<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

                                  (Mark One)


    (X)   Quarterly report pursuant to Section 13 or 15(d) of the Securities
    ------------------------------------------------------------------------
                              Exchange Act of 1934

                For the quarterly period ended March 31, 2000 or


   ( )   Transition report pursuant to Section 13 or 15(d) of the Securities
   -------------------------------------------------------------------------
                              Exchange Act of 1934

                 For the transition period from             to
                 ---------------------------------------------

                        Commission file number  0-24411
                        -------------------------------

                             MASTER GRAPHICS, INC.
                             ---------------------
             (Exact name of registrant as specified in its charter)


           Tennessee                                            62-1694322
-------------------------------------------------------------------------------
  (State or Other Jurisdiction                             (I. R. S. Employer
of Incorporation or Organization)                           Identification No.)


    70 Timber Creek, Suite 5, Cordova, TN                              38018
--------------------------------------------------------------------------------
 (Address of principal executive offices)                            (Zip Code)


                                 (901) 685-2020
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such 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
                                ----------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


Common Stock, $0.001 Par Value, 7,923,026 shares outstanding as of May 12, 2000.
--------------------------------------------------------------------------------
<PAGE>

INDEX

PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements                                            Page

           Condensed Consolidated Balance Sheets, March 31, 2000 and
           December 31, 1999.                                                3

           Condensed Consolidated Statements of Operations for the Three
           Months Ended March 31, 2000 and 1999.                             4

           Condensed Consolidated Statements of Cash Flows for the Three
           Months Ended March 31, 2000 and 1999.                             5

           Notes to Condensed Consolidated
           Financial Statements.                                             6

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


Item 3.    Quantitative and Qualitative Disclosures About Market Risk.      16

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings                                                17

Item 3.    Defaults Upon Senior Securities                                  17

Item 6.    Exhibits and Reports on Form 8-K.                                17

Signatures                                                                  18
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (In Thousands, Except Share Data)

                                                    March 31,    December 31,
                                                      2000           1999
                                                  -----------    ------------
               ASSETS                             (Unaudited)
CURRENT ASSETS:
  Cash and cash equivalents                        $       0      $   1,341
  Trade accounts receivable, net                      47,762         52,334
  Inventories:
     Raw materials and supplies                        4,607          5,097
     Work-in-process                                   8,400         12,047
                                                   ---------      ---------
       Total inventories                              13,007         17,144
  Deferred loan costs, net                             5,989          6,317
  Other current assets                                 1,771          1,505
                                                   ---------      ---------

       Total current assets                           68,529         78,641

Property, plant and equipment, net                    78,129         80,130
Goodwill, net                                         24,981         25,318
Other                                                  3,177          3,350
                                                   ---------      ---------

       Total assets                                $ 174,816      $ 187,439
                                                   =========      =========

     LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current installments of long-term debt           $ 179,198      $ 184,905
  Accounts payable                                    17,885         21,609
  Accrued expenses                                    20,384         15,739
  Put warrants                                         2,200          2,200
                                                   ---------      ---------

       Total current liabilities                     219,667        224,453

Long-term debt, net of current installments           22,296         22,658
Deferred income taxes                                  6,816          6,816
Other liabilities                                      1,014            973
Redeemable preferred stock                             1,611          1,580

Commitments and contingencies

SHAREHOLDERS' EQUITY:
  Common stock ($0.001 par value; 100,000,000
  shares authorized; 7,923,026 shares issued
  and outstanding at March 31, 2000 and
  December 31, 1999)                                       8              8
  Additional paid-in capital                          39,902         39,933
  Retained deficit                                  (116,498)      (108,982)
                                                   ----------     ---------

       Total shareholders' equity (deficit)          (76,588)       (69,041)
                                                   ---------      ---------

       Total liabilities and shareholders' equity  $ 174,816      $ 187,439
                                                   =========      =========

The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands, Except Per Share Data)
                                  (Unaudited)


                                                Three months ended March 31,
                                                        2000      1999
                                                     --------   -------
Net revenue                                          $ 72,195   $56,378
Cost of revenue                                        58,544    41,369
                                                     --------   -------

     Gross profit                                      13,651    15,009
Selling, general and administrative expenses           14,167    10,384
                                                     --------   -------

