SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                          -----------------------


                                 FORM 10-Q


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

For quarter ended September 30, 2001            Commission File Number 33-24317

                          JORDAN INDUSTRIES, INC.
             (Exact name of registrant as specified in charter)


            Illinois                                            36-3598114
(State or other jurisdiction of                              (I.R.S. Employer
Incorporation or organization)                              Identification No.)


       ArborLake Centre, Suite 550                                60015
         1751 Lake Cook Road                                    (Zip Code)
         Deerfield, Illinois
(address of Principal Executive Offices)


         Registrant's telephone number, including Area Code: (847) 945-5591


Former name, former address and former fiscal year, if changed since last
report: Not applicable.


       Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding twelve (12) months (or for such
shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past ninety (90)
days.

                      Yes     X                  No
                           -------                   -------

       The aggregate market value of voting stock held by non-affiliates of
the Registrant is not determinable as such shares were privately placed and
there is currently no public market for such shares.

       The number of shares outstanding of Registrant's Common Stock as of
November 14, 2001:  98,501.0004.




<PAGE>


                          JORDAN INDUSTRIES, INC.

                                   INDEX


Part I.                                                                Page No.
-------                                                                --------

       Condensed Consolidated Balance Sheets
       at September 30, 2001 (Unaudited), and December 31, 2000           3

       Condensed Consolidated Statements of Operations for the
       Three Months Ended September 30, 2001 and 2000, and
       the Nine Months Ended September 30, 2001 and 2000 (Unaudited)      4

       Condensed Consolidated Statements of Cash Flows for
       the Nine Months Ended September 30, 2001 and 2000 (Unaudited)      5

       Notes to Condensed Consolidated Financial Statements (Unaudited)   6

       Management's Discussion and Analysis of
       Financial Condition and Results of Operations                     16


Part II.

       Other Information                                                 24

       Signatures                                                        25




<PAGE>


                          JORDAN INDUSTRIES, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                  September 30,    December 31,
                                                      2001             2000
                                                     -------          -------
                                                   (unaudited)

ASSETS
Current Assets:
  Cash and cash equivalents                           $22,584         $21,713
  Accounts receivable, net                            123,050         128,265
  Inventories                                         125,761         139,046
  Deferred income taxes                                10,792           9,001
  Prepaid expenses and other current assets            42,932          32,155
                                                       ------          ------
    Total Current Assets                              325,119         330,180

Property, plant and equipment, net                    103,098         107,526
Investments in and advances to affiliates              43,848          42,902
Goodwill, net                                         362,781         371,487
Deferred income taxes                                   1,060           2,851
Other assets                                           36,934          41,755
                                                       ------          ------
    Total Assets                                     $872,840        $896,701
                                                     ========        ========

LIABILITIES AND SHAREHOLDER'S EQUITY
(NET CAPITAL DEFICIENCY)
Current Liabilities:
  Accounts payable                                    $54,151         $68,236
  Accrued liabilities                                  67,248          65,108
  Advance deposits                                      1,394           1,937
  Current portion of long-term debt                    21,261          35,600
                                                       ------          ------
    Total Current Liabilities                         144,054         170,881

Long-term debt                                        822,926         787,694
Other non-current liabilities                          24,742          17,728
Minority interest                                          45             410
Preferred stock                                         2,121           1,998

Shareholder's Equity (net capital deficiency):
Common stock $.01 par value: 100,000 shares
 authorized and 98,501 shares
 outstanding                                                1               1
  Additional paid-in capital                            2,116           2,116
  Accumulated other comprehensive loss                (15,900)        (16,641)
  Accumulated deficit                                (107,265)        (67,486)
                                                     ---------        --------
    Total Shareholder's Equity (net capital
     deficiency)                                     (121,048)        (82,010)
                                                     ---------        --------
    Total Liabilities and Shareholder's
     Equity (net capital deficiency)                 $872,840        $896,701
                                                     ========        ========



See accompanying notes to condensed consolidated financial statements.

                                  3

<PAGE>


                          JORDAN INDUSTRIES, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                      THREE MONTHS ENDED      NINE MONTHS ENDED
                                         September 30,           September 30,
                                      ------------------    -------------------
                                       2001       2000       2001       2000
                                      ------     -------     ------    ------

Net sales                            180,026    $203,798   $547,605  $601,999
Cost of sales, excluding
 depreciation                        115,218     130,604    350,013   382,792
Selling, general and
 administrative expenses,
 excluding depreciation               45,492      42,742    131,140   127,084
Depreciation                           5,890       5,903     17,765    17,195
Amortization of goodwill
 and other intangibles                 3,945       4,092     11,826    12,331
Goodwill impairment                        -      14,636          -    14,636
Management fees and other              6,552          65      9,051       557
                                       -----      -------   -------    ------

Operating income                       2,929       5,756     27,810    47,404

Other (income) expenses:
  Interest expense                    22,559      23,340     68,622    69,292
  Interest income                     (1,026)       (600)    (3,174)   (1,960)
  Other                                  545         969        931     1,571
                                           -           -          -         -
                                      22,078      23,709     66,379    68,903
                                      ------      ------     ------    -------
Loss from continuing operations
  before income taxes and
  minority interest                  (19,149)     (17,953)  (38,569)  (21,499)
Provision (benefit) for income
  taxes                                5,913        1,178     1,452      (310)
                                     -------       -------  -------    -------
Loss from continuing operations
   before minority interest          (25,062)     (19,131)  (40,021)  (21,189)
Minority interest                       (200)        (164)     (365)      503
                                        -----        -----   -------      ---
Loss from continuing operations      (24,862)     (18,967)  (39,656)  (21,692)
Discontinued operations, net of
  taxes                                    -          131         -  (198,690)
                                      -------      -------- --------  --------
Net (loss) income                   $(24,862)    $(19,098) $(39,656)  $176,998
                                     =========    ========= ========  ========



See accompanying notes to condensed consolidated financial statements.

                                 4

<PAGE>


                          JORDAN INDUSTRIES, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                             NINE MONTHS ENDED
                                                              September 30,
                                                          ---------------------
                                                           2001          2000
                                                          ------        ------

Cash flows from operating activities:
 Net (loss) income                                      $(39,656)    $176,998
  Adjustments to reconcile net (loss) income to net
   cash provided by (used in) operating activities:
    Depreciation and amortization                         29,591       43,967
    Amortization of deferred financing fees                3,189        3,800
    Minority interest                                       (365)         154
    Non-cash interest                                     16,516       14,830
    Gain on sale of discontinued operations                    -     (198,690)
    Changes in operating assets and liabilities,
     net of effects from acquisitions:
      Increase in current assets                         (12,799)     (23,396)
      Increase (decrease) in current liabilities           1,239      (28,427)
      Increase in non-current assets                        (959)     (19,616)
      Increase in non-current liabilities                  7,016          133
                                                         --------      --------
        Net cash provided by (used in) operating
         activities                                        3,772      (30,247)


Cash flows from investing activities:
  Proceeds from sale of discontinued operations                -      141,953
  Proceeds from sale of subsidiary                        16,663            -
  Capital expenditures, net                               (9,345)     (11,223)
  Acquisitions of subsidiaries                           (13,238)     (38,873)
  Additional purchase price payments                           -       (3,593)
  Net cash acquired in purchase of subsidiaries               14        1,680
  Other                                                      (11)          28
                                                         --------   ---------
         Net cash (used in) provided by investing
           activities                                     (5,917)      89,972

Cash flows from financing activities:
  Proceeds from (repayment of) revolving credit
   facilities, net                                         9,594      (58,993)
  Repayment of long-term debt                             (7,039)      (3,075)
                                                           -------    -------
        Net cash provided by (used in) financing
          activities                                       2,555      (62,068)

Effect of exchange rate changes on cash                      461       (2,775)
                                                           ------     -------
Net increase (decrease) in cash and cash equivalents         871       (5,118)
Cash and cash equivalents at beginning of period          21,713       20,417
                                                          ------       ------
Cash and cash equivalents at end of period               $22,584      $15,299
                                                         =======      =======


See accompanying notes to condensed consolidated financial statements.

