<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q
                                Quarterly Report
                       Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934


                  For the Quarterly Period Ended July 31, 1998

                         Commission File Number 1-13099
                              THE MAXIM GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                       58-2060334
--------------------------------            ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

210 Town Park Drive, Kennesaw, Georgia                         30144
----------------------------------------               ------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code         (770) 590-9369
                                                        -----------------------
N/A
--------------------------------------------------------------------------------
(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 last 90 days.

         Yes       X                            No
              -----------                            --------------

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

       Common Stock, $.001 par value                    19,252,827
--------------------------------------      -----------------------------------
                   Class                     Outstanding at September 8, 1998


<PAGE>   2


PART I--FINANCIAL INFORMATION

ITEM 1--FINANCIAL STATEMENTS

                     THE MAXIM GROUP, INC. AND SUBSIDIARIES


                      CONDENSED CONSOLIDATED BALANCE SHEETS

                  (In Thousands, Except Per Share Information)

                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                  July 31,      January 31,
                                       Assets                                       1998           1998
---------------------------------------------------------------------------      ---------     -----------
<S>                                                                              <C>           <C>
Current assets:
    Cash and cash equivalents, including restricted cash of $12,618 at
       July 31, 1998 and $22,786 at January 31, 1998                             $ 25,030       $ 28,880
    Current portion of franchise license fees receivable, net of allowance
       for doubtful accounts of $383 at July 31, 1998 and $528 at
       January 31, 1998                                                             2,791          3,107

    Trade accounts receivable, net of allowance for doubtful accounts of
       $2,594 at July 31, 1998 and $1,917 at January 31, 1998                      69,461         56,432
    Accounts receivable from officers and employees                                 1,531          1,593
    Current portion of notes receivable from franchisees and related
       parties, net of allowance for doubtful accounts of $252 at July 31,
       1998 and $261 at January 31, 1998                                            1,562          1,165
    Inventories                                                                    64,808         54,693
    Refundable income taxes                                                         1,986          2,558
    Deferred income taxes                                                           5,804          5,714
    Prepaid expenses                                                                4,444          3,406
                                                                                 --------       --------
              Total current assets                                                177,417        157,548

Property and equipment, net of accumulated depreciation and
    amortization of $54,930 at July 31, 1998 and $48,039 at January 31,
    1998                                                                          156,662        137,207

Franchise license fees receivable, less current portion, net of allowance
    for doubtful accounts of $210 at July 31, 1998 and January 31, 1998             4,619          2,718

Notes receivable from franchisees, less current portion                             4,001          3,506

Intangible assets, net of accumulated amortization of $1,993 at July 31,
    1998 and $1,626 at January 31, 1998                                            11,453         13,640

Other assets                                                                        9,279          6,875
                                                                                 --------       --------
                                                                                 $363,431       $321,494
                                                                                 ========       ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                      -2-
<PAGE>   3


                     THE MAXIM GROUP, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED

                  (In Thousands, Except Per Share Information)

                                   (Unaudited)




<TABLE>
<CAPTION>
                                                                          July 31,      January 31,
             Liabilities And Stockholders' Equity                           1998            1998
------------------------------------------------------------------      -----------     -----------
<S>                                                                     <C>             <C>
Current liabilities:
    Current portion of long-term debt                                    $     150        $     384
    Current portion of capital lease obligations                               503              501
    Rebates payable to franchisees                                           3,773            3,975
    Accounts payable                                                        19,369           23,376
    Accrued expenses                                                        40,367           14,333
    Deferred revenue                                                         2,554            1,750
    Deposits                                                                 5,444            2,897
                                                                         ---------        ---------
              Total current liabilities                                     72,160           47,216

Long-term debt, less current portion                                       169,025          129,349

Capital lease obligations, less current portion                              1,174            1,429

Deferred taxes                                                               3,676            9,725
                                                                         ---------        ---------
              Total liabilities                                            246,035          187,719
                                                                         ---------        ---------
Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.001 par value; 1,000 shares authorized, no
       shares issued or outstanding                                              0                0
    Common stock, $.001 par value; 25,000 shares authorized,
       17,577 shares issued at July 31, 1998 and 17,352 shares
       issued at January 31, 1998                                               18               17
    Additional paid-in capital                                             121,214          119,264
    Retained earnings                                                       15,142           29,388
    Treasury stock, 1,455 shares at July 31, 1998 and 1,221 shares
       at January 31, 1998                                                 (18,978)         (14,894)
                                                                         ---------        ---------
              Total stockholders' equity                                   117,396          133,775
                                                                         ---------        ---------
                                                                         $ 363,431        $ 321,494
                                                                         =========        =========
</TABLE>




     See accompanying notes to condensed consolidated financial statements.


