<PAGE>

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


                                   FORM 10-Q

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

            For the third quarterly period ended September 30, 1999

                               GIANT GROUP, LTD.


      9000 Sunset Boulevard, 16/th/ Floor, Los Angeles, California 90069

                 Registrant's telephone number: (310) 273-5678


                         Commission File Number: 1-4323

               I.R.S. Employer Identification Number: 23-0622690

                        State of Incorporation: Delaware


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
                                       -

On November 12, 1999 the latest practicable date, there were 3,989,648 shares of
                           Common Stock outstanding.
<PAGE>

                               GIANT GROUP, LTD.

                                     INDEX


PART I.  FINANCIAL INFORMATION
------------------------------

<TABLE>
<CAPTION>
                                                                                  Page No.
                                                                                  --------
<S>                                                                               <C>
Item 1. Financial Statements

          Consolidated Statements of Operations -
          Three and Nine-Month Periods Ended September 30, 1999 and 1998             3

          Consolidated Balance Sheets -
          September 30, 1999 and December 31, 1998                                   4

          Consolidated Statements of Cash Flows -
          Nine-Month Periods Ended September 30, 1999 and 1998                       5

          Notes to Consolidated Financial Statements                                 6-10

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                          11-15

PART II. OTHER INFORMATION
--------------------------

Item 1. Legal Proceedings                                                            16


Item 6. Exhibits and Reports on Form 8-K                                             16

                 (a) Exhibits

                 (b) Reports on Form 8-K

Signature                                                                            17
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                               GIANT GROUP, LTD.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
    for the three and nine-month periods ended September 30, 1999 and 1998
                                  (Unaudited)

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                   Three-months ended                   Nine-months ended
                                                                      September 30,                       September 30,
                                                               -------------------------            -------------------------
                                                                  1999           1998                  1999           1998
                                                               ----------     ----------            ----------     ----------
<S>                                                            <C>            <C>                   <C>            <C>
Net sales                                                      $   21,971     $        -            $   58,963     $        -
Cost of sales                                                      17,608              -                46,166              -
                                                               ----------     ----------            ----------     ----------
Gross profit                                                        4,363              -                12,797              -
                                                               ----------     ----------            ----------     ----------

 Operating expenses:
   Selling and shipping                                             2,692              -                 6,659              -
   General and administrative                                       1,950            794                 5,351          2,603
   Merger agreement and related legal                                   -            325                     -            325
   Depreciation                                                        95             46                   290            234
   Amortization of goodwill                                           172              -                   515              -
   Co-ownership program, net of
    charter income of $812 and $1,308                                   -           (354)                    -            140
                                                               ----------     ----------            ----------     ----------
                                                                    4,909            811                12,815          3,302
                                                               ----------     ----------            ----------     ----------

 Loss from operations                                                (546)          (811)                  (18)        (3,302)
                                                               ----------     ----------            ----------     ----------

 Other income (expense):
   Factoring and financing costs                                   (1,015)             -                (2,317)            (2)
   Investment and other income                                         20            518                 1,088          1,857
   Gain on sale of property                                             -             10                   269          2,855
                                                               ----------     ----------            ----------     ----------
                                                                     (995)           528                  (960)         4,710
                                                               ----------     ----------            ----------     ----------

 Income (loss) before benefit for income taxes                     (1,541)          (283)                 (978)         1,408
 Benefit for income taxes                                            (505)        (1,047)                 (103)          (350)
                                                               ----------     ----------            ----------     ----------
 Net income (loss)                                             $   (1,036)    $      764            $     (875)    $    1,758
                                                               ==========     ==========            ==========     ==========

 Basic and diluted earnings (loss) per common share            $    (0.26)    $     0.24            $    (0.22)    $     0.55
                                                               ==========     ==========            ==========     ==========

 Weighted average shares - basic and diluted                    3,960,000      3,181,000             3,938,000      3,181,000
                                                               ==========     ==========            ==========     ==========
</TABLE>

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

                                       3
<PAGE>

                               GIANT GROUP, LTD.
                          CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                          September 30,        December 31,
                                                                                              1999                 1998
                                                                                          -------------        ------------
ASSETS                                                                                     (Unaudited)
<S>                                                                                       <C>                  <C>
 Current assets:
   Cash and cash equivalents                                                              $       1,074        $      4,226
   Marketable securities                                                                          9,602               7,797
   Current portion of note receivable from related party                                          2,145               2,002
   Note and other receivables                                                                       975               4,752
   Inventories                                                                                   12,176              12,438
   Prepaid expenses and other assets                                                                608                 690
   Deferred income taxes                                                                          1,852                 892
                                                                                          -------------        ------------
      Total current assets                                                                       28,432              32,797
 Note receivable from related party                                                                 538                 499
 Property and equipment, net                                                                      1,936               1,983
 Deferred income taxes                                                                            1,774               1,748
 Goodwill, net of amortization of $553 and $38                                                   27,252              27,415
 Other assets                                                                                       713                 118
                                                                                          -------------        ------------
      Total assets                                                                        $      60,645        $     64,560
                                                                                          =============        ============

