<PAGE>

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 For the quarterly period ended June 30, 1999

                                       OR

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

                       For the transition period from___ to___

                          Commission file number 0-9899



                          MEDICAL GRAPHICS CORPORATION
        (Exact name of small business issuer as specified in its charter)

         MINNESOTA                                  41-1316712
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)

             350 OAK GROVE PARKWAY, SAINT PAUL, MINNESOTA 55127-8599
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (651) 484-4874



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

As of August 12, 1999, the Company had outstanding 5,650,947 shares of common
stock, $.05 par value, and 444,445 shares of Class A stock, $.05 par value.
Each share of Class A stock is convertible into 3.375 shares of common stock.

Transitional Small Business Disclosure Format: Yes      No  X
                                                  ----    ----


<PAGE>




                          PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


                                                   MEDICAL GRAPHICS CORPORATION
                                                    CONSOLIDATED BALANCE SHEETS
                                                           (UNAUDITED)
                                                         (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                  JUNE 30,               DECEMBER 31,
                                                                                   1999                     1998
                                                                          -----------------------  -----------------------
<S>                                                                       <C>                      <C>
                                         ASSETS
CURRENT ASSETS:
     Cash                                                                               $    364                 $    -
     Accounts receivable, net of allowance for doubtful
        accounts of $104 and $118                                                          4,757                    5,263
     Inventories:
         Purchased components and work in process                                          3,322                    2,941
         Finished goods                                                                    2,130                    1,976
                                                                          -----------------------  -----------------------
                                                                                           5,452                    4,917
     Prepaid expenses                                                                        170                      155
                                                                          -----------------------  -----------------------
         Total current assets                                                             10,743                   10,335
                                                                          -----------------------  -----------------------

EQUIPMENT AND FIXTURES                                                                     4,102                    4,092
     LESS ACCUMULATED DEPRECIATION                                                         3,754                    3,574
                                                                          -----------------------  -----------------------
                                                                          -----------------------  -----------------------
                                                                                             348                      518
SOFTWARE PRODUCTION COSTS, NET OF ACCUMULATED
     AMORTIZATION OF $1,386 AND $1,212                                                       582                      566
OTHER ASSETS                                                                                   3                        7
                                                                          -----------------------  -----------------------
                                                                                        $ 11,676                 $ 11,426
                                                                          -----------------------  -----------------------
                                                                          -----------------------  -----------------------

                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                                   $  2,632                 $  2,975
     Accounts payable financed with vendors - current                                        590                      769
     Line of credit                                                                        3,759                    3,291
     Employee compensation                                                                   671                      517
     Deferred service contract revenue                                                       787                      870
     Warranty reserve                                                                        354                      374
     Other liabilities and accrued expenses                                                  377                      327
                                                                          -----------------------  -----------------------
         Total current liabilities                                                         9,170                    9,123
COMMITMENTS AND CONTINGENCIES
LONG-TERM ACCOUNTS PAYABLE FINANCED WITH VENDORS                                               0                       48
SHAREHOLDERS' EQUITY:
     Class A stock; liquidation preference of $3.375 per share                                22                       22
     Common stock                                                                            282                      280
     Additional paid-in capital                                                           15,763                   15,738
     Retained deficit                                                                    (13,561)                 (13,785)
                                                                          -----------------------  -----------------------
         Total shareholders' equity                                                        2,506                    2,255
                                                                          -----------------------  -----------------------
                                                                                        $ 11,676                 $ 11,426
                                                                          -----------------------  -----------------------
                                                                          -----------------------  -----------------------

</TABLE>

See accompanying notes to financial statements


                                       2
<PAGE>



                                                MEDICAL GRAPHICS CORPORATION

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                       (UNAUDITED)
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                   JUNE 30,                           JUNE 30,
                                                       --------------------------------   --------------------------------
                                                                 1999             1998              1999             1998
                                                       ---------------  ---------------   ---------------  ---------------
<S>                                                    <C>              <C>               <C>              <C>
REVENUES:
     Equipment sales                                          $ 5,097          $ 4,661           $ 9,478          $ 9,234
     Service revenues                                             451              461               953              958
                                                       ---------------  ---------------   ---------------  ---------------
         Total revenues                                         5,548            5,122            10,431           10,192

