**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

| **ý** | **QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                          |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                  |
|       | **For the Quarterly Period Ended May 3, 2003**                                                                                                                                                                                                                                   |
|       |                                                                                                                                                                                                                                                                                  |
| **OR**     |
|       |                                                                                                                                                                                                                                                                                  |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                         |
|       |                                                                                                                                                                                                                                                                                  |
|       | **For the transition period  from                    to                    ** |

 

**Commission File Number: 0-22834**

 

| **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**                            |   | **60504** |
| (Address of  principal executive offices)                        |   | (Zip Code) |
|                                                             |   |   |
| **(630) 820-7200**                                               |
| (Registrant’s  telephone number, including area code)       |

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports) and (2) has been subject to such filing requirements for the past90 days.    Yes  ý        No o

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange ActRule 12b-2).

Yes o       No ý

 

Registrant had9,966,130 shares of common stock, $.01 par value, outstanding as ofMay 31, 2003.

 

 

----

 

**SUCCESSORIES, INC.**

#### **INDEX TO FORM 10-Q**

#### ** **

| **PART I.**                       | **FINANCIAL INFORMATION** |
|-----------------------------------|---------------------------|
|                              |                      |   |
|                              | Item 1.                   | Financial Statements |
|                              |                      |   |
|                              |                      | Consolidated Balance Sheets |
|                              |                      |   |
|                              |                      | Consolidated  Statements of Operations |
|                              |                      |   |
|                              |                      | Consolidated  Statement of Stockholders’ Equity |
|                              |                      |   |
|                              |                      | Consolidated  Statements of Cash Flows |
|                              |                      |   |
|                              |                      | Notes to  Consolidated Financial Statements |
|                              |                      |   |
|                              | Item 2.                   | Management’s Discussion  and Analysis of Financial Condition and Results of Operations |
|                              |                      |   |
|                              | Item 3.                   | Quantitative  and Qualitative Disclosures About Market Risk |
|                              |                      |   |
|                              | Item 4.                   | Controls  and Procedures |
|                              |                      |   |
| **PART II.**                      | **OTHER INFORMATION**     |
|                              |                      |   |
|                              | Item  1.                  | Legal  Proceedings |
|                              |                      |   |
|                              | Item 6.                   | Exhibits and Reports on  Form 8-K |
|                              |                      |   |
| **SIGNATURES  AND CERTIFICATION** |
|                              |                      |   |
| **INDEX TO EXHIBITS**             |

 

2

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#### **PART  I.   FINANCIAL INFORMATION**

#### ** **

**SUCCESSORIES, INC.**

#### **Consolidated Balance Sheets**

**(Unaudited)**

 
|                                                                                                                                                                                                                                                                                                                                                                       |   | **May 3,  2003** |       | **February 1,  2003** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|----------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                 |   |                  |       |                       |       |
| Current  assets:                                                                                                                                                                                                                                                                                                                                                           |   |                  |       |                       |       |
| Cash  and cash equivalents                                                                                                                                                                                                                                                                                                                                                 |   | $                     | 727,000    |                       | $          | 589,000 |   |
| Accounts  and notes receivable, net                                                                                                                                                                                                                                                                                                                                        |   | 1,654,000             |       | 1,913,000                  |       |
| Inventories,  net                                                                                                                                                                                                                                                                                                                                                          |   | 3,508,000             |       | 3,278,000                  |       |
| Prepaid catalog expenses                                                                                                                                                                                                                                                                                                                                                   |   | 1,264,000             |       | 1,320,000                  |       |
| Other  prepaid expenses                                                                                                                                                                                                                                                                                                                                                    |   | 633,000               |       | 665,000                    |       |
| Total  current assets                                                                                                                                                                                                                                                                                                                                                      |   | 7,786,000             |       | 7,765,000                  |       |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| Restricted  cash                                                                                                                                                                                                                                                                                                                                                           |   | 250,000               |       | 250,000                    |       |
| Property  and equipment, net                                                                                                                                                                                                                                                                                                                                               |   | 1,751,000             |       | 1,993,000                  |       |
| Deferred  financing costs and debt discount, net                                                                                                                                                                                                                                                                                                                           |   | 11,000                |       | 43,000                     |       |
| Intangibles  and other assets, net                                                                                                                                                                                                                                                                                                                                         |   | 638,000               |       | 674,000                    |       |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| TOTAL  ASSETS                                                                                                                                                                                                                                                                                                                                                              |   | $                     | 10,436,000 |                       | $          | 10,725,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                                                             |   |                  |       |                       |       |
| Current  liabilities:                                                                                                                                                                                                                                                                                                                                                      |   |                  |       |                       |       |
| Revolving  credit loan                                                                                                                                                                                                                                                                                                                                                     |   | $                     | 1,953,000  |                       | $          | 1,131,000 |   |
| Accounts  payable                                                                                                                                                                                                                                                                                                                                                          |   | 1,535,000             |       | 1,792,000                  |       |
| Accrued  expenses and deferred income taxes                                                                                                                                                                                                                                                                                                                                |   | 1,371,000             |       | 1,692,000                  |       |
| Total current liabilities                                                                                                                                                                                                                                                                                                                                                  |   | 4,859,000             |       | 4,615,000                  |       |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| Minority  interest                                                                                                                                                                                                                                                                                                                                                         |   | —                |       | 6,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| 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 $2.425 per share plus accrued dividends for Series A ($1,219,998 in the  aggregate) and liquidation value of $15.00 per share plus accrued dividends  for Series B ($1,525,005 in the aggregate) |   | 6,000                 |       | 6,000                      |       |
| Common  stock, $.01 par value; 20,000,000 shares Authorized; 9,910,984 and 9,750,729  shares issued and outstanding, respectively                                                                                                                                                                                                                                          |   | 99,000                |       | 98,000                     |       |
| Common  stock warrants                                                                                                                                                                                                                                                                                                                                                     |   | 2,324,000             |       | 2,324,000                  |       |
| Notes  receivable from stockholders                                                                                                                                                                                                                                                                                                                                        |   | (115,000              | )          | (115,000                   | )          |
| Additional  paid-in capital                                                                                                                                                                                                                                                                                                                                                |   | 33,580,000            |       | 33,556,000                 |       |
| Accumulated  deficit                                                                                                                                                                                                                                                                                                                                                       |   | (30,253,000           | )          | (29,701,000                | )          |
| Accumulated  other comprehensive loss                                                                                                                                                                                                                                                                                                                                      |   | (64,000               | )          | (64,000                    | )          |
| Total  stockholders’ equity                                                                                                                                                                                                                                                                                                                                           |   | 5,577,000             |       | 6,104,000                  |       |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |                       |       |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                           |   | $                     | 10,436,000 |                       | $          | 10,725,000 |   |

 

The accompanyingnotes are an integral part of these statements.

 

