<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              __________________

                                   FORM 10-Q

(Mark One)

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

For the quarterly period ended ___________________________________________

                                       OR

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

For the transition period from   January 1, 2000   to   March 31, 2000
                                 ---------------        --------------


                         Commission file number 1-9348
                                                ------

                               MINOLTA - QMS, INC.
                               -------------------
             (Exact name of registrant as specified in its charter)


       DELAWARE                                63-0737870
  ______________________________________________________________________________
(State or other jurisdiction of       (I.R.S. Employer Identification Number)
incorporation or organization)



       ONE MAGNUM PASS, MOBILE, AL             36618
________________________________________________________________________________
(Address of principal executive offices)       (Zip Code)


                                (334) 633-4300
________________________________________________________________________________
(Registrant's telephone number, including area code)


                               QMS, INC.
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)


     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 such
filing requirements for the past 90 days.
                                       Yes    X         No
                                          ----------      ------------


     APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares
outstanding of the issuer's common stock, as of the latest practicable date
13,266,131 at April 28, 2000.
-----------------------------


                                       1
<PAGE>

                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================


                                     INDEX
                                     -----



PART I - FINANCIAL INFORMATION                                      PAGE NUMBER
         ---------------------                                      -----------

Item 1.  Financial Statements
   Condensed Consolidated Balance Sheets (unaudited)
     as of March 31, 2000, and December 31, 1999                        3-4
   Condensed Consolidated Statements of Operations
     (unaudited) for the three months ended
     March 31, 2000, and April 2, 1999                                    5
   Condensed Consolidated Statements of Comprehensive
     Loss (unaudited) for the three months ended
     March 31, 2000, and April 2, 1999                                    6
   Condensed Consolidated Statements of Cash Flows
     (unaudited) for the three months ended
     March 31, 2000, and April 2, 1999                                    7
   Notes to Condensed Consolidated Financial Statements
     (unaudited)                                                         8-12

  Item 2.  Management's Discussion and Analysis of Financial
        Condition and Results of Operations                             13-15

  Item 3.  Quantitative and Qualitative Disclosures About
        Market Risk                                                      16

PART II - OTHER INFORMATION                                              17
          -----------------

  Item 1. Legal Proceedings
  Item 2. Changes in Securities
  Item 3. Defaults upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  Item 6. (a)   Exhibits
          (b)   Reports on Form 8 - K

SIGNATURES                                                               18

                                       2
<PAGE>

                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================

                         PART I - FINANCIAL INFORMATION
                         ITEM 1.  FINANCIAL STATEMENTS

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                  as of March 31, 2000, and December 31, 1999
                                 (Unaudited)


                                                        March 31,  December 31,
in thousands                                              2000        1999
-------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS
    Cash and Cash Equivalents                            $  3,922      $  3,505
    Trade Receivables (less allowance for doubtful
      accounts of $1,292 at March 31, 2000, and $666
      at December 31, 1999)                                52,254        39,926
    Note Receivable, Net                                      239           239
    Inventories, Net (Note 5)                              45,861        56,987
    Deferred income taxes                                   3,975         3,202
    Other Current Assets                                    4,431         5,946
                                                         --------      --------
          Total Current Assets                            110,682       109,805
                                                         --------      --------

PROPERTY, PLANT, AND EQUIPMENT                             41,245        40,211
    Less Accumulated Depreciation                          33,318        33,743
                                                         --------      --------
          Total Property, Plant, and Equipment, Net         7,927         6,468

CAPITALIZED AND DEFERRED SOFTWARE, NET                      9,484         9,481

GOODWILL, NET                                              20,926        21,773

OTHER ASSETS, NET                                           4,486         3,679
                                                         --------      --------

    TOTAL ASSETS                                         $153,505      $151,206
                                                         ========      ========


See Notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>

                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                  as of March 31, 2000, and December 31, 1999
                                  (Unaudited)

