UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2009

[ ] 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 0-14669

THE ARISTOTLE CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE	06-1165854
(STATE OR OTHER JURISDICTION OF	(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)	IDENTIFICATION NO.)

96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

06902

(ZIP CODE)

(203) 358-8000

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”,” “accelerated filer”,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [X]

Smaller reporting company [ ]

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of ~~August~~November 10, 2009, 17,962,875 shares of Common Stock, 1,081,427 shares of Series I Preferred Stock and 10,984,971 shares of Series J Preferred Stock were outstanding.

THE ARISTOTLE CORPORATION

INDEX OF INFORMATION CONTAINED IN FORM 10-Q FOR THE

QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2009

PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets at June 30, 2009 (unaudited),
		Condensed Consolidated Balance Sheets at September 30, 2009 (unaudited),
			December 31, 2008 and June 30, 2008 (unaudited)	1
			December 31, 2008 and September 30, 2008 (unaudited)	1
		Condensed Consolidated Statements of Earnings for the Three and Six
		Condensed Consolidated Statements of Earnings for the Three and Nine
			Months ended June 30, 2009 and 2008 (unaudited)	2
			Months ended September 30, 2009 and 2008 (unaudited)	2
		Condensed Consolidated Statements of Cash Flows for the Six Months
		Condensed Consolidated Statements of Cash Flows for the Nine Months
			ended June 30, 2009 and 2008 (unaudited)	3
			ended September 30, 2009 and 2008 (unaudited)	3
		Notes to Condensed Consolidated Financial Statements (unaudited)		4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and
			Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		20
	Item 4T.	Controls and Procedures		20
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings		21
	Item 1A.	Risk Factors		21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		21
	Item 3.	Defaults Upon Senior Securities		21
	Item 4.	Submission of Matters to a Vote of Security Holders		21
	Item 5.	Other Information		21
	Item 6.	Exhibits		22

PART I

ITEM 1. FINANCIAL STATEMENTS.

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

Assets					~~June~~September 30, 2009	December 31, 2008	~~June~~September 30, 2008
					(unaudited)		(unaudited)
Current assets:
	Cash and cash equivalents			$	2229,~~905~~690	15,290	67,~~444~~138
	Marketable securities				4,~~040~~220	4,437	32,~~195~~480
	Investments				2,~~927~~996	2,876	21,~~656~~991
	Accounts receivable, net				1724,~~766~~065	14,048	2026,~~902~~175
	Inventories, net				4639,~~257~~716	44,653	4842,~~215~~388
	Prepaid expenses and other				54,~~292~~478	8,542	54,~~034~~000
	Income tax receivable				~~912~~-	5,396	-
	Deferred income taxes				4,~~344~~070	4,644	1,~~879~~788
			Total current assets		~~104~~109,~~443~~235	99,886	~~107~~105,~~325~~960
Property, plant and equipment, net					27,~~514~~530	27,808	28,~~603~~429
Goodwill					1314,~~859~~162	13,712	14,~~358~~186
Deferred income taxes					6,668	6,668	5,646
Investments					4,318	4,318	4,318
Other assets					1,~~046~~127	884	~~604~~817
			Total assets	$	~~157~~163,~~848~~040	153,276	~~160~~159,~~854~~356
Liabilities and Stockholders’ Equity
Current liabilities:
	Current installments of long-term debt			$	~~300~~309	294	~~303~~299
	Trade accounts payable				87,~~952~~820	9,576	119,~~762~~331
	Accrued expenses				12,~~736~~907	11,641	7,~~191~~537
	Income taxes				-2,057	-	~~240~~184
	Accrued dividends payable				~~2,156~~-	2,156	~~2,156~~-
			Total current liabilities		2423,~~144~~093	23,667	2117,~~652~~351
Long-term debt, less current installments					10,~~211~~126	10,364	1110,~~506~~434
Long term pension obligations					5,~~639~~587	5,891	2,~~617~~115
Other long-term accruals					2,~~482~~489	2,467	2,~~449~~458
Stockholders’ equity:
	Preferred stock, Series I, 11% cumulative, $6.00 stated value, $.01 par value;
		2,400,000 shares authorized, 1,081,427 shares issued and outstanding			6,489	6,489	6,489
	Preferred stock, Series J, 12% cumulative, $6.00 stated value; $.01 par value;
		11,200,000 shares authorized, 10,984,971 shares issued and outstanding			65,760	65,760	65,760
	Common stock, $.01 par value; 20,000,000 shares authorized,
		17,962,875 shares issued and outstanding			180	180	180
	Additional paid-in capital				7,690	7,690	7,~~683~~685
	Retained earnings				3843,~~450~~262	34,979	4246,~~278~~985
	Accumulated other comprehensive earnings (loss)				(3,197)	(4,211)	240
	Accumulated other comprehensive loss				(1,636)	(4,211)	(101)
			Total stockholders’ equity		~~115~~121,~~372~~745	110,887	~~122~~126,~~630~~998
			Total liabilities and stockholders’ equity	$	~~157~~163,~~848~~040	153,276	~~160~~159,~~854~~356

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except share and per share data)

(Unaudited)

				Three Months Ended		~~Six~~Nine Months Ended
				June 30,		June 30,
				September 30,		September 30,
				2009	2008	2009	2008
Net sales			$	5161,~~425~~128	5664,~~794~~976	97158,~~726~~854	~~107~~172,~~226~~202
Cost of sales				3037,~~869~~089	3440,~~457~~123	5895,~~351~~440	64105,~~993~~116
		Gross profit		2024,~~556~~039	2224,~~337~~853	3963,~~375~~414	4267,~~233~~086
Selling and administrative expense				1112,~~999~~669	1113,~~791~~178	2336,~~938~~607	2336,~~617~~795
		Earnings from operations		811,~~557~~370	1011,~~546~~675	1526,~~437~~807	1830,~~616~~291
Other (expense) income:
	Interest expense			(~~435~~104)	(~~285~~260)	(~~629~~733)	(~~573~~833)
	Other, net			~~381~~167	~~358~~(428)	~~281~~448	~~590~~162
				(54)	73	(348)	17
				63	(688)	(285)	(671)
		Earnings before income taxes		811,~~503~~433	10,~~619~~987	1526,~~089~~522	1829,~~633~~620
Income taxes:
	Current			4,~~752~~371	4,~~006~~234	711,~~245~~616	610,~~334~~568
	Deferred			~~115~~95	(14109)	61156	~~673~~564
				4,867	3,992	7,306	7,007
				4,466	4,125	11,772	11,132
		Net earnings		36,~~636~~967	6,~~627~~862	714,~~783~~750	1118,~~626~~488
Preferred dividends				2,~~156~~155	2,~~156~~155	46,~~312~~467	46,~~312~~467
		Net earnings applicable to common stockholders	$	14,~~480~~812	4,~~471~~707	38,~~471~~283	712,~~314~~021
Earnings per common share:
	Basic		$	.0827	.2526	.1946	.4167
	Diluted		$	.0827	.2526	.1946	.4167
Weighted average common shares outstanding:
	Basic			17,962,875	17,962,~~706~~875	17,962,875	17,~~961~~962,~~873~~209
	Diluted			17,962,875	17,~~971~~968,~~444~~921	17,962,875	17,~~972~~971,~~490~~305

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

							Six Months Ended
							Nine Months Ended
							June 30,
							September 30,
							2009	2008
Cash flows from operating activities:
	Net earnings					$	714,~~783~~750	1118,~~626~~488
	Adjustments to reconcile net earnings to net cash
		provided by operating activities:
			Depreciation and amortization				1,~~030~~582	~~986~~1,525
			Stock option compensation				-	1012
			Earnings in equity method investment				(51120)	(~~505~~840)
			(Gain) loss on sale of marketable securities				(~~183~~210)	~~150~~741
			Impairment loss on marketable securities				174	-306
			Excess tax benefits from stock-based compensation				-	(24)
			Deferred income taxes				76183	~~538~~563
			Change in assets and liabilities:
				Accounts receivable			(310,~~718~~018)	(510,~~271~~544)
				Inventories			(14,~~604)~~937	(~~5,918~~91)
				Prepaid expenses and other			34,~~250~~064	45,~~577~~611
				Income taxes receivable [how was this number arrived at]			4,483	-
				Income taxes receivable			5,396	-
				Other assets			(~~319~~703)	(5096)
				Trade accounts payable			(~~624~~1,756)	(1,~~262~~169)
				Accrued expenses and other liabilities			15,~~935~~325	~~406~~719
				Accrued pension obligations			(~~252~~304)	(~~327~~829)
					Net cash provided by operating activities		1123,~~980~~300	714,~~460~~372
Cash flows from investing activities:
	Purchases of property, plant and equipment						(~~571~~821)	(2,~~221~~942)
	Purchases of investments						-	(3,040)
	Purchases of marketable securities						-	(~~488~~1,635)
	Proceeds from the sale of marketable securities						~~650~~745	~~478~~1,506
					Net cash provided by (used in) investing activities		79	(5,271)
					Net cash used in investing activities		(76)	(6,111)
Cash flows from financing activities:
	Proceeds from issuance of long-term debt						-	7,500
	Principal payments on long-term debt						(~~147~~223)	(45,~~651~~727)
	Proceeds from issuance of stock under stock option plans						-	94
	Changes in other long-term accruals						1522	2029
	Preferred dividends paid						(48,~~312~~623)	(48,~~312~~623)
					Net cash used in financing activities		(48,~~444~~824)	(16,~~349~~727)
					Net increase in cash and cash equivalents		714,~~615~~400	~~840~~1,534
Cash and cash equivalents at beginning of period							15,290	5,604
Cash and cash equivalents at end of period						$	2229,~~905~~690	67,~~444~~138
Supplemental cash flow information
	Cash paid during periods for:
	Interest					$	~~628~~642	~~414~~766
	Income taxes					$	24,~~752~~146	59,~~549~~822

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2009

(Unaudited)

Organization

The Aristotle Corporation (“Aristotle”) and its subsidiaries (together with Aristotle, the “Company”), founded in 1986, and headquartered in Stamford, CT, is a leading manufacturer and global distributor of educational, health, medical technology and agricultural products. A selection of over 80,000 items is offered, primarily through 50 separate catalogs carrying the brand of Nasco (founded in 1941), as well as those bearing the brands of Life/Form®, Whirl-Pak®, Simulaids, Triarco, Spectrum Educational Supplies, Hubbard Scientific, Scott Resources, Haan Crafts, To-Sew, CPR Prompt®, Ginsberg Scientific and Summit Learning. Products include educational materials and supplies for substantially all K-12 curricula, molded plastics, biological materials and items for the agricultural, senior care and food industries. In addition, the Company offers medical simulators and manikins used for training in cardiopulmonary resuscitation and the fire and emergency rescue and patient care fields. The Company also markets proprietary product lines that provide exclusive distribution rights throughout all of its catalogs. The proprietary product lines are developed internally through the Company’s research and development efforts and acquired externally by licensing rights from third parties.

Geneve Corporation (“Geneve”), a privately-held diversified financial holding company, and two affiliated entities held approximately 90% of Aristotle’s voting power at ~~June~~September 30, 2009 and 2008. In October 2009, documents were mailed to the Company’s stockholders describing a proposed short-form merger transaction pursuant to which the Company would be taken private by Geneve.

Financial Statement Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position as of ~~June~~September 30, 2009 and 2008, results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2009 and 2008 and cash flows for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, as applicable, have been made. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2009 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

3. Principles of Consolidation

All significant intercompany balances and transactions have been eliminated in consolidation.

4. Recently Issued Accounting Pronouncements

InEffective ~~December~~July ~~2008~~1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) ~~issued~~Accounting ~~FASB~~Standards ~~Staff~~Codification ~~Position No. 132~~(R“ASC”) 105-110, ~~Employers’~~Generally ~~Disclosure~~Accepted ~~about~~Accounting ~~Postretirement~~Principles ~~Benefit~~– ~~Plan~~Overall ~~Assets~~ (“~~FSP~~ASC No105-10”). ASC ~~132(R)~~105-110 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). ~~FSP~~Rules ~~No.~~and ~~132~~interpretive releases of the Securities and Exchange Commission (R“SEC”)-1 ~~provides~~under ~~guidance~~authority onof anfederal ~~employer’s~~securities ~~disclosures~~laws ~~about~~are ~~plan~~also ~~assets~~sources of aauthoritative ~~defined~~U.S. ~~benefit~~GAAP ~~pension~~for orSEC ~~other~~registrants. All ~~postretirement~~guidance ~~plan~~contained in the ASC carries an equal level of authority. The ~~disclosures~~ASC ~~required~~superseded byall ~~FSP~~existing Nonon-SEC accounting and reporting standards. All ~~132(R)~~other non-1grandfathered, ~~are~~non-SEC ~~effective~~accounting ~~for~~literature ~~the~~not ~~Company’s~~included ~~financial~~in ~~statements~~the ~~issued~~ASC ~~for~~is ~~2009~~non-authoritative. The ~~adoption~~FASB will not issue new standards in the form of ~~FSP~~Statements, NoFASB Staff Positions or Emerging Issues Task Force Abstracts. Rather, ~~132~~it will issue Accounting Standards Updates (R“ASU”)-1. The ~~did~~FASB will not ~~have~~consider aASUs ~~material~~as ~~impact~~authoritative in their own right. ASUs will serve only to update the ASC, provide background information about the guidance and provide the bases for conclusions on the ~~Company’~~change(s) ~~financial~~in ~~position~~the orASC. References ~~results~~made ofto ~~operations~~FASB guidance throughout this document have been updated for the ASC.

In May 2008, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. The effective date of SFAS No. 162 was 60 days following approval by the U.S Securities and Exchange Commission (“SEC”) on September 16, 2008 of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The adoption of SFAS No. 162 did not have a material impact on the Company’s financial position or results of operations.4

4THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

~~(Unaudited)~~ASC 105-10 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASC 105-10 did not have a material impact on the Company’s financial position or results of operations.

InDuring ~~March~~the ~~2008,~~second ~~FASB~~quarter ~~issued~~of ~~SFAS No. 161~~2009, ~~Disclosures~~the ~~about~~Company ~~Derivative~~adopted ~~Instruments~~FASB ~~and~~ASC ~~Hedging~~855-10, ~~Activities~~Subsequent Events-Overall (“~~SFAS~~ASC ~~No. 161~~855-10”)~~. SFAS~~, ~~No.~~formerly ~~161~~known ~~requires~~as ~~enhanced~~Statement ~~disclosures~~of ~~about~~Financial ~~derivative~~Accounting ~~instruments~~Standards ~~and~~(“SFAS”) ~~hedging~~No. ~~activities~~165, ~~and~~Subsequent ~~their~~Events. ASC ~~effects~~855-10 onestablishes angeneral ~~entity’s~~standards ~~financial~~of ~~position,~~accounting ~~financial~~for ~~performance~~ and ~~cash flows. SFAS No. 161 requires~~ disclosure of ~~objectives~~events ~~and~~that ~~strategies~~occur ~~for~~after ~~derivative~~the ~~instruments,~~balance ~~disclosure~~sheet ofdate ~~the~~but ~~fair~~before ~~values~~financial ofstatements ~~derivative~~are ~~instruments~~issued ~~and~~or ~~their~~are ~~gains~~available ~~and~~to ~~losses~~be inissued. It arequires ~~tabular~~the ~~format and~~ disclosure of ~~contingent~~the ~~derivative~~date ~~features~~through ~~that~~which ~~are~~an ~~credit-risk~~entity ~~related~~has evaluated subsequent events, and ~~requires~~whether ~~cross~~that ~~referencing~~date ~~within~~represents ~~footnotes~~the ifdate the ~~required~~financial ~~disclosures~~statements ~~are~~were ~~presented~~issued inor ~~more~~were ~~than~~available ~~one~~to ~~footnote~~be issued. ~~SFAS~~This ~~No.~~standard ~~161~~ is effective for ~~financial~~interim ~~statements issued for fiscal years~~ and ~~interim~~annual periods ~~beginning~~ending after ~~November~~June 15, ~~2008~~2009. The adoption of ~~SFAS~~ASC ~~No.~~855-10 ~~161~~ did not have a material impact on the Company’s financial position or results of operations.