                                      -3-

<PAGE>   4



                     THE MAXIM GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                  (In Thousands, Except Per Share Information)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                        --------------------------
                                                                         July 31,         July 31,
                                                                           1998             1997
                                                                        ---------        ---------

<S>                                                                     <C>              <C>      
Revenues:
    Sales of floorcovering products                                     $  86,849        $  76,881
    Fiber and PET sales                                                     5,209            6,741
    Fees from franchise services                                           11,995            7,292
    Other                                                                   1,823            1,329
                                                                        ---------        ---------
              Total revenues                                              105,876           92,243

Cost of sales                                                              73,425           63,071
                                                                        ---------        ---------
              Gross profit                                                 32,451           29,172

Selling, general, and administrative expenses                              22,097           20,725

Interest income                                                               (32)            (131)

Interest expense                                                            2,836            1,262

Other                                                                        (120)             (49)

Nonrecurring charges                                                       33,000                0
                                                                        ---------        ---------
              (Loss) earnings before income tax (benefit) expense         (25,330)           7,365

Income tax (benefit) expense                                               (7,540)           2,780
                                                                        ---------        ---------
              Net (loss) earnings                                       $ (17,790)       $   4,585
                                                                        =========        =========

(Loss) earnings per common share:
    Basic                                                               $   (1.09)       $    0.28
                                                                        =========        =========

    Diluted                                                             $   (1.09)       $    0.28
                                                                        =========        =========

Weighted average number of common shares outstanding:
    Basic                                                                  16,305           16,294
                                                                        =========        =========

    Diluted                                                                16,305           16,615
                                                                        =========        =========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                      -4-
<PAGE>   5



                     THE MAXIM GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                  (In Thousands, Except Per Share Information)

                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                        --------------------------
                                                                        July 31,         July 31,
                                                                           1998            1997
                                                                        ---------        ---------
<S>                                                                     <C>              <C>      
Revenues:
    Sales of floorcovering products                                     $ 167,985        $ 148,371
    Fiber and PET sales                                                    12,174           12,513
    Fees from franchise services                                           21,282           14,573
    Other                                                                   3,972            3,011
                                                                        ---------        ---------
              Total revenues                                              205,413          178,468

Cost of sales                                                             143,200          122,226
                                                                        ---------        ---------
              Gross profit                                                 62,213           56,242

Selling, general, and administrative expenses                              44,299           41,163

Interest income                                                              (418)            (225)

Interest expense                                                            5,200            2,663

Other                                                                        (307)             (84)

Nonrecurring charges                                                       33,000                0
                                                                        ---------        ---------
              (Loss) earnings before income tax (benefit) expense         (19,561)          12,725

Income tax (benefit) expense                                               (5,315)           4,889
                                                                        ---------        ---------
              Net (loss) earnings                                       $ (14,246)       $   7,836
                                                                        =========        =========

(Loss) earnings per common share
    Basic                                                               $   (0.87)       $    0.48
                                                                        =========        =========

    Diluted                                                             $   (0.87)       $    0.47
                                                                        =========        =========

Weighted average number of common shares outstanding
    Basic                                                                  16,364           16,202
                                                                        =========        =========

    Diluted                                                                16,364           16,623
                                                                        =========        =========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                       -5-
<PAGE>   6


                     THE MAXIM GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                  (In Thousands, Except Per Share Information)

                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                             ------------------------
                                                                             July 31,        July 31,
                                                                               1998            1997
                                                                             --------        --------
<S>                                                                          <C>             <C>     
Cash flows from operating activities:
   Net (loss) earnings                                                       $(14,246)       $  7,836
                                                                             --------        --------
   Adjustments to reconcile net (loss) earnings to net
      cash (used in) provided by
      operating activities:
         Nonrecurring charges                                                  33,000               0
         Depreciation and amortization                                          7,011           5,845
         Deferred income taxes                                                 (6,139)          3,293
         Changes in assets and liabilities:
            Increase in receivables                                           (20,244)         (8,557)
            Increase in inventories                                           (10,515)         (4,884)
            Decrease in refundable income taxes                                   572             334
            Increase in prepaid expenses and other assets                      (3,583)         (3,847)
            Increase in rebates and accounts payable,
               accrued expenses, deferred
               revenue, and deposits                                            4,405             411
                                                                             --------        --------
                 Total adjustments                                              4,507          (7,405)
                                                                             --------        --------
                 Net cash (used in) provided by operating activities           (9,739)            431
                                                                             --------        --------
Cash flows from investing activities:
   Capital expenditures                                                       (28,878)        (11,837)
   Acquisitions, net of cash acquired                                          (2,289)           (977)
                                                                             --------        --------
                 Net cash used in investing activities                        (31,167)        (12,814)
                                                                             --------        --------
Cash flows from financing activities:
   Proceeds from issuance of common stock, net                                      0          47,240
   Proceeds from exercise of options, net                                       1,950             463
   Purchase of treasury stock                                                  (4,083)        (10,938)
   Borrowings under revolving credit agreement                                 39,442               0
   Repayments of revolving credit agreement                                         0         (25,642)
   Principal payments on capital lease obligations                               (253)           (254)
                                                                             --------        --------
                 Net cash provided by financing activities                     37,056          10,869
                                                                             --------        --------
Net decrease in cash                                                           (3,850)         (1,514)

