<PAGE>



                                  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 NOVEMBER 3, 2002

                                       OR

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

                 For the transition period from _____ to ______

                         Commission file number: 1-5364

                         FRANK'S NURSERY & CRAFTS, INC.
             (Exact Name of Registrant as Specified in Its Charter)


                DELAWARE                               47-0863558
        (State of Incorporation)            (IRS Employer Identification No.)

       580 KIRTS BLVD., SUITE 300
             TROY, MICHIGAN                                 48084
(Address of Principal Executive Offices)                 (Zip Code)

                                 (248) 712-7000
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such 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       [ ]

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

               Yes     [X]                 No       [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

               Yes     [ ]                 No       [X]

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

           Class                          Outstanding at December 18, 2002

COMMON STOCK $.001 PAR VALUE                         11,882,006





<PAGE>


                         FRANK'S NURSERY & CRAFTS, INC.

                                      INDEX


<TABLE>
<CAPTION>

PART I                     FINANCIAL INFORMATION                                                                    PAGE NO.
<S>                        <C>                                                                                     <C>
         Item 1.           Unaudited Financial Statements:

                           Balance Sheets as of November 3, 2002, November 4, 2001 and January 27, 2002                3

                           Statements of Operations for the twelve weeks ended November 3, 2002 and the
                           twelve weeks ended November 4, 2001                                                         4

                           Statements of Operations for the twenty-four weeks ended November 3, 2002, the
                           sixteen weeks ended May 19, 2002 and the forty weeks ended November 4, 2001                 5

                           Statements of Shareholders' Equity (Deficit) for the twenty-four weeks ended
                           November 3, 2002 and the sixteen weeks ended May 19, 2002                                   6

                           Statements of Cash Flows for the twenty-four weeks ended November 3, 2002, the
                           sixteen weeks ended May 19, 2002 and forty weeks ended November 4, 2001                     7

                           Notes to Financial Statements                                                               8

         Item 2.           Management's Discussion and Analysis of Financial Condition and Results of
                           Operations                                                                                  14

         Item 3.           Quantitative and Qualitative Disclosures about Market Risk                                  17

         Item 4.           Controls and Procedures                                                                     18

PART II                    OTHER INFORMATION

         Item 1.           Legal Proceedings                                                                           18

         Item 2.           Changes in Securities and Use of Proceeds                                                   18

         Item 6.           Exhibits and Reports on Form 8-K                                                            19

SIGNATURE                                                                                                              20

CERTIFICATIONS                                                                                                         21
</TABLE>






                                       2
<PAGE>


                         FRANK'S NURSERY & CRAFTS, INC.
                                 BALANCE SHEETS
                  (DOLLARS IN THOUSANDS, EXCEPT FOR PAR VALUE)


<TABLE>
<CAPTION>

                                                                          November 3,    November 4,    January 27,
                                                                             2002           2001           2002
                                                                          -----------   -------------  -------------
                                                                          (Successor)   (Predecessor)  (Predecessor)
ASSETS                                                                    (Unaudited)    (Unaudited)
<S>                                                                       <C>           <C>             <C>
Current assets:
   Cash and cash equivalents                                               $   2,570      $   3,580      $   1,870
   Marketable securities                                                       1,023          1,184          1,061
   Notes receivable                                                                                          1,631
   Accounts receivable                                                         2,199          1,144          2,405
   Merchandise inventory                                                      62,096         74,778         37,629
   Assets to be disposed of                                                    2,131         11,398          9,051
   Prepaid expenses and other current assets                                   5,917          6,497          7,058
                                                                           ---------      ---------      ---------
      Total current assets                                                    75,936         98,581         60,705
                                                                           ---------      ---------      ---------

Property, plant and equipment, net                                            53,576        110,216         96,055
Goodwill, less accumulated amortization of $1,229 at November 4, 2001                        14,751
Other assets and deferred charges                                              4,225         11,219          8,553
                                                                           ---------      ---------      ---------
   Total assets                                                            $ 133,737      $ 234,767      $ 165,313
                                                                           =========      =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable                                                        $  32,347      $  17,678      $   8,437
   Accounts payable pre-petition                                                             32,560         32,487
   Accrued expenses                                                           20,613         31,157         25,350
   Accrued expenses payable pre-petition                                       2,520         19,588         26,677
   Notes payable to banks                                                     16,298         51,592         24,297
   Current portion of long-term debt                                           1,806
   Pre-petition long-term debt (including subordinated debt of $115,000)                    138,587        139,315
                                                                           ---------      ---------      ---------
      Total current liabilities                                               73,584        291,162        256,563
                                                                           ---------      ---------      ---------

Long-term debt:
   Senior debt, less current portion                                          26,389          4,113          3,220
   Term Loan                                                                  17,360
                                                                           ---------      ---------      ---------
      Total long-term debt                                                    43,749          4,113          3,220
                                                                           ---------      ---------      ---------

Other liabilities                                                              3,452          4,097          3,525

Shareholders' equity (deficit):
   Predecessor common stock $1.00 par value, 1,000 shares authorized,
      1,000 shares issued and outstanding                                                         1              1
   Successor preferred stock $.001 par value, 10,000,000 shares
      authorized, none issued
   Successor common stock $.001 par value, 50,000,000 shares authorized,
      11,882,006 shares issued and outstanding and
      8,117,994 shares to be issued                                               20
   Additional paid-in-capital                                                 26,100        165,999        165,999
   Net parent investment                                                                     16,176         16,117
   Retained deficit                                                          (13,168)      (246,781)      (280,112)
                                                                           ---------      ---------      ---------
      Total shareholders' equity (deficit)                                    12,952        (64,605)       (97,995)
                                                                           ---------      ---------      ---------
Total liabilities and shareholders' equity (deficit)                       $ 133,737      $ 234,767      $ 165,313
                                                                           =========      =========      =========

</TABLE>



See accompanying notes to financial statements.




                                       3
<PAGE>



                         FRANK'S NURSERY & CRAFTS, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
            TWELVE WEEKS ENDED NOVEMBER 3, 2002 AND NOVEMBER 4, 2001
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                         Twelve Weeks      Twelve Weeks
                                                                             Ended            Ended
                                                                          November 3,       November 4,
                                                                             2002              2001
                                                                       ---------------    ---------------
                                                                         (Successor)       (Predecessor)
<S>                                                                    <C>                 <C>
NET SALES                                                                  $ 39,612          $ 45,704

OPERATING COSTS AND EXPENSES:
   Cost of goods sold, including buying and occupancy                        34,575            50,503
   Selling, general and administrative                                       17,269            20,823
   Restructuring and other related charges                                    1,397             5,112
   Amortization of goodwill                                                                       369
   Other (income) expense                                                       499               (70)
                                                                           --------          --------
      Total operating costs and expenses                                     53,740            76,737
                                                                           --------          --------

LOSS FROM OPERATIONS                                                        (14,128)          (31,033)
INTEREST EXPENSE (CONTRACTUAL INTEREST OF $4,804 FOR THE TWELVE WEEKS
   ENDED NOVEMBER 4, 2001)                                                    1,811             2,084
                                                                           --------          --------
LOSS BEFORE INCOME TAXES                                                    (15,939)          (33,117)
INCOME TAXES
                                                                           --------          --------
NET LOSS                                                                   $(15,939)         $(33,117)
                                                                           ========          ========