     Operating income (loss)                             (516)    4,625
Other income (expense):
     Interest expense                                  (7,331)   (4,674)
     Other, net                                           360       287
                                                     --------   -------

     Income (loss) before income taxes                 (7,487)      238
Income tax expense                                          0       178
                                                     --------   -------

     Net earnings (loss)                             $ (7,487)  $    60
                                                     ========   =======

     Net earnings (loss) per share - basic           $  (0.95)  $  0.00
                                                     ========   =======
     Net earnings (loss) per share - diluted         $  (0.95)  $  0.00
                                                     ========   =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                               Three months ended March 31,
                                                                                                  2000             1999
                                                                                                  ----             ----
<S>                                                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings (loss)                                                                            $(7,487)         $     60
 Adjustments to reconcile net earnings to net cash provided by operating activities:
  Impairment loss                                                                                   226                 0
  Depreciation and amortization                                                                   3,127             2,604
  Deferred income taxes                                                                               0              (389)
  Deferred compensation                                                                              12                12
 Changes in operating assets and liabilities, net of effect of business acquisitions
  Trade accounts receivable                                                                       4,572              (270)
  Inventories                                                                                     4,137            (2,389)
  Other assets                                                                                     (100)           (1,164)
  Accounts payable                                                                               (3,724)            3,154
  Accrued expenses                                                                                4,645              (602)
                                                                                                -------          --------

   Net cash provided by operating activities                                                      5,408             1,016
                                                                                                -------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Business acquisitions, net of cash acquired                                                       (226)          (31,562)
 Purchases of equipment                                                                            (286)           (1,662)

   Net cash used in investing activities                                                           (512)          (33,224)
                                                                                                -------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of long-term debt                                                             0            17,770
 Net borrowings (repayments) on lines of credit                                                  (4,977)            2,628
 Principal payments on long-term debt                                                            (1,260)           (1,669)
 Loan costs incurred                                                                                  0              (249)
 Issuance of common stock to finance acquisitions                                                     0               203
                                                                                                -------          --------

   Net cash provided by (used in) financing activities                                           (6,237)           18,683
                                                                                                -------          --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                             (1,341)          (13,525)
 CASH AND CASH EQUIVALENTS, beginning of period                                                   1,341            13,525
                                                                                                -------          --------
 CASH AND CASH EQUIVALENTS, end of period                                                       $     0          $      0
                                                                                                =======          ========

</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                  (Unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements of Master Graphics,
Inc. and its subsidiary, Premier Graphics, Inc., (collectively "Company") are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements as of and for
the year ended December 31, 1999.

In the opinion of the Company, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of only normal, recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows of the Company as of the dates and for the periods
presented.

Because of the seasonal nature of the Company's business, the results of
operations for the periods presented are not necessarily indicative of the
results of operations for a full fiscal year.

The accompanying unaudited condensed consolidated financial statements of the
Company include the results of operations of Master Graphics, Inc. and its
subsidiary, on a consolidated basis.  All intercompany balances and transactions
have been eliminated in the consolidation.

(2) Earnings Per Share

Basic earnings per share are calculated by dividing net earnings (loss) less
preferred stock dividend and discount accretion by the weighted average number
of common shares outstanding. For the three months ended March 31, 2000 and
1999, the basic weighted average shares outstanding were 7,923,026 and
7,894,818, respectively. Exercise of 497,776 and 277,776 shares of potential
equity securities for the three months ended March 31, 2000 and 1999,
respectively, has not been reflected in the computation of diluted earnings per
share because their impact would have been antidilutive. For the three months
ended March 31, 2000 and 1999, the diluted weighted average shares outstanding
were 7,923,026 and 8,114,818, respectively.