Cash, beginning of period                                                      28,880           6,439
                                                                             --------        --------
Cash, end of period                                                          $ 25,030        $  4,925
                                                                             ========        ========
Supplemental disclosures of cash flow information:
   Cash paid during period for:
      Interest                                                               $  5,052        $  4,067
                                                                             ========        ========

      Income taxes                                                           $    145        $  1,346
                                                                             ========        ========

Supplemental disclosure of noncash investing and financing activities:
   Common stock issued in connection with acquisitions                       $      0        $  3,000
                                                                             ========        ========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                      -6-
<PAGE>   7


                     THE MAXIM GROUP, INC. AND SUBSIDIARIES


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              (Dollars In Thousands, Except Per Share Information)

                                   (Unaudited)



  1.  Consolidated Financial Statements

      The accompanying unaudited condensed consolidated financial statements
      have been prepared in accordance with the instructions to Form 10-Q and 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.
      These statements should be read in conjunction with the consolidated
      financial statements and notes thereto included in the Company's 1998 Form
      10-K as filed with the Securities and Exchange Commission.

      The results of operations for the periods presented are not necessarily
      indicative of the operating results for the full year.


  2.  Inventories

      Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                           July 31,        January 31,
                                             1998             1998
                                           --------         ---------
                <S>                        <C>              <C>    
                Raw materials               $16,339          $14,809
                Work in process               4,139            3,363
                Finished goods               44,330           36,521
                                            -------          -------
                                            $64,808          $54,693
                                            =======          =======
</TABLE>


  3.  Senior Subordinated Notes

      On October 16, 1997, the Company completed the sale of $100 million of
      9-1/4% Senior Subordinated Notes ("Notes") due 2007, to institutional
      buyers in a private offering under Rule 144A promulgated under the
      Securities Act of 1933. The net proceeds to the Company from the offering
      of the Notes were approximately $96 million, net of an issue discount and
      fees and related costs. The Company used the net proceeds from the
      offering of the Notes to repay all borrowings outstanding under its
      revolving credit agreements of 

                                      -7-
<PAGE>   8

      approximately $82.7 million and for general corporate purposes, including
      capital expenditures.

      Each of the Company's subsidiaries has fully and unconditionally
      guaranteed the Notes on a joint and several basis. The guarantor
      subsidiaries comprise all of the direct and indirect subsidiaries of the
      Company. The Company has not presented separate financial statements and
      other disclosures concerning the guarantor subsidiaries because management
      has determined that such information is not material to investors. There
      are no significant restrictions on the ability of the guarantor
      subsidiaries to make distributions to the Company.


  4.  Nonrecurring Charges

      During the period ended July 31, 1998, the Company reevaluated its retail
      strategy. As a result of the assessment, the Company made the
      determination that it would amend its franchise agreement, close certain
      Company-owned stores, and write down the value of certain retail assets
      including goodwill.

      The Company recorded a $33 million charge for certain nonrecurring items
      during the period ended July 31,1998. On June 1, 1998 the Company amended
      its franchise agreement with the majority of its members, whereby the
      Company established certain requirements for more uniformity in the
      appearance and merchandising of the franchise stores. As part of the
      amended franchise agreement, the number of vendors available to franchise
      members through the Company, to buy from and earn rebates, has been
      reduced. The Company has recorded allowances for receivables due from
      vendors replaced in the amended franchise agreement and has also
      established a reserve to settle claims from certain parties. In addition,
      the Company has written down to fair value certain assets made obsolete by
      the amended franchise agreement. The Company also accrued for the costs of
      closing 14 Company-owned retail stores. The Company anticipates all stores
      will be closed within six months.

      In connection with the reevaluation of the Company's retail strategy
      described above, the Company analyzed the performance of its Company owned
      retail regions. This analysis indicated that significant strategic and
      operational changes would be necessary in some stores, including changes
      in the customer mix, location, store design, and merchandising. These
      factors also caused management to assess the realizability of the goodwill
      recorded for these regions.

      The determination of goodwill impairment was made by comparing the
      unamortized goodwill balance for each region to the estimate of the
      related region's undiscounted future cash flows. The assumptions used
      reflected earnings, market and industry conditions, as well as current
      operating plans. The assessment indicated a permanent impairment of
      goodwill related to certain of the regions, therefore such goodwill was
      written down to fair market value which resulted in a write-off totaling
      $4.2 million.