</TABLE>



See accompanying notes to financial statements


                                       4
<PAGE>


                         FRANK'S NURSERY & CRAFTS, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
 TWENTY-FOUR WEEKS ENDED NOVEMBER 3, 2002, THE SIXTEEN WEEKS ENDED MAY 19, 2002
                   AND THE FORTY WEEKS ENDED NOVEMBER 4, 2001
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       Twenty-four      Sixteen Weeks      Forty Weeks
                                                                       Weeks Ended          Ended             Ended
                                                                       November 3,          May 19,        November 4,
                                                                           2002              2002             2001
                                                                       -----------     ---------------    -------------
                                                                       (Successor)      (Predecessor)     (Predecessor)
                                                                                        (Restated)(1)
<S>                                                                    <C>             <C>                <C>
NET SALES                                                               $ 128,682         $ 110,992         $ 285,543

OPERATING COSTS AND EXPENSES:
   Cost of goods sold, including buying and occupancy                      99,221            80,756           233,143
   Selling, general and administrative                                     38,015            31,490            85,189
   Restructuring and other related charges                                  1,397            21,839            12,093
   Early extinguishment of debt                                                                                 4,230
   Amortization of goodwill                                                                                     1,263
   Other income                                                              (180)             (118)             (411)
                                                                        ---------         ---------         ---------

      Total operating costs and expenses                                  138,453           133,967           335,507
                                                                        ---------         ---------         ---------


LOSS FROM OPERATIONS                                                       (9,771)          (22,975)          (49,964)
INTEREST EXPENSE (CONTRACTUAL INTEREST OF $6,210 FOR THE SIXTEEN
   WEEKS ENDED MAY 19, 2002 AND $16,862 FOR THE FORTY
   WEEKS ENDED NOVEMBER 4, 2001)                                            3,397             2,583             8,701
                                                                        ---------         ---------         ---------
LOSS BEFORE REORGANIZATION ITEMS AND INCOME TAXES                         (13,168)          (25,558)          (58,665)
                                                                        ---------         ---------         ---------
REORGANIZATION ITEMS:
   Gain on cancellation of pre-petition liabilities                                         184,954
   Fresh start adjustments                                                                      324
   Extinguishment of debt                                                                    (1,439)
                                                                        ---------         ---------         ---------
      Total reorganization items                                                            183,839
                                                                        ---------         ---------         ---------
INCOME TAX EXPENSE
                                                                        ---------         ---------         ---------
NET (LOSS) INCOME                                                       $ (13,168)        $ 158,281         $ (58,665)
                                                                        =========         =========         =========
</TABLE>


(1)   The sixteen weeks ended May 19, 2002 have been restated to reflect a
      reorganization item for extinguishment of debt of $1,439 belonging to the
      Predecessor.

See accompanying notes to financial statements.










                                       5

<PAGE>


                         FRANK'S NURSERY & CRAFTS, INC.
                  STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                   (UNAUDITED)
  SIXTEEN WEEKS ENDED MAY 19, 2002 AND TWENTY-FOUR WEEKS ENDED NOVEMBER 3, 2002
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                                          Total
                                            Common          Stock       Additional                           Net       Shareholders'
                                            Number           Par          Paid-in         Retained         Parent         Equity
                                          of shares         Value         Capital         Deficit        Investment     (deficit)
                                         -----------      ---------    ------------    -------------     ----------    ------------
<S>                                      <C>              <C>          <C>             <C>               <C>           <C>
Predecessor:
Balance at January 27, 2002                   1,000       $      1     $   165,999     $  (280,112)      $  16,117     $  (97,995)
   Net loss excluding plan of
      reorganization and fresh start
      adjustments                                                                          (25,558)                       (25,558)
   Effect of plan of reorganization
      and fresh start adjustments:
       Cancellation of old common stock     (1,000)            (1)       (165,999)                                       (166,000)
       New common stock                  20,000,000  (1)        20          22,980                                          23,000
       Cancellation of net parent
         investment                                                                                       (16,117)        (16,117)
       Extinguishment of debt                                                               (1,439)                        (1,439)
       Other fresh start adjustments                                                        307,109                        307,109
                                         -----------      ---------    ------------    -------------     ----------    ------------
Successor:
Balance at May 20, 2002                  20,000,000             20          22,980              -0-            -0-          23,000
Issuance of 5,000,000 warrants in
  connection with Term Loan debt                                             3,120                                           3,120
 Net loss                                                                                  (13,168)                       (13,168)
                                         -----------      ---------    ------------    -------------     ----------    ------------
Balance at November 3, 2002              20,000,000       $     20     $    26,100     $   (13,168)      $     -0-     $    12,952
                                         ===========      =========    ============    =============     ==========    ============
</TABLE>

(1) 11,882,006 shares issued and 8,117,994 to be issued.

See accompanying notes to financial statements.





                                       6
<PAGE>



                         FRANK'S NURSERY & CRAFTS, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
   TWENTY-FOUR WEEKS ENDED NOVEMBER 3, 2002, SIXTEEN WEEKS ENDED MAY 19, 2002
                     AND FORTY WEEKS ENDED NOVEMBER 4, 2001
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                Twenty-four        Sixteen Weeks      Forty Weeks
                                                                                Weeks Ended            Ended             Ended
                                                                                November 3,           May 19,          November 4,
                                                                                   2002                 2002              2001
                                                                              ---------------     ---------------    ---------------
                                                                                (Successor)        (Predecessor)      (Predecessor)
                                                                                                    Restated (1)

<S>                                                                           <C>                 <C>                <C>
OPERATING ACTIVITIES:
Net (loss) income                                                             $     (13,168)      $      158,281     $     (58,665)
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
    Depreciation                                                                       3,207               4,900             12,829
    Amortization                                                                         683                 632              2,758
    Non cash portion of restructuring and other related charges                        1,397              17,572              7,336
    Inventory clearance reserve                                                                                               9,545
    Debt issue costs                                                                                       1,079              3,458
    Gain on cancellation of pre-petition liabilities                                                   (184,991)
    Fresh start adjustments                                                                                (324)
    Other                                                                               (78)               (939)               (22)
                                                                              ---------------     ---------------    ---------------
                                                                                     (7,959)             (3,790)           (22,761)
Changes in assets and liabilities, net of effects of fresh start adjustments
  and gain on cancellation of pre-petition liabilities:
     Marketable securities                                                              (22)                 (9)               (88)
     Notes receivable                                                                                      1,631
     Accounts receivable                                                               (279)                 885                568
     Inventory                                                                         (471)            (23,996)           (11,198)
     Prepaid expenses                                                                  (264)               1,405            (2,006)
     Other non current assets                                                        (2,046)               (349)            (2,014)
     Accounts payable                                                               (11,398)              35,440             17,632
     Accrued expenses                                                               (10,242)               8,284             13,432
                                                                              ---------------     ---------------    ---------------
Net cash provided by (used in) operating activities                                 (32,681)              19,501            (6,435)
                                                                              ---------------     ---------------    ---------------

INVESTING ACTIVITIES:
   Additions to property, plant and equipment                                        (2,118)               (605)            (1,850)
   Net proceeds from asset sales                                                       4,969               2,566             18,306
                                                                              ---------------     ---------------    ---------------
Net cash provided by investing activities                                              2,851               1,961             16,456
                                                                              ---------------     ---------------    ---------------

FINANCING ACTIVITIES:
   Increase (decrease) in notes payable to banks (net)                                 2,651            (10,650)              4,240
   Payment of long-term debt and capital leases                                        (750)             (2,183)           (21,287)
   Borrowings under term loan                                                         20,000
   Decrease in net parent investment                                                                                            (1)
                                                                              ---------------     ---------------    ---------------
Net cash provided by (used in) financing activities                                   21,901            (12,833)           (17,048)
                                                                              ---------------     ---------------    ---------------

Net change in cash and cash equivalents                                              (7,929)               8,629            (7,027)
Cash and cash equivalents at beginning of period                                      10,499               1,870             10,607
                                                                              ---------------     ---------------    ---------------
Cash and cash equivalents at end of period                                    $        2,570      $       10,499     $        3,580
                                                                              ===============     ===============    ===============
</TABLE>


(1) The sixteen weeks ended May 19, 2002 have been restated to reflect a
reorganization item for extinguishment of debt of $1,439 belonging to the
Predecessor.