3

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**SUCCESSORIES, INC.**

#### **Consolidated Statementsof Operations**

**(Unaudited)**

** **
|                                                                     |   | **Three  Months Ended** | ** **   |
|--------------------------------------------------------------------------|--------|-------------------------|--------------|
|                                                                     |   | **May 3,  2003**   |         | **May 4,  2002** | ** ** |
|                                                                     |   |                    |         |   |   |
| Net  product sales                                                       |   | $                       | 7,860,000    |   | $ | 8,526,000 |   |
| Cost  of goods sold                                                      |   | 3,738,000               |         | 4,178,000 |   |
|                                                                     |   |                    |         |   |   |
| Gross  profit on product sales                                           |   | 4,122,000               |         | 4,348,000 |   |
|                                                                     |   |                    |         |   |   |
| Fees,  royalties and other income                                        |   | 205,000                 |         | 188,000 |   |
|                                                                     |   |                    |         |   |   |
| Gross  margin                                                            |   | 4,327,000               |         | 4,536,000 |   |
|                                                                     |   |                    |         |   |   |
| Operating expenses                                                       |   | 4,743,000               |         | 5,105,000 |   |
|                                                                     |   |                    |         |   |   |
| **Loss from continuing operations before other expense and  income tax** |   | **(416,000**            | **)**        | **(569,000** | **)** |
| Other  income (expense):                                                 |   |                    |         |   |   |
| Interest  expense                                                        |   | (67,000                 | )            | (74,000 | ) |
| Minority  interests in subsidiaries                                      |   | (3,000                  | )            | (10,000 | ) |
| Interest  income                                                         |   | 10,000                  |         | 14,000 |   |
| Other,  net                                                              |   | 12,000                  |         | 1,000 |   |
|                                                                     |   |                    |         |   |   |
| Total  other expense                                                     |   | (48,000                 | )            | (69,000 | ) |
|                                                                     |   |                    |         |   |   |
| Loss  from continuing operations before income tax                       |   | (464,000                | )            | (638,000 | ) |
|                                                                     |   |                    |         |   |   |
| Income  tax expense (benefit)                                            |   | (7,000                  | )            | (106,000 | ) |
|                                                                     |   |                    |         |   |   |
| Loss  from continuing operations                                         |   | (457,000                | )            | (532,000 | ) |
|                                                                     |   |                    |         |   |   |
| Loss  from discontinued operations                                       |   | (40,000                 | )            | (431,000 | ) |
|                                                                     |   |                    |         |   |   |
| **Net loss**                                                             |   | **$**                   | **(497,000** | **)** | **$** | **(963,000** | **)** |
|                                                                     |   |                    |         |   |   |
| Dividend  to preferred shareholders                                      |   | 55,000                  |         | 55,000 |   |
|                                                                     |   |                    |         |   |   |
| Loss  available to common stockholders                                   |   | $                       | (552,000     | ) | $ | (1,018,000 | ) |
|                                                                     |   |                    |         |   |   |
| **Loss  per share (basic and diluted):**                                 |   |                    | ** **   |   | ** ** |
| Loss  from continuing operations                                         |   | $                       | (0.06        | ) | $ | (0.06 | ) |
| Loss  from discontinued operations                                       |   | $                       | (0.00        | ) | $ | (0.05 | ) |
| Net  loss                                                                |   | $                       | (0.06        | ) | $ | (0.11 | ) |

 

The accompanying notes are an integral part of these statements.

 

4

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**SUCCESSORIES, INC.**

#### **Consolidated StatementOf Stockholders’ Equity**

**(Unaudited)**

 
|                                                                                                          |              |       |       |       |       |       |      |   | ** ** | **Common  Stock  Warrants** | ** ** | **Notes  Receivable  From  Stockholders** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Accumulated  Deficit** | ** ** |
|---------------------------------------------------------------------------------------------------------------|-------------------|------------|------------|------------|------------|------------|-----------|--------|------------|-----------------------------|------------|-------------------------------------------|------------|----------------------------------|------------|--------------------------|------------|
| **Convertible  Preferred Stock**                                                                              |              |       |       |       |
|                                                                                                          | **Common  Stock** |
| **Shares**                                                                                                    | ** **        | **Amount** | ** ** | **Shares** | ** ** | **Amount** |
|                                                                                                          |              |       |       |       |       |       |      |   |       |                        |       |                                      |       |                             |       |                     |       |
| Balance  at February 1, 2003                                                                             |              | 604,759    |       | $          | 6,000      |       | 9,750,729 |   | $          | 98,000                      |       | $                                         | 2,324,000  |                             | $          | (115,000                 | )          | $ | 33,556,000 |   | $ | (29,701,000 | ) |
|                                                                                                          |              |       |       |       |       |       |      |   |       |                        |       |                                      |       |                             |       |                     |       |
| Net  loss                                                                                                     |              | —     |       | —     |       | —     |      | — |       | —                      |       | —                                    |       | —                           |       | (497,000                 | )          |
|                                                                                                          |              |       |       |       |       |       |      |   |       |                        |       |                                      |       |                             |       |                     |       |
| Common  Stock transactions:  Common Stock  issued  in conjunction with  Board of Director Fees |              | —     |       | —     |       | 160,255    |      | 1,000  |       | —                      |       | —                                    |       | 24,000                           |       | —                   |       |
|                                                                                                          |              |       |       |       |       |       |      |   |       |                        |       |                                      |       |                             |       |                     |       |
| Preferred  stock transactions:  Preferred stock  dividends                                               |              | —     |       | —     |       | —     |      | — |       | —                      |       | —                                    |       | —                           |       | (55,000                  | )          |
|                                                                                                          |              |       |       |       |       |       |      |   |       |                        |       |                                      |       |                             |       |                     |       |
| Balance  at May 3, 2003                                                                                  |              | 604,759    |       | $          | 6,000      |       | 9,910,984 |   | $          | 99,000                      |       | $                                         | 2,324,000  |                             | $          | (115,000                 | )          | $ | 33,580,000 |   | $ | (30,253,000 | ) |

 
|                                                                                               |   | **Accumulated  Other  Comprehensive  Loss** |    | **Total  Stockholders’  Equity** | ** ** |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------|---------------------------------------|------------|
|                                                                                               |   |                                        |    |                                  |       |
| Balance  at February 1, 2003                                                                  |   | $                                           | (64,000 | )                                     | $          | 6,104,000 |   |
|                                                                                               |   |                                        |    |                                  |       |
| Net  loss                                                                                          |   | —                                      |    | (497,000                              | )          |
|                                                                                               |   |                                        |    |                                  |       |
| Common  Stock transactions:  Common Stock issued  in conjunction  with Board of Director Fees |   | —                                      |    | 25,000                                |       |
|                                                                                               |   |                                        |    |                                  |       |
| Preferred  stock transactions:  Preferred stock dividends                                          |   | —                                      |    | (55,000                               | )          |
|                                                                                               |   |                                        |    |                                  |       |
| Balance  at May 3, 2003                                                                       |   | $                                           | (64,000 | )                                     | $          | 5,577,000 |   |

 

The accompanyingnotes are an integral part of these statements.

 

5

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**SUCCESSORIES, INC.**

#### **Consolidated Statementsof Cash Flows**

**(Unaudited)**

 
|                                                                                     |   | **Three  Months Ended** | ** ** |
|------------------------------------------------------------------------------------------|--------|-------------------------|------------|
|                                                                                     |   | **May 3,  2003**   |       | **May 4,  2002** | ** ** |
| Cash  flows from operating activities:                                                   |   |                    |       |   |   |
| Net  loss                                                                                |   | $                       | (497,000   | ) | $ | (963,000 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities:         |   |                    |       |   |   |
| Depreciation  and amortization                                                           |   | 364,000                 |       | 518,000 |   |
| Amortization of debt discount                                                            |   | 32,000                  |       | 32,000 |   |
| Minority interests in subsidiaries                                                       |   | 3,000                   |       | 10,000 |   |
| Board of Directors’ fees                                                            |   | 15,000                  |       | 25,000 |   |
| Loss  from discontinuing operations                                                      |   | 40,000                  |       | 431,000 |   |
|                                                                                     |   | (43,000                 | )          | 53,000 |   |
|                                                                                     |   |                    |       |   |   |
| Changes in operating assets and liabilities:                                             |   |                    |       |   |   |
| Accounts  and notes receivable                                                           |   | 254,000                 |       | 315,000 |   |
| Inventories                                                                              |   | (230,000                | )          | (331,000 | ) |
| Prepaid  catalog expenses                                                                |   | 56,000                  |       | 176,000 |   |
| Other prepaid expenses                                                                   |   | 32,000                  |       | (210,000 | ) |
| Accounts  payable                                                                        |   | (257,000                | )          | 639,000 |   |
| Accrued  expenses                                                                        |   | (286,000                | )          | (178,000 | ) |
| Other  assets                                                                            |   | (47,000                 | )          | 92,000 |   |
| Net cash (used in) provided by operating activities                                      |   | (521,000                | )          | 556,000 |   |
|                                                                                     |   |                    |       |   |   |
| Cash  flows from investing activities:                                                   |   |                    |       |   |   |
| Proceeds  from notes receivable issued in connection with sale of property and equipment |   | —                  |       | 19,000 |   |
| Purchase  of property and equipment                                                      |   | (16,000                 | )          | (15,000 | ) |
| Net  cash (used in) provided by investing activities                                     |   | (16,000                 | )          | 4,000 |   |
|                                                                                     |   |                    |       |   |   |
| Cash  flows from financing activities:                                                   |   |                    |       |   |   |
| Net  borrowings (repayments) on revolving credit loan                                    |   | 822,000                 |       | (225,000 | ) |
| Distributions to joint venture partners                                                  |   | (33,000                 | )          | (143,000 | ) |
|                                                                                     |   |                    |       |   |   |
| Net  cash provided by (used in) financing activities                                     |   | 789,000                 |       | (368,000 | ) |
|                                                                                     |   |                    |       |   |   |
| Net  cash provided by continuing operations                                              |   | 252,000                 |       | 192,000 |   |
|                                                                                     |   |                    |       |   |   |
| Net cash  used in discontinuing operations                                               |   | (114,000                | )          | (289,000 | ) |
|                                                                                     |   |                    |       |   |   |
| Net increase (decrease) in cash                                                          |   | 138,000                 |       | (97,000 | ) |
|                                                                                     |   |                    |       |   |   |
| Cash  and cash equivalents, beginning of period                                          |   | 589,000                 |       | 602,000 |   |
| Cash  and cash equivalents, end of period                                                |   | $                       | 727,000    |   | $ | 505,000 |   |

 

The accompanyingnotes are an integral part of these statements.