                                      -8-
<PAGE>   9


      The major components of the nonrecurring charges are as follows:

<TABLE>
<CAPTION>
                                                         CHARGE
                                                           TO
                                              INITIAL   RELATED    REMAINING
                                              CHARGE     ASSETS     BALANCE
                                              ------     ------     -------

         <S>                                  <C>       <C>         <C>    
         Vendors' receivable allowances        $ 5,300    $ 5,300    $     0
         Claims' reserves                      $10,700    $     0    $10,700
         Write-down of equipment                 2,100      2,100          0
         Store closure and carrying costs       10,700        700     10,000
         Write-down of goodwill                  4,200      4,200          0
                                               -------    -------    -------
                                               $33,000    $12,300    $20,700
                                               =======    =======    =======
</TABLE>

  5.  Acquisitions
      
      On July 14, 1998 the Company executed a non-binding letter of intent to
      purchase the stock of CarpetsPlus of America, LLC, a floorcovering buying
      group. The acquisition is expected to close by October 31, 1998.


  6.  Subsequent Event

      Effective August 9, 1998, the Company acquired substantially all of the
      residential retail store assets of Shaw Industries, Inc. and its wholly
      owned subsidiary, Shaw Carpet Showplace, Inc. (collectively, "Shaw"),
      pursuant to an Agreement and Plan of Merger dated as of June 23, 1998.
      These assets include 266 retail stores with annual revenues of
      approximately $584 million and are being operated through the Company's
      newly organized Maxim Retail Stores, Inc. subsidiary. The Company intends
      to continue operating the residential retail stores acquired from Shaw as
      retail floorcovering stores. Under the terms of the Merger Agreement, the
      Company issued to Shaw 3,150,000 shares of common stock of the Company and
      a one-year note in the principal amount of $18 million and paid Shaw $25
      million in cash.
















                                      -9-

<PAGE>   10
ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Results of Operations

      Total Revenues. Total revenues increased 14.8% to $105.9 million for the
      three months ended July 31, 1998 from $92.2 million for the three months
      ended July 31, 1997. Total revenues increased 15.1% to $205.4 million for
      the six months ended July 31, 1998 from $178.5 million reported in the
      prior year period. The components of total revenues are discussed below:

         Sales of Floorcovering Products. Sales of floorcovering products
         increased 13.0% to $86.8 million for the three months ended July 31,
         1998 from $76.9 million for the three months ended July 31, 1997, and
         increased 13.2% to $168.0 for the six months ended July 31, 1998 from
         $148.4 million in the prior year period. Sales of floorcovering
         products in Company-owned stores increased 10.5% to $40.2 million for
         the three months ended July 31, 1998 from $36.4 million for the three
         months ended July 31, 1997, and increased 14.1% to $76.3 million for
         the six months ended July 31, 1998 from $66.9 million in the prior year
         period. The growth in retail sales of floorcovering products was
         primarily due to internal growth. Sales of manufactured carpet
         increased 13.0% to $42.3 million for the three months ended July 31,
         1998 from $37.5 million for the three months ended July 31, 1997, and
         increased 9.6% to $82.6 million for the six-months ended July 31, 1998
         from $75.4 million in the prior year period. Unit sales of manufactured
         carpet increased 21.0% to 7.5 million square yards for the three months
         ended July 31, 1998 from 6.2 million square yards for the three months
         ended July 31, 1997, and increased 14.1% to 14.6 million square yards
         for the six months ended July 31, 1998 from 12.8 million square yards
         in the prior year period. Sales from the Company's two distribution
         centers amounted to $4.3 million for the three months ended July 31,
         1998 and $3.0 million for the three months ended July 31, 1997, and
         $9.1 million for the six months ended July 31, 1998 and $6.1 million in
         the prior year period, largely representing sales to the Company's
         franchisees.

         Fees From Franchise Services. Fees from franchise services, which
         include franchise license fees and royalties, brokering of
         floorcovering products, and advertising, increased 64.4% to $12.0
         million for the three months ended July 31, 1998 from $7.3 million for
         the three months ended July 31, 1997, and increased 46.0% to $21.3 for
         the six months ended July 31, 1998 from $14.6 million in the prior year
         period. This increase was attributable to increases in brokering
         activity generated from new CarpetMAX and GCO franchisees, growth in
         demand for franchise services from existing CarpetMAX and GCO
         franchisees, greater utilization of advertising and other services
         offered to franchisees, and an expansion of advertising services
         offered by the Company.