<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                Income (loss)    Shares      Per-Share
     THREE MONTHS ENDED MARCH 31, 2000           (Numerator)  (Denominator)    Amount
     ---------------------------------          ------------- -------------  ----------
<S>                                              <C>          <C>            <C>

Net loss                                            $(7,487)
Less: Redeemable preferred stock dividends              (28)
Less: Redeemable preferred stock discount               (34)
                                                    -------

BASIC LOSS PER SHARE
Net loss available to common shareholders           $(7,549)     7,923,026      ($0.95)
                                                    =======      =========      =======

DILUTED LOSS PER SHARE
Net loss available to common shareholders           $(7,549)     7,923,026      ($0.95)
                                                    =======      =========      =======


                                                   Income        Shares      Per-Share
     THREE MONTHS ENDED MARCH 31, 1999          (Numerator)  (Denominator)    Amount
     ---------------------------------           ----------   ------------   ---------

Net earnings                                        $   60
Less: Redeemable preferred stock dividends              30
Less: Redeemable preferred stock discount               30
                                                    ------

BASIC EARNINGS PER SHARE
Net earnings available to common shareholders       $    0      7,894,818       $0.00
                                                                                =====

EFFECT OF DILUTIVE SECURITIES
Lender warrants                                                   220,000
                                                                ---------
DILUTED EARNINGS PER SHARE
Net earnings available to common shareholders
plus assumed conversions                            $    0      8,114,818       $0.00
                                                    ======      =========       =====

</TABLE>
                 Dollars in thousands except per share amounts
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                 MARCH 31, 2000
                                  (Unaudited)

(3) Acquisitions

The following unaudited pro forma financial information presents the combined
results of operations of the Company and the acquired businesses, as if the
acquisitions had occurred at the beginning of the period presented. Effect has
been given to certain adjustments, including amortization of goodwill, adjusted
depreciation expense and increased interest expense on debt related to the
acquisitions. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the Company and the
acquired businesses constituted a single entity during such period.


                                         Three months ended March 31,
                                                      1999
                                                      ----
Net revenue                                         $67,631
Net earnings                                           (357)
Basic earnings per share                            $ (0.05)
                                                    ========
Diluted earnings per share                          $ (0.05)
                                                    ========
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                 MARCH 31, 2000
                                  (Unaudited)

(4) Long-Term Debt

The following is a summary of the Company's long-term debt instruments (in
thousands) as of:
<TABLE>
<CAPTION>

                                        March 31,     December 31,
                                          2000            1999
                                        --------       --------
                                      (unaudited)
<S>                                   <C>              <C>
    Senior Notes                        $130,000       $130,000
    Credit Facilities:
        Term debt                         26,705         27,749
        Revolver                           9,850         14,826
        Overline Loan                     12,500         12,500
    Sellers' notes                        15,641         15,627
    Other                                 10,594         10,825
                                        --------       --------
                                         205,290        211,527
    Less unamortized debt discount         3,796          3,964
                                        --------       --------
                                         201,494        207,563
    Less current maturities              179,198        184,905
                                        --------       --------
                                        $ 22,296       $ 22,658
                                        ========       ========
</TABLE>

In March 1999, the Company completed a restructuring of its senior secured
credit facility. Pursuant to the amended agreement, the facility consists of two
term loans ("Term Loan A" and "Term Loan B") each of $30 million and a revolving
credit facility ("Revolver") of $20 million. Term Loan A bears interest, payable
monthly, at a floating rate equal to LIBOR plus 3.5% (9.3763% at March 31,
2000), and Term Loan B bears interest, payable monthly, at a floating rate equal
to LIBOR plus 4.0% (9.873% at March 31, 2000). Term Loan A matures in March
2004, and is payable in quarterly installments. Term Loan B matures in March
2005, and is payable in quarterly installments and a final balloon payment at
maturity. The annual amortization of the $26.7 million outstanding as of March
31, 2000 will approximate $4.2 million for each of the next five years. The
Revolver, which contains certain borrowing base limitations, bears interest at
the "Base Rate" or the prime rate for corporate loans from U.S. financial
institutions as published by The Wall Street Journal from time to time plus 0.5%
(9.5% at March 31, 2000) and is repayable in full in March 2005. The security
for the facility includes a lien on all of the assets of Premier Graphics, as
well as a pledge by Master Graphics on all of the issued and outstanding stock
of Premier Graphics. The facility includes a prepayment penalty of 1% of the
amount prepaid and requires a minimum level of prepayment to Term Loan A and
Term Loan B based on 50% of annual excess cash flows as defined. In November
1999, we completed an amendment to our secured credit facility that terminated
the remaining Term Loan availability.

In December 1999, the Company completed an amendment to the Revolver to provide
for an overline amount of $12.5 million ("Overline Loan"). This Overline Loan
bears interest at a floating rate equal to Base Rate plus 3.5% (12.00% at March
31, 2000), payable monthly.