 LIABILITIES
 Current liabilities:
   Due to factor                                                                          $       5,288               3,868
   Accounts payable                                                                               4,051               7,134
   Current portion of note payable to related party                                                 400                 400
   Accrued expenses                                                                               1,223               1,297
   Income taxes payable                                                                             252                 554
                                                                                          -------------        ------------
      Total current liabilities                                                                  11,214              13,253
 Capital lease obligations                                                                          204                 252
 Note payable to related party                                                                    1,318               1,227
 Deferred income taxes                                                                                7                   7
                                                                                          -------------        ------------
      Total liabilities                                                                          12,743              14,739
                                                                                          -------------        ------------

 Commitments and contingencies

 STOCKHOLDERS' EQUITY
 Preferred stock, $.01 par value; authorized 2,000,000 shares, none issued                            -                   -
 Class A common stock, $.01 par value; authorized 5,000,000 shares, none issued                       -                   -
 Common stock, $.01 par value; authorized 12,500,000 shares, 7,266,000 shares issued                 73                  73
 Capital in excess of par value                                                                  35,008              35,196
 Accumulated other comprehensive loss - unrealized losses on marketable securities, net          (1,585)               (190)
 Retained earnings                                                                               42,708              43,583
                                                                                          -------------        ------------
                                                                                                 76,204              78,662
 Less 3,276,000 shares of Common stock in treasury, at cost                                     (28,302)            (28,841)
                                                                                          -------------        ------------
      Total stockholders' equity                                                                 47,902              49,821
                                                                                          -------------        ------------
      Total liabilities and stockholders' equity                                          $      60,645        $     64,560
                                                                                          =============        ============
</TABLE>

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

                                       4
<PAGE>

                               GIANT GROUP, LTD.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
         for the nine-month periods ended September 30, 1999 and 1998
                                  (Unaudited)
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                         Nine-months ended
                                                                                           September 30,
                                                                                ----------------------------------
                                                                                 1999                       1998
                                                                                -------                   --------
<S>                                                                             <C>                       <C>
Operating Activities:
  Net income (loss)                                                             $  (875)                  $  1,758
  Adjustments to reconcile net income (loss) to net cash (used)
    provided by operating activities:
   Depreciation and amortization                                                    998                        234
   Provision for impairment of assets held-for-sale                                   -                        541
   Gain on sale of land and property and equipment                                 (269)                    (2,855)
   Gain on sale of marketable securities                                           (419)                      (128)
   Deferred income taxes                                                            (56)                      (450)
   Accretion of discounts on investments, net                                      (323)                      (532)
  Changes in assets and liabilities:
    Decrease in income tax receivables                                                -                      1,100
    Decrease in inventories                                                         262                          -
    Decrease (increase) in receivables and prepaid expenses and                     403                       (455)
     other assets
    Increase in due to factor                                                     1,420                          -
    Decrease in accounts payable and accrued expenses                            (3,161)                      (157)
    (Decrease) increase in income taxes payable                                    (302)                     1,224
                                                                                -------                   --------
         Net cash (used) provided by operating activities                        (2,322)                       280
                                                                                -------                   --------

Investing Activities:
  Sales of marketable securities                                                  4,445                     22,362
  Purchases of marketable securities                                             (5,111)                   (41,937)
  Net proceeds from sale of assets                                                  284                     19,843
  Debt payment                                                                        -                         99
  Purchase of assets held-for-sale and related costs                                  -                        (49)
  Purchases of property and equipment                                              (261)                       (46)
                                                                                -------                   --------
         Net cash (used) provided by investing activities                          (643)                       272
                                                                                -------                   --------

Financing Activities:
  Proceeds from short-term loan                                                   1,662                          -
  Principal payment on short-term loan                                           (1,662)                         -
  Principal payments on capital lease obligations                                   (44)                         -
  Increase in note receivable from related party                                   (143)                         -
                                                                                -------                   --------
         Net cash used by financing activities                                     (187)                         -
                                                                                -------                   --------

         (Decrease) increase in cash and cash equivalents                        (3,152)                       552

