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<ins> Prepared by MERRILL CORPORATION www.edgaradvantage.com
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington, D.C. 20549

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

FORM 10-Q

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

QUARTERLY REPORT PURSUANT TO SECTION

Quarterly Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES
EXCHANGE ACT OFof the Securities

Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MAY 8,

For the Quarterly Period Ended November 6, 1999

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

Commission File No. 1-13099
THE MAXIM GROUP, INC.
A Delaware Corporation

(IRS Employer Identification No. 58-2060334)

210 TownPark Drive

Kennesaw, Georgia 30144

(678) 355-4000
Securities
Registered Pursuant to Section 12(b)

of the Securities Exchange Act of 1934:

Common Stock, $.001 par value

9¹/4% Senior Subordinated Notes Due 2007 New York Stock Exchange, Inc.
9 1/4% Senior Subordinated Notes Due 2007

New York Stock Exchange, Inc.
- -------------------------------------------- --------------------------------------------
(TITLE
(TITLE OF EACH CLASS) (NAME (NAME OF EACH EXCHANGE

ON WHICH REGISTERED)

Securities
Registered Pursuant to Section 12(g)

of the Securities Exchange Act of 1934:

Common Stock, $.001 par value

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ____/x/ No _X_/ /
Indicate
the number of shares outstanding of the registrant's classes of common Stock, as of the latest practicable date:

Common Stock, $.001 par value 19,072,532
- -------------------------------------------- --------------------------------------------

Class 19,038,347
Outstanding at November 1,December 17, 1999

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PART

Part 1 FINANCIAL INFORMATION
ITEMFinancial Information

Item 1. FINANCIAL STATEMENTS.

Financial Statements.
THE MAXIM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)
(In thousands, except share data)

MAY 8, JANUARY
November 6,

1999 January 31,

1999 1999
----------- -----------
(UNAUDITED)
(Unaudited)

ASSETS
Cash and cash equivalents................................... equivalents $ 46,296 64,899 $ 89,901
Current portion of franchiseefranchise license fees receivable....... 307 receivable 2,548 2,013
Current portion of notes receivable......................... 2,404 receivable 2,444 3,405
Receivables................................................. 65,019
Receivables 63,479 52,607
Inventories................................................. 64,613
Inventories 62,831 58,744
Refundable income taxes..................................... 4,476 --
taxes 4,766 —
Deferred income taxes....................................... taxes 7,361 7,361
Prepaid expenses............................................ 7,930 expenses 8,148 6,316
-------- --------
Total current assets.................................... 198,406 assets 216,476 220,347
Property, plant and equipment, net.......................... 80,322 net 82,829 71,766
Franchise license fees receivable, less current portion..... 4,734 portion 4,373 2,337
Notes receivable from franchisees, less current portion..... 9,585 portion 6,825 8,228
Deferred income taxes....................................... taxes 1,465 1,065 1,065
Intangible assets........................................... 76,836 assets 83,103 71,341
Other assets................................................ 12,376 assets 15,180 13,684
-------- --------
Total assets................................................ $383,324 $388,768
======== ========
assets $ 410,251 $ 388,768
LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion of long-term debt........................... debt $ 17,123 42,227 $ 16,952
Senior subordinated notes................................... 95,428 notes 95,462 99,387
Current portion of capital lease obligations................ 6,589 obligations 5,245 6,635
Accounts payable............................................ 27,892 payable 37,101 26,706
Rebates payable to franchisees.............................. 4,540 franchisees 6,905 749
Deposits.................................................... 18,533
Deposits 17,688 14,769
Deferred revenue............................................ 5,215 revenue 4,170 2,254
Income taxes payable........................................ -- payable — 2,633
Other accrued liabilities................................... 42,470 liabilities 43,369 55,827
-------- --------
Total current liabilities............................... 217,790 liabilities 252,167 225,912
-------- --------
Long-term debt, less current portion........................ 3,351 portion 6,410 4
-------- --------
Capital lease obligations, less current portion............. 1,391 portion 1,092 1,469
-------- --------
Other long-term liabilities................................. -- liabilities — 516
-------- --------
Stockholders' equity:
Common stock-shares issued: 21,326,18421,404,247 and 21,315,664 as of May 8,November 6, 1999 and January 31, 1999, respectively....... respectively 21 21
Additional paid-in capital................................ capital 186,553 185,828
Retained earnings......................................... 9,036 earnings (deficit) (778 ) 9,836
Unrealized holding loss on investments (396 ) —
Treasury stock-shares at cost: 2,365,900 as of May 8,November 6, 1999 and January 31, 1999 respectively...................... (34,818) (34,818)
-------- --------
(34,818 ) (34,818 )
Total stockholders' equity.............................. 160,792 equity 150,582 160,867
-------- --------
Total liabilities and stockholders' equity.................. $383,324 $388,768
======== ========equity $ 410,251 $ 388,768

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

THE MAXIM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)
(In thousands, except per share data)

(Unaudited)

THREE MONTHS ENDED
-----------------------
MAY 8, APRIL 30,
Three Months Ended Nine Months Ended
November 6,

1999 October 31,

1998
-------- ---------
November 6,

1999 October 31,

1998
Revenues:
Sales of floor covering products.......................... $180,568 $80,661
products $ 187,278 $ 235,116 $ 559,047 $ 401,934
Fees from franchise services.............................. 11,300 6,857
services 10,485 4,558 32,223 13,807
Fiber and PET sales....................................... -- 6,965
Other..................................................... 712 2,149
-------- -------
sales — 8,257 — 20,431
Other 1,080 1,641 2,659 5,613
Total revenues.......................................... 192,580 96,632
revenues 198,843 249,572 593,929 441,785
Cost of sales............................................... 118,906 69,564
-------- -------
sales 120,358 163,599 365,515 305,984
Gross profit.............................................. 73,674 27,068
profit 78,485 85,973 228,414 135,801
Selling, general and administrative expenses................ 72,685 22,390
-------- -------
expenses 83,201 77,352 233,856 123,147
Nonrecurring charges — — — 28,531
Operating income.......................................... 989 4,678

(loss) income (4,716 ) 8,621 (5,442 ) (15,877 )
Other income (expense):
Interest income........................................... 1,167 386
income 468 345 2,437 763
Interest expense.......................................... (2,799) (2,459)
expense (3,179 ) (4,296 ) (9,140 ) (9,681 )
Other, net................................................ 79 (52)
-------- -------
net 304 — 653 904
(Loss) income before income taxes and extraordinary charge.................................................... (564) 2,553
charge (7,123 ) 4,670 (11,492 ) (23,891 )
Benefit (provision) for income taxes........................ 38 (1,235)
-------- -------
taxes — (2,039 ) 1,152 6,240
(Loss) income before extraordinary charge................... (526) 1,318
charge (7,123 ) 2,631 (10,340 ) (17,651 )
Extraordinary charge on early retirement of debt, net of tax benefit................................................... (274) --
-------- -------
benefit — (377 ) (274 ) (377 )
Net (loss) income........................................... income (7,123 ) 2,254 (10,614 ) (18,028 )

Unrealized holding loss on investments

(396
)

—

(396
)

—
Comprehensive (loss) income $ (800) (7,519 ) $ 1,318
======== =======

2,254 $ (11,010 ) $ (18,028 )
Basic (loss) earnings per share before extraordinary charge.................................................... charge $ (0.03) (0.37 ) $ 0.08
0.14 $ (0.54 ) $ (1.02 )
Extraordinary charge per share.............................. (0.01) --
-------- -------
share — (0.02 ) (0.01 ) (0.02 )
Basic (loss) earnings per share............................. share $ (0.04) (0.37 ) $ 0.08
======== =======

0.12 $ (0.55 ) $ (1.04 )
Diluted (loss) earnings per share before extraordinary charge.................................................... charge $ (0.03) (0.37 ) $ 0.08
0.13 $ (0.54 ) $ (1.02 )
Extraordinary charge per share.............................. (0.01) --
-------- -------
share — (0.02 ) (0.01 ) (0.02 )
Diluted (loss) earnings per share........................... share $ (0.04) (0.37 ) $ 0.08
======== ======= 0.11 $ (0.55 ) $ (1.04 )

Weighted average common shares.............................. 19,153 16,424
======== =======
shares

19,234

19,428

19,234

17,385
Weighted average common shares and equivalents.............. 19,153 17,247
======== =======equivalents 19,234 20,241 19,234 17,385

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

THE MAXIM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)
(In thousands)

(Unaudited)

THREE MONTHS ENDED
-----------------------
MAY 8, APRIL 30,
Nine Months Ended
November 6,

1999 October 31,

1998
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income......................................... loss $ (800) (10,614 ) $ 1,318
(18,028 )
Adjustments to reconcile net (loss) incomeloss to net cash (used in) provided by operating activities:
Nonrecurring charges — 7,540
Depreciation and amortization........................... 2,856 3,372
amortization 9,739 13,154
Deferred income taxes................................... -- 695
taxes (445 ) (6,611 )
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables........................................... (11,407) (6,229)
Inventories........................................... (4,189) (4,264)
Receivables (6,652 ) (12,800 )
Inventories (1,426 ) (20,023 )
Refundable income taxes............................... (4,476) 572
taxes (4,766 ) 693
Prepaid expenses and other assets..................... (410) (4,510)
assets (4,878 ) (13,180 )
Accounts payable and other liabilities................ (3,935) (987)
-------- --------
Net cash (used in) operating activities..................... (22,361) (10,033)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (9,120) (14,172)
Acquisitions, net of cash acquired........................ (8,042) --
-------- --------
Net cash (used in) investing activities..................... (17,162) (14,172)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options................... 325 1,348
Purchase of treasury stock................................ -- (1,760)
Long-term debt proceeds................................... -- 17,114
Principal payments on capital lease obligations........... (124) (129)
Early extinguishment of debt.............................. (4,283) --
-------- --------
liabilities 4,045 57,689
Net cash (used in) provided by operating activities (14,997 ) 8,434
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,952 ) (46,382 )
Acquisitions, net of cash acquired (14,582 ) (25,354 )
Net cash used in investing activities (29,534 ) (71,736 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 325 3,960
Purchase of treasury stock — (19,924 )
Long-term debt proceeds 25,254 128,482
Long-term debt payments (4,283 ) (43,461 )
Principal payments on capital lease obligations (1,767 ) (376 )
Net cash provided by financing activities......... (4,082) 16,573
-------- --------
activities 19,529 68,681
Net decrease(decrease) increase in cash and cash equivalents................... (43,605) (7,632)
equivalents (25,002 ) 5,379
Cash and cash equivalents at beginning of period............ period 89,901 28,880
-------- --------
Cash and cash equivalents at end of period.................. period $ 46,296 64,899 $ 21,248
======== ======== 34,259

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

THE MAXIM GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE
Note 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

CONSOLIDATED FINANCIAL STATEMENTSDescription of Business and Summary of Significant Accounting Policies.
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 adjustments) considered necessary for a fair presentation have been included. The interim results for the three and nine month periods ended November 6, 1999 are
not necessarily indicative of the results to be expected for the fiscal year ending February 5, 2000. These statements should be read in conjunction with the condensed consolidated financial
statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999, as filed with the Securities and Exchange
Commission.
Comprehensive
loss,loss/income, as defined by Statement of Financial Accounting StandardStandards ("SFAS") No. 130, "Reporting Comprehensive Income," wasIncome" is presented in the same as net income
(loss) for the three months ended May 8, 1999 and April 30, 1998.

