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 1, 2001

                                       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.)



900 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 9,
2001 was 11,247,805.

<PAGE>

                               Movie Gallery, Inc.

                                      Index



Part I.  Financial Information

Item 1.  Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets - April 1, 2001 and December 31, 2000..............1

Consolidated Statements of Income - Thirteen weeks ended April 1, 2001
and April 2, 2000..............................................................2

Consolidated Statements of Cash Flows - Thirteen weeks ended April 1, 2001
and April 2, 2000..............................................................3

Notes to Consolidated Financial Statements - April 1, 2001.....................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>

                               Movie Gallery, Inc.

                           Consolidated Balance Sheets
                                 (in thousands)

<TABLE>
<CAPTION>

                                                          April 1,  December 31,
                                                            2001        2000
                                                         ----------------------
                                                        (Unaudited)
<S>                                                       <C>          <C>
Assets
Current assets:
   Cash and cash equivalents                              $  6,858     $  7,029
   Merchandise inventory                                     6,027        9,264
   Prepaid expenses                                          2,155        1,000
   Store supplies and other                                  3,943        3,852
   Deferred income taxes                                       497          502
                                                          --------     --------
Total current assets                                        19,480       21,647

Rental inventory, net                                       63,078       61,773
Property, furnishings and equipment, net                    53,971       53,124
Goodwill and other intangibles, net                         76,028       77,926
Deposits and other assets                                    2,404        3,066
                                                          --------     --------
Total assets                                              $214,961     $217,536
                                                          ========     ========

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                       $ 28,426     $ 31,111
   Accrued liabilities                                      10,946       11,631
   Current portion of long-term debt                        34,600         --
                                                          --------     --------
Total current liabilities                                   73,972       42,742

Long-term debt                                                --         40,600
Other accrued liabilities                                      250          253
Deferred income taxes                                        6,530        4,732

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, 11,176,167 and 11,136,167
       shares issued and outstanding                            11           11
   Additional paid-in capital                              122,822      121,841
   Retained earnings                                        11,376        7,357
                                                          --------     --------
Total stockholders' equity                                 134,209      129,209
                                                          --------     --------
Total liabilities and stockholders' equity                $214,961     $217,536
                                                          ========     ========
See accompanying notes.

</TABLE>

                                       1
<PAGE>


                              Movie Gallery, Inc.

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

<TABLE>
<CAPTION>
                                                        Thirteen weeks ended
                                                       April 1,        April 2,
                                                         2001            2000
                                                       ------------------------
<S>                                                    <C>             <C>
Revenues:
   Rentals                                             $ 77,898        $ 69,777
   Product sales                                         13,673          11,716
                                                       --------        --------
                                                         91,571          81,493
Cost of sales:
   Cost of rental revenues                               22,599          20,591
   Cost of product sales                                  9,116           7,190
                                                       --------        --------
Gross margin                                             59,856          53,712

Operating costs and expenses:
   Store operating expenses                              41,394          38,113
   Amortization of intangibles                            1,914           1,805
   General and administrative                             9,135           6,316
                                                       --------        --------
Operating income                                          7,413           7,478

Interest expense, net                                      (665)           (868)
                                                       --------        --------
Income before income taxes                                6,748           6,610

Income taxes                                              2,729           2,710
                                                       --------        --------
Net income                                             $  4,019        $  3,900
                                                       ========        ========

Earnings  per share:
  Basic                                                $   0.36        $   0.32
                                                       ========        ========
  Diluted                                              $   0.35        $   0.32
                                                       ========        ========

Weighted average shares outstanding:
   Basic                                                 11,153          12,275
   Diluted                                               11,508          12,300

See accompanying notes.
</TABLE>

                                       2
<PAGE>

                               Movie Gallery, Inc.

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


<TABLE>
<CAPTION>
                                                           Thirteen weeks ended
                                                           April 1,    April 2,
                                                             2001        2000
                                                           --------------------
<S>                                                        <C>         <C>
Operating activities:
Net income                                                 $  4,019    $  3,900
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization                             21,457      18,443
   Stock option compensation                                    811        --
   Deferred income taxes                                      1,818       1,935
Changes in operating assets and liabilities:
   Merchandise inventory                                      3,237       2,129
   Other current assets                                      (1,246)       (275)
   Deposits and other assets                                    662      (1,319)
   Accounts payable                                          (2,685)     (2,905)
   Accrued liabilities                                         (688)     (3,503)
                                                           --------    --------
Net cash provided by operating activities                    27,385      18,405

