<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                                    FORM 10-Q

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

                   For the Fiscal Quarter Ended June 30, 1998

                                       OR

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

                         Commission File Number: 0-26756

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

                                GEOGRAPHICS, INC.
             (Exact name of Registrant as specified in its charter)

            WYOMING                                               87-0305614
(State or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)


                1555 Odell Road, P.O. Box 1755, Blaine, WA 98231
--------------------------------------------------------------------------------
              (Address of principal executive office and zip code)

                                 (360) 332-6711
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

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

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

                    Yes  [ ]                       No  [X] 

The Registrant had 9,857,252 shares of common stock, no par value, outstanding
at June 30, 1998

                       DOCUMENTS INCORPORATED BY REFERENCE
           FORM 8-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                                ON JUNE 29, 1998

<PAGE>   2
TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                           PAGE
<S>                                                                                                        <C>
PART I  FINANCIAL INFORMATION................................................................................2

        ITEM 1.         FINANCIAL STATEMENTS.................................................................2

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

                LATE FILINGS; SUBSEQUENT EVENTS AND FILINGS..................................................2

                FORWARD-LOOKING STATEMENTS...................................................................2

                OVERVIEW.....................................................................................3

                        SEASONALITY..........................................................................4

                        QUARTERLY FLUCTUATIONS...............................................................4

                RESULTS OF OPERATIONS........................................................................4

                        SALES................................................................................4

                        GROSS MARGIN.........................................................................5

                        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.........................................5

                        INTEREST EXPENSE.....................................................................5

                LIQUIDITY AND CAPITAL RESOURCES..............................................................5

        ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK............................6

                FOREIGN CURRENCY.............................................................................6

PART II OTHER INFORMATION....................................................................................6

        Item 1.         Legal Proceedings....................................................................6

        Item 2.         Changes in Securities and Use of Proceeds............................................7

        Item 3.         Defaults Upon Senior Securities......................................................7

        Item 4.         Submission of Matters to a Vote of Security Holders..................................7

        Item 5.         Other Information....................................................................7

        ITEM 6.         EXHIBIT AND REPORTS ON FORM 8-K......................................................8

SIGNATURES...................................................................................................9

INDEX TO FINANCIAL STATEMENTS...............................................................................10

CONSOLIDATED BALANCE SHEET.................................................................................F-1

CONSOLIDATED STATEMENT OF OPERATIONS.......................................................................F-2

CONSOLIDATED STATEMENT OF CASH FLOWS.......................................................................F-3

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................F-4
</TABLE>


<PAGE>   3
                                     PART I
                              FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

        Geographics, Inc. (the "Company" or "Geographics") has attached to this
Report and by this reference incorporated herein the consolidated balance sheets
as of June 30, 1998 (unaudited) and March 31, 1998, the unaudited statements of
operations for the three months ended June 30, 1998 and June 30, 1997, and the
unaudited consolidated statements of cash flows for the three months ended June
30, 1998 and June 30, 1997, together with the notes thereto.

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

        The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto appearing
elsewhere on this Report.

        LATE FILINGS; SUBSEQUENT EVENTS AND FILINGS

        The Company has not, during the preceding 12 months, timely filed all
reports required to be filed by it pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, despite the fact that it has been subject to
such filing requirements for the past 90 days.

INFORMATION SET FORTH IN THIS FORM 10-Q EXCLUSIVELY COVERS THE COMPANY'S FISCAL
QUARTER ENDED JUNE 30, 1998 AND MUST ONLY BE READ IN CONJUNCTION WITH THE
COMPANY'S MOST RECENT REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

Potential investors should realize that material, subsequent developments with
respect to the Company's business, operations and financial condition have
occurred from and after June 30, 1998 and that such developments are more fully
described in each of the following reports filed by the Company on or before
March 19, 1999:

1.      Form 10-Q for the period ending December 31, 1998; and
2.      Form 10-Q for the period ending September 30, 1998.