                                   5
<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

A.  Organization
----------------

The unaudited condensed consolidated financial statements, which reflect
all adjustments that management believes necessary to present fairly the
results of interim operations and are of a normal recurring nature, should
be read in conjunction with the Notes to the Consolidated Financial
Statements (including the Summary of Significant Accounting Policies)
included in the Company's audited consolidated financial statements for the
year ended December 31, 2000, which are included in the Company's Annual
Report filed on Form 10-K for such year (the "2000 10-K"). Results of
operations for the interim periods are not necessarily indicative of annual
results of operations.

B.  Accounting Policies - New Pronouncements
--------------------------------------------

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will
be subject to annual impairment tests in accordance with the Statements.
Other intangible assets will continue to be amortized over their useful
lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of
the nonamortization provisions of the Statement is expected to result in an
increase in pretax income of approximately $16.0 million per year. During
2002, the Company will perform the first of the required impairment tests
of goodwill and indefinite lived intangible assets as of January 1, 2002
and has not yet determined what the effect of these tests will be on the
earnings and financial position of the Company.

C.  Inventories
---------------

Inventories are summarized as follows:

                                      September 30,           December 31,
                                           2001                   2000
                                       ------------           ------------

       Raw materials                     $52,288                $ 51,814
       Work-in-process                    17,702                  16,760
       Finished goods                     55,771                  70,472
                                         -------                --------
                                        $125,761                $139,046
                                        ========                ========

D.  Comprehensive Income
------------------------

Total comprehensive (loss) income for the quarters and nine months ended
September 30, 2001 and 2000 is as follows:

                                  Three Months ended        Nine Months ended
                                       September 30,            September 30,
                                 ----------------------    ------------------
                                   2001        2000          2001      2000
                                 --------    --------      --------  ---------

Net (loss) income                $(24,862)   $(19,098)    $(39,656)  $176,998
Foreign currency translation         (795)        847          741     (6,381)
                                     ----        -----     --------  ---------
Comprehensive (loss) income      $(25,657)    $(18,251)   $(38,915)  $170,617
                                 =========    =========    =========  ========



                                 6
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

E.  Sale of Subsidiaries
------------------------

On February 2, 2001, the Company sold the assets of Riverside to a
third-party for cash proceeds of $16,663. Riverside is a publisher of
Bibles and a distributor of Bibles, religious books and music recordings.
The cash proceeds were used to pay off the Company's Revolving Credit
Facility. The Company recognized a loss on the sale of $2,798, which was
recorded in the 2000 financial statements.

F.  Acquisition and Formation of Subsidiaries
---------------------------------------------

On July 23, 2001, the Company purchased the customer lists of The George
Kreisler Corporation ("Kreisler") for $200 in cash. Kreisler has been fully
integrated into Pamco.

On July 3, 2001, the Company purchased the assets of Pioneer Paper Corp.
("Pioneer"). Pioneer is a manufacturer of printed folding paperboard boxes,
insert packaging, and blister pack cards. The Company paid $2,734 in cash
for the assets. The purchase price was preliminarily allocated to accounts
receivable of $1,343, inventory of $298, property plant and equipment of
$1,000, net operating liabilities of $(303), and resulted in an excess
purchase price over identifiable assets of $396.

On June 30, 2001, the Company purchased Atco Products ("Atco"). Atco is a
manufacturer of air-conditioning components for the automotive aftermarket,
heavy duty truck OEs and international markets. The Company paid $7,200 in
cash for the assets of Atco. The purchase price has been preliminarily
allocated to working capital of $4,120 and property plant and equipment of
$3,080.

On March 7, 2001, the Company purchased the assets of J.A. Larson Company
("JA Larson"). JA Larson is a flexographic printer of pressure sensitive
labels, tags and seals, which are manufactured in a wide variety of shapes
and sizes. JA Larson is fully integrated into Pamco. The Company paid $383
in cash for the assets. The purchase price was allocated to inventory of
$100, property and equipment of $20 and resulted in an excess purchase
price over identifiable assets of $263.

In December 2000, the Company formed GramTel Communications, Inc.
("GramTel"). GramTel is an information technology infrastructure
outsourcing company that allows its customers to transfer, protect and
store their mission critical data at regionally located Secure Network
Access Centers. The Company has invested $4,696 in GramTel through
September 30, 2001 for property, equipment and other start-up related
expenses.

On October 23, 2000, the Company purchased the stock of Flavorsource, Inc.
("Flavorsource") for $10,809 including costs directly related to the
transaction. Flavorsource is a developer and compounder of flavors for use
in beverages of all kinds, including coffee, tea, juices, bar mixes, sodas,
and cordials, as well as in nutritional foods, bakery products and ice
cream and dairy products. The acquisition was financed with $9,559 in cash
and a $1,250 subordinated seller note. The purchase price has been
allocated to working capital of $270 and property, plant and equipment of
$66, and resulted in an excess purchase price over net identifiable assets
of $10,473.



                                  7

<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

On October 10, 2000, the Company purchased the assets of Internet Services
of Michigan, Inc. ("ISMI") for $1,181. ISMI is an Internet service provider
with approximately 9,500 customers located in Michigan. ISMI offers
standard dial up resources as well as high-speed Internet connections such
as DSL, Satellite and ISDN. ISMI also provides website development and
creation services and web hosting features. The acquisition was financed
with cash and the purchase price has been allocated to net operating
liabilities of $(659), and property, plant and equipment of $350, and
resulted in an excess purchase price over net identifiable assets of
$1,490.

On June 2, 2000, the Company purchased Instachange Displays Limited and
Pique Display Systems, Inc. (collectively "IDL") for approximately $12,805
including costs directly related to the transaction. IDL is Canada's
leading manufacturer and distributor of point-of-purchase display and
retail merchandising products. The acquisition was financed with $10,316 of
cash and a $2,489 subordinated seller note. The purchase price has been
allocated to working capital of $1,629, and property, plant and equipment
of $1,389, and resulted in an excess purchase price over net identifiable
assets of $9,787. IDL is a division of Deflecto.

On March 14, 2000, the Company purchased Online Environs, Inc. ("Online
Environs"), an international Internet business solutions developer and
consultant, for $5,093 including costs directly associated with the
transaction. The acquisition was financed with $3,593 in cash and a $1,500
subordinated seller note. Online Environs' digital communications solutions
are designed to help clients increase sales, improve communications, and
create and enhance business identities over the Internet, commonly known as
eBusiness. The purchase price has been allocated to working capital of
$258, property, plant and equipment of $194, non current assets of $2, and
long-term liabilities of $(43) and resulted in an excess purchase price
over net identifiable assets of $4,682.