The resultsCondensed
Consolidated Statements of operations for the periods presented are not necessarily
indicativeOperations.
Description of the operating results for the year.

DESCRIPTION OF BUSINESSBusiness
The Maxim Group, Inc. and subsidiaries (the "Company" or "Maxim") are engaged in retail and commercial sales of floor covering products throughout North
America through a network of Company-owned retail stores and a network of franchisees. The Company is also engaged in the sale of franchises for the retail floor covering industry and other related
products and services to its franchises. Substantially all of the assets of Image Industries, Inc. ("Image"), a wholly owned manufacturing subsidiary of Maxim, were sold on January 29,
1999. Image was engaged in the manufacturing of residential carpet and plastics recycling.

RISK FACTORS
Risk Factors
The Company relies on several large floor covering manufacturers for the supply of its floor covering products. While the Company believes there are a number
of alternative manufacturers capable of supplying and distributing its products, delays in obtaining alternative sources, if necessary, could have a significant adverse effect on the Company's results
of operations.
The
Company also has certain other risk factors, which include, but are not limited to, risks associated with integration of acquisitions and new computer systems, litigation,
competition, possible economic downturns and changes in laws and regulations.

GOING CONCERN
Going Concern
The accompanying condensed consolidated financial statements of the Company have been presented on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
As
of May 8,November 6, 1999 and January 31, 1999, the Company was not in compliance with a certain restricted payment covenant contained in the Indenture pursuant to which
references
the Company's $100 million$100,000,000 9 1/4%¹/4% senior subordinated notes (the "Senior Notes"). were issued.
During
the three month period ended October 31, 1998, the Company's restricted payments exceeded that allowed under the Indenture. As of May 8,November 6, 1999 and
January 31, 1999, the Company was 5

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(CONTINUED)

not in

compliance with the terms of the Indenture and as a result, the trustee or the holders of not less than 25% of the aggregate outstanding principal amount of the Senior Notes may declare all unpaid
principal plus any accrued interest of all of the Senior Notes due and payable. Accordingly, the Senior Notes are classified as a current liability in the accompanying condensed consolidated balance
sheets as of May 8,November 6, 1999 and January 31, 1999.
As
of November 1,December 17, 1999, the Company's available borrowings under its Senior Credit Facility plus cash on hand were not sufficient to repay the Senior Notes if such Senior
Notes were declared due and payable.
The
Company is currently negotiating with the holders of the Senior Notes to obtain the requisite consent to waive the default. Any such consent may include, among other things, the
redemption of a portion of the Senior Notes, the payment of a consent fee by Maxim and a higher interest rate on the Senior Notes which remain outstanding. There can be no assurance that any such
waiver will be granted. If a waiver is not obtained by Maxim, repayment of the Senior Notes may be accelerated, as discussed above.
Additionally,
the Company is currently in negotiations with its senior lenders to amend or replace its Senior Credit Facility to allow for enhanced availability, an extended maturity
date, and improved advance ratios on existing collateral.

NOTE
Note 2. NEW ACCOUNTING PRONOUNCEMENTS.New Accounting Pronouncements.
During June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
This Statement established accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value and
that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows derivative gains and
losses to offset related results on the hedged item in the statements of operations and requires that a company formally document, designate and assess the effectiveness of transactions that receive
hedge accounting. SFAS No. 133 is effective for fiscal years beginning after
June 15, 2000, although earlier adoption is permitted. SFAS No. 133 cannot be applied retroactively. The Company does not believe this statementStatement will have a material impact on the
financial statements.

NOTE
Note 3. ACQUISITIONS.Acquisitions.
During the threenine months ended May 8,November 6, 1999, the Company acquired 715 retail locations for aggregate consideration of approximately $8,530,000. Subsequent to
the three months ended May 8, 1999, the Company acquired 8 retail locations for
aggregate consideration of approximately $12,170,000.$20,700,000. The
related purchase agreements also provide for additional consideration to be paid based on certain locationsthe future financial performance.performance of certain of the acquired locations.
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"). The acquisition has been recorded using the purchase method of accounting. On January 29, 1999, the Company sold substantially all of the
assets of its Image subsidiary. The operating results of the retail stores acquired from Shaw are included in the Company's condensed consolidated statements of operations from the date of
acquisition. The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the acquisition of the retail store assets of Shaw and the disposition of
all of the assets of Image had occurred on February 1, 1998. The pro 6

NOTE 3. ACQUISITIONS. (CONTINUED)

forma expenses include

the recurring costs that are directly attributable to the acquisition, such as interest expense and amortization of goodwill, and their related tax effects.

THREE MONTHS ENDED
-----------------------
MAY 8, APRIL 30,
Three Months Ended Nine Months Ended
November 6, 1999 October 31, 1998
(IN THOUSANDS) -------- ---------
November 6, 1999 October 31, 1998
(In thousands)

Net revenue............................................ $192,580 $185,848
revenue $ 198,843 $ 195,148 $ 593,929 $ 563,790
Net loss............................................... (800) (2,048)

loss (7,123 ) (211 ) (10,614 ) (26,937 )
Basic loss per share................................... share $ (0.04) (0.37 ) $ (0.10)
(0.01 ) $ (0.55 ) $ (1.38 )
Diluted loss per share................................. (0.04) (0.10)share (0.37 ) (0.01 ) (0.55 ) (1.38 )

NOTE
Note 4. INVENTORIES.Inventories.
Inventories consist of the following:

MAY 8, JANUARY
November 6,

1999 January 31,

1999 1999
(IN THOUSANDS) -------- -----------
(In thousands)

Raw materials.......................................... materials $ 309 $ 309
Finished goods......................................... 64,304 goods 62,522 58,435
------- -------
Total.................................................. $64,613 $58,744
======= =======
Total $ 62,831 $ 58,744

On
a segment basis, the Company's inventories consist of the following:

MAY 8, JANUARY
November 6,

1999 January 31,

1999 1999
(IN THOUSANDS) -------- -----------

Retail................................................. $62,796 $56,927
Image..................................................
(In thousands)

Retail $ 62,522 $ 56,927
Image 309 1,817 1,817
------- -------
Total.................................................. $64,613 $58,744
======= =======
Total $ 62,831 $ 58,744

NOTE

Note 5. NONRECURRING CHARGES.Nonrecurring Charges.
During the three month period ended July 31, 1998, the Company reevaluated its business strategy and determined to expand its focus on its retail
operations. As a result of the revised retail strategy, the Company amended the franchise agreement for one of its franchised line of retail stores, closed certain Company-owned stores, and wrote down
to fair value certain retail assets, including goodwill. The Company estimated that the changes to the franchise agreement would result in franchisee claims brought against the Company. The Company
recorded a $28,531,000 charge for these nonrecurring items during the three monththree-month period ended July 31, 1998. The initial charge was subsequently reduced by $4,818,000, as revised estimates for
franchisee claim reserves and store closure costs were less than initially expected. The revised estimates were offset in part by a ten store net increase in the number of
stores to be closed. As of
May 8,November 6, 1999, $19,365,000 of the$21,633,000 nonrecurring charges were incurred, with $4,348,000$2,080,000
remaining in the reserve, which is included in accrued liabilities on the accompanying condensed consolidated balance sheet.
7

NOTE 5. NONRECURRING CHARGES. (CONTINUED)
The
major components of the nonrecurring charge balance the remainder of
which is included in other accrued liabilities on the balance sheet at May 8,
1999 and January 31, 1999 are as follows:

JANUARY
January 31, MAY 8,

1999 AMOUNT Amount

Incurred November 6,

1999
BALANCE INCURRED BALANCE
(IN THOUSANDS) ----------- -------- --------
(In thousands)

Claim reserves.............................................. $3,195 reserves $ (191) $3,004
3,195 $ (1,115 ) $ 2,080
Store closure and carrying costs............................ costs 2,822 (1,478) 1,344
------ ------- ------
$6,017 $(1,669) $4,348
====== ======= ====== (2,822 ) —
$ 6,017 $ (3,937 ) $ 2,080

NOTE
Note 6. DEBTDebt
In March 1999, the Company purchased the principal amount of $4,000,000 of its Senior Notes in the open market. The amount paid approximated the face
amount of the Senior Notes.

NOTE 7. SEGMENT INFORMATION.