        FORWARD-LOOKING STATEMENTS

        Statements herein concerning expectations for the future constitute
forward-looking statements which are subject to a number of known and unknown
risks, uncertainties and other factors which might cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Forward-looking statements herein include, but are not limited to,
those concerning trends relating to the Company's profitability and gross
profits margins; the ability of the Company to increase the size and
capabilities of its accounting department, to implement a management information
system, including an electronic data interchange system, adequate to meet
operations requirements in the future and to improve its internal controls; the
ability of the Company to refinance its existing revolving credit facility, to
identify potential 


                                       2
<PAGE>   4
buyers for all or part of its business or to raise additional debt or equity
financing sufficient to meet its working capital requirements; and the ability
of the Company to continue operations as a going concern. Relevant risks and
uncertainties include, but are not limited to, slower than anticipated growth of
the pre-print market, loss of certain key customers, insufficient market
acceptance of the Company's specialty papers products; unanticipated actions,
including price reductions, by the Company's competitors; unanticipated
increases in the costs of raw materials used to produce the Company's products;
loss of favorable trade credit, supply terms, reliable and immediately available
raw material supply and other favorable terms with certain key vendors; greater
than expected costs incurred in connection with the implementation of a
management information system; inability to implement an electronic data
interchange system adequate to support the Company's operations; failure to
realize expected economic efficiencies of the Company's automated production
equipment; unexpected increases in the costs of production as a result of
collective bargaining arrangements; unfavorable determinations of pending
lawsuits or disputes; and inability to secure additional working capital when
and as needed. Additional risks and uncertainties include those described under
"Risk Factors" in Part I of the Company's Annual Report on Form 10-K for the
year ended March 31, 1998 and those described from time to time in the Company's
other filings with the Securities and Exchange Commission, press releases and
other communications.

        OVERVIEW

        Geographics was incorporated as a Wyoming corporation on September 20,
1974. From its inception until fiscal 1991, the Company was engaged exclusively
in the manufacture and wholesale marketing of various rub-on and stick-on
lettering, stencils, graphics arts products and other signage products. In 1991,
the Company began the development of "pre-print" or "specialty" paper products
consisting of paper on which photographs or other art images are printed and
which is then cut to size. In 1992, the Company introduced its first specialty
paper product under the Geopaper brand name. The Company now has several
specialty paper products using Geopaper designs, including stationery, business
cards, brochures, memo pads and paper cubes, which, in North America, are sold
primarily to office supply superstores and mass market retailers, and which are
also distributed internationally through the Company's subsidiaries in Canada,
Europe and Australia. The specialty papers group now constitutes the Company's
principal business, with approximately 87% and 78% of the Company's total sales
in the quarter ended June 30, 1998 and the fiscal year ended March 31, 1998,
respectively, attributable to sales of Geopaper products. Primarily as a result
of sales generated by the specialty papers group, the Company has experienced
substantial growth, with total sales increasing from $6,900,875 during fiscal
year 1994 to $24,097,845 for fiscal 1998, an increase of 249%.

        On May 4, 1998, the Company and its primary lender, U.S. Bank of
Washington, National Association (the "Bank"), executed an Amended and Restated
Asset Purchase Agreement for the sale of the Company's lettering and signage
business (the "Transaction") to Identity Group, Inc., an unaffiliated Tennessee
corporation. The terms governing and the circumstances surrounding the
Transaction were previously disclosed by the Company in a Form 8-K filed with
the Securities and Exchange Commission on June 29, 1998. Such Form 8-K is hereby
incorporated by reference herein and made a part hereof.

        Primarily to develop its specialty papers group, the Company has made
substantial investments to expand its facilities, purchase and install automated
production equipment and 


                                       3
<PAGE>   5
an integrated management information system and enhance administrative and other
infrastructure systems.

        Since June 30, 1998, the Company has continued to seek extended payment
terms from its vendors, delayed purchases of raw materials, instituted internal
cost reduction measures and took other steps to conserve operating capital. As
a result, from and after June 30, 1998, the Company has faced the proposition
that its vendors may place the Company on credit hold or take other actions
against the Company, including the termination of their relationship with the
Company or the initiation of collection proceedings. In addition, since June
30, 1998, the Company has continued to pursue possible sources of additional
capital, which could include the issuance of debt or equity securities or the
sale of all or part of the Company's assets. However, at the end of the period
ending June 30, 1998, the Company had received no firm commitments with respect
to any such transaction and there can be no assurance that any such transaction
will be identified. Further, there can be no assurance that the Company will be
able to obtain additional sources of working capital when and as needed or that
the terms of any such funding will be acceptable to the Company. Any equity
financing may involve substantial dilution to the interests of the Company's
shareholders. See "--Liquidity and Capital Resources."