 

6

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**SUCCESSORIES, INC.**

#### **Notes ToConsolidated Financial Statements**

**(Unaudited)**

 

**NOTE 1.  DESCRIPTION OF THE BUSINESS**

 

Successories, Inc.and its subsidiaries (collectively the “Company”) design, manufacture, andmarket a diverse range of motivational and self-improvement products, most ofwhich are the Company’s own proprietary designs.  The Company considers itself a single line of business withproducts that are marketed currently under the *Successories* trade namethrough direct marketing (catalog, electronic commerce and telemarketing),joint venture retail stores, sales to franchisees and wholesale distributionchannels.

 

**NOTE 2.  BASIS OFPRESENTATION**

 

The accompanyingconsolidated financial statements have been prepared, without audit, inaccordance with generally accepted accounting principles for interim financialinformation and in conjunction with the rules and regulations of the Securitiesand Exchange Commission.  Accordingly,they do not include all of the information and footnotes required by generallyaccepted accounting principles for complete financial statements.  In the opinion of management, alladjustments (consisting only of normal recurring matters) considered necessaryfor a fair presentation have been included.

 

The Company’s fiscal yearends on the Saturday closest to January 31.  References to the three months ended May 3, 2003 andMay 4, 2002, refer to the thirteen weeks ended on the dates indicated.

 

Certain prior yearamounts have been reclassified to conform with the current yearpresentation.  The results of operationsfor the three months ended May 3, 2003 are not necessarily indicative ofthe results to be expected for the full year. These financial statements should be read in conjunction with theCompany’s financial statements and notes thereto included in the Company’sAnnual Report on Form 10-K for the fiscal year ended February 1, 2003.

 

**NOTE 3.  STOCK-BASED COMPENSATION**

 

The Companyaccounts for stock-based compensation with employees in accordance withAccounting Principles Board Opinion No. 25, “Accounting for Stock Issued toEmployees,” under which no compensation cost for stock options is recognizedfor stock option awards granted at or above fair market value.  The Company complies with the disclosureprovisions of Statement of Financial Accounting Standards No. 123, “Accountingfor Stock-Based Compensation” (SFAS 123) and Statement of Financial AccountingStandards No. 148 “Accounting for Stock Based Compensation Transition andDisclosure.”

 

The Companyaccounts for stock-based compensation arrangements with non-employees inaccordance with SFAS 123. SFAS 123 established accounting and disclosurerequirements using a fair value-based method of accounting for stock-basedemployee compensation plans.  Under thefair value-based method, compensation cost is measured at the grant date basedon the value of the award, which is calculated using an option pricing model,and is recognized over the service period which is usually the vesting period.

 

7

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The followingtable illustrates the effect on net income (loss) and earnings (loss) per shareif expense was measured using the fair value recognition provisions describedabove:

 
|                                  |   | **Quarter Ended**    |     |
|---------------------------------------|--------|----------------------|----------|
|                                  |   | **May 3, 2003** |     | **May 4, 2002** |   |
|                                  |   |                 |     |   |   |
| Net  loss                             |   |                 |     |   |   |
| As  reported                          |   | $                    | (497,000 | ) | $ | (963,000 | ) |
| Pro  forma                            |   | (510,000             | )        | (1,028,000 | ) |
|                                  |   |                 |     |   |   |
| Basic  and diluted net loss per share |   |                 |     |   |   |
| As  reported                          |   | (0.06                | )        | (0.11 | ) |
| Pro  forma                            |   | (0.06                | )        | (0.12 | ) |
|                                       |        |                      |          |  |  |  |  |

 

**NOTE 4:****                  DISCONTINUEDOPERATIONS**

 

On May 7,2002 in the process of reviewing its strategic options, the Company decided totake immediate steps to develop and implement a plan to close all of its 100%owned retail stores.  The 100% ownedretail store segment, which has not been as profitable as the other segments inthe past few years, reported an operating loss of $(2,826,000) and $(2,039,000)for the years ended February 1, 2003 and February 2, 2002,respectively.

 

As a result, inthe second quarter ended August 3, 2002, the Company started negotiatingearly lease terminations and evaluating asset impairment charges related to the100% owned retail stores.  At February 1,2003, all the 100% Company-owned retail stores were closed.  The results of operations and costsassociated with the Company’s closing the 100% owned retail stores have beenreflected as discontinued operations in the accompanying consolidated financialstatements.

 

The loss fromdiscontinued operations was $40,000 and $431,000 for the quarter endedMay 3, 2003 and May 4, 2002, respectively.  As of May 3, 2003 and February 1, 2003, the assets ofdiscontinued operations were $0 and $5,000, and the liabilities were $0 and$79,000, respectively.  The assets andliabilities of the discontinued operations have been included in theaccompanying consolidated balance sheet.

 

**NOTE 5.  INVENTORIES**

 

Inventories are comprisedof the following:

 
|                           |   | **May 3,  2003** |      | **February 1,  2003** | ** ** |
|--------------------------------|--------|-----------------------|-----------|----------------------------|------------|
|                           |   |                  |      |                       |       |
| Finished goods                 |   | $                     | 2,623,000 |                       | $          | 2,400,000 |   |
| Raw Materials                  |   | 1,236,000             |      | 1,285,000                  |       |
|                           |   | 3,859,000             |      | 3,685,000                  |       |
|                           |   |                  |      |                       |       |
| Less  reserve for obsolescence |   | (351,000              | )         | (407,000                   | )          |
|                           |   | $                     | 3,508,000 |                       | $          | 3,278,000 |   |
|                                |        |                       |           |                            |            |  |  |  |  |  |

 

8

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**NOTE 6.  DEBT**

 

On June 20,1997, the Company entered into a credit facility agreement with The ProvidentBank (the “Bank”), amended most recently on April 25, 2003, which iscomprised of a revolving credit loan, term loan and fixed rate loan.  In conjunction with the credit facilityagreement, warrants to purchase 150,000 shares of the Company’s common stockwere issued to the bank as part of this agreement.  Initially these warrants had exercise prices ranging from $6.19to $9.73 and expiration dates in June 2001; however, the exercise priceswere subsequently adjusted to $2.00 and the expiration dates were extended toJune 2005.  The revolving creditloan provides for maximum borrowings of $3,000,000, and the borrowing base islimited to 80% of eligible receivables plus 45% of eligible inventory. Acommitment fee of 0.25% is payable on the daily unused amount of the maximumrevolving credit commitment.  Thefacility expires on June 30, 2003, and all borrowings under the facilityare secured by substantially all the assets of the Company.  The interest rate on the revolving creditloan is prime plus 2.00%.  Interest ispayable monthly.  The interest rate onthe outstanding revolving credit loan was 6.25% at May 3, 2003.  As of May 3, 2003, available borrowingson the revolving credit loan were $638,000. No amounts were outstanding under the term loan or fixed rate loan atFebruary 1, 2003 or February 2, 2002.

 

On April 25,2003, the Company obtained an amendment to the credit facility to extend thecredit facility expiration from June 1, 2003 to June 30, 2003.  The bank has not given indication that theyintend to renew the agreement.  See Note11 for further information on Management Plans.

 

The creditfacility agreement contains, among other provisions, requirements formaintaining certain earnings levels and financial ratios, limits on capitalexpenditures and additional indebtedness, and use of proceeds from certainequity offerings.  As of May 3,2003, the Company was in compliance with all the debt covenant requirements ofthe credit facility agreement.

 

The weighted averageinterest rates on borrowings outstanding as of May 3, 2003 and May 4,2002 were 6.3% and 6.8% respectively.