Cash and cash equivalents:
  Beginning of period                                                             4,226                      1,137
                                                                                -------                   --------
  End of period                                                                 $ 1,074                   $  1,689
                                                                                =======                   ========
Supplemental disclosure of cash (paid) received for:
  Income taxes                                                                  $ (323)                   $  2,193
  Interest                                                                      (1,659)                         (2)
</TABLE>

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


                                       5
<PAGE>

                               GIANT GROUP, LTD.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
               (Dollars in thousands, except per share amounts)

1.   Basis of Presentation
     ---------------------

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1999, the results of operations for the three and nine-month periods ended
September 30, 1999 and 1998 and cash flows for the nine-month periods ended
September 30, 1999 and 1998. These results have been determined on the basis of
generally accepted accounting principles and practices applied consistently with
those used in the preparation of the Company's 1998 Annual Report on Form 10-K.
However, for interim periods, customer returns and allowances are accrued based
on expected annualized activity and cost of sales are computed using the gross
profit method. Certain 1998 amounts have been reclassified to conform to the
1999 presentation. Operating results for the three and nine-month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full year. It is suggested that the accompanying unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes in the Company's 1998 Annual Report on Form 10-K.

2.   Acquisition
     -----------

     On December 11, 1998 the Company acquired 100% of the outstanding common
stock of Periscope, which designs, sources and markets an extensive line of high
quality moderate priced, women and children's clothing to mass merchandisers and
major retailers, primarily for sale under private labels. Periscope uses only
outside manufacturers, primarily in Mexico, and then ships direct to its retail
customers. It also imports finished products primarily from China and Taiwan. It
only manufactures products based on firm orders and, once a product is shipped
to a customer, returns are not accepted unless the product is defective or
delivered late.

     The acquisition has been accounted for by the purchase method of
accounting, and, accordingly, Periscope's assets and liabilities have been
recorded at their fair value as of the date of acquisition. Periscope's results
of operations are included in the Company's consolidated statement of operations
for the three and nine-month periods ended September 30, 1999. On December 11,
1998, prior to the effective date of the acquisition, the Company made a gross
advance of $28,500 in cash to Periscope, which Periscope used to reduce certain
borrowings. On May 18, 1999, the Company's Board of Directors approved the
capitalization of this advance.

     The initial cost of the acquisition included 953,093 shares of Company
common stock, which were held in treasury and valued at $6,493, 75,000 Company
warrants valued at $195 and exercisable at $7.25 over a five year period, and
transaction costs of $259. In August, the Company issued an additional 62,500
shares of common stock, valued at $352, to Periscope stockholders (see next
paragraph). The excess of the total cost over the estimated fair value of the
net assets acquired of $27,805, based on the Company's allocation of the
purchase price, was allocated to goodwill and is being amortized on a straight-
line basis over 40 years. The Company will finalize the allocation of the
purchase price during the year 1999, subject to any contingent shares issued in
2000 (see next paragraph).

     The Company was under an obligation to issue 225,000 shares of additional
Company common stock to the former Periscope stockholders based on the level of
Periscope pre-tax profits, as defined in the merger agreement, which exceeded
$13 million dollars for the year ended December 31, 1999. On May 18, 1999, the
Company's Board of Directors approved an election that was given to the
Periscope stockholders on July 23, 1999. The election gave the Periscope
stockholders a choice of receiving their pro-rata portion of 62,500 shares of
the Company's common stock and also their pro-rata portion of an additional
62,500 shares of the Company's common stock should Periscope's pre-tax profits
for the twelve months ended June 30, 2000 exceed $13 million, instead of
receiving 225,000 shares of the Company's common stock, as previously discussed.
On August 13, 1999 ("Election Date"), all Periscope stockholders elected to
receive their pro-rata portion of 62,500 shares of the Company's common stock.
The Company valued the stock at $352, which represented the fair market value of

                                       6
<PAGE>

                               GIANT GROUP, LTD.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
               (Dollars in thousands, except per share amounts)

the common stock on the Election Date. The stockholders received the common
stock, which was held in treasury, in September of this year.

     During the third quarter of 1999 the Company determined that a receivable
acquired in the acquisition would not be collected within one year. The Company
recorded a discount of $139 and has reclassified $602 to long-term other assets.