Supplemental disclosure of non cash financing information:
  Fair valuing of assets due to fresh start accounting of $36,171 for the
    sixteen weeks ended May 19, 2002.

See accompanying notes to financial statements.





                                       7
<PAGE>

                         FRANK'S NURSERY & CRAFTS, INC.
                                   (UNAUDITED)
                          NOTES TO FINANCIAL STATEMENTS
                              (TABLES IN THOUSANDS)

(1) GENERAL

Frank's Nursery & Crafts, Inc., a Delaware corporation ("Frank's" or the
"Company"), operates the nation's largest chain of lawn and garden specialty
retail stores. Frank's is also a retailer of Christmas trim-a-tree merchandise,
artificial flowers and arrangements, garden decor and home decorative products.

CHAPTER 11 PROCEEDINGS AND REORGANIZATION

On February 19, 2001 (the "Petition Date"), Frank's Nursery & Crafts, Inc., a
Michigan corporation ("Old Frank's"), and FNC Holdings Inc. ("Holdings"), the
sole shareholder of Old Frank's, (collectively with Old Frank's, the "Debtors"),
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Maryland (the "Bankruptcy Court"). The Chapter 11
cases for the Debtors (the "Chapter 11 Cases") were jointly administered for
procedural purposes. From the Petition Date until May 19, 2002, the Debtors
operated their businesses as debtors-in-possession pursuant to the Bankruptcy
Code. On May 7, 2002, the Bankruptcy Court confirmed the Debtors' Second Amended
Joint Plan of Reorganization, with certain modifications (as so modified, the
"Plan"). On May 20, 2002 (the "Effective Date"), the Plan became effective and
the Debtors successfully emerged from their chapter 11 bankruptcy proceedings.

Pursuant to the Plan, the following transactions were completed on or about the
Effective Date:

-        all of Old Frank's and Holdings issued and outstanding common stock was
         cancelled;

-        Old Frank's merged with and into Holdings, and then changed its name to
         Frank's, which was reincorporated in Delaware (the "Merger");

-        certain indebtedness of the Debtors was cancelled in exchange for cash
         and/or common stock, par value $.001 per share, of Frank's ("Common
         Stock");

-        executory contracts or unexpired leases to which any Debtor was a party
         were assumed, or rejected;

-        members of the boards of directors and officers of Frank's were elected
         and began serving their respective terms; and

-        the overall corporate structure was simplified through the
         restructuring and dissolution of certain Old Frank's and Holdings
         subsidiaries.

On the Effective Date, 50,000,000 shares of Common Stock were authorized and (a)
20,000,000 shares of Common Stock were reserved for distribution in respect of
claims against the Debtors, (b) 913,044 shares of Common Stock were reserved for
issuance of warrants to purchase shares of Common Stock ("Warrants") at an
exercise price of $1.38 for the old equity holders of Holdings, (c) 3,652,174
shares of Common Stock were reserved for a new stock option plan, which was
implemented in accordance with the Plan and (d) 5,869,565 shares of Common Stock
were reserved for the conversion rights of Kimco Services Inc., an affiliate of
Kimco Realty Corporation ("Kimco"), as part of the exit financing. In addition,
on the Effective Date, Frank's entered into a three-year $50 million secured
revolving credit facility, that includes $25 million for letters of credit (the
"Exit Revolver Facility") with Congress Financial Corporation as agent for a
syndicate of lenders and a $30 million term and revolving loan with Kimco (the
"Exit Term and Revolving Loan"). See note 2 for a more detailed description of
the exit financing.

FRESH START ADJUSTMENTS

The Debtors emerged from their chapter 11 bankruptcy proceedings on May 20,
2002, which for financial reporting purposes was deemed the effective date of
the Plan. In accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7"), the Company adopted
fresh start reporting because holders of existing voting shares of Holdings
immediately before filing and confirmation of the Plan received less than 50% of
the Common stock distributed under the Plan and the Company's reorganization
value was less than the Debtors' post-petition liabilities and allowed claims in
the aggregate on a consolidated basis.




                                       8
<PAGE>

Fresh start reporting requires that the reorganization value of the Company be
allocated to its assets in conformity with Statement of Financial Accounting
Standard ("SFAS") No. 141, "Business Combinations". The excess of the fair value
of the specific tangible or identifiable intangible net assets over
reorganization value, or negative goodwill, is to be allocated to non-current
non-monetary assets on a pro rata basis. Based on the consideration of many
factors and various valuation methods, including a discounted cash flow, a
comparable public company analysis, a comparable acquisitions analysis, and
other applicable analyses believed by the Company's management to be appropriate
for the Company's business and industry, the Company and its financial advisors
determined the reorganization value of the Company to be approximately $90
million, which served as the basis for the Plan approved by the Bankruptcy
Court. Approximately $67 million of the reorganization value related to debt and
other obligations was outstanding as of the Effective Date, and the remaining
reorganization value of approximately $23 million was assigned as the initial
equity of the Company. Due to the cyclical nature of the business and the timing
of emergence, the reorganization value related to debt was based upon average
historical levels and is not equal to the debt levels of the successor company
at May 20, 2002, thus resulting in a change to the original estimated negative
goodwill of $58 million in the Plan.

The fair value of the net assets exceeded the reorganization value by $36.2
million, resulting in negative goodwill. The negative goodwill has been
allocated to property, plant and equipment.

The following table reflects the adjustments to Old Frank's balance sheet as of
May 20, 2002:

<TABLE>
<CAPTION>

                                                                                                 Fresh
                                                                         Plan of                 Start
                                                     Predecessor      Reorganization          Adjustments             Successor
                                                    --------------    --------------          -------------          -------------
<S>                                                 <C>               <C>                     <C>                    <C>
Assets:
Current assets                                      $      88,516     $       (360)  (b)                             $     88,156
Property, plant and equipment, net                         90,836                             $   (36,171)   (f)           54,665
Other assets                                                7,729           (4,851)  (a)(b)          (373)   (e)            2,505
                                                    --------------    --------------          -------------          -------------
Total assets                                        $     187,081     $     (5,211)           $   (36,544)           $    145,326
                                                    ==============    ==============          =============          =============

Liabilities and shareholders' equity (deficit):

Accounts payable                                    $      43,825     $        (80)  (a)      $        959   (f)     $     44,704
Accounts payable pre-petition                              32,539          (32,539)  (a)
Accrued expenses                                           32,834               751  (a)           (3,169)   (e)(f)        30,416
Accrued expense - pre-petition                             21,514          (20,514)  (a)                                    1,000
Accrued interest - pre-petition                             5,894           (5,894)  (c)
Notes payable to banks                                     13,647                                                          13,647
Liability for lease rejections                             15,450          (15,450)  (a)
Pre-petition long-term debt (including
  subordinated debt of $115,000)                          137,909         (115,000)  (c)          (22,909)   (e)
Current portion of long-term debt                                                                    2,521   (e)            2,521
Senior mortgage debt                                                                                23,016   (e)           23,016
Obligations under capital lease                             3,528                                                           3,528
Other liabilities                                           3,494                                                           3,494
                                                    --------------    --------------          -------------          -------------
  Total liabilities                                       310,634         (188,726)                    418                122,326

Shareholders' equity (deficit)                          (123,553)           183,515  (d)          (36,962)   (g)           23,000
                                                    --------------    --------------          -------------          -------------
  Total liabilities and shareholders' equity
    (deficit)                                       $     187,081     $     (5,211)           $   (36,544)           $    145,326
                                                    ==============    ==============          =============          =============
</TABLE>

(a)  To record elimination of pre-petition liabilities which were cancelled.
(b)  To record extinguishment of debt.
(c)  To record elimination of subordinated debt and related accrued interest.
(d)  To record gain on cancellation of pre-petition liabilities ($184.9 million)
     and loss on extinguishment of debt ($1.4 million).
(e)  To record refinanced mortgages.
(f)  To reflect assets and liabilities at fair value, resulting in negative
     goodwill ($36.2 million).
(g)  To record  common  stock to be issued and  write-off  of Old  Frank's
     accumulated  deficit and net parent investment.