Investing activities:
Business acquisitions                                           (38)       (628)
Purchases of rental inventory, net                          (17,011)    (14,642)
Purchases of property, furnishings and equipment             (4,662)     (5,183)
                                                           --------    --------
Net cash used in investing activities                       (21,711)    (20,453)

Financing activities:
Purchases and retirement of common stock                       --        (2,107)
Proceeds from issuance of long-term debt                       --         3,383
Proceeds from exercise of stock options                         155        --
Principal payments on long-term debt                         (6,000)        (89)
                                                           --------    --------
Net cash provided by (used in) financing activities          (5,845)      1,187
                                                           --------    --------
Decrease in cash and cash equivalents                          (171)       (861)
Cash and cash equivalents at beginning of period              7,029       6,970
                                                           --------    --------
Cash and cash equivalents at end of period                 $  6,858    $  6,109
                                                           ========    ========

See accompanying notes.

                                       3

</TABLE>

<PAGE>

                               Movie Gallery, Inc.

             Notes to Consolidated Financial Statements (Unaudited)

                                  April 1, 2001

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 1, 2001 are not  necessarily  indicative  of the results that may be
expected for the fiscal year ending January 6, 2002 ("Fiscal 2001"). 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 December 31, 2000 ("Fiscal 2000").

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 is unsecured, originally provided for borrowings of up
to $65 million and will mature in its  entirety on January 7, 2002.  The Company
voluntarily  reduced the  commitment  under the Facility to $50 million in April
2001.  The interest  rate on 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 was structured to effectively fix 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.

Effective  with Fiscal  2001,  the  Company's  interest  rate swap  agreement is
required to be accounted for under Financial Accounting Standards Board ("FASB")
Statement  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities."  Adoption of Statement 133 had no impact on the Company's financial
position or results of operations.

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 (355,000 and 25,000 for the thirteen weeks ended April 1, 2001 and April
2,  2000,  respectively).  No  adjustments  were  made  to  net  income  in  the
computation of basic or diluted earnings per share.


                                       4
<PAGE>

                               Movie Gallery, Inc.

        Notes to Consolidated Financial Statements (Unaudited)(continued)


4. Supply Contract

In March 2001, the Company and Rentrak Corporation ("Rentrak") amended the terms
of  the  Company's   existing   supply   contract  with  Rentrak.   General  and
administrative  expenses  for  the  quarter  ended  April  1,  2001,  include  a
nonrecurring  charge of $1,600,000 ($0.08 per diluted share,  after tax) paid to
Rentrak in  connection  with the amendment to the  contract.  Additionally,  the
Company prepaid  approximately  $900,000 to be applied over a three-year  period
against future amounts due under the contract.

5. Stock Option Repricing

In March 2000,  the FASB  issued  FASB  Interpretation  No. 44, "Accounting  for
Certain  Transactions  involving Stock  Compensation,  an  interpretation of APB
Opinion No. 25." The Interpretation  requires  that stock options that have been
modified to reduce the exercise price be accounted for as variable.  The Company
repriced  384,000 stock options in March 2001, and reduced the exercise price to
$4 per share. Under the  Interpretation,  the repriced options are accounted for
as variable  until the options are exercised,  forfeited or expire  unexercised.
General and administrative expenses for the quarter ended April 1, 2001, include
$811,000 ($0.04 per diluted share, after tax) of non-cash  compensation  expense
that  represents  the  difference  between the  exercise  price of the  repriced
options and the market price at the end of the quarter.


                                       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,  statement of income
data  expressed as a percentage of total  revenue,  the  percentage  increase or
decrease from the  comparable  period,  adjusted  EBITDA,  cash earnings and the
number of stores open at the end of each period.
<TABLE>
<CAPTION>

                                                      Thirteen weeks ended
                                             --------------------------------------
                                              April 1,       April 2,      Increase
                                                2001           2000       (Decrease)
                                             ---------      ---------     ---------
<S>                                          <C>            <C>           <C>
Revenues:
   Rentals                                        85.1%          85.6%         (0.5)%
   Product sales                                  14.9           14.4           0.5
                                             ---------      ---------     ---------
                                                 100.0          100.0         --
Cost of sales:
   Cost of rental revenues                        24.7           25.2          (0.5)
   Cost of product sales                           9.9            8.8           1.1
                                             ---------      ---------     ---------
Gross margin                                      65.4           66.0          (0.6)