COST OF GOODS SOLD                                              2,940            3,269             5,729            6,253
                                                       ---------------  ---------------   ---------------  ---------------

     Gross margin                                               2,608            1,853             4,702            3,939

OPERATING EXPENSES:
     Selling and marketing                                      1,299            1,520             2,414            2,929
     General and administrative                                   581              534             1,033            1,027
     Research and development                                     355              449               757              856
                                                       ---------------  ---------------   ---------------  ---------------
                                                                2,235            2,503             4,204            4,812
                                                       ---------------  ---------------   ---------------  ---------------

OPERATING INCOME (LOSS)                                           373             (650)              498             (873)

     Interest expense                                            (152)            (100)             (274)            (197)
                                                       ---------------  ---------------   ---------------  ---------------

INCOME (LOSS) BEFORE TAXES                                        221             (750)              224           (1,070)

     Income tax benefit                                             0                0                 0                0
                                                       ---------------  ---------------   ---------------  ---------------

NET INCOME (LOSS)                                             $   221          $  (750)          $   224          $(1,070)
                                                       ---------------  ---------------   ---------------  ---------------
                                                       ---------------  ---------------   ---------------  ---------------

NET INCOME (LOSS) PER WEIGHTED AVERAGE SHARE
     Basic                                                    $  0.03          $ (0.13)          $  0.03          $ (0.19)
     Diluted                                                     0.03            (0.13)             0.03            (0.19)
                                                       ---------------  ---------------   ---------------  ---------------
                                                       ---------------  ---------------   ---------------  ---------------

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
     Basic                                                      7,121            5,708             7,116            5,595
     Diluted                                                    7,179            5,708             7,171            5,595
                                                       ---------------  ---------------   ---------------  ---------------
                                                       ---------------  ---------------   ---------------  ---------------

</TABLE>

See accompanying notes to financial statements


                                       3
<PAGE>

                                               MEDICAL GRAPHICS CORPORATION

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (UNAUDITED)
                                                     (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                                 SIX MONTHS ENDED
                                                                                                      JUNE 30,
                                                                                ------------------------------------------------
                                                                                                  1999                     1998
                                                                                -----------------------  -----------------------
<S>                                                                             <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income (Loss)                                                                        $    224                 $ (1,070)
     Adjustments to reconcile net income (loss) to
         net cash provided (used) in operating activities:
         Depreciation                                                                              180                      301
         Amortization                                                                              174                      168
         Changes in operating assets and liabilities:
             Accounts receivable                                                                   506                     (362)
             Inventory                                                                            (535)                    (634)
             Prepaid expenses and other assets                                                     (11)                     (48)
             Accounts payable and accrued expenses                                                (318)                     121
             Warranty reserve                                                                      (20)                     (40)
             Deferred service contract revenue                                                     (83)                       3
                                                                                -----------------------  -----------------------
                 Net cash provided (used) in operating activities                                  117                   (1,561)
                                                                                -----------------------  -----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Software production costs                                                                    (190)                    (179)
     Capital expenditures                                                                          (10)                     (21)
                                                                                -----------------------  -----------------------
         Net cash used in investing activities                                                    (200)                    (200)
                                                                                -----------------------  -----------------------


CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings under bank line of credit                                                       11,693                   11,828
     Repayments under bank line of credit                                                      (11,225)                 (11,498)
     Payments on long-term accounts payable financed with vendors                                  (48)                    (410)
     Net proceeds from issuances of common stock                                                    27                    1,639
                                                                                -----------------------  -----------------------
         Net cash provided by financing activities                                                 447                    1,559
                                                                                -----------------------  -----------------------

NET INCREASE (DECREASE) IN CASH                                                                    364                     (202)

CASH AT BEGINNING OF PERIOD                                                                          0                      387
                                                                                -----------------------  -----------------------

CASH AT END OF PERIOD                                                                         $    364                 $    185
                                                                                -----------------------  -----------------------
                                                                                -----------------------  -----------------------

CASH PAID FOR INTEREST EXPENSE                                                                $    261                 $    184
                                                                                -----------------------  -----------------------
                                                                                -----------------------  -----------------------

</TABLE>

See accompanying notes to financial statements


                                       4
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1999
                                   (Unaudited)

1.   BASIS OF PRESENTATION

The consolidated balance sheet as of June 30, 1999, the consolidated
statements of operations for the three and six months ended June 30, 1999 and
1998, the consolidated statements of cash flows for the six months ended June
30, 1999 and 1998, and the related information presented in these notes have
been prepared by management in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Rule 10-01 of Regulation S-X, without audit. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of results have
been included. The consolidated balance sheet at December 31, 1998 was
derived from the audited financial statements as of that date. Operating
results for the three and six month periods ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the financial
statements and notes thereto included in MedGraphic's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998.

