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 April 2, 2000

                                       OR

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

          For The Transition Period From___________ to__________



                         Commission file number 0-24548

                               Movie Gallery, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                          63-1120122
  (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                         Identification No.)



               739 West Main Street, Dothan, Alabama     36301
              (Address of principal executive offices) (Zip Code)

                                 (334) 677-2108
              (Registrant's telephone number, including area code)

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

The number of shares outstanding of the registrant's  common stock as of May 11,
2000 was 11,286,167.

<PAGE>

                               Movie Gallery, Inc.

                                      Index



Part I.  Financial Information

Item 1.  Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets - April 2, 2000 and January 2, 2000................1

Consolidated Statements of Income - Thirteen weeks ended April 2, 2000
and April 4, 1999..............................................................2

Consolidated Statements of Cash Flows - Thirteen weeks ended April 2, 2000
and April 4, 1999..............................................................3

Notes to Consolidated Financial Statements - April 2, 2000.....................4

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................6

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........11

Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K.....................................11


<PAGE>
<TABLE>

                               Movie Gallery, Inc.

                           Consolidated Balance Sheets
                                 (in thousands)


<CAPTION>
                                                             April 2,   January 2,
                                                               2000        2000
                                                            ---------   ---------
                                                           (Unaudited)
<S>                                                         <C>         <C>
Assets
Current assets:
   Cash and cash equivalents                                $   6,109   $   6,970
   Merchandise inventory                                       13,019      15,148
   Prepaid expenses                                               883         814
   Store supplies and other                                     3,601       3,395
   Deferred income taxes                                          274         229
                                                            ---------   ---------
Total current assets                                           23,886      26,556

Rental inventory, net                                          53,909      52,357
Property, furnishings and equipment, net                       45,960      44,320
Goodwill and other intangibles, net                            82,357      83,539
Deposits and other assets                                       3,862       2,543
Deferred income taxes                                            --           212
                                                            ---------   ---------
Total assets                                                $ 209,974   $ 209,527
                                                            =========   =========

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                         $  23,338   $  26,243
   Accrued liabilities                                          9,543      12,989
   Current portion of long-term debt                              174         263
                                                            ---------   ---------
Total current liabilities                                      33,055      39,495

Long-term debt                                                 47,760      44,377
Other accrued liabilities                                         177         234
Deferred income taxes                                           1,768        --

Stockholders' equity:
   Preferred stock, $.10 par value; 2,000,000 shares
       authorized, no shares issued or outstanding               --          --
   Common stock, $.001 par value; 35,000,000
       shares authorized, 11,992,167 and 12,549,667
       shares issued and outstanding                               12          13
   Additional paid-in capital                                 125,431     127,537
   Retained earnings (deficit)                                  1,771      (2,129)
                                                            ---------   ---------
Total stockholders' equity                                    127,214     125,421
                                                            ---------   ---------
Total liabilities and stockholders' equity                  $ 209,974   $ 209,527
                                                            =========   =========

See accompanying notes.
</TABLE>

                                       1
<PAGE>

<TABLE>

                               Movie Gallery, Inc.

                        Consolidated Statements of Income
                                   (Unaudited)
                      (in thousands, except per share data)

<CAPTION>

                                                                 Thirteen weeks ended
                                                                 April 2,     April 4,
                                                                   2000         1999
                                                                 --------------------

<S>                                                              <C>         <C>
Revenues:
   Rentals                                                       $ 69,777    $ 59,326
   Product sales                                                   11,716      10,294
                                                                 --------    --------
                                                                   81,493      69,620
Cost of sales:
   Cost of rental revenues                                         20,591      16,626
   Cost of product sales                                            7,190       6,884
                                                                 --------    --------
Gross margin                                                       53,712      46,110

Operating costs and expenses:
   Store operating expenses                                        38,113      32,978
   Amortization of intangibles                                      1,805       1,838
   General and administrative                                       6,316       4,917
                                                                 --------    --------
Operating income                                                    7,478       6,377