 

**NOTE 7.  SUPPLEMENTAL CASH FLOW INFORMATION**

 

Supplemental disclosuresto the statements of cash flows are as follows:

 
|                                          |   | **Three  Months Ended** | ** ** |
|-----------------------------------------------|--------|-------------------------|------------|
|                                          |   | **May 3,  2003**   |       | **May 4,  2002** | ** ** |
| Cash  paid during the period for:             |   |                    |       |   |   |
| Income  taxes                                 |   | $                       | 1,000      |   | $ | 1,000 |   |
| Interest                                      |   | 28,000                  |       | 32,000 |   |
| Non-cash  investing and financing Activities: |   |                    |       |   |   |
| Preferred  stock dividends                    |   | $                       | --         |   | $ | 55,000 |   |

 

9

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**NOTE 8.  LOSS PER SHARE**

 

The computationsof basic and diluted loss per share are as follows:

 
|                                                            |   | **Three  Months Ended** |     |
|-----------------------------------------------------------------|--------|-------------------------|----------|
|                                                            |   | **May 3,  2003**   |     | **May 4,  2002** | ** ** |
| **Numerator for loss from continuing  operations per share:**   |   |                    |     |   |   |
| Loss  from continuing operations                                |   | $                       | (457,000 | ) | $ | (532,000 | ) |
| Preferred  stock dividends                                      |   | (55,000                 | )        | (55,000 | ) |
|                                                            |   |                    |     |   |   |
| Numerator  for loss from continuing operations per share        |   | $                       | (512,000 | ) | $ | (587,000 | ) |
|                                                            |   |                    |     |   |   |
| **Numerator  for loss from discontinued operations per share:** |   | $                       | (40,000  | ) | $ | (431,000 | ) |
|                                                            |   |                    |     |   |   |
| **Numerator  for net loss per share:**                          |   |                    |     |   |   |
| Net  loss                                                       |   | $                       | (497,000 | ) | $ | (963,000 | ) |
| Preferred  stock dividends                                      |   | (55,000                 | )        | (55,000 | ) |
|                                                            |   |                    |     |   |   |
| Numerator  for net loss per share                               |   | $                       | (552,000 | ) | $ | (1,018,000 | ) |
|                                                            |   |                    |     |   |   |
| **Denominator  for loss per share:**                            |   |                    |     |   |   |
| Weighted  average common stock shares                           |   | 9,909,223               |     | 9,313,884 |   |
|                                                            |   |                    |     |   |   |
| **Basic  and diluted loss per share:**                          |   |                    |     |   |   |
| Loss  from continuing operations                                |   | $                       | (0.06    | ) | $ | (0.06 | ) |
| Loss  from discontinued operations                              |   | $                       | (0.00    | ) | $ | (0.05 | ) |
| Net  loss                                                       |   | $                       | (0.06    | ) | $ | (0.11 | ) |

 

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

 

**NOTE 9.  SEGMENT ANDRELATED INFORMATION**

 

The Company has adoptedSFAS No. 131, “Disclosures About Segments of an Enterprise and RelatedInformation.”  This Statementestablishes standards for the way public business enterprises reportinformation about operating segments in annual financial statements and ininterim financial reports issued to shareholders.

 

The Company’s reportablesegments are the various distribution channels used to market its products. TheCompany’s products have similar purposes and uses in each channel ofdistribution, but profitability varies among the channels. The Companyconsiders itself a single line of business with products that are marketedthrough direct marketing (catalog, electronic commerce and telemarketing),retail (100% Company-owned stores) - See Note 4 to the Consolidated FinancialStatements “Discontinued Operations,” wholesale, sales to franchisees channelsand joint venture retail stores.  Inaddition, the Company generated revenue from providing framing services tooutside corporate businesses on a contract fee basis in fiscal 2002.  The Company has four reportable segments –Direct Marketing - *Successories*, Retail Company-owned stores– See Note 4 to the Consolidated Financial Statements “DiscontinuedOperations,” Sales to Franchisees and other segments (Wholesale, ContractFraming and Joint Venture Retail Stores).

 

The accounting policiesof the reportable segments are the same as those described in Note 2 of Notesto Consolidated Financial Statements in the Company’s 10-K.  The Company evaluates the 

 

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performance of itsoperating segments based on income (loss) before other income (expense) andincome taxes.

 

Summarized financialinformation concerning the Company’s reportable segments is shown in thefollowing table.  Certain prior yearamounts have been reclassified to conform with the current year presentationfor the discontinued operations.  The“Corporate” row includes corporate related items not allocated to reportablesegments.

 
|                                      |   | **Net  Sales** |      | **Segment  Profit (Loss)** |   | **Total  Assets** |   | **Capital  Expenditures** |       | **Depreciation  and Amortization** |   |
|-------------------------------------------|--------|----------------|-----------|----------------------------|--------|-------------------|--------|---------------------------|------------|------------------------------------|--------|
|                                      |   |           |      |                       |   |              |   |                      |       |                               |   |
| **Three  Months Ended May 3, 2003:** |   |           |      |                       |   |              |   |                      |       |                               |   |
| Direct  Marketing *Successories*          |   | $              | 7,038,000 |                       | $      | 659,000           |   | $                         | 2,592,000  |                               | $      | — |   | $ | 57,000 |   |
| Sales  to Franchisees                     |   | 399,000        |      | 73,000                     |   | 322,000           |   | —                    |       | 3,000                              |   |
| Other  segments                           |   | 423,000        |      | 71,000                     |   | 438,000           |   | —                    |       | 7,000                              |   |
| Corporate                                 |   | —         |      | (1,260,000                 | )      | 7,084,000         |   | 16,000                    |       | 297,000                            |   |
| CONTINUING  OPERATIONS                    |   | $              | 7,860,000 |                       | $      | (457,000          | )      | $                         | 10,436,000 |                               | $      | 16,000 |   | 364,000 |   |
| Retail  100% owned stores                 |   | $              | —    |                       | $      | (40,000           | )      | $                         | —     |                               | $      | — |   | $ | — |   |
|                                      |   |           |      |                       |   |              |   |                      |       |                               |   |
| **Three  Months Ended May 4, 2002:** |   |           |      |                       |   |              |   |                      |       |                               |   |
| Direct  Marketing *Successories*          |   | $              | 7,328,000 |                       | $      | 838,000           |   | $                         | 3,062,000  |                               | $      | 9,000 |   | $ | 66,000 |   |
| Sales  to Franchisees                     |   | 586,000        |      | 20,000                     |   | 583,000           |   | —                    |       | 3,000                              |   |
| Other  segments                           |   | 612,000        |      | 86,000                     |   | 632,000           |   | —                    |       | 9,000                              |   |
| Corporate                                 |   | —         |      | (1,476,000                 | )      | 9,338,000         |   | 4,000                     |       | 440,000                            |   |
| CONTINUING  OPERATIONS                    |   | $              | 8,526,000 |                       | $      | (532,000          | )      | $                         | 13,615,000 |                               | $      | 13,000 |   | $ | 518,000 |   |
| Retail  100% owned stores                 |   | $              | 1,550,000 |                       | $      | (431,000          | )      | $                         | 1,414,000  |                               | $      | 2,000 |   | $ | 93,000 |   |

 

The Company utilizes itsfacilities and the majority of its assets interchangeably among eachdistribution channel. Assets that relate specifically to a reportable segmenthave been included in the above table. Assets identified to the reportablesegments are primarily cash, receivables, inventory, prepaid catalogs, propertyand equipment, and intangibles.  Theassets of the discontinued operations of the retail 100% owned stores have beenincluded in the accompanying consolidated balance sheet.

 

Thefollowing table presents the details for “Corporate”:

 
|                                                     |   | **Three  Months Ended** | ** ** |
|----------------------------------------------------------|--------|-------------------------|------------|
|                                                     |   | **May 3,  2003**   |       | **May 4,  2002** | ** ** |
|                                                     |   |                    |       |   |   |
| Corporate  administrative expenses                       |   | $                       | 922,000    |   | $ | 1,073,000 |   |
| Unallocated  depreciation and  amortization expense |   | 297,000                 |       | 440,000 |   |
| Other  expenses                                          |   | 48,000                  |       | 69,000 |   |
| Income  tax expense (benefit)                            |   | (7,000                  | )          | (106,000 | ) |
|                                                     |   |                    |       |   |   |
|                                                     |   | $                       | 1,260,000  |   | $ | 1,476,000 |   |

 

Corporateadministrative expenses are primarily charges for those functions notspecifically attributable to any specific segment; these functions include theproduct development, merchandising, information systems, accounting, legal,human resource and executive departments. Included in the expenses associated with these functions are payroll andrelated costs, professional fees, information system maintenance costs, officeoccupancy costs, and property and casualty insurance.

