|Total other expense                                    |                                         |                    | (91,000    | )                 |  
|                                                       |                                         |                    |            |                   |  
|(Loss) income before income tax and extraordinary item |                                         |                    | (1,771,000 | )                 |  
|Income tax                                             |                                         |                    |           |                   |  
|                                                       |                                         |                    |            |                   |  
|(Loss) income before extraordinary item                |                                         |                    | (1,771,000 | )                 |  
|Extraordinary loss on early extinguishment of debt     |                                         |                    |           |                   |  
|                                                       |                                         |                    |            |                   |  
|Net (loss) income                                      |                                         | $                  | (1,771,000 | )                 | $
|Dividend to preferred shareholders                     |                                         |                    | 55,000     |                   |  
|                                                       |                                         |                    |            |                   |  
|(Loss) income available to common stockholders         |                                         | $                  | (1,826,000 | )                 | $
|                                                       |                                         |                    |            |                   |  
|Foreign currency translation adjustment                |                                         | $                  |           |                   | $
|                                                       |                                         |                    |            |                   |  
|Comprehensive (loss) income                            |                                         | $                  | (1,771,000 | )                 | $
|                                                       |                                         |                    |            |                   |  
|Loss per share (basic and diluted):                    |                                         |                    |            |                   |  
|                                                       | (Loss) income before extraordinary item |                    | $          | (0.20             | )
|                                                       |                                         |                    |            |                   |  
|                                                       | Net (loss) income                       |                    | $          | (0.20             | )
|                                                       |                                         |                    |            |                   |  

The
accompanying notes are an integral part of these statements.

4

---



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 |   | $ | (148,000 | ) | $ | 33,136,000
|Net loss                                |                                                 |                            |   |   |      |   |          |         |   |       |       |   |          |   |   |         |   |   |          
|Foreign currency translation adjustment |                                                 |                            |   |   |      |   |          |         |   |       |       |   |          |   |   |         |   |   |          
|Notes receivable payments               |                                                 |                            |   |   |      |   |          |         |   |       |       |   |          |   |   | 30,000   |   |   |          
|Common stock transactions:              |                                                 |                             |   |   |       |   |           |         |   |        |       |   |           |   |   |          |   |   |           
|                                        | Sales of common shares                          |                             |  |   |       |  |           | 18,691  |   |        |      |   |           |  |   |          |  |   |           
|                                        | Preferred stock dividend issued as common stock |                             |  |   |       |  |           | 113,997 |   |        | 1,000 |   |           |  |   |          |  |   |           
|Preferred stock transactions:           |                                                 |                             |   |   |       |   |           |         |   |        |       |   |           |   |   |          |   |   |           
|                                        | Preferred stock dividends                       |                             |  |   |       |  |           |        |   |        |      |   |           |  |   |          |  |   |           
|                                        |                                                 |                             |   |   |       |   |           |         |   |        |       |   |           |   |   |          |   |   |           
|Balance at November 3, 2001             |                                                 | 604,759                     |   | $ | 6,000 |   | 9,313,884 |         | $ | 93,000 |       | $ | 2,324,000 |   | $ | (118,000 | ) | $ | 33,321,000
|                                        |                                                 |                             |   |   |       |   |           |         |   |        |       |   |           |   |   |          |   |   |           

The accompanying notes are an integral part of these statements.

5

---

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

|                                                    |                                                                                         | Nine 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 |           
|                                                    |                                                                                         | Deferred income tax asset  valuation allowance    |           
|                                                    |                                                                                         |                                                    |           
|                                                    |                                                                                         |                                                    | (2,042,000
|                                                    | 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 |                                                                                         |                                                    | 147,000   
|                                                    |                                                                                         |                                                    |           
|Cash flows from investing activities:               |                                                                                         |                                                    |           
|                                                    | Proceeds from notes receivable issued in connection with sale of property and equipment |                                                    |           
|                                                    | Reduction in restricted cash                                                            |                                                    |           
|                                                    | Purchase of property and equipment                                                      |                                                    |           
|                                                    |                                                                                         |                                                    |           
|Net cash (used in) investing activities             |                                                                                         |                                                    | (201,000  
|                                                    |                                                                                         |                                                    |           
|Cash flows from financing activities:               |                                                                                         |                                                    |           
|                                                    | Proceeds from sale of common stock                                                      |                                                    |           
|                                                    | Net borrowings (repayments) 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               |                                                                                         |                                                    | (1,842,000
|                                                    |                                                                                         |                                                    |           
|Net decrease in cash                                |                                                                                         |                                                    | (1,896,000
|Cash and cash equivalents, beginning of period      |                                                                                         |                                                    | 2,468,000 
|                                                    |                                                                                         |                                                    |           
|Cash and cash equivalents, end of period            |                                                                                         | $                                                  | 572,000   
|                                                    |                                                                                         |                                                    |           

The
accompanying notes are an integral part of these statements.