Interest expense, net                                                (868)       (866)
                                                                 --------    --------
Income before income taxes, extraordinary item and
    cumulative effect of accounting change                          6,610       5,511

Income taxes                                                        2,710       2,149
                                                                 --------    --------
Income before extraordinary item and cumulative effect of
   accounting change                                                3,900       3,362
Extraordinary loss on early extinguishment of debt, net of tax       --          (682)
Cumulative effect of accounting change, net of tax                   --          (699)
                                                                 --------    --------
Net income                                                       $  3,900    $  1,981
                                                                 ========    ========

Basic and diluted earnings  per share:
Income before extraordinary item and cumulative effect of
  accounting change                                              $   0.32    $   0.25
Extraordinary loss on early extinguishment of debt, net of tax       --         (0.05)
Cumulative effect of accounting change, net of tax                   --         (0.05)
                                                                 --------    --------
Net income                                                       $   0.32    $   0.15
                                                                 ========    ========

Weighted average shares outstanding:
   Basic                                                           12,275      13,279
   Diluted                                                         12,300      13,614

See accompanying notes.
</TABLE>

                                       2
<PAGE>

<TABLE>

                              Movie Gallery, Inc.

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (in thousands)


<CAPTION>
                                                                    Thirteen weeks ended
                                                                    April 2,     April 4,
                                                                      2000         1999
                                                                    --------------------
<S>                                                                 <C>         <C>
Operating activities
Net income                                                          $  3,900    $  1,981
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Extraordinary loss on early extinguishment of debt, net of tax       --           682
   Cumulative effect of accounting change, net of tax                   --           699
   Depreciation and amortization                                      18,443      18,757
   Deferred income taxes                                               1,935       1,813
Changes in operating assets and liabilities:
   Merchandise inventory                                               2,129       1,064
   Other current assets                                                 (275)         78
   Deposits and other assets                                          (1,319)       (755)
   Accounts payable                                                   (2,905)     (3,491)
   Accrued liabilities                                                (3,503)     (1,844)
                                                                    --------    --------
Net cash provided by operating activities                             18,405      18,984

Investing activities
Business acquisitions                                                   (628)        (65)
Purchases of rental inventory, net                                   (14,642)    (13,812)
Purchases of property, furnishings and equipment                      (5,183)     (1,569)
                                                                    --------    --------
Net cash used in investing activities                                (20,453)    (15,446)

Financing activities
Purchases and retirement of common stock                              (2,107)       (402)
Proceeds from issuance of long-term debt                               3,383        --
Principal payments on long-term debt                                     (89)     (5,768)
                                                                    --------    --------
Net cash provided by (used in) financing activities                    1,187      (6,170)
                                                                    --------    --------
Decrease in cash and cash equivalents                                   (861)     (2,632)
Cash and cash equivalents at beginning of period                       6,970       6,983
                                                                    --------    --------
Cash and cash equivalents at end of period                          $  6,109    $  4,351
                                                                    ========    ========

See accompanying notes.

</TABLE>

                                       3
<PAGE>


                               Movie Gallery, Inc.

             Notes to Consolidated Financial Statements (Unaudited)

                                  April 2, 2000

1.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 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,  the financial statements do not include all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation have been included.  Operating results for the thirteen week period
ended April 2, 2000 are not  necessarily  indicative  of the results that may be
expected for the fiscal year ending December 31, 2000. For further  information,
refer to the consolidated financial statements and footnotes thereto included in
Movie  Gallery,  Inc.'s  annual  report on Form 10-K for the  fiscal  year ended
January 2, 2000.

Certain  reclassifications have been made to the prior year financial statements
to conform to the current  year  presentation.  These  reclassifications  had no
impact on stockholders'  equity or net income.  Amortization of rental inventory
and revenue  sharing  expenses  have been  combined and are presented as cost of
rental revenues on the statement of operations.