        SEASONALITY. A significant portion of the Company's customer orders are
placed between August and October of each year for shipment during the Company's
third fiscal quarter, which includes the Christmas season, with the largest
levels of sales historically occurring in the second half of the calendar year.
As a result, the Company has experienced, and is expected to continue to
experience, seasonal fluctuations in its operating results.

        QUARTERLY FLUCTUATIONS. The Company's operating results may fluctuate
significantly from period to period as a result of a variety of factors,
including product returns, purchasing patterns of consumers, the length of the
Company's sales cycle to key customers and distributors, the timing of the
introduction of new products and product enhancements by the Company and its
competitors, technological factors, variations in sales by product and
distributions channel, and competitive pricing. Consequently, the Company's
revenues may vary significantly by quarter and the Company's operating results
may experience significant fluctuations.

        RESULTS OF OPERATIONS

        SALES. Sales decreased 20% to $6,059,978 in the quarter ended June 30,
1998 from $7,608,260 in the quarter ended June 30, 1997. Geopaper products were
responsible for 88% of sales for the quarter ended June 30, 1998, compared to
79% for the same period a year earlier. Sales of Geopaper decreased 11% to
approximately $5,308,438 from approximately $5,884,000 for the periods ended
June 30, 1998 and June 30, 1997, respectively.

        Despite the fact that the Company sold its lettering and signage
business during its first quarter, sales of the Company's lettering and signage
products decreased 55% to approximately $751,539 for the quarter ended June 30,
1998 compared to approximately $1,724,109 for the quarter ended June 30, 1997.

        International sales of Geographics products were $1,746,621 for the
quarter ended 


                                       4
<PAGE>   6
June 30, 1998, an increase of 4% over international sales of $1,684,119 for the
quarter ended June 30, 1997. International sales of Geographics products
represented 25% of the Company's total sales for the quarter ended June 30,
1998, compared to 23% of total sales for the same period in the prior year.

        GROSS MARGIN.. Gross profit margin as a percentage of sales was 52% for
the quarter ended June 30, 1998, compared to 23% for the same period in the
prior year.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's selling,
shipping, general and administrative expenses, which consist of payroll,
advertising, commissions, administrative, accounting, legal and other costs,
decreased as a percentage of sales during the quarter ended June 30, 1998 to
44%, as compared to 53% during the same period in the prior year. The decrease
as a percentage of sales was primarily the result of decreased costs associated
with advertising and other rebates and promotions to key customers.

        INTEREST EXPENSE. The Company's interest expense for the quarter ended
June 30, 1998 decreased 21% to $337,480 compared to $428,324 for the same period
in the prior year. The decrease is mainly due to the $6.8 million pay-down of
the credit line from the sale of the Core Business.

        LIQUIDITY AND CAPITAL RESOURCES

        As a result of the rapid growth of the Company's specialty papers group,
capital expenditures relating to the purchase and installation of automated
production equipment and a management information system, operating losses and
other factors, the Company has required, and continues to require, substantial
external working capital. Moreover, subsequent to the end of fiscal 1998, the
Company has experienced working capital short-falls which have required the
Company to delay payments to certain vendors, delay purchases, institute
internal cost reduction measures and take other steps to conserve operating
capital. During fiscal 1998, operating losses totaled $8,011,719, and the
Company experienced positive operating cash flows of $1,145,131. During the
quarter ended June 30, 1998, operating income totaled $492,146, and the Company
experienced positive operating cash flows of $7,411,945.

        At the date of this Report, the Company's only available source of
working capital consisted of borrowings available under its revolving credit
facility. The revolving credit facility permits borrowings of up to $6.0 million
subject to a borrowing base limitation of 70% of the value of the Company's
eligible accounts receivable and 55% of the value of its inventory, net of
certain reserves. Borrowings under the facility bear interest at the prime rate
and are secured by substantially all of the Company's assets. Under the terms of
the facility, the Company is required to comply with a number of financial
covenants relating to, among other things, the maintenance of minimum net worth,
debt-to-equity ratios and cash flow coverage ratios.

        The Company's Consolidated Financial Statements for the fiscal year
ended March 31, 1998 (as well as the Unaudited Consolidated Financial Statements
for the fiscal quarter ended June 30, 1998 included in this Report) were
prepared assuming that the Company will continue as a going concern and do not
include any adjustments that might result from the outcome of this uncertainty.


                                       5
<PAGE>   7
        The Company entered into a third forbearance agreement with its lender,
effective May 1, 1998, pursuant to which the lender agreed to extend the
expiration date of the revolving credit facility to November 30, 1998.