SFAS No. 131--
In
an effort to resolve the default under its Senior Notes, Maxim has reached an agreement in principle with an ad hoc committee consisting of Noteholders who own a majority of the
principal amount of the outstanding Senior Notes. Pursuant to the agreement in principle, Maxim has commenced an offer to purchase not less than $40,000,000 of Senior Notes at a purchase price of
102%, plus accrued and unpaid interest and other fees and charges. Maxim is required to pay a cash consent fee of $50 per $1,000 principal amount of Senior Notes to those Noteholders who consent to
the default waiver and whose Senior Notes are not purchased by Maxim.
Under
the terms of the pending offer to purchase and consent solicitation, the following additional terms would apply to Senior Notes which are not purchased by Maxim:
The
interest rate would increase from 9¹/4% per annum to 12³/4% per annum and would increase by 25 basis points on October 15, 2000 and further increase every six
months thereafter (increasing instead by 50 basis points if the bond rating assigned to the Senior Notes by Standard & Poor's is less than "B-"Disclosures about Segments);
The
Senior Notes would be secured by a second lien on certain assets;
Maxim
would, on an annual basis beginning on February 7, 2001, be required to consummate an offer to purchase not less than $10,000,000 of outstanding Senior Notes at a purchase price of 102%,
plus accrued and unpaid interest and other fees and charges (increasing to 103% if the bond rating assigned to the Senior Notes by Standard & Poor's is less than "B");
Maxim
would be required to consummate an offer to purchase any Senior Notes which remain outstanding on October 15, 2002 at a price of 106.375%, plus accrued and unpaid interest and other fees
and charges, and
Maxim
would be required to maintain a fixed charge coverage ratio to be determined.
Consummation
of the transactions contemplated by the agreement in principle is subject to, among other things, negotiation of an Enterpriseamended or replacement senior credit facility
acceptable to Maxim and Related
Information"--became effective forthe Noteholders, receipt of consents from Noteholders representing at least a majority in aggregate principal amount of outstanding Senior Notes, and certain other customary
conditions. Maxim expects to complete the transactions contemplated by the offer to purchase and consent solicitation during the fourth quarter of fiscal year 1999 and for all succeeding
interim reporting periods. In accordance with the requirements of SFAS No. 131,
the Company has identified three reportable segments through which it conducts
its operating activities: retail, manufacturing and franchise services. These
three segments reflect an aggregation2000. There can be no assurance that such a
waiver will ultimately be granted. If a waiver is not

obtained by Maxim, repayment of the operating segments usedSenior Notes could be accelerated by Company
management for making decisions and assessing performance. Management determines
operating segments based primarily upon the operations' linetrustee or the holders of business and
geographic location. Operating segments were aggregated into reportable segments
based upon characteristics such as products and services, operating methods,
customers, and distribution methods. The retail segment is comprised of retail
floor covering stores and distribution support centers. The manufacturing
segment is comprisednot less than 25% of the operations of Image. With the sale of substantially
all the assets of Image on January 29, 1999, Maxim no longer engages in
manufacturing operations. The franchise services segment includes store
development, marketing, advertising, production, consumer credit, training and
product sourcing activities as well as interest expense and corporate
non-operating items not directly relating to the manufacturing or retail
segments.

Intersegment sales and transfers occurred as carpet was transferred from
Image to the Company's retail segment. The retail segment purchases advertising,
training or product sourcing services from the franchise services segment.
Intersegment transactions are accounted for on the same basis as transactions
with third parties.

NOTE 7. SEGMENT INFORMATION. (CONTINUED)

Identifiable assets consist of cash, property, plant and equipment used in
the operationsaggregate outstanding principal amount of the segment, as well as inventory, receivables and other
assets directly related to the segment. The Company has no assets located
outside the United States.

FRANCHISE INTERSEGMENT
MANUFACTURING RETAIL SERVICES ELIMINATIONS TOTAL
(IN THOUSANDS) ------------- -------- --------- ------------ --------

Three Months Ended May 8, 1999:
Revenues............................ $ -- $176,769 $ 21,627 $(5,816) $192,580
Operating income (loss)............. -- (3,661) 4,650 -- 989
Interest expense.................... -- 901 2,898 (1,000) 2,799
Income tax benefit (provision)...... -- 122 (84) -- 38
Extraordinary charge................ -- -- 274 -- 274
Net (loss) income................... -- (4,343) 3,543 -- (800)
Total assets........................ 7,168 222,507 153,649 -- 383,324
------- -------- -------- ------- --------
Three Months Ended April 30, 1998:
Revenues............................ $48,584 $ 39,799 $ 12,080 $(3,831) $ 96,632
Operating income (loss)............. 4,431 (660) 959 (52) 4,678
Interest expense.................... 1,429 854 2,251 (2,075) 2,459
Income tax benefit (provision)...... (1,216) 856 (875) -- (1,235)
Net (loss) income................... 2,070 (1,442) 690 -- 1,318
------- -------- -------- ------- --------

NOTE 8. SUBSEQUENT EVENTS.

CREDIT FACILITYSenior Notes.
Credit Facility
On May 18, 1999, the Company entered into an amended and restated credit facility, which provides for aggregate commitments of $75.0 million$75,000,000 (the "Senior
Credit Facility"). The Senior Credit Facility consists of a revolving facility that matures May 18, 2002. Borrowings under the Senior Credit Facility are secured by accounts receivable,
inventories, certain real and personal property, and certain intangible assets of Maxim and its subsidiaries, as well as the capital stock of all of its subsidiaries. As additional collateral security
for the Senior Credit Facility, the Company has established a cash collateral account with the lenders. As of November 10,December 17, 1999 the cash collateral account balance was $42.6 million.approximately
$42,600,000. As of November 10,December 17, 1999, the Company had $5.8 millionapproximately $1,200,000 available under the revolver. Amounts outstanding under the Senior Credit Facility bear interest at various
variable rates. The Senior Credit Facility contains a number of covenants customary for credit transactions of this type and requires the Company to meet certain financial ratios. Because of the
Company's violation of various covenants (principally related to failures to provide required financial information and other documentation), certain events of default exist under the Senior Credit
Facility. The Company and its Senior Credit Facility lenders have entered into a forebearance agreement with respect to such events of default, which forebearance currently extends to
November 15,
1999.January 31, 2000. The Company is currently in discussions with its Senior Credit Facility lenders to amend or replace the Senior Credit Facility. The negotiations involve enhanced credit
availability, a new maturity date and improved advance ratios on existing collateral.
Amounts
outstanding under the Senior Credit Facility bear interest at a variable rate equal to, at the Company's option, (i) the base rate (defined as the greater of the prime
rate or the federal funds rate
plus one-half of one percent) or (ii) the adjusted LIBOR rate, in each case plus the applicable margin. The applicable margin ranges from 1.25% to 2.50% for loans that bear interest
at the adjusted LIBOR rate. The Company is required to pay the lenders under the Senior Credit Facility, on a quarterly basis, a commitment fee ranging from 0.25% to 0.50% of the unused portion of the
Senior

NOTE 8. SUBSEQUENT EVENTS. (CONTINUED) Credit Facility. The Company is required to pay administration fees quarterly. The Senior Credit Facility contains a number of covenants, including, among others, covenants restricting the
Company and certain of its subsidiaries with respect to the incurrence of indebtedness (including contingent obligations); the creation of liens; the sale, lease, assignment, transfer, or other
disposition of assets; the making of certain investments, loans, advances, and acquisitions; the consummation of certain transactions, such as mergers or consolidations. Further, the Senior Credit
Facility contains cross default provisions related to the Company's other indebtedness. The Senior Credit Facility requires the Company to meet certain financial ratios and covenants, including debt
to equity, debt to capital, minimum tangible net worth, minimum EBITDAR and fixed charges.

SENIOR SUBORDINATED NOTES
Note 7. Segment Information.
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" became effective for fiscal year 1999 and for all succeeding interim
reporting periods. In accordance with the requirements of SFAS No. 131, the Company has identified three reportable segments through which it conducts its operating activities: retail,
manufacturing and franchise services. These three segments reflect an effort to resolve the pending defaultaggregation of the Senior Notes, Maxim has
reached an agreement in principle with an ad hoc committee consistingoperating segments used by Company management for making decisions and

assessing performance. Management determines operating segments based primarily upon the operations' line of Noteholders who own a majoritybusiness and geographic location. Operating segments were aggregated into reportable
segments based upon characteristics such as products and services, operating methods, customers, and distribution methods. The retail segment is comprised of retail floor covering stores and
distribution support centers. The manufacturing segment is comprised of the principal amountoperations of Image. With the sale of substantially all the assets of Image on January 29, 1999, Maxim no longer
engages in manufacturing operations. The franchise services segment includes store development, marketing, advertising, production, consumer credit, training and product sourcing activities as well as
interest expense and corporate non-operating items not directly relating to the manufacturing or retail segments.
Intersegment
sales and transfers occured as carpet was transferred from Image to the Company's retail segment. The retail segment purchases advertising, training or product sourcing
services from the franchise services segment. Intersegment transactions are accounted for on the same basis as transactions with third parties.
Note 8. Contingencies.
Since the May 18, 1999 announcement that Maxim would be restating financial results for fiscal 1999 and certain of the outstanding Senior
Notes. Pursuantquarters therein, eleven lawsuits
claiming to be class actions have been filed against Maxim and certain of its current and former executive officers and directors. In addition, the agreement in principle, MaximSecurities and Exchange Commission ("SEC") has
commenced an offerinformal inquiry in connection with the matters relating to purchasethe restatement.
Management
does not less than $40.0 millionbelieve that it is feasible to predict or determine the final outcome of Senior Notes atthe class action lawsuits or the SEC inquiry or their effect on Maxim's financial results,
its business or its management. In addition, management does not believe it is feasible to estimate the amounts or potential range of loss with respect thereto. The potential outcomes or resolutions
of the class action lawsuits could include a purchase pricejudgement against Maxim or settlements that could require substantial payments by Maxim. Potential outcomes of 102%, plus accruedthe SEC inquiry could include administrative
or other sanctions being imposed on Maxim and/or certain of its officers. In addition, the timing of the final resolution of these matters is uncertain. Material adverse outcomes with respect to the
class action lawsuits or the SEC inquiry could have a material adverse effect on Maxim's financial condition, results of operations and unpaid interestcash flows.

Identifiable assets consist of cash, property, plant and equipment used in the operations of the segment, as well as inventory, receivables and other fees and charges. Maxim is
required to pay a cash consent fee of $50 per $1,000 principal amount of Senior
Notes to those Noteholders who consentassets directly related to the
default waiversegment. The Company has no assets located outside the United States.

Manufacturing Retail Franchise

Services Intersegment

Eliminations Total
(In thousands)

Three Months Ended November 6, 1999:
Revenues $ — $ 185,388 $ 19,539 $ (6,084 ) $ 198,843
Operating (loss) income — (1,296 ) (3,420 ) — (4,716 )
Interest expense — 142 3,037 — 3,179
Income tax (provision) benefit — — — — —
Net (loss) income — (1,153 ) (5,970 ) — (7,123 )
Total assets 530 239,853 169,868 — 410,251
Three Months Ended October 31, 1998:
Revenues $ 54,424 $ 190,625 $ 15,217 $ (10,694 ) $ 249,572
Operating income (loss) 4,994 2,995 (76 ) 708 8,621
Interest expense 1,543 999 4,134 (2,380 ) 4,296
Income tax (provision) benefit (1,117 ) (569 ) (353 ) — (2,039 )
Extraordinary charge — — 377 — 377
Net (loss) income 2,465 703 (914 ) — 2,254
Nine Months Ended November 6, 1999:
Revenues $ — $ 551,122 $ 61,440 $ (18,633 ) $ 593,929
Operating income (loss) — (7,856 ) 2,414 — (5,442 )
Interest expense — 1,602 9,027 (1,489 ) 9,140
Income tax benefit — 54 1,098 — 1,152
Extraordinary charge — — 274 — 274
Net (loss) income — (8,796 ) (1,818 ) — (10,614 )
Nine Months Ended October 31, 1998:
Revenues $ 152,148 $ 273,888 $ 37,740 $ (21,991 ) $ 441,785
Nonrecurring charges — — 28,531 — 28,531
Operating income (loss) 13,376 4,139 (31,880 ) (1,512 ) (15,877 )
Interest expense 4,380 2,772 9,152 (6,623 ) 9,681
Income tax (provision) benefit (3,256 ) 150 9,346 — 6,240
Extraordinary charge — — 377 — 377
Net (loss) income 6,039 (732 ) (23,335 ) — (18,028 )

Item 2. Management's Discussion and whose Senior
Notes are not purchased by Maxim.