 

The Company’s operationsare principally in North America.  Nosingle foreign country or geographic area is significant to the consolidatedoperations.  Long-lived assets are alllocated in North America.

 

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The Company’s productsinclude distinctive lines of wall decor, desktop accessories, books andstationery, personalized gifts and awards. In addition, the Company sells othermotivational products supplied by third parties.

 

For the three monthsended May 3, 2003 and May 4, 2002, net product sales by productcategories were as follows:

 
|                           |   | **Three  Months Ended** | ** ** |
|--------------------------------|--------|-------------------------|------------|
|                           |   | **May 3,  2003**   |       | **May 4,  2002** | ** ** |
|                           |   |                    |       |   |   |
| Wall  décor               |   | 45.0                    | %          | 42.0 | % |
| Desktop  accessories           |   | 15.0                    | %          | 18.0 | % |
| Books  and stationery          |   | 19.0                    | %          | 19.0 | % |
| Personalized  gifts and awards |   | 21.0                    | %          | 21.0 | % |

 

**NOTE 10.  NEW ACCOUNTING PRONOUNCEMENTS**

 

In May 2003,the FASB issued SFAS No. 149 “Amendment of Statement 133 on DerivativeInstruments and Hedging Activities.” SFAS 149 provides for certain changes in the accounting treatment ofderivative contracts, SFAS No. 149 is effective for contracts entered into ormodified after June 30, 2003, except for certain provisions that relate toSFAS No. 133 Implementation Issues that have been effective for fiscal quartersthat began prior to June 15, 2003, which should continue to be applied inaccordance with their respective effective dates.  The guidance should be applied prospectively.  Management anticipates that the adoption ofSFAS No. 149 will not have a material impact on the Company’s consolidatedfinancial statements.

 

Also inMay 2003, the FASB issued SFAS No. 150, “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity.”  This new statement changes the accountingfor certain financial instruments that, under previous guidance, issuers couldaccount for as equity.  It requires thatthose instruments be classified as liabilities in balance sheets.  Most of the guidance in SFAS 150 iseffective for all financial instruments entered into or modified afterMay 31, 2003, and otherwise is effective at the beginning of the Company’sthird quarter of fiscal 2003. Management anticipates that the adoption of SFAS No. 150 will not have amaterial impact on the Company’s consolidated financial statements.

 

**NOTE 11.  MANAGEMENT PLANS**

 

OnFebruary 13, 2003, the Company announced that it has entered into adefinitive merger agreement with S.I. Acquisition LLC, an Illinois limitedliability company formed principally for the benefit of Jack Miller, theCompany’s Chairman, members of his family and Howard I. Bernstein, a BoardMember of the Company.  The mergeragreement provides that, at the closing of the merger, each outstanding shareof the Company’s common stock will convert into the right to receive $0.30, andeach outstanding share of the Company’s Series B preferred stock will convertinto the right to receive $15 (the stated value of each share of Series Bpreferred stock) plus all accrued and unpaid dividends in cash (other thanCompany series B convertible preferred stock owned by S.I. Acquisition).  As a result of the merger, the Company willbecome a privately held company and its common stock will no longer be quotedon the OTCBB.  Accordingly upon closing,the registration of the Company’s common stock under the Securities ExchangeAct of 1934, as amended, will terminate. After the merger, the Company will continue to operate from itsheadquarters in Aurora, Illinois.  TheCompany may terminate the merger agreement if it receives an acquisitionproposal that is superior to the current transaction.  Upon such 

 

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termination, theCompany would reimburse S.I. Acquisition for its expenses, not to exceed$150,000.  The closing of the merger issubject to various conditions, including shareholder approval.  The Company has solicited shareholderapproval by means of a proxy statement dated May 20, 2003.  A special meeting of shareholders of theCompany has been scheduled on June 19, 2003 for shareholders of record atthe close of business on May 16, 2003.

 

The Company willcontinue its primary focus on sales growth in the direct marketing channel,support of its current franchisees and joint venture retail stores, andservicing its current wholesale business customers.  The current credit facility agreement originally expired onJune 1, 2003 but the bank has agreed to extend the term of the creditfacility to June 30, 2003. The bank has not given indication that theyintend to renew the credit facility agreement. The Company continues discussions with various financing sources forfunding alternatives to its current credit facility, and to date has not beenable to secure alternate financing.  TheCompany is currently in discussions with two banks to obtain a credit facilityin the event the pending merger transaction with S.I. Acquisition LLCcloses.  In each case, the banks arerequiring a personal guarantee or pledge of assets from the Company’s Chairmanof the Board, Jack Miller.  TheCompany’s recurring losses from operations and liquidity issues raisesubstantial doubt about its ability to continue as a going concern.  The financial statements do not include anyadjustments relating to the recoverability and classification of asset-carryingamounts or the amount and classification of liabilities that might resultshould the Company be unable to continue as a going concern.

 

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**ITEM 2.**                                                     MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

On February 13,2003, the Company announced that it has entered into a definitive mergeragreement with S.I. Acquisition LLC, an Illinois limited liability companyformed principally for the benefit of Jack Miller, the Company’s Chairman,members of his family and Howard I. Bernstein, a Board Member of theCompany.  The merger agreement providesthat, at the closing of the merger, each outstanding share of the Company’scommon stock will convert into the right to receive $0.30, and each outstandingshare of the Company’s Series B preferred stock will convert into the right toreceive $15 (the stated value of each share of Series B preferred stock) plusall accrued and unpaid dividends in cash (other than Company series Bconvertible preferred stock owned by S.I. Acquisition).  As a result of the merger, the Company willbecome a privately held company and its common stock will no longer be quotedon the OTCBB.  Accordingly upon closing,the registration of the Company’s common stock under the Securities ExchangeAct of 1934, as amended, will terminate. After the merger, the Company will continue to operate from itsheadquarters in Aurora, Illinois.  TheCompany may terminate the merger agreement if it receives an acquisitionproposal that is superior to the current transaction.  Upon such termination, the Company would reimburse S.I.Acquisition for its expenses, not to exceed $150,000.  The closing of the merger is subject to various conditions,including shareholder approval.  TheCompany has solicited shareholder approval by means of a proxy statement datedMay 20, 2003.  A special meeting ofshareholders of the Company has been scheduled on June 19, 2003 forshareholders of record at the close of business on May 16, 2003.

 

*The following discussion should beread in conjunction with, and is qualified in its entirety by, the ConsolidatedFinancial Statements and Notes thereto included elsewhere in this Report.*

 

Successories designs,manufactures and markets a diverse range of motivational and self-improvementproducts, most of which are the Company’s own proprietary designs.  The Company’s products include distinctivelines of wall decor, desktop accessories, books and stationery, andpersonalized gifts and awards. Successories’ personnel create proprietary artwork and designs that can be used in conjunction with a wide variety ofproducts.  The Company will alsocustomize products to fulfill customers’ special needs.

 

The Company’s productsare currently marketed under its *Successories* trade name through directmarketing (catalog, electronic commerce and telemarketing), sales tofranchisees and wholesale distribution. Although the Company utilizes multiple distribution channels for itsproducts, the Company’s products have similar purposes and uses in each channelof distribution.  The profitabilityvaries among products and distribution channels.  The Company utilizes its facilities interchangeably for eachdistribution channel.  Furthermore, themarketing channels are directed at a single customer base located primarily inNorth America.

 

During the year endedFebruary 1, 2003, the Company closed all of its retail 100% Company-ownedstores – See Note 4 to the Consolidated Financial Statements “DiscontinuedOperations.”  The results of operationsand costs incurred through the year ended February 1, 2003 associated withthe Company’s plan to close the 100% owned retail stores have been reflected asdiscontinued operations in the accompanying consolidated financial statements.  At the end of the first quarter in fiscal2002, the Company discontinued contract-framing services for third partyproducts.  Any future contract framingservices shall be limited primarily to large and multiple unit production runs.