        Although the Company's lender has permitted borrowings under the
revolving credit facility, however, there can be no assurance that it will
continue to do so. Accordingly, for the foreseeable future the Company will
continue to seek extended payment terms from its vendors, delay purchases of
raw materials, institute internal cost reduction measures and taking other
steps to conserve operating capital. As a result, the Company's vendors may
place the Company on credit hold or take other actions against the Company,
including the termination of their relationship with the Company or the
initiation of collection proceedings. In addition, the Company is pursuing
possible sources of additional capital, which could include the issuance of
debt or equity securities or the sale of all or part of the Company's assets.
However, as of the end of the quarter ended June 30, 1998, the Company had
received no firm commitments with respect to any such transaction and there can
be no assurance that any such transaction will be identified. Further, there
can be no assurance that the Company will be able to obtain additional sources
of working capital when and as needed or that the terms of any such funding
will be acceptable to the Company. Any equity financing may involve substantial
dilution to the interests of the Company's shareholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        FOREIGN CURRENCY

        Substantially all of the revenue and operating expenses of the Company's
foreign subsidiaries are denominated in local currencies and translated into US
dollars at rates of exchange approximating those existing at the date of the
transactions. Foreign currency translation impacts primarily revenue and
operating expenses as a result of foreign exchange rate fluctuations. The
Company's foreign currency transaction risk is primarily limited to amounts
receivable from its foreign subsidiaries, which are denominated in local
currencies. To minimize foreign currency transaction risk, the Company ensures
that its foreign subsidiaries remit amounts to the US parent in a timely manner.
Foreign country short-term borrowing facilities are utilized where necessary to
ensure prompt payments. The Company does not currently utilize foreign currency
hedging contracts.

        If the US dollar uniformly increases in strength by 10% in 1999 relative
to the currencies in which the Company's sales are denominated, income before
taxes would decrease by $100,000.00 for the fiscal year ending March 31, 1999.
This calculation assumes that each exchange rate would change in the same
direction relative to the U.S. dollar. In addition to the direct effects of
changes in exchange rates, which are a changed dollar value of the resulting
sales, changes in exchange rates also affect the volume of sales or the foreign
currency sales price as competitors' products become more or less attractive.
The Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates does not factor in a potential change in sales levels or local
currency prices.

        INFLATION

        Although the Company cannot accurately anticipate the effects of
inflation on its financial condition or operations, the Company does not
believe inflation has had or is likely to have a material effect on its
results, operations or liquidity.
                                       6
<PAGE>   8
                                     PART II
                                OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.

        In its Form 10-Q filed with the Securities and Exchange Commission on
April 29, 1998 for the period ending December 31, 1997, the Company reported
that in July 1997, three related class actions were filed against it, its
Chairman of the Board and its Chief Executive Officer. These suits alleged
various violations by the named defendants of the Securities Exchange Act of
1934, as amended. As at the end of the Company's fiscal quarter ending June 30,
1998, these suits had not been resolved.

        In addition to the litigation matter described above, the Company is
subject to additional claims and actions incident to the operation of its
business. It is the opinion of management that the ultimate resolution of these
matters and any future unidentified claims will not have a material adverse
effect on the Company's business, financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        As has been previously reported by the Company, the Company has, since
May 1997, failed to comply with the net worth, debt-to-equity ratios and cash
flow coverage ratios under its existing revolving credit facility with its
lender. As at June 30, 1998, borrowings under the Company's revolving credit
facility aggregated approximately $4,275,178. The Company's lender has also
provided the Company with several mortgage loans and equipment loans and the
defaults under the revolving credit facility constitute cross-defaults under
these other loans. The Company has previously reported that these defaults,
coupled with its fiscal year 1998 losses, raise substantial doubt about the
Company's ability to continue as a going concern.

        In May 1998, the Company requested and received a forbearance agreement
with its lender pursuant to which the lender agreed to extend the expiration
date of the revolving credit facility to November 1, 1998 and to forbear from
asserting its rights with respect to the Company's non-compliance with the
revolving credit facility's financial covenants. Although the Company's lender
has permitted borrowings under the revolving credit facility in excess of the
borrowing base limitations set forth in the agreement, there can be no assurance
that the lender will continue to allow such borrowings to occur. Over the course
of the fiscal quarter ending June 30, 1998, the Company continued to evaluate
additional sources of working capital in order to finance its ongoing business
operations. The Company is firmly committed to continuing that process for the
remainder of the 1999 fiscal year. In addition, the Company continues to have
ongoing discussions with its lender regarding the execution of a new forbearance
agreement and/or a complete restructuring of its obligations under its existing
revolving credit facility. See "Management's Discussion of Financial Condition
and Results of Operations--Liquidity and Capital Resources."