InDuring ~~December~~the ~~2007~~fourth quarter of 2008, FASB issued ~~SFAS~~updated ~~No.~~guidance ~~141~~related ~~(revised~~to ~~2007),~~employers ~~Business~~disclosures ~~Combinations~~regarding ~~(“SFAS~~postretirement ~~No.~~benefit ~~141R”)~~plan assets, which ~~replaces~~is ~~SFAS~~included ~~No. 141. SFAS No. 141R establishes principles and requirements for recognition and measurement~~ in ~~the~~ASC ~~Company’s~~715-20, ~~financial~~Defined ~~statements~~Benefit ofPlans ~~identifiable~~(“ASC ~~assets acquired~~715-20), ~~liabilities~~formerly ~~assumed,~~known ~~any~~as ~~non-controlling~~FASB ~~interest~~Staff inPosition ~~the~~No. ~~acquired~~132(R)-1, ~~entity~~Employers’ ~~and~~Disclosure ~~goodwill~~about ~~acquired~~Postretirement inBenefit aPlan ~~business combination~~Assets. ~~SFAS~~ ~~No.~~ASC ~~141R~~715-20 ~~also~~provides ~~establishes~~guidance ~~disclosure~~on ~~requirements~~an ~~which~~employer’s ~~will~~disclosures ~~enable~~about ~~readers~~plan toassets ~~evaluate~~of ~~the~~a ~~nature~~defined ~~and~~benefit ~~financial~~pension ~~effects~~or ofother ~~the~~postretirement ~~business combination~~plan. ~~SFAS~~The ~~No.~~disclosures ~~141R~~required isby ASC 715-20 are effective for ~~fiscal~~the ~~years~~Company’s ~~beginning~~financial ~~after~~statements ~~December~~issued ~~15,~~for ~~2008~~2009. The ~~Company~~adoption ~~will~~of ~~apply~~this ~~the~~updated ~~provisions~~guidance ofdid ~~SFAS~~not ~~No.~~have ~~141R~~a tomaterial ~~the~~impact ~~accounting~~on ~~treatment~~the ofCompany’s ~~business~~financial ~~acquisitions~~position ~~completed~~or ~~after~~results ~~December~~of ~~31, 2008~~operations.

InDuring ~~December~~the ~~2007~~first quarter of 2008, FASB issued ~~SFAS~~updated ~~No.~~guidance ~~160~~related to disclosures regarding derivatives and hedging activities, ~~Noncontrolling~~which ~~Interests~~is included in ~~Consolidated~~ASC ~~Financial~~815-10, ~~Statements~~Derivatives and Hedging – Overall (“ASC 815-10”), formerly known as SFAS No. ~~160”)~~161, ~~which~~Disclosures ~~requires~~about ~~noncontrolling~~Derivative ~~(minority)~~Instruments ~~interests~~and inHedging ~~subsidiaries~~Activities. ASC to815-10 berequires ~~initially~~enhanced ~~measured~~disclosures atabout ~~fair~~derivative ~~value~~instruments and ~~presented~~hedging asactivities, aand ~~separate~~their ~~component~~effects ofon ~~stockholders~~an entity’s ~~equity~~financial position, financial performance and cash flows. ~~The~~ASC ~~presentation~~815-10 requires disclosure of objectives and strategies for derivative instruments, disclosure ~~provisions~~of the fair values of ~~SFAS~~derivative ~~No.~~instruments ~~160~~and their gains and losses in a tabular format and disclosure of contingent derivative features that are credit-risk related, and requires cross referencing within footnotes if the required todisclosures beare ~~applied~~presented onin amore ~~retrospective~~than ~~basis~~one footnote. ~~SFAS~~The ~~No.~~updated ~~160~~guidance in ASC 815-10 is effective for ~~the~~financial ~~Company~~statements issued for fiscal years and interim periods beginning onafter ~~January~~November 115, ~~2009~~2008. The adoption of ~~SFAS~~ASC ~~No.~~815-10 ~~160~~ did not have a material impact on the Company’s financial position or results of operations.

InDuring ~~February~~the fourth quarter of 2007, FASB issued ~~SFAS~~updated ~~No.~~guidance ~~159,~~regarding ~~The~~business ~~Fair~~combination ~~Value~~transactions, ~~Option~~which ~~for~~is ~~Financial~~included ~~Assets~~in ~~and~~ASC ~~Financial Liabilities~~805-10, ~~Including~~Business anCombinations ~~amendment of FASB Statement No. 115~~ (“~~SFAS~~ASC ~~No. 159~~805-10”), ~~which~~formerly ~~allows~~known anas ~~entity~~SFAS toNo. ~~elect,~~141 at(revised ~~specified election dates~~2007), toBusiness ~~measure~~Combinations ~~eligible~~(“SFAS ~~financial~~No. ~~instruments at fair value~~141R”). AnASC ~~entity~~805-10 ~~shall~~establishes ~~report~~principles ~~unrealized gains~~ and ~~losses~~requirements ~~on items~~ for ~~which~~recognition ~~the~~and ~~fair~~measurement ~~value~~in ~~option~~the ~~has~~Company’s ~~been~~financial ~~elected~~statements inof ~~earnings~~identifiable atassets ~~each~~acquired, ~~subsequent~~liabilities ~~reporting date~~assumed, ~~and~~any ~~recognize~~non-controlling ~~upfront~~interest ~~costs~~in ~~and~~the ~~fees~~acquired ~~related~~entity toand ~~those~~goodwill ~~items~~acquired in ~~earnings~~a asbusiness ~~incurred and not deferred~~combination. ~~SFAS~~ASC ~~No.~~805-10 ~~159~~also ~~applies~~establishes todisclosure ~~fiscal~~requirements ~~years~~which ~~beginning~~will ~~after~~enable ~~November~~readers ~~15, 2007, with early adoption permitted for an entity that has elected~~ to ~~apply~~evaluate the ~~provisions~~nature ofand ~~SFAS~~financial ~~No.~~effects ~~157,~~of ~~Fair~~the ~~Value~~business ~~Measurements (“SFAS No~~combination. ~~157”).~~ AnThe ~~entity~~updated isguidance ~~prohibited~~in ~~from~~ASC ~~retrospectively~~805-10 ~~applying~~is ~~SFAS~~effective ~~No.~~for ~~159,~~fiscal ~~unless~~years itbeginning ~~chooses~~after ~~early~~December ~~adoption~~15, 2008. The ~~adoption~~Company ofwill ~~SFAS~~apply ~~No.~~the ~~159~~provisions ~~did~~of ~~not~~ASC ~~have~~805-10 ato ~~material~~the ~~impact~~accounting ontreatment ~~the~~of ~~Company’s~~business ~~financial~~acquisitions ~~position~~completed orafter ~~results~~December of31, ~~operations~~2008.

InAlso ~~September 2006, FASB issued SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value~~ in ~~generally accepted accounting principles and expands disclosures about fair value. SFAS No. 157 expands~~ the ~~disclosures~~fourth ~~about~~quarter ~~the use~~ of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. The disclosures focus on the inputs used to measure fair value, the recurring fair value measurements using significant unobservable inputs and the effect of the measurement on earnings (or changes in net assets) for the period. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, ~~and interim periods within those fiscal years. In February 2008,~~ FASB issued ~~Staff~~ASC ~~Position 157~~810-10-65-1, ~~Application~~Noncontrolling ofInterests ~~FASB~~in ~~Statement~~Consolidated ~~No.~~Financial ~~157~~Statements to– ~~FASB~~an ~~Statement~~amendment ~~No. 13, and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes~~ of ~~Lease~~ARB ~~Classification or Measurement Under Statement~~ No. 1351 (“~~FSP~~ASC ~~157~~810-10-65-1”)~~. FSP~~, ~~157-1~~formerly ~~amends~~known ~~SFAS~~as ~~No. 157 to exclude~~ SFAS No. 13160, ~~Accounting~~Noncontrolling ~~for~~Interests ~~Leases,~~in ~~and~~Consolidated ~~its~~Financial ~~related interpretive accounting pronouncements that address lease transactions~~Statements. InASC ~~February 2008, FASB issued Staff Position 157~~810-2,10-65-1 ~~Effective~~requires ~~Date~~noncontrolling of(minority) ~~FASB~~interests ~~Statement~~in ~~157,~~subsidiaries ~~which~~to ~~delays~~be ~~the~~initially ~~effective date of SFAS No. 157 for non-financial assets and liabilities which are not~~ measured at fair value onand apresented ~~recurring~~as ~~basis~~a ~~(at~~separate ~~least~~component ~~annually)~~of ~~until~~stockholders’ ~~fiscal years beginning after November 15, 2008~~equity. InThe ~~October~~presentation ~~2008,~~and ~~FASB~~disclosure ~~issued~~provisions ~~Staff~~of ~~Position~~ASC ~~157~~810-3,10-65-1 ~~Determining~~are ~~the~~required ~~Fair~~to ~~Value~~be ofapplied on a ~~Financial~~retrospective ~~Asset~~basis. ASC ~~When~~810-10-65-1 ~~the~~is ~~Market~~effective for ~~That~~the ~~Asset~~Company Isbeginning ~~Not~~on ~~Active~~January ~~(“FSP~~1, ~~157-3”)~~2009. ~~FSP~~The ~~157-3~~adoption ~~clarifies the application~~ of ~~SFAS~~ASC-810-65-1 ~~No.~~did ~~157 in a market that is~~ not ~~active,~~have ~~and provides an example to illustrate key considerations in determining the fair value of~~ a ~~financial~~material ~~asset~~impact ~~when~~on the ~~market~~Company’s ~~for that~~ financial ~~asset~~position isor ~~not~~results ~~active. In April 2009, FASB issued Staff Position 157-4, Determining Fair Value When the Volume and Level~~ of ~~Activity for the Asset or Liability Have Significantly Decreased and~~ operations.

5During the third quarter of 2006, FASB issued guidance included in ASC 820-10, Fair Value Measurement (“ASC 820-10”), formerly known as SFAS No. 157, Fair Value Measurements. ASC 820-10 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value. ASC 820-10 expands the disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to

~~THE ARISTOTLE CORPORATION AND SUBSIDIARIES~~5

~~NOTES~~THE TOARISTOTLE ~~CONDENSED~~CORPORATION ~~CONSOLIDATED~~AND ~~FINANCIAL STATEMENTS~~SUBSIDIARIES

~~June~~NOTES ~~30,~~TO ~~2009~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~September 30, 2009

~~Identifying Transactions That Are Not Orderly~~ (~~“FSP 157-4”~~Unaudited). FSP 157-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position or results of operations.

Ininitial ~~April 2009, FASB issued Staff Position 107-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP 107-1”)~~recognition. ~~FSP~~The ~~107-1~~disclosures ~~amends~~focus ~~SFAS~~on ~~No.~~the ~~107,~~inputs ~~Disclosures~~used ~~about~~to ~~Fair~~measure ~~Value~~fair ~~of Financial Instruments~~value, tothe ~~require~~recurring ~~disclosures about~~ fair value ofmeasurements ~~financial~~using ~~instruments~~significant ~~for~~unobservable ~~interim~~inputs ~~periods~~and the effect of ~~publicly~~the ~~traded~~measurement ~~companies~~on asearnings ~~well~~(or aschanges in ~~annual~~net ~~financial~~assets) ~~statements~~for the period. ~~FSP~~During ~~107-1~~the ~~also~~first ~~amends~~quarter ~~APB~~of ~~Opinion~~2008, ~~No.~~FASB ~~28,~~issued ~~Interim~~guidance ~~Financial~~included ~~Reporting,~~in toASC ~~require~~820-10 ~~those~~which ~~disclosures~~delayed inthe ~~summarized~~effective ~~financial~~date ~~information~~for atnon-financial ~~interim~~assets ~~periods. FSP~~and ~~107-1~~liabilities iswhich ~~effective~~are ~~for~~not ~~interim~~measured ~~periods~~at ~~ending~~fair ~~after~~value ~~June~~on ~~15,~~a ~~2009,~~recurring ~~with~~basis ~~early~~(at ~~adoption~~least ~~permitted~~annually) ~~for~~until ~~periods~~fiscal ~~ending~~years beginning after ~~March~~November 15, ~~2009~~2008. The adoption of ~~FSP~~ASC ~~107~~820-110 did not have a material impact on the Company’s financial position or results of operations.

~~In May 2009, FASB issued SFAS No~~5. Earnings ~~165,~~per ~~Subsequent~~Common Events, (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events, and whether that date represents the date the financial statements were issued or were available to be issued. This standard is effective for interim and annual periods ending June 15, 2009. The Company has adopted SFAS No. 165 as of June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s financial position or results of operations.Share

5Basic earnings per common share is calculated by dividing net earnings applicable to common stockholders by the weighted average number of common shares outstanding for the period. ~~Earnings~~ Diluted earnings per ~~Common~~common ~~Share~~share is calculated by dividing net earnings applicable to common stockholders by the weighted average number of common shares outstanding during the period and including each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period. For each of the three and nine months ended September 30, 2009, the Company has not assumed the exercise of options to purchase 42,875 shares of common stock as the impact would be antidilutive.

~~Basic earnings per common share is calculated by dividing net earnings applicable to common stockholders by the weighted average number of common shares outstanding for the period~~6. ~~Diluted~~ Marketable earnings per common share is calculated by dividing net earnings applicable to common stockholders by the weighted average number of common shares outstanding during the period and including each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period. For each of the three and six months ended June 30, 2009, the Company has not assumed the exercise of common stock equivalents as the impact would be antidilutive. Securities

6The Company invests in marketable equity securities, which the Company classifies as available-for-sale. ~~Marketable~~ The ~~Securities~~marketable securities are included in current assets, and are reported at fair value based on quoted market prices as of the reporting date. All unrealized gains or losses are reflected net of tax in accumulated other comprehensive income (loss) within Stockholders’ Equity. The Company did not make any additional investments in marketable securities during the nine months ended September 30, 2009.

The ~~Company~~carrying ~~invests~~value inof the marketable equity securities, ~~which~~at ~~the~~September ~~Company~~30, ~~classifies~~2009 asand ~~available-for-sale~~2008 was $4. ~~The~~2 ~~marketable~~million ~~securities~~and ~~are~~$2.5 ~~included~~million, inrespectively. Net ~~current~~unrealized ~~assets~~gain, ~~and~~net ~~are~~of ~~reported~~tax, atincluded ~~fair~~in ~~value~~accumulated ~~based~~other oncomprehensive ~~quoted~~income ~~market~~(loss) ~~prices~~was as$.2 ofmillion ~~the~~at ~~reporting~~September ~~date~~30, 2009. ~~All~~Net unrealized ~~gains~~loss, ~~or losses are reflected~~ net of tax, included in accumulated other comprehensive income (loss) ~~within~~was ~~Stockholders’~~$.1 ~~Equity~~million and $.4 million at December 31, 2008 and September 30, 2008, respectively. ~~The~~In ~~Company~~the ~~did~~quarters ~~not~~ended ~~make~~September ~~any~~30, ~~additional~~2009 ~~investments~~and 2008, the Company recognized $0 and $.3 million in other than temporary losses related to marketable securities. In ~~during~~ the ~~six~~nine ~~months~~month periods ended ~~June~~September 30, 2009 and 2008, the Company recognized $. 2 million and $.3 million, respectively, of losses related to marketable securities which were determined to be other than temporary.

~~The carrying value of the marketable equity securities at June 30, 2009 and 2008 was $4~~7.0 million and $3.2 million, respectively. Net unrealized gain, net of tax, included in accumulated other comprehensive income (loss) was $.1 million at June 30, 2009. Net unrealized loss, net of tax, included in accumulated other comprehensive income (loss) was $.1 million and $.4 million at December 31, 2008 and June 30, 2008, respectively. In the quarters ended June 30, 2009 and 2008, the Company did not recognize any other than temporary losses related to marketable securities. In the six month periods ended June 30, 2009 and 2008, the Company recognized $.2 million and $0, respectively, of losses related to marketable securities which were determined to be other than temporary. Investments

7The Company has invested in a limited partnership, the general partner of which is an affiliate of the Company. ~~Investments~~ The purpose of this limited partnership is to manage a diversified investment portfolio. The Company’s investment is accounted for under the equity method of accounting, which equates the carrying value of the investment to the Company’s equity in the partnership’s underlying book value. The Company’s equity earnings or loss is credited or charged, as appropriate, to other income, net, within the Consolidated Statements of Earnings. For the three months ended September 30, 2009 and 2008, equity earnings amounted to a loss of less than $.1 and a gain of $.5 million, respectively. At September 30, 2009, December 31, 2008 and September 30, 2008, net book value (and estimated fair value) of this investment was less than $.1 million, less than $.1 million and $17.4 million, respectively. In December 2008, the Company became aware of certain activities engaged in by a non-affiliate broker-dealer with whom the assets of the partnership had been invested. The broker-dealer is now in bankruptcy. As a result, the Company recorded a loss proportionate to the total estimated loss by the limited partnership in 2008. The assets of this limited partnership were invested in cash equivalents at each of September 30, 2009 and December 31, 2008. At September 30, 2008, the assets of this limited partnership were invested in Treasury bills.