2.  Financing Obligations

On January 7, 1999, the Company entered into a Credit Agreement with First Union
National Bank of North Carolina with respect to a revolving credit facility (the
"Facility").  The Facility  provides  for  borrowings  of up to $65 million,  is
unsecured  and will mature in its  entirety on January 7, 2002.  The Company may
increase  the amount of the Facility to $85 million if existing  banks  increase
their commitments or if any new banks enter the Credit  Agreement.  The interest
rate of the  Facility is based on LIBOR plus an  applicable  margin  percentage,
which depends on the Company's cash flow generation and borrowings  outstanding.
The  Company  may repay  the  Facility  at any time  without  penalty.  The more
restrictive  covenants of the Facility restrict  borrowings based upon cash flow
levels.

Concurrent  with the Facility,  the Company  amended its then existing  interest
rate swap to coincide  with the maturity of the Facility.  The amended  interest
rate swap agreement  effectively  fixes the Company's  interest rate exposure on
$37  million  of the  amount  outstanding  under  the  Facility  at 5.8% plus an
applicable  margin  percentage.  The  interest  rate  swap  reduces  the risk of
increases  in  interest  rates  during  the life of the  Facility.  The  Company
accounts  for its  interest  rate  swap as a hedge of its debt  obligation.  The
Company pays a fixed rate of interest and receives  payment  based on a variable
rate of interest. The difference in amounts paid and received under the contract
is accrued and  recognized  as an  adjustment  to interest  expense on the debt.
There  are no  termination  penalties  associated  with the  interest  rate swap
agreement;  however,  if the swap  agreement  was  terminated  at the  Company's
option,  the  Company  would  either pay or  receive  the  present  value of the
remaining hedge payments at the then  prevailing  interest rates for the time to
maturity of the swap agreement.  The interest rate swap agreement  terminates at
the time the Facility matures.

As a result of the Facility and the amended  interest rate swap  agreement,  the
Company recognized an extraordinary loss on the early  extinguishment of debt of
$682,000  (net of taxes of  $359,000),  or $0.05  per  share,  during  the first
quarter of 1999. The extraordinary  loss was comprised  primarily of unamortized
debt issue costs associated with the Company's  previous credit facility and the
negative value of the previous interest rate swap at January 7, 1999.

                                       4
<PAGE>

                              Movie Gallery, Inc.

        Notes to Consolidated Financial Statements (Unaudited)(continued)

3.  Earnings Per Share

Basic  earnings per share is computed  based on the weighted  average  number of
shares of  common  stock  outstanding  during  the  periods  presented.  Diluted
earnings per share is computed based on the weighted average number of shares of
common stock outstanding during the periods  presented,  increased solely by the
effects  of shares to be issued  from the  exercise  of  dilutive  common  stock
options (25,000 and 335,000 for the thirteen weeks ended April 2, 2000 and April
4,  1999,  respectively).  No  adjustments  were  made  to  net  income  in  the
computation of basic or diluted earnings per share.

4.  Cumulative Effect of a Change in Accounting Principle

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position   ("SOP")  98-5,   "Reporting   the  Costs  of  Start-Up
Activities," which requires that certain costs related to start-up activities be
expensed as incurred.  Prior to January 4, 1999, the Company capitalized certain
costs incurred in connection  with site selection for new video  specialty store
locations.  The  Company  adopted  the  provisions  of the SOP in its  financial
statements for the first quarter of 1999. The effect of the adoption of SOP 98-5
was to record a charge  for the  cumulative  effect of an  accounting  change of
$699,000  (net of taxes of  $368,000),  or  $0.05  per  share,  to  expense  the
unamortized costs that had been capitalized prior to January 4, 1999. The impact
of adoption on income from  continuing  operations  for the thirteen weeks ended
April 4, 1999 was not material.



                                        5
<PAGE>

                              Movie Gallery, Inc.

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

Results of Operations

The  following  table sets  forth,  for the  periods  indicated,  statements  of
operations  data  expressed as a percentage  of total  revenue,  the  percentage
increase or decrease from the comparable period and the number of stores open at
the end of each period.