Analysis of Financial Condition and Results of Operations.
The following additional terms would apply to Senior Notes which are not
purchased by Maxim:

- The interest rate will increase from 9 1/4% per annum to 12 3/4% per annum
and will increase by 25 basis pointsdiscussion should be read in conjunction with the Condensed Consolidated Financial Statements of Maxim, including the
notes thereto contained in this Quarterly Report on October 15, 2000 and further
increase every six months thereafter (increasing instead by 50 basis
points if the bond rating assigned to the Senior Notes by Standard &
Poor's is less than "B-");

- The Senior Notes will be secured by a second lien on certain assets;

- Maxim will, on an annual basis beginning on February 7, 2001, be required
to consummate an offer to purchase not less than $10.0 million of
outstanding Senior Notes at a purchase price of 102%, plus accrued and
unpaid interest and other fees and charges (increasing to 103% if the bond
rating assigned to the Senior Notes by Standard & Poor's is less than
"B");

- Maxim will consummate an offer to purchase any Senior Notes which remain
outstanding on October 15, 2002 at a price of 106.375%, plus accrued and
unpaid interest and other fees and charges, and

- Maxim will be required to maintain a fixed charge coverage ratio to be
determined.

Consummation of the transactions contemplated by the agreement in principle
is subject to, among other things, negotiation of an amended or replacement
senior credit facility acceptable to Maxim and the Noteholders, receipt of
consents from Noteholders representing at least a majority in aggregate
principal amount of outstanding Senior Notes, and certain other customary
conditions. Maxim expects to complete the transactions contemplated by the
agreement in principle during the fourth quarter of fiscal 2000. There can be no
assurance that such a waiver will ultimately be granted. If a waiver is not
obtained by Maxim, repayment of the Senior Notes may be accelerated.

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

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF MAXIM, INCLUDING THE NOTES THERETO,
CONTAINED IN THIS QUARTERLY REPORT ON FORMForm 10-Q.

GENERAL
General
During the year ended January 31, 1999, Maxim acquired the retail store assets of Shaw Industries, Inc. for consideration of 3,150,000 shares of
Maxim's common stock valued at $55.2 million, an $18.0 million promissory note, subsequently adjusted to $11.5$10.0 million after the effect of purchase price adjustments, and $25.0 million
in cash. These assets were purchased effective August 9, 1998, and included 266 retail floor covering centers. The acquisition of these assets resulted in a substantial increase in the number
of Company-owned stores. As reflected in the following discussion, the acquisition of these assets materially impacted Maxim's financial condition and results of operations.
The
acquired retail stores are currently being integrated into Maxim. Maxim is evaluating the strengths of the acquired brands and is currently making merchandise shifts to maximize
the stores' potential. Changes will include rebranding of these stores to the newly established Flooring America brand, adjusting merchandising fixtures and displays, closing or selling certain stores
and reviewing current operational practices at each store.
The
Shaw retail stores incurred significant losses in periods prior to their acquisition by Maxim. These stores historically operated at a lower profit level than those typical in the
retail flooring industry. To the extent such conditions continue before and after Maxim's integration of these stores, such conditions may affect not only the operation of the acquired stores, but
also the consolidated results of operations of Maxim. Moreover, the acquired stores' geographic areas and product lines overlapped with the Company's existing stores in certain areas causing the need
to close or remodel certain stores.
In
order to focus its full efforts and resources on the growth and efficiency of the retail operations, Maxim sold itsthe carpet manufacturing operations of its Image subsidiary in
January 1999 for total consideration of $210.7 million which included the subsidiary assumption of $48.1 million in debt and short-term liabilities. With this sale of Maxim's
manufacturing assets, management believes that Maxim is positioned as one of the leading speciality retailers of flooring product on an exclusive basis.products. As of November 1, 1999, Maxim's retail network consisted of
323 Company-owned stores and 1,035 franchise centers/locations.
During
the three and nine months ended May 8,November 6, 1999, Maxim operated two reportable segments: retail and franchise services. During the three and nine months ended
April 30,October 31, 1998, Maxim operated a third reportable segment, manufacturing. The retail segment is a chain of stores and support centers. The franchise services segment includes franchise fees
and related activities, general corporate charges, interest expense and corporate non-operating items not directly relating to the manufacturing or retail segments. See Note 7 to
Maxim's Condensed Consolidated Financial Statements for certain financial information relating to these three segments.

11
On
February 1, 1999, Maxim changed its fiscal year end from January 31 to the first Saturday following January 31. Accordingly, the firstthird quarter of the fiscal
year ending February 5, 2000 consists of the 14-week13-week period ended May 8,
1999 compared to a 13-week period in the prior year.November 6, 1999. Financial results for the three monthsand nine month ended April 30,October 31, 1998 have not been
restated to reflect the effects of the change in fiscal year.

RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 8,
Results of Operations
Three Months Ended November 6, 1999 COMPARED TO THREE MONTHS ENDED APRIL 30,Compared to Three Months Ended October 31, 1998

TOTAL REVENUES.
Total Revenues. Total revenues increased 99.3%decreased 20.3% to $192.6$198.8 million for the three months ended May 8,November 6,
1999 from $96.6$249.6 million for the three months ended April 30,October 31, 1998. The components of total revenues, exclusive of the effect of intersegmentintercompany eliminations, are discussed below.
Intersegment

eliminations, which totaled $5.8$6.1 million for the three months ended May 8,November 6, 1999 and $3.8$10.7 million for the three months ended April 30,October 31, 1998, include certain
intercompany allocations.

RETAIL REVENUE.
Retail Revenue. Retail revenue consists of sales of floor covering products by Maxim's retail stores. Retail revenues
increased 344.2%decreased 2.7% to $176.8$185.4 million for the three months ended May 8,November 6, 1999 from $39.8$190.6 million for the three months ended April 30,October 31, 1998. The growthdecrease in retail sales
of floor covering products was primarily due to less demand in the impact of the acquisition of the
retail store assets of Shawcommercial and to a lesser extent, to internal growth.

FRANCHISE SERVICES REVENUE.builder sectors in certain markets.
Franchise Services Revenue. Franchise services revenue is generated from three primary sources:
(i) one-time franchise fees from new franchisees
(revenue recognized at time of franchise agreement signing),franchisees; (ii) brokerage fees and/or royalties on certain floor covering products purchased by the franchisee; and
(iii) franchise service fees for services and products such as advertising, which are offered to franchisees. Franchise services revenue increased 79.0%28.4% to $21.6$19.5 million for the three
months ended May 8,November 6, 1999 from $12.1$15.2 million for the three months ended April 30,October 31, 1998. The increase in franchise services revenue is due to, among other things, increases
in national accounts revenue, rebates from floor covering vendors and growth in the demand for franchise services, particularlyservices.
Manufacturing Revenue. Manufacturing revenue of $54.4 million for the MAXCare franchise.

MANUFACTURING REVENUE: Manufacturing revenuethree months ended October 31, 1998
included the sale of manufactured carpet and polyethylene tereptalate ("PET"), fiber and flake. Manufacturing revenueWith the sale of substantially all the assets of Image in January 1999, Maxim no longer engages
in manufacturing operations.
Gross Profit. Gross profit decreased 8.7% to $78.5 million for the three months ended April 30,November 6, 1999
from $86.0 million for the three months ended October 31, 1998. As a percentage of total revenue, gross profit was 39.5% for the three months ended November 6, 1999 compared to
34.4% for the three months ended October 31, 1998 as a result of the sale of the manufacturing segment in January 1999. The manufacturing segment experienced a lower gross margin
percentage than Maxim's retail and franchise services segments.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 7.6% to
$83.2 million for the three months ended November 6, 1999 from $77.4 million for the three months ended October 31, 1998. As a percentage of total revenue, selling, general
and administrative expenses increased to 41.8% for the three months ended November 6, 1999 from 31.0% for the three months ended October 31, 1998. The increase in selling, general and
administrative expenses, both as a percentage of revenues and operating expenses reflected Maxim's changing revenue mix, increased advertising cost and certain one-time professional fees. Selling,
general and administrative expenses of Maxim's retail segment, which operates on a higher cost basis than the manufacturing segment, increased as a percentage of revenue. With the sale of Maxim's
manufacturing operations in January 1999, the retail segment comprises a substantial portion of Maxim's operations in future periods. Also contributing to the increase in selling, general and
administrative expenses were one-time charges for professional and legal fees of approximately $3.7 million, along with increases in consulting fees of $1.2 million for costs
associated with Year 2000 remediation. The one-time charges for professional and legal fees are related to the restatement of fiscal 1999 financial results.
Operating Income/Loss. Operating income/loss decreased to a loss of $4.7 million for the three months ended
November 6, 1999 from income of $8.6 million for the three months ended October 31, 1998. The components of operating income/loss, exclusive of the effect of intersegment
eliminations, are discussed below. Intersegment eliminations totaled $708,000 for the three months ended October 31, 1998.
Retail Operating Income/Loss. Retail operating income/loss decreased to a loss of $1.3 million for the three
months ended November 6, 1999 from income of $3.0 million for the three months ended October 31, 1998. This decrease was primarily due to a decrease in revenue, as well as, higher
selling, general and administrative expense related to advertising.