The above acquisitions have been accounted for as purchases and their
operating results have been consolidated with the Company's results since
the respective dates of acquisition. Unaudited pro forma information with
respect to the Company as if the 2001 acquisitions and divestitures had
occurred on January 1, 2001 and 2000 and as if the 2000 acquisitions and
divestitures had occurred on January 1, 2000, is as follows:

                                                      Nine months ended
                                                        September 30,
                                                      2001          2000
                                                      ----          ----

Net sales                                           $553,010      $589,521
Net (loss) income                                   $(27,554)     $(12,599)

G.  Discontinued Operations
---------------------------

On July 25, 1997, the Company recapitalized its investment in Jordan
Telecommunication Products, Inc. ("JTP") and JTP acquired the Company's
telecommunications and data communications products business from the
Company for total consideration of approximately $294,027, consisting of
$264,027 in cash, $10,000 of assumed indebtedness and preferred stock, and
the issuance to the Company of $20,000 aggregate liquidation preference of
JTP Junior Preferred Stock. The Company's stockholders and affiliates and
JTP management invested in and acquired the JTP common stock. As a result
of the recapitalization, certain of the Company's affiliates and JTP
management owned substantially all of the JTP common stock. The Company's
investment in JTP was represented solely by the JTP Junior Preferred Stock.
The JTP Junior Preferred Stock controlled over 80% of JTP's stockholder
voting rights and accreted 95% of JTP's net income or loss. The Company had
obtained an independent opinion as to the fairness, from a financial point
of view, of the recapitalization to the Company and its public bondholders.

                                    8
<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)



On January 18, 2000, the Company's affiliates sold the common stock of JTP
to an unaffiliated third party and the Company sold its interest in the JTP
Junior Preferred Stock for $54,100. The Company also received $6,535 for
reimbursement of expenses, $12,000 for the buyout of the management
services agreements, and $3,900 for an advisory and indemnity fee. The
Company recognized a gain on the sale of its interests in JTP of $187,053
during the first nine months of 2000, net of taxes of approximately
$28,000.

For the period from January 1, 2000 to January 18, 2000, JTP's net sales
were $20,724. The losses from discontinued operations related to JTP in the
Company's Statements of Operations for the period from January 1, 2000 to
January 18, 2000, included income tax expense of $406.

On June 22, 2000, the shareholders of Capita Technologies, Inc. ("Capita")
(including the Company) exchanged their stock in Capita, which included its
subsidiaries Protech, Aurora, Garg, and Raba, for shares in The Interpublic
Group of Companies, Inc. ("IPG") in a reorganization of Capita. In the
reorganization, the Company received registered common shares in IPG having
a value of $10,000 in exchange for its Capita stock. The Company also
received registered common shares in IPG having a value of $60,750 for its
intercompany notes and $2,000 in cash for the buyout of its management
services agreements. The Company's common shares in IPG were sold for cash
of $70,750 in August 2000. In the first nine months of 2000, the Company
recognized a gain, for financial reporting purposes, on the sale of its
stock in IPG of $11,637, net of taxes of $7,000.

For the period from January 1, 2000 to June 22, 2000, Capita's net sales
were $17,225. The losses from discontinued operations related to Capita in
the Company's Statements of Operations for the period from January 1, 2000
to June 22, 2000, included tax expenses of $0.

As a result of the transactions described above, the Jordan
Telecommunication Products segment and the Capita Technologies segment have
been reported as discontinued operations for financial reporting purposes
in accordance with Accounting Principals Board ("APB") Opinion No. 30.

The following table summarizes the Company's discontinued operations:

                                         Three months ended   Nine Months ended
                                            September 30,       September 30,
                                        2001          2000    2001         2000
                                        -----         ----    ----         ----

Loss from discontinued operations
 before income taxes                        -            -        -     $9,190
Provision for income taxes                  -            -        -        406
                                        -----      ------    ------     -------
Net loss from discontinued
 operations                                 -            -        -      9,596
Gain on sale of discontinued
 operations                                 -          131        -   (243,286)
Provision for income taxes                  -            -        -     35,000
                                        -----       -----    ------    -------
Gain on sale, net of taxes                  -          131        -   (208,286)
                                        -----       -----    ------   ---------
Discontinued operations, net of taxes   $   -         $131      $ -  $(198,690)
                                        =====       ======   ======  ==========

                                    9
<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


H.  Investments in JAAI, JSP, and M&G Holdings
----------------------------------------------

JAAI
----

During 1999, the Company completed the recapitalization of Jordan Auto
Aftermarket, Inc. ("JAAI"). As a result of the recapitalization, certain of
the Company's affiliates and JAAI management own substantially all of the
JAAI common stock and the Company's investment in JAAI is represented
solely by the Cumulative Preferred Stock of JAAI. The JAAI Cumulative
Preferred Stock controls over 80% of the combined voting power of JAAI
capital stock outstanding and accretes at plus or minus 97.5% of the
cumulative JAAI net income or net loss, as the case may be, through the
earlier of an Early Redemption Event (as defined) or the fifth anniversary
of issuance (unless redemption is prohibited by a JAAI or Company debt
covenant).

The Company recapitalized JAAI in order to establish JAAI as a more
independent, stand-alone, industry-focused company. The Company continues
to consolidate JAAI and its subsidiaries, for financial reporting purposes,
as subsidiaries of the Company. The Company's consolidation of the results
of JAAI will be discontinued upon redemption of the JAAI Cumulative
Preferred Stock, or at such time as the JAAI Cumulative Preferred Stock
ceases to represent at least a majority of the voting power and a majority
share in the earnings of JAAI and its subsidiaries. The JAAI Cumulative
Preferred Stock is mandatorily redeemable upon certain events and is
redeemable at the option of JAAI, in whole or in part, at any time.

JSP
---

During 1998, the Company recapitalized Jordan Specialty Plastics, Inc.
("JSP"). As a result of the recapitalization, certain of the Company's
affiliates and JSP management own substantially all of the JSP common stock
and the Company's investment in JSP is represented solely by the Cumulative
Preferred Stock of JSP. The JSP Cumulative Preferred Stock controls over
80% of the combined voting power of JSP capital stock outstanding and
accretes at plus or minus 95% of the cumulative JSP net income or net loss,
as the case may be, through the earlier of an Early Redemption Event (as
defined) or the fifth anniversary of issuance (unless redemption is
prohibited by a JSP or Company debt covenant).

The Company continues to consolidate JSP and its subsidiaries, for
financial reporting purposes, as subsidiaries of the Company. The Company's
consolidation of the results of JSP will be discontinued upon redemption of
the JSP Cumulative Preferred Stock, or at such time as the JSP Cumulative
Preferred Stock ceases to represent at least a majority of the voting power
and a majority share in the earnings of JSP and its subsidiaries. The JSP
Cumulative Preferred Stock is mandatorily redeemable upon certain events
and is redeemable at the option of JSP, in whole or in part, at any time.

M&G Holdings
------------

Motors and Gears Holdings, Inc., ("M&G Holdings" or "M&G") along with its
wholly-owned subsidiary, Kinetek, Inc. ("Kinetek") (formerly Motors and
Gears, Inc.), was formed to combine a group of companies engaged in the
manufacturing and sale of fractional and sub-fractional motors and gear
motors primarily to customers located throughout the United States and
Europe.