                                                     March 31,  December 31,
in thousands                                            2000       1999
----------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable                                    $ 30,692      $ 37,678
  Revolving Credit Loans (Note 8)                       33,745        26,840
  Current Maturities of Long-Term Debt                   8,203         5,616
  Current Maturities of Capital Lease Obligations          698           568
  Employment Costs                                       4,732         5,003
  Deferred Service Revenue                               3,193         5,156
  Other Current Liabilities (Note 6)                    11,930        14,523
                                                      --------      --------
         Total Current Liabilities                      93,193        95,384

LONG-TERM DEBT                                          43,674        37,148

LONG-TERM CAPITAL LEASE OBLIGATIONS                      1,337         1,385

OTHER LIABILITIES                                        3,938         4,159

COMMITMENTS AND CONTINGENCIES (Note 11)                     --            --
                                                      --------      --------
STOCKHOLDERS' EQUITY (Notes 7 and 8)                    11,363        13,130
                                                      --------      --------

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $153,505      $151,206
                                                      ========      ========

See Notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>

                     MINOLTA - QMS, INC. AND SUBSIDIARIES
                     ====================================

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Three Months Ended March 31, 2000, and April 2, 1999
                                  (Unaudited)

                                                        Three Months Ended
                                                        ------------------
                                                      March 31,       April 2,
in thousands, except per share amounts                   2000           1999
------------------------------------------------------------------------------

NET SALES                                                   $78,991    $43,366

COST OF SALES                                                58,664     33,325
                                                            -------    -------

GROSS PROFIT                                                 20,327     10,041

OPERATING EXPENSES                                           18,712     10,640
                                                            -------    -------

OPERATING INCOME (LOSS)                                       1,615       (599)

OTHER INCOME (EXPENSE)
  Interest Income                                                 0         26
  Interest Expense                                           (1,703)      (247)
  Miscellaneous Expense                                        (605)       (37)
                                                            -------    -------
     Total Other Expense, net                                (2,308)      (258)
                                                            -------    -------

LOSS BEFORE INCOME TAXES                                       (693)      (857)

INCOME TAX PROVISION                                            246         34
                                                            -------    -------

NET LOSS                                                    $  (939)   $  (891)
                                                            =======    =======

NET LOSS PER COMMON SHARE (Note 3)
  Basic and Diluted                                         $ (0.07)   $ (0.08)
                                                            =======    =======

SHARES USED IN PER SHARE COMPUTATION (Note 3)
  Basic and Diluted                                          13,260     10,700

See Notes to Condensed Consolidated Financial Statements

                                       5
<PAGE>

                     MINOLTA - QMS, INC. AND SUBSIDIARIES
                     ====================================

        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
         For the Three Months Ended March 31, 2000, and April 2, 1999
                                  (Unaudited)

                                                     Three Months Ended
                                                    ---------------------
                                                    March 31,   April 2,
in thousands                                          2000        1999
-------------------------------------------------------------------------

Net Loss                                              $  (939)   $  (891)

Other Comprehensive Loss (no income
   tax effect):
    Foreign Currency Translation Adjustments             (859)      (242)
    Unrealized Gain on Securities                          31          0
                                                      -------    -------
         Total Other Comprehensive Loss                  (828)      (242)
                                                      -------    -------

Comprehensive Loss                                    $(1,767)   $(1,133)
                                                      =======    =======

See Notes to Condensed Consolidated Financial Statements

                                       6
<PAGE>

                     MINOLTA - QMS, INC. AND SUBSIDIARIES
                     ====================================

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         For the Three Months Ended March 31, 2000, and April 2, 1999
                                  (Unaudited)

                                                            Three Months Ended
                                                            --------------------
                                                            March 31,  April 2,
in thousands                                                  2000      1999
--------------------------------------------------------------------------------