The Company has invested in aanother limited partnership, the general partner of which is an affiliate of the Company. The purpose of this limited partnership is to manage a diversified investment portfolio. The Company’s investment is accounted for ~~under the equity method of accounting, which equates the carrying value of the investment to the Company’s equity in the~~

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2009

(Unaudited)

~~partnership’s~~under ~~underlying~~the ~~book~~equity ~~value~~method of accounting. The Company’s ~~equity~~invested ~~earnings~~no oradditional ~~loss~~monies isin ~~credited~~this orlimited ~~charged,~~partnership asduring ~~appropriate,~~the tothree ~~other~~months ~~income,~~ended ~~net~~September 30, ~~within~~2009 ~~the~~and ~~Consolidated Statements of Earnings~~2008. ~~For~~During the ~~three~~nine months ended ~~June~~September 30, 2009 and 2008, ~~equity~~the ~~earnings~~Company ~~amounted~~invested ~~to a loss of less than~~ $.10 and ~~a gain of~~ $3.40 million, ~~respectively. At~~in ~~June~~this ~~30,~~limited ~~2009,~~partnership. For ~~December~~the ~~31,~~three ~~2008~~months ~~and~~ended ~~June~~September 30, ~~2008~~2009, ~~net~~the ~~book~~equity ~~value~~gain ~~(and~~amounted ~~estimated~~to ~~fair value) of this investment was~~ less than $.1 million,. During ~~less~~the ~~than~~three ~~$.1~~months ~~million~~ended ~~and~~September ~~$16.8 million~~30, ~~respectively. In December~~ 2008, the ~~Company~~equity ~~became~~loss ~~aware~~amounted ofto ~~certain~~$.2 ~~activities~~million. For ~~engaged~~the innine bymonths aended ~~non-affliliate~~September ~~broker-dealer~~30, ~~with~~2009, ~~whom~~ the ~~assets~~equity ofgain ~~the~~amounted ~~partnership~~to ~~had~~$.1 ~~been invested~~million. ~~The~~For ~~broker-dealer~~the isnine ~~now~~months inended ~~bankruptcy. As~~September a30, ~~result~~2008, the ~~Company~~equity ~~recorded a~~ loss ~~proportionate~~amounted to ~~the~~$.4 ~~total estimated loss by the limited partnership in 2008~~million. ~~The~~At ~~assets~~September ~~of this limited partnership were invested in cash equivalents at each of June~~ 30, 2009, ~~and~~ December 31, 2008~~. At~~ ~~June~~and September 30, 2008, the ~~assets~~net book value (and estimated fair value) of this ~~limited~~investment ~~partnership~~was ~~were~~$3.0 ~~invested~~million, in$2.8 ~~Treasury~~million ~~bills~~and $4.6 million, respectively.

The Company has invested in$4.3 ~~another~~million ~~limited~~to ~~partnership,~~acquire ~~the~~a ~~general~~4.6% ~~partner~~ownership ofinterest ~~which~~in isa anprovider ~~affiliate~~ of ~~the~~interactive ~~Company. The~~instructional ~~purpose~~assessment ofsystems ~~this~~for ~~limited~~K-12 ~~partnership~~and isother toeducation ~~manage a diversified investment portfolio~~markets. The Company’s ~~investment~~accounts isfor ~~accounted~~this ~~for~~investment under the ~~equity~~cost method of accounting~~. For the three months ended June 30~~, ~~2009~~which ~~and~~records ~~2008,~~ the ~~Company~~investment ~~invested~~at $0the ~~and~~historical $2cost.~~0 million, respectively.~~ ~~During~~Under the ~~six~~cost ~~months ended June 30~~method, ~~2009 and 2008,~~ the Company ~~invested~~will $0not ~~and~~estimate ~~$3.0~~a ~~million,~~fair ~~respectively. For~~value ~~the~~if ~~three~~there ~~months~~are ~~ended~~not ~~June~~identifiable ~~30,~~events ~~2009,~~or ~~the~~changes ~~equity~~in ~~gain~~circumstances ~~amounted~~that tomay ~~$.1~~have ~~million. During~~a ~~the~~significant ~~three~~adverse ~~months~~effect ~~ended~~on ~~June 30, 2008,~~ the ~~equity~~fair ~~loss~~value ~~amounted~~of tothe ~~less than $~~investment.~~1 million.~~ ~~For~~In ~~the~~accordance ~~six~~with ~~months~~the ~~ended~~terms ~~June~~of ~~30,~~this ~~2009~~investment, the ~~equity~~Company ~~gain~~accrues ~~amounted~~an to8% ~~$.1~~preferred ~~million. For~~return ~~the six months ended June 30~~thereon, ~~2008,~~which ~~the~~is ~~equity~~included ~~loss~~in ~~amounted~~other ~~to $~~assets.~~2 million.~~ At ~~June~~September 30, 2009, December 31, 2008 and ~~June~~September 30, 2008, the ~~net~~accrued ~~book value (~~and ~~estimated~~unpaid ~~fair~~preferred ~~value)~~return ~~of this investment~~ was $2.98 million, $2.95 million and $4.84 million, respectively.

The Company has invested $4.3 million to acquire a 4.6% ownership interest in a provider of interactive instructional assessment systems for K-12 and other education markets. The Company accounts for this investment under the cost method of accounting, which records the investment at the historical cost. Under the cost method, the Company will not estimate a fair value if there are not identifiable events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. In accordance with the terms of this investment, the Company accrues an 8~~% preferred return thereon, which is included in other assets~~. ~~At June 30, 2009, December 31, 2008 and June 30, 2008, the accrued and unpaid preferred return was $.7 million, $.5 million and $.3, respectively.~~ Inventories

~~8. Inventories~~The classification of inventories is as follows (in thousands):

The classification of inventories is as follows (in thousands):


			September 30,	December 31,	September 30,
			2009	2008	2008

Raw materials		$	6,813	7,325	7,724
Work in process			2,392	2,078	2,004
Finished goods			32,074	36,965	34,319
Less inventory reserves			(1,563)	(1,715)	(1,659)
	Net inventories	$	39,716	44,653	42,388

			June 30,	December 31,	June 30,
			2009	2008	2008
Raw materials		$	6,448	7,325	7,609
Work in process			2,957	2,078	2,526
Finished goods			38,487	36,965	39,553
Less inventory reserves			(1,635)	(1,715)	(1,473)
	Net inventories	$	46,257	44,653	48,215

7THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

~~(Unaudited)~~9. Stockholders’ Equity and Comprehensive Earnings

~~9. Stockholders~~Changes in stockholders’ ~~Equity~~equity ~~and~~for ~~Comprehensive~~the ~~Earnings~~nine months ended September 30 are as follows (in thousands):

Changes in stockholders’ equity for the six months ended June 30 are as follows (in thousands):


				2009	2008
Balance at January 1			$	110,887	115,681
Net earnings				14,750	18,488
Exercise of stock options, including related
		tax benefit of $0 and $24 for 2009
		and 2008, respectively		-	94
Stock option compensation				-	12
Other comprehensive earnings: Amortization of pension prior service cost and unrecognized net actuarial loss				311	221
Unrealized gain on marketable securities				298	38
	Foreign currency translation adjustment			1,966	(1,069)
Preferred dividends				(6,467)	(6,467)
Balance at September 30			$	121,745	126,998

				2009	2008
Balance at January 1			$	110,887	115,681
Net earnings				7,783	11,626
Exercise of stock options, including related
		tax benefit of $0 and $24 for 2009
		and 2008, respectively		-	94
Stock option compensation				-	10
Other comprehensive earnings: Amortization of pension prior service cost and unrecognized net actuarial loss				208	151
Unrealized gain (loss) on marketable securities				148	(211)
	Foreign currency translation adjustment			658	(409)
Preferred dividends				(4,312)	(4,312)
Balance at June 30			$	115,372	122,630

Comprehensive earnings for the three and nine months ended September 30 are as follows (in thousands):

Comprehensive earnings for the three and six months ended June 30 are as follows (in thousands):


		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2009	2008	2009	2008
Net earnings	$	6,967	6,862	14,750	18,488
Amortization of pension prior service cost and unrecognized net actuarial loss		103	70	311	221
Unrealized gain on marketable securities		150	249	298	38
Foreign currency translation adjustment		1,308	(660)	1,966	(1,069)
Comprehensive earnings	$	8,528	6,521	17,325	17,678

		Three Months Ended		Six Months Ended
		June 30,		June 30,
		2009	2008	2009	2008
Net earnings	$	3,636	6,627	7,783	11,626
Amortization of pension prior service cost and unrecognized net actuarial loss		81	76	208	151
Unrealized gain (loss) on marketable securities		210	(7)	148	(211)
Foreign currency translation adjustment		1,139	83	658	(409)
Comprehensive earnings	$	5,066	6,779	8,797	11,157

10. Stock Options

~~10.~~ The Company established the 2002 Employee, Director and Consultant Stock Plan in 2002 (“2002 Plan”) under which employees, directors and consultants of the Company are eligible to receive nonincentive and incentive options and stock grants of up to an aggregate of 1,500,000 shares of Common Stock. Options granted under the 2002 Plan generally vest over a three year period and have an exercise term of no longer than five years from the issue date.

The ~~Company~~fair ~~established~~value ~~the~~of ~~2002~~each ~~Employee,~~option ~~Director~~granted ~~and~~is ~~Consultant~~estimated ~~Stock~~on ~~Plan~~the indate ~~2002~~of ~~(“2002~~grant ~~Plan”)~~using ~~under~~the ~~which~~Black-Scholes ~~employees,~~option ~~directors~~pricing ~~and~~model. The ~~consultants~~risk-free ofinterest ~~the~~rate ~~Company~~is ~~are~~based ~~eligible~~on toUnited ~~receive~~States ~~nonincentive~~Treasury ~~and~~yields ~~incentive~~in ~~options~~effect ~~and~~at ~~stock~~the ~~grants~~date of upgrant toconsistent anwith ~~aggregate~~the ofestimated ~~1,500,000~~life ~~shares~~ of ~~Common~~the ~~Stock~~options. ~~Options~~The estimated life of options granted ~~under~~represents the ~~2002~~period ~~Plan~~of ~~generally~~time ~~vest~~that ~~over~~the aoptions ~~three~~are ~~year~~expected ~~period~~to ~~and~~be ~~have~~outstanding. The expected volatility is based on an ~~exercise~~analysis ~~term~~of historical prices of nothe ~~longer~~Company’s ~~than~~stock ~~five~~over ~~years~~a ~~from~~period of time consistent with the ~~issue~~estimated ~~date~~life of the options.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. The risk-free interest rate is based on United States Treasury yields in effect at the date of grant consistent with the estimated life of the options. The estimated life of options granted represents the period of time that the options are expected to be outstanding. The expected volatility is based on an analysis of historical prices of the Company’s stock over a period of time consistent with the estimated life of the options. 8

8THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

A summary of option activity during the nine months ended September 30, 2009 is presented below (~~Unaudited~~in thousands, except share and per share data):

A summary of option activity during the six months ended June 30, 2009 is presented below (in thousands, except share and per share data):


				Weighted
			Weighted	Average
	Number		Average	Remaining		Aggregate
	of		Exercise	Contractual		Intrinsic
	Options		Price	Term		Value

Outstanding at December 31, 2008	48,875	$	6.65
Granted	-		-
Expired	-		-
Forfeited	6,000		6.36
Exercised	-		-
Outstanding at September 30, 2009	42,875		6.69	.36	$	-
Exercisable at September 30, 2009	42,875		6.69	.36		-

				Weighted
			Weighted	Average
	Number		Average	Remaining		Aggregate
	of		Exercise	Contractual		Intrinsic
	Options		Price	Term		Value
Outstanding at December 31, 2008	48,875	$	6.65
Granted	-		-
Expired	-		-
Forfeited	6,000		6.36
Exercised	-		-
Outstanding at June 30, 2009	42,875		6.69	.61	$	-
Exercisable at June 30, 2009	42,875		6.69	.61		-

No options were granted during each of the three and nine months ended September 30, 2009 and 2008. There were no stock options exercised during the three months ended September 30, 2009. Options to purchase 6,000 shares were forfeited during nine months ended September 30, 2009. The intrinsic value of options exercised during the nine months ended September 30, 2008 totaled less than $.1 million. Cash received from option exercises for the nine months ended September 30, 2008 totaled $.1 million.

No ~~options~~nonvested ~~were granted during each of the three and six months ended June 30, 2009 and 2008. There were no stock~~ options ~~exercised during the three months ended June 30, 2009. Options to purchase 6,000 shares~~ were ~~forfeited~~outstanding ~~during~~at ~~the~~September ~~three and six months ended June~~ 30, 2009~~. The~~ ~~intrinsic~~or ~~value~~December ~~of options exercised during the three months ended June 30~~31, 2008 ~~totaled less than $~~.1 million. The intrinsic value of options exercised during the six months ended June 30, 2008 totaled less than $.1 million. Cash received from option exercises for the three and six months ended June 30, 2008 totaled less than $.1 million and $.1 million, respectively.

NoAt ~~nonvested~~September ~~options~~30, 2009, there were ~~outstanding~~no atunrecognized ~~June~~compensation ~~30,~~costs ~~2009~~related orto ~~December~~options. No 31options vested during the three and nine months ended September 30, ~~2008~~2009.

AtThere ~~June~~was ~~30,~~no ~~2009,~~stock ~~there~~option ~~were~~compensation norecognized ~~unrecognized~~in ~~compensation~~each ~~costs~~of ~~related~~the tothree ~~options~~months or nine months ended September 30, 2009. NoStock ~~options~~option ~~vested~~compensation ~~during~~recognized was less than $.1 million in each of the three and ~~six~~nine months ended ~~June~~September 30, ~~2009~~2008.

~~There was no stock option compensation recognized in each of the three months or six months ended June 30, 2009~~11. ~~Stock~~Defined ~~option~~Benefit ~~compensation~~Pension ~~recognized was less than $.1 million in each of the three and six months ended June 30, 2008.~~Plan

~~11. Defined~~On ~~Benefit~~December ~~Pension~~31, ~~Plan~~2005, the Company froze the benefits under its pension plan for all hourly employees and certain salaried employees.

OnThe ~~December~~Company 31contributed $.1 million and $.5 million to the pension plan for the three months ended September 30, ~~2005~~2009 and 2008, ~~the~~respectively. The Company ~~froze~~contributed ~~the~~$.6 ~~benefits~~million ~~under~~and ~~its~~$1.0 million to the pension plan for ~~all~~the ~~hourly~~nine ~~employees~~months ended September 30, 2009 and ~~certain~~2008, ~~salaried~~respectively. The ~~employees~~Company expects to contribute a total of approximately $. 8 million to the pension plan in 2009.

The Company contributed $.2 million to the pension plan for each of the three months ended June 30, 2009 and 2008. The Company contributed $.5 million to the pension plan for each of the six months ended June 30, 2009 and 2008. The Company expects to contribute a total of approximately $.9 ~~million to the pension plan in 2009.~~

9THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

The following table presents the components of net periodic benefit cost for the three and nine months ended September 30 (~~Unaudited~~in thousands):

The following table presents the components of net periodic benefit cost for the three and six months ended June 30 (in thousands):


			Three Months Ended		Nine Months Ended
			September 30,		September 30,
			2009	2008	2009	2008

Service cost		$	74	70	220	232
Interest cost			224	239	673	664
Expected return on plan assets			(186)	(314)	(559)	(719)
Amortization of prior service costs			-	(1)	-	(1)
Recognized net actuarial loss			172	115	516	365
	Net periodic benefit cost	$	284	109	850	541

			Three Months Ended		Six Months Ended
			June 30,		June 30,
			2009	2008	2009	2008
Service cost		$	65	81	146	162
Interest cost			199	212	449	425
Expected return on plan assets			(175)	(202)	(373)	(405)
Recognized net actuarial loss			134	125	344	250
	Net periodic benefit cost	$	223	216	566	432

12. Income Taxes

12The income tax provisions for the three and nine months ended September 30, 2009 reflect effective tax rates of 39.1% and 44.4%, respectively. ~~Income~~The ~~Taxes~~difference between the Federal statutory income tax rate of 35% and the effective tax rates result principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a final settlement with the Internal Revenue Service relating to an audit of the Company’s tax returns, the tax provision for the nine months ended September 30, 2009 includes additional taxes of $.5 million and $1.0 million for the 2006 and 2007 tax years, respectively, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. In the third quarter of 2009, an adjustment to the initial IRS settlement (recorded in the second quarter of 2009 in the aggregate amount of $1.8 million) reduced the Federal tax expense by $.3 million in the three and nine months ended September 30, 2009. No additional taxes were due for any years prior to 2006.