3.   Factor and Financing Arrangements
     ---------------------------------

     On August 10, 1999, Periscope signed an agreement ("Factoring Agreement")
with a major factor to obtain a new factoring line which permits, as defined in
the Factoring Agreement, daily working capital borrowing of 90.0% of eligible
accounts receivable (non-recourse), 50.0% of letters of credit outstanding
issued by Periscope and 50% of eligible inventory. The maximum borrowings under
the Factoring Agreement are $36 million. The outstanding debt is collateralized
by Periscope's receivables, inventory and other assets as defined in the
Factoring Agreement. In addition, $4million is guaranteed by the Company and
$1million is personally guaranteed by Glenn Sands, Periscope's President and
Chief Executive Officer. Borrowings are subject to a processing charge equal to
0.45% on factor credit approved accounts receivable and .30% on non-factor
credit approved accounts receivable. In addition, an interest charge is applied
to the total outstanding debt equal to the greater of 6% or the prime rate plus
one-quarter of one percent. On October 1, 1999 this interest rate is subject to
a 3% increase on certain borrowings as defined in the Factoring Agreement.
Periscope is required under the Factoring Agreement to maintain certain
financial ratios and places certain limitations on capital expenditures,
indebtedness and dividend payments. The factoring line shall continue until the
last day of the 24/th/ month from the date the Factoring Agreement was signed
and thereafter automatically renews from year to year unless terminated at the
option of Periscope with 60 days of acceptable written notice given to the
factor or terminated by the factor by giving 5 days written notice to Periscope.
The uncollected balance of receivables held by the factor was approximately $29
million and $12 million for the periods ended September 30, 1999 and December
31, 1998, respectively. The net outstanding balance under this factoring line
was $5.3 million at September 30, 1999 and $3.9 million under the previous
factoring line at December 31, 1998. Interest on the total outstanding debt was
8.50% and 8.25%, respectively, at September 30, 1999 and December 31, 1998.
Periscope had approximately $6.8 million of open letters of credit at September
30, 1999.

     This Factoring Agreement arranged by Periscope replaced the Company's May
1999 new letter of credit agreement. Both agreements were with the same factor.
The new letter of credit agreement had provided for an additional letter of
credit accommodation to collateralize the Company's obligations to third parties
for Periscope's purchase of goods and inventory. The Company was subject to an
interest rate equal to the greater of 6% or prime plus one-quarter of one
percent on any money paid in connection with the New LC and other fees stated in
the agreement. Upon the termination of the new letter of credit agreement, the
Company received back from the factor its collateral security deposit of $2,000,
plus interest.

     At September 30, 1999, Periscope was in technical default of certain
covenants under the Factoring Agreement. In addition, the factor has provided an
overadvance in excess of the amount provided for in the Factoring Agreement and
the total outstanding, including letters of credit of $6.8 million, exceeds the
maximum line of $36 million by approximately $2.2 million. As of November 1,
1999, the factor has restricted the borrowing by Periscope, availability being
based only on new shipments of goods, and is not issuing additional letters of
credit. It is expected that these restrictions will continue until the default
conditions have been resolved and the overadvance and excess above the maximum
line have been reduced to amounts acceptable to the factor. To date, no formal
demand to Periscope has been made by the factor. Periscope is having on-going
discussions with the factor to resolve these issues. If Periscope is successful
in resolving the issues, Periscope will again have credit available under the
Factoring Agreement. The Company is also exploring alternatives, should the
factor stop all borrowing, and believes that other sources of financing will be
available. However, no assurance can be given that the issues will be resolved
or that additional sources of financing will be identified.

                                       7
<PAGE>

                               GIANT GROUP, LTD.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
               (Dollars in thousands, except per share amounts)

4.   Earnings (Loss) Per Share
     -------------------------

     Basic earnings (loss) per common share ("Basic EPS") is computed by
dividing reported net earnings or loss available to common stockholders by the
weighted average shares outstanding. The computation of diluted earnings (loss)
per common share ("Diluted EPS") using the treasury stock method includes shares
to be issued upon the assumed exercise of those stock options and warrants for
which the average market price of the Company's common stock for the period
exceeds the exercise price of the options and warrants. The calculation of
Diluted EPS for the three and nine-month periods ended September 30, 1999 does
not include 2,206,000 options and warrants, at a range of $5.44 to $8.25,
because the effect would be anti-dilutive as the Company recorded a net loss for
both periods. Options to purchase 2,101,000 shares of the Company's common stock
at a range of $5.44 to $8.25 were outstanding during the prior year periods but
were not included in the computation of Diluted EPS because the options prices
were greater than the average market price of the Company's common stock and the
effect would be anti-dilutive.