6

---



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.

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 and nine months ended November 3, 2001, and October 28, 2000, refer
to the thirteen and thirty-nine weeks ended on the dates indicated.

The
results of operations for the nine months ended November 3, 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:

November 3,
2001

February 3,
2001Finished goods

$
4,000,000

$
5,461,000Raw Materials


2,521,000


2,092,0006,521,000


7,553,000Less: reserve for obsolescence


(454,000
)

(497,000
)$
6,067,000

$
7,056,000


7

---

NOTE 4. DEBT

Debt consists of the following:

November 3,
2001

February 3,
2001Bank borrowings:Term loan

$


$
3,090,000Revolving credit loan


1,922,000


Fixed rate loan





500,000Capital lease obligations





20,0001,922,000


3,610,000Less: current portion


(1,922,000
)

(3,597,000
)Long-term debt

$


$
13,000


On
June 20, 1997, the Company entered into a credit facility agreement with The Provident Bank (the "Bank"), amended most recently on December 3, 2001, which is
comprised of a revolving credit loan, term loan and fixed rate loan. Prior to September 4, 2001, the revolving credit loan provided for maximum borrowings of $9 million for each
succeeding July 1 through December 31, and at all other times of $6 million. Subsequent to September 4, 2001, the revolving credit loan provides for maximum borrowings of
$6 million through December 31, 2001 and each succeeding July 1 through December 31, and at all other times of $5 million. In addition, subsequent to
September 4, 2001, the borrowing base is further reduced by $1,000,000 for the rolling 12-month period at fiscal quarter-ends with EBITDA equal or less than $4,000,000.
Borrowings under the revolving credit loan are limited to 85% of eligible receivables plus 57% of eligible inventory, as defined. Subsequent to December 3, 2001, the borrowings under the
revolving credit loan are limited to 85% of eligible receivables plus the lesser of 57% of eligible inventory or $3,000,000, as defined. A commitment fee of 0.25% 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 less 0.25% to a maximum of prime plus 0.75% 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 5.75% at November 3, 2001. Subsequent to December 3, 2001, the interest rate on the revolving credit loan is prime plus 2.00%. As of
November 3, 2001, available borrowings on the revolving credit loan were $3,078,000.

On
September 4, 2001, the Company obtained an amendment to the credit facility to adjust certain financial covenants, reduce applicable interest rate on the revolver and
commitment fee on the unused revolver, and amend certain other terms for the quarter ended August 4, 2001 and prospectively.

On
December 3, 2001, the Company obtained an amendment to the credit facility to waive certain financial covenants for the quarter ended November 3, 2001. In addition,
the amendment included an adjustment to the interest rate on the revolver and the borrowing base, prospectively.

In
February 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.

8

---

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. As noted above, on December 3, 2001, the Company obtained an amendment to the credit facility to waive certain of
said financial covenants for the quarter ended November 3, 2001.

The
weighted average interest rates on cash interest expense for borrowings outstanding as of November 3, 2001 and October 28, 2000 were 8.7% and 10.7%, respectively.

NOTE 5. IMPAIRMENT CHARGE

Pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the
Company evaluated the realizability of assets related to certain under performing company owned retail stores because the anticipated cash flows from these retail locations did not support the net
book value of the productive assets. In addition, the Company discontinued the planned implementation of a warehouse management enhancement project due to lower than anticipated production volumes. As
a result, the Company recorded impairment charges of approximately $530,000 in the third quarter ended November 3, 2001.

NOTE 6. INCOME TAXES

During the quarter ended August 4, 2001, based on the current economic slow-down, the management of the Company determined that the
valuation allowance associated with the deferred tax asset should be increased due to the reduced likelihood of whether all the benefits of net operating loss (NOL) carryforwards would be fully
utilized before they expire. In the quarter ended August 4, 2001, the Company recognized an income tax expense of $1,000,000 to increase the valuation allowance associated with the deferred tax
asset. At November 3, 2001, the deferred tax asset balance (net of valuation allowance) was $3,873,000.

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.

