UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


       (Mark One)

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

For the quarterly period ended August 29, 1999.

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
       OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from .............to ............

Commission File Number 1-7013

                           GRISTEDE'S FOODS, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

          Delaware                                      13-1829183
-------------------------------                     -------------------
(State or Other Jurisdiction of                     (I.R.S. Employer
Incorporation or Organization)                      Identification No.)

                  823 Eleventh Avenue, New York, New York 10019
                  ---------------------------------------------
                     (Address of Principal Executive Offices)


                                 (212) 956-5803
             ----------------------------------------------------
             (Registrant's Telephone Number, Including Area Code)

                            GRISTEDE'S SLOAN'S, INC.
              ----------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Indicate by check mark  whether the  registrant  (1) has filed all reports to be
filed  by  Section  13 or 15 (d) of  the  Securities  Exchange  Act  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  [ ]

At October 12, 1999, the registrant had issued and outstanding 19,636,574 shares
of common stock.


<PAGE>


                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES

                         PART I - FINANCIAL INFORMATION



Item 1. Financial Statements

            Consolidated Balance Sheets as of
                 August 29,1999 and November 29, 1998                     Page 3

            Consolidated Statements of Operations for
                 the quarters and nine months ended
                 August 29,1999 and August 30,1998                        Page 4

            Consolidated Statements of Stockholders' Equity for
                 the year ended  November 29, 1998 and the
                 nine months ended August 29, 1999                        Page 5

            Consolidated Statements of Cash Flows for
                 the nine months ended
                 August 29,1999 and August 30,1998                        Page 6

            Notes to Consolidated Financial Statements                    Page 7




Item 2. Management's Discussion and Analysis of
          Financial Condition and Results of
          Operations                                                      Page 9




                                      - 2 -


<PAGE>
Item 1
Financial Statements

<TABLE>
<CAPTION>
                                                       GRISTEDE'S FOODS, INC.
                                                UNAUDITED CONSOLIDATED BALANCE SHEETS

                                                                                                 August 29,            November 29,
ASSETS                                                                                              1999                   1998
                                                                                                ============           ============
CURRENT ASSETS:
<S>                                                                                             <C>                    <C>
     Cash ...........................................................................           $     69,274           $     53,794
     Accounts receivable - net of allowance for
       doubtful accounts
       of $0 at August 29, 1999 and $0 November 29, 1998 ............................              6,537,670              5,091,174
     Inventory ......................................................................             24,139,693             18,425,802
     Prepaid expenses and other current assets ......................................              1,928,698              1,320,931
     Notes receivable - current portion .............................................                309,745              1,032,203
                                                                                                ------------           ------------

     Total current assets ...........................................................             32,985,079             25,923,904
                                                                                                ------------           ------------

PROPERTY AND EQUIPMENT:
     Furniture, fixtures and equipment ..............................................             15,220,261             14,610,788
     Capitalized equipment leases ...................................................             12,186,790              8,267,999
     Leaseholds and leasehold improvements ..........................................             43,098,823             34,388,652
                                                                                                ------------           ------------
                                                                                                  70,505,873             57,267,439
     Less accumulated depreciation and amortization .................................             28,477,884             25,716,915
                                                                                                ------------           ------------

     Net property and equipment .....................................................             42,027,989             31,550,524

     Deposits and other assets ......................................................                866,721                719,429
     Deferred costs .................................................................              2,291,559              1,968,859
     Notes receivable - noncurrent portion ..........................................                330,708                543,793
                                                                                                ------------           ------------

TOTAL ...............................................................................           $ 78,502,056           $ 60,706,509
                                                                                                ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable, trade ........................................................           $ 14,422,287           $ 11,951,436
     Accrued payroll, vacation and withholdings .....................................                523,057              1,543,748
     Accrued expenses and other current liabilities .................................              1,204,327                896,716
     Note payable ...................................................................                      0                319,138
     Capitalized lease obligation - current portion .................................              1,362,544                695,665
     Current portion of long term debt ..............................................              1,385,714              3,314,283
                                                                                                ------------           ------------

     Total current liabilities ......................................................             18,897,930             18,720,986