                                      -10-
<PAGE>   11

         Fiber and PET Sales. Sales of fiber and polyethylene terephthalate
         ("PET") decreased 22.7% to $5.2 million for the three months ended July
         31, 1998 from $6.7 million for the three months ended July 31, 1997,
         and decreased 2.7% to $12.2 million for the six months ended July 31,
         1998 from $12.5 million in the prior year period. Unit sales decreased
         29.1% to 12.2 million pounds for the three months ended July 31, 1998
         from 17.2 million pounds for the three months ended July 31, 1997, and
         decreased 12.6% to 28.5 million pounds for the six months ended July
         31, 1998 from 32.6 million pounds in the prior year period. The unit
         sales decrease was the result of increased demand from the Company's
         carpet operations.


      Gross Profit. Gross profit increased 11.2% to $32.5 million for the three
      months ended July 31, 1998 from $29.2 million for the three months ended
      July 31, 1997, and increased 10.6% to $62.2 million for the six months
      ended July 31, 1998 from $56.2 million in the prior year period. As a
      percentage of sales, gross profit was 30.7% for the three months ended
      July 31, 1998 compared to 31.6% for the three months ended July 31, 1997
      and 30.3% for the six months ended July 31, 1998 compared to 31.5% in the
      prior year period. Contributing to the decrease in gross profit as a
      percentage of sales was the continuing change in the retail business mix
      of the Company to a revenue base consisting principally of the net sales
      of floor covering products and a higher cost of raw materials at the
      Company's manufacturing subsidiary, Image Industries, Inc. ("Image").

      Selling, General, and Administrative Expenses. Selling, general, and
      administrative expenses increased 6.6% to $22.1 million for the three
      months ended July 31, 1998 from $20.7 million for the three months ended
      July 31, 1997, and increased 7.6% to $44.3 million for the six months
      ended July 31, 1998 from $41.2 million in the prior year period. Increases
      in operating expenses on an absolute basis reflect an overall growth in
      the size of the Company's operations required to serve a growing retail
      base as well as increased selling costs at Image related to newly created
      territories. As a percentage of revenues, selling, general, and
      administrative expenses decreased to 20.9% for the three months ended July
      31, 1998 from 22.5% for the three months ended July 31, 1997 and decreased
      to 21.6% from 23.1% for the six months ended July 31, 1998 as compared to
      the prior year period as a result of spreading fixed costs over a larger
      revenue base.

      Interest Expense. Interest expense increased 125.0% to $2.8 million for
      the three months ended July 31, 1998 from $1.3 million for the three
      months ended July 31, 1997, and increased 95.3% to $5.2 million for the
      six months ended July 31, 1998 from $2.7 million in the prior year period,
      due principally to the Company having a higher debt balance and a higher
      interest rate during the six months ended July 31, 1998 as compared to the
      prior year period. In October 1997, the Company sold $100 million of
      9-1/4% senior subordinated notes, see "Liquidity and Capital Resources."

      Nonrecurring Charges. The Company recorded a $33 million charge for
      certain nonrecurring items for the period ending July 31, 1998. On June 1,
      1998, the Company amended its franchise agreement with the majority of its
      members, whereby the Company established certain requirements for more
      uniformity in the appearance and merchandising of the franchise stores. 



                                      -11-
<PAGE>   12
      As part of the amended franchise agreement, the number of vendors
      available to buy from and earn rebates has been reduced. The Company has
      recorded allowances for receivables due from vendors replaced in the
      amended franchise agreement and has also established a reserve to settle
      claims from certain parties.

      In addition, the Company has written down to fair value certain assets
      made obsolete by the amended franchise agreement. The Company also accrued
      for the costs of closing 14 Company-owned retail stores. The Company
      anticipates all stores will be closed within six months.

      In connection with the reevaluation of the Company's retail strategy
      described above, the Company analyzed the performance of its Company owned
      retail regions. This analysis indicated that significant strategic and
      operational changes would be necessary in some stores, including changes
      in the customer mix, location, store design, and merchandising. These
      factors also caused management to assess the realizability of the goodwill
      recorded for these regions.

      The determination of goodwill impairment was made by comparing the
      unamortized goodwill balance for each region to the estimate of the
      related region's undiscounted future cash flows. The assumptions used
      reflected the earnings, market, and industry conditions, as well as
      current operating plans. The assessment indicated a permanent impairment
      of goodwill related to certain of the regions, therefore such goodwill was
      written down to fair market value which resulted in a write-off totaling
      $4.2 million.

      Income Tax Expense. The Company recorded an income tax benefit of $7.5
      million for the three months ended July 31, 1998 compared to a $2.8
      million expense for the three months ended July 31, 1997, and a $5.3
      million tax benefit for the six months ended July 31, 1998 compared to
      $4.9 million expense in the prior year period. The decrease in income tax
      expense is due to the Company recording a loss from a nonrecurring charge
      for the three and six months ended July 31, 1998, as compared to the prior
      year periods.