Franchise Services Operating Income/Loss. Franchise services operating loss increased to $3.7 million for the
three months ended November 6, 1999 from a loss of $76,000 for the three months ended October 31, 1998. This increased loss was due to higher selling, general and administrative
expenses, including professional and legal fees, incurred during the three months ended November 6, 1999.
Manufacturing Operating Income/Loss. Manufacturing operating income was $5.0 million for the three months ended
October 31, 1998. With the sale of substantially all the assets of Image in January 1999, Maxim no longer engages in manufacturing operations.
Interest Expense. Interest expense decreased 26.0% to $3.2 million for the three months ended November 6,
1999 from $4.3 million for the three months ended October 31, 1998, due principally to a reduction in debt levels. See "Liquidity and Capital Resources."
Income Tax Benefit. Maxim recorded no income taxes for the three months ended November 6, 1999 compared to a
$2.0 million benefit for the three months ended October 31, 1998. An income tax benefit was not recorded for the three months ended November 6, 1999 due to fully utilizing the
carry back potential of the deferred tax assets on Maxim's condensed consolidated balance sheet in prior quarters. Maxim has also not reflected a benefit for the potential loss carry forward for
future periods.
Nine Months Ended November 6, 1999 Compared to Nine Months Ended October 31, 1998
Total Revenues. Total revenues increased 34.4% to $593.9 million for the nine months ended November 6,
1999, from $441.8 million for the nine months ended October 31, 1998. The components of total revenues, exclusive of the effect of intercompany eliminations, are discussed below.
Intersegment eliminations, which totaled $18.6 million for the nine months ended November 6, 1999 and $22.0 million for the nine months ended October 31, 1998, include
certain intercompany allocations.
Retail Revenue. Retail revenues increased 101.2% to $551.0 million for the nine months ended November 6,
1999 from $273.9 million for the nine months ended October 31, 1998. The growth in retail sales of floor covering products was primarily due to the impact of the acquisition of the
retail store assets of Shaw.
Franchise Services Revenue. Franchise services revenue increased 62.8% to $61.4 million for the nine months ended
November 6, 1999 from $37.7 million for the nine months ended October 31, 1998. The increase in franchise services revenue is due to, among other things, increases in rebates from
floor covering vendors, advertizing, distribution and growth in the demand for franchise services.
Manufacturing Revenue. Manufacturing revenue for the nine months ended October 31, 1998 was
$48.6$152.1 million. With the sale of substantially all the assets of Image in January 1999, Maxim no longer engages in manufacturing operations.

GROSS PROFIT.
Gross Profit. Gross profit increased 172.2%68.2% to $73.7$228.4 million for the threenine months ended May 8,November 6, 1999
from $27.1$135.8 million for the threenine months ended April 30,October 31, 1998. As a percentage of total revenue, gross profit was 38.3%38.5% for the threenine months ended May 8,November 6, 1999 compared to
28.0%30.7% for the threenine months ended April 30,October 31, 1998 as a result of the sale in January 1999 of the manufacturing segment in
January 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.which had lower gross margins.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 224.6%89.9% to
$72.7$233.9 million for the threenine months ended May 8,November 6, 1999 from $22.4$123.1 million for the threenine months ended April 30,October 31, 1998. The increase in selling, general and
administrative expenses reflects an overall growth in the size of Maxim's retail base, including the retail store assets acquired from Shaw. These stores incurred higher levels of advertising costs
than other Maxim stores.Brands. These acquired stores also incurred selling, general and administrative expense relating to the integration of these stores into Maxim. As a percentage of total revenue,
selling, general and administrative expenses increased to 37.7%39.4% for the threenine months ended May 8,November 6, 1999 from 23.2%27.9% for the threenine months ended April 30,October 31, 1998.

The increase in selling, general and administrative expenses, both as a percentage of revenues and operating expenses reflectedreflect Maxim's changing revenue mix.mix and increased consulting and professional
fees. Selling, general and administrative expenses of Maxim's retail segment, which operates on a higher cost basis than the manufacturing segment, increased as a percentage of revenue due to the
purchase of Shaw's retail store assets in August 1998. With the sale of Maxim's manufacturing operations in January 1999, the retail segment 12
comprises a substantial portion of Maxim's
operations in future periods. Increases in consulting/advertising and certain one-time professional fees legal and bad debt expenses also contributed to the overall increase in total selling, general and administrative expenses in the three months ended May 8, 1999.

OPERATING INCOME/LOSS.expenses.
Operating incomeIncome/Loss. Operating loss decreased to $989,000 for the three
months ended May 8, 1999, from $4.7$5.4 million for the threenine months ended April 30,November 6,
1999 from a loss of $15.9 million for the nine months ended October 31, 1998. The components of operating income,income/loss, exclusive of the effect of intersegment eliminations, are discussed
below. Intersegment eliminations totaled $52,000 in$1.5 million for the threenine months ended April 30,October 31, 1998.

RETAIL OPERATING INCOME/LOSS.
Retail Operating Income/Loss. Retail operating income/loss increaseddecreased to a loss of $3.7$7.9 million for the threenine
months ended May 8,November 6, 1999 from lossincome of $660,000$4.1 million for the threenine months ended April 30,October 31, 1998. This increasedecrease was primarily due to the impact of the acquisition of the
retail store assets of Shaw.Shaw, as well as a decrease in revenue of these retail stores for the three months ended November 6, 1999. These stores have higher selling, general and administrative
expense related to advertising, as well as, higher costs related to the remodeling of these stores.

FRANCHISE SERVICES OPERATING INCOME/LOSS.
Franchise Services Operating Income/Loss. Franchise services operating incomeincome/loss increased to $4.7income of
$2.0 million for the threenine months ended May 8,November 6, 1999 from $1.0a loss of $31.9 million for the threenine months ended April 30,October 31, 1998. This $3.7The loss incurred in 1998 was primarily due
to $28.5 million increase was a result of increased revenue duringnonrecurring charges related to the three months ended
May 8, 1999.

MANUFACTURING OPERATING INCOME/LOSS.re-evaluation of the Company's business strategy.
Manufacturing Operating Income/Loss. Manufacturing operating income was $13.4 million for the threenine months ended
April 30, 1998 was $4.4 million.October 31, 1998. With the sale of substantially all the assets of Image in January 1999, Maxim no longer engages in manufacturing operations.

INTEREST EXPENSE.
Interest Expense. Interest expense increased 13.8%decreased 5.6% to $2.8$9.1 million for the threenine months ended May 8,November 6,
1999 from $2.5$9.7 million for the threenine months ended April 30,October 31, 1998 due principally to a higher interest ratelower debt levels during the three months
ended May 8,fiscal 1999. See "Liquidity and Capital Resources."

INCOME TAX (PROVISION) BENEFIT.
Income Tax Benefit. Maxim recorded an income tax benefit of $38,000$1.2 million for the threenine months ended
May 8,November 6, 1999 compared to a $1.2$6.2 million provisionbenefit for the threenine months ended April 30,October 31, 1998. The decrease in income taxestax benefit is due to Maxim recording less of a pre-tax loss infor the
threenine months ended May 8,November 6, 1999.

EXTRAORDINARY CHARGE.
Extraordinary Charge. The extraordinary charge recorded in the threenine months ended May 8,November 6, 1999 resulted from
the repurchase of $4.0 million principal amount Senior Notes and the write-off of unamortized financing fees and discount
associated with the purchase of the Senior Notes.discounts. The total charge amounted to $295,000, which was tax
effected by $21,000 and discount for the threenine months ended May 8,November 6, 1999.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL.
Liquidity and Capital Resources
General. Maxim's primary capital requirements are for new store openings and working capital. Maxim historically has
met its capital requirements through a combination of cash flow provided by operations, net proceeds from the sale of equity and debt securities, bank lines of credit, disposition of assets, and
standard payment terms from suppliers.

STOCK REPURCHASE PROGRAM.
Stock Repurchase Program. In March 1997, the Board of Directors of Maxim authorized a stock repurchase program
pursuant to which Maxim has periodically repurchased shares of its common stock in the open market. As of November 1,December 17, 1999, Maxim had repurchased an aggregate of 2.4 million shares of
common stock in the open market for $34.8 million. These purchases were financed from borrowings

under Maxim's revolving credit facility and cash balances. As discussed below, the ability of Maxim to repurchase its common shares is limited by certain restrictions contained in the indentureIndenture
relating to Maxim's senior subordinated notes. See "--Senior"Senior Subordinated Notes."

CREDIT FACILITY.
Credit Facility. On May 18, 1999, Maxim entered into an amended and restated credit facility, which provides for
aggregate commitments of $75.0 million. The credit facilitymillion (the "Senior Credit Facility") This. The Senior Credit Facility consists of a revolving facility that matures May 18, 2002. Borrowings under the

13
Senior
Credit Facility are secured by accounts receivable, inventories, certain real and personal property, and certain intangible assets of Maxim and its subsidiaries, as well as the capital stock of all of
its subsidiaries. As additional collateral security for its obligations under the Senior Credit Facility, the amended credit facility, Maxim established a cash collateral account with the lenders. As of November 10,December 17, 1999,
the cash collateral account balance was $42.6 million. As of November 10,December 17, 1999, the Company had $5.8$1.2 million available under the Senior Credit Facility. Amounts outstanding under
the Senior Credit Facility bear interest at various variable rates. The Senior Credit Facility contains a number of covenants customary for credit transactions of this type and requires Maxim to meet
certain financial ratios. Because of Maxim's violation of various covenants (principally related to failures to provide required financial information and other documentation), certain events of
default exist under the Senior Credit Facility. Maxim and its Senior Credit Facility lenders have entered into a forbearance agreement with respect to such events of default, which forbearance
currently extends to November 15, 1999.January 31, 2000. Maxim is currently in discussions with its Senior Credit Facility lenders to amend or replace such facility. The negotiations involve enhanced credit
availability, a new maturity date and improved advance ratios on existing collateral.