     Long-term debt - noncurrent portion ............................................             26,197,031             18,663,935
     Due to Affiliate ...............................................................              9,113,500              4,031,394
     Deferred advertising ...........................................................              1,755,154                248,654
     Capitalized lease obligation - noncurrent portion ..............................              5,455,415              2,986,007
     Deferred rents .................................................................              2,217,717              1,673,850
                                                                                                ------------           ------------

      Total liabilities .............................................................             63,636,747             46,324,826
                                                                                                ------------           ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred Stock, $50 Par, -shares authorized 500,000;
       none issued
     Common stock,$0.02 par value -
       shares authorized 25,000,000; outstanding
       19,636,574 shares at August 29, 1999 and November 29, 1998 ...................                392,732                392,732
     Additional paid-in capital .....................................................             14,136,674             14,136,674
     Retained eanings/ (deficit) ....................................................                335,903               (147,723)
                                                                                                ------------           ------------

     Total stockholders' equity .....................................................             14,865,309             14,381,683
                                                                                                ------------           ------------

TOTAL ...............................................................................           $ 78,502,056           $ 60,706,509
                                                                                                ============           ============

</TABLE>
See accompanying notes.

                                                                 -3-

<PAGE>

<TABLE>
<CAPTION>
                                                       GRISTEDE'S FOODS, INC.
                                           UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE 39 WEEKS AND 13 WEEKS ENDED AUGUST 29, 1999 AND AUGUST 30, 1998


                                                                  39 weeks          13 weeks           39 weeks          13 weeks
                                                                   ended             ended              ended             ended
                                                                 August 29,        August 29,         August 30,        August 30,
                                                                    1999              1999               1998             1998
                                                                =============     =============     =============     =============


<S>                                                             <C>               <C>               <C>               <C>
Sales ......................................................    $ 132,321,470     $  43,778,204     $ 116,296,764     $  37,631,409
Cost of sales ..............................................       80,855,046        27,171,491        70,211,045        23,006,331
                                                                -------------     -------------     -------------     -------------

Gross profit ...............................................       51,466,424        16,606,713        46,085,719        14,625,078

Store operating, general and administrative expense ........       41,932,689        14,142,298        39,167,716        13,164,251

Depreciation and amortization ..............................        3,366,818         1,058,839         2,973,525           862,422

Non-store operating expenses:

    Administrative payroll and fringes .....................        2,818,819           957,643         2,307,783           842,747
    General office expense .................................          905,259           299,888           871,630           344,019
    Professional fees ......................................          398,069           104,661           148,370            20,373
    Corporate expense ......................................          151,338            36,255           117,689            44,913
                                                                -------------     -------------     -------------     -------------

Total non-store operating expense ..........................        4,273,485         1,398,447         3,445,472         1,252,052
                                                                -------------     -------------     -------------     -------------

Operating profit/ (loss) ...................................        1,893,432             7,129           499,006          (653,647)
                                                                -------------     -------------     -------------     -------------

Other income (expense):

    Interest expense .......................................       (1,738,785)         (676,284)       (1,386,393)         (533,453)
    Interest income ........................................           69,337            21,775           142,298            43,611
    Other income ...........................................          307,098           307,098                 0                 0
                                                                -------------     -------------     -------------     -------------

Total other expense - net ..................................       (1,362,349)         (347,410)       (1,244,095)         (489,842)
                                                                -------------     -------------     -------------     -------------

Income/ (loss) before income taxes .........................          531,083          (340,281)         (745,089)       (1,143,489)

Provision for income taxes .................................           47,457            19,120                 0           (42,500)
                                                                -------------     -------------     -------------     -------------

Net income/ (loss) .........................................    $     483,626     $    (359,401)    $    (745,089)    $  (1,100,989)
                                                                =============     =============     =============     =============

Income/ (loss) per share ...................................    $        0.02     ($       0.02)    ($       0.04)    ($       0.06)
                                                                =============     =============     =============     =============

Weighted average number of shares and
equivalents outstanding ....................................       19,636,574        19,636,574        19,636,574        19,636,574
                                                                =============     =============     =============     =============

</TABLE>


See accompanying notes





                                                                 -4-



<PAGE>

<TABLE>
<CAPTION>


                                                       GRISTEDE'S FOODS, INC.
                                      UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                              FOR THE NINE MONTHS ENDED AUGUST 29, 1999