NOTE 7. SUPPLEMENTAL CASH FLOW INFORMATION

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

Nine Months EndedNovember 3,
2001

October 28,
2000Cash paid during the period for:Income taxes

$
87,000

$
27,000Interest


120,000


577,000Non-cash investing and financing activities:Preferred stock dividends

$
164,000

$
115,000Revaluation of stock warrants





33,000


9

---

NOTE 8. (LOSS) INCOME PER SHARE

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

|                                                                 |                                                                           | Three Months Ended |   | Nine Months Ended |   
|---------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------ | - | ----------------- | --
|
|Numerator for (loss) income before extraordinary item per share: |                                                                           |                    |   |                   |   
|                                                                 | (Loss) income before extraordinary item                                   |                    | $ | (1,771,000        | ) 
|                                                                 | Less: Preferred stock dividend                                            |                    |   | (55,000           | ) 
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Numerator for (loss) income before extraordinary item per share  basic   |                    | $ | (1,826,000        | ) 
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Numerator for (loss) income before extraordinary item per share  diluted |                    | $ | (1,826,000        | )*
|                                                                 |                                                                           |                    |   |                   |   
|Numerator for net (loss) income per share:                       |                                                                           |                    |   |                   |   
|                                                                 | Net (loss) income                                                         |                    | $ | (1,771,000        | ) 
|                                                                 | Less: Preferred stock dividends                                           |                    |   | (55,000           | ) 
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Numerator for net (loss) income per share  basic                         |                    | $ | (1,826,000        | ) 
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Numerator for net (loss) income per share  diluted                       |                    | $ | (1,826,000        | )*
|                                                                 |                                                                           |                    |   |                   |   
|Denominator for (loss) income per share:                         |                                                                           |                    |   |                   |   
|                                                                 | Weighted average common stock shares                                      |                    |   | 9,252,812         |   
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Weighted average common stock shares after assumed conversionsdiluted    |                    |   | 9,252,812         | * 
|                                                                 |                                                                           |                    |   |                   |   
|Basic and diluted (loss) income per share:                       |                                                                           |                    |   |                   |   
|                                                                 | (Loss) income before extraordinary item                                   |                    | $ | (0.20             | ) 
|                                                                 |                                                                           |                    |   |                   |   
|                                                                 | Net (loss) income                                                         |                    | $ | (0.20             | ) 
|                                                                 |                                                                           |                    |   |                   |   

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.

*
The diluted (loss) income per share did not assume the conversion of applicable stock options and warrants nor the conversion of preferred stock, due to their
anti-dilutive effect on the (loss) income per share.

10

---

NOTE 9. 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 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 November 3, 2001: |              |           |           |                       |   |              |            |                      |            |                              
|Direct MarketingSuccessories         |              | $         | 6,473,000 |                       | $ | 765,000      |            | $                    | 8,273,000  |                              
|Retail Company-owned stores          |              |           | 1,819,000 |                       |   | (936,000     | )          |                      | 2,568,000  |                              
|Sales to Franchisees                 |              |           | 1,348,000 |                       |   | 104,000      |            |                      | 1,122,000  |                              
|Other segments                       |              |           | 242,000   |                       |   | (11,000      | )          |                      | 287,000    |                              
|Corporate                            |              |           |          |                       |   | (1,693,000   | )          |                      | 9,048,000  |                              
|                                     |              |           |           |                       |   |              |            |                      |            |                              
|                                     | CONSOLIDATED |           | $         | 9,882,000             |   | $            | (1,771,000 | )                    | $          | 21,298,000                   
|Three Months Ended October 28, 2000: |              |           |           |                       |   |              |            |                      |            |                              
|Direct MarketingSuccessories         |              | $         | 7,877,000 |                       | $ | 1,652,000    |            | $                    | 3,522,000  |                              
|Retail Company-owned stores          |              |           | 2,298,000 |                       |   | (153,000     | )          |                      | 3,903,000  |                              
|Sales to Franchisees                 |              |           | 2,496,000 |                       |   | 695,000      |            |                      | 2,741,000  |                              
|Other segments                       |              |           | 427,000   |                       |   | 186,000      |            |                      | 282,000    |                              
|Corporate                            |              |           |          |                       |   | (2,048,000   | )          |                      | 19,355,000 |                              
|                                     |              |           |           |                       |   |              |            |                      |            |                              
|                                     | CONSOLIDATED |           | $         | 13,098,000            |   | $            | 332,000    |                      | $          | 29,803,000                   

11

---

|Nine Months Ended November 3, 2001: |              |   |            |            |   |            |            |   |            |            |   |         |         |   |          
|----------------------------------- | ------------ | - | ---------- | ---------- | - | ---------- | ---------- | - | ---------- | ---------- | - | ------- | ------- | - | ---------
|Direct MarketingSuccessories        |              | $ | 20,413,000 |            | $ | 1,656,000  |            | $ | 8,273,000  |            | $ | 53,000  |         | $ | 201,000  
|Retail Company-owned stores         |              |   | 6,055,000  |            |   | (1,752,000 | )          |   | 2,568,000  |            |   | 60,000  |         |   | 1,025,000
|Sales to Franchisees                |              |   | 3,274,000  |            |   | 172,000    |            |   | 1,122,000  |            |   |        |         |   | 7,000    
|Other segments                      |              |   | 919,000    |            |   | 92,000     |            |   | 287,000    |            |   |        |         |   |         
|Corporate                           |              |   |           |            |   | (6,334,000 | )          |   | 9,048,000  |            |   | 143,000 |         |   | 1,466,000
|                                    |              |   |            |            |   |            |            |   |            |           
|                                    | CONSOLIDATED |   | $          | 30,661,000 |   | $          | (6,166,000 | ) | $          | 21,298,000 |   | $       | 256,000 |   | $        
|Nine Months Ended October 28, 2000: |              |   |            |            |   |            |            |   |            |            |   |         |         |   |          
|Direct MarketingSuccessories        |              | $ | 24,061,000 |            | $ | 3,893,000  |            | $ | 3,522,000  |            | $ |        |         | $ | 216,000  
|Retail Company-owned stores         |              |   | 7,249,000  |            |   | 36,000     |            |   | 3,903,000  |            |   | 8,000   |         |   | 540,000  
|Sales to Franchisees                |              |   | 4,836,000  |            |   | 1,131,000  |            |   | 2,741,000  |            |   |        |         |   | 23,000   
|Other segments                      |              |   | 1,479,000  |            |   | 500,000    |            |   | 282,000    |            |   |        |         |   |         
|Corporate                           |              |   |           |            |   | (5,861,000 | )          |   | 19,355,000 |            |   | 285,000 |         |   | 1,366,000
|                                    |              |   |            |            |   |            |            |   |            |           
|                                    | CONSOLIDATED |   | $          | 37,625,000 |   | $          | (301,000   | ) | $          | 29,803,000 |   | $       | 293,000 |   | $        