On March 17, 2000, the senior secured lender exercised its rights under the put
feature of its warrants to sell to the Company 220,000 shares of common stock
for $2.2 million. This transaction was financed by a demand promissory note on
April 3, 2000. This note bears interest at 19%.

On April 3, 2000, the Company received a notice of default from its senior
lenders. Among the lenders' rights and remedies as a result of these defaults
are (1) the right to declare indebtedness due and payable at any time, (2) the
right to foreclose on collateral, and (3) the right to charge interest at the
default rate which is 2% greater than the otherwise applicable rate (which the
lenders chose to do commencing on April 3, 2000). The lenders have also
limited the making of revolver advances to a day-to-day discretionary basis.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company has engaged professionals to assist in the
restructuring of these debt instruments.
<PAGE>

On April 19, 2000, following the filing of Form 10-Q/A restating the condensed
consolidated financial statements as of and for the three months ended March 31,
1999, the Company was notified by its senior lenders that the senior lenders
would charge interest at the default rate from May 15, 1999 forward. The
accompanying condensed consolidated financial statements include an accrual for
this additional interest expense. The Company was also notified the revolving
credit facility would be reduced from $20 million to $15 million.

Under its senior secured credit facility, Premier Graphics is required to
maintain certain financial ratios, including tests related to net worth, EBITDA,
interest coverage, fixed charge coverage and leverage ratios. Premier Graphics
is also subject to affirmative and negative covenants which, among other things,
limit capital expenditures and the payment of dividends. As of March 31, 2000
and December 31, 1999, Premier Graphics was in violation of its covenants under
the senior secured credit facility and has been unable to date to obtain waivers
for those violations. Due to cross-default provisions, the Company is also in
default of the Senior Notes. Independent events of default also exist under the
indenture. See note 6 to the condensed consolidated financial statements.


<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                 MARCH 31, 2000
                                  (Unaudited)

(5) Wholly-owned Operating Subsidiary

Master Graphics is a holding company with no operating assets or operations.
Premier Graphics, its primary operating subsidiary, is the primary obligor for
the Senior Notes and the credit facility with General Electric Capital
Corporation, as agent. The Senior Notes are fully and unconditionally guaranteed
by Master Graphics. Following is summarized combined financial information of
Premier Graphics as of March 31, 2000 and December 31, 1999 and for the three
months ended March 31, 2000 and 1999 (in thousands).
<TABLE>
<CAPTION>

                                                   March 31, 2000      December 31, 1999
                                                   --------------      -----------------
<S>                                                <C>                 <C>
Balance sheet data:
   Current assets                                      $ 70,528             $ 78,134
   Property, plant and equipment                         77,919               79,918
   Goodwill, net                                         24,981               25,318
   Due from Shareholder                                  79,815               80,245
   Other non-current assets                               2,556                2,835
                                                       --------             --------

   Total assets                                        $255,799             $266,450
                                                       ========             ========


   Current liabilities, including current
   installments of long-term debt of
   $177,683 and $183,392 in 2000 and 1999              $213,983             $218,711
   Long-term debt, net                                    8,156                8,529
   Other liabilities                                      2,024                2,024
                                                       --------             --------
   Total liabilities                                    224,163              229,264
   Stockholders' equity                                  31,636               37,186
                                                       --------             --------
   Total liabilities and stockholders'
   equity                                              $255,799             $266,450
                                                       ========             ========


                                                 Three months ended   Three months ended
                                                   March 31, 2000       March 31, 1999
                                                 ------------------   ------------------
   Statement of operations data:
   Net revenues                                        $ 72,195             $ 56,378
   Gross profit                                          13,651               15,009
   Operating income                                         781                5,081
   Interest expense                                       6,710                4,196
   Income tax expense                                         0                  178
   Net earnings (loss)                                   (5,557)                 994
</TABLE>

The following unaudited pro forma financial information presents the combined
results of operations of Premier Graphics and the businesses acquired in 1999 as
if the acquisitions and related financings, including the initial public
offering of Master Graphics common stock and the Senior Notes offering had
occurred as of January 1, 1999 after giving effects to certain adjustments,
including amortization of goodwill, adjusted depreciation expense and increased
interest expense on debt related to the acquisitions. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had Premier Graphics and the acquired businesses constituted a
single entity during such period (in thousands).