                                  10

<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

At the end of 1996, M&G was comprised of Merkle-Korff and its wholly-owned
subsidiary, Barber-Colman, and Imperial and its wholly-owned subsidiaries,
Scott and Gear. All of the outstanding shares of Merkle-Korff were
purchased by M&G in September 1995 and the net assets of Barber-Colman were
purchased by Merkle-Korff in March 1996. Barber-Colman was legally merged
into Merkle-Korff as of January 1, 1997 and now operates as a division of
Merkle-Korff. The net assets of Imperial, Scott, and Gear were purchased by
M&G, from the Company, at an arms length basis on November 7, 1996, with
the proceeds from a debt offering. The purchase price was $75,656, which
included the repayment of $6,008 in Imperial liabilities owed to the
Company, and a contingent payment payable pursuant to a contingent earnout
agreement. Under the terms of the contingent earnout agreement, 50% of
Imperial, Scott, and Gear's cumulative earnings before interest, taxes,
depreciation and amortization, as defined, exceeding $50,000 during the
five fiscal years ended December 31, 1996, through December 31, 2000, will
be paid to the Company. The Company was paid $174 for this agreement in the
second quarter of 2001.

As a result of this sale to M&G, the Company recognized approximately
$62,700 of deferred gain at the time of sale for U.S. Federal income tax
purposes. A portion of this deferred gain is recognized as M&G reports
depreciation and amortization over approximately 15 years on the step-up in
basis of those purchased assets. As long as M&G remains in the Company's
affiliated group, the gain recognized and the depreciation on the step-up
in basis should exactly offset each other. Upon any future de-consolidation
of M&G from the Company's affiliated group for U.S. Federal income tax
purposes, any unreported gain would be fully reported and subject to tax.

On May 16, 1997, the Company participated in a recapitalization of M&G
Holdings. In connection with the recapitalization, M&G Holdings issued
16,250 shares of M&G Holdings common stock (representing approximately
82.5% of the outstanding shares of M&G Holdings common stock) to certain
stockholders and affiliates of the Company and M&G Holdings management for
total consideration of $2,200 (of which $1,110 was paid in cash and $1,090
was paid through delivery of 8.0% zero coupon notes due 2007). As a result
of the recapitalization, certain of the Company's affiliates and M&G
Holdings management own substantially all of the M&G Holdings common stock
and the Company's investment in M&G Holdings is represented solely by the
Cumulative Preferred Stock of M&G Holdings (the "M&G Holdings Junior
Preferred Stock"). The M&G Holdings Junior Preferred Stock represents 82.5%
of M&G Holdings' stockholder voting rights and 80% of M&G Holdings' net
income or loss is accretable to the M&G Holdings Junior Preferred Stock.
The Company has obtained an independent opinion as to the fairness, from a
financial point of view, of the recapitalization to the Company and its
public bondholders. The Company continues to consolidate M&G Holdings and
its subsidiaries, for financial reporting purposes, as subsidiaries of the
Company. The M&G Holdings Junior Preferred Stock discontinues its
participation in M&G Holdings' earnings on the fifth anniversary of
issuance. The Company's consolidation of the results of M&G Holdings will
be discontinued upon redemption of the M&G Holdings Junior Preferred Stock,
or at such time as the M&G Holdings Junior Preferred Stock ceases to
represent at least a majority of the voting power and a majority share in
the earnings of M&G Holdings and its subsidiaries. As long as the M&G
Holdings Junior Preferred Stock is outstanding, the Company expects the
vote test to be satisfied. The M&G Holdings Junior Preferred Stock is
mandatorily redeemable upon certain events and is redeemable at the option
of M&G Holdings, in whole or in part, at any time.


                                    11

<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


The Company expects to continue to include M&G Holdings and its
subsidiaries in its consolidated group for U.S. Federal income tax
purposes. This consolidation would be discontinued, however, upon the
redemption of the M&G Holdings Junior Preferred Stock, which could result
in recognition by the Company of substantial income tax liabilities arising
out of the recapitalization. If such deconsolidation had occurred at
September 30, 2001, the Company believes that the amount of taxable income
to the Company attributable to M&G Holdings would have been approximately
$55,000 (or approximately $22,000 of tax liabilities, assuming a 40.0%
combined Federal, state, and local tax rate). The Company currently expects
to offset these tax liabilities arising from deconsolidation with
redemption proceeds from the M&G Holdings Junior Preferred Stock.
Deconsolidation would also occur with respect to M&G Holdings if the M&G
Holdings Junior Preferred Stock ceased to represent at least 80.0% of the
voting power and 80.0% of the combined stock value of the outstanding M&G
Holdings Junior Preferred Stock and common stock of M&G Holdings. As long
as the M&G Holdings Junior Preferred Stock is outstanding, the Company
expects the vote test to be satisfied. The value test depends on the
relative values of the M&G Holdings Junior Preferred Stock and common stock
of M&G Holdings. The Company believes the value test is satisfied at
September 30, 2001. It is possible that on or before the fifth anniversary
of its issuance, the M&G Holdings Junior Preferred Stock would cease to
represent 80.0% of the relevant total combined stock value. In the event
that deconsolidation for U.S. Federal income tax purposes occurs without
redemption of the M&G Holdings Junior Preferred Stock, the tax liabilities
discussed above would be incurred without the Company receiving the
proceeds of the redemption.

I.  Additional Purchase Price Agreements
----------------------------------------

The Company has a deferred purchase price agreement relating to its
acquisition of Yearntree in December 1999. The agreement is based on
Yearntree achieving certain agreed upon cumulative net income before
interest and taxes for the 24 months beginning January 1, 2000 and ending
December 31, 2001. The agreement is payable 30 days after the receipt of
the December 31, 2001 audited financial statements.

The Company also has a deferred purchase price agreement relating to its
acquisition of Teleflow in July 1999. The agreement is based upon Teleflow
achieving certain agreed upon earnings before interest, taxes,
depreciation, and amortization for each year through the year ended
December 31, 2002. The Company paid $260 and $500 related to this agreement
in April 2001 and 2000, respectively.

The Company has a contingent purchase price agreement relating to its
acquisition of Deflecto in 1998. The plan is based on Deflecto achieving
certain earnings before interest and taxes and is payable on April 30,
2008. If Deflecto is sold prior to April 30, 2008, the plan is payable 120
days after the transaction.

The terms of Kinetek's Advanced DC purchase price agreement provides for
additional consideration to be paid if the acquired entity's results of
operations exceed certain targeted levels. Targeted levels were set
substantially above the historical experience of the acquired entity at the
time of acquisition. The contingent payments applied to operations of
fiscal years 1998 and 1999. Kinetek made payments to the previous
shareholders of Advanced DC of $3,200 in March 1999 and $3,100 in March
2000 related to this agreement.


                                 12
<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


Kinetek has a contingent purchase price agreement relating to its
acquisition of Motion Control on December 18, 1997. The terms of the
Company's Motion Control acquisition agreement provide for additional
consideration to be paid if the acquired entity's results of operations
exceed certain targeted levels. Targeted levels are set substantially above
the historical experience of the acquired entity at the time of
acquisition. The agreement becomes exercisable in 2003 and payments, if
any, under the contingent agreement will be placed in a trust and paid out
in cash in equal annual installments over a four year period.

J.  Related Party Transactions
------------------------------

An individual who is shareholder, Director, General Counsel, and Secretary
for the Company is also a partner in a law firm used by the Company. The
firm was paid $534 and $397 in fees and expenses in the first nine months
of 2001 and 2000, respectively. The rates charged to the Company were at
arms-length.

Certain shareholders of TJC Management Corporation ("TJC") are also
shareholders of the Company. On July 25, 1997, a previous agreement with
TJC was amended and restated. This agreement was amended again in December
1999. Effective January 1, 2000, the Company pays TJC a $250 quarterly fee
for management services. The Company accrued fees to TJC of $750 in the
first nine months of 2001 and 2000, respectively, related to this
agreement. These expenses are classified in "management fees and other" in
the Company's statements of operations.