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 Ended |           | Nine Months Ended
|------------------------------------------------- |  | ------------------ | --------- | -----------------
|
|Corporate expenses                                |  | $                  | 1,128,000 |                  
|Unallocated depreciation and amortization expense |  |                    | 474,000   |                  
|Other expenses                                    |  |                    | 91,000    |                  
|Income tax expense                                |  |                    |          |                  
|Extraordinary loss on early debt extinguishment   |  |                    |          |                  
|                                                  |  |                    |           |                  
|                                                  |  | $                  | 1,693,000 |                  
|                                                  |  |                    |           |                  

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.

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.

12

---

For the nine months ended November 3, 2001 and October 28, 2000, net product sales by product categories were as follows:

Nine Months EndedNovember 3,
2001

October 28,
2000Wall décor

43.4
%
46.8
%Desktop accessories

21.2
%
21.1
%Books and stationery

19.1
%
17.3
%Personalized gifts and awards

15.5
%
13.3
%Other

0.8
%
1.5
%


NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued FASB Statement No. 143, "Accounting for Asset Retirement Obligations." FAS
No. 143 will become effective for the Company in 2003. The adoption of FAS No. 143 is not expected to have a material impact on the Company's results of operations and financial
condition.

In
August 2001, the Financial Accounting Standards Board issued FASB no. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." FAS
No. 144 will become effective for the Company on February 4, 2002. The adoption of FAS No. 144 is not expected to have a material impact on the Company's results of operations and
financial condition.

13

---



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 corporate facility 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.

For
the three and nine months ended November 3, 2001 and October 28, 2000, net product sales for the various distribution channels, as a percentage of total net product
sales, were as follows:

|                              |  | Three Months Ended |   | Nine Months Ended |  
|----------------------------- |  | ------------------ | - | ----------------- | -
|
|Direct marketingSuccessories |  | 65.5               | % | 60.1              | %
|Retail Company-owned stores   |  | 18.4               | % | 17.5              | %
|Sales to franchisees          |  | 13.6               | % | 19.0              | %
|Other channels                |  | 2.5                | % | 3.4               | %

The
gross profit margins for direct marketing and retail vary due to differences in product mix and volume discounts 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.

14

---

RESULTS OF OPERATIONS

The following tables set forth the results of operations for the three months and six months ended November 3, 2001 and October 28, 2000.

(Dollars in thousands)

|                                        |  | Three Months Ended |        | Increase (Decrease) |      
|--------------------------------------- |  | ------------------ | ------ | ------------------- | -----
|
|
|Net product sales                       |  | $                  | 9,882  |                     | 100.0
|Cost of goods sold                      |  |                    | 5,176  |                     | 52.4 
|                                        |  |                    |        |                     |      
|Gross profit on product sales           |  |                    | 4,706  |                     | 47.6 
|Fees, royalties and other income        |  |                    | 286    |                     | 2.9  
|                                        |  |                    |        |                     |      
|Gross margin                            |  |                    | 4,992  |                     | 50.5 
|Operating expenses                      |  |                    | 6,672  |                     | 67.5 
|                                        |  |                    |        |                     |      
|(Loss) income from operations           |  |                    | (1,680 | )                   | (17.0
|Interest and other expenses             |  |                    | 91     |                     | 0.9  
|                                        |  |                    |        |                     |      
|(Loss) income before income taxes       |  |                    | (1,771 | )                   | (17.9
|Income tax expense                      |  |                    |       |                     |     
|                                        |  |                    |        |                     |      
|(Loss) income before extraordinary item |  |                    | (1,771 | )                   | (17.9
|Extraordinary loss                      |  |                    |       |                     |     
|                                        |  |                    |        |                     |      
|Net (loss) income                       |  | $                  | (1,771 | )                   | (17.9
|                                        |  |                    |        |                     |      