SENIOR SUBORDINATED NOTES.
Senior Subordinated Notes. On October 16, 1997, Maxim issued $100 million of 9 1/4%¹/4% Senior
Subordinated Notes due 2007 (the "Senior Notes"). The proceeds to Maxim from the offering of the Senior Notes
were approximately $96$96.0 million net of an initial issue discount, and fees and related costs. Maxim used the net proceeds from the offering of the Senior Notes to repay all borrowings then outstanding under its
revolving credit facility of approximately $82.7 million and for general corporate purposes, including capital expenditures.
Each
of Maxim's operating 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 operating subsidiaries of Maxim. Maxim 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 Maxim.
Maxim
is currently in default of the restricted payment covenant contained in the Indenture (the "Indenture") pursuant to which the Senior Notes were issued. The default occurred on
September 3, 1998 when Maxim repurchased shares of its common stock in the open market pursuant to its ongoing stock repurchase program.
On
November 12, 1998, Maxim notified the Trustee under the Indenture of its default of the restricted payment covenant in the Indenture. In accordance with the terms of the
Indenture, the Trustee on November 17, 1998 notified Maxim that such default would become an event of default on December 17, 1998 (30 days after the date of the Trustee's notice
to Maxim) if not cured or waived prior to that date. To date, Maxim has not been able to obtain the consent of the Noteholders for a waiver of this covenant violation. Accordingly, the Trustee or the
holders of not less than 25% in aggregate principal amount of Senior Notes outstanding may declare all unpaid principal of, premium, if any, and accrued and unpaid interest ofon all such Senior Notes to
be due and payable.
Because
either the Trustee or the holders of not less than 25% in aggregate principal amount of Senior Notes outstanding may accelerate payment of the Senior Notes, the Senior Notes
are classified as a current liability on the
accompanying condensed unauditedMaxim's November 6, 1999 balance sheet.sheets. If Maxim receives the requisite consent to

the waiver from the Senior Noteholders, however, the Senior Notes will again be classified as long-term debt of Maxim.
In
an effort to resolve the pending default of theunder its Senior Notes, Maxim has reached an agreement in principle with an ad hoc committee consisting of Noteholders who own a majority of the
principal amount of the outstanding Senior Notes. Pursuant to the agreement in principle, Maxim has commenced an offer to purchase not less than $40.0 million of Senior Notes at a purchase
price of 102%, plus accrued and unpaid interest and other fees and charges. Maxim is required to pay a cash consent 14
fee of $50 per $1,000 principal amount of Senior Notes to those Noteholders who
consent to the default waiver and whose Senior Notes are not purchased by Maxim.

The
Under
the terms of the pending offer to purchase and consent solicitation, the following additional terms would apply to Senior Notes which are not purchased by Maxim:

-
The
interest rate willwould increase from 9 1/4%¹/4% per annum to 12 3/4%³/4% per annum and willwould increase by 25 basis points on October 15, 2000 and further increase every six
months thereafter (increasing instead by 50 basis points if the bond rating assigned to the Senior Notes by Standard && Poor's is less than "B-");

-
The
Senior Notes willwould be secured by a second lien on certain assets;

-
Maxim
will,would, on an annual basis beginning on February 7, 2001, be required to consummate an offer to purchase not less than $10.0 million of outstanding Senior Notes at a purchase price
of 102%, plus accrued and unpaid interest and other fees and charges (increasing to 103% if the bond rating assigned to the Senior Notes by Standard && Poor's is less than "B");

-
Maxim
willwould be required to consummate an offer to purchase any Senior Notes which remain outstanding on October 15, 2002 at a price of 106.375%, plus accrued and unpaid interest and other fees
and charges, and

-
Maxim
willwould be required to maintain a fixed charge coverage ratio to be determined.
Consummation
of the transactions contemplated by the agreement in principle is subject to, among other things, negotiation of an amended or replacement senior credit facility
acceptable to Maxim and the Noteholders, receipt of consents from Noteholders representing at least a majority in aggregate principal amount of outstanding Senior Notes, and certain other customary
conditions. Maxim expects to complete the transactions contemplated by the agreement in principleoffer to purchase and consent solicitation during the fourth quarter of fiscal 2000. There can be no assurance that such a
waiver will ultimately be granted. If a waiver is not obtained by Maxim, repayment of the Senior Notes maycould be accelerated as
discussed above.

SYNTHETIC LEASE FINANCING.by the trustee or the holders of not less than 25% of the aggregate
outstanding principal amount of the Senior Notes.
Synthetic Lease Financing. Maxim has established a $10.0 million synthetic lease facility with a lending group
with amounts outstanding of approximately $5.0 million as of November 1,December 17, 1999. Under the synthetic lease facility, which is scheduled to mature no later than November 2003, Maxim
has the ability to direct the lender group to make loans to First Security Bank, National Association, in its capacity as the co-owner-trustee under the Facility. The
loan proceedsfacility. These loans may then be used
for acquisition, development or expansion of Maxim's flooring center locations, which financed locations are then leased back by the co-owner-trustee to Maxim or a designated subsidiary.
Maxim has guaranteed repayment of the amounts outstanding under the facility. The facility contains various financial and nonfinancial covenants. As of May 8,January 31, 1999, Maxim was not in
compliance with certain of these covenants and Maxim obtained a waiver from the lenders under the synthetic lease facility. These lenders have waived such noncompliance and any right to accelerate
payment of amounts outstanding under the facility because of such noncompliance.

GOING CONCERN.
Going Concern The accompanying condensed consolidated financial statements of the Company have been presented on a
going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As
of May 8,November 6, 1999 and January 31, 1999, the Company was not in compliance with a certain restricted payment covenant contained in the Indenture which references the
Senior Notes.
During
the three month period ended October 31, 1998, the Company's restricted payments exceeded that allowed under the Indenture. As of May 8,November 6, 1999 and
January 31, 1999, the Company was not in compliance with the terms of the Indenture and as a result, the trustee or the holders of not less than 25% of the Senior Notes may declare all unpaid
principal plus any accrued interest of all of the Senior Notes due and payable. Accordingly, the Senior Notes are classified as a current liability in the accompanying condensed consolidated balance
sheetsheets as of May 8,November 6, 1999 and January 31, 1999.

15
As
of November 1,December 17, 1999, the Company's available borrowings under its Senior Credit Facility plus cash on hand were not sufficient to repay the Senior Notes if declared due and
payable.
As
described above, the Company is currently negotiating with the holders of the Senior Notes to obtain the requisite consent to waive the default. Any such consent may include, among
other things, the redemption of a portion of the Senior Notes, the payment of a consent fee by Maxim and a higher interest rate on the Senior Notes which remain outstanding. There can be no assurance
that such waiver will be granted. If a waiver is not obtained by Maxim, repayment of the Senior Notes may be accelerated, as discussed above.
Additionally,
the Company is currently in negotiations with its senior lenders to amend or replace its Senior Credit Facility to allow for enhanced availability, an extended maturity
date, and improved advance ratios on existing collateral.

CONTINGENCIES.
Contingencies. Since the May 18, 1999 announcement that Maxim would be restating financial results for fiscal
1999 and certain of the quarters therein, eleven lawsuits claiming to be class actions have been filed against Maxim and certain of its current and former executive officers and directors. In
addition, the Securities and Exchange Commission ("SEC") has commenced an informal inquiry in connection with the matters relating to the restatement.
Management
does not believe that it is feasible to predict or determine the final outcome of the class action lawsuits or the SEC inquiry onor their effect on Maxim's financial results,
its business or its management. In addition, management does not believe it is feasible to estimate the amounts or potential range of loss with respect thereto. The potential outcomes or resolutions
of the class action lawsuits could include a judgmentjudgement against Maxim or settlements that could require substantial payments by Maxim. Potential outcomes of the SEC inquiry could include administrative
or other sanctions being imposed on Maxim and/or certain of its officers. In addition, the timing of the final resolution of these matters is uncertain. Material adverse outcomes with respect to the
class action lawsuits or the SEC inquiry could have a material adverse effect on Maxim's financial condition, results of operations and cash flows.

CASH FLOWS.
Cash Flows. During the threenine months ended in May 8,November 6, 1999, operating activities used $22.4$15.0 million
compared to $10.0providing $8.4 million used infor the threenine months ended April 30,October 31, 1998. The increase in cash used in operating activities resulted primarily from an increase in accounts
receivable and inventories.receivable. The increase in accounts receivable and inventories was mainly due to higher sales of floor covering products to franchisees and other carpet retailers.
During
the threenine months ended May 8,November 6, 1999, investing activities used $17.2$29.5 million compared to using $14.2$71.7 million infor the three monthsnine ended April 30,October 6, 1998. The
changedecrease in cash used is primarily due to the reduced levelslevel of capital expenditures offset by increased funds used to purchase additional retail
locations.and reduced level of acquisitions.
During
the threenine months ended May 8,November 6, 1999, financing activities used
$4.1provided $19.5 million compared to providing $16.6$68.7 million provided for the threenine months ended
April 30,October 31, 1998. This change resulted from the early extinguishment ofdecrease is primarily due to a reduction in long-term debt for
the three months ended May 8, 1999 as compared to the increase in of debt during
the three months ended April 30, 1998.

CAPITAL EXPENDITURES.proceeds.

Capital Expenditures. Maxim anticipates that it will require approximately $30.0$20.0 million for capital
expenditures during fiscal 2000, of which approximately $20.0$15.0 million has been spent through November 1,6, 1999, to (i) rebrand certain of its various retail formats under the singular
Flooring America name, including signage and interior store changes, (ii) reconfigure existing stores including certain of the stores acquired from Shaw, and (iii) upgrade its management
information systems.

SEASONALITY
Seasonality
Historically, Maxim's retail floor covering sales are subject to some seasonal fluctuation, which Maxim believes is typical to the floor covering industry.
Higher sales occurredoccur in the summer and fall months during Maxim's second and third quarters, and lower sales occurredoccur during the fourth quarter holiday season. Increases 16
occur in the second quarter asdue to
historically greater home construction schedules increaseactivity during the summer, and the largest increase occurs in the third quarter due to of a combination of ongoing home construction and pre-Christmas
home remodeling.