                                                                                         Additional      Retained         Total
                                                              Common stock                Paid-In        earnings     Stockholders'
                                                         Shares          Amount           Capital        (Deficit)        Equity
                                                      ===========      ===========      ===========     ===========     ===========
<S>                                                    <C>             <C>              <C>              <C>             <C>
Balance at November 30, 1997 ....................      19,636,574      $   392,732      $14,136,674         140,616      14,670,022

Net loss for the year ended
  Novemeber 29, 1998 ............................                                                          (288,339)       (288,339)

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

Balance at November 29, 1998 ....................      19,636,574      $   392,732      $14,136,674        (147,723)     14,381,683

Net income for the thirty nine  weeks
   ended August 29, 1999 ........................                                                           483,626         483,626
                                                      -----------      -----------      -----------     -----------     -----------

Balance at August 29, 1999 ......................      19,636,574      $   392,732      $14,136,674         335,903      14,865,309
                                                      ===========      ===========      ===========     ===========     ===========

</TABLE>




See accompanying notes.





                                                                 -5-


<PAGE>
<TABLE>
<CAPTION>
                                                       GRISTEDE'S FOODS, INC.
                                           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    FOR THE NINE MONTHS ENDED AUGUST 29, 1999 AND AUGUST 30, 1998

                                                                             39 weeks              39 weeks
                                                                               ended                ended
                                                                            August 29,            August 30,
                                                                               1999                  1998
                                                                           ============          ============
<S>                                                                        <C>                   <C>
Cash flows from operating activities:

   Net income/ (loss) ..................................................   $    483,626          $   (745,089)

   Adjustments to reconcile net income to
     net cash provided by operating activities:

     Depreciation and amortization .....................................      3,366,818             2,973,252

     Changes in operating assets and liabilities:

       Accounts receivable - net .......................................     (1,446,495)             (972,510)
       Inventory .......................................................     (5,713,891)           (1,652,663)
       Prepaid expenses and other current assets .......................       (607,767)             (298,687)
       Notes receivable ................................................        935,543               386,030
       Receivable from officer .........................................              0               351,778
       Due to related party ............................................      5,082,106
       Other assets ....................................................     (1,075,841)             (451,862)
       Accounts payable, trade .........................................      2,470,852            (2,188,126)
       Accrued payroll, vacation and withholdings ......................     (1,020,691)             (711,765)
       Accrued expenses and other current liabilities ..................        307,611               (11,017)
       Deferred rents ..................................................        543,867               522,466
       Other credits ...................................................      1,506,500               (97,500)
                                                                           ------------          ------------

         Net cash provided by/(used)
          in operating activities ......................................      4,832,238            (2,895,693)
                                                                           ------------          ------------

Cash flows from investing activities:

   Capital expenditures - net ..........................................    (13,238,434)           (7,036,763)
                                                                           ------------          ------------

         Net cash used in investing activities .........................    (13,238,434)           (7,036,763)
                                                                           ------------          ------------

Cash flows from financing activities:

    Repayments of bank loan ............................................     (2,264,611)           (1,546,545)
    Repayment capitalized lease obligations ............................       (732,471)             (403,749)
    Proceeds from bank loans ...........................................      7,550,000            10,500,000
    Proceeds from capitalized lease obligations ........................      3,868,758             1,396,331
                                                                           ------------          ------------

         Net cash provided by financing activities .....................      8,421,676             9,946,037
                                                                           ------------          ------------

NET INCREASE  IN CASH AND CASH EQUIVALENTS .............................         15,480                13,581

CASH AND CASH EQUIVALENTS, begining of period ..........................         53,794                88,970
                                                                           ------------          ------------

CASH AND CASH EQUIVALENTS, end of period ...............................   $     69,274          $    102,551
                                                                           ============          ============

Supplemental disclosures of cash flow information:

    Cash paid for interest .............................................   $  1,464,021          $  1,277,535
    Cash paid for taxes ................................................   $     55,808          $     22,056


Noncash Transactions:
    Acquisition of new store ...........................................                               30,921

</TABLE>

See accompanying notes.