|                                 |  | Nine Months Ended |        | Increase (Decrease) |      
|-------------------------------- |  | ----------------- | ------ | ------------------- | -----
|
|
|Net product sales                |  | $                 | 30,661 |                     | 100.0
|Cost of goods sold               |  |                   | 15,088 |                     | 49.2 
|                                 |  |                   |        |                     |      
|Gross profit on product sales    |  |                   | 15,573 |                     | 50.8 
|Fees, royalties and other income |  |                   | 795    |                     | 2.6  
|                                 |  |                   |        |                     |      
|Gross margin                     |  |                   | 16,368 |                     | 53.4 
|Operating expenses               |  |                   | 21,063 |                     | 68.7 
|                                 |  |                   |        |                     |      
|(Loss) income from operations    |  |                   | (4,695 | )                   | (15.3
|Interest and other expenses      |  |                   | 252    |                     | 0.8  
|                                 |  |                   |        |                     |      
|Loss before income taxes         |  |                   | (4,947 | )                   | (16.1
|Income tax expense               |  |                   | 1,000  |                     | 3.3  
|                                 |  |                   |        |                     |      
|Loss before extraordinary item   |  |                   | (5,947 | )                   | (19.4
|Extraordinary loss               |  |                   | 219    |                     | 0.7  
|                                 |  |                   |        |                     |      
|Net loss                         |  | $                 | (6,166 | )                   | (20.1
|                                 |  |                   |        |                     |      

Three Months Ended November 3, 2001 (Third Quarter 2001), Compared To Three Months Ended October 28, 2000 (Third Quarter
2000)

Net
product sales were $9,882,000 in the current year third quarter ended November 3, 2001, compared to $13,098,000 for the corresponding third quarter ended October 28,
2000 in the prior year. The $3,216,000 or 24.6% decrease in net sales was comprised of direct marketingSuccessoriesof

15

---

$1,404,000 or 17.8%, retail Company-owned stores of $479,000 or 20.8%, sales to franchisees of $1,148,000 or 46.0%, and other channels of $185,000 or 43.3%.

As
in the first and second quarters, the decrease in net product sales experienced in the third quarter can be primarily attributed to the weak economy. 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, direct marketing Successoriessales in the third
quarter of this year were further impacted by a planned reduction in prospect catalog circulation in the light of lower
response rates being experienced as a result of the current business environment. The Company's direct marketing efforts continue to focus on aggressively targeting opportunities in niche markets and
refining marketing strategies focussed on increasing sales from the existing customer base. Internet sales, which are included in the direct marketing Successorieschannel, continue to grow from year to
yearincreased to 25.4% of the total direct marketing sales in the current year from
15.5% in the prior year. In addition to the already weak economy, the events of September 11, 2001 further impacted sales negatively in the retail Company-owned and franchised stores in the
third quarter in comparison to the first and second quarter. The comparable store sales in retail Company-owned stores decreased by 23.9% in the current year third quarter in comparison to the prior
year. The decrease in sales to franchisees can also be attributed to 8 fewer stores in operation and decline in advanced holiday season inventory purchases in the current year third quarter. In
addition to purchasing a franchise store during the current year third quarter, the Company terminated the franchise agreements for 6 franchise locations. Of these 6 franchise locations, 4 locations
have been closed and 2 locations have been reopened as Company-owned stores.

Gross
margin decreased in the current year third quarter to $4,992,000 from $6,921,000 in the prior year. The decrease in gross margin can be attributed to the decline in net product
sales and gross profit percentage in the current year. The decline in gross profit percentage can be attributed to change in product sales mix and higher fixed production costs per unit resulting from
lower sales volume being generated through the manufacturing facility in the current year.

Operating
expenses increased in the current year third quarter to $6,672,000 from $6,113,000 in the prior year. The variable operating expenses decreased from year to year with the
decline in net product sales. However, operating expenses other than variable increased as a result of $932,000 in additional charges being recognized in the current year third quarter. These charges
were primarily related to asset impairment write-downs for two under-performing Company-owned retail stores, obligations due
from franchisees, discontinuance of a warehouse management system enhancement project due to lower than anticipated production volumes and severance payments related to the reduction in workforce
instituted during the third quarter.

During
the current year third quarter, the Company generated a net loss of $1,771,000 in comparison to a net income of $332,000 in the prior year. The net loss incurred in the current
year can be primarily attributed to the decrease in gross margin from decline in net product sales and additional charges recorded in the operating expenses in the current year as a result of the
continuing business economic slow-down.

Nine Months Ended November 3, 2001 (Year-To-Date 2001), Compared To Nine Months Ended October 28, 2000
(Year-To-Date 2000)

Net
product sales were $30,661,000 in the current year to-date through November 3, 2001, compared to $37,625,000 for the corresponding year to-date
through October 28, 2000 in the prior year. The $6,964,000 or 18.5% decrease in net sales was comprised of direct marketingSuccessoriesof
$3,648,000 or 15.2%, retail Company-owned stores of $1,194,000 or 16.5%, sales to franchisees of $1,562,000 or 32.3%, and other channels of $560,000 or 37.8%.