Comprehensive income is a measure of all non-owner changes in shareholders'
equity and includes such items as net income, certain foreign currency
translation items, minimum pension liability adjustments and changes in the
value of available-for-sale securities. For the three and six months ended
June 30, 1999 and 1998, comprehensive income for MedGraphics was equivalent
to net income as reported.

2.   RECLASSIFICATIONS

Certain amounts in MedGraphic's Form 10-QSB for the three and six month
periods ended June 30, 1998 have been reclassified to conform to the 1999
presentation. These reclassifications had no effect on net loss or
shareholders' equity as previously reported.

3.   AMENDMENT TO BANK LINE OF CREDIT

On June 16, 1999, MedGraphics amended its line of credit agreement to provide
for additional working capital. As of June 30, 1999, the Company was in
compliance with all covenants under the amended line of credit agreement.


                                       5
<PAGE>

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

FORWARD-LOOKING STATEMENT

Statements included in this Quarterly Report on Form 10-QSB that are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provision of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties that could cause
actual results to differ materially. Various forward-looking statements have
been made in this Quarterly Report on Form 10-QSB and may also be made in
other MedGraphic's reports filed under the Securities Exchange Act of 1934,
in its press releases and in other documents. In addition, from time to time,
the Company through its management may make oral forward-looking statements.

RESULTS OF OPERATIONS

Medgraphics recorded net income of $221,000 for the three months ended June
30, 1999 compared to a net loss of $750,000 for the same period in 1998.
Medgraphics recorded net income of $224,000 for the six months ended June 30,
1999 compared to a net loss of $1,070,000 for the same period in 1998.

REVENUES

Revenues consist of equipment sales and service revenues. Equipment sales
reflect revenues from MedGraphics's pulmonary function testing systems, gas
exchange testing systems, sleep diagnostic systems and aftermarket sales of
peripherals and supplies. Service revenues reflect contract revenues from
extended warranties, non-warranty service visits and training.

Second quarter revenues increased 8.3% to $5,548,000 in 1999 compared to
$5,122,000 in 1998. Domestic revenue increased by 9.3% to $4,511,000 in 1999
compared to $4,129,000 in 1998. This increase reflected strong consumer
interest in our new pulmonary function testing systems and increased sales of
software upgrade products offset by lower sales of sleep diagnostic systems.
International revenue increased 10.2% to $586,000 in 1999 from $532,000 in
1998. This international increase also reflects renewed interest in our new
pulmonary function testing systems. Service revenue of $451,000 for the three
months ended June 30, 1999 was relatively unchanged from the $461,000
recorded in the same period of 1998.

For the six months ended June 30, revenues increased 2.3% to $10,431,000 in
1999 from $10,192,000 in 1998. Domestic revenue increased 5.2% to $8,220,000
in 1999 from $7,810,000 in 1998. This growth is due to renewed interest in
our new pulmonary function testing systems and increased sales of software
upgrade products offset by lower sales of sleep diagnostic systems.
Internationally, year to date revenue is down 11.7% on 1999 revenue of
$1,258,000 compared to $1,424,000 in 1998 because of previous changes in our
European distribution channels and a stronger dollar versus other
international currencies, offset by more recent renewed interest in our new
pulmonary function testing systems. Service revenue decreased slightly to
$953,000 in 1999 from $958,000 in 1998.

GROSS MARGIN

Gross margin percentage increased to 47.0% of revenue for the three months ended
June 30,


                                       6
<PAGE>

1999 from 36.2% in 1998. For the six months ended June 30, gross margin
percentage increased to 45.1% in 1999 from 38.6% in 1998. Margin increases
for both the three and six month periods reflect MedGraphic's continuing
efforts to decrease its costs of manufacturing through increased efficiencies
and value engineering. In addition, product mix changes from reduced sales of
lower margin sleep diagnostic systems and increased sales of higher margin
software upgrade products have favorably influenced gross margin percentages
for both periods.