 

For the three monthsended May 3, 2003 and May 4, 2002, net product sales for the variousdistribution channels, as a percentage of total net product sales, were asfollows:

 

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|                              |   | **Three  Months Ended** |   |
|-----------------------------------|--------|-------------------------|--------|
|                              |   | **May 3,  2003**   |   | **May 4,  2002** |   |
| Direct  marketing                 |   | 89.5                    | %      | 72.7 | % |
| Retail  100% Company-owned stores |   | —                  |   | 15.4 | % |
| Sales  to franchisees             |   | 5.1                     | %      | 5.8 | % |
| Other  segments                   |   | 5.4                     | %      | 6.1 | % |

 

The gross profitmargins for direct marketing and retail channels vary due to differences inproduct mix and volume discounts based on order size.  The gross profit margin for sales to the franchisees is lowerthan the direct marketing and retail channels since these sales are generallymade at a significant discount from retail price.

 

**RESULTS OF OPERATIONS**

 

The following table sets forth the results ofoperations for the three months ended May 3, 2003 and May 4, 2002:

 
|                                                             |   | **(Dollars in thousands)** |   |
|------------------------------------------------------------------|--------|----------------------------|--------|
|                                                             |   | **Three  Months Ended**    |   |   |   |
|                                                             |   | **May 3,  2003**      |   | **May 4,  2002** |   | **Increase  (Decrease)** |   |
|                                                             |   | **Amount**                 |   | **%** |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   |
|                                                             |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net  product sales                                               |   | $                          | 7,860  |   | 100.0 | % | $ | 8,526 |   | 100.0 | % | $ | (666 | ) | (7.8 | ) |
| Cost  of goods sold                                              |   | 3,738                      |   | 47.6 |   | 4,178 |   | 49.0 |   | (440 | ) | (10.5 | ) |
| Gross  profit on product sales                                   |   | 4,122                      |   | 52.4 |   | 4,348 |   | 51.0 |   | (226 | ) | (5.2 | ) |
| Fees,  royalties and other income                                |   | 205                        |   | 2.6 |   | 188 |   | 2.2 |   | 17 |   | 9.0 |   |
| Gross  margin                                                    |   | 4,327                      |   | 55.0 |   | 4,536 |   | 53.2 |   | (209 | ) | (4.6 | ) |
| Operating  expenses                                              |   | 4,743                      |   | 60.3 |   | 5,105 |   | 59.9 |   | (362 | ) | (7.1 | ) |
| Loss  from continuing operations before other expenses and taxes |   | (416                       | )      | (5.3 | ) | (569 | ) | (6.7 | ) | 153 |   | 26.9 |   |
| Interest  and other, net                                         |   | (48                        | )      | (0.6 | ) | (69 | ) | (0.8 | ) | (21 | ) | (30.4 | ) |
| Loss  from continuing operations before income taxes             |   | (464                       | )      | (5.9 | ) | (638 | ) | (7.5 | ) | 174 |   | 27.3 |   |
| Income  tax expense (benefit)                                    |   | (7                         | )      | (0.1 | ) | (106 | ) | (1.3 | ) | (99 | ) | (93.4 | ) |
| Loss  from continuing operations                                 |   | (457                       | )      | (5.8 | ) | (532 | ) | (6.2 | ) | 75 |   | 14.1 |   |
| Loss  from discontinued operations                               |   | (40                        | )      | (0.5 | ) | (431 | ) | (5.1 | ) | 391 |   | 90.7 |   |
| Net  loss                                                        |   | $                          | (497   | ) | (6.3 | ) | $ | (963 | ) | (11.3 | ) | $ | 466 |   | 48.4 |   |

 

***Three Months Ended May 3, 2003 (First Quarter 2003),Compared To Three Months Ended May 4, 2002 (First Quarter 2002)***

 

Net product sales were$7,860,000 in the current year first quarter ended May 3, 2003, comparedto $8,526,000 for the corresponding prior year first quarter ended May 4,2002.  The $666,000 or 7.8% decrease innet sales was comprised of $290,000 or 3.9% in direct marketing, sales tofranchisees of $187,000 or 31.9%, and other channels of $189,000 or 30.9%.  The net sales and operations of the retail100% owned stores are reported separately as discontinued operations on theaccompanying consolidated statements of operations and comprehensive loss.

 

The Company’s directmarketing sales in the first quarter 2003 were 3.9% lower than prior year firstquarter 2002.  The decrease in directmarketing sales was as a result of lower response rates on the prospectcatalogs in the current year in comparison to the prior year.  The decrease in sales to franchisees can beprimarily attributed to 11 fewer stores in operation in the current year incomparison to the prior year.  The decreasein net sales in the other channels from year to year can be primarilyattributed to the 

 

15

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Company’s decision madein first quarter 2002 to discontinue contract framing services for third partyproducts, and one fewer joint venture retail store in operation in the currentyear; offset by increase in the sales of wholesale channel as a result of newcustomer sales.

 

Gross margin decreased inthe current year first quarter 2003 to $4,327,000 from $4,536,000 in the prioryear first quarter 2002, as a result of sales decline.  Even though sales declined, gross margin, asa percentage of sales, increased in the current year in comparison to the prioryear.  The improvement in gross marginis the result of change in channel sales mix, and lower material and laborcosts. Also, the lower sales volume in the current year has not significantlyimpacted the fixed product costs per unit due to various manufacturing costreduction efforts undertaken by the Company.

 

Operating expensesdecreased in the current year first quarter 2003 to $4,743,000 from $5,105,000in the prior year first quarter 2002. The decrease in operating expenses from year to year of $362,000 isprimarily in corporate payroll expenses related to workforce reductionsinitiated in the fiscal year 2002 and first quarter 2003, lower depreciationand amortization expense as a result of minimal capital expenditure spending inthe past few years, and variable operating expenses as a result of decline insales volume.

 

The net loss was $497,000in the current year first quarter 2003, compared to $963,000 in thecorresponding prior year first quarter 2002. The loss from continuingoperations improved from the prior year, in spite of lower sales volume, as aresult of improved gross margin and streamlining of operating expenses.  The loss from discontinued operationsdeclined in the current year as a result of all the 100% Company-owned retailstores being closed in the prior year.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company's ongoingcash requirements are for working capital, capital expenditures and debtservice.  The Company expects to rely oncash generated from its operations, supplemented by borrowings available on itsrevolving credit loan (current credit facility expires on June 30, 2003), tofind its cash requirements.

 

Operating activities usedcash of $521,000 in the current year for the three months ended May 3,2003, compared to provided cash of $556,000 in the prior year for the threemonths ended May 4, 2002. The decrease in cash provided from operatingactivities can be attributed primarily to the net change in accounts payablebalance from year to year, offset by improvement in operating results in thecurrent year.  In the current year, theaccounts payable balance decreased in the first quarter as a result of theCompany paying vendors sooner to take advantage of cash discounts.  In the prior year, the accounts payablebalance increased in the first quarter as the Company extended payment termsdue to cash restraints.

 

Investing activities usedcash of $16,000 for the three months ended May 3, 2003, compared toprovided cash of $4,000 for the three months ended May 4, 2002.  The principal use of cash in investingactivities is capital expenditures and the source of cash is proceeds fromsales of property and equipment.  Thecapital expenditures were primarily related to corporate computer systemsupgrades and additional internet website costs. The Company’s current creditfacility limits capital expenditures to $1 million for the fiscal year.

 

Financing activitiesprovided cash of $789,000 for the three months ended May 3, 2003, comparedto used cash of $368,000 for the three months ended May 4, 2002.  Proceeds from net borrowings on the revolvingcredit loan were the primary source of cash. Net repayments on the revolving credit loan were the principal uses ofcash.

 

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The creditfacility with The Provident Bank (the “Bank”) also contains, among otherprovisions, requirements for maintaining certain earnings levels and financialratios, limits on capital expenditures and additional indebtedness, and use ofproceeds from certain equity offerings. As of May 3, 2003, the Company was in compliance with all the debtcovenant requirements of the credit facility agreement.  The current credit facility originallyexpired on June 1, 2003 but the Bank has agreed to extend the term of thecredit facility to June 30, 2003. The Bank has not given indication that they intend to renew the creditfacility agreement.  The Companycontinues discussions with various financing sources for funding alternativesto its current credit facility, and to date has not been able to securealternate financing.  The Company iscurrently in discussions with two banks to obtain a credit facility in theevent the pending merger transaction with S.I. Acquisition LLC closes.  In each case, the banks are requiring apersonal guarantee or pledge of assets from the Company’s Chairman of theBoard, Jack Miller.  In the event themerger transaction does not close and the Company is unable to secureadditional bank borrowings or alternative sources of capital, the Company willhave liquidity issues that raise substantial doubt about the Company’s abilityto continue as a going concern and may consider filing for protection under theUnited States bankruptcy laws.  Thefinancial statements do not include any adjustments relating to therecoverability and classification of asset carrying amounts or the amount andclassification of liabilities that might result should the Company be unable tocontinue to operate as a going concern.