Operating costs and expenses:
   Store operating expenses                       45.2           46.8          (1.6)
   Amortization of intangibles                     2.1            2.2          (0.1)
   General and administrative                     10.0            7.8           2.2
                                             ---------      ---------     ---------
Operating income                                   8.1            9.2          (1.1)

Interest expense, net                             (0.7)          (1.1)          0.4
                                             ---------      ---------     ---------
Income before income taxes                         7.4            8.1          (0.7)

Income taxes                                       3.0            3.3          (0.3)
                                             ---------      ---------     ---------
Net income                                         4.4%           4.8%         (0.4)%
                                             =========      =========     =========

Adjusted EBITDA (in thousands)               $  16,025      $  12,664     $   3,361
                                             =========      =========     =========
Cash earnings (in thousands)                 $   7,370      $   5,705     $   1,665
                                             =========      =========     =========
Number of stores open at end of period           1,031            960            71
                                             =========      =========     =========

</TABLE>

Revenue.  For the thirteen weeks ended April 1, 2001,  total revenues were $91.6
million,  a 12.4%  increase  from $81.5  million in the first  quarter of Fiscal
2000. The increase was due primarily to an increase in same-store sales of 4.3%,
as well as a 7.1% increase in the average number of stores open during the first
quarter of Fiscal 2001 versus Fiscal 2000. The increase in same-store  sales for
the first  quarter of Fiscal 2001 was the result of (i)  successful,  chain-wide
internal  marketing  programs designed to generate more consumer  excitement and
traffic  in the  Company's  base of  stores;  (ii) an  increase  in the sales of
previously  viewed  movies  and  previously  played  games;   (iii)  significant
increases  in DVD  (digital  video disk)  rental  revenue;  and (iv)  marginally
favorable  weather  conditions.  The revenue  increase was partially offset by a
decline in game rentals due to consumer anticipation of new game platforms being
introduced  late in the year as well as a decline in new movie sales as a result
of fewer titles being  released at  sell-through  price points and the continued
liquidation of older sell-through titles in certain stores.

                                       6
<PAGE>

                              Movie Gallery, Inc.

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

Cost of Sales.  The gross margin on rental  revenue for the thirteen week period
ended April 1, 2001 was 71.0%,  a slight  increase  from 70.5% 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 was primarily due to the increase in same-store  sales offset partially
by trailing rental costs related to significant  rental  inventory  purchases in
the fourth quarter of Fiscal 2000.

Cost of  product  sales  includes  the costs of new  videocassettes  and  DVD's,
confectionery  items  and  other  goods,  as well as the  unamortized  value  of
previously  viewed  rental  inventory  sold.  The gross margin on product  sales
decreased  to 33.3% in the first  quarter of Fiscal 2001 from 38.6% in the first
quarter of Fiscal  2000.  The  decrease in  profitability  of product  sales was
primarily the result of significant  discounting  associated  with the continued
liquidation  of older  sell-through  titles and other slow moving  inventory  in
certain stores.

Gross  Margins.  The slight  increase  in profit  margins on rental  revenue was
partially offset by the decline in profit margins on product sales, resulting in
a total gross margin increase to 34.6% for the first quarter of Fiscal 2001 from
34.0% in the first quarter of Fiscal 2000.

Operating  Costs  and  Expenses.   Store  operating   expenses,   which  include
store-level  expenses such as lease payments and in-store payroll,  decreased to
45.2% of total  revenue  for the first  quarter of Fiscal 2001 from 46.8% in the
first  quarter of Fiscal  2000.  The  decrease in store  operating  expenses was
primarily due to the same-store  sales increase of 4.3% during the first quarter
and continued  initiatives  to  streamline  operating  costs,  as well as strong
performance of new stores coupled with the closure of under-performing units.

Amortization  of  intangibles  as a percentage of total revenue for the thirteen
weeks  ended  April 1, 2001 was 2.1%,  consistent  with 2.2% for the  comparable
period in the prior year.

General and administrative  expenses include a nonrecurring charge of $1,600,000
related to an  amendment  of the  Company's  supply  agreement  with Rentrak and
non-cash  compensation  expense of $811,000  related to the repricing of certain
stock  options  (see  Notes  4 and 5 of the  "Notes  to  Consolidated  Financial
Statements").  Excluding these two items, general and administrative expenses as
a percentage  of revenue  decreased to 7.3% in the first  quarter of Fiscal 2001
from 7.8% for the first  quarter of Fiscal 2000.  The decrease was primarily due
to increased revenue levels in 2001.