<TABLE>
<CAPTION>
                                                             Thirteen weeks ended
                                                      ----------------------------------
                                                       April 2,      April 4,   Increase
                                                         2000          1999    (Decrease)
                                                      --------      --------    --------
<S>                                                   <C>           <C>          <C>
Revenues:
   Rentals                                                85.6%         85.2%        0.4%
   Product sales                                          14.4          14.8        (0.4)
                                                      --------      --------    --------
                                                         100.0         100.0        --
Cost of sales:
   Cost of rental revenues                                25.2          23.9         1.3
   Cost of product sales                                   8.8           9.9        (1.1)
                                                      --------      --------    --------
Gross margin                                              66.0          66.2        (0.2)

Operating costs and expenses:
   Store operating expenses                               46.8          47.4        (0.6)
   Amortization of intangibles                             2.2           2.6        (0.4)
   General and administrative                              7.8           7.1         0.7
                                                      --------      --------    --------
Operating income                                           9.2           9.1         0.1

Interest expense, net                                     (1.1)         (1.2)        0.1
                                                      --------      --------    --------
Income before income taxes,  extraordinary item
  and cumulative effect of accounting change               8.1           7.9         0.2

Income taxes                                               3.3           3.1         0.2
                                                      --------      --------    --------
Income before extraordinary item and cumulative
  effect of accounting change                              4.8           4.8        --
Extraordinary loss on early extinguishment of
  debt, net of tax                                        --            (1.0)        1.0
Cumulative effect of accounting change, net of tax        --            (1.0)        1.0
                                                      --------      --------    --------
Net income                                                 4.8%          2.8%        2.0%
                                                      ========      ========    ========

Adjusted EBITDA (in thousands)                        $ 12,664      $ 11,509    $  1,155
                                                      ========      ========    ========
Cash earnings (in thousands)                          $  5,705      $  5,200    $    505
                                                      ========      ========    ========
Number of stores open at end of period                     960           826         134
                                                      ========      ========    ========
</TABLE>

                                       6
<PAGE>


                               Movie Gallery, Inc.

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)

Revenue.  For the thirteen weeks ended April 2, 2000,  total revenues were $81.5
million,  a 17.1%  increase from $69.6 million in the first quarter of 1999. The
increase was due  primarily to an increase in  same-store  revenues of 3.1%,  as
well as a 15.5%  increase in the average  number of stores open during the first
quarter of 2000 versus 1999.  The increase in same-store  revenues for the first
quarter of 2000 was the result of (i) an increase in the number of copies of new
release  videocassettes  available  to  customers  as a result of the  Company's
continuing focus on the use of copy-depth initiatives, including revenue sharing
programs and other depth of copy programs available from movie studios;  (ii) an
increase in the sales of previously viewed movies, which is the direct result of
more product  available  to  consumers  due to the  copy-depth  initiatives  and
revenue sharing programs  discussed above;  (iii) marginally  favorable  weather
conditions; and (iv) successful, chain-wide internal marketing programs designed
to  generate  more  consumer  excitement  and traffic in the  Company's  base of
stores.  The revenue  increase  was  partially  offset by a decline in new movie
sales as a result of fewer titles being released at sell-through price points.

Cost of Sales.  The cost of rental  revenues  as a  percentage  of total  rental
revenues for the thirteen week period ended April 2, 2000 was 29.5%, an increase
from 28.0% in the prior year quarter.  The cost of rental revenues includes both
the amortization of rental  inventory and revenue sharing  expenses  incurred by
the Company.  The slight increase is primarily due to continued expansion of the
Company's participation in various revenue sharing and other copy depth programs
and costs  associated  with the  chain-wide  roll-out of DVD in the last half of
1999 and early 2000.