Cash Flows from Operating Activities:
 Net Loss                                                   $   (939)  $  (891)
 Adjustments to Reconcile Net Loss to Net Cash
  Used in Operating Activities:
   Depreciation of Property, Plant and Equipment                 798       596
   Amortization of Goodwill                                      847         0
   Amortization of Capitalized and Deferred Software           2,319     2,288
   Provision for Losses on Accounts and Notes Receivable         522        50
   Provision (Recovery) for Losses on Inventory               (2,752)      717
   Other                                                         144       (12)
 Net Change in Assets and Liabilities that Provided
  (Used) Cash:
   Trade Receivables                                         (12,954)   (5,050)
   Inventories, Net                                           13,878    (4,930)
   Accounts Payable                                           (6,986)    7,794
   Other                                                      (5,789)   (1,705)
                                                            --------   -------
    Net Cash Used in Operating Activities                    (10,912)   (1,143)
                                                            --------   -------

Cash Flows from Investing Activities:
 Collections of Notes Receivable                                 104       172
 Purchase of Property, Plant and Equipment                    (2,257)     (601)
 Proceeds from Disposal of Property, Plant and Equipment           0        29
 Additions to Capitalized and Deferred Software Costs         (2,322)   (2,610)
                                                            --------   -------
    Net Cash Used in Investing Activities                     (4,475)   (3,010)
                                                            --------   -------

Cash Flows from Financing Activities:
 Net Proceeds from Revolving Credit Loans                      6,905     3,531
 Proceeds from Long-Term Debt                                 10,000         0
 Payments of Long-Term Debt and Capital Lease Obligations     (1,036)      (78)
 Other                                                           (65)       (2)
                                                            --------   -------
    Net Cash Provided by Financing Activities                 15,804     3,451
                                                            --------   -------

Net Change in Cash and Cash Equivalents                          417      (702)
Cash and Cash Equivalents at Beginning of Period               3,505     1,707
                                                            --------   -------
Cash and Cash Equivalents at End of Period                  $  3,922   $ 1,005
                                                            ========   =======

See Notes to Condensed Consolidated Financial Statements

                                       7
<PAGE>

                     MINOLTA - QMS, INC. AND SUBSIDIARIES
                     ====================================

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1. MANAGEMENT OPINION

   In the opinion of management, the condensed consolidated financial statements
   reflect all adjustments necessary to present fairly the financial position of
   the Company as of March 31, 2000, the results of operations and changes in
   cash flows for the three months ended March 31, 2000, and April 2, 1999. The
   results of operations for the three months ended March 31, 2000, are not
   necessarily indicative of the results to be expected for the fiscal year
   ending March 30, 2001. Certain reclassifications have been made to fiscal
   1999 amounts to conform to the transitional period ending March 31, 2000,
   presentation.

2. FISCAL YEAR AND NAME CHANGE AND TRANSITION PERIOD

   On October 8, 1999, the Company's Board of Directors modified its accounting
   periods effective in fiscal 2000, from a fiscal year ending on the Friday
   closest to December 31 to a fiscal year ending on the Friday closest to March
   31. Accordingly, this Form 10-Q is for the three-month transition period
   ended on March 31, 2000. In connection with this fiscal year change, the
   Company will include audited financial statements for this three-month
   transition period ended March 31, 2000, in its annual report on Form 10-K for
   its new fiscal year ending March 30, 2001.

   On April 24, 2000 the Company's Shareholders approved changing the Company's
   name to Minolta-QMS, Inc.

3. NET LOSS PER SHARE

   Basic and diluted loss per share computations are based on the weighted
   average number of common shares outstanding during the period. The diluted
   loss per share does not included the effect of the assumed exercise of stock
   options, as they are antidilutive.

4. COMPREHENSIVE LOSS

   Comprehensive loss consists of net loss and foreign currency translation
   adjustments and is reflected in the Condensed Consolidated Statements of
   Comprehensive Loss. Due to the Company's available operating loss
   carryforwards, there was no income tax effect related to the components of
   other comprehensive loss for any of the periods presented.