SELLING AND MARKETING

Selling and marketing expenses for the three months ended June 30 decreased
14.5% to $1,299,000 in 1999 from $1,520,000 in 1998. For the six months ended
June 30, selling and marketing expenses decreased 17.6% to $2,414,000 in 1999
from $2,929,000 in 1998. Both periods are favorably influenced by lower
personnel expenses due to reduced headcount, reductions in travel,
consulting, and costs of attending trade shows. These decreases are the
result of cost containment measures implemented during the last half of 1998.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased 8.8% to $581,000 in the second
quarter of 1999 from $534,000 in 1998. Year to date general and
administrative expenses of $1,033,000 for 1999 increased slightly from the
$1,027,000 incurred in 1998. Both periods include higher personnel,
depreciation and legal expenses and a higher provision for doubtful accounts,
offset by lower travel and consulting expenses.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased by 20.9% to $355,000 in the
second quarter of 1999 from $449,000 in 1998. For the six months ended June
30, research and development expenses decreased 11.6% to $757,000 in 1999
from $856,000 in 1998. MedGraphics continues to use in-house software
engineers rather than independent software contractors as part of the
Company's transition of its product software to a Windows98-Registered
Trademark- platform. Additionally, the 1998 costs associated with
re-engineering our pulmonary function testing hardware are not being incurred
in 1999.

YEAR 2000

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer
equipment, software, devices and products with imbedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.

STATE OF READINESS

In late 1997, the Audit Committee of the Board of Directors of the Company
directed the Company's management to initiate a Year 2000 compliance plan. By
March 1998, management implemented a formal program to address the Company's
Year 2000 compliance by forming a Year 2000 staff consisting of personnel
from cross-functional areas of the Company, including information systems,
marketing, research and development, technical support, quality assurance


                                       7
<PAGE>

and regulatory affairs and administration (the "Y2K Project Team"). A
Project Manager, who reports to the Audit Committee of the Board, leads the
Y2K Project Team to ensure that it meets time deadlines, objectives and
documents remedial action.

As part of its compliance plan, the Company's Y2K Project Team is taking
inventory of the Company's operations and dividing areas for assessment into
three categories:

-    VITAL - computer-controlled systems, programs, equipment and products that
     the Company needs to function day-to-day;

-    CRITICAL - those systems which must be repaired or replaced prior to the
     millennium but are not necessary for the Company's day-to-day operations;
     and

-    MARGINAL - those systems for which repair and replacement are not material
     to the Company's operations.

The Y2K Project Team has also identified five areas covering the entire scope
of the Company's business and has committed to completing an 8-step program
for each area. The diagram below identifies the five areas as well as the
current and projected schedule of the 8-step program for each area.

<TABLE>
<CAPTION>

                      ------------------ ------------------ ------------------ ------------------ ------------------
                      Company Products   OEM Products       Internal           Business           Vendors &
                                                            Programming        Information        Suppliers
                                                                               Systems
<S>                   <C>                <C>                <C>                <C>                <C>
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Team Formation &      Completed          Completed          Completed          Completed          Completed
Assignment
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Inventory Assessment  Completed          Completed          Completed          Completed          Completed
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Compliance            Completed          Completed          Completed          Completed          Completed
Assessment
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Risk Assessment       Completed          Completed          Completed          99%                90%
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Resolution &          Completed          80%                Completed          Completed          85%
Remediation
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Validation            Completed          80%                Completed          90%                Completed
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Contingency Plans     Completed          Completed          Completed          90%                90%
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Certification &       Completed          Completed          Completed          90%                90%
Sign-off
--------------------- ------------------ ------------------ ------------------ ------------------ ------------------

</TABLE>

With respect to the Company's relationships with third parties, the Company
relies both domestically and internationally upon various vendors,
governmental agencies, utility companies, telecommunications service
companies, delivery service companies and other service providers. Although
these service providers are outside of the Company's control, the Company has
mailed letters to those with whom it believes its relationships are material
and has verbally


                                       8
<PAGE>

communicated with some of its strategic business partners to determine the
extent to which electronic interfaces with such entities are vulnerable to
Year 2000 issues and whether products and services purchased from or by such
entities are Year 2000 ready. As of July 1, 1999, the Company had received
responses from 90% of such third parties, and all of the responding companies
have provided written assurances indicating that their Year 2000 issues will
be addressed on a timely basis. The Company intends to complete follow-up
activities, including but not limited to phone surveys, with significant
vendors and service providers by the third quarter of 1999.