                                                                 -6-

<PAGE>


                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS - On November 4, 1997, Sloan's  Supermarkets,  Inc. ("Sloan's") changed
its name to Gristede's Sloan's,  Inc. ("GRI" or the "Company").  On November 10,
1997,  GRI  acquired  certain  assets,  net  of  liabilities,   of  29  selected
supermarkets and a wholesale distribution business ("The Food Group") controlled
by  Mr.  John  Catsimatidis,  Chairman  and  37%  stockholder  of  Sloan's.  The
transaction  was accounted for as the  acquisition  of Sloan's by The Food Group
pursuant  to  Emerging  Issues  Task  Force  90-13 as a result of The Food Group
obtaining  control of Sloan's after the transaction.  The assets and liabilities
of The Food Group were recorded at their  historical  cost.  Sloan's  assets and
liabilities   were  recorded  at  their  fair  value  to  the  extent  acquired.
Consideration  for the  transaction  was based on an aggregate of $36,000,000 in
market value of the Company's  common stock and the  assumption of $4,000,000 of
liabilities.  16,504,298  shares of common  stock were issued on the date of the
acquisition  based on a market price of $2.18 per share.  On August 16, 1999 the
Company changed its name to Gristede's Foods, Inc.

The Company  presently  operates 41 supermarkets  (the  "Supermarkets")  and one
pharmacy  store.  36  Supermarkets  are located in  Manhattan,  New York,  three
Supermarkets  are located in Westchester  County,  New York, one  Supermarket is
located in Brooklyn,  New York, one  Supermarket is located in Long Island,  New
York.  The  pharmacy  store  is  located  in  Manhattan,  New  York.  10 of  the
Supermarkets are operated under the "Sloan's" name and 31 are operated under the
"Gristede's" name. The Company leases all of its store locations.

The Company also owns City Produce Operating Corp., a corporation which operates
a  warehouse  and  distribution  center  primarily  for fresh  produce on leased
premises in the Bronx, New York.

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include the
accounts  of  the  Company  and  its  wholly-owned  subsidiaries.  All  material
intercompany accounts and transactions have been eliminated in consolidation.

QUARTER END - The Company  operates  using the  conventional  retail  52/53 week
fiscal year.  The fiscal  quarter  ends on the Sunday  closest to the end of the
quarter. The Company's fiscal year ends on the Sunday closest to November 30.

INVENTORY - Store  inventories  are valued  principally  at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.

PROPERTY AND EQUIPMENT -  Depreciation  of furniture,  fixtures and equipment is
computed by the  straight-line  method over the  estimated  useful  lives of the
assets.

LEASES - The Company charges the cost of noncancelable  operating lease payments
and beneficial  leaseholds to operations on a straight-line basis over the lives
of the leases.


                                      - 7 -


<PAGE>


                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
   POLICIES (Continued)

PROVISION FOR INCOME TAXES - Income taxes reflect Federal and State  alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carry forward.

INCOME PER SHARE - Per share data are based on the  weighted  average  number of
shares of common stock and equivalents  outstanding during each quarter.  Income
per share is computed by the treasury  stock  method;  primary and fully diluted
income per share are the same.

In the opinion of management, the information furnished reflects all adjustments
(consisting  of normal  recurring  adjustments)  which are  necessary for a fair
statement  of the  results of  operations  for the interim  period.  The interim
figures are not  necessarily  indicative  of the results to be expected  for the
fiscal year.

The Company's  Annual Report on Form 10-K for the 12 month period ended November
29, 1998 contains information which should be read in conjunction herewith.

2. RELATED PARTY TRANSACTIONS

Under a management  agreement dated November 10, 1997, Namdor Inc., a subsidiary
of  the  Company,   performs   consulting  and  managerial  services  for  three
supermarkets  owned  by  corporations   controlled  by  John  Catsimatidis.   In
consideration  of such  services,  Namdor  Inc.  is  entitled  to  receive  on a
quarterly basis a cash payment of 1.25% of all sales of merchandise  made at the
managed  supermarkets.  During the quarter and nine months ended August 29, 1999
the management fee income was $23,250 and $76,231, respectively. For the quarter
and nine months ended August 30, 1998 the  management fee income was $26,873 and
$85,664, respectively.