                                       8
<PAGE>

5. INVENTORIES

   Inventories at March 31, 2000, and December 31, 1999, are summarized as
   follows (in thousands):

<TABLE>
<CAPTION>
                                        March 31,        December 31,
                                          2000               1999
                                       -----------        ----------
<S>                                    <C>                <C>
Raw materials                              $ 9,088        $   13,705
Work in process                              1,227            16,191
Finished goods                              41,421            35,718
Inventory reserve                           (5,875)           (8,627)
                                       -----------        ----------

 TOTAL                                     $45,861        $   56,987
                                       ===========        ==========
</TABLE>

6. OTHER CURRENT LIABILITIES

   Other current liabilities at March 31, 2000, and December 31, 1999, are
   summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                        March 31,        December 31,
                                          2000               1999
                                       ----------        ----------
<S>                                    <C>                <C>
Warranty accrual                         $  3,280           $ 2,979
Management transition expense               1,864             1,809
Reserves for restructuring charges          1,698             3,980
Other                                       5,088             5,755
                                       ----------        ----------

 TOTAL                                   $ 11,930           $14,523
                                       ==========        ==========
</TABLE>

The decrease in the reserves for restructuring charges at March 31, 2000
resulted from payments made during the period.

7. LEASE AGREEMENT

   An operating lease agreement contains various covenants and a provision
   which requires the lessor's approval of the Company's payment of cash
   dividends. At October 3, 1997, and October 2, 1998, the Company was not in
   compliance with the minimum Net Worth covenant contained in the lease
   agreement. On December 8, 1997, the Company obtained a one-year waiver of
   non-compliance from the lessor through October 5, 1998, in exchange for $1.3
   million in prepaid rent and an amendment to a related warrant agreement to
   purchase 100,000 shares of the Company's common stock at $4 per share.
   Warrants granted under this agreement are exercisable through December 31,
   2001. On November 17, 1998, the Company obtained a continuation of the waiver
   of non-compliance from the lessor through December 31, 1999, in exchange for
   continuing the $1.3 million in prepaid rent. On June 7, 1999, the Company
   obtained a waiver agreement and lease amendment for the transactions related
   to the Minolta convergence and reacquisition of the European and Australian
   subsidiaries.

   At March 31, 2000, the Company was in violation of several financial
   covenants contained in the operating lease agreement. Among the remedies
   available to the landlord is the acceleration of all remaining base rent on a
   discounted basis for the initial lease term (approximately $13.0 million),
   cancellation of the lease, or all other remedies available by law. The
   violations of the financial covenants in the lease agreement will also
   constitute an event of default under the Harris revolving credit agreement
   (see note 8).

                                       9
<PAGE>

   On March 10, 2000 the Company received a letter of intent from its landlord
   indicating its willingness to sell the leased property for the greater of
   $14.0 million or an appraised value, based upon a mutually agreed to process,
   provided such sale is consummated no later than May 31, 2000. Management
   believes it is probable that negotiations to complete the purchase of the
   property and cancel the operating lease agreement will be successful, and
   the Company's parent (Minolta Investments Company) has agreed to provide the
   funding necessary to consummate such purchase. In addition, on March 20,
   2000, the Company obtained a waiver of the cross covenant contained in the
   Harris revolving credit agreement.

8. FINANCING AGREEMENTS

   Amounts borrowed at March 31, 2000 and December 31, 1999, consist of $33.7
   million and $26.8 million, respectively, under secured revolving credit
   agreements.

   On August 19, 1999, the Company entered into an agreement with Harris Trust
   and Savings Bank ("Harris"). This credit facility provides for a revolving
   line of credit through August 2002 with maximum availability of $20.0
   million, secured by the Company's domestic and Canadian accounts receivable
   and inventory. At March 31, 2000, total availability was $19.8 million and
   $10.0 million was outstanding. The stated rate of interest for any borrowings
   under the agreement is one-quarter of one percent (0.25) over prime or London
   Interbank Offered Rate ("LIBOR") plus three percent. The effective rate at
   March 31, 2000, was 9.25%.

   In compliance with Financial Accounting Standards Board ("FASB") Emerging
   Issues Task Force Issue No. 95-22, "Balance Sheet Classification of
   Borrowings Outstanding Under Revolving Credit Arrangements That Include a
   Subjective Acceleration Clause and a Lock-Box Arrangement," the Harris credit
   facility is classified as short-term debt in the financial statements.