      Net Earnings. As a result of the foregoing factors, the Company recorded a
      net loss of $17.8 million for the three months ended July 31, 1998
      compared to net earnings of $4.6 million for the three months ended July
      31, 1997, and a net loss of $14.2 million for the six months ended July
      31, 1998 compared to net earnings of $7.8 million in the prior year
      period.

Liquidity and Capital Resources

      General. The Company's primary capital requirements are for new store
      openings, investments in the manufacturing operations, working capital and
      acquisitions. The Company historically has met its capital requirements
      through a combination of cash flow from operations, net proceeds from the
      sale of equity and debt securities, bank lines of credit, and standard
      payment terms.



                                      -12-
<PAGE>   13
      In March 1997, the Board of Directors of the Company authorized management
      to repurchase up to one million shares of common stock of the Company. In
      October 1997, the Board of Directors of the Company authorized management
      to repurchase up to an additional one million shares of the common stock
      of the Company. As of September 8, 1998, the Company had repurchased
      1,528,300 shares of its common stock in the open market for a total of
      $20.4 million. These purchases were, and any future purchases will be,
      financed from borrowings under the Company's revolving credit facility.

      Credit Facility. On August 26, 1997 (as amended on September 24, 1997 and
      August 7, 1998), the Company established a credit facility providing for
      aggregate commitments of $141 million (the "Credit Facility"). The Credit
      Facility consists of (i) a $110 million revolving credit facility, of
      which $39.8 million was available for borrowings on September 8, 1998 and
      (ii) a special-purpose letter of credit in the amount of up to $31 million
      for use as credit support for the Summerville Loan (defined below) to be
      used to finance the expansion of Image's fiber extrusion capabilities at
      its plant in Summerville, Georgia. As of September 8, 1998, the Company
      had $70.2 million outstanding under the revolving credit facility. No
      amounts have been drawn on the letter of credit. Amounts outstanding under
      the Credit Facility bear interest at a variable rate based on LIBOR or the
      prime rate, at the Company's option. The Credit Facility contains
      customary covenants. As of September 8, 1998, the Company was in
      compliance with, or had obtained waivers of all violations of, all
      covenants under the Credit Facility.

      The Credit Facility, as amended, expires on October 6, 1998. The Company
      has accepted a $141 million committed credit facility ("Committed
      Facility") to refinance the current Credit Facility at maturity. The
      Committed Facility consists of (i) a $95 million five-year revolving
      credit facility, (ii) a $15 million 364 day line of credit, and (iii) a
      $31 million letter of credit to support the Summerville Loan.

      Summerville Loan. Effective September 1, 1997, the Development Authority
      of the city of Summerville, Georgia (the "Authority"), issued Exempt
      Facility Revenue Bonds in an aggregate principal amount of $30 million
      (the "Facility Revenue Bonds"). On September 17, 1997, the Authority
      loaned (the "Summerville Loan") the proceeds from the sale of the Facility
      Revenue Bonds to Image to finance, in whole or in part, the expansion of
      Image's fiber extrusion capabilities at its plant in Summerville, Georgia.
      The Facility Revenue Bonds and the interest thereon are special, limited
      obligations of the Authority, payable solely from the revenues and income
      derived from a loan agreement between Image and the Authority, which
      payment thereof and funds which may be drawn under the special-purpose
      letter of credit described above. The Facility Revenue Bonds and the
      Summerville Loan will mature on September 1, 2017, and the interest rate
      of the Facility Revenue Bonds is to be determined from time to time based
      on the minimum rate of interest that would be necessary to sell the
      Facility Revenue Bonds in a secondary market at the principal amount
      thereof. The interest rate on the Summerville Loan equals the interest
      rate on the Facility Revenue Bonds.

      Senior Notes. On October 16, 1997, the Company completed the sale of $100
      million of 9-1/4% senior subordinated notes ("Senior Notes") due 2007.
      Each of the Company's subsidiaries has fully and unconditionally
      guaranteed the Senior Notes on a joint and several basis. The guarantor
      subsidiaries comprise all of the direct and indirect



                                      -13-
<PAGE>   14

      subsidiaries of the Company. The Company has not presented separate
      financial statements and other disclosures concerning the guarantor
      subsidiaries because management has determined that such information is
      not material to investors. There are no significant restrictions on the
      ability of the guarantor subsidiaries to make distributions to the
      Company.

      Cash Flows. During the six months ended July 31, 1998, operating
      activities used $9.7 million of cash compared to $431,000 cash provided in
      the six months ended July 31, 1997. The decrease in cash provided by
      operating activities resulted primarily from an increase in inventories
      and accounts receivable. The increase in inventories and accounts
      receivable was partially due to higher sales of floorcovering products to
      franchisees and other carpet retailers.