C&S Acquisition Corp.  (formerly Red Apple Leasing,  Inc.) a corporation  wholly
owned by John  Catsimatidis,  leases  equipment to the Company.  Such leases are
primarily for store  operating  equipment.  Obligations  under capital leases at
August 29, 1999 were $552,757 and require  monthly  payments of $35,114  through
March 1, 2001.  Obligations under operating leases were $41,676 per month during
the quarter ended August 29, 1999.

Advertising  services are provided to the Company by an affiliated company,  MCV
Advertising  Associates  Inc.,  a company  owned by John  Catsimatidis.  For the
quarter and nine months ended August 29, 1999 the costs  incurred  were $211,179
and  $830,428  respectively.  For the quarter and nine months  ended  August 30,
1998, the costs incurred were $232,279 and $818,616, respectively.


                                      - 8 -


<PAGE>


                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. RELATED PARTY TRANSACTIONS (Continued)

The Company leases three  locations from Red Apple Real Estate,  Inc., a company
solely  owned by John  Catsimatidis.  During the quarter  and nine months  ended
August 29, 1999 the Company  paid to Red Apple Real  Estate,  Inc. $158,361  and
$788,227, respectively.  During the quarter and nine months ended August 30,1998
the Company paid $301,852 and $675,971, respectively.

Wolf,  Block,  Schorr and  Solis-Cohen  LLP, a law firm of which Martin Bring, a
director of the  Company is a partner,  received  fees of $89,574  and  $183,738
during the quarter and nine months ended August 29, 1999,  respectively.  During
the quarter and nine months ended August 30, 1998, they received fees of $75,252
and $157,047, respectively.

On February 6, 1998, the Company  purchased  substantially all of the assets and
assumed certain of the liabilities of a supermarket located at 1644 York Avenue,
New York City, that was owned by a corporation  controlled by John Catsimatidis.
The purchase  price was to be  determined  at a subsequent  date based on, among
other  things,  a review of the  operating  statement  of the  supermarket  from
February 6, 1998 to a date no earlier than January 31, 1999. During the quarter,
and using a  valuation  methodology  similar to that used in the  October,  1997
valuation  of the Food Group,  the  supermarket  was valued at  $3,389,000.  The
excess over the $30,921 book value of the fixed assets  acquired was credited to
fixed  assets.  The Company paid for the  supermarket  by recording an affiliate
liability.


                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES

                                     PART I

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS FOR THE QUARTERS  AND NINE MONTHS
              ENDED AUGUST 29, 1999 AND AUGUST 30, 1998

RESULTS OF OPERATIONS

The following table sets forth items from the Company's Consolidated  Statements
of Operations as a percentage on sales.

                                      39 weeks   13 weeks   39 weeks    13 weeks
                                        ended      ended      ended       ended
                                       8/29/99    8/29/99    8/30/98     8/30/98
                                       =======    =======    =======     =======
Sales ..............................     100.0      100.0      100.0      100.0
Cost of sales ......................      61.1       62.1       60.4       61.1
                                         -----      -----      -----      -----
Gross profit .......................      38.9       37.9       39.6       38.9
Store operating, general and
    administrative expense .........      31.7       32.3       33.7       35.0
Depreciation and amortization ......       2.5        2.4        2.5        2.3
Non-store operating expense ........       3.2        3.2        3.0        3.3
                                         -----      -----      -----      -----
Operating profit ...................       1.5        0.0        0.4       (1.7)
Other income (expense) .............      (1.0)      (0.8)      (1.0)      (1.3)
                                         -----      -----      -----      -----
Income from operations
    before income taxes ............       0.5       (0.8)      (0.6)      (3.0)
Provisions for income taxes ........       0.1       --         --          0.1
                                         -----      -----      -----      -----
Net income .........................       0.4       (0.8)      (0.6)      (2.9)
                                         =====      =====      =====      =====


                                      - 9 -


<PAGE>


Sales for the quarter and nine months ended August 29, 1999 were $43,778,204 and
$132,321,470,  respectively.  Sales for the quarter and nine months ended August
30, 1998 were $37,631,409 and $116,296,764,  respectively. The increase in sales
during the 1999 periods were  primarily the result of the  Company's  remodeling
program,  which is continuing and a new store which was in operation  during the
entire third quarter of 1999.