Cost of product sales  includes the costs of new  videocassettes,  confectionery
items and other goods,  as well as the  unamortized  value of previously  viewed
rental  inventory  sold. The gross margin on product sales increased to 38.6% in
the first quarter of 2000 from 33.1% in the first quarter of 1999.  The increase
in  profitability  of product  sales is  primarily  the result of an increase in
previously  viewed movie sales and a decrease in new movie sales throughout 1999
and continuing in 2000,  driven by the Company's  increased focus on the sale of
previously viewed movies.  Previously viewed movies carry gross margins that are
substantially  higher  than the  average  gross  margins for new movie sales and
increasing  participation in copy depth programs provides significant  resources
to support a larger previously viewed movie inventory.

Gross Margins.  The  significant  improvement in profit margins on product sales
was  partially  offset  by the  slight  increase  in the cost  margin  on rental
revenues  resulting  in a total  gross  margin  increase  to 34.0% for the first
quarter of 2000 from 33.8% in the first quarter of 1999.

Operating  Costs  and  Expenses.   Store  operating   expenses,   which  include
store-level  expenses such as lease payments and in-store payroll,  decreased to
46.8% of total  revenue  for the first  quarter  of 2000 from 47.4% in the first
quarter of 1999.  The decrease in store  operating  expenses is primarily due to
the  same-store  revenue  increase of 3.1% during the first  quarter of 2000 and
overall cost containment at the store level.

Amortization  of  intangibles  as a percentage of total revenue for the thirteen
weeks  ended  April 2, 2000 was 2.2%,  a decrease  from 2.6% for the  comparable
period in the prior year.  This decrease is primarily due to the 17.1%  increase
in revenue.

General and administrative expenses as a percentage of revenue increased to 7.8%
in the  first  quarter  of 2000 from 7.1% for the  first  quarter  of 1999.  The
increase is primarily due to increased staffing and travel costs associated with
the Company's  increased new store development which began in the latter half of
1999,  as well as  incremental  expenses  from the  operation  of the  Company's
e-commerce effort which was launched in September 1999.

                                       7
<PAGE>
                               Movie Gallery, Inc.

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)


Extraordinary  Loss.  During the first quarter of 1999, the Company  incurred an
extraordinary loss on the early extinguishment of debt of $682,000 (net of taxes
of $359,000), or $0.05 per share. The extraordinary loss was comprised primarily
of the write off of both the unamortized debt issue costs and the negative value
of an interest rate swap agreement in association with the  restructuring of the
Company's debt obligations discussed below in "Liquidity and Capital Resources."

Cumulative  Effect  Accounting  Change.  Effective  January 4, 1999, the Company
adopted the provisions of the American Institute of Certified Public Accountants
Statement  of  Position   ("SOP")  98-5,   "Reporting   the  Costs  of  Start-up
Activities."  As a result,  the  Company  recorded a charge  for the  cumulative
effect of an accounting change of $699,000 (net of taxes of $368,000),  or $0.05
per share, to expense the unamortized portion of certain start-up costs that had
been  capitalized  prior to January 4,  1999,  discussed  fully in Note 4 of the
"Notes to Consolidated Financial Statements."

Liquidity and Capital Resources

Historically,  the  Company's  primary  capital  needs have been for opening and
acquiring  new stores and for the  purchase of  videocassette  inventory.  Other
capital needs include the  refurbishment,  remodeling and relocation of existing
stores,  as well as common stock  repurchases  within the past year. The Company
has funded inventory purchases,  remodeling and relocation  programs,  new store
opening costs,  acquisitions and stock repurchases primarily from cash flow from
operations,  the proceeds of two public equity offerings,  loans under revolving
credit facilities and seller financing.

During  the   thirteen   weeks  ended  April  2,  2000  the  Company   generated
approximately  $12.7  million in Adjusted  EBITDA,  a 10.0%  increase over $11.5
million for the comparable  period in 1999. The increase was primarily driven by
the 17.1%  increase  in total  revenue.  Adjusted  EBITDA is defined as earnings
before  interest,  taxes,  depreciation  and  amortization,  less the  Company's
purchase  of  rental  inventory  which  excludes  rental   inventory   purchases
specifically  for new store  openings.  Adjusted  EBITDA should be considered in
addition to, but not as a substitute for or superior to, operating  income,  net
income,  cash flow and other  measures  of  financial  performance  prepared  in
accordance with generally accepted accounting principles.