   The Company was not in compliance with certain of the Harris financial
   covenants at December 31, 1999. A waiver of non-compliance was received from
   the lender on March 2, 2000 and is extended until an agreement is reached on
   revised covenants. An event of default under the Harris agreement also
   occurred at March 31, 2000, as a result of the Company's conditions of
   continued non-compliance with an operating lease agreement. Under the terms
   of the letter of intent from the landlord, the Company is presently
   negotiating the purchase of the leased property and cancellation of the
   operating lease agreement (see Note 7). Accordingly, on March 20, 2000, the
   Company obtained a waiver of this cross covenant from Harris.

   At March 31, 2000, the Company's wholly owned subsidiary, QMS B.V., had
   borrowings of $23.7 million under the revolving credit facilities with ING
   Bank N.V., Ing. Mezzanine Fonds B.V. and NMB Heller N.V. (collectively
   "Heller") through February 2001. Total borrowing capacity under this
   agreement is based on a percentage of eligible accounts receivable and
   inventory and is secured by these assets. At March 31, 2000, total
   availability was $27.1 million and $23.7 million was outstanding. The
   stated rate of interest for any borrowings under this agreement is Amsterdam
   Interbank Offered Rate ("AIBOR") plus 1.25% with a minimum of 4% per annum
   (5.75% at March 31, 2000). The Company was not in compliance with the Heller
   required minimum stockholders' equity covenant at March 31, 2000. A waiver of
   non-compliance was received from the lender. The Heller credit facility
   requires lender approval for payment of dividends from QMS B.V., to
   Minolta-QMS, Inc.

   On February 4, 2000, the Company received a $10 million loan from Minolta.
   This loan is payable in thirty-six principal installments. The stated
   interest rate is LIBOR plus 2.5% payable monthly in arrears. Proceeds of this
   loan will be used for corporate working capital purposes.

9. SEGMENT REPORTING

                                       10
<PAGE>

    The Company has three geographic reportable segments: United
    States/Canada/Latin America; Japan; and Europe/Australia. Each segment's
    operations consist of the manufacture and sale of network printing solutions
    and related servicing activities, albeit at varying levels by segment. The
    accounting policies of the segments are the same as those described in the
    summary of significant accounting policies in the Company's 1999 Annual
    Report on Form 10-K. The Company evaluates segment performance based on
    operating profit (loss). Sales for each segment are based on the locations
    of the third-party customer. All intercompany transactions between segments
    have been eliminated. Segment results for the three months ended March 31,
    2000, and April 2, 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                    March 31,   April 2,
                                      2000       1999
                                    --------    -------
<S>                                <C>         <C>
NET SALES
U.S./Canada/Latin America           $ 28,773    $33,920
Japan                                  5,164      9,446
Europe/Australia                      45,054          0
                                    --------    -------
   Total Net Sales                  $ 78,991    $43,366
                                    ========    =======

Operating Income (loss)
U.S./Canada/Latin America           $  1,504    $  (386)
Japan                                 (1,025)      (213)
Europe/Australia                       1,136          0
                                    --------    -------
   Segment Operating Income (loss)     1,615       (599)
Other expense                         (2,308)      (258)
                                    --------    -------
   Total Loss Before Income Taxes   $   (693)   $  (857)
                                    ========    =======

</TABLE>

There was no material change in segment identifiable assets during the period.

10. RECENTLY ISSUED ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
    Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
    for Derivative Instruments and Hedging Activities," which will be effective
    (as amended) for the Company in fiscal 2002. This Statement requires that
    all derivatives be recognized in the statement of financial position as
    either assets or liabilities and measured at fair value. In addition, all
    hedging relationships must be designated, reassessed and documented pursuant
    to the provisions of SFAS No. 133. The Company's management has not yet
    determined the effect SFAS No. 133 will have on its consolidated financial
    statements.

11. COMMITMENTS AND CONTINGENCIES

                                       11
<PAGE>

    As of March 31, 2000, the Company had commitments of approximately $57.7
    million under contracts to purchase print engines and consumables and
    approximately $16.7 million under contracts to purchase spares and related
    components.