                                       9
<PAGE>


BASIS OF PRESENTATION

References in these financial statements to "Predecessor" refer to Old Frank's
on and prior to May 20, 2002. References to "Successor" refer to Frank's on and
after May 20, 2002, after giving effect to the implementation of fresh start
reporting.

The accompanying financial statements for the sixteen weeks ended May 19, 2002
(Predecessor) and as of January 27, 2002 (Predecessor) have been presented in
accordance with SOP 90-7 and assumed that the Debtors would continue as a going
concern. In the Chapter 11 Cases, substantially all unsecured liabilities as of
the Petition Date were subject to compromise or other treatment under the Plan.
For financial reporting purposes, those liabilities and obligations whose
treatment and satisfaction were dependent on the outcome of the Chapter 11 Cases
have been segregated and classified as pre-petition liabilities in the
accompanying balance sheets as of November 4, 2001 and January 27, 2002.

Pursuant to SOP 90-7, professional fees and other costs associated with the
Chapter 11 Cases were expensed as incurred and reported as restructuring items.
Interest expense was reported only to the extent that it was expected to be paid
following the Chapter 11 Cases.

Certain reclassifications have been made to prior periods (Predecessor) to
conform to the financial statements for the twenty-four weeks ended November 3,
2002 (Successor).

The accompanying unaudited financial statements include all adjustments,
consisting only of normal, recurring adjustments and accruals, which are, in the
opinion of management, necessary for fair presentation of the results of
operations and financial position. Results of operations for interim periods may
not be indicative of future results. The unaudited financial statements should
be read in conjunction with the audited financial statements included in Old
Frank's Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission for the fiscal year ended January 27, 2002.

(2) LONG-TERM DEBT AND LIQUIDITY

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                            NOVEMBER 3,           NOVEMBER 4,          JANUARY 27,
                                                                               2002                   2001                 2002
                                                                          -----------------     ----------------     ---------------
                                                                             (SUCCESSOR)          (PREDECESSOR)       (PREDECESSOR)
<S>                                                                       <C>                   <C>                  <C>
Exit Term Loan (see note 4)                                               $         17,360
Mortgages notes due 2012 with interest rates from 7% to 7.6%                        24,092
Exit Revolver Facility                                                              16,298
Pre-petition mortgage notes originally due on varying dates from
   February 1, 2001 to September 1, 2007                                                        $        22,045      $       22,045
DIP Financing Facility                                                                                   51,592              24,297
10 1/4% Senior Subordinated Notes originally due March 1, 2008                                          115,000             115,000
Capital lease obligations                                                            4,103                5,655               5,490
                                                                          -----------------     ----------------     ---------------

Total debt                                                                          61,853              194,292             166,832
Less:
   Current portion of long-term debt                                                 1,806
   Exit Revolver Facility                                                           16,298
   DIP Financing Facility                                                                                51,592              24,297
   Pre-petition long-term debt                                                                          138,587             139,315
                                                                          -----------------     ----------------     ---------------
Total long-term debt                                                      $         43,749      $         4,113      $        3,220
                                                                          =================     ================     ===============
</TABLE>


EXIT REVOLVER FACILITY

As discussed in note 1, the Company entered into the Exit Revolver Facility on
the effective Date. The Exit Revolver Facility is a three-year $50 million
secured revolving loan facility, which includes $25 million of letters of
credit. The availability of borrowings under the Exit Revolver Facility
generally is based on a percentage of eligible accounts receivable, eligible
inventory and certain other assets, subject to certain reserves.

The Exit Revolver Facility allows the Company the option of prime rate loans or
Eurodollar loans. Depending upon the Company's excess availability under the
Exit Revolver Facility the loans bear interest at: (a) prime rate plus .25% or
..50%; or (b) Eurodollar rate plus 2.75%, 3% or 3.25% for an initial term of
three years, with annual renewal rights. The Exit Revolver Facility includes an
unused line fee of .25% per annum, a servicing fee of $10,000 per calendar
quarter, and an early termination fee in an




                                       10
<PAGE>

amount equal to 2% of the amount of the maximum credit if the Exit Revolver
Facility is terminated in whole during the first year, 1% during the second
year, and 0.5% during the third year.

The Exit Revolver Facility ("Facility") contains a number of covenants, which
restrict, among other things, Frank's ability to incur additional debt, pay
dividends or make other restricted payments, grant liens, make loans, advances,
and investments, engage in transactions with affiliates, dispose of assets,
prepay and refinance debt, and make certain changes in its business. As of
November 3, 2002, there was $16.3 million outstanding under the Facility and
outstanding letters of credit aggregated $11.4 million. Availability as of
November 3, 2002 was $13.5 million. For certain days during the 2002 third
quarter the Company was not in compliance with financial covenants in the
Facility that required minimum levels of inventory and financial ratios. The
lender under the Facility waived that noncompliance on December 17, 2002. As a
result of obtaining more favorable vendor terms than originally anticipated and
improved inventory management, the assumptions on which the financial
projections were based in determining the financial covenants for the Facility
have changed. The Company is presently in negotiations with the Lender to revise
certain financial ratios under the Facility. On November 3, 2002 the Company was
in compliance with the financial covenants.

EXIT TERM AND REVOLVING LOAN

On the Effective Date, Frank's also entered into an Exit Term and Revolving
Loan. The Exit Term and Revolving Loan is comprised of a $20 million term loan
(the "Exit Term Loan") and $10 million of revolving loans, both secured by the
Company's owned but unmortgaged and leased real property. These two loans bear
interest at 10.25% per annum for an initial term of three years, with renewal
rights for up to two years. The Exit Term and Revolving Loan has at the lender's
option purchase rights under a warrant agreement to purchase up to 5,869,565
shares of common stock at $1.15, subject to adjustment for anti-dilution (see
note 4). In addition Frank's is required to prepay the Exit Term and Revolving
Loans with the net cash proceeds from the sale of certain assets.

The Exit Term Loan also contains a number of covenants, which restrict, among
other things, Frank's ability to incur additional debt, pay dividends or make
other restricted payments, grant liens, make loans, advances and investments,
engage in transactions with affiliates, dispose of assets, enter into
sale-leaseback arrangements, effect mergers, consolidations, and dissolutions.

Upon emergence from bankruptcy, the $20 million Exit Term Loan was utilized to
retire the borrowings under the DIP Financing Facility. As of November 3, 2002,
$20 million was outstanding under the Exit Term Loan.

DIP FINANCING FACILITY

On February 19, 2001, the Debtors entered into a $100 million
debtor-in-possession financing facility (the "DIP Financing Facility") with
Wells Fargo, as administrative agent for a syndicate of financing institutions.
The DIP Financing Facility expired by its terms on the Effective Date. Frank's
had borrowings outstanding of $13.6 million on the expiration date. A portion of
the Exit Term Loan proceeds was utilized to retire the DIP Financing Facility on
the Effective Date. In conjunction with the retirement, a charge of $1.4 million
for extinguishment of debt primarily related to the write-off of debt issue
costs was recognized as a reorganization item.