Gross profit was  $16,606,713  or 37.93% of sales and  $51,466,424  or 38.89% of
sales for the quarter and nine months  ended August 29,  1999,  respectively  as
compared with  $14,625,078 or 38.86% of sales and $46,085,719 or 39.63% of sales
for the  quarter  and nine  months  ended  August 30,  1998,  respectively.  The
decrease in gross  profit as a  percentage  of sales during the 1999 periods was
primarily due to selected  promotional  price  reductions in connection with the
grand reopening periods of the newly remodeled stores.

Store operating,  general and administrative expenses were $14,142,298 or 32.30%
of sales and  $41,932,689  or 31.69% of sales for the  quarter  and nine  months
ended August 29,  1999,  respectively  as compared to $ 13,164,251  or 34.98% of
sales and  $39,167,716  or 33.68% of sales for the quarter and nine months ended
August 30,  1998,  respectively.  The decrease in store  operating,  general and
administrative  expense as a percentage  of sales in the 1999 periods was mainly
due to better cost controls in relation to the increased sales.

Non-store operating expenses were $1,398,447 or 3.19% of sales and $4,273,485 or
3.23%  of  sales  for the  quarter  and  nine  months  ended  August  29,  1999,
respectively as compared to $1,252,052 or 3.33% of sales and $3,445,472 or 2.96%
of sales for the quarter and nine months  ended  August  30,1998,  respectively.
Administrative  payroll and  fringes  were 2.19% of sales and 2.13% of sales for
the quarter and nine months ended August 29, 1999, respectively as compared with
2.24% and 1.98% of sales for the quarter and nine months  ended August 30, 1998,
respectively.  The increase in the 1999 nine month period  reflects the addition
of supervisory and data processing  personnel to handle the additional  business
generated  by  the  store  remodeling  program.  General office  expenses  as  a
percentage  of sales were 0.68% and 0.69% for the quarter and nine months  ended
August 29, 1999, respectively as compared to 0.91% and 0.75% for the quarter and
nine months ended August 30, 1998,  respectively.  The decrease  during the 1999
periods was  primarily  due to better cost controls in relation to the increased
sales.  Professional fees were 0.24% and 0.30% of sales for the quarter and nine
months  ended  August 29,  1999 as  compared to 0.06% and 0.13% of sales for the
quarter and nine months ended August 30, 1998, respectively. The increase in the
1999 periods was due to the  additional  need for outside  accounting  and legal
services.  Corporate  expenses as a percentage of sales were 0.08% and 0.11% for
the quarter and nine months ended August 29, 1999,  respectively  as compared to
0.12% and 0.10% of sales for the quarter and nine months  ended August 30, 1998,
respectively.  The decrease  during the quarter was  primarily  due to decreased
shareholder expenses.

Interest  expense  for the quarter  and nine  months  ended  August 29, 1999 was
$676,284 and $1,738,785, respectively as compared to $533,453 and $1,386,393 for
the quarter and nine months ended August 30, 1998, respectively. The increase in
the 1999 periods was primarily  attributable to increased  borrowings  under the
Company's bank credit facility and increased capitalized equipment leasing.

                                     - 10 -


<PAGE>


Interest  income for the  quarter  and nine  months  ended  August 29,  1999 was
$21,775 and $69,337,  respectively as compared with $43,611 and $142,298 for the
quarter and nine months ended August 30, 1998, respectively. The decrease in the
1999  periods  was due to the  reduction  in  outstanding  notes  receivable  as
compared to the 1998 periods.

Other  income  for the  quarter  and  nine  months  ended  August  29,  1999 was
$307,098,and $307,098, respectively and represents net income from the buyout of
a lease on a non- productive store.

As a result  of the items  reviewed  above  the net loss and net  income  before
provision  for income  taxes for the quarter and nine  months  ended  August 29,
1999, respectively was $340,281 and $531,083,  respectively as compared to a net
loss of $1,143,489 and $745,089, respectively.