    The Company is a defendant in various litigation and claims in the normal
    course of business. Based on consultation with various counsel in these
    matters, management is of the opinion that the ultimate resolution of such
    litigation and claims will not materially affect the Company's financial
    position, results of operations, or cash flows.

                                       12
<PAGE>

                     MINOLTA - QMS, INC. AND SUBSIDIARIES
                     ====================================

                        PART I - FINANCIAL INFORMATION
                ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

On April 24, 2000, the Company's shareholders approved changing the Company's
name to Minolta-QMS, Inc.

Results of Operations
---------------------

Net loss for the three months ended March 31, 2000 was $.9 million ($.07 per
share) on net sales of $79.0 million compared to a net loss of $.9 million ($.08
per share) for the three months ended April 2, 1999, on net sales of $43.4
million.

Net Sales Comparisons for Key Geographic Locations

<TABLE>
<CAPTION>

                              Three months ended
                      ----------------------------------
                       March 31,   April 2,
    (000's)              2000       1999      Difference
    -------           ---------   ---------   ----------
<S>                   <C>         <C>         <C>
U.S./Canada            $ 26,863    $ 24,224    $   2,639
Europe/Australia         45,054       9,065       35,989
Japan                     5,164       9,446       (4,282)
Latin America               792         566          226
All Other                 1,118          65        1,053
                      ----------------------------------
Total                  $ 78,991    $ 43,366    $  35,625
                      ==================================
</TABLE>

Net sales for the three months ended March 31, 2000, increased 82.2% from net
sales for the three months ended April 2, 1999. The sales increase relates
primarily to the reacquisition of the Company's former European and Australian
subsidiaries, in June 1999.

During the three months ended March 31, 2000, total U.S. and Canadian sales
increased by 10.9% as compared to net sales for the three months ended
April 2, 1999.  This was due mainly to the increased sales of color laser
printers and consumables in the U.S.

Japanese sales for the three months ended March 31, 2000, as compared to the
three months ended  April 2, 1999, decrease by $4.3 million or 45.3%.  This was
due primarily to the restructuring in Japan and a reduction in sales to certain
Asian markets.

The Company's gross profit for the three-month comparisons increased $10.3
million (from $10.0 million to $20.3 million), primarily as a result of higher
sales. Gross profit as a percentage of sales increased from 23.2% to 25.7%. This
was the result of improved margins on color laser printers.

The operating expenses including goodwill amortization increased by $8.1 million
for the three month comparisons. As a percentage of net sales, operating
expenses including goodwill amortization decreased from 24.5% to 23.7% for the
comparison. The increase in operating expenses including goodwill amortization
reflects additions of the European and Australian subsidiaries. The decrease in
operating expenses as a percentage of sales reflects the Company's continuing
strategy to align operating expenses with revenues.

Total other income and expense for the three months ended March 31, 2000, was a
net expense of $2.3 million.  This was an increase of $2.0 million from the
three months ended April 2, 1999.  The increase was primarily due to the
increase in interest expense and reflects the new short-term debt and long-term
debt incurred in connection with the Minolta convergence and the reacquisition
of the Company's former European subsidiary.

                                       13
<PAGE>

Income taxes reflect estimated foreign income taxes of Minolta - QMS, Inc.'s
foreign subsidiaries and U.S. tax liabilities for foreign commissions earned.

Financial Condition
-------------------
Accounts receivable grew by $12.3 million during the three month period ended
March 31, 2000, due to the addition of the Company's reacquired European
subsidiary. Inventories and accounts payable decreased by $11.1 million and $7.0
million, respectively. The decrease in inventory was primarily due to increased
emphasis by the Company on global supply management as it relates to purchasing
and manufacturing. The decrease in accounts payable followed the reduction of
the Company's inventory.

The Company expects its assets and liabilities to remain at higher levels due to
higher sales and production volumes from acquisitions.


Liquidity and Capital Resources
-------------------------------

The Company's net working capital as of March 31, 2000, was $17.5 million as
compared to $14.4 million at December 31, 1999 and $12.5 million at April 2,
1999.