                                       7
<PAGE>   9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None.

ITEM 5. OTHER INFORMATION.

        In its Form 10-Q filed with the Securities and Exchange Commission on
April 29, 1998, for the period ending December 31, 1998, the Company reported
the establishment of a special committee of the Company's board of directors to
investigate the performance and conduct of management. As at June 30, 1998, the
special committee had not completed its work with respect to these matters.

ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K

        A.      The following documents are filed as part of this Report:

<TABLE>
<CAPTION>
        EXHIBIT NUMBER                                                 DESCRIPTION OF DOCUMENT
<S>                            <C>
        10.1                   Third Forbearance Agreement, between U.S. Bank, N.A. and Geographics,
                               Inc., dated May 1, 1998.
        
</TABLE>

        B.      The following Current Reports on Form 8-K were filed by the
Company during the period covered by this Report:

                1.      Current Report on Form 8-K filed with the Securities and
        Exchange Commission on June 29, 1998


                                       8
<PAGE>   10
                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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 on this 18th day of
March, 1999.

        GEOGRAPHICS, INC.

        By: /s/ Richard C. Gockelman
            -------------------------------------
            Richard C. Gockelman
            President and Chief Executive Officer


                                       9
<PAGE>   11
                          INDEX TO FINANCIAL STATEMENTS

Consolidated Balance Sheets as of June 30, 1998 and March 31, 1998           F-1

Consolidated Statements of Operations for the three months ended
June 30, 1998 and 1997                                                       F-2

Consolidated Statements of Cash Flows for the three months ended
June 30, 1998 and 1997                                                       F-3

Notes to Consolidated Financial Statements                                   F-5



                                       10
<PAGE>   12
                                GEOGRAPHICS, INC.

                           CONSOLIDATED BALANCE SHEET

                     AS OF JUNE 30, 1998 AND MARCH 31, 1997


<TABLE>
<CAPTION>
ASSETS                                                                     JUNE 30, 1998        MARCH 31, 1998
                                                                            (UNAUDITED)            (AUDITED)
<S>                                                                        <C>                  <C>          

CURRENT ASSETS
     Cash                                                                  $     190,339        $     316,078
     Accounts receivable
       Trade receivables, net                                                  3,644,433            4,164,861
       Other receivables                                                         271,516              148,050
     Inventory, net of allowance for obsolete inventory of $486,547
       and $586,000 at March 31, 1998                                          5,344,345            6,763,508
     Prepaid expenses, deposits, and other current assets                        947,102              731,307
                                                                           -------------        -------------

       Total current assets                                                   10,397,735           12,123,804

PROPERTY, PLANT AND EQUIPMENT, NET                                            12,480,662           12,881,118
OTHER ASSETS                                                                     372,688              340,043
                                                                           -------------        -------------

TOTAL ASSETS                                                               $  23,251,085        $  25,344,965
                                                                           =============        =============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Bank overdrafts                                                       $     198,943        $     301,716
     Note payable to bank                                                      4,275,177           11,300,808
     Accounts payable                                                          3,223,934            3,285,467
     Accrued liabilities                                                       2,381,453            2,680,594
     Notes payable to officers and directors                                          --                   --
     Current portion of long-term debt                                         3,350,344            3,350,344
                                                                           -------------        -------------

       Total current liabilities                                              13,429,852           20,918,929
                                                                           -------------        -------------

LONG-TERM DEBT                                                                 4,517,712            4,853,254
                                                                           -------------        -------------

       Total liabilities                                                   $  17,947,564        $  25,772,183
                                                                           -------------        =============

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     No par common stock--100,000,000 authorized, 9,857,252 and
       9,857,252 issued and outstanding at June 30, 1998 and March
       31, 1998, respectively                                                 15,759,353           15,769,018
     Foreign currency translation adjustment                                                           33,899
     Retained earnings (accumulated deficit)                                 (10,455,831)         (16,230,135)
                                                                           -------------        -------------

       Total stockholders' equity                                              5,303,522             (427,218)
                                                                           =============        =============

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $  23,251,085        $  25,344,965
                                                                           =============        =============
</TABLE>


              See Accompanying Notes to These Financial Statements.