SENIOR SUBORDINATED DEBT

Frank's had outstanding $115 million of 10 1/4% Senior Subordinated Notes
originally due March 1, 2008 (the "10 1/4% Notes"). The 10 1/4% Notes were
general unsecured obligations of Old Frank's, were subordinated in right of
payment to all existing and future senior indebtedness.

No interest payments were made on the 10 1/4% Notes during the pendency of the
Chapter 11 Cases.

On the Effective Date, pursuant to the Plan, indebtedness under the 10 1/4%
Notes of $115 million, was cancelled, and the holders became entitled to receive
Common Stock.


SENIOR DEBT

As part of the Plan, the pre-petition mortgage notes were renegotiated with
interest rates between 7% and 7.6% and ten-year terms. As of November 3, 2002
scheduled maturities of the renegotiated mortgage notes are $0.7 million for the
remainder of 2002; $0.6 million in 2003; $0.6 in 2004; $0.6 in 2005; $0.7
million in 2006 and $3.5 in 2007.




                                       11
<PAGE>

REJECTED CONTRACTS AND LEASES

During the pendency of the Chapter 11 Cases, the Debtors reviewed their
executory contracts and unexpired leases and received approval from the
Bankruptcy Court to reject certain contracts and leases. In this context,
"rejection" means that the Debtors were relieved from their obligations to
perform further under the contract or lease. Any claim for damages resulting
from the rejection of a contract or lease was treated as a general unsecured
claim in the Chapter 11 Cases and a $15.5 million charge for the estimated
maximum allowed claim under bankruptcy law was recognized as a reorganization
item.


(3) INCOME TAXES

The Company's management, in assessing the realizability of deferred tax assets,
must consider whether it is more likely than not that part or all of the
deferred tax assets may not be realized. This assessment includes consideration
for the scheduled reversal of temporary taxable difference, projected future
taxable income, and tax planning strategies.

No income tax benefit was recognized for the loss from operations for the twelve
weeks ended November 3, 2002. Instead, the increase in net deferred tax assets
as a result of the loss was offset by an equal increase in the valuation
allowance.

PREDECESSOR PERIODS

No income tax benefit was recognized for the loss from operations before
reorganization items for the sixteen weeks ended May 19, 2002. Instead, the
increase in net deferred tax assets as a result of the loss was offset by an
equal increase in the valuation allowance. In addition, no income tax expense or
benefit was recognized on the reorganization items for the sixteen weeks ended
May 19, 2002. The items of income and expense included in the reorganization
income are non-taxable and non-deductible, respectively.


BANKRUPTCY IMPACT

In connection with the reorganization, a gain on cancellation of indebtedness
was realized. This gain will not be taxable since the gain resulted from
reorganization under the Bankruptcy Code. However, the Company will be required,
as of the beginning of its 2003 taxable year, to reduce certain attributes
including net operating loss carryforwards ("NOLs"), certain tax credits and tax
bases in assets in an amount equal to such gain on extinguishment.

The reorganization of the Company on the Effective Date constituted an ownership
change under Section 382 of the Internal Revenue Code. Consequently, the use of
any of the NOLs and tax credits generated prior to the ownership change, that
are not reduced pursuant to the provisions discussed above, will be subject to
an annual limitation.

(4) SHAREHOLDERS' EQUITY

The Exit Term and Revolving Loan incorporated stock purchase warrants
("Warrants"). The Warrants are exercisable to purchase the Company's Common
Stock, par value $.001 per share, at a price of $1.15 per share subject to
adjustments for anti-dilution. The Warrants are redeemable upon certain
conditions being met and will expire on May 20, 2005, subject to extension under
the Exit Term and Revolving Loan. Accounting Principles Board 14 "Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants, Emerging Issues
Task Force (EITF) 00-27 "Application of EITF Issue No 98-5 to Certain
Convertible Instruments" requires the issuer to allocate the proceeds received
in a financing transaction that includes a convertible instrument to the
convertible instrument and any other detachable instruments included in the
exchange on a relative fair value basis. As of May 20, 2002 Warrants available
for exercise and included for valuation purposes were 5,000,000. The remaining
Warrants of 869,565 will be exercisable upon initial utilization of the
revolving portion of the Exit Term and Revolving Loan, at which time the fair
value of such Warrants will be determined. (see note 7). The valuation of the
$20 million proceeds under the Exit Term Loan resulted in an allocation to the
Warrants of $3.1 million as shown in the statement of shareholders' equity and
the remaining $16.9 million to the Exit Term Loan. The $3.1 million is being
amortized to interest expense over the initial term of the debt. As of November
3, 2002, the un-amortized discount is $2.6 million.

Pursuant to the Plan, the Company has issued 11,882,006 shares of common stock
to creditors of record. The Company will issue the remaining 8,117,994 shares,
as disputed claims are resolved. The stock is traded on the OTC Bulletin Board.
The ticker symbol is FNCN.

Pursuant to the Plan, the Company established the 2002 Stock Option Plan for
which 3,652,174 shares of Common Stock are reserved for issuance under the Plan.
On September 12, 2002 the Company granted options to key executives and outside
directors for 2,476,087 in two groupings with a grant price of $1.15 per share.
The first group of options for 1,826,087 were to



                                       12
<PAGE>

vest over two years, with 50% vested at September 12, 2002 and the remaining 50%
on May 20, 2003. Due to recent management changes (see note 8) the options that
vested at September 12, 2002 will expire July 31, 2003 if not exercised and the
remaining 50% will not vest. The second group of options for 650,000 will vest
over three years, with 33 1/3% vesting at the end of each of the first three
years beginning May 20, 2003 and will expire ten years from grant date if not
exercised.

(5) EARNINGS PER SHARE

Due to the Company's emergence from bankruptcy and the implementation of fresh
start reporting, the presentation of earnings per share is not meaningful in the
accompanying financial statements.


(6) RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations completed
after June 30, 2001, and specifies criteria for the recognition and reporting of
intangible assets apart from goodwill. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually. Intangible assets with definite
useful lives will be amortized over such lives to their estimated residual
values. SFAS No. 142 was adopted as of May 19, 2002. As a result of the chapter
11 bankruptcy proceedings and the write-off of goodwill in the fiscal year ended
January 27, 2002, the adoption of SFAS No. 141 and SFAS No. 142 by Old Frank's
in the sixteen weeks ended May 19, 2002 had no impact on the Company's earnings
or financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
SFAS No. 145, among other things, prohibits the classification of gains and
losses from extinguishment of debt as extraordinary unless they meet the
criteria defined in Opinion 30. The provisions of SFAS No. 145 were adopted in
the 2002 first quarter, and as such, the loss recognized by Old Frank's on the
extinguishment of debt resulting from the emergence from the chapter 11
bankruptcy proceedings has been classified as a reorganization item. Restatement
of previously issued financial statements is required, and as such, the loss
recognized by Old Frank's on the extinguishment of debt for the 2001 first three
quarters has been reclassified as part of the loss from operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 applies to costs associated with
an exit activity (including a restructuring) or with a disposal of long-lived
assets. Under SFAS No. 146, a company will record a liability for a cost
associated with an exit or disposal activity when that liability is incurred and
can be measured at fair value. A liability is incurred when an event obligates
the entity to transfer or use assets. Under current accounting guidance, a
liability can be recorded when management has committed to an exit plan. The
requirements under SFAS No. 146 are effective prospectively for exit or disposal
activities initiated after December 31, 2002. Restatement of previously issued
financial statements is not permitted.