16

---

In the current year, the decrease in net product sales across the channels can be primarily attributed to the continuing economic slow-down. In addition, direct marketing Successoriessales starting in the second quarter of this year were further impacted by a planned reduction in prospect catalog circulation in light of
lower response rates experienced as a result of the current business environment. The Company's direct marketing efforts continue to focus on aggressively targeting opportunities in niche markets and
refining marketing strategies focussed on increasing sales from the existing customer base. The comparable store sales in retail Company-owned stores decreased by 16.1% in the current year in
comparison to the prior year. The total number of retail Company-owned stores in operation in the current year were 27, compared to the 24 in operation in the prior year. The sales to franchisees were
also impacted by fewer stores in operation in the current year43 in the current year versus 51 in the prior year. The decrease in sales from other channels is primarily due to loss of
sales in contract framing compared to the prior year. A major contract framing customer is no longer in business.

Operating
expenses increased in the current year to $21,063,000 from $20,218,000 in the prior year. The increase in operating expenses can be attributed to additional charges
recognized in the current year second and third quarter of $1,326,000. The additional charges related to bad debt reserves for franchisee related receivables, write-off of the net book
value of fixed assets pertaining to five Company-owned store leases expiring prior to the end of the fiscal year and two under-performing Company-owned stores, acceleration of goodwill amortization
for Company-owned retail stores from a useful life of 15 years to the end of the current lease term, discontinuance of a warehouse management
system enhancement project due to lower than anticipated production volumes and severance payments related to the reduction in workforce instituted during the third quarter. The variable operating
expenses decreased from year to year with the decline in net product sales.

In
the current year second quarter 2001, the Company recorded an income tax expense of $1,000,000 to increase the valuation allowance associated with the deferred tax asset balance.
As a result of the current challenging economic environment, the Company's management increased the valuation allowance due to the reduced likelihood that all the benefits of the deferred tax asset
related to the net operating loss (NOL) carryforwards would be fully utilized before they expire.

In
the current year first quarter 2001, the Company recorded an extraordinary loss of $219,000 related to early debt extinguishment. 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 $6,166,000 in the current year was significantly higher than the net loss of $301,000 in the prior year. The increase in net loss in the current year can be primarily
attributed to the decline in gross margin and additional charges recorded to operating expenses as a result of decline in sales volume due to economic downturn, income tax expense recorded to increase
the valuation allowance associated with the deferred tax asset 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 $147,000 in the current year nine months ended November 3, 2001, compared to cash used of $38,000 in the prior year corresponding nine
months ended October 28, 2000. The increase in cash inflow from operating activities can be primarily attributed to a decrease in accounts receivable and inventory, offset by decrease in cash
inflow from operating results.

17

---

The decrease in accounts receivable and inventory can be attributed to decline in sales levels and improved management of assets in the current year.

Investing
activities used cash of $201,000 in the current year nine months ended November 3, 2001, compared to $166,000 in the corresponding nine months ended
October 28, 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.

Financing
activities used cash of $1,842,000 in the current year nine months ended November 3, 2001, compared to $18,000 in the corresponding nine months ended
October 28, 2000. Scheduled debt repayments on the term note and net repayments on the revolving credit loan are the principal uses of cash. Proceeds from net borrowings on the revolving credit
loan are the primary source of cash. As planned, in the current year first quarter 2001, the company prepaid its term loan and fixed rate loan with the bank, 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. In the prior year, the company generated proceeds from the common stock rights offering in
October 2000, which in turn were used to pay-down the term and fixed loan in 2001.

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. On December 3, 2001, the Company obtained an amendment to the credit facility to waive certain financial covenants
for the quarter ended November 3, 2001. In addition, the amendment included an adjustment to the interest rate on the revolver and the borrowing base, prospectively.

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. At November 3, 2001 the available borrowings on the revolving credit loan were $3,078,000.

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

18

---

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. Potential risks and uncertainties include such factors as the financial strength of the economy, and the
retail and catalog industries in general, changes in consumer confidence, the level of consumer spending on motivational-type products, the competitive pricing environment within the
markets that the Company distributes its products, the level of the Company's success in continuing to control costs and the Company's ability to increase certain margins through economics of scale.
An additional risk and uncertainty is the Company's development and introduction of successful new products. Investors are also directed to consider other risks and uncertainties discussed in the
Company's public announcements, reports to shareholders and documents filed by the Company with the Securities and Exchange Commission, including but not limited to Reports on Forms 10-K,
8-K and 10-Q. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The
Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

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 $1,922,000 in variable rate debt. The impact of a 1% change in interest rates on the variable rate debt is approximately $19,000. 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 $2,000,000.