YEARremodeling projects.
Year 2000
Maxim has conducted an assessment of its computer systems to identify the systems that could be affected by the "Year 2000" issue, which results from computer
programs being written using two digits rather than four to define the applicable year.
Maxim's
Year 2000 readiness efforts are beinghave been undertaken on a project team basis with centralized oversight from an external project management firm. Each project team has developed
and is implementing a plan to minimize the risk of a significant negative impact on its operations. The teams are performingperformed an inventory of Year 2000 components (software, hardware and other equipment),
assessing which components may expose Maxim to business interruptions, reprogramming or replacing components as necessary, testing each component, and returning each component to production. Maxim
is utilizingutilized predominantly internal resources to reprogram, replace, or test Maxim's software for Year 2000 compliance. Maxim believes the readiness effort related to critical systems will
be completed bywas substantially
complete at the end of the third fiscal quarter ending November 6, 1999, which is prior to any anticipated impact on its operating systems. Maxim believes its other systems will be Year 2000
compliant by December 31, 1999.
Maxim has
initiated formal communications with all of its significant suppliers to determine the extent to which Maxim's operations and systems are vulnerable to third parties' failure.
Key vendor initiative documentation has been received from vendors addressing all Year 2000 compliance issues. No significant business disruptions are expected. Maxim 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. All other equipment,
machinery and systems have been identified, replaced or upgraded as needed.
Maxim's
contingency plans at the retail store level include the temporary use of manual processes, which Maxim occasionally utilizes during system maintenance. The manual processes
have been documented and tested with no significant revenue loss anticipated. A business contingency plan has been developed utilizing five professional project managers to implement the plan. The
plan includes a business systems implementation schedule listing all issues related to the Year 2000. The issues include identification of changes needed, costs, completion dates and staffing.
Maxim
currently believes the costs to remediate Year 2000 issues are approximately $2.8 million, of which approximately $1.5 million$350,000 remains to be spent as of November 1,December 17,
1999. All costs associated with analyzing the Year 2000 issue or making conversions to existing software are being expensed as incurred. The costs to Maxim of Year 2000 compliance and the date on
which Maxim 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. There can be no assurance that these estimates will be
achieved and actual results could differ materially from those anticipated.
Risks
include the availability and cost of personnel trained in this area, the ability to locate and correct all relevant hardware, software, computer codes and similar uncertainties.
Such risks could result in a system failure of miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. Also, there is the risk that the systems of other companies upon which Maxim's operations and systems rely will not be converted timely and will have an adverse
effect on Maxim's results of operations.

FORWARD-LOOKING STATEMENTS
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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. These statements appear in a number of places in this Report and include statements regarding the intent,
belief or current expectations of Maxim, its directors or its officers with respect to, among other things:

-
trends
affecting Maxim's financial condition or results of operations,

-
potential
acquisitions by Maxim,

-
Maxim's
business and growth strategies,

-
Maxim's
ability to successfully integrate acquired businesses,

-
the
timing, magnitude and costs of the roll-out of new flooring centers, and

-
Maxim's
financing plans.
You
are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statements as a result of various factors. Among others, factors that could adversely affect actual results and performance include:

-
local
and regional economic conditions in the areas served by Maxim,

-
the
level of customerconsumer spending for floor covering products,

-
competition
among floor covering retailers and carpet manufacturers,

-
changes
in merchandise mixes, site selection and related traffic and demographic patterns,

-
availability
of financing,

-
inventory
management and turnover levels,

-
realization
of cost savings,

-
Maxim's
success in integrating recent and potential future acquisitions, and

-
the
resolution or outcome of the pending litigation and government inquiry relating to the restatement of previously announced financial results for fiscal 1999 and for each of the quarters therein.
The
accompanying information contained in this Form 10-Q, as well as in Maxim's other 1934 Act filings, identifies important additional factors that could adversely
affect actual results and performance. See "Item 1. Business-Risk Factors" in Maxim's Annual Report on Form 10-K for the year ended January 31, 1999. You are
urged to carefully consider such factors.
ITEM
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY.Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Sensitivity. Maxim has limited exposure to market volatility infor interest rates. As of May 8,November 6,
1999, exposure from interest rates was not material to Maxim's financial position, results of operations, or cash flows, as $95.4$95.5 million of Maxim's $115.9$144.1 million of debt consisting of it Senior Notes has been fixed
at a rate of 9 1/4%¹/4% until 2007. In the event that the 9 1/4%¹/4% notes are called by the noteholders or the Company elects to purchase the Senior Notes, the Company will be
subject to interest rate volatility based on the market's forward curve. The Company also had twocurrently has no interest rate swap agreements
for a total notional amount of less than $2.5 million. These swap agreements
were terminated in May 1999.agreements. Based on Maxim's low overall floating interest rate exposure at
May 8,November 6, 1999, a

18
near-term 100 basis point change in interest rates would not materially effect Maxim's financial statements.

COMMODITY PRICE AND FOREIGN CURRENCY SENSITIVITY.
Commodity Price and Foreign Currency Sensitivity. Increases or decreases in the market price of carpet, hardwood and
vinyl flooring may affect the valuation of Maxim's inventories and purchases and, accordingly, Maxim's earnings. Maxim does not use futures or options contracts to manage volatility with respect to
this exposure. The potential increase in cost of inventories and purchases based on commodity activity is generally also reflected as a corresponding increase in Maxim's prices, and therefore, is not
material to Maxim's financial position and results of operations.
The
majority of Maxim's sales and purchases are denominated in U.S. dollars and it is Maxim's policy to eliminate short-term exchange rate volatility in the event foreign
currency transactions occur. As of May 8,November 6, 1999, there was no exposure to foreign currency exchange rate volatility.

PART

Part II. OTHER INFORMATION

ITEMOther Information
Item 3. DEFAULTS UPON SENIOR SECURITIESDefaults upon Senior Securities
Maxim is currently in default of the restricted payment covenant contained in the indenture pursuant to which theits 9 1/4%¹/4% Senior Subordinated
Notes of Maxim were issued. See "Part 1.I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations--LiquidityOperations—Liquidity and Capital Resources--SeniorResources—Senior
Subordinated Notes" included elsewhere herein for additional information concerning this default.

ITEM
Item 6. EXHIBITS AND REPORTS ON FORM 8-Q

(A) Exhibits

10.23.4 Fourth Amendment to Credit Agreement, dated October 21,
1999, among the Company, as Borrower, the Domestic
Subsidiaries of the Company, as Guarantors, Bank of America
(formerly NationsBank, N.A.), as Administrative Agent, and
the Lenders party thereto.

27.1 Financial Data Schedule for (for SEC use only)

(B) Reports on Form 8-K

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

20
Exhibits and Reports on Form 8-K
(A)
Exhibits

27.1
Financial
Data Schedule (For SEC use only)

(B)
Reports
on Form 8-K

No
reports on Form 8-K were filed during the three months ended November 6, 1999.

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: December 21, 1999

By:

/s/ A. J. NASSAR
-----------------------------------------
A. J. Nassar,
President and Chief Executive Officer

Dated: November 12,December 21, 1999

By:

/s/ STEPHEN P. COBURN
-----------------------------------------
Stephen P. Coburn,
Principal AccountingLEONARD H. THILL
Leonard H. Thill,
Chief Financial Officer
Dated: November 12, 1999

	November 6, 1999			January 31, 1999 ~~1999 ----------- ----------- (UNAUDITED)~~
	(Unaudited)

ASSETS
Cash and cash ~~equivalents...................................~~ equivalents	$ ~~46,296~~	64,899		$	89,901
Current portion of ~~franchisee~~franchise license fees ~~receivable....... 307~~ receivable		2,548			2,013
Current portion of notes ~~receivable......................... 2,404~~ receivable		2,444			3,405 ~~Receivables................................................. 65,019~~
Receivables		63,479			52,607 ~~Inventories................................................. 64,613~~
Inventories		62,831			58,744
Refundable income ~~taxes..................................... 4,476 --~~ taxes		4,766			—
Deferred income ~~taxes.......................................~~ taxes		7,361			7,361
Prepaid ~~expenses............................................ 7,930~~ expenses		8,148			6,316 ~~-------- --------~~

Total current ~~assets.................................... 198,406~~ assets		216,476			220,347
Property, plant and equipment, ~~net.......................... 80,322~~ net		82,829			71,766
Franchise license fees receivable, less current ~~portion..... 4,734~~ portion		4,373			2,337
Notes receivable from franchisees, less current ~~portion..... 9,585~~ portion		6,825			8,228
Deferred income ~~taxes.......................................~~ taxes		1,465			1,065 ~~1,065~~
Intangible ~~assets........................................... 76,836~~ assets		83,103			71,341
Other ~~assets................................................ 12,376~~ assets		15,180			13,684 ~~-------- --------~~

Total ~~assets................................................ $383,324 $388,768 ======== ========~~ assets	$	410,251		$	388,768

LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term ~~debt...........................~~ debt	$ ~~17,123~~	42,227		$	16,952
Senior subordinated ~~notes................................... 95,428~~ notes		95,462			99,387
Current portion of capital lease ~~obligations................ 6,589~~ obligations		5,245			6,635
Accounts ~~payable............................................ 27,892~~ payable		37,101			26,706
Rebates payable to ~~franchisees.............................. 4,540~~ franchisees		6,905			749 ~~Deposits.................................................... 18,533~~
Deposits		17,688			14,769
Deferred ~~revenue............................................ 5,215~~ revenue		4,170			2,254
Income taxes ~~payable........................................ --~~ payable		—			2,633
Other accrued ~~liabilities................................... 42,470~~ liabilities		43,369			55,827 ~~-------- --------~~

Total current ~~liabilities............................... 217,790~~ liabilities		252,167			225,912 ~~-------- --------~~

Long-term debt, less current ~~portion........................ 3,351~~ portion		6,410			4 ~~-------- --------~~

Capital lease obligations, less current ~~portion............. 1,391~~ portion		1,092			1,469 ~~-------- --------~~

Other long-term ~~liabilities................................. --~~ liabilities		—			516 ~~-------- --------~~

Stockholders' equity:
Common stock-shares issued: ~~21,326,184~~21,404,247 and 21,315,664 as of ~~May 8,~~November 6, 1999 and January 31, 1999, ~~respectively.......~~ respectively		21			21
Additional paid-in ~~capital................................~~ capital		186,553			185,828
Retained ~~earnings......................................... 9,036~~ earnings (deficit)		(778	)		9,836
Unrealized holding loss on investments		(396	)		—
Treasury stock-shares at cost: 2,365,900 as of ~~May 8,~~November 6, 1999 and January 31, 1999 ~~respectively...................... (34,818) (34,818) -------- --------~~		(34,818	)		(34,818	)

Total stockholders' ~~equity.............................. 160,792~~ equity		150,582			160,867 ~~-------- --------~~

Total liabilities and stockholders' ~~equity.................. $383,324 $388,768 ======== ========~~equity	$	410,251		$	388,768

	Three Months Ended						Nine Months Ended
	November 6, 1999			October 31, 1998 ~~-------- ---------~~			November 6, 1999			October 31, 1998

Revenues:
Sales of floor covering ~~products.......................... $180,568 $80,661~~ products	$	187,278		$	235,116		$	559,047		$	401,934
Fees from franchise ~~services.............................. 11,300 6,857~~ services		10,485			4,558			32,223			13,807
Fiber and PET sales....................................... -- 6,965 Other..................................................... 712 2,149 -------- ------- sales		—			8,257			—			20,431
Other		1,080			1,641			2,659			5,613

Total ~~revenues.......................................... 192,580 96,632~~ revenues		198,843			249,572			593,929			441,785
Cost of ~~sales............................................... 118,906 69,564 -------- -------~~ sales		120,358			163,599			365,515			305,984