                                       F-1
<PAGE>   13
                                GEOGRAPHICS, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
               THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED
                                                                                          JUNE 30
                                                                                    1998                1997
                                                                                -----------         -----------
<S>                                                                             <C>                 <C>        
SALES                                                                           $ 6,059,978         $ 7,608,260
COST OF SALES                                                                     2,887,185           5,893,368
                                                                                -----------         -----------
     Gross margin                                                                 3,172,793           1,714,892
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                      2,680,647           4,003,301
                                                                                -----------         -----------
     Income from operations                                                         492,146          (2,288,409)
OTHER INCOME (EXPENSE)
     Interest Expense                                                              (337,480)           (428,324)
     Other                                                                          (14,473)            (19,040)
                                                                                -----------         -----------
                                                                                   (353,053)           (447,364)

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                     139,093          (2,735,772)
INCOME TAX PROVISION                                                             
                                                                                -----------         -----------
PROCEEDS FROM SALE OF CORE BUSINESS                                               5,657,580                  --

NET INCOME                                                                      $ 5,796,673         $(2,735,772)
                                                                                ===========         ===========

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
     BASIC                                                                      $       .59         $     (0.29)
                                                                                -----------         -----------

     DILUTED                                                                            .59               (0.29)
                                                                                -----------         -----------

SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
     BASIC                                                                        9,857,252           9,467,877
                                                                                -----------         -----------

     DILUTED                                                                    $ 9,857,252         $ 9,467,877
                                                                                ===========         ===========
</TABLE>


        See accompanying notes to these consolidated financial statements


                                       F-2
<PAGE>   14
                                GEOGRAPHICS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
               THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                           INCREASE (DECREASE) IN CASH
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED JUNE 30
                                                                       1998                1997
                                                                   -----------         -----------
<S>                                                                <C>                 <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                             $ 5,796,673         $(2,735,772)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH FLOWS FROM
OPERATING ACTIVITIES
     Depreciation and amortization                                     432,261             428,205
     Deferred income taxes                                                  --                  --
     (Gain) loss on sales of property and equipment                         --               1,740
     Reserve for impairment on EDP installation-in-progress
Changes in Non-cash Operating Assets and Liabilities
     Trade receivables                                                 520,428            (478,793)
     Related party receivables                                              --                  --
     Other receivables                                                (123,466)            108,987
     Inventory                                                       1,419,163             755,698
     Prepaid expenses, deposits and other current assets              (248,440)           (336,962)
     Accounts payable                                                  (61,533)          1,145,755
     Accrued liabilities                                              (323,141)              3,524
     Income tax payable                                                     --                  --
                                                                   -----------         -----------
       Net cash flows from operating activities                      7,411,945          (1,107,618)
                                                                   -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Decrease in bank overdrafts                                      (102,772)            331,314
     Net borrowings on note payable to bank                         (7,025,631)          2,598,835
     Proceeds from long-term debt borrowings                                --                  --
     Repayment of long-term debt                                      (335,542)           (281,884)
     Repayments of notes payable to officers and directors                  --            (850,000)
     Net Proceeds (costs) from issuance of common stock                     --                  --
     Foreign currency translation                                      (41,933)            (41,506)
                                                                   -----------         -----------
       Net cash flows from financing activities                     (7,505,878)          1,756,175
                                                                   -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of plant and equipment                                   (31,808)           (674,956)
     Proceeds from sales of equipment                                       --                  --
     Net advances from (repayments to) partnerships                         --                  --
     Change in other assets                                                                (49,977)
                                                                   -----------         -----------

       Net cash flows from investing activities                        (31,808)           (724,934)
                                                                   -----------         -----------

NET CHANGE IN CASH                                                    (125,740)            (76,376)
CASH, beginning of quarter                                             316,078             408,757
                                                                   -----------         -----------
CASH, end of quarter                                               $   190,339         $   332,381
                                                                   ===========         ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES
     Financing obtained in acquisition of equipment                $         0         $ 1,677,918
</TABLE>


        See Accompanying Notes to These Consolidated Financial Statements


                                       F-3
<PAGE>   15
                                GEOGRAPHICS, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


        The accompanying interim unaudited consolidated financial statements of
Geographics, Inc. (the "Company" or "Geographics") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, such interim statements reflect all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position and the results of operations and cash flows for
the interim periods presented. The results of operations for these interim
periods are not necessarily indicative of the results to be expected for the
full year. These financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes included in the
Company's consolidated financial statements and notes thereto for the fiscal
year ended March 31, 1998.