      During the six months ended July 31, 1998, investing activities used cash
      in the amount of $31.2 million compared to $12.8 million for the six
      months ended July 31, 1997. The increase is primarily due to an increase
      in capital expenditures relating to manufacturing operations and the
      expansion of the retail business.

      During the six months ended July 31, 1998, financing activities provided
      cash of $37.1 million compared to $10.9 million in the six months ended
      July 31, 1997. This increase is primarily due to proceeds received from
      borrowings under the Company's revolving credit agreement.

      Capital Expenditures. The Company anticipates that it will require
      approximately $15 million for the remainder of fiscal 1999 to (i) open
      approximately 10 new Gallery stores (assuming approximately 50% of such
      stores will be located on Company-owned property and the remainder on
      leased property), (ii) reconfigure three existing CarpetMAX stores, and
      (iii) upgrade its management information systems. The actual costs that
      the Company will incur in opening new Gallery stores cannot be predicted
      with precision because the opening costs will vary based upon geographic
      location, the size of the store, the amount of supplier contributions and
      the extent of the buildout required at the selected site. The Company
      anticipates that it will require approximately $10 million during the
      remainder of fiscal 1999 for capital expenditures at Image, including the
      expansion of Image's polyester fiber production capacity.

      The Company believes that the net proceeds from the Notes Offering,
      borrowings under the Credit Facility, the Summerville Loan, and cash flows
      from operating activities will be adequate to meet the Company's working
      capital needs, planned capital expenditures, and debt service obligations
      through fiscal 1999. As the Company's debt matures, the Company may need
      to refinance such debt. There can be no assurance that such debt can be
      refinanced or, if so, whether it can be refinanced on terms acceptable to
      the Company. If the Company is unable to service its indebtedness, it will
      be required to adopt alternative strategies, which may include actions
      such as reducing or delaying capital expenditures, selling assets,
      restructuring, or refinancing its indebtedness or seeking additional
      equity capital. There can be no assurance that any of these strategies
      could be effected on satisfactory terms, if at all.

      Recent Accounting Pronouncements

      Effective with the three months ended April 30, 1998, the Company adopted
      Statement of Financial Accounting Standards No. 130 ("FAS 130"),
      Reporting Comprehensive Income." FAS 130 establishes standards for
      reporting and display of comprehensive income and its components in
      financial statements. FAS 130 did not have an impact on the Company's
      financial statements.

      In June 1997, the FASB issued Statement of Financial Accounting Standards
      No. 131 ("FAS 131"), "Disclosures About Segments of an Enterprise and
      Related Information", which is effective for fiscal years beginning after
      December 15, 1997. FAS 131 establishes reporting standards for public
      companies concerning operating segments and related disclosures about
      products and services, geographic areas and major customers. FAS 131 will
      be adopted with the Company's Annual Report for the fiscal year ending
      January 31, 1999.

      In June 1998, the FASB issued Statement of Financial Accounting Standards
      No. 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
      Activities", which is effective for fiscal years beginning after June 15,
      1999. Early adoption is encouraged. FAS 133 establishes accounting and
      reporting standards for derivative instruments and transactions involving
      hedge accounting. The Company does not anticipate this statement will
      have an impact on its financial statements.

      In April 1998, the American Institute of Certified Public Accountants
      issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs
      of Start-Up Activities", which is effective for fiscal years beginning
      after December 15, 1998. SOP 98-5 requires entities to expense certain
      start-up costs and organization costs as they are incurred. The Company
      does not anticipate that this statement will have an impact on its
      financial statements.

      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.
      Any of the Company's computer 
                                      -14-
<PAGE>   15

      programs that have time-sensitive software 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.

      Based on the assessment of the Company's information technology systems,
      management presently believes that with the planned conversion to new
      software and hardware and the planned modifications to existing software
      and hardware, the effects of the year 2000 issue will be timely resolved.
      The Company is in the process of conducting an inventory and business risk
      assessment of its non-information technology systems. These
      non-information technology systems include items such as embedded
      technology including microcontrollers used in the Company's manufacturing
      processes. The Company will develop remediation plans for such
      non-information technology systems if its business risk assessment
      indicates such is warranted. All costs associated with analyzing the year
      2000 issue or making conversions to existing systems are being expensed as
      incurred.

      The Company is planning formal communications with all of its significant
      suppliers of goods and services to determine the extent to which the
      Company's operations and systems are vulnerable to those third parties'
      failure to remediate their own year 2000 issues. There can be no guarantee
      that the systems of other companies on which the Company's operations and
      systems rely will be timely converted and will not have an adverse effect
      on the Company's results of operations. The Company will utilize
      predominately internal resources to reprogram, or replace, and test the
      Company's software for year 2000 compliance by June 1999, which is prior
      to any anticipated impact on its operating systems. Management has not
      estimated a total cost of the year 2000 issues; however, such costs are
      not expected to have a material effect on the results of operations during
      any quarterly or annual reporting period.