 

**SEASONALITY**

 

The Company’sbusiness is subject to seasonal variations in demand.  Historically, a significant portion of the Company’s sales andnet income have been realized during the period from October throughJanuary.  The effects of seasonality aregreater in the Company’s retail operations as it relates to sales tofranchisees and joint venture retail stores. Most operating expenses are incurred evenly throughout the year,although some selling and administrative expenses are variable depending onsales, and direct marketing catalog advertising expenses as a percentage ofsales are generally higher in the first calendar quarter due to moreprospecting.  The Company’s operatingresults may also vary depending upon such factors as catalog mailings and thetiming of new product introductions and promotions by the Company.  Historically, the Company’s cash requirementsgenerally reach a seasonal peak in the second half of the fiscal year tofinance increased inventory levels needed to meet the third and fourth quartersales demand.

 

**INFLATION**

 

The Company doesnot believe that inflation has had a material impact on its operations duringthe last fiscal quarter.

 

**DISCLOSURE REGARDING FORWARD-LOOKINGSTATEMENTS**

 

This Form 10-Qreport contains forward-looking statements which the Company believes arewithin the meaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. Such forward-looking statements may be deemed to include, among otherthings, 

 

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statementsrelating to anticipated financial performance, the management team,management’s long-term performance goals, channels, programs to reduce costsand enhance asset utilization, banking arrangement and terms, realization ofdeferred tax assets, filing for protection under the United States bankruptcylaws, as well as statements relating to the Company’s operational and growthstrategies.  Although the Companybelieves that the expectations reflected in such forward-looking statements arereasonable, it can give no assurance that such expectations will prove to be accurate,and actual results could differ materially from those addressed inforward-looking statements contained in this Form 10-Q report.  Potential risks and uncertainties includesuch factors as the financial strength of the economy, and the retail and catalogindustries in general, changes in consumer confidence, the level of customerspending on motivational-type products, the competitive pricing environmentwithin the markets that the Company distributes its products, the level of theCompany’s success in continuing to control costs and the Company’s ability toincrease certain margins through economies of scale.  Additional risks and uncertainties include the Company’s abilityto develop and introduce successful new products, generate funds or obtain outsidesources of capital sufficient to meet its current operating and capital needs,as well as consummate the proposed merger. Investors are also directed to consider other risks and uncertaintiesdiscussed in the Company’s public announcements, reports to shareholders anddocuments 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 beconsidered in evaluating forward-looking statements and undue reliance shouldnot be placed on such statements.  TheCompany undertakes no obligation to update or revise any forward-lookingstatements to reflect events or circumstances that may arise after the date onthis report.

 

**ITEM 3.**                                                     QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

** **

The Company is subject tomarket risk associated with adverse changes in interest rates and foreigncurrency exchange rates, but does not hold any market risk sensitiveinstruments for trading purposes.  TheCompany uses variable rate debt, as described in Note 6 of the Notes toConsolidated Financial Statements included herein.  At May 3, 2003, principal exposed to interest rate risk islimited to $1,953,000 in variable rate debt. The variable rate debt level varies periodically, and the maximumborrowing available under the credit facility at May 3, 2003 was$2,591,000.  The impact of a 1% changein interest rates on the variable rate debt is approximately $20,000.  The Company’s exposure to foreign currencyexchange rate risk relates primarily to the financial position and results ofoperations in Canada.  The Company’sexposure to foreign currency exchange rate risk is difficult to estimate due tofactors such as balance sheet accounts, and the existing economic uncertaintyand future economic conditions in the international marketplace.  The Company does not expect significantimpact from foreign currency exchange rate risk.  The Company’s Canadian operations annual sales are approximately$2,000,000.

 

**ITEM 4.**                                                     CONTROLS AND PROCEDURES

 

## **Within90 days prior to the date of filing this quarterly report, the Company’s ChiefExecutive Officer (Interim) and Chief Financial Officer carried out anevaluation under his supervision, with the participation of other members ofmanagement as was deemed appropriate, of the effectiveness of the design andthe operation of the Company’s disclosure controls and procedures ascontemplated by Exchange Act Rule 13a-15. Based upon, and as of the date of that evaluation, the Chief ExecutiveOfficer (Interim) and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures**

## ** **

## **18**

## ****

##  

## **areeffective, in all material respects, in timely alerting them to materialinformation relating to the Company (and its consolidated subsidiaries)required to be included in the periodic reports the Company is required to fileand submit to the SEC under the Exchange Act.**

## ** **

There have been nosignificant changes to the Company’s internal controls or in other factors thatcould significantly affect these controls subsequent to the date that theinternal controls were most recently evaluated.  There were no significant deficiencies or material weaknessesidentified in that evaluation and, therefore, no corrective actions were taken.

 

19

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**PART II.  OTHERINFORMATION**

 

##### **ITEM 1.**                                                     LEGALPROCEEDINGS

##### ** **

There are no materialpending legal proceedings against the Company. The Company is, however, at times involved in routine litigation arisingin the ordinary course of its business and, while the results of suchproceedings cannot be predicted with certainty, the Company believes that thefinal outcome of such matters will not have a material adverse effect on theCompany’s consolidated financial position or results of operations.

 

**ITEM6.****                                                     EXHIBITSAND REPORTS****ON FORM 8-K**

 

(a)                                  SeeIndex to Exhibits immediately following the Signatures page.

 

(b)                                 Noreports on Form 8-K have been filed during the three months ended May 3,2003.

 

20

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#### **SIGNATURES**

#### ** **

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                      | **SUCCESSORIES, INC.**(Registrant) |
|---------------------------|------------------------------------|
|                      |                               |   |
|                      |                               |   |
| Date:  June 17, 2003 | By:                                | /s/ John C. Carroll |   |
|                      |                               | John C. Carroll  Interim President and Chief Executive Officer  (Interim Principal Executive Officer)  Chief Financial and Chief Operating Officer  (Principal Financial and Accounting Officer) |

 

21

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**CERTIFICATION**

 

I, John C.Carroll, Interim President and Chief Executive Officer (Interim PrincipalExecutive Officer), Chief Financial and Chief Operating Officer (PrincipalFinancial and Accounting Officer) of Successories, Inc., certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of Successories, Inc.;

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)              designed such disclosurecontrols and procedures to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)             evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother officers and I have disclosed, based on our most recent evaluation, tothe registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother officers and I have indicated in this quarterly report whether or notthere were significant changes in internal controls or in other factors thatcould significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| Date:  June 17, 2003 | /s/ JOHN C. CARROLL                                                                                                                                                               |   |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                      |                                                                                                                                                                              |
|                      | John C. Carroll                                                                                                                                                                   |
|                      | Interim President and  Chief Executive Officer  (Interim Principal Executive Officer),  Chief Financial and Chief Operating Officer  (Principal Financial and Accounting Officer) |

 