(7) SUBSEQUENT EVENTS

On November 4, 2002 the Company borrowed $5 million at an annual interest rate
of 10 1/4% under the revolving loan portion of the Exit Term and Revolving Loan
Agreement triggering the exercise clause for the remaining stock purchase
warrants (see note 4). In accordance with EITF No. 98-5, the fair value of the
869,565 Warrants is $0.4 million. The $5 million revolving loan was repaid on
December 12, 2002.

On December 10, 2002, the Company made an election to be treated as a taxable
REIT subsidiary for federal income tax purposes due to the significant ownership
of stock in the Company by an affiliate of Kimco. As a result of this election,
certain expenses of the Company paid to Kimco or its affiliates, which are
primarily rent and interest could be subject to limitations as to their
deductibility. The Company does not believe that this election will have a
material effect on its results of operations.


(8) RECENT MANAGEMENT CHANGE

The Company announced November 27, 2002 that Steven S. Fishman, its Chairman and
Chief Executive Officer, resigned in order to pursue other endeavors. Adam
Szopinski, the current President and Chief Operating Officer of the Company
assumed the duties of Mr. Fishman. Mr. Fishman will continue with the Company in
a consulting role through April 30, 2003.



                                       13
<PAGE>



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

CORPORATE STRATEGY

As part of emergence from bankruptcy, the Company is instituting new
merchandising and marketing strategies to position itself as a convenience
nursery, home decor and seasonal retailer. Initiatives are already in place for
improvements in store and product presentation, merchandise mix, marketing and
overall operations. Ongoing cost reductions, inventory management efforts, and
vendor quality programs will continue to be a high priority for the success of
the Company.

The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included elsewhere in this Quarterly
Report, and with the audited financial statements and notes thereto included in
the Annual Report on Form 10-K of Frank's Nursery & Crafts, Inc., a Michigan
Corporation ("Old Frank's"), as filed with the Securities and Exchange
Commission for the fiscal year ended January 27, 2002. Frank's Nursery & Crafts,
Inc., a Delaware corporation, is referred to herein as "Frank's" or the
"Company."

FRESH START REPORTING AND FACTORS AFFECTING COMPARABILITY OF FINANCIAL
INFORMATION

The Debtor emerged from their chapter 11 bankruptcy proceedings on May 20, 2002,
which for financial reporting purposes, the Company deemed the Effective Date of
the Plan. Fresh start reporting has been implemented as of May 20, 2002, and
accordingly, at such date all assets and liabilities were restated to reflect
their respective fair values. See note 1 to the unaudited financial statements
included elsewhere in this Quarterly Report for a discussion of the fresh start
adjustments. For financial reporting purposes, references to "Predecessor" refer
to Old Frank's on and prior to May 20, 2002, and references to "Successor" refer
to Frank's on and after May 20, 2002, after giving effect to the implementation
of fresh start reporting. Successor financial statements are not comparable to
Predecessor financial statements. However, for purposes of discussion of results
of operations, the twelve weeks ended November 3, 2002 (Successor) has been
compared to the twelve weeks ended November 4, 2001 (Predecessor). Similarly,
for year-to-date discussion of results of operations, the twenty-four weeks
ended November 3, 2002 (Successor) has been combined with the sixteen weeks
ended May 19, 2002 (Predecessor) and compared with the forty weeks ended
November 4, 2001 (Predecessor).








                                       14
<PAGE>


RESULTS OF OPERATIONS

The following table shows the combined 2002 periods in comparison to the
corresponding 2001 period (dollars in thousands):


<TABLE>
<CAPTION>
                                                              Twelve Weeks Ended                  Forty Weeks Ended
                                                        --------------------------------    -------------------------------
                                                          November 3,       November 4,      November 3,       November 4,
                                                             2002              2001              2002             2001
                                                        --------------    --------------    -------------    --------------
<S>                                                     <C>               <C>               <C>              <C>
Net sales                                               $      39,612     $      45,704     $    239,674     $     285,543

Operating costs and expenses:
   Cost of goods sold, including buying and                    34,575            50,503          179,977           233,143
     occupancy
   Selling general and administrative                          17,269            20,823           69,505            85,189
   Restructuring and other related charges                      1,397             5,112           23,236            12,093
   Early extinguishment of debt                                                                                      4,230
   Amortization of goodwill                                                         369                              1,263
   Other (income) expense                                         499              (70)            (298)             (411)
     Total operating costs and expenses                        53,740            76,737          272,420           335,507
Loss from operations                                         (14,128)          (31,033)         (32,746)          (49,964)
Interest expense                                                1,811             2,084            5,980             8,701
Reorganization income                                                                            183,839
Income taxes
                                                        --------------    --------------    -------------    --------------
Net income (loss)                                       $    (15,939)     $    (33,117)     $    145,113     $    (58,665)
                                                        ==============    ==============    =============    ==============
</TABLE>


NET SALES. Net sales were $39.6 million for the twelve weeks ended November 3,
2002 ("2002 quarter"), a decrease of $6.1 million or 13.4% compared with the
twelve weeks ended November 4, 2001 ("2001 quarter"). Comparative store sales
decreased 8.4% for the 2002 quarter reflecting the transition to the home decor
strategy and significant discounting in the third quarter of last year. Net
sales for the forty weeks ended November 3, 2002 ("2002 YTD") were $239.7
million, a decrease of $45.8 million or 16% compared with the forty weeks ended
November 4, 2001 ("2001 YTD"). Comparative store sales decreased 4% for 2002
YTD. The unfavorable weather patterns in virtually all markets where the Company
operates negatively impacted the lawn and garden sales for the 2002 first
quarter thus contributing to the net sales decrease for 2002 YTD. Net sales for
the 2001 quarter and 2001 YTD included sales related to the store closure
programs that amounted to $2.5 million and $36 million, respectively.

COST OF SALES, INCLUDING BUYING AND OCCUPANCY. Cost of sales were $34.6 million
for the 2002 quarter, a decrease of $15.9 million or 31.5% compared with the
2001 quarter. During the 2001 quarter the Company recorded a charge of $9.5
million for a lower of cost or market reserve for inventory designated as
clearance product in the floral, home decor and Christmas trim-a-tree product
lines ("inventory clearance reserve"). Cost of sales, as a percentage of net
sales, was 87.3% in the 2002 quarter compared with 89.6% in the 2001 quarter,
excluding the inventory clearance reserve. On a comparative base (the current
170 stores) cost of sales, as a percentage of net sales, for the 2001 quarter
would have been 87.8%. Merchandise margins on a comparative base were the same
for the 2002 and 2001 quarter. Cost of sales were $180 million for 2002 YTD
compared with $233.1 million for 2001 YTD. Cost of sales, as a percentage of net
sales, was 75.1% in 2002 YTD compared with 78.3% in 2001 YTD, excluding the $9.5
million inventory clearance reserve. On a comparative base, cost of sales, as a
percentage of net sales, for 2001 YTD would have been 74.8%. The merchandise
margin decline for 2002 YTD is primarily due to increased promotional activity
of crafts as the Company exited certain categories. This decline was partially
offset by higher margins in the new home decor lines. The 2001 YTD also included
a $1.6 million lower of cost or market reserve for the inventory liquidation of
12 stores closed in 2001 and the $9.5 million inventory clearance reserve.

SELLING, GENERAL, AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses were $17.3
million for the 2002 quarter, a decrease of $3.5 million or 16.8% compared with
the 2001 quarter. SG&A expenses, as a percentage of net sales, were 43.6%
compared with 45.6% for the 2001 quarter. On a comparative base, SG&A expenses,
as a percentage of net sales, for the 2001 quarter would have been 45.1%. SG&A
expenses for 2002 YTD were $69.5 million compared with $85.2 million for 2001
YTD. As a percentage of net sales, SG&A expenses were 29% for 2002 YTD compared
with 29.8% for 2001 YTD. On a comparative base, 2001 YTD would have been 30.3%.
The decline was due primarily to lower store expenses resulting from the lower
store base and lower corporate expenses.