On July 25, 1997, a previous agreement with TJC was amended and restated.
Under the new agreement, the Company pays TJC an investment banking fee of
up to 1%, based on the aggregate consideration paid, for its assistance in
acquisitions undertaken by the Company or its subsidiaries, and a financial
consulting fee not to exceed 0.5% of the aggregate debt and equity
financing that is arranged by the Jordan Company, plus the reimbursement of
out-of-pocket and other expenses. The Company made no payments in either
the first nine months of 2001 or 2000 to TJC for their assistance in
relation to acquisition and refinancing activities. The expenses related to
these services are classified in "management fees and other" in the
Company's statements of operations.

The Company has agreements to provide management and consulting services to
various entities whose shareholders are also shareholders of the Company.
The Company also has agreements to provide investment banking and financial
consulting services to these entities. Fees for management and consulting
services are typically a percentage of the entity's net sales or earnings
before interest, taxes, depreciation and amortization. Fees for investment
banking and financial consulting services are based on the aggregate
consideration paid for acquisitions or the aggregate debt and equity
financing that is arranged by the Company, plus the reimbursement of out-of
pocket and other expenses. Amounts due from affiliated entities as a result
of providing the services described above were $5,615 and $2,469 as of
September 30, 2001 and December 31, 2000, respectively, and are classified
in "prepaid expenses and other current assets" in the Company's balance
sheets. The Company also made unsecured advances to these entities for the
purpose of funding operating expenses and working capital needs. These
advances totaled $12,577 and $9,081 as of September 30, 2001 and December
31, 2000, respectively, and are classified in "prepaid expenses and other
current assets" in the Company's balance sheets.


                             13

<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

K.  Investments in and advances to affiliates
---------------------------------------------

The Company holds 75.6133 shares of Class A PIK Preferred Stock and 151.28
shares of common stock of Fannie May Holdings, Inc. ("Fannie May"),
representing a total investment of $1,721 and approximately 15.1% of the
outstanding common stock of Fannie May on a fully diluted basis. The
Company is accounting for this investment under the cost method. Fannie
May's Chief Executive Officer is Mr. Quinn, and its stockholders include
Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher, who are directors
and stockholders of the Company, as well as other partners, principals, and
associates of the Jordan Company, who are also stockholders of the Company.
Fannie May, which is also known as "Fannie May Candies", is a manufacturer
and marketer of kitchen-fresh, high-end boxed chocolates and other
confectionary items, through its company-owned retail stores and through
specialty sales channels. Its products are marketed under the "Fannie May
Candy", "Fanny Farmer Candy", "Sweet Factory", and "Laura Secord" brand
names.

As of September 30, 2001 and December 31, 2000, the Company had made
approximately $14,736 and $14,446 of unsecured advances to JIR Broadcast,
Inc. and JIR Paging, Inc. Each of these companies' Chief Executive Officer
is Mr. Quinn and its stockholders include Messrs. Jordan, Quinn, Zalaznick,
and Boucher, who are the Company's directors and stockholders, as well as
other partners, principals and associates of The Jordan Company who are
also the Company's stockholders. These companies are engaged in the
development of businesses in Russia, including the broadcast and paging
sectors. The Company receives notes in exchange for these advances, which
bear interest at 12.0%.

In November 1998, the Company, through Kinetek, invested $5,585 in Class A
Preferred Stock and $1,700 in Class B Preferred Stock of JZ International,
Ltd. In April 2000, the Company, through Kinetek, invested an additional
$5,059 in Class A Preferred Stock of JZ International, Ltd. At September
30, 2001 and December 31, 2000, the Company's investment in JZ
International was $12,344. JZ International's Chief Executive Officer is
David W. Zalaznick, and its stockholders include Messrs. Jordan, Quinn,
Zalaznick and Boucher, who are the Company's directors and stockholders, as
well as other partners, principals and associates. JZ International is a
merchant bank located in London, England that is focused on making European
and other international investments. The Company is accounting for this
investment under the cost method. At September 30, 2001, the cost of the
investment approximates market value.

Internet Services Management Group ("ISMG") is an Internet service provider
with over 110,000 customers. ISMG's stockholders include Mr. Jordan, Mr.
Quinn, Mr. Zalaznick, and Mr. Boucher, who are directors and stockholders
of the Company, as well as other partners, principals, and associates of
the Jordan Company, who are also stockholders of the Company. The Company
has a 5% ownership interest in ISMG's common stock and $1,000 of ISMG's 5%
mandatorily redeemable cumulative preferred stock. The Company is
accounting for these investments under the cost method. The Company has
also made unsecured advances to ISMG totaling $11,001 and $10,701 as of
September 30, 2001 and December 31, 2000, respectively, for the purpose of
funding ISMG acquisitions and its working capital needs.


                                 14
<PAGE>

                          JORDAN INDUSTRIES, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


The Company has a 20% limited partnership interest in a partnership that
was formed during 2000 for the purpose of making equity investments
primarily in datacom/telecom infrastructure and software, e-commerce
products and services, and other Internet-related companies. The Company
has a $10,000 capital commitment, of which $1,440 and $1,390 had been
contributed through September 30, 2001 and December 31, 2000, respectively.
The Company is accounting for this investment using the equity method of
accounting. Certain stockholders of the Company are also stockholders in
the general partner of the partnership. The Company has an agreement with
the partnership's general partner to provide management services to the
partnership for annual fees of $1,250.

L.  Business Segment Information
--------------------------------

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for the Company's business segment disclosures.
There have been no changes from the Company's December 31, 2000
consolidated financial statements with respect to segmentation or the
measurement of segment profit or loss.

M.  Income taxes
----------------

The provision (benefit) for income taxes from continuing operations differs
from the amount of income tax provision (benefit) computed by applying the
United States federal income tax rate to income (loss) from continuing
operations before income taxes, minority interest, and extraordinary items.
A reconciliation of the differences is as follows:


                                         Nine Months ended    Nine Months ended
                                        September 30, 2001   September 30, 2000
                                        ------------------   ------------------
Computed statutory tax benefit                $(13,499)          $(7,525)
Increase (decrease) resulting from:
    Increase in valuation allowance             10,953                 -
    Amortization of goodwill                     2,223             1,025
    Goodwill write-off                               -             5,123
    Disallowed meals and entertainment             323               220
    State and local tax and other                1,452               847
                                                 ------           -------
Provision for (benefit from) income
  taxes                                        $ 1,452              $(310)
                                                =======           ========


N.  Kinetek Credit Agreement
----------------------------

On November 6, 2001, Kinetek amended its Credit Agreement to extend the
final maturity date from November 7, 2001 to December 15, 2001 and to
reduce the amount available for borrowing from $75,000 to $40,000. As of
November 14, 2001, Kinetek had $16,000 of borrowings and $100 in letters of
credit outstanding under the Credit Agreement.

O.  Jordan Industries Credit Agreement
--------------------------------------

On August 16, 2001, the Company entered into a new Loan and Security
Agreement with Congress Financial Corporation.  The agreement
replaces, in its entirety, the Company's Revolving Credit Facility
with FleetBoston N.A. The new facility provides for borrowings
up to $110,000 based on the value of certain assets including
inventory, accounts receivable and fixed assets. As of November 14, 2001
the Company had borrowings of $21,439 and letters of credit of $9,963
outstanding under the facility.


                                   15
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the 2000 10-K and the financial statements and the related
notes thereto.