COSTS TO ADDRESS YEAR 2000 ISSUES

To date, the Company has not incurred any material expenditures in connection
with identifying or evaluating Year 2000 compliance issues. The Company has
incurred the majority of its costs from the recent installation of updated
internal computer systems as well as the labor cost and opportunity cost of
time spent by employees of the Company evaluating Year 2000 compliance
matters generally. Because the Company upgraded its internal computer systems
as part of its regularly planned software and hardware upgrade efforts, it
does not consider those costs to be charges for Year 2000 compliance. The
Company presently estimates the labor and other costs of its Year 2000
compliance efforts to date to be approximately $126,000. With respect to
future costs, the Company estimates it may spend approximately $147,000 for
remediation and validation of products and programs that the Company
presently knows are not compliant. The Company believes that these estimates
are reasonable and presently expects such to be within the Company's fiscal
1999 budget.

RISKS OF YEAR 2000 ISSUES

Although the Company is near completion of its discovery and evaluation of
overall Year 2000 exposure, it still cannot state with certainty that the
Year 2000 issues will not have a material adverse impact on its financial
condition, results of operations and liquidity. Although the Company
considers them unlikely, the Company believes that the following several
situations, not in any particular order, make up the Company's "most
reasonably likely worst case Year 2000 scenarios":

1.  CUSTOMER LITIGATION.

The Company has developed a program to advise all customers of Year 2000
compliance of its products and has identified upgrade and replacement
products for its customers affected by Year 2000 compliance issues. These
efforts pertain not only to the Company's internally developed products but
also to externally acquired products. Although the Company believes that its
efforts will ensure no disruption in the business or operations of its
customers, the possibility exists that some customers may experience problems
that may motivate them to commence litigation against the Company for
restitution and damages that may be related to such problems.

2.  DISRUPTION OF SUPPLY MATERIALS.

MedGraphics began the process of surveying its vendors with regard to their
Year 2000 readiness during the first quarter of 1998. We are now in the
process of finalizing our assessment of the survey responses. In addition, we
are actively pursuing responses from critical and non-critical vendors who
have not yet responded. The Company expects to work with vendors that show a
need for assistance or that provide inadequate responses, and in many cases
expects that survey


                                       9
<PAGE>

results will be refined significantly by such work. Where ultimate survey
results show that the need arises, the Company will arrange for back-up vendors
before the changeover date.

3. DISRUPTION OF THE COMPANY'S INTERNAL COMPUTER SYSTEMS.

The Company has completed a scheduled upgrade of its current hardware and
software systems and this process has required Year 2000 compliance in all
areas. Year 2000 testing occurred as the upgrade process proceeded and will
continue to occur prior to the changeover date. For this reason, the Company
considers that disruption of its internal computer systems is unlikely.

4. DISRUPTION OF THE COMPANY'S NON-COMPUTER SYSTEMS.

MedGraphics is currently conducting a comprehensive assessment of all
non-computer systems, including utility, telecommunications, delivery and
other services. Although we intend to work with third party providers of
these services to ensure that there will be no disruption of operations, the
Company believes that if any disruptions do occur, they will be dealt with
promptly and will be no more severe with respect to correction or impact than
would be an unexpected breakdown of such services and related equipment.

CONTINGENCY PLANS

MedGraphics recognizes the need for contingency planning and is addressing
this through the aforementioned 8-step program. The details of any
contingency plan will depend on our final assessment of the problem as well
as the evaluation and success of our remediation efforts. Future disclosures
will include contingency plans as they become necessary and available.

LIQUIDITY AND CAPITAL RESOURCES

MedGraphics had cash of $364,000 and working capital of $1,573,000 as of June
30, 1999. In addition, the Company had a balance outstanding under its bank
line of credit of $3,759,000 and additional availability of $153,000.