The income tax provision for each of the three and ~~six~~nine months ended ~~June~~September 30, ~~2009~~2008 reflect effective tax rates of 5737.25% and 4837.46%, respectively. The difference between the Federal statutory income tax rate of 35% and the effective tax rates result principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a settlement with the Internal Revenue Service relating to an audit of the Company’s tax returns, the tax provision for the second quarter and six months ended June 30, 2009 includes additional taxes of $.5 million and $1.3 million for the 2006 and 2007 tax years, respectively, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. No additional taxes were due for any years prior to 2006. Also related to the settlement, the Company recorded $.2 million in interest expense in the quarter and six months ended June 30, 2009.

~~The income tax provision for each of the three and six months ended June 30, 2008 reflect effective tax rates of 37~~13.~~6%. The~~ Fair ~~difference~~Value between the Federal statutory income tax rate of 35% and the effective tax rates result principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates.Accounting

13Guidance included in ASC 820-10 was issued in September 2006 and adopted by the Company as of January 1, 2008. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair ~~Value~~value ~~Accounting~~measurements are not adjusted for transaction costs. In addition, ASC 820-10 establishes a three-tiered hierarchy for inputs used in measuring fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are ones that market participants would use in pricing a financial instrument. Unobservable inputs are ones that reflect the belief about the assumptions that market participants would use in pricing a financial instrument based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

SFAS No. 157 was issued in September 2006 and adopted by the Company as of January 1, 2008. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. In addition, SFAS No. 157 establishes a three-tiered hierarchy for inputs used in measuring fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are ones that market participants would use in pricing a financial instrument. Unobservable inputs are ones that reflect the belief about the assumptions that market participants would use in pricing a financial instrument based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:·

·“Level 1.” Valuations are based on unadjusted quoted prices in active markets for identical, unrestricted assets. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these assets does not involve any meaningful degree of judgment. For the Company, assets utilizing Level 1 inputs generally include marketable securities, including common and preferred stocks.

“Level 1.” Valuations are based on unadjusted quoted prices in active markets for identical, unrestricted assets. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these assets does not involve any meaningful degree of judgment. For the Company, assets utilizing Level 1 inputs generally include marketable securities, including common and preferred stocks.10

10THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

~~(Unaudited)~~·

·“Level 2.” Valuations are based on quoted prices in markets that are not deemed to be sufficiently “active”, or involve direct or indirect observable market inputs, such as prices for similar securities.

“Level 2.” Valuations are based on quoted prices in markets that are not deemed to be sufficiently “active”, or involve direct or indirect observable market inputs, such as prices for similar securities. ·

·“Level 3.” Valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Valuation under Level 3 generally involves a significant degree of judgment.

~~“Level~~The ~~3.” Valuations~~estimated ~~are~~fair ~~based~~values ~~on inputs that are unobservable~~ (and ~~significant~~carrying toamounts) of the ~~overall~~Company’s ~~fair~~invested ~~value~~assets ~~measurement. Valuation~~as ~~under~~of ~~Level~~September 330, ~~generally~~2009 ~~involves~~are aas ~~significant~~follows ~~degree~~(in ~~of judgment.~~ thousands):

The estimated fair values (and carrying amounts) of the Company’s invested assets as of June 30, 2009 are as follows (in thousands):


		Level 1	Level 2	Level 3	Total

Cash equivalents	$	22,095	-	-	22,095
Marketable securities		4,220	-	-	4,220
Total assets measured at fair value	$	26,315	-	-	26,315

		Level 1	Level 2	Level 3	Total
Cash equivalents	$	15,799	-	-	15,799
Marketable securities		4,040	-	-	4,040
Total assets measured at fair value	$	19,839	-	-	19,839

The Company’s investments in limited partnerships of $3.0 million at September 30, 2009 are accounted for under the equity method of accounting and, therefore, are not within the scope of ASC 820-10.

The ~~Company’s~~estimated ~~investments~~fair invalue ~~limited~~and ~~partnerships~~carrying amounts of ~~$2.9~~the ~~million~~Company’s debt instruments at ~~June~~September 30, 2009 are ~~accounted~~as ~~for~~follows ~~under~~(in ~~the equity method of accounting and, therefore, are not within the scope of SFAS No. 157.~~ thousands):

The estimated fair value and carrying amounts of the Company’s debt instruments at June 30, 2009 are as follows (in thousands):


		Carrying Value		Fair Value

Revolving credit facility	$	5,000	$	5,000
Mortgage notes		5,435		5,435

	Carrying Value	Fair Value
Revolving credit facility	5,000	5,000
Mortgage notes	5,511	5,511

The fair values of the debt instruments equal the carrying values because the respective rates of interest are variable, based upon Prime or LIBOR rates.

~~The fair values of the debt instruments equal the carrying values because the respective rates of interest are variable, based upon Prime or LIBOR rates~~14. Subsequent Events

~~14. Subsequent~~The ~~Events~~Company has evaluated subsequent events through November 12, 2009, the date the financial statements were issued, and no event has occurred from the balance sheet date through the evaluation date which would impact the consolidated financial statements.

The Company has evaluated subsequent events through August 14, 2009, the date the financial statements were issued, and no event has occurred from the balance sheet date through that date which would impact the consolidated financial statements15. Segment Reporting

15The Company’s business activities are organized into two business segments, educational and commercial. ~~Segment~~The ~~Reporting~~educational segment relates to instructional teaching aids and materials, which are distributed to educational institutions principally in North America, for kindergarten through grade 12 classes, and for nursing school and emergency medical instructors. Products in the educational segment are marketed primarily through catalogs. The growth potential of the educational segment is directly related to school enrollments and the strength of government funding of education. The commercial segment relates to agricultural products, sterile sampling containers and systems, materials for nursing home activities and novelty and gift products. Products in the commercial segment are marketed through catalogs nationwide and through a worldwide dealer network covering more than 60 countries. Market growth in the commercial segment is principally impacted by the general economic conditions of world agriculture, the increasing size of the aged population, as well as increasing global awareness of food and water quality standards. The Company evaluates the performance of these segments based on segment net sales and gross profit.

The Company’s business activities are organized into two business segments, educational and commercial. The educational segment relates to instructional teaching aids and materials, which are distributed to educational institutions principally in North America, for kindergarten through grade 12 classes, and for nursing school and emergency medical instructors. Products in the educational segment are marketed primarily through catalogs. The growth potential of the educational segment is directly related to school enrollments and the strength of government funding of education. The commercial segment relates to agricultural products, sterile sampling containers and systems, materials for nursing home activities and novelty and gift products. Products in the commercial segment are marketed through catalogs nationwide and through a worldwide dealer network covering more than 60 countries. Market growth in the commercial segment is principally impacted by the general economic conditions of world agriculture, the increasing size of the aged population, as well as increasing global awareness of food and water quality standards. The Company evaluates the performance of these segments based on segment net sales and gross profit. 11

11THE ARISTOTLE CORPORATION AND SUBSIDIARIES

~~THE~~NOTES ~~ARISTOTLE~~TO ~~CORPORATION~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~NOTES~~September TO30, ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2009

~~June 30, 2009~~(Unaudited)

The following table presents segment information for the three and nine months ended September 30 (~~Unaudited~~in thousands):

The following table presents segment information for the three and six months ended June 30 (in thousands):


				Three Months Ended		Nine Months Ended
				September 30,		September 30,
				2009	2008	2009	2008
Net sales:
	Educational		$	52,529	56,020	134,316	146,062
	Commercial			8,599	8,956	24,538	26,140
		Net sales	$	61,128	64,976	158,854	172,202
Gross profit:
	Educational		$	20,763	22,007	54,873	59,088
	Commercial			3,603	3,650	10,385	10,627
	Other costs of sales			(327)	(804)	(1,844)	(2,629)
		Gross profit	$	24,039	24,853	63,414	67,086

				Three Months Ended		Six Months Ended
				June 30,		June 30,
				2009	2008	2009	2008
Net sales:
	Educational		$	43,198	48,274	81,787	90,048
	Commercial			8,227	8,520	15,939	17,178
		Net sales	$	51,425	56,794	97,726	107,226
Gross profit:
	Educational		$	18,019	19,738	34,110	37,081
	Commercial			3,436	3,454	6,782	6,977
	Other costs of sales			(899)	(855)	(1,517)	(1,825)
		Gross profit	$	20,556	22,337	39,375	42,233

Other costs of sales primarily include freight costs incurred in the procurement of inventories and shipment of customer orders not allocable to a particular segment.

~~Other~~The ~~costs~~following oftable ~~sales~~presents ~~primarily~~segment ~~include~~identifiable ~~freight~~asset ~~costs~~information ~~incurred~~as ~~in the procurement~~ of ~~inventories~~September ~~and~~30, ~~shipment~~2009, ofDecember ~~customer~~31, ~~orders~~2008 ~~not~~and ~~allocable~~September to30, a2008 ~~particular~~(in ~~segment.~~thousands):

The following table presents segment identifiable asset information as of June 30, 2009, December 31, 2008 and June 30, 2008 (in thousands):


				September 30,	December 31,	September 30,
				2009	2008	2008
Identifiable assets:
	Educational		$	64,733	70,894	68,893
	Commercial			6,396	6,743	6,473
	Other corporate assets			91,911	75,639	83,990
		Identifiable assets	$	163,040	153,276	159,356

				June 30,	December 31,	June 30,
				2009	2008	2008
Identifiable assets:
	Educational		$	71,683	70,894	76,252
	Commercial			6,060	6,743	6,458
	Other corporate assets			80,105	75,639	78,144
		Identifiable assets	$	157,848	153,276	160,854

Educational assets include $14.1 million, $13.6 million and $14.1 million of goodwill at September 30, 2009, December 31, 2008 and September 30, 2008, respectively. Commercial assets included $.1 million of goodwill at each of September 30, 2009, December 31, 2008 and September 30, 2008.

Educational assets include $13.7 million, $13.6 million and $14.2 million of goodwill at June 30, 2009, December 31, 2008 and June 30, 2008, respectively. Commercial assets included $.1 million of goodwill at each of June 30, 2009, December 31, 2008 and June 30, 2008.12

12ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~GENERAL

~~GENERAL~~This discussion and analysis of financial condition and results of operations reviews the results of operations of the Company, on a consolidated basis, for the three and nine months ended September 30, 2009, as compared to the three and nine months ended September 30, 2008. This discussion and analysis of financial condition and results of operations has been derived from, and should be read in conjunction with, the unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained herein.

~~This~~The ~~discussion and analysis of financial condition and results of operations reviews the results of operations of the~~ Company, onis a ~~consolidated~~leading ~~basis,~~manufacturer ~~for the three~~ and ~~six~~global ~~months~~distributor ~~ended~~of ~~June 30~~educational, ~~2009~~health, asmedical ~~compared~~technology ~~to the three~~ and ~~six~~agricultural ~~months ended June 30~~products, ~~2008. This~~primarily ~~discussion~~offered ~~and~~through ~~analysis~~50 ofseparate financial condition and results of operations has been derived from, and should be read in conjunction with, the unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained hereincatalogs.

The ~~Company~~following is a ~~leading~~summary ~~manufacturer~~of ~~and~~key ~~global~~events ~~distributor~~for ofthe ~~educational,~~three ~~health,~~and ~~medical~~nine ~~technology~~months ~~and~~ended ~~agricultural~~September ~~products~~30, ~~primarily offered through 50 separate catalogs.~~ 2009:

~~The following is a summary of key events for the three and six months ended June 30, 2009:~~§

§decrease in net sales of 5.9% and 7.8% in the three and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008;

~~decrease in net sales of 9.5% and 8.9% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008;~~ §

§decrease in gross profit of 3.3% and 5.5% in the three and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008;

~~decrease in gross profit of 8.0% and 6.8% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008;~~ §

§decrease in earnings from operations of 2.6% and 11.5% in the three and nine months ended September 30, 2009, respectively, as compared to the same period of 2008.

~~decrease in earnings before income taxes of 19.9% and 19.0% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008;~~§

§increase in earnings before income taxes of 4.1% in the three months ended September 30, 2009, and decrease in earnings before taxes of 10.5% in the nine months ended September 30, 2009, as compared to the same periods in 2008;

incremental increase in Federal income tax expense of $1.8 million as a result of a partial disallowance of the Company’s historical Federal net operating tax losses pursuant to a settlement of an IRS audit; §

§incremental increase in Federal income tax expense of $1.5 million in the nine months ended September 30, 2009 as a result of a partial disallowance of the Company’s historical Federal net operating tax losses pursuant to a settlement of an IRS audit;

decrease in net earnings of 45.1% and 33.1% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008; as a percentage of net sales, net earnings amounted to 7.2% in the second quarter of 2009, compared to 11.7% in the same period in 2008; as a percentage of net sales, net earnings amounted to 8.0% in the six months ended June 30, 2009, compared to 10.9% in the same period in 2008; §

§increase in net earnings of 1.5% in the three months ended September 30, 2009, and decrease in net earnings of 20.2% in the nine months ended September 30, 2009, respectively, as compared to the same periods in 2008; as a percentage of net sales, net earnings amounted to 11.4% in the third quarter of 2009, compared to 10.6% in the same period in 2008; as a percentage of net sales, net earnings amounted to 9.3% in the nine months ended September 30, 2009, compared to 10.7% in the same period in 2008;

decrease in diluted earnings per common share to $.19 in the six months ended June 30, 2009, as compared to $.41 in the same six month period of 2008; diluted earnings per common share of $.08 in the three months ended June 30, 2009, as compared to $.25 for the same period in 2008; §

§decrease in diluted earnings per common share to $.46 in the nine months ended September 30, 2009, as compared to $.67 in the same nine month period of 2008; diluted earnings per common share of $.27 in the three months ended September 30, 2009, as compared to $.26 for the same period in 2008;

~~semi-annual dividend payments on March 31, 2009 totaling $4.3 million on the Company’s Series I Preferred Stock and Series J Preferred Stock.~~§

Asemi-annual ~~key~~dividend ~~strength~~payments ofon ~~the~~March ~~Company’s~~31, ~~business~~2009 isand ~~its~~September ~~ability~~30, to2009 ~~generate~~totaling ~~cash consistently~~$8. ~~The~~6 ~~Board~~million ofon ~~Directors and management use cash generated as a measure of~~ the Company’s ~~performance. The~~Series ~~Company~~I ~~uses~~Preferred ~~the~~Stock ~~cash generated from operations to strengthen the balance sheet, including making investments in marketable securities~~ and ~~limited~~Series ~~partnerships~~J ~~and~~Preferred ~~reducing liabilities such as pension and debt obligations, paying dividends on its preferred stocks and completing prudent acquisition opportunities~~Stock. ~~The Company’s management believes that examining the ability to generate cash provides investors with additional insight into the Company’s performance.~~

13A key strength of the Company’s business is its ability to generate cash consistently. The Board of Directors and management use cash generated as a measure of the Company’s performance. The Company uses the cash generated from operations to strengthen the balance sheet, including making investments in marketable securities and limited partnerships and reducing liabilities such as pension and debt obligations, paying dividends on its preferred stocks and completing prudent acquisition opportunities. The Company’s management believes that examining the ability to generate cash provides investors with additional insight into the Company’s performance.