19

---



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is currently one of two named defendants in a case filed by Tower City Properties LTD ("Plaintiff"). Tower City Properties LTD v
Getting The Edge Company and Celex Group, Inc. (now Successories, Inc.) (Case No. CV-435521) was filed in the Common Pleas Court of Cuyahoga County, Cleveland, Ohio on
April 13, 2001 with the Company being served in July of 2001. Plaintiff alleges that: Getting The Edge Company entered into a lease agreement with Plaintiff; Getting The Edge Company is in
default under the lease agreement due to failure to pay rent; and Company guaranteed Getting The Edge Company's performance of the lease terms and obligations. Plaintiff seeks (i) compensatory
damages of $73,779.52 as of April 2, 2001, plus further rent that accrues prior to the trial; (ii) pre-judgment and post-judgment interest of 10% per annum;
(iii) costs; (iv) attorney's fees and (v) such other and further relief as the Court may deem just and equitable. The Company believes it has a meritorious defense and intends to
vigorously defend itself. The Company disputes being a Guarantor and has filed its answer, Affirmative Defense and a Third-Party Complaint against Getting The Edge Company. A pre-trial
court appearance date of February 28, 2002 has been set.

In
a related matter, on August 29, 2001 the Company filed a complaint against Getting The Edge Company and Victor S. Voinovich, Sr. ("Defendants") in the United States District
Court of the Northern District of Illinois in Cook County, Chicago, Illinois (Case No. 01 C 6745). The Company alleges that: Defendants executed franchise agreements, including personal
guarantees, to operate three (3) Successories stores in Ohio; Mr. Voinovich executed a promissory note to the order of the Company; Defendants breached the franchise agreements and
promissory note by non-payment of monies due the Company; and Defendants are infringing on the Company's federally registered trademarks and service marks. The relief sought by the Company
includes: (i) a temporary restraining order, a preliminary injunction and a permanent injunction prohibiting, enjoining and/or restraining Defendants from infringing on the Company's
intellectual property; (ii) an order directing Defendants to eliminate all advertising under the Successories name or the Company's intellectual property; (iii) an order directing
Defendants to render an accounting to the Company of the gross sales by Defendants under the infringing marks; (iv) an award of three times the damages to the Company's goodwill and
intellectual property resulting from Defendant's infringing use of the Company's name and marks; (v) an award of punitive damages from Defendant's of at least $500,000; (vi) an award
from Defendants of attorney's fees, expenses and costs; (vii) an award of the full amount due from Defendants under the franchise agreements and the promissory note of at least $209,495.44 as
of August 27, 2001; and (viii) such other further and different relief as the Court deems just and appropriate. A preliminary injunction against the Defendants became effective on
November 2, 2001.

On
September 25, 2001 the Company filed a complaint against TGMK Group, Inc., TMK Group, Inc. and Terry Keenan. ("Defendants") in the United States District Court
of the Northern District of Illinois in Cook County, Chicago, Illinois (Case No. 01C7405). The Company alleges that: Defendants executed franchise agreements, including personal guarantees, to
operate Successories stores in Illinois; Mr. Keenan executed promissory notes to the order of the Company; Defendants breached the franchise agreements and promissory notes by
non-payment of monies due the Company; and Defendants are infringing on the Company's federally registered trademarks and service marks. The relief sought by the Company includes:
(i) a temporary restraining order, a preliminary injunction and a permanent injunction prohibiting, enjoining and/or restraining Defendants from infringing on the Company's intellectual
property; (ii) an order directing Defendants to eliminate all advertising under the Successories name or the Company's intellectual property; (iii) an order directing Defendants to
render an accounting to the Company of the gross sales by Defendants under the infringing marks; (iv) an award of three times the damages to the Company's goodwill and intellectual property
resulting from Defendant's infringing use of the Company's name and marks; (v) an award of punitive damages

20

---

from Defendant's of at least $500,000; (vi) an award from Defendants of attorney's fees, expenses and costs; (vii) an award of the full amount due from Defendants under the franchise
agreements and the promissory notes of at least $480,350.73 as of September 25, 2001; and (viii) such other further and different relief as the Court deems just and appropriate. A
preliminary injunction against the Defendants became effective on October 10, 2001.

On
October 24, 2001 the Company filed a complaint against Successories of Missouri, Inc. and Chad Everett in the Circuit Court of The Eighteenth Judicial Circuit in
DuPage County, Wheaton, Illinois (Case No. 01AR002620). The Company alleges that: Successories of Missouri executed a promissory note to the order of the Company; Successories of Missouri has
failed to make payments on the Note; and Chad Everett guaranteed Successories of Missouri's performance on the note. The Company seeks $23,577.69 and other amounts that become due and owing. A court
ordered arbitration date of February 20, 2002 has been set.