As a result of the above  factors  and  excluding  the  nonrecurring  charge and
non-cash  compensation  expense,  operating  income  increased  by 31.4% to $9.8
million in the first quarter of Fiscal 2001 from $7.5 million in the prior year.

Liquidity and Capital Resources

Historically,  the  Company's  primary  capital  needs have been for opening and
acquiring  new stores and for the purchase of  inventory.  Other  capital  needs
include the refurbishment, remodeling and relocation of existing stores, as well
as common stock  repurchases  within the past two years.  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.

                                       7
<PAGE>

                              Movie Gallery, Inc.

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

During  the   thirteen   weeks  ended  April  1,  2001  the  Company   generated
approximately  $16.0  million in Adjusted  EBITDA,  a 26.5%  increase over $12.7
million for the comparable  period in 2000. The increase was primarily driven by
the 12.4%  increase  in total  revenue.  Adjusted  EBITDA is defined as earnings
before interest, taxes, depreciation and amortization, non-cash compensation and
nonrecurring  items,  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 Fiscal 2001  increased
39.1% to $0.64 from $0.46 in the first quarter of Fiscal 2000.  Contributing  to
this increase was a 6.4% decline in weighted  average  shares  outstanding  as a
result of share  repurchases.  Cash  earnings  is defined  as net income  before
amortization of intangibles,  non-cash compensation and nonrecurring items. 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 $27.4  million for the thirteen
weeks ended April 1, 2001 as compared to $18.4  million for the  thirteen  weeks
ended April 2, 2000.  The increase in net cash provided by operating  activities
was primarily the result of increased net income,  the  recognition  of non-cash
compensation  expense,  increased  rental  inventory  amortization,  a continued
reduction in levels of new merchandise inventory and a notably smaller reduction
in accrued  liabilities versus the comparable period of the prior year. Net cash
provided by operating  activities  continues to be  sufficient  to cover capital
resource and debt service needs.

Net cash used in investing activities was $21.7 million for the first quarter of
Fiscal 2001,  consistent  with $20.5 million for the comparable  period of 2000.
Results did not fluctuate  significantly  year-over-year  due to comparable  new
store development levels.

Net cash used in financing  activities was $5.8 million for the first quarter of
Fiscal 2001 as compared to net cash  provided by  financing  activities  of $1.2
million for the  comparable  period of Fiscal  2000.  The changes from the first
quarter of Fiscal 2000 were due  primarily  to  significant  reductions  in debt
levels during the first quarter of Fiscal 2001,  offset by stock  repurchases in
the comparable period of the prior year.

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 is unsecured, originally provided for borrowings of up
to $65 million and will mature in its  entirety on January 7, 2002.  The Company
voluntarily  reduced the  commitment  under the Facility to $50 million in April
2001.  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 is currently  negotiating a replacement
for the  existing  Facility  and expects to have a new credit  facility in place
during the second half of the year.

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 was structured to effectively fix 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

                                       8
<PAGE>

                              Movie Gallery, Inc.

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

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 Company  grows its store base  through  internally  developed  and  acquired
stores.  The Company  opened 24  internally  developed  stores  during the first
quarter of Fiscal 2001 and remains on target to open approximately 75 new stores
during the year. To the extent available, new stores and 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.

At April 1, 2001,  the Company had a working  capital  deficit of $54.5 million,
due to the accounting  treatment of its rental  inventory and the current status
of its credit facility.  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 2001,
including its anticipated new store openings and acquisition  program.  However,
to fund a major acquisition, or to provide funds in the event that the Company's
need for funds is 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  may  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.

Other Matters

In May 2001, the Company purchased the senior secured bank debt of Video Update,
Inc. from a syndication of financial  institutions led by BNP Paribas.  The bank
debt,  which had a $121  million  face  value,  was  purchased  at a discount of
greater than 90% from face.  Video Update,  Inc.,  which is currently  operating
under Chapter 11 of the United States  Bankruptcy  Code,  owns and operates over
350 video specialty  retail stores in the United States and Canada.  The Company
is currently evaluating its alternatives as the senior secured debt holder.

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


                                       9
<PAGE>

                              Movie Gallery, Inc.

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

geographic  markets,  adequate  product  availability  from movie  studios,  the
Company's  ability to refinance  its existing  credit  facility,  the  Company's
ability to continue to expand, including its ability to successfully execute its
new  store  opening  program,  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 December 31, 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 December 31, 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

              None.

         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 16, 2001                      /s/ J. Steven Roy
                                         --------------------------------------
                                         J. Steven Roy
                                         Executive Vice President
                                         and Chief Financial Officer




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