The following table sets forth selected financial data (i) as a percentage of net sales for the three and six months ended June 30, 2009 and 2008 and (ii) the percentage change in those reported items from the comparable period in 2007:13

				Three Months Ended June 30,						Six Months Ended June 30,
				2009		2008		% Change		2009		2008		% Change
Net sales				100.0	%	100.0	%	(9.5)	%	100.0	%	100.0	%	(8.9)	%
Cost of sales				60.0		60.7		(10.4)		59.7		60.6		(10.2)
			Gross profit	40.0		39.3		(8.0)		40.3		39.4		(6.8)
Selling and administrative expense				23.3		20.8		1.8		24.5		22.0		1.4
			Earnings from operations	16.7		18.5		(18.9)		15.8		17.4		(17.1)
Other (expense) income:
	Interest expense			(.8)		(.5)		52.6		(.6)		(.5)		9.8
	Other, net			.7		.6		(6.8)		.3		.5		(52.4)
				(.1)		.1		***		(.3)		-		***
			Earnings before income taxes	16.6		18.6		(19.9)		15.5		17.4		(19.0)
Income taxes:
		Current		9.2		7.1		18.6		7.4		5.9		14.4
		Deferred		.2		-		***		0.1		0.6		(90.9)
				9.4		7.1		21.9		7.5		6.5		4.3
			Net earnings	7.2	%	11.7	%	(45.1)	%	8.0	%	10.9	%	(33.1)	%

The following table sets forth selected financial data (i) as a percentage of net sales for the three and nine months ended September 30, 2009 and 2008 and (ii) the percentage change in those reported items from the comparable period in 2008:

***


				Three Months Ended September 30,						Nine Months Ended September 30,
				2009		2008		% Change		2009		2008		% Change

Net sales				100.0	%	100.0	%	(5.9)	%	100.0	%	100.0	%	(7.8)	%
Cost of sales				60.7		61.8		(7.6)		60.1		61.0		(9.2)
			Gross profit	39.3		38.2		(3.3)		39.9		39.0		(5.5)

Selling and administrative expense				20.7		20.3		(3.9)		23.0		21.4		(.5)
			Earnings from operations	18.6		17.9		(2.6)		16.9		17.6		(11.5)

Other (expense) income:
	Interest expense			(.2)		(.4)		(60.0)		(.5)		(.5)		(12.0)
	Other, net			.3		(.7)		***		.3		.1		***
				.1		(1.1)		***		(.2)		(.4)		***
			Earnings before income taxes	18.7		16.8		4.1		16.7		17.2		(10.5)

Income taxes:
		Current		7.1		6.5		3.2		7.3		6.1		9.9
		Deferred		.2		(.2)		***		.1		0.3		(72.3)
				7.3		6.3		8.3		7.4		6.4		5.7
			Net earnings	11.4	%	10.6	%	1.5	%	9.3	%	10.7	%	(20.2)	%

~~Not~~*** ~~meaningful~~

~~FLUCTUATIONS~~Not ~~IN QUARTERLY RESULTS OF OPERATIONS~~meaningful

~~The~~FLUCTUATIONS ~~Company~~IN isQUARTERLY ~~subject~~RESULTS toOF seasonal influences with peak levels occurring in the second and third quarters of the fiscal year primarily due to increased educational shipments coinciding with the start of new school years in the Fall. As a result, the Company typically recognizes approximately 60% of its annual net earnings in the second and third quarters of its fiscal year. Inventory levels increase in March through June in anticipation of the peak shipping season. The majority of shipments are made between June and August and the majority of cash receipts are collected from August through October. OPERATIONS

~~Quarterly~~The ~~results~~Company ~~may~~is ~~also~~subject beto ~~materially~~seasonal ~~affected~~influences bywith ~~the~~peak ~~timing~~levels ofoccurring ~~acquisitions,~~in the ~~timing~~second and ~~magnitude~~third quarters of ~~costs~~the ~~related~~fiscal year primarily due to ~~such~~increased ~~acquisitions,~~educational ~~variations~~shipments incoinciding ~~costs~~with the start of ~~products~~new ~~sold~~school years in the Fall. As a result, the ~~mix~~Company typically recognizes approximately 60% of ~~products~~its ~~sold~~annual net earnings in the second and ~~general~~third ~~economic~~quarters ~~conditions~~of its fiscal year. ~~Results~~Inventory ~~for~~levels ~~any~~increase ~~fiscal~~in ~~quarter~~March ~~are~~through ~~not~~June ~~indicative~~in anticipation of the ~~results~~peak ~~for~~shipping ~~any~~season. The ~~subsequent~~majority ~~fiscal~~of ~~quarter~~shipments orare ~~for~~made abetween ~~full~~June ~~fiscal~~and ~~year.~~August and the majority of cash receipts are collected from August through October.

~~RESULTS~~Quarterly OFresults ~~OPERATIONS~~may -also ~~THREE~~be ~~MONTHS~~materially ~~ENDED~~affected ~~JUNE~~by 30the timing of acquisitions, ~~2009~~the AStiming ~~COMPARED~~and TOmagnitude ~~THREE~~of ~~MONTHS~~costs ~~ENDED~~related ~~JUNE~~to 30such acquisitions, ~~2008~~variations in costs of products sold, the mix of products sold and general economic conditions. Results for any fiscal quarter are not indicative of the results for any subsequent fiscal quarter or for a full fiscal year.

~~Net~~RESULTS ~~Sales~~OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2009 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2008

Net sales for the second quarter of 2009 decreased 9.5% to $51.4 million from $56.8 million for the comparable period in 2008. The decrease in sales is primarily attributable to recessionary national, state and local economies, particularly as they affect state education budgets. Shipments originating in the U.S. to international accounts increased 6.6% compared to the same period last year, primarily in the Company’s medical simulators and training manikins. Sales

Net sales infor the ~~educational~~third ~~segment,~~quarter ~~totaling~~of ~~$43.2~~2009 ~~million,~~ decreased ~~10.~~5.9% into ~~the~~$61.1 ~~second~~million ~~quarter of 2009~~ from $4865.30 million infor the comparable period in 2008. The ~~decline~~decrease in ~~educational~~ sales is ~~directly~~primarily ~~related~~attributable to ~~the~~recessionary ~~unstable~~national, ~~conditions~~state ofand ~~state~~local ~~budgets~~economies, ~~which~~particularly ~~are the primary sources of funding for K-12 schools. Expected educational funding through the federal stimulus plan has not~~ as ~~yet~~they ~~provided~~affect ~~meaningful~~state ~~assistance~~education ~~to the Company’s educational accounts~~budgets. ~~The commercial segment recorded net sales of $8.2~~

14Net sales in the educational segment, totaling $52.5 million, decreased 6.3% in the third quarter of 2009 from $56.0 million in the comparable period in 2008. The decline in educational sales is directly related to the unstable conditions of state budgets, which are the primary sources of funding for K-12 schools. Expected flow of educational funding through the American Recovery and Reinvestment Act of 2009 (“ARRA”) to K-12 institutions remains slow and lacking meaningful assistance. Although ARRA funds have eased current state budget problems, many states still report budget shortfalls, and expect shortfalls to continue into

million in the second quarter of 2009, decreasing 3.4% from the second quarter of 2008. The decline in commercial sales is attributable to the impact of the negative U.S. general economic climate across most product lines. 14

~~Gross~~2010. The ~~Profit~~commercial segment recorded net sales of $8.6 million in the third quarter of 2009, decreasing 4.0% from the third quarter of 2008. The decline in commercial sales is attributable to the impact of the negative U.S. general economic climate across most commercial product lines, particularly in agriculture-related catalogs.

Gross profit for the second quarter of 2009 decreased 8.0% to $20.6 million from $22.3 million for the comparable period in 2008. The decrease in gross profit for the second quarter of 2009 is primarily attributable to the 9.5% decrease in net sales. The gross profit margin increased to 40.0% in the second quarter of 2009 from 39.3% in the comparable period in 2008. The gross profit margin improvement is attributed to the stability in the Company’s proprietary product lines, which have higher gross profit margins than other products in both domestic and international markets, and effective efforts to control transportation costs. Profit

~~The~~Gross ~~educational segment gross~~ profit for the ~~second~~third quarter of 2009 decreased 83.73% to $1824.0 million from $1924.79 million for the comparable period in 2008. The ~~educational~~decrease ~~segment~~in gross profit ~~margin~~for ~~was 41.7% in~~ the ~~second~~third ~~quarters~~quarter of 2009 ~~compared~~is primarily attributable to 40the 5.9% decrease in ~~the~~net ~~second quarter of 2008~~sales. The ~~commercial segment~~ gross profit ~~for~~margin increased to 39.3% in the ~~second~~third quarter of 2009 ~~decreased~~from 38.52% toin ~~$3.4 million from $3.5 million for~~ the comparable period in 2008. The ~~commercial segment yielded a~~ gross profit margin ofimprovement ~~41.8%~~is inattributed to the ~~second~~profit ~~quarter~~contributions offrom ~~2009~~the asCompany’s ~~compared~~proprietary toproduct ~~40.5%~~lines, inwhich ~~the~~have ~~second~~higher ~~quarter~~gross ofprofit ~~2008. The~~margins ~~increase~~than other products in ~~the~~both ~~commercial~~domestic ~~segment~~and ~~gross~~international ~~profit~~markets, ~~margin~~and iseffective ~~attributed~~efforts to ~~favorable~~control ~~mix~~transportation ofcosts ~~proprietary~~in ~~sales~~comparison ~~which~~to ~~have~~the ~~higher~~same ~~gross~~period ~~margins~~last year.

~~Other~~The ~~cost~~educational segment gross profit for the third quarter of ~~sales,~~2009 ~~which~~decreased 5.7% to $20.8 million from $22.0 million for the ~~Company~~comparable ~~does~~period ~~not~~in ~~allocate~~2008. The byeducational segment, ~~including~~gross ~~freight~~profit ~~costs~~margin ~~incurred~~was 39.5% in the ~~procurement~~third quarter of ~~inventories~~2009 ~~and~~compared ~~shipment~~to 39.3% in the third quarter of ~~customer~~2008. The ~~orders,~~commercial ~~increased~~segment ~~less~~gross ~~than~~profit for the third quarter of 2009 decreased 1.3% to $3.16 million from $3.7 million for the comparable period in 2008. The commercial segment yielded a gross profit margin of 41.8% in the ~~second~~third quarter of 2009 as compared to 40.7% in the third quarter of 2008. The increase in the commercial segment gross profit margin is attributed to favorable mix of proprietary sales which have higher gross margins.

Selling and ~~administrative~~Administrative expenses for the second quarter of 2009 increased 1.8% to $12.0 million from $11.8 million in the comparable period in 2008. As a percent of net sales, selling and administrative expenses amounted to 23.3% and 20.8% for the second quarters of 2009 and 2008, respectively. Selling and administrative expenses include advertising and catalog costs, warehouse and shipping activities, customer service and general administrative functions. Selling and administrative expenses for the second quarter of 2009 were primarily impacted by: (i) a decrease in salaries and wages of $.5 million, or 7.4%, as a result of changes in the number of employees due to sales declines; (ii) an increase in group health care costs of $.3 million; and (iii) an increase in catalog and advertising costs of 2.8% or $.1 million. Selling and administrative expenses for the second quarter of 2008 were reduced by an insurance recovery of $.7 million.Expenses

~~The~~Selling ~~Company~~and ~~recorded~~administrative $0expenses ~~and~~for ~~less~~the ~~than~~third quarter of 2009 decreased 3.9% to $12.17 million from $13.2 million in ~~compensation~~the ~~expense~~comparable ~~for~~period ~~each~~in 2008. As a percent of net sales, selling and administrative expenses amounted to 20.7% and 20.3% for the ~~second~~third quarters of 2009 and 2008, respectively. Selling and administrative expenses include advertising and catalog costs, ~~related~~warehouse toand ~~grants~~shipping activities, customer service and general administrative functions. Selling and administrative expenses for the third quarter of ~~stock~~2009 ~~options~~were toprimarily ~~certain~~impacted by: (i) a decrease in salaries and wages of $.5 million, or 7.3%, as a result of changes in the number of employees due to sales declines; and ~~directors~~(ii) an increase in catalog and advertising costs of 5. 5% or $.2 million.

The Company ~~incurred~~recorded ~~expenses~~$0 ofand less than $.31 million toin ~~Geneve~~compensation expense for ~~certain~~the ~~administrative~~third ~~services~~quarters ~~for~~of ~~each~~2009 ofand ~~the~~2008, ~~quarters~~respectively, ~~ended~~related ~~June~~to ~~30,~~grants ~~2009~~of stock options to certain employees and ~~2008~~directors.

~~Interest~~The ~~Expense~~Company incurred expenses of $.3 million to Geneve for certain administrative services for each of the quarters ended September 30, 2009 and 2008.

Interest expense for the second quarter of 2009 increased 52.6% to $435 thousand from $285 thousand for the second quarter of 2008. The increase in interest expense is principally due to the estimated interest due of $239 thousand related to the settlement of the IRS audit (see ”Income Tax Provision” below), offset by a decrease in the average effective interest rate on outstanding debt under the Company’s primary line of credit to 2.6% during the second quarter of 2009 compared to 3.8% during the second quarter of 2008. Interest expense of $.1 million in each of the second quarters of 2009 and 2008 relates to other long-term accruals established in the fourth quarter of 2006 in connection with the transfer of ownership of certain assets. Expense

~~Weighted~~Interest ~~average~~expense for the third quarter of 2009 decreased 60.0% to $104 thousand from $260 thousand for the third quarter of 2008. The decrease in interest ~~rates~~expense ~~related~~is principally due to: (i) a decrease in the average effective interest rate on outstanding debt under the Company’s ~~credit~~primary ~~agreements~~line ~~were~~of 2credit to 1.42%, during the third quarter of 2009 compared to 3.05% during the third quarter of 2008; and 4(ii) a $.2%1 atmillion ~~June~~reduction ~~30,~~in ~~2009,~~the ~~December~~interest ~~31,~~due ~~2008~~related ~~and~~to ~~June~~the ~~30,~~settlement of the IRS audit of the Company’s tax returns for the years 2004 through 2007. Interest expense of $.1 million in each of the third quarters of 2009 and 2008, ~~respectively~~relates to other long-term accruals established in the fourth quarter of 2006 in connection with the transfer of ownership of certain assets.

~~Income~~Weighted ~~Tax~~average ~~Provision~~interest rates related to the Company’s credit agreements were 2.5%, 3.0% and 4.3% at September 30, 2009, December 31, 2008 and September 30, 2008, respectively.

~~Aristotle~~Income ~~and~~Tax its qualifying domestic subsidiaries are included in the Federal income tax return and certain state income tax returns of Geneve. The provision for income taxes for the Company is determined on a separate return basis in accordance with the terms of a tax sharing agreement with Geneve, and payments for current Federal and certain state income taxes are made to Geneve.Provision

15Aristotle and its qualifying domestic subsidiaries are included in the Federal income tax return and certain state income tax returns of Geneve. The provision for income taxes for the Company is determined on a separate return basis in accordance with the terms of a tax sharing agreement with Geneve, and payments for current Federal and certain state income taxes are made to Geneve.

The income tax provision for the second quarter of 2009 was $4.9 million versus $4.0 million for the comparable period in 2008. These tax provisions reflect effective tax rates of 57.2% and 37.6% for the second quarters of 2009 and 2008, respectively. For each of the second quarters of 2009 and 2008, the difference between the Federal statutory income tax rate of 35% and the effective income tax rate results principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a settlement with the IRS, the tax provision for the second quarter of 2009 includes additional taxes of $.5 million and $1.3 million for the 2006 and 2007 tax years, respectively, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. No additional taxes were due for any years prior to 2006.15

~~RESULTS~~The OFincome ~~OPERATIONS~~tax -provision ~~SIX~~for ~~MONTHS~~the ~~ENDED~~third ~~JUNE~~quarter ~~30,~~of 2009 ASwas ~~COMPARED~~$4.5 TOmillion ~~SIX~~versus ~~MONTHS~~$4.1 ~~ENDED~~million ~~JUNE~~for 30the comparable period in 2008. These tax provisions reflect effective tax rates of 39.1% and 37.5% for the third quarters of 2009 and 2008, respectively. For each of the third quarters of 2009 and 2008, the difference between the Federal statutory income tax rate of 35% and the effective income tax rate results principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a final settlement with the IRS, the tax provision for the third quarter of 2009 includes a $.3 million reduction in the additional taxes due for the 2007 tax year.

~~Net~~RESULTS ~~Sales~~OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2009 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2008

Net sales for the six months ended June 30, 2009 decreased 8.9% to $97.7 million from $107.2 million for the comparable period in 2008. The decrease in sales is primarily attributable to recessionary national, state and local economies, which have impacted sales volumes throughout the first six months of 2009. Shipments originating in the U.S to international accounts increased 6.8% compared to the same period last year. Sales

Net sales ~~in the educational segment were $81.8 million~~ for the ~~six~~nine months ended ~~June~~September 30, 2009, ~~decreasing~~decreased 97.28% ~~from~~to $90158.~~0 million in the comparable period in 2008. The commercial segment recorded net sales of $15.~~9 million ~~in the six months ended June 30, 2009, decreasing 7.2%~~ from $17172.2 million infor the comparable period in 2008. ~~Sales~~The ~~declines~~decrease in ~~both~~sales ~~the~~is ~~educational~~primarily ~~and~~attributable ~~commercial segments relate~~ to ~~continuing~~recessionary ~~negative U.S. general economic conditions affecting most product lines~~national, ~~which~~state ~~have~~and ~~affected~~local ~~revenues throughout 2009~~economies. ~~Expected~~ ~~educational funding through the federal stimulus plan has not as yet provided meaningful assistance to the Company’s educational accounts during the first 6 months of 2009.~~

~~Gross~~Net ~~Profit~~sales in the educational segment were $134.3 million for the nine months ended September 30, 2009, decreasing 8.1% from $146.1 million in the comparable period in 2008. The commercial segment recorded net sales of $24.6 million in the nine months ended September 30, 2009, decreasing 6.0% from $26.1 million in the comparable period in 2008. Sales declines in both the educational and commercial segments relate to continuing negative U.S. general economic conditions affecting most product lines. Expected educational funding through ARRA has not been distributed to states in a manner to yet provide meaningful assistance to the Company’s educational accounts during the first nine months of 2009.