                                                  Three months ended
                                                       March 31,
                                                         1999
                                                         ----
   Net revenue                                         $67,631
   Operating income                                      4,918
   Depreciation and amortization                         2,667
   Net earnings                                            535


<PAGE>


(6) Going Concern

During 1999, the Company experienced significant declines in sales, operating
income and operating cash flows. The Company's projected cash flows for future
years are not adequate to cover interest expense related to current debt levels.
In addition, the Company is currently in violation of financial and other
covenants related to the senior secured credit facility and the Senior Notes. As
of May 12, 2000, the Company has been unable to obtain waivers for these
covenant violations. As a result of the violations and inability to obtain
waivers, the maturity date of the senior secured credit facility and the Senior
Notes may be accelerated and therefore have been classified as current in the
March 31, 2000 and December 31, 1999 balance sheets, as have the related
deferred loan costs.

On April 3, 2000, the Company received a notice of default from its senior
lenders. Among the lenders' rights and remedies as a result of these defaults
are (1) the right to declare indebtedness due and payable at any time, (2) the
right to foreclose on collateral, and (3) the right to charge interest at the
default rate which is 2% greater than the otherwise applicable rate (which the
lenders chose to do commencing on April 3, 2000). The lenders have also limited
the making of revolver advances to a day-to-day discretionary basis. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The Company has engaged professionals to assist in the
restructuring of these debt instruments.

On April 19, 2000, following the filing of Form 10-Q/A restating the condensed
consolidated financial statements as of and for the three months ended March 31,
1999, the Company was notified by its senior lenders that the senior lenders
would charge interest at the default rate from May 15, 1999 forward. The
accompanying condensed consolidated financial statements include an accrual for
this additional interest expense. The Company was also notified the revolving
credit facility would be reduced from $20 million to $15 million.


<PAGE>

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

CERTAIN MATTERS DISCUSSED IN THIS PRESS RELEASE MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE
TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN, OR
CONTEMPLATED BY, THE FORWARD-LOOKING STATEMENTS. OUR YEAR 2000 OPERATING PLAN
MAY NOT ACHIEVE ITS DESIRED RESULTS DUE TO A NUMBER OF FACTORS THAT ARE BEYOND
OUR CONTROL, INCLUDING COMPETITIVE FACTORS, THE PERFORMANCE OF THE PRINTING
INDUSTRY GENERALLY AND OUR DIVISIONS SPECIFICALLY, AND THE ABILITY OF OUR
DIVISIONS TO ADAPT TO THE CHANGES CONTAINED IN THE FISCAL YEAR 2000 PLAN. FOR
FURTHER INFORMATION ON FACTORS WHICH COULD IMPACT THE COMPANY AND THE STATEMENTS
CONTAINED HEREIN, REFERENCE IS MADE TO THE FILINGS OF MASTER GRAPHICS, INC.,
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>

MATERIAL CHANGES IN FINANCIAL CONDITION

As disclosed in notes 4 and 6 to the condensed consolidated financial
statements, as of March 31, 2000 and December 31, 1999, we were in violation of
certain covenants under our senior secured credit facility and the indenture
under which we issued our Senior Notes. As a result, we reclassified the related
debt to current liabilities as of December 31, 1999. From December 31, 1999 to
March 31, 2000, our working capital position declined by approximately $5.3
million.

CONSOLIDATED RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated financial data for
the periods indicated (dollars in millions) and such results as a percentage of
revenue.

                                        Three months ended March 31,
                                            2000              1999
                                            ----              ----
Revenue                                 $72.2   100.0%    $56.4  100.0%
Gross profit                             13.7    19.0      15.0   26.6
Selling, general and administrative
 expenses                                14.2    19.7      10.4   18.4
Operating income (loss)                  (0.5)   (0.7)      4.6    8.2
Interest and other expense                7.0     9.7       4.4    7.8
Net earnings (loss)                     $(7.5)  (10.4)%   $ 0.1    0.2%

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999

Revenue. Revenue increased approximately 28% from 56.4 million for the three
months ended March 31, 1999 to $72.2 million for the three months ended March
31, 2000. This growth was primarily due to our five acquisitions during 1999. On
a same store basis, revenue increased approximately 7% for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999. This
growth in same store revenue was primarily the result of a large project for a
major customer of our Atlanta, Georgia division.