        The consolidated financial statements include the accounts of
Geographics and its wholly-owned subsidiaries: Geographics Marketing Canada
Inc., Geographics (Europe) Limited and Geographics Australia, Pty. Limited. All
intercompany balances and transactions have been eliminated.

        Certain of the Company's subsidiaries calculated cost of sales using an
estimated gross profit method for interim periods. Cost of sales at these
subsidiaries are adjusted based on physical inventories which are performed no
less than once a year.

        Reclassifications - Certain prior year amounts have been reclassified to
conform to current Year presentations. Such reclassifications had no effect on
previously reported Earnings or financial position.

        NOTE 2--COMMITMENTS AND CONTINGENCIES

        LEASES--The Company conducts certain operations in leased facilities,
under leases that are classified as operating leases for financial statement
purposes.

        The leases provide for the Company to pay real estate taxes, common area
maintenance, and certain other expenses. Lease terms, excluding renewal option
periods exercisable by the Company at escalated rents, expire April 1999. The
minimum lease commitment is $64,770 in 1999.

        LITIGATION--In July 1997, three related class action suits were filed in
the United States District Court for the Western District of Washington against
the Company, its President, Chief Executive Officer and Chairman of its Board of
Directors, and the Company's former Vice President of Finance and Chief
Financial Officer (the "Defendants"). The suits allege that the Defendants
inflated the price of the Company's stock by intentionally or recklessly making
misrepresentations or omissions which deceived the public about the Company's
financial condition and prospects, thus misleading shareholders who purchased
shares between August 6, 1996 and June 12, 1997. The complaints seek damages in
unstated amounts.


<PAGE>   16
        Management intends to vigorously defend these complaints, however the
ultimate outcome of these actions cannot be predicted with certainty. The
Company owns insurance policies applicable to certain losses including costs of
defense. These insurance policies have an aggregate self-insurance retention of
$150,000. If the Company is determined to be liable for, or otherwise agrees to
settle or compromise, any claim, there is no assurance that any or all of such
liability, compromise or settlement would be covered by the Company's insurance.
If the amount of insurance is insufficient, or if the policies are determined to
be inapplicable, the Company could be required to make additional payment beyond
the self-insurance retention in the form of cash, indebtedness or equity
securities. A payment of this nature could have a negative material impact on
the Company's capital resources and issuance of additional equity securities
could have a negative material impact on the Company's existing shareholders.
The defense of this or any pending or future litigation, investigations or
disputes could result in substantial legal and professional costs to the
Company.

        There are various additional claims, lawsuits, and pending actions
against the Company incident to the operations of its business. It is the
opinion of management that the ultimate resolution of these matters and any
future unidentified claims will not have a material effect on the Company's
financial position, results of operations or liquidity.

        CONTINGENCY FOR YEAR 2000 ISSUES--The Company has not yet made an
assessment of the impact of the year 2000 on their computer software, hardware
and other systems, including those of vendors, customers and other third
parties. The potential expense to ensure that all of the computer and other
systems are year 2000 compliant cannot be determined until such an assessment is
made.

        NOTE 3--GOING CONCERN

        As a result of the $8,649,618 loss incurred by the Company for the year
ended March 31, 1998, the report of the Company's auditors, dated September 22,
1998, relating to the Company's Consolidated Financial Statements for the year
ended March 31, 1998 states that there is substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements
have been prepared assuming the Company will continue as a going concern and do
not include any adjustments that might result from the outcome this uncertainty.

        The Company's lender has permitted borrowings under the Company's
revolving credit facility, there can be no assurance that it will continue to do
so. Accordingly, the Company is continuing to seek extended payment terms from
its vendors, delaying purchases of raw materials, instituting internal cost
reduction measures and taking other steps to conserve operating capital. As a
result, the Company's vendors may place the Company on credit hold or take other
actions against the Company, including the termination of their relationship
with the Company or the initiation of collection proceedings. In addition, the
Company is actively pursuing possible sources of additional capital and has
engaged an investment banker to assist in the evaluation and pursuit of
financing transactions, which could include the issuance of debt or equity
securities or the sale of all or part of the Company's assets.