Gross profit for the six months ended June 30, 2009 decreased 6.8% to $39.4 million from $42.2 million for the comparable period in 2008. The decrease in gross profit for the six months ended June 30, 2009 is primarily attributable to the 8.9% decrease in net sales. The gross profit margin increased to 40.3% in the six months ended June 30, 2009 from 39.4% in the comparable period in 2008. The increase in consolidated gross margin is attributed to the stable sales of the Company’s proprietary product lines, which have higher gross margins, and the Company’s management of transportation costs. Profit

~~The~~Gross ~~educational segment gross~~ profit for the ~~six~~nine months ended ~~June~~September 30, 2009 decreased 85.05% to $3463.14 million from $3767.1 million for the comparable period in 2008. The ~~educational~~decrease ~~segment~~in gross profit ~~margin~~for in the ~~six~~nine months ended ~~June~~September 30, 2009 ~~was~~is ~~41.7%~~primarily ~~compared~~attributable to ~~41.2% for~~ the ~~same period of 2008~~7. ~~The improvement in educational gross profit margin is attributed to shifts in the product mix. The commercial segment gross profit for the six months ended June 30, 2009 decreased 2.~~8% todecrease ~~$6.8~~in ~~million~~net ~~from $7~~sales.~~0 million for the comparable period in 2008.~~ The ~~commercial segment~~ gross profit margin increased to 4239.59% in the ~~six~~nine months ended ~~June~~September 30, 2009, asfrom ~~compared to 40~~39.60% in the ~~six~~comparable ~~months~~period ~~ended~~in ~~June 30,~~ 2008. The increase in ~~the~~consolidated ~~commercial segment~~ gross ~~profit~~ margin is ~~primarily~~attributed ~~attributable~~ to ~~an increase in~~ the stable sales ~~mix~~ of ~~certain~~the Company’s proprietary ~~commercial~~product ~~products~~lines, which have higher gross margins, and the Company’s management of transportation costs.

~~Other~~The ~~cost~~educational ofsegment ~~sales~~gross profit for the nine months ended September 30, ~~which~~2009 decreased 7.1% to $54.9 million from $59.1 million for the ~~Company~~comparable ~~does~~period ~~not~~in ~~allocate~~2008. The byeducational segment gross profit margin in the nine months ended September 30, ~~including~~2009 ~~freight~~was ~~costs~~40.9% ~~incurred~~compared into 40.5% for the ~~procurement~~same period of ~~inventories~~2008. ~~and~~The ~~shipment~~improvement ofin ~~customer~~educational ~~orders,~~gross ~~declined~~profit ~~$.3~~margin ~~million~~is attributed to shifts in the ~~six~~product mix. The commercial segment gross profit for the nine months ended ~~June~~September 30, 2009 ~~compared~~decreased 2.3% to ~~2008~~$10.4 ~~primarily~~million asfrom a$10.6 ~~result~~million offor ~~long~~the ~~term~~comparable ~~efforts~~period in 2008. The commercial segment gross profit margin increased to ~~control~~42.3% ~~net~~in ~~shipping~~the ~~costs~~nine months ended September 30, ~~including:~~2009, ~~(i)~~as compared to 40.7% in the ~~consolidation~~nine ofmonths ended September 30, 2008. The increase in~~-bound~~ ~~and~~the ~~out-bound~~commercial ~~shipments;~~segment ~~and~~gross ~~(ii)~~profit margin is primarily attributable to an increase in the ~~negotiation~~sales mix of ~~favorable~~certain ~~shipping~~proprietary ~~contract~~commercial ~~terms~~products, which have higher gross margins.

~~Selling~~Other cost of sales, which the Company does not allocate by segment, including freight costs incurred in the procurement of inventories and ~~Administrative~~shipment ~~Expenses~~of customer orders, declined $.8 million in the nine months ended September 30, 2009 compared to 2008 primarily as a result of long term efforts to control net shipping costs, including: (i) the consolidation of in-bound and out-bound shipments; and (ii) the negotiation of favorable shipping contract terms.

Selling and ~~administrative~~Administrative expenses for the six months ended June 30, 2009 increased 1.4% to $23.9 million from $23.6 million in the comparable period in 2008. As a percent of net sales, selling and administrative expenses amounted to 24.5% for the six months ended June 30, 2009 as compared to 22.0% in the comparable period of 2008. Selling and administrative expenses include advertising and catalog costs, warehouse and shipping activities, customer service and general administrative functions. Selling and administrative expenses for the six months ended June 30, 2009 were primarily impacted by: (i) a decrease in salaries Expenses

16Selling and administrative expenses for the nine months ended September 30, 2009 decreased .5% to $36.6 million from $36.8 million in the comparable period in 2008. As a percent of net sales, selling and administrative expenses amounted to 23.0% for the nine months ended September 30, 2009 as compared to 21.4% in the comparable period of 2008. Selling and administrative expenses include advertising and catalog costs, warehouse and shipping activities, customer service and general administrative functions. Selling and administrative expenses for the nine months ended September 30, 2009 were primarily impacted by: (i) a decrease in salaries and wages of $1.2 million, or 6.5%, as a result of changes in the number of employees due to sales declines; (ii) an increase in group health care costs by $.5 million; (iii) an increase in pension costs of $.3 million due to underperformance of

and wages of $.7 million, or 6.0%, as a result of changes in the number of employees due to sales declines; (ii) an increase in group health care costs by $.5 million; and (iii) an increase in catalog and advertising costs of 5.1% or $.3 million. Selling and administrative expenses for the six months ended June 30, 2008 were reduced by an insurance recovery of $.7 million.16

~~The~~pension ~~Company~~plan ~~recorded~~asset $0investments; and ~~less~~(iv) ~~than~~an increase in catalog and advertising costs of 5.3% or $.14 million. Selling inand ~~compensation~~administrative ~~expense~~expenses for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, ~~2009 and~~ 2008 ~~related~~were toreduced ~~grants~~by ofan ~~stock~~insurance ~~options~~recovery toof ~~certain~~$.7 ~~employees and directors~~million.

The Company ~~incurred~~recorded ~~expenses~~$0 ofand less than $.51 tomillion ~~Geneve~~in ~~for~~compensation ~~certain~~expense ~~administrative services~~ for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively, related to grants of stock options to certain employees and directors.

~~Interest~~The ~~Expense~~Company incurred expenses of $.8 to Geneve for certain administrative services for each of the nine months ended September 30, 2009 and 2008.

Interest expense for the six months ended June 30, 2009 increased to $629 thousand from $573 thousand for the comparable period in 2008. The increase in interest expense is principally due to the estimated interest due of $239 thousand related to the settlement of the IRS audit of the Company’s tax returns for the years 2004 through 2007, offset by a decrease in the average effective interest rate on outstanding debt under the Company’s primary line of credit to 2.6% during the first six months of 2009, compared to 4.3% during the first six months of 2008. Interest expense of $.2 million in each of the six months ended June 30, 2009 and 2008 relates to other long-term accruals established in the fourth quarter of 2006 in connection with the transfer of ownership of certain assets. Expense

~~Weighted~~Interest ~~average~~expense for the nine months ended September 30, 2009 decreased to $733 thousand from $833 thousand for the comparable period in 2008. The decrease in interest ~~rates~~expense ~~related~~is principally due to a decrease in the average effective interest rate on outstanding debt under the Company’s ~~credit~~primary ~~agreements~~line ~~were~~of 2credit to 1.4% during the first nine months of 2009, ~~3.0%~~compared ~~and~~to 4.20% atduring ~~June~~the ~~30,~~first ~~2009,~~nine ~~December~~months ~~31,~~of 2008, ~~and~~offset ~~June~~by interest due of $147 thousand related to the settlement of the IRS audit of the Company’s tax returns for the years 2004 through 2007. Interest expense of $.3 million in each of the nine months ended September 30, 2009 and 2008, ~~respectively~~relates to other long-term accruals established in the fourth quarter of 2006 in connection with the transfer of ownership of certain assets.

~~Income~~Weighted ~~Tax~~average ~~Provision~~interest rates related to the Company’s credit agreements were 2.6%, 3.0% and 4.3% at September 30, 2009, December 31, 2008 and September 30, 2008, respectively.

~~The~~Aristotle ~~income~~and ~~tax~~its ~~provision~~qualifying ~~for~~domestic ~~the~~subsidiaries ~~six~~are ~~months~~included ~~ended June 30, 2009 was $7.3 million versus $7.0 million for the comparable period~~ in ~~2008. These tax provisions reflect effective tax rates of 48.4% and 37.6% for~~ the ~~six months ended June 30, 2009 and 2008, respectively. For each of the six months ended June 30, 2009 and 2008, the difference between the~~ Federal ~~statutory~~ income tax ~~rate~~return ~~of 35%~~ and ~~the~~certain ~~effective~~state income tax ~~rate~~returns ~~results~~of ~~principally~~Geneve. The ~~from~~provision ~~state~~for income taxes, ~~net~~for of the ~~Federal~~Company ~~tax~~is ~~benefit,~~determined ~~certain~~on ~~manufacturing~~a ~~tax~~separate ~~credits~~return ~~provided~~basis byin ~~Section~~accordance ~~199~~with of the ~~Internal~~terms ~~Revenue~~of ~~Code,~~a ~~and the differential between the Federal~~ tax ~~rate~~sharing ~~and~~agreement ~~the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a settlement~~ with ~~the IRS~~Geneve, ~~the tax provision for the first six months of 2009 includes additional taxes of $.5 million~~ and ~~$1.3~~payments ~~million~~ for ~~the~~current ~~2006~~Federal and ~~2007~~certain ~~tax~~state ~~years,~~income ~~respectively, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. No additional~~ taxes ~~were~~are ~~due~~made ~~for any years prior~~ to ~~2006~~Geneve.

~~LIQUIDITY~~The ~~AND~~income ~~CAPITAL~~tax ~~RESOURCES~~provision for the nine months ended September 30, 2009 was $11.8 million versus $11.1 million for the comparable period in 2008. These tax provisions reflect effective tax rates of 44.4% and 37.6% for the nine months ended September 30, 2009 and 2008, respectively. For each of the nine months ended September 30, 2009 and 2008, the difference between the Federal statutory income tax rate of 35% and the effective income tax rate results principally from state income taxes, net of the Federal tax benefit, certain manufacturing tax credits provided by Section 199 of the Internal Revenue Code, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates. In addition, pursuant to a settlement with the IRS, the tax provision for the first nine months of 2009 includes additional taxes of $.5 million and $1.0 million for the 2006 and 2007 tax years, respectively, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. No additional taxes were due for any years prior to 2006.

AtLIQUIDITY ~~June~~AND ~~30,~~CAPITAL 2009, the Company had working capital of $80.3 million, increasing from $76.2 million at December 31, 2008. At June 30, 2008, the Company had working capital of $85.7 million. Cash and cash equivalents increased $7.6 million in the six months ended June 30, 2009, ending the period at $22.9 million. The increase in the generation of cash and cash equivalents during the six months ended June 30, 2009 as compared to the same period in 2008 is primarily due to the following: RESOURCES

§At September 30, 2009, the Company had working capital of $86.1 million, increasing from $76.2 million at December 31, 2008. At September 30, 2008, the Company had working capital of $88.6 million. Cash and cash equivalents increased $14.4 million in the nine months ended September 30, 2009, ending the period at $29.7 million. The increase in the generation of cash and cash equivalents during the nine months ended September 30, 2009 as compared to the same period in 2008 is primarily due to the following:

The Company generated cash of $12.0 million from operations during the six months ended June 30, 2009, compared to $7.5 million for the comparable period of 2008. The increase in cash generated from operations in the six months ended June 30, 2009 compared to the same period in 2008 was principally the result of: (i) a $4.3 million lower investment in inventory; and (ii) lower investments in other working capital items, offset by a $3.8 million decline in net earnings. §

The ~~changes~~Company ingenerated ~~current~~cash ~~assets~~of ~~and~~$23.3 ~~liabilities~~million ~~are~~from ~~typical~~operations ~~for~~during the ~~first~~nine ~~six~~ months ofended ~~the~~September ~~fiscal~~30, ~~year~~2009, ascompared to $14.4 million for the ~~Company~~comparable isperiod ~~preparing~~of ~~for~~2008. The ~~its~~increase ~~peak~~in ~~business~~cash ~~cycle,~~generated ~~which~~from ~~occurs~~operations ~~during~~in the ~~second~~nine ~~and~~months ~~third~~ended ~~quarters~~September of30, 2009 compared to the ~~fiscal~~same ~~year. For~~period ~~more~~in ~~information~~2008 onwas principally the ~~seasonality~~result of: ~~the~~(i) ~~Company’s~~a ~~business,~~$4.9 ~~please~~million ~~refer~~lower toinvestment ~~the~~in ~~“Fluctuations~~inventory; and (ii) lower investments in ~~Quarterly~~other ~~Results~~working ofcapital ~~Operations”~~items, ~~section~~offset ~~above~~by a $3.7 million decline in net earnings.

17The changes in current assets and liabilities are typical for the first nine months of the fiscal year as the Company completes its peak business cycle, which occurs during the second and third quarters of the fiscal year. For more information on the seasonality of the Company’s business, please refer to the “Fluctuations in Quarterly Results of Operations” section above.

§17

The Company generated cash of $.1 million from investing activities in the six months ended June 30, 2009, compared to a $5.3 million use of cash for the comparable period in 2009. In the six months ended June 30, 2009, the Company used $.6 million to fund the purchase of fixed assets, and generated $.7 million from the sale of marketable securities. In the six months ended June 30, 2008, the Company used $2.2 million to fund the purchase of fixed assets, including $1.2 million for renovations of an existing facility. §

~~During~~The ~~the~~Company ~~six~~used ~~months~~cash ~~ended~~of ~~June~~less ~~30,~~than ~~2009~~$.1 ~~and~~million ~~2008,~~from ~~the~~investing ~~Company~~activities ~~invested~~in $0the ~~and~~nine ~~$.5~~months ~~million~~ended September 30, ~~respectively~~2009, incompared ~~marketable~~to ~~securities~~a ~~(see~~$6.1 ~~Note~~million 6use of ~~the~~cash ~~Notes~~for tothe ~~Condensed~~comparable ~~Consolidated~~period ~~Financial~~in ~~Statements~~2009. In ~~included~~the innine ~~Item~~months 1ended ofSeptember ~~this~~30, ~~Form~~2009, ~~10-Q). Also~~the ~~during~~Company ~~these~~used ~~comparable~~$.8 ~~six~~million ~~month~~to ~~periods,~~fund the ~~Company~~purchase ~~invested~~of $0fixed assets, and generated $3.07 million, ~~respectively,~~from inthe ~~limited~~sale ~~partnerships~~of ~~(see~~marketable ~~Note~~securities. In 7the ofnine months ended September 30, 2008, the ~~Notes~~Company used $2.9 million to ~~Condensed~~fund ~~Consolidated~~the ~~Financial~~purchase ~~Statements~~of ~~included~~fixed inassets, ~~Item~~including $1.2 million for renovations of ~~this~~an ~~Form~~existing ~~10-Q)~~facility.

§During the nine months ended September 30, 2009 and 2008, the Company invested $0 and $1.6 million, respectively, in marketable securities (see Note 6 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q). Also during these comparable nine month periods, the Company invested $0 and $3.0 million, respectively, in limited partnerships (see Note 7 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q).

Financing activities used cash of $4.4 million and $1.3 million in the six months ended June 30, 2009 and 2008, respectively. In the six months ended June 30, 2009, the Company reduced long-term debt by $.1 million. In the six months ended June 30, 2008, net proceeds from borrowings under the Company’s primary credit facility of $2.8 million were needed for seasonal working capital requirements, including the payment of Preferred Stock cash dividends on March 31, 2008. §

~~Proceeds~~Financing ~~from~~activities ~~the~~used ~~exercise~~cash of ~~stock options were~~ $08.8 million and ~~less than~~ $6.17 million in the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. In the nine months ended September 30, 2009, the Company reduced long-term debt by $.2 million. In the nine months ended September 30, 2008, net proceeds from borrowings under the Company’s primary credit facility of $1.8 million were used for seasonal working capital requirements, including the payment of Preferred Stock cash dividends on March 31, 2008.