Cash earnings per diluted share for the first quarter of 2000 increased 21.1% to
$0.46 from $0.38 in the first quarter of 1999. Contributing to this increase was
a 9.7%  decline in  weighted  average  shares  outstanding  as a result of share
repurchases.  Cash earnings is defined as net income before extraordinary items,
cumulative  effect  accounting  changes and  amortization of  intangibles.  Cash
earnings  should be  considered  in addition to, but not as a substitute  for or
superior  to,  operating  income,  net income,  cash flow and other  measures of
financial  performance prepared in accordance with generally accepted accounting
principles.

Net cash  provided by operating  activities  was $18.4  million for the thirteen
weeks ended April 2, 2000 as compared to $19.0  million for the  thirteen  weeks
ended April 4, 1999.  The decrease in net cash provided by operating  activities
was primarily the result of a continued  reduction in rental  product costs that
are  capitalized  and amortized  versus an increase in variable  rental  product
costs which are expensed as incurred. The remaining decrease is due to increases
in various other assets and offsetting decreases of inventory,  accounts payable
and accrued liabilities.  Net cash provided by operating activities continues to
be sufficient to cover capital resource and debt service needs.


                                       8
<PAGE>

                               Movie Gallery, Inc.

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)


Net cash used in investing activities was $20.5 million for the first quarter of
2000 as  compared  to $15.4  million  for the  comparable  period of 1999.  This
increase  in funds used for  investing  activities  is  primarily  the result of
increases in capital  expenditures  related to rental  inventory  and  property,
furnishings and equipment purchased to support the Company's increased new store
development plan.

Net cash provided by financing activities was $1.2 million for the first quarter
of 2000 as compared to net cash used in financing activities of $6.2 million for
the  comparable  period of 1999.  The changes from the first quarter of 1999 are
due primarily to significant  reductions in long-term debt repayments during the
first quarter of 2000 to fund increased  capital needs for stock repurchases and
new store development.

On January 7, 1999, the Company  entered into a new Credit  Agreement with First
Union  National  Bank of North  Carolina  with  respect  to a  revolving  credit
facility (the  "Facility").  The Facility  provides for  borrowings of up to $65
million,  is unsecured  and will mature in its entirety on January 7, 2002.  The
Company may increase the amount of the Facility to $85 million if existing banks
increase their commitments or if any new banks enter the Credit  Agreement.  The
interest  rate of the  Facility  is  based on LIBOR  plus an  applicable  margin
percentage,  which depends on the Company's cash flow  generation and borrowings
outstanding. The Company may repay the Facility at any time without penalty. The
more restrictive  covenants of the Facility restrict  borrowings based upon cash
flow levels.

The Company  grows its store base  through  internally  developed  and  acquired
stores and may require  capital in excess of internally  generated  cash flow to
achieve its desired growth.  The Company opened 24  internally-developed  stores
during the first quarter of 2000 and remains on target to open approximately 100
new stores during the year.  The Company will  entertain  potential  acquisition
transactions;  however,  the number of acquired stores in 2000 is expected to be
less than the number of internally  developed  stores.  To the extent available,
future  acquisitions  may be completed using funds available under the Facility,
financing provided by sellers,  alternative financing arrangements such as funds
raised in public or private debt or equity  offerings or shares of the Company's
stock issued to sellers.  However, there can be no assurance that financing will
be available to the Company on terms which will be acceptable, if at all.

During the first quarter of 2000, the Company completed its previously announced
$5  million  stock  repurchase  plan and  announced  another  $5  million  stock
repurchase  plan.  Through May 11, 2000, the Company has  repurchased  1,063,500
shares  under  the  new  repurchase  plan  which,  combined  with  the  previous
repurchase  plan,  represents  approximately  16% of the  Company's  outstanding
shares since  September  1998. It is anticipated  the majority of the $5 million
under the new repurchase  plan will be utilized  during the first half of fiscal
year 2000.