Results of Operations
---------------------

Summarized below are the net sales, operating income and operating margins
(as defined) for each of the Company's business segments for the quarters
ended September 30, 2001 and 2000. This discussion reviews the following
segment data and certain of the consolidated financial data for the
Company.
<TABLE>
<CAPTION>
                                              Three Months Ended        Nine Months Ended
                                                September 30,              September 30,
                                             ---------------------     --------------------
                                             2001            2000       2001         2000
                                             -----          ------     ------       -------


                                        <c>             <c>        <c>         <c>
Net Sales:
Specialty Printing and Labeling             $28,841         $31,345    $80,823      $87,261
Jordan Specialty Plastics                    25,179          25,985     75,475       73,451
Jordan Auto Aftermarket                      37,408          33,265    115,165      109,433
Kinetek                                      70,309          82,131    222,850      244,378
Consumer and Industrial Products             18,289          31,072     53,292       87,476
                                           --------        --------    -------     --------
   Total                                   $180,026        $203,798    547,605     $601,999
                                           ========        ========    =======     ========

Operating Income (Loss):
Specialty Printing and Labeling             $(2,126)         $2,008    $(2,099)     $6,029
Jordan Specialty Plastics                      (106)          1,526      1,740       4,329
Jordan Auto Aftermarket                       4,704           3,853     15,783      14,255
Kinetek                                       9,643          (1,335)    30,833      25,715
Consumer and Industrial Products               (869)            873     (5,423)        948
                                            --------         -------   --------    -------
   Total(a)                                 $11,246          $6,925    $40,834     $51,276
                                            ========         =======   ========    ========

Operating Margin(b)
Specialty Printing and Labeling               (7.4)%           6.4%       (2.6)%      6.9%
Jordan Specialty Plastics                     (0.4)%           5.9%        2.3%       5.9%
Jordan Auto Aftermarket                       12.6%           11.6%       13.7%      13.0%
Kinetek                                       13.7%           (1.6)%      13.8%      10.5%
Consumer and Industrial Products              (4.8)%           2.8%      (10.2)%      1.1%
   Total(a)                                    6.3%            3.4%        7.5%       8.5%

-----------------------------
(a) The total does not include corporate overhead of $1,317 and $1,169 and
advisory fees and other of $7,000 and $0 for the three months ended
September 30, 2001 and 2000, respectively, and corporate overhead of $6,024
and $3,872 and advisory fees and other of $7,000 and $0 for the nine months
ended September 30, 2001 and 2000 respectively.

(b)  Operating margin is operating income (loss) divided by net sales.
</TABLE>


                                   16
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


       Specialty Printing and Labeling. As of September 30, 2001, the
Specialty Printing and Labeling group ("SPL") consisted of JII Promotions,
Valmark, Pamco, and Seaboard.

Net sales for the third quarter of 2001 decreased $2.5 million, or 8.0%,
from the same period in 2000. This decrease was due to lower sales of
calendars and outside specialties at JII Promotions, $1.6 million and $0.6
million, respectively, and decreased sales of screen printed products,
membrane switches and rollstock at Valmark, $0.7 million, $0.3 million and
$0.4 million respectively. Partially offsetting these decreases were higher
sales of labels at Pamco, $0.2 million, and higher sales of folding boxes
at Seaboard, $0.9 million. The decrease in calendar sales at JII Promotions
is due to more calendars being shipped in the first six months of 2001
versus 2000. The production schedule was moved up earlier in the year to
increase productivity and lower overtime throughout the year. Valmark's
sales decrease is due to lower sales to Apple Computer, which has
experienced a downturn resulting from slowing demand for personal
computers. Net sales for the first nine months of 2001 decreased $6.4
million, or 7.4%, from the same period in 2000. This decrease was due to
lower sales of outside specialties and school annuals at JII Promotions,
$4.1 million and $0.3 million, respectively, decreased sales of screen
printed products, shrouds and rollstock at Valmark, $1.4 million, $0.1
million and $0.9 million, respectively, and lower sales of folding boxes at
Seaboard, $0.5 million. Partially offsetting these decreases were increased
sales of calendars at JII Promotions, $0.7 million, higher sales of
membrane switches at Valmark, $0.1 million, and increased sales of labels
at Pamco, $0.1 million. The decrease in outside specialties at JII
Promotions is due to large one-time orders in 2000, which have not been
repeated in 2001. Valmark's decrease is due to the decrease in sales to
Apple Computer mentioned above.

Operating income for the third quarter of 2001 decreased $4.1 million, or
205.9%, from the same period in 2000. Operating income decreased at JII
Promotions, $1.8 million, Valmark, $1.5 million, and Pamco, $1.4 million.
Partially offsetting these decreases was higher operating income at
Seaboard, $0.6 million. The decrease in operating income at JII Promotions
and Valmark is due to the sales decreases mentioned previously, as well as
to the write-off of uncollectible accounts receivable. The decrease at
Pamco is due to losses at the East Coast facility. Operating income for the
first nine months of 2001 decreased $8.1 million, or 134.8%, from the same
period in 2000. Operating income decreased at JII Promotions, $2.6 million,
Valmark, $2.5 million, and Pamco, $3.0 million. The decrease in operating
income is due to lower sales mentioned above, smaller gross profit margins
due to competition in these businesses, and losses at the Pamco East Coast
facility. The Pamco East Coast facility was closed in October 2001.

       Jordan Specialty Plastics. As of September 30, 2001, the Jordan
Specialty Plastics group ("JSP") consisted of Beemak, Sate-Lite, and Deflecto.

Net sales for the third quarter of 2001 decreased $0.8 million, or 3.1%,
from the same period in 2000. This decrease was due to lower sales of
injection molded products at Beemak, $0.2 million, and decreased sales of
office products at Deflecto, $1.2 million. Partially offsetting these
decreases were higher sales of hardware products at Deflecto, $0.6 million.
The decrease in office products at Deflecto is due primarily to the loss of
wall pocket business at Office Depot.


                                    17
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


Deflecto's sales price was undercut by a competitor. Net sales for the
first nine months of 2001 increased $2.0 million, or 2.8%, from the same
period in 2000. This increase was primarily due to higher sales of hardware
products at Deflecto, $3.7 million. Partially offsetting this increase were
lower sales of plastic injection molded products and fabricated products at
Beemak, $1.5 million and $0.2 million, respectively. The decrease in sales
at Beemak is due to lower advertising dollars being spent due to the
slowing economy, and competition from various plastic injection molding
companies.

Operating income for the third quarter of 2001 decreased $1.6 million, or
107.0%, from the same period in 2000. Operating income decreased at Beemak,
$0.2 million, and Deflecto, $1.7 million. Partially offsetting these
decreases was higher operating income at Sate-Lite, $0.3 million. The
decrease in operating income is due to lower sales volumes and the
resulting negative impact to overhead absorption. Operating income for the
first nine months of 2001 decreased $2.6 million, or 59.8%, from the same
period in 2000. Operating income decreased at Beemak, $0.8 million, and
Deflecto, $2.1 million. Partially offsetting these decreases was higher
operating income at Sate-Lite, $0.3 million. Operating income was
negatively impacted by decreased sales as well as the increase in accounts
receivable write-offs due to the depressed economic climate.

       Jordan Auto Aftermarket.  As of September 30, 2001, the Jordan Auto
Aftermarket group ("JAAI") consisted of Dacco, Alma and Atco.