~~The~~Proceeds ~~Company~~from ~~paid~~the ~~dividends~~exercise of stock options were $40 and $.31 million in ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, ~~on its Series I Preferred Stock and Series J Preferred Stock~~respectively.

~~On October 15, 2003, the Company entered into a five-year, non-amortizing, $45.0 million Revolving Credit Facility.~~ The ~~Revolving Credit Facility provides the~~ Company ~~with~~paid ~~seasonal~~dividends ~~working capital, letters~~ of credit and funds for appropriate acquisitions of businesses similar in nature to the Company’s current business segments. This debt carries a variable rate of interest that is based on Prime or LIBOR rates plus applicable margins. On February 26, 2008, the Company and its primary lenders executed an amendment to the Revolving Credit Facility. The primary provisions of the amendment: (i) extend the term of the Revolving Credit Facility from October 15, 2008 to January 31, 2013; (ii) provide the Company the option to expand the capacity of the facility from $458.06 million toin ~~$60.0~~each ~~million during the term~~ of the ~~agreement;~~nine ~~(iii)~~months ~~relieve~~ended ~~the~~September Company of certain monthly reporting obligations; (iv) modify the pricing structure to provide interest rates more favorable to the Company; and (v) update certain financial covenants to standards relevant to the Company’s current financial condition. At June 30, 2009, the weighted average interest rate on this debt was 1.3%. The Revolving Credit Facility currently has a committed weighted average rate of interest (including applicable margins) of approximately 1.3%. Such rate commitments expire on various dates through August 27, 2009. Subsequent to that date, the rate commitments will be renewed at interest rates based on the then-current LIBOR rates. The Company’s Revolving Credit Facility is collateralized by certain accounts receivable, inventories and ~~property,~~2008 plant and equipment, and shares of a certain subsidiary’s outstanding capital stock and ownership interests of certain of the Company’s limited liability subsidiaries. The Revolving Credit Facility contains various financial and operating covenants, including, among other things, requirements to maintain certain financial ratios and restrictions on ~~additional~~its ~~indebtedness,~~Series ~~common~~I ~~stock~~Preferred ~~dividend~~Stock ~~payments, capital disposals~~ and ~~intercompany~~Series ~~management~~J ~~fees. The~~Preferred ~~Company was in compliance with all financial covenants as of June 30, 2009~~Stock.

InOn ~~2009~~October 15, 2003, the Company entered into a five-year, non-amortizing, $45.0 million Revolving Credit Facility. The Revolving Credit Facility provides the Company with seasonal working capital, ~~expenditures~~letters toof ~~replace~~credit and ~~upgrade~~funds ~~existing~~for ~~equipment~~appropriate ~~and~~acquisitions ~~install~~of ~~new~~businesses ~~equipment~~similar in nature to the Company’s current business segments. This debt carries a variable rate of interest that is based on Prime or LIBOR rates plus applicable margins. On February 26, 2008, the Company and ~~fixtures~~its primary lenders executed an amendment to ~~provide~~the ~~additional~~Revolving ~~operating~~Credit ~~efficiencies~~Facility. The ~~are~~primary ~~expected~~provisions of the amendment: (i) extend the term of the Revolving Credit Facility from October 15, 2008 to ~~approximate~~January 31, 2013; (ii) provide the Company the option to expand the capacity of the facility from $145.70 million to $60.0 million during the term of the agreement; (iii) relieve the Company of certain monthly reporting obligations; (iv) modify the pricing structure to provide interest rates more favorable to the Company; and (v) update certain financial covenants to standards relevant to the Company’s current financial condition. At September 30, 2009, the weighted average interest rate on this debt was 1.2%. The Revolving Credit Facility currently has a committed weighted average rate of interest (including applicable margins) of approximately 1.2%. Such rate commitments expire on various dates through November 30, 2009. Subsequent to that date, the rate commitments will be renewed at interest rates based on the then-current LIBOR rates. The Company’s Revolving Credit Facility is collateralized by certain accounts receivable, inventories and property, plant and equipment, and shares of a certain subsidiary’s outstanding capital stock and ownership interests of certain of the Company’s limited liability subsidiaries. The Revolving Credit Facility contains various financial and operating covenants, including, among other things, requirements to maintain certain financial ratios and restrictions on additional indebtedness, common stock dividend payments, capital disposals and intercompany management fees. The Company was in compliance with all financial covenants as of September 30, 2009.

~~Capital~~In ~~resources~~2009, incapital ~~the~~expenditures ~~future~~to ~~are~~replace ~~expected~~and toupgrade beexisting ~~used~~equipment ~~for~~and ~~the~~install ~~development~~new ofequipment ~~catalogs~~ and ~~product~~fixtures ~~lines,~~ to ~~acquire~~provide additional ~~businesses~~operating ~~and~~efficiencies ~~for~~are ~~other~~expected ~~investing activities. The Company anticipates that there will be sufficient financial resources~~ to ~~meet~~approximate ~~projected working capital and other cash requirements for at least the next twelve months~~$1. ~~Management~~3 ~~of the Company believes it has sufficient capacity to maintain current operations and support a sustained level of future growth~~million.

18Capital resources in the future are expected to be used for the development of catalogs and product lines, to acquire additional businesses and for other investing activities. The Company anticipates that there will be sufficient financial resources to meet projected working capital and other cash requirements for at least the next twelve months. Management of the Company believes it has sufficient capacity to maintain current operations and support a sustained level of future growth.

~~INFLATION~~18

Inflation has had only a minor effect on the Company’s operating results and its sources of liquidity. Inflation, including as it related to the increased cost of fuel and plastic materials, did not significantly impact the Company’s operating results and its sources of liquidity in each of the three and six months ended June 30, 2009 and 2008.INFLATION

~~SIGNIFICANT~~Inflation ~~ACCOUNTING~~has ~~POLICIES~~had only a minor effect on the Company’s operating results and its sources of liquidity. Inflation, including as it related to the increased cost of fuel and plastic materials, did not significantly impact the Company’s operating results and its sources of liquidity in each of the three and nine months ended September 30, 2009 and 2008.

~~The~~SIGNIFICANT ~~preparation~~ACCOUNTING of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and notes thereto. Actual results could differ from those estimates. The Company believes the following accounting policies affect the more significant judgments and estimates used in the preparation of the Condensed Consolidated Financial Statements:POLICIES

~~Prepaid~~The ~~Catalog~~preparation ~~Costs~~of ~~and~~the ~~Amortization~~Condensed -Consolidated ~~The~~Financial ~~Company~~Statements ~~accumulates~~in ~~all~~conformity ~~direct~~with ~~costs,~~GAAP ~~less~~requires ~~applicable~~management ~~vendor~~to ~~rebates,~~make ~~incurred~~estimates inand ~~the~~assumptions ~~development,~~that ~~production~~affect ~~and~~the ~~circulation~~amounts ofreported ~~catalogs~~in on the Condensed Consolidated ~~Balance~~Financial ~~Sheets~~Statements ~~until~~and ~~the~~notes ~~related~~thereto. Actual ~~catalog~~results iscould ~~mailed,~~differ atfrom ~~which~~those ~~time~~estimates. The ~~such~~Company ~~catalog~~believes ~~costs~~the ~~are~~following ~~amortized~~accounting ~~into~~policies ~~selling~~affect ~~and administrative expense over~~ the ~~estimated~~more ~~sales~~significant ~~realization~~judgments ~~cycle~~and ofestimates ~~one~~used ~~year,~~in ~~using~~ the ~~ratio~~preparation of ~~current period revenues to~~ the ~~total~~Condensed ofConsolidated ~~current~~Financial ~~and future period revenues for each catalog.~~ Statements:

~~Deferred~~Prepaid ~~Income~~Catalog ~~Taxes~~Costs and Amortization - The Company ~~accounts~~accumulates ~~for~~all ~~income~~direct ~~taxes~~costs, ~~under~~less ~~the~~applicable ~~asset~~vendor ~~and liability method~~rebates, ~~wherein~~incurred ~~deferred~~in ~~income~~the ~~tax~~development, ~~assets~~production and ~~liabilities~~circulation ~~are~~of ~~recognized~~catalogs ~~for~~on the ~~future~~Condensed ~~tax~~Consolidated ~~consequences~~Balance ~~attributable~~Sheets tountil ~~differences between~~ the ~~consolidated~~related ~~financial~~catalog ~~statement~~is ~~carrying~~mailed, ~~amounts~~at ofwhich ~~existing~~time ~~assets~~such ~~and~~catalog ~~liabilities~~costs ~~and~~are ~~their~~amortized ~~respective~~into ~~tax~~selling ~~bases. Deferred income tax assets~~ and ~~liabilities~~administrative ~~are~~expense ~~measured~~over ~~using~~the ~~enacted~~estimated ~~tax~~sales ~~rates~~realization ~~expected~~cycle toof ~~apply~~one toyear, ~~taxable~~using ~~income in~~ the ~~years~~ratio inof ~~which~~current ~~those~~period ~~temporary~~revenues ~~differences are expected~~ to bethe ~~recovered~~total orof ~~settled. The~~current ~~effect on deferred income tax assets~~ and ~~liabilities~~future ~~of a change in tax rates is recognized in income in the~~ period ~~that~~revenues ~~includes~~for ~~the~~each ~~enactment date~~catalog.

~~Goodwill~~Deferred Income Taxes - The Company ~~evaluates~~accounts ~~goodwill~~ for ~~impairment~~income attaxes ~~least~~under ~~annually, or more frequently if events or circumstances indicate that~~ the ~~assets~~asset ~~may~~and beliability ~~impaired~~method, bywherein ~~applying~~deferred aincome ~~fair~~tax ~~value~~assets ~~based test~~ and, ifliabilities ~~impairment~~are ~~occurs,~~recognized ~~the amount of impaired goodwill is written off immediately. The Company evaluates goodwill~~ for ~~impairment based on~~ the ~~expected~~ future ~~cash~~tax ~~flows~~consequences orattributable ~~earnings~~to ~~projections. Goodwill~~differences isbetween ~~deemed~~the ~~impaired~~consolidated iffinancial ~~the~~statement ~~estimated~~carrying ~~discounted~~amounts ~~cash~~of ~~flows~~existing orassets ~~earnings~~and ~~projections~~liabilities doand ~~not~~their ~~substantiate~~respective ~~the~~tax ~~carrying value~~bases. ~~The~~Deferred ~~estimation~~income oftax ~~such~~assets ~~amounts~~and ~~requires~~liabilities ~~significant~~are ~~management~~measured ~~judgment~~using ~~with~~enacted ~~respect~~tax rates expected to ~~revenue~~apply ~~and~~to ~~expense~~taxable ~~growth~~income ~~rates,~~in ~~changes~~the years in ~~working~~which ~~capital~~those ~~and~~temporary ~~selection~~differences ofare anexpected ~~appropriate~~to ~~discount~~be ~~rate,~~recovered asor ~~applicable~~settled. The ~~use~~effect ofon ~~different~~deferred ~~assumptions~~income ~~would~~tax ~~increase~~assets orand ~~decrease~~liabilities ~~discounted~~of ~~future~~a ~~operating~~change ~~cash~~in ~~flows~~tax orrates ~~earnings~~is ~~projections~~recognized ~~and~~in ~~could,~~income ~~therefore,~~in ~~change~~ the ~~impairment~~period ~~determination. The Company evaluated its goodwill at December 31, 2008, and determined~~ that ~~there~~includes ~~was~~the noenactment ~~impairment of goodwill~~date.

~~Defined~~Goodwill ~~Benefit Plans~~ - The Company ~~accounts~~evaluates goodwill for ~~the~~impairment ~~benefits~~at ~~under~~least ~~its~~annually, ~~defined~~or ~~benefit~~more ~~pension~~frequently ~~plan~~if ~~using~~events ~~actuarial~~or ~~models~~circumstances ~~required~~indicate that the assets may be impaired, by ~~SFAS~~applying ~~No. 87~~a fair value based test and, ~~“Employers’~~if ~~Accounting~~impairment ~~for~~occurs, ~~Pensions~~the amount of impaired goodwill is written off immediately.” ~~These~~The ~~models~~Company ~~use~~evaluates angoodwill ~~attribution~~for ~~approach~~impairment ~~that~~based ~~generally~~on ~~spreads~~the ~~individual~~expected ~~events~~future ~~over~~cash ~~the~~flows ~~service~~or ~~lives~~earnings ofprojections. Goodwill is deemed impaired if the ~~employees~~estimated indiscounted cash flows or earnings projections do not substantiate the ~~plan~~carrying value. ~~Examples~~The estimation of ~~“events”~~such ~~are~~amounts ~~plan~~requires ~~amendments~~significant ~~and~~management ~~changes~~judgment inwith ~~actuarial~~respect ~~assumptions~~to ~~such~~revenue asand ~~discount~~expense ~~rate~~growth rates, ~~expected~~changes ~~return~~in onworking ~~plan~~capital ~~assets~~ and ~~rate~~selection of ~~compensation~~an ~~increases. The~~appropriate ~~principle~~discount ~~underlying~~rate, ~~the~~as ~~required~~applicable. The ~~attribution~~use ~~approach~~of isdifferent ~~that~~assumptions ~~employees~~would ~~render~~increase ~~service~~or ~~over~~decrease ~~their~~discounted ~~service~~future ~~lives~~operating oncash aflows ~~relatively~~or ~~consistent~~earnings ~~basis~~projections and could, therefore, change the ~~statement~~impairment ofdetermination. The ~~earnings~~Company ~~effects~~evaluated ofits ~~pension~~goodwill ~~benefits~~at ~~are~~December ~~earned~~31, in2008, and ~~should~~determined bethat ~~expensed~~there ~~in,~~was ~~the~~no ~~same~~impairment ~~pattern~~of goodwill.

InDefined ~~calculating~~Benefit ~~net~~Plans ~~periodic~~- ~~benefit~~The ~~cost~~Company ~~and~~accounts for the ~~related~~benefits ~~benefit~~under ~~obligation,~~its ~~the~~defined ~~Company~~benefit ispension ~~required~~plan tousing ~~select certain~~ actuarial ~~assumptions. These~~models ~~assumptions~~required ~~include~~by ~~discount~~ASC ~~rate~~715-10, ~~expected~~“Employers’ ~~return~~Accounting onfor ~~plan~~Pensions”, ~~assets~~formerly ~~and~~known ~~rate~~as. ofSFAS ~~compensation increase~~No. ~~The~~ 87, ~~discount~~“Employers’ ~~rate~~Accounting ~~assumptions~~for ~~reflect~~Pensions.” These ~~the~~models ~~prevailing~~use ~~market~~an ~~rates~~attribution ~~for~~approach ~~long-term,~~that ~~high-quality,~~generally ~~fixed-income~~spreads ~~debt~~individual ~~instruments~~events ~~that,~~over if the ~~obligation~~service ~~was~~lives ~~settled~~of at the ~~measurement~~employees ~~date,~~in ~~would provide~~ the ~~necessary~~plan. Examples ~~future~~of ~~cash~~“events” ~~flows~~are toplan ~~pay~~amendments ~~the~~and ~~benefit~~changes ~~obligation~~in ~~when~~actuarial ~~due. The~~assumptions ~~Company~~such ~~uses~~as ~~long-term~~discount ~~historical~~rate, ~~actual~~expected return ~~experience~~on ~~with~~plan ~~consideration~~assets ofand ~~the~~rate ~~expected~~of ~~investment~~compensation ~~mix~~increases. The ofprinciple underlying the ~~plan’s~~required ~~assets,~~attribution asapproach ~~well~~is asthat ~~future~~employees ~~estimates~~render ofservice ~~long-term~~over ~~investment~~their ~~returns,~~service tolives ~~develop~~on ~~its~~a ~~assumptions~~relatively ofconsistent ~~the~~basis ~~expected~~and, ~~return~~therefore, onthe ~~plan~~statement ~~assets. The rate~~ of ~~compensation~~earnings ~~increase~~effects isof ~~based~~pension onbenefits ~~historical~~are ~~experience~~earned in, and ~~the~~should ~~Company’s~~be ~~long-term~~expensed ~~plans~~in, ~~for~~the ~~such~~same ~~increases~~pattern.