EARLY EXTINGUISHMENT OF DEBT. The early extinguishment of debt for 2001 YTD
primarily represented the write-off of debt issue costs to retire an outstanding
credit facility obligation utilizing proceeds from the DIP Financing Facility at
the petition date.

RESTRUCTURING AND OTHER RELATED CHARGES. The 2002 quarter charge of $1.4 million
represented a change in estimate for the pre-petition claim payments of $2
million, offset by $0.6 million of income for the revaluation of assets held for
resale based upon




                                       15
<PAGE>

purchase agreements. The 2002 YTD charge was $23.2 million compared with $12.1
million in 2001 YTD. The 2002 YTD charge included: $15.5 million for costs of
lease rejections; $2 million for additional pre-petition claim payments; $2.6
million for professional fees; $1.8 million for severance and employee retention
plans approved by the Court while under chapter 11; $1.1 million for costs of
mortgage debt to be refinanced and $0.2 million for miscellaneous items. The
$15.5 million liability for the costs of rejected store leases represented an
estimate of the maximum claim allowed under bankruptcy law. In accordance with
the Plan, these claims were treated as general unsecured claims and resulted in
a cancellation of debt and recognized as a reorganization item. The $1.1 million
liability for costs of mortgage debt represented an estimate to properly state
the pre-petition long-term debt in accordance with the Plan. The 2001 YTD
includes $4 million for the revaluation of the estimated net selling price of
the properties classified as assets to be disposed of and losses on properties
that sold below their estimated net selling price originally established at
January 28, 2001. Charges related to the store closings included, $0.3 million
for termination and severance payments for the store closure programs and $3.2
million for the write-off of the remaining assets, related goodwill, and capital
lease debt related to the store closure programs, offset by $0.9 million of
leasehold interest sales. Also included are professional fees of $3.8 million
and $1.7 million under a key employee retention program.

INTEREST EXPENSE. Interest expense was $1.8 million for the 2002 quarter
compared with $2.1 million for the 2001 quarter. Lower interest expense in the
2002 quarter results from lower levels of borrowings under the Company's credit
facilities, offset in part by the interest under the Exit Term Loan. 2002 YTD
expense was $6 million compared with $8.7 million for 2001 YTD. Lower interest
for 2002 YTD in part related to the discontinuance of an interest accrual for
the senior subordinated notes since the pre-petition date and lower levels of
outstanding borrowings in 2002 YTD.

REORGANIZATION ITEMS. A gain of $183.8 million was recognized for 2002 YTD. The
gain was due to the cancellation of pre-petition liabilities upon emergence
($184.9 million), the fresh start accounting adjustments ($0.3 million), offset
by a loss from the extinguishment of debt ($1.4 million).

LIQUIDITY AND CAPITAL RESOURCES

EXIT REVOLVER FACILITY

As discussed above and in note 1 to the unaudited financial statements included
elsewhere in this Quarterly Report, the Company entered into the Exit Revolver
Facility on the Effective Date. The Exit Revolver Facility ("Facility") is the
three-year $50 million secured revolving loan facility, which includes $25
million of letters of credit. The availability of borrowings under the Facility
generally is based on a percentage of eligible accounts receivable, eligible
inventory, and certain other assets, subject to certain reserves.

The Facility allows the Company the option of prime rate loans or Eurodollar
loans. Depending upon the Company's excess availability under the Facility the
loans bear interest at: (a) prime rate plus .25% or .50%; or (b) Eurodollar rate
plus 2.75%, 3%, or 3.25%, for an initial term of three years, with annual
renewal rights. The Facility includes an unused line fee of .25% per annum, a
servicing fee of $10,000 per calendar quarter, and an early termination fee in
an amount equal to 2% of the amount of the maximum credit if the Facility is
terminated in whole during the first year, 1% during the second year, and 0.5%
during the third year.

The Facility contains a number of covenants, which restrict, among other things,
Frank's ability to incur additional debt, pay dividends or make other restricted
payments, grant liens, make loans, advances, and investments, engage in
transactions with affiliates, dispose of assets, prepay and refinance debt, and
make certain changes in its business. As of November 3, 2002, there was $16.3
million outstanding under the Facility and outstanding letters of credit
aggregated $11.4 million. Availability as of November 3, 2002 was $13.5 million.
For certain days during the 2002 third quarter the Company was not in compliance
with financial covenants in the Facility that required minimum levels of
inventory and financial ratios. The lender under the Facility waived that
noncompliance on December 17, 2002. As a result of obtaining more favorable
vendor terms than originally anticipated and improved inventory management, the
assumptions on which the financial projections were based in determining the
financial covenants for the Facility have changed. The Company is presently in
negotiations with the Lender to revise certain financial ratios under the
Facility. On November 3, 2002 the Company was in compliance with the financial
covenants.


EXIT TERM AND REVOLVING LOAN

On the Effective Date, Frank's also entered into an Exit Term and Revolving
Loan. The Exit Term and Revolving Loan is comprised of a $20 million term loan
(the "Exit Term Loan") and $10 million of revolving loans, both secured by the
Company's owned but unmortgaged and leased real property. These two loans bear
interest at 10.25% per annum for an initial term of three years, with renewal
rights for up to two years. The Exit Term and Revolving Loan has at the lenders
option purchase rights under a Warrant agreement to purchase up to 5,869,565
shares of common stock at $1.15, subject to adjustment for anti-dilution. In




                                       16
<PAGE>

addition Frank's is required to prepay the Exit Term and Revolving Loans with
the net cash proceeds from the sale of certain assets.

The Exit Term and Revolving Loan also contains a number of covenants, which
restrict, among other things, Frank's ability to incur additional debt, pay
dividends or make other restricted payments, grant liens, make loans, advances
and investments, engage in transactions with affiliates, dispose of assets,
enter into sale-leaseback arrangements, effect mergers, consolidations, and
dissolutions.

Upon emergence from bankruptcy, the $20 million Exit Term Loan was utilized to
retire the borrowings under the DIP Financing Facility. In conjunction with the
retirement of the DIP Financing Facility a charge of $1.4 million for
extinguishment of debt primarily related to the write-off of debt issue costs
was recognized as a reorganization item. As of November 3, 2002, $20 million was
outstanding under the Exit Term Loan.


ADEQUACY OF CAPITAL RESOURCES

The Company's principal sources of liquidity will be cash flows from operations
and borrowings under the Exit Revolver Facility and the Exit Term and Revolving
Facility (collectively, the "Credit Facilities"). Based on current and
anticipated levels of operations, the Company's management believes that cash
flows from operations, together with amounts available under the Credit
Facilities, will be adequate to meet the Company's anticipated cash
requirements, including debt service requirements and planned capital
expenditures. The Company's most significant cash requirements are for
merchandise inventory that fluctuates throughout the year due to the seasonality
of the business. Cash requirements increase substantially in August and
September in anticipation of the Christmas season and in March and April for the
lawn and garden business. Additionally, the Company's business depends, in part,
on normal weather patterns across its markets. Any unusual weather patterns can
have a material and adverse impact on the Company's business, particularly on
the lawn and garden sector. In the event that cash flows, together with
available borrowings under the Credit Facilities are not sufficient to meet the
Company's cash requirements, the Company would be required to obtain alternative
financing or reduce planned capital expenditures. The Company can provide no
assurance that alternative financing would be available on acceptable terms,
especially in light of the fact that, except for miscellaneous real property and
equipment, substantially all of the Company's existing assets are pledged as
collateral for the Credit Facilities or that reductions in planned capital
expenditures would be sufficient to cover any cash shortfalls.