Gross Profit. Gross profit decreased from $15.0 million for the three months
ended March 31, 1999 to $13.7 million for the three months ended March 31, 2000.
As a percentage of sales, gross profit decreased from 26.6% for the three months
ended March 31, 1999 to 19.0% for the three months ended March 31, 2000. A key
component of our gross profit calculation is an interim line item we call "value
added," which we define as sales less the direct cost of sales (i.e., paper, ink
and outside services). Other manufacturing costs such as labor, utilities,
supplies, and repairs are deducted from value added to arrive at gross profit.
Value added for the three months ended March 31, 1999 was approximately 62% of
sales compared to 57% of sales for the three months ended March 31, 2000. The
decrease in value added is primarily the result of a carry-over of less
profitable projects from our Master Central organization. Although we
discontinued our Master Central organization in early January 2000, there were
still several projects in process during the first quarter of 2000 that
negatively affected value added. The decrease in value added is the primary
cause of our decrease in gross profit and gross profit as a percentage of sales.

In addition to the decrease in value added described above, expenses related to
our fourteen new Heidelberg printing presses also negatively impacted our gross
profit for the three months ended March 31, 2000 compared to the same period
from 1999. The additional lease costs associated with the new Heidelberg presses
of approximately $1.6 million for the three months ended March 31, 2000 were
expenses we did not have during the three months ended March 31, 1999.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $10.4 million for three months ended
March 31, 1999 to $14.2 million for the three months ended March 31, 2000. This
growth was primarily due to our five acquisitions during 1999.

Interest and other expense. Interest and other expense increased from $4.4
million for the three months ended March 31, 1999 to $7.0 million for the three
months ended March 31, 2000. A significant portion of the purchase price of our
acquisitions was financed with debt and, accordingly, interest cost has
increased.

On April 19, 2000 the senior secured lending group notified the Company that
based upon the Company's restatement of its first quarter 1999 financial
statements, the senior lending group was instituting a default interest rate
retroactive to May 15, 1999. The retroactive interest from May 15, 1999 through
March 31, 2000 is approximately $0.9 million and has been accrued in first
quarter 2000 results.



<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash requirements have been for debt service, capital expenditures,
acquisitions and working capital. Historically, we have financed our operations
and equipment purchases with cash flow from operations, capital leases and
secured loans through commercial banks or other institutional lenders, credit
lines from commercial banks and our Senior Notes. We have financed our
acquisitions primarily with funds under credit facilities as well as
subordinated notes payable to a number of former owners of the acquired
companies. At March 31, 2000, we had a working capital deficit of $151.1
million, a decrease in working capital of $5.3 million from December 31, 1999.
Due to violations of certain financial and non-financial debt covenants, which
give our lenders the right to accelerate repayment of their loans, we have
reclassified the related debt to current liabilities in the consolidated balance
sheet. See note 4 to the condensed consolidated financial statements. Also see
note 6 to the condensed consolidated financial statements for a discussion of
uncertainties, and our ability to continue as a going concern.

Our largest source of capital for acquisitions has been debt financing including
the $130 million of 11.5% Senior Notes due 2005 as well as our senior credit
facility which originally closed in September 1997 and which has been revised
from time to time, most recently being revised in March 1999. Footnote 4 to the
condensed consolidated financial statements included herein provides a brief
description of the revised credit facility.

As part of the respective purchase agreements, we agreed to pay the former
owners of 11 of the acquired companies additional purchase price consideration
if those companies surpass certain EBITDA-based targets, which generally exceed
the pre-acquisition performance levels of those companies. Reaching these
targets will result in additional cash inflow to us arising from the incremental
EBITDA above the targets and additional cash outflow from the consideration
required to be paid. The periods for which the targets will be measured vary for
each of the companies, and the measurement periods range from one year to five
years of operations. For some of the companies, additional consideration will be
payable by us annually for each year in which the EBITDA- based target is
surpassed, and for other companies, only a single lump sum payment will be made
by us if the performance of the company exceeds the target. The maximum
additional purchase price consideration payable to the former owners of 10 of
the companies is limited to a specified amount. The amount of additional
consideration payable to the former owners of the other company is not limited
once the EBITDA-based target is surpassed. We paid former owners $7.7 million of
additional purchase price consideration in 1999. We do not anticipate paying
former owners additional purchase price consideration in 2000. Assuming the
former owners become entitled to receive the maximum amount of additional
purchase price consideration at the earliest possible time, we would pay the
former owners $3.0 million in 2000, $16.3 million in 2001, $8.5 million in 2002,
$15.5 million in 2003 and $0.5 million in 2004. Approximately $7.5 million of
the $15.5 million payable in 2003 would be payable in shares of our common
stock. Otherwise, any additional purchase price consideration is payable in
cash. These payments are typically recorded as adjustments to goodwill. However,
pending management's ongoing evaluation of asset impairment, these payments may
be recorded as a direct charge to earnings. Based on the Company's current
performance trend, it does not expect a significant portion of these amounts to
be earned.