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

21

---



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: December 17, 2001 | By:                            
|Date: December 17, 2001 | By:                            

22

---

INDEX TO EXHIBITS

|Exhibit No. |     | Description                                                                                                                                                                                                                                                                                                                                       
|----------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |     | Articles of Incorporation of RegistrantAmended and Restated as of October 28, 1999 (14)                                                                                                                                                                                                                                                          
|3.3         |     | By-laws of Registrant (11)                                                                                                                                                                                                                                                                                                                        
|3.4         |     | Amended and Restated Certificate of Designation of Series A and Series B Convertible Preferred Stock (12)                                                                                                                                                                                                                                         
|4.1         |     | Specimen Common Stock Certificate (11)                                                                                                                                                                                                                                                                                                            
|4.2         |     | Specimen Series A Convertible Preferred Stock Certificate (13)                                                                                                                                                                                                                                                                                    
|4.3         |     | Specimen Series B Convertible Preferred Stock Certificate (13)                                                                                                                                                                                                                                                                                    
|10.1        |     | Form of Franchising Agreement (11)                                                                                                                                                                                                                                                                                                                
|10.2        |     | Stock Option Instrument for Arnold M. Anderson dated November 19, 1991 (1)                                                                                                                                                                                                                                                                        
|10.3        |     | Successories, Inc. Amended and Restated Stock Option Plan (17)                                                                                                                                                                                                                                                                                    
|10.4        |     | Joint Venture Agreement with Morrison DFW, Inc. and related documents (3)                                                                                                                                                                                                                                                                         
|10.5        |     | Indemnification Agreement dated April 7, 1999 between the Company and Arnold M. Anderson (10)                                                                                                                                                                                                                                                     
|            |     | 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 (4)                                                                                                                              
|10.7        |     | Common Stock Option Agreement granted to Arnold M. Anderson and Incentive Stock Option Agreement granted to Arnold M. Anderson (4)                                                                                                                                                                                                                
|10.8        | (a) | Employment Agreement with Arnold M. Anderson dated March 1, 1996 (5)                                                                                                                                                                                                                                                                              
|10.8        | (b) | Amendment to Employment Agreement with Arnold M. Anderson dated January 14, 1997 (14)                                                                                                                                                                                                                                                             
|10.8        | (c) | Addendum to Employment Agreement with Arnold M. Anderson dated February 16, 2000 (14)                                                                                                                                                                                                                                                             
|10.9        |     | Employment Agreement with Michael H. McKee dated June 1, 1999 (11)                                                                                                                                                                                                                                                                                
|10.10       |     | Form of Subordinated Note Extensions, Stock Options and Subordination Agreement relating to the extension of $100,000 of Subordinated Notes, and options to purchase 10,000 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 (6)                                                                                                                                                                                                                                                         
|10.12       |     | First Amendment to Credit Agreement between the Company and The Provident Bank dated as of July 16, 1997 (6)                                                                                                                                                                                                                                      
|10.13       |     | Lease Agreement between LaSalle National Trust, N.A. as Trustee under Trust No. 120358 and Celex Group, Inc. (7)                                                                                                                                                                                                                                  

---

|10.14 |  | Second Amendment to Credit Agreement between the Company and The Provident Bank dated as of May 14, 1998 (7)                       
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------
|10.15 |  | Third Amendment to Credit Agreement between the Company and The Provident Bank dated as of September 1, 1998 (8)                   
|10.16 |  | Employment Agreement with Gary Rovansek dated October 29, 1998 (8)                                                                 
|10.17 |  | Fourth Amendment to Credit Agreement between the Company and The Provident Bank dated as of April 28, 1999 (10)                    
|10.18 |  | Warrants to Purchase Common Stock of the Company granted to Provident Financial Group, Inc. dated as of April 29, 1999 (10)        
|10.19 |  | Preferred Stock Purchase Agreement, dated as of May 28, 1999, by and among the Company and the investors (9)                       
|10.20 |  | Registration Rights Agreement, dated as of May 28, 1999, by and among the Company and the investors (9)                            
|10.21 |  | Preferred Stock Purchase Agreement, dated as of October 18, 1999, by and among the Company and the investors (12)                  
|10.22 |  | Amendment No. 1 to the Registration Rights Agreement, dated as of October 18, 1999, by and among the Company and the investors (12)
|10.23 |  | Fifth Amendment to Credit Agreement between the Company and The Provident Bank dated as of April 6, 2000 (15)                      
|10.24 |  | Sixth Amendment to Credit Agreement between the Company and The Provident Bank dated as of August 28, 2000 (16)                    
|10.25 |  | Joint Venture Agreement with Celebrating Excellence of Minnesota, Inc. and related documents (17)                                  
|10.26 |  | Seventh Amendment to Credit Agreement between the Company and The Provident Bank dated as of September 4, 2001 (filed herewith)    
|10.27 |  | Retainer Agreement between the Company and Jack Miller dated April 17,2001 (filed herewith)                                        

---

---

---

QuickLinks