The Company anticipates spending approximately $4 million for capital
expenditures for the current fiscal year, primarily for upgrades to the
information technology systems and for store remodelization. No store openings
are planned for the remainder of the fiscal year.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This filing contains certain forward-looking statements, which reflect
management's current views of future events and financial performance. These
forward-looking statements are based on many assumptions and factors detailed in
the Company's filings with the Securities and Exchange Commission, including the
effect of currency translations, customer demand, fashion trends, competitive
market forces, uncertainties related to the effect of competitive products and
pricing, customer acceptance of the Company's merchandise mix and retail
locations, unseasonable weather, risks associated with foreign global sourcing,
including political instability and changes in import regulations, economic
conditions worldwide, and the ability of the Company to execute its business
plans effectively. Any changes in such assumptions or factors could produce
significantly different results. The Company undertakes no obligation to update
forward-looking statements, whether as a result of new information, future
events, or otherwise.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company perceives its only market interest rate risk to be limited to
borrowings under the Exit Revolving Facility. These borrowings are at variable
interest rates; and therefore, the related interest expense is sensitive to
changes in the general level of U.S. interest rates and the Eurodollar rate. The
Company had borrowings outstanding under the Exit Revolving Facility of $16.3
million at November 3, 2002, with a current interest rate of 5 1/4%. Interest
under the Exit Term and Revolving Loan of $20 million is fixed at 10 1/4% per
annum.




                                       17
<PAGE>


ITEM 4.  CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective. Disclosure controls and procedures are controls and procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.



PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Old Frank's Current Reports on Form 8-K filed on May 22,
2002, June 25, 2002, July 3, 2002, July 25, 2002, and September 12, 2002, and
Part I, Item 3. Legal Proceedings, of the Annual Report on Form 10-K for the
fiscal year ended January 27, 2002 filed on April 29, 2002. See note 1 to the
unaudited financial statements included elsewhere in this Quarterly Report and
Part I, Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for a discussion of the Chapter 11 Cases. Such discussion
is incorporated herein by this reference.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The Plan became effective on May 20, 2002. On the Effective Date, pursuant to
the Plan all of Old Frank's and Holdings issued and outstanding common stock was
cancelled without consideration; Old Frank's merged with Holdings, and then
changed its name to Frank's, which was reincorporated in Delaware; and a new
Certificate of Incorporation (the "Certificate") and Bylaws (the "Bylaws") of
Frank's. Additionally, on the Effective Date, pursuant to the Plan (a)
20,000,000 shares of Common Stock were reserved for distribution in respect of
claims against the Debtors, (b) 913,044 shares of Common Stock were reserved for
issuance upon the exercise of Warrants for old equity holders of Holdings (c)
3,652,174 shares of Common Stock were reserved for a new stock option plan,
which was implemented in accordance with the Plan, and (d) 5,869,565 shares of
Common Stock were reserved for the conversion rights of an affiliate of Kimco as
part of the exit financings. Descriptions of the Common Stock and Warrants are
included in the Plan as filed in the Company's Current Report on Form 8-K dated
May 7 and filed May 22, 2002. Copies of the Certificate and Bylaws are filed as
Exhibits 3.1 and 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 11, 2002 filed on September 25, 2002.

Section 1145 (a)(1) of the Bankruptcy Code exempts the offer and sale of
securities under a plan of reorganization from registration under the Securities
Act and state securities laws if three principal requirements are satisfied: (a)
the securities must be offered and sold under a plan of reorganization and must
be securities of the debtor, an affiliate participating in a joint plan with the
debtor or a successor to the debtor under the plan; (b) the recipients of the
securities must hold a pre-petition or administrative expense claim against the
debtor or an interest in the debtor; and (c) the securities must be issued
entirely in exchange for the recipient's claim against or interest in the
debtor, or principally in such exchange and partly for cash or property. Section
1145 (a)(2) of the Bankruptcy Code exempts the offer of a security through any
Warrant, option, right to purchase or conversion privilege that is sold in the
manner specified in section 1145 (a)(1) and the sale of a security upon the
exercise of such a Warrant, option, right or privilege. Frank's believes that
the offer and sale of the Common Stock and the Warrants under the Plan satisfy
the requirements of section 1145 (a)(1) of the Bankruptcy Code and, therefore,
are exempt from registration under the Securities Act and state securities laws.
Similarly, Frank's believes that the offer of Common Stock through the Warrants
and the sale of Common Stock upon the exercise of the Warrants satisfy the
requirements of Section 1145 (a)(2) of the Bankruptcy Code and, therefore, are
exempt from registration under the Securities Act and state securities laws.






                                       18
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

  (a)      Exhibits

           Exhibits No.       Description

               99.1           Chief Executive Officer Certification Pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002
               99.2           Chief Financial Officer Certification Pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002




  (b)      Reports on Form 8-K

           During the quarter ended November 3, 2002, the Company filed a
   Current Reports on Form 8-K dated September 12, 2002, reporting information
   under "Item 5. Other Events" regarding the issuance of Common Stock.





                                       19
<PAGE>


                                    SIGNATURE

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.

DATE:    December 18, 2002                 FRANK'S NURSERY & CRAFTS, INC.
                                           (Registrant)


                                    By:    /s/ Adam Szopinski
                                           -------------------------------------
                                           Adam Szopinski
                                           President and Chief Operating Officer

                                           /s/ Alan J. Minker
                                           ------------------------------------
                                           Alan J. Minker
                                           Senior Vice President and Chief
                                           Financial Officer







                                       20
<PAGE>


           CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
                          FINANCIAL OFFICER PURSUANT TO
              RULE 13A - 14 OF THE SECURITIES EXCHANGE ACT OF 1934
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Adam Szopinski, certify, pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, with respect to the Quarterly Report of Frank's Nursery & Crafts, Inc. on
Form 10-Q for the quarterly period ended November 3, 2002 ("Report") that (1) I
have reviewed the Report being filed; (2) based on my knowledge, the Report does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by the Report; and (3) based on my knowledge, the financial statements,
and other financial information included in the Report, fairly represent in all
material respects the financial condition, results of operations and cash flows
of the issuer as of, and for, the periods presented in the Report; (4) the
registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; (5) the registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and (6) the registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

                               By: /s/ Adam Szopinski
                                  ------------------------------------------
                               Name:  Adam Szopinski
                               Title:  President and Chief Operating Officer











                                       21
<PAGE>


I, Alan J. Minker, certify, pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, with respect to the Quarterly Report of Frank's Nursery & Crafts, Inc. on
Form 10-Q for the quarterly period ended August 11, 2002 ("Report") that (1) I
have reviewed the Report being filed; (2) based on my knowledge, the Report does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by the Report; and (3) based on my knowledge, the financial statements,
and other financial information included in the Report, fairly represent in all
material respects the financial condition, results of operations and cash flows
of the issuer as of, and for, the periods presented in the Report; (4) the
registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; (5) the registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and (6) the registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.


                                         By: /s/ Alan J. Minker
                                            -----------------------------
                                         Name:  Alan J. Minker
                                         Title: Senior Vice President and
                                                Chief Financial Officer



                                       22

<PAGE>
                                 EXHIBIT INDEX


Exhibit No.           Description
-----------           -----------
   99.1               Chief Executive Officer Certification Pursuant to Section
                      906 of the Sarbanes-Oxley Act of 2002
   99.2               Chief Financial Officer Certification Pursuant to Section
                      906 of the Sarbanes-Oxley Act of 2002