Gross ~~profit.............................................. 73,674 27,068~~ profit		78,485			85,973			228,414			135,801
Selling, general and administrative ~~expenses................ 72,685 22,390 -------- -------~~ expenses		83,201			77,352			233,856			123,147
Nonrecurring charges		—			—			—			28,531

Operating ~~income.......................................... 989 4,678~~ (loss) income		(4,716	)		8,621			(5,442	)		(15,877	)
Other income (expense):
Interest ~~income........................................... 1,167 386~~ income		468			345			2,437			763
Interest ~~expense.......................................... (2,799) (2,459)~~ expense		(3,179	)		(4,296	)		(9,140	)		(9,681	)
Other, ~~net................................................ 79 (52) -------- -------~~ net		304			—			653			904

(Loss) income before income taxes and extraordinary ~~charge.................................................... (564) 2,553~~ charge		(7,123	)		4,670			(11,492	)		(23,891	)
Benefit (provision) for income ~~taxes........................ 38 (1,235) -------- -------~~ taxes		—			(2,039	)		1,152			6,240

(Loss) income before extraordinary ~~charge................... (526) 1,318~~ charge		(7,123	)		2,631			(10,340	)		(17,651	)
Extraordinary charge on early retirement of debt, net of tax ~~benefit................................................... (274) -- -------- -------~~ benefit		—			(377	)		(274	)		(377	)

Net (loss) ~~income...........................................~~ income		(7,123	)		2,254			(10,614	)		(18,028	)
Unrealized holding loss on investments		(396	)		—			(396	)		—

Comprehensive (loss) income	$ ~~(800)~~	(7,519	)	$ ~~1,318 ======== =======~~	2,254		$	(11,010	)	$	(18,028	)

Basic (loss) earnings per share before extraordinary ~~charge....................................................~~ charge	$ ~~(0.03)~~	(0.37	)	$ ~~0.08~~	0.14		$	(0.54	)	$	(1.02	)
Extraordinary charge per ~~share.............................. (0.01) -- -------- -------~~ share		—			(0.02	)		(0.01	)		(0.02	)

Basic (loss) earnings per ~~share.............................~~ share	$ ~~(0.04)~~	(0.37	)	$ ~~0.08 ======== =======~~	0.12		$	(0.55	)	$	(1.04	)

Diluted (loss) earnings per share before extraordinary ~~charge....................................................~~ charge	$ ~~(0.03)~~	(0.37	)	$ ~~0.08~~	0.13		$	(0.54	)	$	(1.02	)
Extraordinary charge per ~~share.............................. (0.01) -- -------- -------~~ share		—			(0.02	)		(0.01	)		(0.02	)

Diluted (loss) earnings per ~~share...........................~~ share	$ ~~(0.04)~~	(0.37	)	$ ~~0.08 ======== =======~~	0.11		$	(0.55	)	$	(1.04	)

Weighted average common ~~shares.............................. 19,153 16,424 ======== =======~~ shares		19,234			19,428			19,234			17,385

Weighted average common shares and ~~equivalents.............. 19,153 17,247 ======== =======~~equivalents		19,234			20,241			19,234			17,385

	Nine Months Ended
	November 6, 1999			October 31, 1998 ~~-------- ---------~~

CASH FLOWS FROM OPERATING ACTIVITIES:
Net ~~(loss) income.........................................~~ loss	$ ~~(800)~~	(10,614	)	$ ~~1,318~~	(18,028	)
Adjustments to reconcile net ~~(loss) income~~loss to net cash (used in) provided by operating activities:
Nonrecurring charges		—			7,540
Depreciation and ~~amortization........................... 2,856 3,372~~ amortization		9,739			13,154
Deferred income ~~taxes................................... -- 695~~ taxes		(445	)		(6,611	)
Changes in operating assets and liabilities, net of effects of acquisitions: ~~Receivables........................................... (11,407) (6,229) Inventories........................................... (4,189) (4,264)~~
Receivables		(6,652	)		(12,800	)
Inventories		(1,426	)		(20,023	)
Refundable income ~~taxes............................... (4,476) 572~~ taxes		(4,766	)		693
Prepaid expenses and other ~~assets..................... (410) (4,510)~~ assets		(4,878	)		(13,180	)
Accounts payable and other liabilities................ (3,935) (987) -------- -------- Net cash (used in) operating activities..................... (22,361) (10,033) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (9,120) (14,172) Acquisitions, net of cash acquired........................ (8,042) -- -------- -------- Net cash (used in) investing activities..................... (17,162) (14,172) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options................... 325 1,348 Purchase of treasury stock................................ -- (1,760) Long-term debt proceeds................................... -- 17,114 Principal payments on capital lease obligations........... (124) (129) Early extinguishment of debt.............................. (4,283) -- -------- -------- liabilities		4,045			57,689

Net cash (used in) provided by operating activities		(14,997	)		8,434

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(14,952	)		(46,382	)
Acquisitions, net of cash acquired		(14,582	)		(25,354	)

Net cash used in investing activities		(29,534	)		(71,736	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		325			3,960
Purchase of treasury stock		—			(19,924	)
Long-term debt proceeds		25,254			128,482
Long-term debt payments		(4,283	)		(43,461	)
Principal payments on capital lease obligations		(1,767	)		(376	)

Net cash provided by financing ~~activities......... (4,082) 16,573 -------- --------~~ activities		19,529			68,681

Net ~~decrease~~(decrease) increase in cash and cash ~~equivalents................... (43,605) (7,632)~~ equivalents		(25,002	)		5,379
Cash and cash equivalents at beginning of ~~period............~~ period		89,901			28,880 ~~-------- --------~~

Cash and cash equivalents at end of ~~period..................~~ period	$ ~~46,296~~	64,899		$ ~~21,248 ======== ========~~	34,259

	Three Months Ended						Nine Months Ended
	November 6, 1999			October 31, 1998 ~~(IN THOUSANDS) -------- ---------~~			November 6, 1999			October 31, 1998
(In thousands)

Net ~~revenue............................................ $192,580 $185,848~~ revenue	$	198,843		$	195,148		$	593,929		$	563,790
Net ~~loss............................................... (800) (2,048)~~ loss		(7,123	)		(211	)		(10,614	)		(26,937	)
Basic loss per ~~share...................................~~ share	$ ~~(0.04)~~	(0.37	)	$ ~~(0.10)~~	(0.01	)	$	(0.55	)	$	(1.38	)
Diluted loss per ~~share................................. (0.04) (0.10)~~share		(0.37	)		(0.01	)		(0.55	)		(1.38	)

	November 6, 1999		January 31, 1999 ~~1999 (IN THOUSANDS) -------- -----------~~
(In thousands)

Raw ~~materials..........................................~~ materials	$	309	$	309
Finished ~~goods......................................... 64,304~~ goods		62,522		58,435 ~~------- ------- Total.................................................. $64,613 $58,744 ======= =======~~

Total	$	62,831	$	58,744

	November 6, 1999		January 31, 1999 ~~1999 (IN THOUSANDS) -------- -----------~~ ~~Retail................................................. $62,796 $56,927 Image..................................................~~
(In thousands)

Retail	$	62,522	$	56,927
Image		309		1,817 1,817 ------- ------- Total.................................................. $64,613 $58,744 ======= =======

Total	$	62,831	$	58,744

	January 31, ~~MAY 8,~~ 1999 ~~AMOUNT~~		Amount Incurred			November 6, 1999 ~~BALANCE INCURRED BALANCE (IN THOUSANDS) ----------- -------- --------~~
(In thousands)

Claim ~~reserves.............................................. $3,195~~ reserves	$ ~~(191) $3,004~~	3,195	$	(1,115	)	$	2,080
Store closure and carrying ~~costs............................~~ costs		2,822 (1,478) 1,344 ------ ------- ------ $6,017 $(1,669) $4,348 ====== ======= ======		(2,822	)		—

	$	6,017	$	(3,937	)	$	2,080

	Manufacturing			Retail			Franchise Services			Intersegment Eliminations			Total
(In thousands)

Three Months Ended November 6, 1999:
Revenues	$	—		$	185,388		$	19,539		$	(6,084	)	$	198,843
Operating (loss) income		—			(1,296	)		(3,420	)		—			(4,716	)
Interest expense		—			142			3,037			—			3,179
Income tax (provision) benefit		—			—			—			—			—
Net (loss) income		—			(1,153	)		(5,970	)		—			(7,123	)
Total assets		530			239,853			169,868			—			410,251

Three Months Ended October 31, 1998:
Revenues	$	54,424		$	190,625		$	15,217		$	(10,694	)	$	249,572
Operating income (loss)		4,994			2,995			(76	)		708			8,621
Interest expense		1,543			999			4,134			(2,380	)		4,296
Income tax (provision) benefit		(1,117	)		(569	)		(353	)		—			(2,039	)
Extraordinary charge		—			—			377			—			377
Net (loss) income		2,465			703			(914	)		—			2,254

Nine Months Ended November 6, 1999:
Revenues	$	—		$	551,122		$	61,440		$	(18,633	)	$	593,929
Operating income (loss)		—			(7,856	)		2,414			—			(5,442	)
Interest expense		—			1,602			9,027			(1,489	)		9,140
Income tax benefit		—			54			1,098			—			1,152
Extraordinary charge		—			—			274			—			274
Net (loss) income		—			(8,796	)		(1,818	)		—			(10,614	)

Nine Months Ended October 31, 1998:
Revenues	$	152,148		$	273,888		$	37,740		$	(21,991	)	$	441,785
Nonrecurring charges		—			—			28,531			—			28,531
Operating income (loss)		13,376			4,139			(31,880	)		(1,512	)		(15,877	)
Interest expense		4,380			2,772			9,152			(6,623	)		9,681
Income tax (provision) benefit		(3,256	)		150			9,346			—			6,240
Extraordinary charge		—			—			377			—			377
Net (loss) income		6,039			(732	)		(23,335	)		—			(18,028	)

	THE MAXIM GROUP , INC.
Dated: December 21, 1999	By:	/s/ A. J. NASSAR ~~-----------------------------------------~~ A. J. Nassar, President and Chief Executive Officer
Dated: ~~November 12,~~December 21, 1999	By:	/s/ STEPHEN P. COBURN ----------------------------------------- Stephen P. Coburn, Principal AccountingLEONARD H. THILL Leonard H. Thill, Chief Financial Officer ~~Dated: November 12, 1999~~