At March 31, 2000, the Company had cash on hand of $3.9 million and borrowings
of $10.0 million and $23.7 million under the revolving credit facilities with
Harris Trust and Savings Bank ("Harris") and Heller National Bank ("HNB"),
respectively.  Total borrowing capacity under the facilities is a function of
eligible accounts receivable and inventory.  At March 31, 2000, total
availability was $46.9 million, consisting of $19.8 million with Harris and
$27.1 million with HNB.  The Company believes its current working capital
availability, including the effect of the acquisition, is adequate for its
operating needs.

The Company was not in compliance with certain of the Harris financial covenants
at December 31, 1999.  A waiver of non-compliance was received from the lender
on March 2, 2000 and is extended until an agreement is reached on revised
covenants. An event of default under the Harris agreement also occurred at March
31, 2000, as a result of the Company's conditions of continued non-compliance
with an operating lease agreement. Under the terms of the letter of intent from
the landlord, the Company is presently negotiating the purchase of the leased
property and cancellation of the operating lease agreement (see Note 7).
Accordingly, on March 20, 2000, the Company obtained a waiver of this cross
covenant from Harris.

On February 4, 2000, the Company received a $10 million loan from Minolta.  This
loan is payable in thirty-six principal installments.  The stated interest rate
is LIBOR plus 2.5% payable monthly in arrears.  Proceeds of this loan will be
used for corporate working capital purposes.


Lease Agreement
---------------

An operating lease agreement contains various covenants and a provision which
requires the lessor's approval of the Company's payment of cash dividends.  At
October 3, 1997, and October 2, 1998, the Company was not in compliance with the
minimum Net Worth covenant contained in the lease agreement.  On December 8,
1997, the Company obtained a one-year waiver of non-compliance from the lessor
through October 5, 1998, in exchange for $1.3 million in prepaid rent and an
amendment to a related warrant agreement to purchase 100,000 shares of the
Company's common stock at $4 per share.  Warrants granted under this agreement
are exercisable through December 31, 2001.  On

                                       14

<PAGE>

November 17, 1998, the Company obtained a continuation of the waiver of non-
compliance from the lessor through December 31, 1999, in exchange for continuing
the $1.3 million in prepaid rent. On June 7, 1999, the Company obtained a waiver
agreement and lease amendment for the transactions related to the Minolta
convergence and reacquisition of the European and Australian subsidiaries.

At March 31, 2000, the Company was in violation of several financial covenants
contained in the operating lease agreement.  Among the remedies available to the
landlord is the acceleration of all remaining base rent on a discounted basis
for the initial lease term (approximately $13.0 million), cancellation of the
lease, or all other remedies available by law.  The violations of the financial
covenants in the lease agreement will also constitute an event of default under
the Harris revolving credit agreement (see note 8).

On March 10, 2000 the Company received a letter of intent from its landlord
indicating its willingness to sell the leased property for the greater of $14.0
million or appraised value, based upon a mutually agreed to process, provided
such sale is consummated no later than May 31, 2000.  Management believes it is
probable that negotiations to complete the purchase of the property and cancel
the operating lease agreement will be successful, and the Company's parent
(Minolta Investments Company) has agreed to provide the funding necessary to
consummate such purchase. In addition, on March 20, 2000, the Company obtained a
waiver of the cross covenant contained in the Harris revolving credit agreement.


Foreign Currency Exchange Rates
-------------------------------

The Company purchases print engine mechanisms and memory components from several
Japanese suppliers.  Fluctuations in Japanese yen currency exchange rates will
affect the prices of these products.  The Company is attempting to mitigate
negative impacts through yen-sharing arrangements with suppliers; however,
material price increases resulting from unfavorable exchange rate fluctuations
could adversely affect operating results.

The effect of yen fluctuations on material prices are also offset in part by
yen-based Japanese sales.  Roughly 6.5% of all Company sales are in Japanese
yen, which causes sales and profit margins to increase when yen values increase.


Recently Issued Accounting Standards
------------------------------------

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which will be effective (as amended) for
the Company in fiscal 2002.  This Statement requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value.  In addition, all hedging relationships
must be designated, reassessed and documented pursuant to the provisions of SFAS
No. 133.  The Company's management has not yet determined the effect SFAS No.
133 will have on its consolidated financial statements.