22

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**INDEX TO EXHIBITS**

 
| **Exhibit No.** |   | **Description**                                                                                                                                                                                                                                                                                                                                      |
|-----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 2.1             |   | Agreement and Plan of  Merger by and between S.I. Acquisition LLC and the Registrant, dated as of  February 13, 2003 (21)                                                                                                                                                                                                                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 3.1             |   | Articles of  Incorporation of Registrant - Amended and Restated as of  October 28, 1999 (12)                                                                                                                                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 3.2             |   | By-laws of Registrant  (9)                                                                                                                                                                                                                                                                                                                           |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 3.3             |   | Amendment No. 1 to  By-Laws of Registrant (21)                                                                                                                                                                                                                                                                                                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 3.4             |   | Amended and Restated  Certificate of Designation of Series A and Series B Convertible Preferred  Stock (10)                                                                                                                                                                                                                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.1             |   | Specimen Common Stock  Certificate (9)                                                                                                                                                                                                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.2             |   | Specimen Series A  Convertible Preferred Stock Certificate (11)                                                                                                                                                                                                                                                                                      |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.3             |   | Specimen Series B  Convertible Preferred Stock Certificate (11)                                                                                                                                                                                                                                                                                      |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.1            |   | Form of Franchising  Agreement (9)                                                                                                                                                                                                                                                                                                                   |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.3            |   | Successories, Inc.  Amended and Restated Stock Option Plan (15)                                                                                                                                                                                                                                                                                      |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.4            |   | Joint Venture Agreement  with Morrison DFW, Inc. and related documents (1)                                                                                                                                                                                                                                                                           |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.5            |   | Indemnification  Agreement dated April 7, 1999 between the Company and Arnold M. Anderson  (8)                                                                                                                                                                                                                                                  |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
|            |   | 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, Larry A. Hodges, and Leslie Nathanson  Juris. |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.6            |   | Common Stock Option  Agreement granted to Arnold M. Anderson and Incentive Stock Option Agreement  granted to Arnold M. Anderson (2) *                                                                                                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.7 (a)        |   | Employment Agreement  with Arnold M. Anderson dated March 1, 1996 (3) *                                                                                                                                                                                                                                                                         |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.7 (b)        |   | Amendment to Employment  Agreement with Arnold M. Anderson dated March 1, 1996 (12) *                                                                                                                                                                                                                                                           |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.7 (c)        |   | Amendment to Employment  Agreement with Arnold M. Anderson dated January 14, 1997 (12) *                                                                                                                                                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.7 (d)        |   | Addendum to Employment  Agreement with Arnold M. Anderson dated February 16, 2000 (12) *                                                                                                                                                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.7 (e)        |   | Amendment to Employment  Agreement with Arnold M. Anderson dated October 1, 2001 (18) *                                                                                                                                                                                                                                                         |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.8            |   | Employment Agreement  with Michael H. McKee dated June 1, 1999 (9) *                                                                                                                                                                                                                                                                            |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.9            |   | Credit Agreement  between the Company and The Provident Bank dated as of June 20, 1997 (4)                                                                                                                                                                                                                                                      |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.11           |   | First Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  July 16, 1997 (4)                                                                                                                                                                                                                                  |
|            |   |                                                                                                                                                                                                                                                                                                                                                 |
| 10.12           |   | Lease Agreement between  LaSalle National Trust, N.A. as Trustee under Trust No. 120358 and Celex  Group, Inc. (5)                                                                                                                                                                                                                                   |

 

23

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| 10.13  |   | Second Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  May 14, 1998 (5)                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                       |
| 10.14  |   | Third Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  September 1, 1998 (6)                    |
|   |   |                                                                                                                                       |
| 10.15  |   | Employment Agreement  with Gary Rovansek dated October 29, 1998 (6)                                                                   |
|   |   |                                                                                                                                       |
| 10.16  |   | Fourth Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  April 28, 1999 (8)                      |
|   |   |                                                                                                                                       |
| 10.17  |   | Warrants to Purchase  Common Stock of the Company granted to Provident Financial Group, Inc. dated  as of April 29, 1999 (8)          |
|   |   |                                                                                                                                       |
| 10.18  |   | Preferred Stock  Purchase Agreement, dated as of May 28, 1999, by and among the Company  and the investors (7)                        |
|   |   |                                                                                                                                       |
| 10.19  |   | Registration Rights  Agreement, dated as of May 28, 1999, by and among the Company and the  investors (7)                             |
|   |   |                                                                                                                                       |
| 10.20  |   | Preferred Stock  Purchase Agreement, dated as of October 18, 1999, by and among the  Company and the investors (10)                   |
|   |   |                                                                                                                                       |
| 10.21  |   | Amendment No. 1 to the  Registration Rights Agreement, dated as of October 18, 1999, by and  among the Company and the investors (10) |
|   |   |                                                                                                                                       |
| 10.22  |   | Fifth Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  April 6, 2000 (13)                       |
|   |   |                                                                                                                                       |
| 10.23  |   | Sixth Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  August 28, 2000 (14)                     |
|   |   |                                                                                                                                       |
| 10.24  |   | Joint Venture Agreement  with Celebrating Excellence of Minnesota, Inc. and related documents (16)                                         |
|   |   |                                                                                                                                       |
| 10.25  |   | Seventh Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  September 4, 2001 (17)                 |
|   |   |                                                                                                                                       |
| 10.26  |   | Eighth Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  December 3, 2001 (18)                   |
|   |   |                                                                                                                                       |
| 10.27  |   | Ninth Amendment to  Credit Agreement between the Company and the Provident Bank dated as of  June 13, 2002 (19)                       |
|   |   |                                                                                                                                       |
| 10.28  |   | Retention Agreement  with Gary J. Rovansek dated August 20, 2002 (19)                                                                 |
|   |   |                                                                                                                                       |
| 10.29  |   | Retention Agreement  with John C. Carroll dated August 20, 2002 (19)                                                                  |
|   |   |                                                                                                                                       |
| 10.30  |   | Retention Agreement  with John F. Halpin dated August 20, 2002 (19)                                                                   |
|   |   |                                                                                                                                       |
| 10.31  |   | Retention Agreement  with Michael McKee dated August 20, 2002 (19)                                                                    |
|   |   |                                                                                                                                       |
| 10.32  |   | Retention Agreement  with Gregory J. Nowak dated August 20, 2002 (19)                                                                 |
|   |   |                                                                                                                                       |
| 10.33  |   | Tenth Amendment to  Credit Agreement between the Company and the Provident Bank dated as of  September 11, 2002 (20)                  |

 

24

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| 10.34  |   | Retention Agreement  with James W. Brintnall dated December 5, 2002 (20)                                             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                      |
| 10.35  |   | Eleventh Amendment to  Credit Agreement between the Company and The Provident Bank dated as of  April 25, 2003. (22) |
|   |   |                                                                                                                      |
| 99.1   |   | Certification of Chief  Executive Officer (Interim) and Chief Financial Officer (filed herewith)                          |

 

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* Denotes management contract or compensatory plan or arrangementrequired to be filed as an exhibit.

 

(1)                                  Previouslyfiled with the Company’s Annual Report on Form 10-K for the year endedApril 30, 1994, and incorporated herein by reference.

 

(2)                                  Previouslyfiled with the Company’s Annual Report on Form 10-K for the year endedFebruary 3, 1996, and incorporated herein by reference.

 

(3)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter ended August 3,1996, and incorporated herein by reference.

 

(4)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter endedNovember 1, 1997, and incorporated herein by reference.

 

(5)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter ended May 2,1998, and incorporated herein by reference.

 

(6)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter endedOctober 31, 1998, and incorporated herein by reference.

 

(7)                                  Previouslyfiled with the Company’s Current Report on Form 8-K filed on June 10,1999, reporting date of event June 7, 1999, and incorporated herein byreference.

 

(8)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter ended May 1,1999, and incorporated herein by reference.

 

(9)                                  Previouslyfiled with the Company’s Form 10-Q Report for the quarter ended July 31,1999, and incorporated herein by reference.

 

(10)                            Previouslyfiled with the Company’s Current Report on Form 8-K filed on November 4,1999, reporting date of event October 18, 1999, and incorporated herein byreference.

 

(11)                            Previouslyfiled with the Company’s Form 10-Q Report for the Quarter endedOctober 30, 1999, and incorporated herein by reference.

 

(12)                            Previouslyfiled with the Company’s Annual Report on form 10-K for the year endedJanuary 29, 2000, and incorporated herein by reference.

 

(13)                            Previouslyfiled with the Company’s Form 10-Q Report for the Quarter ended April 29,2000, and incorporated herein by reference.

 

(14)                            Previouslyfiled with the Company’s Form 10-Q Report for the Quarter endedOctober 28, 2000, and incorporated herein by reference.

 

(15)                            Previouslyfiled with the Company’s Proxy Statement Schedule 14A filed on May 31,2001, and incorporated herein by reference.

 

(16)                            Previouslyfiled with the Company’s annual report on Form 10-K for the year endedFebruary 3, 2001, and incorporated herein by reference.

 

(17)                            Previouslyfiled with the Company’s Form 10-Q Report for the Quarter endedNovember 3, 2001, and incorporated herein by reference.

 

(18)                            Previouslyfiled with the Company’s Form 10-K Report for the year ended February 2,2002, and incorporated herein by reference

 

(19)                            Previouslyfiled with the Company’s Form 10-Q Report for the quarter ended August 3,2002, and incorporated herein by reference

 

25

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(20)                            Previouslyfiled with the Company’s Form 10-Q Report for the quarter endedNovember 2, 2002, and incorporated herein by reference

 

(21)                            Previouslyfiled with the Company’s Current Report on Form 8-K dated February 13,2003, and incorporated herein by reference

 

(22)                            Previouslyfiled with the Company’s Current Report on Form 10-K dated February 1,2003, and incorporated herein by reference

 

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