Under our senior credit facility, we are required to maintain certain financial
ratios, including tests related to net worth, EBITDA, interest coverage, fixed
charge coverage and leverage ratios. We are also subject to affirmative and
negative covenants which, among other things, limit capital expenditures and the
payment of dividends. Largely as a result of our poor 1999 operating
performance, as of March 31, 2000, we were in violation of certain of the
financial and other covenants related to our secured credit facility. These
violations are events of default under the terms of the facility, and because of
cross-default provisions create an event of default under the senior notes
indenture. Independent events of default also exist under the indenture. An
event of default under both our secured credit facility and the senior notes
indenture gives our lenders the right to accelerate payment of the underlying
debt. As of May 12, 2000, we had not obtained waivers of any events of default.
Our secured lenders may have the discretion to stop future advances under our
revolving line of credit. If the secured lenders refuse to advance additional
working capital funds or accelerate the repayment of existing outstanding
borrowings, such an event would have a material adverse effect on our ability to
operate our business. We expect our operations to improve from fourth quarter
1999 levels as a result of our year 2000 operating plan. Holders of our senior
notes also have the right to accelerate payment of the notes due to independent
events of default as well as the cross-default provisions set forth in the
senior note indenture. We are aggreressively pursuing all available alternatives
to restructure our balance sheet. See note 6 for a discussion of uncertainties,
and our ability to continue as a going concern.

We believe the baseline level of EBITDA generated by our divisions has been
eroded due to market pressures and the overall difficulties our division
management teams have had in adapting to a general corporate environment. We
recognize that the transition from an entrepreneurial based, acquisition
oriented corporate strategy into an operations oriented cohesive unit strategy
will be evolutionary and will involve further transitions at some divisions. We
believe that this new baseline level of EBITDA is adequate to support our
ongoing working capital requirements, a level of capital expenditures for
machinery and equipment (currently anticipated at $3 million annually) and a
level of other long-term debt service. We do not believe our new baseline EBITDA
is capable of supporting our current level of debt service, which includes
amounts required to finance the premiums paid for our acquisitions. We have
engaged professionals to assist in the refinancing of these debt instruments.

<PAGE>

Year-2000 Readiness Program

We have had no disruption to our operations to date as a result of any year 2000
(Y2K) issue. The Y2K internal issues are the result of computer programs being
written using two digits rather than four to define the applicable year. As a
result, computer programs that have time-sensitive software are at risk to
recognize a date using "00" as the year 1900 rather than the year 2000. We
completed a company-wide program to ensure its systems were Y2K compliant during
1999.

The total cost to modify existing software for Y2K compliance, expended over the
period 1998-1999, was approximately $0.7 million. In many instances, we
installed new hardware and software with greatly enhanced functionality that
also solved potential Y2K compliance issues and capitalized the costs of those
installations.

We have contingency plans to address situations that may result if we encounter
a future Y2K issue in a mission critical operating system. These contingency
plans cover the critical order processing and distribution systems as well as
plant operating and process control systems. If both our Y2K solutions and
contingency plans fail for a critical system for a prolonged period, the impact
on the Company would be material.

Despite assurances from outside parties of their timely readiness, we cannot
ensure that our suppliers, vendors and customers have resolved all Y2K issues.
Given the responses from suppliers and our experience thus far in 2000, we
believe it is highly unlikely that a large number of outside parties will
experience any significant problems due to unresolved Y2K issues. In the event
that a large number of customers suffer Y2K compliance issues over a prolonged
period, the impact on the Company would be material.