Net sales for the third quarter of 2001 increased $4.1 million, or 12.5%,
from the same period in 2000. This increase is primarily due to the
acquisition of Atco in June 2001. Atco manufactures accumulators, driers,
fittings, hose assemblies, and other air conditioning system components for
the automotive and heavy truck industries. Atco contributed net sales of
$4.1 million in the third quarter of 2001. In addition, sales of air
compressors increased at Alma, $2.0 million, and sales of soft parts
increased at Dacco, $0.2 million. Partially offsetting these increases were
lower sales of rebuilt converters at both Alma and Dacco, $2.2 million. The
increase in air compressor sales is due to the sale of new compressors
through existing sales channels. Rebuilt converter sales decreased due to
reduced demand at Chrysler, which has been hurt by the slowing economy and
inventory reductions. Net sales for the first nine months of 2001 increased
$5.7 million, or 5.2%, from the same period in 2000. This increase was also
primarily due to the acquisition of Atco, as mentioned above. Atco
contributed net sales of $4.1 million in the first nine months of 2001. In
addition, sales of air compressors increased at Alma, $3.6 million, and
sales of soft and hard parts increased at Dacco, $1.2 million and $0.9
million, respectively. Partially offsetting these increases were lower
sales of rebuilt converters and clutches and discs at Alma, $1.0 million
and $1.3 million, respectively, and lower sales of rebuilt converters at
Dacco, $1.8 million. Dacco's increase in sales in soft and hard parts is
due to the addition of four new stores around the country. The Dacco stores
sell to warehouse distributors as well as directly to transmission shops.

Operating income for the third quarter of 2001 increased $0.9 million, or
22.1%, from the same period in 2000. The acquisition of Atco contributed
$0.7 million of operating income in the third quarter of 2001. Operating
income was positively affected by the increase in sales and the purchase of
Atco, which manufactures both air compressors as well as air compressor
parts. Operating income for the irst nine months of 2001 increased $1.5
million, or 10.7% from the same period in 2000. As mentioned above, the
acquisition of Atco contributed operating income in 2001 of $0.7 million.
The remaining increase in operating income was due to the increase in sales
as well as favorable product mix.


                                   18
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


       Kinetek.  As of September 30, 2001, the Kinetek group consisted of
Imperial, Gear, Merkle-Korff, FIR, ED&C, Motion Control and Advanced DC.

Net sales for the third quarter of 2001 declined $11.8 million, or 14.4%,
from the same period in 2000. Net sales for the first nine months of 2001
decreased $21.5 million, or 8.8%, from the same period in 2000. The decline
in sales resulted from general softness in all of the company's principal
markets. The motors segment delivered a 15.7% decrease in third quarter
sales versus 2000, with year to date sales 10.5% below the same period in
2000. Net sales of subfractional motors were down 17.5% for the third
quarter and 17.1% year to date, driven by weak demand for refrigeration
appliance motors and by continued weakness in the bottle and can vending
market. Net sales of fractional/integral motors decreased 14.5% for the
third quarter and 6% for the nine months, compared with the same periods in
2000. The sales declines were led by reduced demand for AC and DC products
used in the floor care end market and by sharp third quarter declines in
sales of DC products used in material handling applications. Moderate sales
declines in Europe during the third quarter were exacerbated by the
negative impact of foreign currency translation on Kinetek's foreign
operations. Net sales in the controls segment fell 10.8% in the third
quarter and 4.0% for the nine month period compared with 2000 performance,
driven by general softness and moderate pricing pressures in the elevator
modernization market.

Operating income for the third quarter of 2001 increased $11.0 million over
the same period in 2000, while operating income for the nine months
increased $5.1 million, or 19.9%, over the same period in 2000. These
increases were primarily due to the write-off of goodwill due to impairment
in the third quarter of 2000. In addition, operating income for the motors
segment decreased 29.2% for the quarter to $9.4 million and decreased 24.5%
to $30.5 million for the year to date period. The operating income of the
controls segment increased 3.3% to $2.6 million for the third quarter and
increased 4.8% to $7.9 million for the nine month period then ended.

       Consumer and Industrial Products. As of September 30, 2001, the
Consumer and Industrial Products group consisted of Cape, Welcome Home,
Cho-Pat, Online Environs, Flavorsource, ISMI and GramTel. Riverside was
sold on February 2, 2001. See Note E to the Condensed Consolidated
Financial Statements.

Net sales for the third quarter of 2001 decreased $12.8 million, or 41.1%,
from the same period in 2000. This decrease was primarily due to the
divestiture of Riverside in February 2001, $12.6 million. In addition,
sales decreased due to lower sales of home accessories at Cape, $1.3
million, decreased retail sales at Welcome Home, $0.1 million, lower sales
of orthopedic supports at Cho-Pat, $0.1 million, and decreased sales of
internet consulting services at Online, $0.7 million. Partially offsetting
these decreases were sales at ISMI, Flavorsource and GramTel, $0.6 million,
$1.3 million and $0.1 million, respectively, due to the acquisition of
these subsidiaries in October 2000, October 2000,and December 2000,
respectively. Cape Craftsmen, a wholesaler of home accessories and gift
items, continues to be plagued by the drop in overall retail sales due to
economic uncertainty and the September 11th tragedy. Net sales for the
first nine months of 2001 decreased $34.2 million, or 39.1%, from the same
period in 2000. This decrease was also primarily due to the divestiture of
Riverside, $34.8 million. In addition, sales decreased due to lower sales
of home accessories at Cape, $2.5 million, decreased retail sales at
Welcome Home, $1.1 million, lower sales of orthopedic supports at Cho-Pat,
$0.4 million, and decreased sales of internet consulting services at


                                   19
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

Online, $1.8 million. Partially offsetting these decreases were sales at
ISMI, Flavorsource, and GramTel due to the acquisition of these
subsidiaries, as mentioned above. ISMI, Flavorsource, and GramTel
contributed sales of $1.8 million, $4.4 million, and $0.2 million,
respectively, in the first nine months of 2001. Cape Craftsmen and Welcome
Home, which has 120 retail stores in factory outlet malls, have been
negatively affected by the poor retail environment. Online has seen a
drastic drop in demand for web site development and web site modifications.

Operating income for the third quarter of 2001 decreased $1.7 million, or
199.5%, from the same period in 2000. This decrease is due to lower
operating income at Cape, $0.3 million, Welcome Home, $0.1 million,
Cho-Pat, $0.1 million, and Online, $0.2 million. In addition, operating
income decreased due to the divestiture of Riverside, $0.2 million, and
start-up costs at GramTel, $0.8 million. The decrease in operating income
is due to sales decreases mentioned above. Operating income for the first
nine months of 2001 decreased $6.4 million when compared to the same period
in 2000. This decrease is due to lower operating income at Cape, $0.9
million, Welcome Home, $1.4 million, Cho-Pat, $0.3 million, and Online,
$1.5 million. In addition, operating income decreased at ISMI and GramTel,
$0.3 million and $1.4 million, respectively, and at Riverside, $1.0
million, due to the sale of the company. Partially offsetting these
decreases was higher operating income at Flavorsource, $0.4 million. The
decrease in operating income is due to the decrease in sales mentioned
previously, as well as a decrease in gross profit margin due to competition
and the negative impact to absorbed overhead resulting from lower sales.

Consolidated Results:  (See Condensed Consolidated Statement of Operations).