LIQUIDITY AND CAPITAL RESOURCES

On November 10, 1997, the Company  completed its financial  arrangements  with a
group of banks for a credit  facility in the  aggregate  amount of  $25,000,000.
Under the credit  agreement  the  Company  obtained a term loan in the amount of
$12,000,000  to  refinance  prior bank debt,  an  improvement  term loan line of
credit in the  amount of  $8,000,000  to  finance  capital  improvements  to its
supermarkets  and a  revolving  line of credit in the  amount of  $5,000,000  to
provide working capital. Effective May 29, 1999, the banks executed an amendment
to the credit  facility that (i) extended its maturity  date until  November 30,
2003,  at which time all amounts  outstanding  thereunder  are due, (ii) amended
certain financial  covenants and (iii) reduced the amortization of the term loan
and improvement  term loan facilities and increased the revolving line of credit
to  $14,000,000,  all as  follows:  the term loan  amortization  was  reduced to
$100,000  per month  until June 2000,  and  thereafter  is  $142,857  per month;
amortization on the improvement  term loan is $50,000 per month  commencing July
2000 until June 2001 and $133,333 per month  thereafter;  the  revolving  credit
commitment  reduces by $466,667  per month  commencing  July  1,2001.  Presently
$1,400,000  is  available  under the  revolving  line of  credit;  the term loan
facility and the improvement term loan facility are fully utilized.

Borrowing  under the credit  facility  bear interest at a spread over either the
prime rate of the agent bank or a LIBOR rate,  with the spread  dependent on the
ratio of the  Company's  funded debt to EBITDA  ratio,  as defined in the credit
agreement.  The average interest rate on amounts  outstanding under the facility
during the 13 weeks ended August 29, 1999 was 7.9 % per annum.

The credit facility contains  covenants,  representations  and events of default
typical of credit  facility  agreements,  including  financial  covenants  which
require the Company to meet,  among other things,  a minimum tangible net worth,
debt service coverage ratios and fixed charge coverage  ratios,  and which limit
transactions with affiliates. The facility is secured by equipment,  inventories
and accounts receivable.


                                     - 11 -


<PAGE>


The Company has not incurred any material commitments for capital  expenditures,
although  it  anticipates  spending  approximately   $10,000,000  on  its  store
remodeling and expansion program in fiscal 1999.

The Company has  available  approximately  $1.2  million in third party  leasing
lines  of  credit  to lease  finance  equipment  for its  store  remodeling  and
expansion program.


YEAR 2000 ISSUE

The Company has assessed it's  information  technology  ("IT")  systems for Year
2000  readiness  and has given  the  highest  priority  to those IT  systems  it
considers mission  critical.  The systems the Company considers mission critical
are its store  automation  systems  (including  point of sale  systems)  and its
computer systems at its main office which support these store systems.

The  Company,  working  with  the  original  vendor,   successfully  tested  and
implemented  the Year 2000 compliant  version of the systems at its main office,
which support the in store automation  systems.  During March 1999, the Company,
working with the original vendor,  successfully  tested and implemented the Year
2000 complaint  version of its store  automation  system in one of its automated
stores.  This Year 2000 compliant  version of the in store automation  system is
currently being implemented in the remaining stores, as required.

No  additional  expense  has or will be  incurred  by the Company to bring these
systems into Year 2000  compliance as any necessary  changes are provided by the
vendors under software maintenance programs in place.

The Company has assessed the other IT systems,  including accounting and payroll
systems, deployed at its main office and its City Produce warehouse facility for
Year 2000 compliance and has identified the steps necessary to ensure that these
systems will be Year 2000 compliant.

The  Company  has decided to  substantially  expand and enhance its  information
technology  systems to further  leverage the  investment the Company has made on
in-store  automation and  networking in the last few years.  The Company will be
implementing  state of the art client  server  systems on  Microsoft  Windows NT
platforms,  using best of breed applications from selected vendors, for time and
attendance,   payroll,   inventory  control  and  distribution,   and  financial
applications.  The Company  switched  all payroll  processing  to the new system
during June 1999. These systems will allow for better decision tools and quicker
information  flows  between the stores,  the main office,  and the Company owned
distribution facility.