                                       15
<PAGE>

                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================

                         PART I - FINANCIAL INFORMATION
               ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                               ABOUT MARKET RISK
________________________________________________________________________________

The Company is exposed to market risk primarily from changes in foreign currency
exchange rates and to a lesser extent interest rates.  The following describes
the nature of these risks.

Foreign Currency Exchange Risk

At March 31, 2000, the Company had sales in over 90 countries worldwide.
These sales outside the United States accounted for approximately 60 percent of
worldwide sales.  Virtually all of these sales were denominated in currencies of
the local country.  As such, the Company's reported profits and cash flows are
exposed to changing exchange rates.

To date, management has not deemed it cost-effective to engage in a formula-
based program of hedging the profits and cash flows of foreign operations using
derivative financial instruments.  The Company's U.S. operations purchase
significant quantities of inventory from Japanese suppliers.  Payments are made
to these suppliers in U.S. dollars linked to the yen.  In the OEM agreements
with these suppliers, a currency payment model is negotiated that describes how
fluctuations in exchange rates will be shared over the term of the agreement.
In June 1999, the Company reacquired its former European subsidiary which also
purchases significant quantities of inventory from Japanese suppliers in yen.
The Company is currently negotiating with its European subsidiary's suppliers to
adjust for fluctuations in exchange rates.

In addition, at any point in time the Company's foreign subsidiaries hold
financial assets and liabilities that are denominated in currencies other than
U.S. dollars.  These financial assets and liabilities consist primarily of
short-term, third-party receivables and payables.  Changes in exchange rates
affect these financial assets and liabilities.

Prior to 2000, the Company on occasion has used derivatives to hedge specific
risk situations involving foreign currency exposures.  No such derivatives were
held at March 31, 2000.

Interest Rate Risk

The financial liabilities of the Company that are exposed to changes in interest
rates include short-term borrowings and long-term debt.  The stated rate of
interest for borrowings under the Harris revolving credit agreement is one-
quarter of one percent (0.25) over prime or LIBOR plus three percent, and the
stated rate of interest for borrowings under the Heller revolving credit
agreement is one and one-quarter percent (1.25) over AIBOR.  Long-term
borrowings with Minolta and Alto Imaging Group N.V. have stated interest rates
of LIBOR plus 2.5% payable monthly in arrears and LIBOR plus 0.5% (but not to be
less than 6.50%), respectively.  Long-term borrowings of the Company's European
subsidiary bear interest at 6% and 10%.  A one percent annual increase in the
stated interest rates would have resulted in approximately $195,000 of
additional interest expense for the three months ended March 31, 2000.

                                       16
<PAGE>

                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================


                          PART II - OTHER INFORMATION

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


ITEM 1 - LEGAL PROCEEDINGS
--------------------------


The Company is a defendant in various litigation and claims in the normal course
of business.  Based on consultation with various counsel in these matters,
management is of the opinion that the ultimate resolution of such litigation and
claims will not materially affect the Company's financial position, results of
operations, or cash flows.



ITEM 2 - CHANGES IN SECURITIES - None.
------------------------------



ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
----------------------------------------



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

ITEM 5 - OTHER INFORMATION - None.
--------------------------

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

(a)  Exhibits:
     Exhibit
     Number         Description
     ------         -----------


     3(b)           Amended and Restated By-Laws of Registrant

     27             Financial Data Schedule


(b)  Reports:  None.



                                       17
<PAGE>
                      MINOLTA - QMS, INC. AND SUBSIDIARIES
                      ====================================


                                   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.



                                  MINOLTA - QMS, INC.
                                  (Registrant)



Date:   May 10, 2000              /s/ Edward E. Lucente
      -----------------           ---------------------------------
                                  Edward E. Lucente
                                  President and Chief Executive Officer





Date:   May 10, 2000              /s/ Albert A. Butler
      -----------------           ----------------------
                                  Albert A. Butler
                                  Chief Financial Officer

                                       18