Net sales for the third quarter of 2001 decreased $23.8 million, or 11.7%,
from the same period in 2000. This decrease was partially due to lower
sales of calendars and outside specialties at JII Promotions, decreased
sales of screen printed products at Valmark, lower sales of office products
at Deflecto, lower sales of rebuilt converters at both Dacco and Alma,
lower sales of subfractional motors, fractional/integral motors and
controls at Kinetek, and lower sales of home accessories and gift items at
Cape. In addition, sales decreased due to the divestiture of Riverside in
February 2001. Partially offsetting these decreases were higher sales of
folding boxes at Seaboard, increased sales of hardware products at
Deflecto, and increased sales of air compressors at Alma. In addition, the
acquisitions of Atco, ISMI, GramTel, and Flavorsource contributed sales in
the third quarter of 2001. Net sales for the nine months of 2001 decreased
$54.4 million, or 9.0%, from the same period in 2000. This decrease was
partially due to lower sales of outside specialties at JII Promotions,
decreased sales of screen printed products and rollstock at Valmark, lower
sales of plastic injection molded products at Beemak, decreased sales of
rebuilt converters and clutches and discs at Alma, lower sales of
subfractional motors at Kinetek, decreased sales of home accessories and gift
items at Cape, and decreased retail sales at Welcome Home. In addition, sales
decreased due to the sale of Riverside, as mentioned above. Partially
offsetting these decreases were higher sales of calendars at JII Promotions,
increased sales of hardware products at Deflecto, higher sales of air
compressors at Alma, and increased sales of both soft and hard parts at Dacco.
In addition, sales increased due to the acquisitions of Atco, ISMI, GramTel,
and Flavorsource, as mentioned above.


                                    20
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


Consolidated operating income for the third quarter of 2001 decreased $2.8
million, or 49.1%, from the same period in 2000. This decrease was
partially due to lower operating income at JII Promotions, Valmark, Pamco,
Deflecto, Alma, the motors segment of Kinetek, and Cape. In addition,
operating income decreased due to the divestiture of Riverside, as
previously mentioned. Partially offsetting these decreases was higher
operating income at Seaboard, Sate-Lite, and Dacco, as well as to the
acquisitions of Atco, ISMI, GramTel, and Flavorsource. In addition,
operating income increased due to the write-off of goodwill at Kinetek in
the third quarter of 2000. Consolidated operating income for the nine
months of 2001 decreased $19.6 million, or 41.3%, from the same period in
2000. This decrease is primarily due to lower sales levels, lower gross
margins due to heavy competition, increased accounts receivable write-offs,
and start-up costs incurred for expansion. Partially offsetting these
decreases was higher operating income due to favorable product mix and the
acquisitions completed in 2001, as mentioned above.

       Liquidity and Capital Resources.

In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, debt repayment and its acquisition strategy.
Of primary importance are the Company's working capital requirements, which
increase whenever the Company experiences strong incremental demand or
geographical expansion. The Company expects to satisfy its liquidity
requirements through a combination of funds generated from operating
activities and the funds available under its revolving credit facilities.

The Company had approximately $181.1 million of working capital at
September 30, 2001 compared to approximately $159.3 million at the end of
2000. The increase in working capital during the first nine months of 2001
was primarily due to higher prepaids and other current assets of $10.8
million, and lower accounts payable and current portion of long-term debt
of $14.1 million, and $14.3 million, respectively. These increases in
working capital are partially offset by lower accounts receivable and
inventories of $5.2 million and $13.3 million, respectively, and higher
accrued liabilities of $2.1 million.

Operating activities. Net cash provided by operating activities for the
nine months ended September 30, 2001 was $3.8 million compared to net cash
used in operating activities of $30.2 million during the same period in
2000. The increase in cash provided is primarily due to favorable working
capital variances compared with the same period in 2000.

Investing activities. Net cash used in investing activities for the nine
months ended September 30, 2001 was $5.9 million compared to net cash
provided by investing activities of $90.0 million during the same period in
2000. The decrease was primarily due to the proceeds from the sale of
discontinued operations in the prior year.

Financing activities. Net cash provided by financing activities for the
nine months ended September 30, 2001 was $2.6 million compared to net cash
used in financing activities of $62.1 million during the same period in
2000. This change is primarily due to net revolver borrowings of $9.6
million in the current year as compared to net revolver repayments of $59.0
million in the prior year.


                                   21
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)

The Company expects its principal sources of liquidity to be from its
operating activities and funding from its revolving lines of credit. The
Company further expects that these sources will enable it to meet its
long-term cash requirements for working capital, capital expenditures,
interest, taxes, and debt repayment for at least the next twelve months.

The Company is party to various credit agreements under which the Company
is able to borrow up to $133.0 million to fund acquisitions, provide
working capital and for other general corporate purposes. The credit
agreements mature at various dates in 2001 and 2006. The agreements are
secured by a first priority security interest in substantially all of the
Company's assets. As of November 14, 2001, the Company had approximately
$82.1 million of available funds under these arrangements.

The Company may, from time to time, use cash, including cash generated from
borrowings under its credit agreements, to purchase either its 11 3/4%
Senior Subordinated Discount Debentures due 2009 or its 10 3/8% Senior
Notes due 2007, or any combination thereof, through open market purchases,
privately negotiated purchases or exchanges, tender offers, redemptions or
otherwise, and may, from time to time, pursue various refinancing or
financial restructurings, including pursuant to current solicitations and
waivers involving those securities, in each case, without public
announcement or prior notice to the holders thereof, and if initiated or
commenced, such purchases or offers to purchase may be discontinued at any
time.

If the Company's EBITDA and cash flow continue through 2002 at the levels
experienced in the third quarter and the first nine months of 2001, the
Company would barely generate sufficient cash to cover its interest payment
obligations in respect of its bank debt, senior notes and senior
subordinated discount notes (which cease to accrue, and become cash-pay
obligations in the fourth quarter of 2002). This assumes no further
general, economic or industry declines, which may necessitate the Company
to further reduce capital expenditures and acquisitions, and no assurances
can be given that, at the end of 2002, the Company will have sufficient
financial resources to pay its cash interest obligations.

The Company's aggregate business has a certain degree of seasonality. JII
Promotions and Welcome Home's sales are somewhat stronger toward year-end
due to the nature of their products. Calendars at JII Promotions have an
annual cycle and home furnishings and accessories at Welcome Home are
popular holiday gifts.

Quantitative And Qualitative Disclosures About Market Risks

The Company's debt obligations are primarily fixed-rate in nature and, as
such, are not sensitive to changes in interest rates. At September 30,
2001, the Company had $41.3 million of variable rate debt outstanding. A
one percentage point increase in interest rates would increase the annual
amount of interest paid by approximately $0.4 million.  The Company does
not believe that its market risk financial instruments on September 30,
2001 would have a material effect on future operations or cash flows.

The Company is exposed to market risk from changes in foreign currency
exchange rates, including fluctuations in the functional currency of
foreign operations. The functional currency of operations outside the
United States is the respective local currency. Foreign currency
translation effects are included in accumulated other comprehensive income
in shareholder's equity.


                                    22
<PAGE>

                             OTHER INFORMATION



Item 1.           Legal Proceedings
                  -----------------
                  None

Item 2.           Changes in Securities
                  ---------------------
                  None

Item 3.           Defaults upon Senior Securities
                  -------------------------------
                  None

Item 4.           Submission of Matters to a Vote of Security Holders
                  ---------------------------------------------------
                  None

Item 5.           Other Information
                  -----------------
                  None

Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------
                  8-K filed on August 16, 2001 regarding Loan and
                  Security Agreement with Congress Financial
                  Corporation.


                                  23
<PAGE>


                                 SIGNATURES
                                 ----------



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


                                               JORDAN INDUSTRIES, INC.



November 14, 2001                     By:    /s/ Thomas C. Spielberger
                                           ---------------------------
                                               Thomas C. Spielberger
                                                   Senior Vice President,
                                                   Finance and Accounting

                                    24