Impact of Recently Issued Accounting Standards

We do not believe that any recently issued accounting standards, which have not
yet been adopted, will have a material impact on our consolidated financial
statements. SFAS 133, "Accounting for Derivative Financial Instruments," as
amended by SFAS 137, which will be effective for our year ending December 31,
2000, is not expected to have a material impact on our financial statements
because SFAS 133 deals with derivative financial instruments, which presently
are not instruments that we are involved in to a material extent.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk at March 31, 2000 is generally limited to interest rate risk related
to indebtedness under our senior secured credit facility, which bears interest
based on the Base Rate plus 0.5% for the Revolver and LIBOR plus margin bases
ranging from 3.5% for the Term Loan A traunche to 4.0% for the Term Loan B
traunche. We do not currently deal in any derivative instruments nor are we
exposed to any currency translation fluctuations. We do not have any commodity
derivative instruments because we generally pass any paper price fluctuations
through to our customers using product pricing.

As disclosed in note 4 to the condensed consolidated financial statements, as of
March 31, 2000 and December 31, 1999, we were in violation of certain covenants
under our secured credit facility. At April 3, 2000, we were notified by our
lenders that those violations are events of default. Among the lenders' rights
and remedies as a result of these events of default are (1) the right to declare
indebtedness due and payable at any time, (2) the right to foreclose on
collateral, and (3) the right to charge interest at the default rate which is 2%
greater than the otherwise applicable rate (which the lenders chose to do
commencing on April 3, 2000). The lenders have also limited the making of
Revolver advances to a day-to-day discretionary basis.

On April 19, 2000, following the filing of Form 10-Q/A restating the condensed
consolidated financial statements for the first quarter of 1999, we were
notified by our senior lenders that the senior lenders would charge interest at
the default rate from May 15, 1999 forward. The accompanying condensed
consolidated financial statements include an accrual for this additional
interest expense. We were also notified the revolving credit facility would be
reduced from $20 million to $15 million.
<PAGE>

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising
in the normal course of business. We maintain insurance coverage in amounts
deemed adequate to cover potential claims. Current litigation that involves us
is not considered significant by management to our financial position or
operating results. While the outcome of lawsuits or other proceedings against us
cannot be predicted with certainty, we believe the outcomes of any of these
matters will not have a material effect on operating results or financial
position.

In addition, on February 15, 2000, Margaret Webb McQuiddy, individually and as
executrix of the Estate of David L. McQuiddy, Jr., filed a complaint against
Master Graphics in the Chancery Court for Davidson County, at Nashville,
Tennessee.  The complaint alleges that Master Graphics owes the Estate of David
L. McQuiddy, Jr. $1,502,948 plus interest relating to a demand promissory note
issued to Mr. McQuiddy by Master Graphics in connection with the acquisition of
our McQuiddy Printing Division. Master Graphics has filed an answer to
McQuiddy's complaint.

Item 3 - Defaults Upon Senior Securities

The information called for by this item is incorporated by this reference to the
information set forth in Part I of this Form 10-Q in the fourth paragraph under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and in the second and
third paragraphs under the heading "Quantitative and Qualitative Disclosures
About Market Risks."

Item 6 - Exhibits and Reports on Form 8-K

(A) EXHIBITS

      3.1*  Charter of Master Graphics, Inc. (Exhibit 3.1)
      3.2*  Bylaws of Master Graphics, Inc. (Exhibit 3.3)
     11.1   Statement regarding computation of Per Share Earnings
     27.1   Financial Data Schedule (for SEC use only)

 * Incorporated by reference to Master Graphics' Registration Statement on Form
 S-1 (Registration No. 333-49861). The parenthetical exhibit number indicates
 where the exhibit is found in that filing.

(B) REPORTS ON FORM 8-K

None
<PAGE>

                                   SIGNATURES

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

                                      MASTER GRAPHICS, INC.

                                      By: /s/ P. Melvin Henson, Jr.
                                      -----------------------------
                                      P. Melvin Henson, Jr.
                                      Chief Financial Officer

                                      Date:  May 12, 2000

                                      By: /s/ J. Denton Pearson, Jr.
                                      ------------------------------
                                      J. Denton Pearson, Jr.
                                      Corporate Controller

                                      Date: May 12, 2000