~~Revenues~~In -calculating ~~Customarily~~net ~~applying~~periodic ~~FOB-shipping~~benefit ~~point~~cost ~~terms~~and the related benefit obligation, the Company ~~recognizes~~is ~~revenue~~required ~~upon~~to ~~shipment~~select certain actuarial assumptions. These assumptions include discount rate, expected return on plan assets and rate of ~~products~~compensation toincrease. The ~~its~~discount ~~customers~~rate assumptions reflect the prevailing market rates for long-term, ~~which~~high-quality, ~~corresponds~~fixed-income todebt instruments that, if the ~~time~~obligation ~~when~~was ~~risk~~settled ofat ~~ownership~~the ~~transfers~~measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. The ~~point~~Company ofuses ~~shipment~~long-term ishistorical ~~typically~~actual ~~from~~return ~~one~~experience with consideration of the ~~Company~~expected investment mix of the plan’s ~~distribution~~assets, ~~centers~~as ~~or,~~well onas ~~occasion~~future estimates of long-term investment returns, ato ~~vendor’s~~develop ~~location~~its asassumptions aof ~~drop~~the ~~shipment~~expected return on plan assets. ~~All~~The ~~drop~~rate ~~shipment~~of ~~sales~~compensation ~~are~~increase ~~recorded~~is atbased ~~gross~~on ~~selling~~historical ~~price~~experience asand the Company’s ~~acts~~long-term asplans ~~principal~~for insuch ~~the transactions~~increases.

19Revenues - Customarily applying FOB-shipping point terms, the Company recognizes revenue upon shipment of products to its customers, which corresponds to the time when risk of ownership transfers. The point of shipment is typically from one of the Company’s distribution centers or, on occasion, a vendor’s location as a drop shipment. All drop shipment sales are recorded at

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~19

~~The~~gross ~~Company’s~~selling ~~financial~~price ~~instruments~~as include cash and cash equivalents, marketable securities, investments, accounts receivable, accounts payable, accrued liabilities and debt. As described below, credit risk, market risk and interest rate risk are the ~~primary~~Company ~~sources~~acts ofas ~~risk~~principal in the ~~Company’s accounts receivable, marketable securities, investments and debt~~transactions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~Credit Risk:~~ The Company’s ~~provides~~financial ~~credit~~instruments ininclude ~~the~~cash ~~normal~~and ~~course~~cash ofequivalents, ~~business~~marketable tosecurities, ~~its customers~~investments, ~~which~~accounts ~~are~~receivable, ~~primarily~~accounts ~~educational~~payable, ~~institutions~~accrued orliabilities ~~distributors~~and debt. NoAs ~~single~~described ~~customer~~below, ~~accounted~~credit ~~for~~risk, ~~more~~market ~~than~~risk ~~10%~~and ofinterest ~~the~~rate ~~Company’s~~risk ~~sales~~are ~~in each of~~ the ~~three~~primary ~~and~~sources ~~six~~of ~~months~~risk ~~ended~~in ~~June~~the ~~30, 2009 and 2008. The~~ Company’s ~~performs~~accounts ~~ongoing~~receivable, ~~credit~~marketable ~~evaluations of its customers~~securities, ~~maintains~~investments ~~allowances for potential credit losses~~ and ~~generally does not require collateral to support its accounts receivable balances~~debt.

Market Risk: The Company’s exposure to market risk relates to the quality of holdings of its marketable securities and limited partnership investment. The fair market values of the marketable securities and limited partnerships’ investments are subject to increases or decreases in value resulting from the performance of the securities issuers, from upgrades or downgrades in the credit worthiness of the securities issuers and from changes in general market conditions. The Company may be required to record losses on marketable securities when the market value of such securities falls below cost and the loss is considered other than temporary. The Company seeks to manage its exposure to market risk by investing in accordance with standards established by the Investment Committee of the Board of Directors. The standards of the Investment Committee are: (i) preservation of capital; (ii) provision of adequate liquidity to meet projected cash requirements; (iii) minimization of risk of principal loss through diversified short and medium term investments; and (iv) maximization of yields in relationship to the guidelines, risk, market conditions and tax considerations. QUALITATIVE

~~Interest~~Credit ~~Rate~~ Risk: ~~Changes~~The inCompany ~~interest~~provides ~~rates~~credit ~~can~~in ~~potentially impact~~ the ~~Company’s~~normal ~~profitability~~course ~~and~~of ~~its~~business ~~ability~~ to ~~realize~~its ~~assets and satisfy liabilities. Interest rate risk is resident primarily in debt~~customers, which ~~typically~~are ~~has~~primarily ~~variable~~educational ~~interest~~institutions ~~rates based on Prime~~ or ~~LIBOR rates~~distributors. ~~Assuming~~No nosingle ~~other~~customer ~~change~~accounted infor ~~financial~~more ~~structure,~~than an10% ~~increase~~ of ~~1% in~~ the Company’s ~~variable~~sales ~~interest~~in ~~rate~~each ~~for~~of ~~debt~~the ~~would~~three ~~decrease~~and ~~pre-tax~~nine ~~earnings~~months ~~for~~ended ~~2009~~September by30, ~~approximately~~2009 ~~$.1~~and ~~million~~2008. ~~This~~The ~~amount~~Company isperforms ~~determined~~ongoing bycredit ~~considering~~evaluations ~~the impact~~ of aits 1%customers, ~~increase~~maintains inallowances ~~interest~~for ~~rates~~potential oncredit ~~the~~losses ~~average~~and ~~debt~~generally ~~estimated~~does tonot berequire ~~outstanding~~collateral onto ~~the~~support ~~Company’s~~its ~~primary~~accounts ~~credit~~receivable ~~facility and variable rate mortgage in 2009~~balances.

~~QUANTITATIVE~~Market Risk: The Company’s exposure to market risk relates to the quality of holdings of its marketable securities and limited partnership investments. The fair market values of the marketable securities and limited partnerships’ investments are subject to increases or decreases in value resulting from the performance of the securities issuers, from upgrades or downgrades in the credit worthiness of the securities issuers and from changes in general market conditions. The Company may be required to record losses on marketable securities when the market value of such securities falls below cost and the loss is considered other than temporary. The Company seeks to manage its exposure to market risk by investing in accordance with standards established by the Investment Committee of the Board of Directors. The standards of the Investment Committee are: (i) preservation of capital; (ii) provision of adequate liquidity to meet projected cash requirements; (iii) minimization of risk of principal loss through diversified short and medium term investments; and (iv) maximization of yields in relationship to the guidelines, risk, market conditions and tax considerations.

~~The~~Interest Rate Risk: Changes in interest rates can potentially impact the Company’s profitability and its ability to realize assets and satisfy liabilities. Interest rate risk is resident primarily in debt, aswhich oftypically ~~June~~has 30variable interest rates based on Prime or LIBOR rates. Assuming no other change in financial structure, an increase of 1% in the Company’s variable interest rate for debt would decrease pre-tax earnings for 2009 by approximately $.1 million. This amount is asdetermined ~~follows~~by (considering the impact of a 1% increase in ~~millions,~~interest ~~except~~rates ~~percentage~~on ~~data):~~the average debt estimated to be outstanding on the Company’s primary credit facility and variable rate mortgage in 2009.

	MATURITY LESS THAN ONE YEAR		MATURITY GREATER THAN ONE YEAR
Amount	$	.3	$	10.2
Weighted average interest rate		3.3%		2.4%
Fair market value	$	.3	$	10.2

QUANTITATIVE

The ~~fair~~Company’s ~~market value of~~ debt ~~equals~~as ~~the face amount~~ of ~~debt~~September ~~outstanding~~30, ~~because~~2009 ~~the underlying rate of interest on substantially all of the Company’s debt~~ is ~~variable~~as ~~based~~follows ~~upon~~(in ~~Prime~~millions, orexcept ~~LIBOR~~percentage ~~rates.~~ data):

ITEM 4T. CONTROLS AND PROCEDURES


	MATURITY LESS THAN ONE YEAR		MATURITY GREATER THAN ONE YEAR

Amount	$	.3	$	10.1
Weighted average interest rate		3.3%		2.4%
Fair market value	$	.3	$	10.1

The ~~President~~fair ~~and~~market ~~the~~value ~~Chief~~of ~~Financial~~debt ~~Officer~~equals of the ~~Company~~face ~~(its~~amount ~~principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as~~ of ~~the~~debt ~~end~~outstanding ofbecause the ~~period~~underlying ~~covered~~rate byof ~~this~~interest ~~Quarterly Report~~ on ~~Form~~substantially ~~10-Q,~~all ~~that~~of the Company’s ~~disclosure~~debt ~~controls~~is ~~and~~variable ~~procedures~~based ~~are~~upon ~~effective~~Prime ~~to ensure that information required to be disclosed by the Company in the reports filed~~ or ~~submitted~~LIBOR by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the President and the Chief Financial Officer, as appropriate, and allow timely decisions regarding required disclosurerates.

20ITEM 4T. CONTROLS AND PROCEDURES.

~~There~~The ~~have~~President ~~not~~and ~~been~~the ~~any~~Chief ~~changes~~Financial inOfficer of the Company’s ~~internal~~(its ~~control~~principal ~~over~~executive officer and principal financial ~~reporting~~officer, ~~during~~respectively) have concluded, based on their evaluation as of the ~~fiscal~~end ~~quarter~~of ~~ended~~the ~~June~~period ~~30,~~covered ~~2009~~by ~~that~~this ~~have~~Quarterly ~~materially~~Report ~~affected~~on Form 10-Q, orthat the Company’s disclosure controls and procedures are ~~reasonably~~effective ~~likely~~to ensure that information required to ~~materially~~be ~~affect,~~disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s ~~internal~~rules ~~control~~and ~~over~~forms, ~~financial~~and ~~reporting.~~include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to

~~PART II~~20

~~ITEM~~the 1.Company’s ~~LEGAL~~management, ~~PROCEEDINGS~~including the President and the Chief Financial Officer, as appropriate, and allow timely decisions regarding required disclosure.

~~The~~There have not been any changes in the Company’s isinternal ~~not~~control aover ~~party~~financial reporting during the fiscal quarter ended September 30, 2009 that have materially affected, or are reasonably likely to ~~any~~materially ~~material~~affect, ~~legal~~the ~~proceedings.~~Company’s internal control over financial reporting.

~~ITEM~~PART ~~1A. RISK FACTORS~~II

~~FORWARD-LOOKING~~ITEM ~~STATEMENTS~~1. LEGAL PROCEEDINGS.

The Company ~~believes~~is ~~that~~not ~~this~~a ~~Quarterly~~party Report on Form 10-Q may contain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, and assumptions and other statements which are other than statements of historical facts. These forward-looking statements are based on management’s current expectations and are subject to, ~~and~~any ~~are~~material ~~qualified~~legal ~~by, risks and uncertainties that could cause actual results or business conditions to differ materially from those projected or suggested in such forward-looking statements~~proceedings.

~~The~~ITEM Company cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors including, but not limited to, the following: (i) the ability of the Company to obtain financing and additional capital to fund its business strategy on acceptable terms, if at all; (ii) the ability of the Company on a timely basis to find, prudently negotiate and consummate additional acquisitions; (iii) the ability of the Company to manage any to-be acquired businesses; (iv) there is not an active trading market for the Company’s securities and the stock prices thereof are highly volatile, due in part to the relatively small percentage of the Company’s securities which is not held by the Company’s majority stockholder and members of the Company’s Board of Directors and/or management; and (v) other factors identified below or in Item 1A ~~of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008~~. As aRISK ~~result, the Company’s future development efforts involve a high degree of risk~~FACTORS. ~~For further information, please see the Company’s filings with the SEC, including its Forms 10-K, 10-K/A, 10-Q and 8-K.~~

As previously reported in the Company’s public filings, the Internal Revenue Service (the ”IRS”) had been auditing the consolidated tax returns of Geneve Holdings, Inc., that included the Company. Pursuant to a settlement with the IRS in the second quarter of 2009, the Company incurred additional taxes of $.5 million and $1.3 million for the 2006 and 2007 tax years, respectively, plus interest, relating to a partial disallowance of the Company’s historical net operating tax losses that were utilized. No additional taxes were due for any years prior to 2006. Therefore, the previously noted risk related to the Company’s ability to retain its Federal net operating tax loss position has been deleted from the risk factors above. There have been no other material changes from the risk factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10FORWARD-KLOOKING ~~for the year ended December 31, 2008.~~ STATEMENTS

~~ITEM~~The 2Company believes that this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward ~~UNREGISTERED~~looking ~~SALES~~statements OFinclude ~~EQUITY~~statements ~~SECURITIES~~concerning ~~AND~~plans, ~~USE~~objectives, OFgoals, ~~PROCEEDS~~strategies, future events or performance, expectations, predictions, and assumptions and other statements which are other than statements of historical facts. These forward-looking statements are based on management’s current expectations and are subject to, and are qualified by, risks and uncertainties that could cause actual results or business conditions to differ materially from those projected or suggested in such forward-looking statements.

~~None~~The Company cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors including, but not limited to, the following: (i) the ability of the Company to obtain financing and additional capital to fund its business strategy on acceptable terms, if at all; (ii) the ability of the Company on a timely basis to find, prudently negotiate and consummate additional acquisitions; (iii) the ability of the Company to manage any to-be acquired businesses; (iv) there is not an active trading market for the Company’s securities and the stock prices thereof are highly volatile, due in part to the relatively small percentage of the Company’s securities which is not held by the Company’s majority stockholder and members of the Company’s Board of Directors and/or management; and (v) other factors identified below or in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. As a result, the Company’s future development efforts involve a high degree of risk. For further information, please see the Company’s filings with the SEC, including its Forms 10-K, 10-K/A, 10-Q and 8-K.

~~ITEM~~As 3previously reported in the Company’s public filings, the Internal Revenue Service (the ”IRS”) had been auditing the consolidated tax returns of Geneve Holdings, Inc., ~~DEFAULTS~~that ~~UPON~~included ~~SENIOR~~the ~~SECURITIES~~Company. Pursuant to a final settlement with the IRS in the third quarter of 2009, the Company incurred additional taxes of $.5 million and $1.0 million for the 2006 and 2007 tax years, respectively, plus interest of $147 thousand, relating to a partial disallowance of the Company’s historical net operating tax losses that were utilized. No additional taxes were due for any years prior to 2006. Therefore, the previously noted risk related to the Company’s ability to retain its Federal net operating tax loss position has been deleted from the risk factors above. There have been no other material changes from the risk factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

~~None~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~None

NoITEM ~~matters~~3. ~~were~~DEFAULTS ~~submitted~~UPON toSENIOR ~~a vote of the Company’s security holders during the second quarter of 2009~~SECURITIES.

~~ITEM 5. OTHER INFORMATION~~None

~~None~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

21No matters were submitted to a vote of the Company’s security holders during the third quarter of 2009.

ITEM 65. ~~EXHIBITS~~OTHER INFORMATION.

~~The following exhibits are filed as part of this report:~~None

EXHIBIT NUMBER		DESCRIPTION
31.1		Rule 13a-14(a)/15d-14(a) Certifications.
31.2		Rule 13a-14(a)/15d-14(a) Certifications.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

22ITEM 6. EXHIBITS.

~~SIGNATURES~~The following exhibits are filed as part of this report:

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.


EXHIBIT NUMBER		DESCRIPTION
31.1		Rule 13a-14(a)/15d-14(a) Certifications.
31.2		Rule 13a-14(a)/15d-14(a) Certifications.
32.1		Certification Pursuant to 18 U.S.C. Section 1350.
32.2		Certification Pursuant to 18 U.S.C. Section 1350.

~~Date: August 14, 2009~~22

~~/s/ Steven B. Lapin~~SIGNATURES

~~Steven~~Pursuant Bto 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. ~~Lapin~~

~~President~~Date: November 12, ~~and Chief Operating Officer~~2009

~~(Principal~~/s/ ~~Executive~~Steven ~~Officer)~~B. Lapin

~~Date: August~~Steven ~~14,~~B. ~~2009~~Lapin

~~/s/~~President ~~Dean~~and T.Chief ~~Johnson~~Operating Officer

~~Dean~~(Principal T.Executive ~~Johnson~~Officer)

~~Senior~~Date: November ~~Vice~~12, ~~President and Chief Financial Officer~~2009

~~(Principal~~/s/ ~~Financial~~Dean ~~and~~T. ~~Accounting Officer)~~Johnson

23Dean T. Johnson

EXHIBIT INDEX
EXHIBIT NUMBER		DESCRIPTION
31.1		Rule 13a-14(a)/15d-14(a) Certifications.
31.2		Rule 13a-14(a)/15d-14(a) Certifications.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Senior Vice President and Chief Financial Officer

24(Principal Financial and Accounting Officer)


EXHIBIT INDEX
EXHIBIT NUMBER		DESCRIPTION
31.1		Rule 13a-14(a)/15d-14(a) Certifications.
31.2		Rule 13a-14(a)/15d-14(a) Certifications.
32.1		Certification Pursuant to 18 U.S.C. Section 1350.
32.2		Certification Pursuant to 18 U.S.C. Section 1350.

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