During the six months ended June 30, 1999, MedGraphics generated $117,000 of
cash from operating activities. Principal sources of cash included net income
before depreciation and amortization of $578,000 and a $506,000 decrease in
accounts receivable. Uses of cash included an increase of $535,000 in
inventory and a $318,000 decrease in accounts payable and accrued expenses.
We used $200,000 for investing activities, consisting of software production
costs of $190,000 and capital expenditures of $10,000. MedGraphics generated
$447,000 from financing activities, primarily from $468,000 in net borrowings
under its line of credit, partially offset by a decrease of $48,000 in
long-term accounts payable with vendors.

During the six months ended June 30, 1998, the Company used $1,561,000 of
cash in operating activities, primarily resulting from a net loss before
depreciation and amortization of $601,000 and increases of $362,000 in
accounts receivable and $634,000 in inventory. The Company used $200,000 for
investing activities, consisting of software production costs of $179,000 and
capital expenditures of $21,000. The Company generated $1,559,000 from
financing activities, primarily from $1,500,000 in proceeds from the private
placement of its common stock and net borrowings of $330,000 under its line
of credit, offset by a decrease of $410,000 in long-term accounts payable
with vendors.


                                       10
<PAGE>



At June 30, 1999 the Company had no material commitments for capital
expenditures.

MedGraphics believes that cash generated from operations, together with cash
and borrowings available under its line of credit facility will be adequate
to satisfy its liquidity and capital resource needs through 1999.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None


                                       11
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

There have been no material developments in any of the legal proceedings
described in the Form 10-KSB for the year ended December 31, 1998.
MedGraphics is a defendant in various claims and litigation which are
incidental to its business. Management is of the opinion that ultimate
settlement of these matters will not have a material impact on its financial
statements.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Shareholders was held on May 27, 1999. The
shareholders took the following actions:

(a)     The shareholders elected two directors to hold office until the annual
        meeting of shareholders is held in the year 2002. The shareholders
        present in person or by proxy cast the following numbers of votes in
        connection with the election of directors, resulting in the election of
        all of the nominees:

<TABLE>
<CAPTION>
                                            VOTES FOR                  VOTES WITHHELD
                                            -----------                --------------
                  <S>                       <C>                        <C>
                  Gerald T. Knight          5,528,823                  213,440
                  W. Edward McConaghay      5,528,823                  213,440

</TABLE>

(b)     The shareholders ratified and approved an amendment to Section 3.01 of
        the Company's Articles of Incorporation to increase the number of
        authorized shares of stock from 10,000,000 shares to 25,000,000 shares.
        5,407,334 votes were cast for the resolution, 329,174 votes were cast
        against the resolution and 5,755 votes abstained.

(c)     The shareholders ratified and approved an amendment to the Company's
        1987 Stock Option Plan to increase the annual limitation of option
        grants under the Plan from 75,000 to 200,000. 5,371,987 votes were cast
        for the resolution, 362,771 votes were cast against the resolution and
        7,505 votes abstained.

ITEM 5.  OTHER INFORMATION

None.


                                       12

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits List

        Exhibit 10.1       Seventh Amendment to Credit and Security Agreement
                           dated June 16, 1999 between the Company and Wells
                           Fargo Business Credit, Inc. f/k/a Norwest Business
                           Credit, Inc.

        Exhibit 27         Financial Data Schedule

(b)     Reports on Form 8-K

        No reports on Form 8-K were filed during the three months ended June 30,
        1999.


                                       13
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                                            Medical Graphics Corporation
                                            ----------------------------
                                             (Registrant)


Date August 13, 1999                        /s/ Richard E. Jahnke
     ---------------                        ----------------------------
                                            Richard E. Jahnke, President
                                            and Chief Executive Officer
                                            (Principal Executive Officer)

Date August 13, 1999                        /s/ Dale H. Johnson
     ---------------                        ----------------------------
                                            Dale H. Johnson, Chief Financial
                                            Officer (Chief Accounting Officer)


                                       14
<PAGE>

                                INDEX TO EXHIBITS

Exhibit
Number              Description
-------             -----------

Exhibit 10.1        Seventh Amendment to Credit and Security Agreement dated
                    June 16, 1999 between the Company and Wells Fargo Business
                    Credit, Inc. f/k/a Norwest Business Credit, Inc.

27                  Financial Data Schedule.


                                       15