      The costs to the Company of year 2000 compliance and the date on which the
      Company believes it will complete the year 2000 modifications are based on
      management's best estimates, which were derived utilizing numerous
      assumptions of future events, including the continued availability of
      certain resources, third-party modification plans, and other factors.
      However, there can be no assurance that these estimates will be achieved,
      and actual results could differ materially from those anticipated.
      Specific factors that might cause such material differences include, but
      are not limited to, the availability and cost of personnel trained in this
      area, the ability to locate and correct all relevant computer codes, and
      similar uncertainties.

      Forward-Looking Statements. This Report contains statements that
      constitute "forward-looking statements" within the meaning of Section 27A
      of the Securities Act of 1933 and Section 21E of the Securities Exchange
      Act of 1934. Those statements appear in a number of places in this Report
      and include statements regarding the intent, belief or current
      expectations of the Company, its directors or its officers with respect
      to, among other things: (i) the timing, magnitude and costs of the
      roll-out of the Gallery Stores; (ii) potential acquisitions by the
      Company; (iii) the Company's financing plans; (iv) trends affecting the
      Company's financial condition or results of operations; (v) the Company's
      business and growth strategies; and (vi) the declaration and payment of
      dividends. Any such forward-looking statements are not guarantees of
      future performance and involve risks and uncertainties, and actual results
      may differ materially from those projected in the forward-looking
      statements as a result of various factors. The accompanying information
      contained in this Report, including without limitation the information set
      forth under the headings "Management's Discussion and Analysis of
      Financial Condition and Results of Operations," identifies important
      factors that could cause such differences.

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


N/A




                                      -15-
<PAGE>   16





PART II--OTHER INFORMATION


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

      On June 26, 1998, the Company held its 1998 Annual Meeting of
      Shareholders. At the meeting, the following persons were elected to serve
      on the Company's board of directors for a term of three years and until
      their successors are elected and have qualified: David E. Cicchinelli and
      James W. Inglis. The number of votes cast for and against the election of
      each nominee for director was as follows:

<TABLE>
<CAPTION>
                  DIRECTOR                  FOR                   AGAINST
                  --------                  ---                   -------

            <S>                          <C>                      <C>    
            David E. Cicchinelli         13,356,830               214,762
            James W. Inglis              13,359,330               212,262
</TABLE>

      In addition, the Company's shareholders approved an amendment to the
      Company's 1993 Stock Option Plan to increase the number of shares
      available for grant thereunder from 3,000,000 shares to 4,000,000 shares.
      The number of votes cast in favor of adoption of the amendment to the 1993
      Stock Option Plan was 7,804,628 and the number of votes cast against
      adoption of the amendment was 519,385. There were 6,611,599 abstentions
      and broker nonvotes.


ITEM 5--OTHER INFORMATION

      As set forth in the Company's 1998 Proxy Statement, proposals of
      shareholders intended to be presented at the Company's 1999 Annual Meeting
      of Shareholders must be received at the Company's principal executive
      offices by January 30, 1999 in order to be eligible for inclusion in the
      Company's proxy statement and form of proxy for that meeting.

      With respect to any such proposals received by the Company after April 19,
      1999, the persons named in the form of proxy solicited by management in
      connection with the 1999 annual meeting of shareholders of the Company
      will have discretionary authority to vote on any such shareholder
      proposals in accordance with their judgment of what is in the best
      interests of the Company.


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


(A)   Exhibits

      

<TABLE>
      <S>      <C>                                                            
      11       Statements Regarding Computation of Per Share Earnings

      27.1     Financial Data Schedule (for SEC use only)

      27.2     Restated Financial Data Schedule (for SEC use only)
</TABLE>
















                                      -16-
<PAGE>   17


(B)   Reports on Form 8-K

      The following report on Form 8-K was filed during the quarter ended July
      31, 1998: Current Report on Form 8-K dated June 23, 1998 (reporting
      agreement to acquire substantially all of the residential retail store
      assets of Shaw Industries, Inc.)





























                                      -17-
<PAGE>   18

                                   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.

                                          THE MAXIM GROUP, INC.


Dated:  September 8, 1998        By:   /s/ A. J. Nassar
                                       ----------------------------------------
                                       A. J. Nassar, President and 
                                       Chief Executive Officer

Dated:  September 8, 1998        By:   /s/ Gary Brugliera
                                       ----------------------------------------
                                       Gary Brugliera, Chief Financial Officer



















                                      -18-