At April 2, 2000, the Company had a working capital deficit of $9.2 million, due
to the accounting treatment of its rental inventory. Rental inventory is treated
as a noncurrent asset under generally accepted accounting  principles because it
is a depreciable  asset and is not an asset which is  reasonably  expected to be
completely  realized in cash or sold in the normal business cycle.  Although the
rental of this inventory  generates the major portion of the Company's  revenue,
the  classification  of this asset as noncurrent  results in its exclusion  from
working capital.  The aggregate amount payable for this inventory,  however,  is
reported  as a current  liability  until paid and,  accordingly,  is included in
working capital.  Consequently, the Company believes that working capital is not
an appropriate measure of its liquidity and it anticipates that it will continue
to operate with a working capital deficit.

The Company believes its projected cash flow from operations, borrowing capacity
with the  Facility,  cash on hand and trade  credit will  provide the  necessary
capital to fund its current plan of operations  for the remainder of fiscal year
2000,   including  its  anticipated  new  store  openings,  a  modest  potential
acquisition program and stock repurchases.  However, to fund a major acquisition
program,  or to provide funds in the event that the Company's  need for funds is


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<PAGE>

                               Movie Gallery, Inc.

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)

greater than expected,  or if certain of the financing sources  identified above
are not  available to the extent  anticipated  or if the Company  increases  its
growth plan, the Company will need to seek additional or alternative  sources of
financing.  This  financing  may not be available on terms  satisfactory  to the
Company.  Failure to obtain  financing to fund the Company's  expansion plans or
for other purposes could have a material adverse effect on the Company.

Forward Looking Statements

This report contains certain  forward-looking  statements regarding the Company.
The Company  desires to take  advantage of the "safe  harbor"  provisions of the
Private  Securities  Litigation  Reform  Act of  1995  and  in  that  regard  is
cautioning  the readers of this report that a number of  important  risk factors
could affect the Company's actual results of operations and may cause changes in
the Company's strategy with the result that the Company's operations and results
may differ  materially  from those expressed in any  forward-looking  statements
made by, or on behalf of, the Company.  These risk factors include,  but are not
limited to,  competitive  factors and weather  conditions  within the  Company's
geographic  markets,  adequate  product  availability  from movie  studios,  the
Company's  ability to successfully  execute its new store opening  program,  the
Company's  ability  to  repurchase  common  stock  under  its  share  repurchase
authorization  and the risk factors that are discussed from  time-to-time in the
Company's  SEC reports,  including,  but not limited to, the report on Form 10-K
for the fiscal year ended January 2, 2000.


                                       10
<PAGE>


Item 3.  Quantitative and Qualitative Disclosures About Market Risks

     There have been no material changes in the Company's  inherent market risks
since the disclosures  made as of January 2, 2000 in the Company's annual report
on Form 10-K.

                           Part II - Other Information

Item 6.  Exhibits and Reports on Form 8-K

         a)    Exhibits

               10.1   Amended and Restated  Supply  Agreement dated February 28,
                      2000 between M. G. A., Inc. and Ingram Entertainment, Inc.
                      (portions   were   omitted   pursuant  to  a  request  for
                      confidential treatment)
               10.2   First  Amendment to  Employment Contract  between  M.G.A.,
                      Inc. and J. T. Malugen dated April 3, 2000.
               10.3   First  Amendment to  Employment Contract  between  M.G.A.,
                      Inc. and H. Harrison Parrish dated April 3, 2000.
               27     Financial Data Schedule.

         b)    Reports on Form 8-K

               None.

                                   Signatures

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



                                                 Movie Gallery, Inc.
                                       -------------------------------------
                                                    (Registrant)


Date:  May 17, 2000                    /s/ J. Steven Roy
                                       --------------------------------------
                                       J. Steven Roy, Executive Vice President
                                       and Chief Financial Officer



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