The cost of this program,  including new network  enabled time clocks,  computer
hardware,  software, and implementation services is budgeted to be approximately
$850,000 and will be completed by the end of fiscal 1999 (11/28/99). The Company
had  previously  expected to spend  $100,000 out of cash flow generated from its
operations to modify its existing systems to be Year 2000 compliant. The Company
will redirect those  resources  towards this new effort and plans on leasing the
systems, where appropriate, in a manner similar to the way the

                                      - 12 -


<PAGE>


Company currently leases its store automation  systems.  The new systems will be
Year 2000 compliant.

The Company does not currently  intend to hire an outside firm to  independently
verify that its systems are Year 2000 compliant.

The  Company  has  assessed  the  majority  of its non-IT  systems for Year 2000
readiness  and has  identified  a small  number of  systems,  including  certain
equipment  at store  level,  which may not be Year 2000  ready.  The  Company is
working with the vendor of these  systems to identify the best  approach.  While
these systems have an internal clock and date, the date is not necessary for the
systems to be productive.  Such systems could therefore  continue to function as
needed and  management  does not  anticipate  that these  systems  will pose any
significant Year 2000 problem or expense.

The Company is continuing to review the Year 2000  readiness  plans of its major
vendors in an effort to ensure that  operations  remain  unaffected by Year 2000
related  failures.  The Company  will place  preset  orders with  certain  major
vendors  to help  ensure  product  deliveries  in the event  that the  vendor is
affected  by  failures  at some  level of its  operations  but is still  able to
deliver  merchandise.  In the event a major vendor is unable to provide products
the Company will increase  purchases  from other vendors from which it currently
buys.

The Company  purchases  merchandise sold in its stores from multiple vendors and
is not reliant on any one vendor for the normal conduct of its  operations.  The
Company is not dependent on these supplier  relationships  since  merchandise is
readily available from numerous sources under different brand names,  subject to
conditions affecting food supplies generally.

The  Company  believes  that its efforts  will  result in year 2000  compliance.
However,  the impact on business operations of failure by the Company to achieve
compliance or failure by external  entities  which the Company  cannot  control,
such as vendors,  to achieve  compliance,  could be  material  to the  Company's
consolidated results of operations.




                                     - 13 -


<PAGE>


                    GRISTEDE'S FOODS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

              None.

Item 2.  Changes in Securities and Use of Proceeds

              None.

Item 3.  Defaults Upon Senior Securities

              None.

Item 4.  Submission of Matters to a Vote of Security Holders

              An Annual  Meeting  of  Stockholders  of the  Company  was held on
August 12,  1999.  The  stockholders  approved  an  amendment  to the  Company's
Certificate  of  Incorporation  to change the name of the Company to  Gristede's
Foods,  Inc. The number of votes cast in favor  of the amendment was 17,869,670.
There  were no votes cast  against  and no  abstentions.  In  addition,  each of
Kishore  Lall,  Martin  Steinberg  and Edward  Salzano  was elected as a Class 1
director  to serve  for a term  expiring  at the 2002  Meeting  of  Stockholders
(17,869,670  shares  voted in favor of the  election  of each of  Kishore  Lall,
Martin Steinberg and Edward Salzano with no votes cast against or abstaining).

              The stockholders  also approved a proposal to amend the 1998 Stock
Option  Plan of the  Company to  increase  the number of shares of Common  Stock
reserved  for  issuance  upon  exercise of options  granted  under the Plan from
500,000 to 1,500,000.  The number of votes cast in favor was 17,869,670  with no
votes cast against or abstaining.

Item 5.  Other Information
              None.

Item 6.  Exhibits and Reports on Form 8-K
         (a) Exhibits

              27. Financial Data Schedule (filed herewith)

          (b) On June 15, 1999 the  Company filed a  Current Report  on Form 8-K
reporting certain amendments to its Credit Facility with a group of banks.





                                     - 14 -


<PAGE>


                                   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.


                                                  Gristede's Foods, Inc.

                                              By: /s/ John A. Catsimatidis
                                                  ------------------------
                                                  John A. Catsimatidis
                                                  Chairman of the Board and
                                                  Chief Executive Officer

Dated: October 12, 1999



                                              By: /s/ Stuart Spivak
                                                  ------------------------
                                                  Stuart Spivak
                                                  Executive Vice President and
                                                  Chief Financial Officer

Dated: October 12, 1999








                                     - 15 -