5.   Comprehensive Income
     --------------------

     The changes in components of comprehensive income (loss), net of benefit
for income taxes, for the  nine-month periods ended September 30, 1999 and 1998
are as follows:


<TABLE>
<CAPTION>
                                                   1999                                             1998
                                   ----------------------------------------         ---------------------------------------
                                   Pre-tax          Tax               Net           Pre-tax          Tax              Net
                                   Amount         Benefit            Amount         Amount         Benefit           Amount
                                   ------         -------            ------         -------        -------           ------
<S>                              <C>              <C>              <C>             <C>            <C>              <C>
Other comprehensive loss:
 Unrealized losses on
 marketable securities, net      $ (2,325)        $  (930)         $ (1,395)       $ (6,183)      $ (2,473)        $ (3,710)

Net income (loss)                                                      (875)                                          1,758
                                                                   --------                                        --------
Comprehensive loss                                                 $ (2,270)                                       $ (1,952)
                                                                   --------                                        --------
</TABLE>

6.   Affiliates' Transactions
     ------------------------

     In March 1999, KCC signed an agreement with Santa Barbara Restaurant Group,
Inc. ("SBRG"). In accordance with the agreement, KCC exchanged its remaining
$2,995 of Checkers 13% restructured debt for 998,377 shares of SBRG's $.08 par
value common stock at a market price of $3.00. The Company recorded investment
income of approximately $129 equal to the remaining unamortized discount of the
13% restructured debt. In October 1999, the SBRG shares were registered under
the Securities Act of 1933.

     On August 9, 1999, Checkers and Rally's merged in an all-stock transaction,
which was previously announced on January 29, 1999. The merger agreement,
approved by the stockholders of both Checkers and Rally's, provided that each
outstanding share of Rally's stock be exchanged for 1.99 shares of Checkers
stock. The Checkers common stock owned by Rally's (approximately 26% of Checkers
common stock) was retired after the merger. In addition, the Checkers
stockholders approved a post-merger one-for-twelve reverse stock split.
Subsequent to the merger and reverse stock split, the Company owns approximately
535,000 shares of Checkers common stock or 5.7% of the outstanding shares of
Checkers common stock and owns warrants to purchase approximately 237,000 shares
of Checkers common stock at a strike price of $3.00. The new company will
continue to operate restaurants under both the Checkers and Rally's brand names
for the foreseeable future.

                                       8
<PAGE>

                               GIANT GROUP, LTD.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
               (Dollars in thousands, except per share amounts)

7.   Information Concerning Business Segments
     ----------------------------------------

     The Company's one reportable segment, the design, manufacture and sale of
women and children's clothing, was acquired through an acquisition, effective
December 11, 1998. The Company's current period consolidated statement of
operations reflects the segment's results of operations for the three and nine
months ended September 30, 1999. Women and children's clothing sales made to
three major customers represented approximately 60% of net sales for the three
and nine-month periods ended September 30, 1999.

8.   Recent Accounting Pronouncements
     --------------------------------

     In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". The statement is intended to eliminate the diversity in practice
in accounting for internal-use software costs and improve financial reporting.
The statement is effective for fiscal years beginning after December 15, 1998.
The Company has adopted this statement in the first quarter of 1999 and has
determined that the effect of this statement on the Company's current
consolidated financial position and consolidated results of operations is not
material.

     In June 1998, the Financial Accounting Standards Board issued FASB 133
"Accounting for Derivative Instruments and Hedging Activities" ("FASB 133").
This statement increases the visibility, comparability, and understanding of the
risks associated with holding derivatives by requiring all entities to report
all derivatives at fair value as assets or liabilities. It also provides
guidance and practice by providing companies with comprehensive rules for all
derivatives and hedging activities. FASB 133 is effective for fiscal quarters of
fiscal years that begin after June 15, 2000. The Company will follow the
disclosure requirements set forth in this statement; however, the Company does
not currently hold or issue derivative instruments or nonderivative instruments
that are designated and qualify as hedging instruments.

9.   Commitments and Contingencies
     -----------------------------

     The Company is involved in lawsuits as described in the Company's 1998
Annual Report on Form 10-K and as further described in the following paragraphs.

     Mittman/Rally's. In January and February 1994, two putative class action
     ---------------
lawsuits were filed, purportedly on behalf of the shareholders of Rally's in the
United States District Court for the Western District of Kentucky, against
Rally's, certain of Rally's present and former officers, directors and
shareholders and its auditors and GIANT. The complaints allege defendants
violated the Securities Exchange Act of 1934, as amended, among other claims, by
issuing inaccurate public statements about Rally's in order to arbitrarily
inflate the price of Rally's common stock, and seek unspecified damages,
including punitive damages. On April 15, 1994, GIANT filed a motion to dismiss
and a motion to strike. On April 5, 1995, the Court struck certain provisions of
the complaint but otherwise denied GIANT's motion to dismiss. In addition, the
Court denied plaintiffs' motion for class certification. On July 31, 1995, the
plaintiffs renewed this motion, and on April 16, 1996, the Court certified the
class. Two settlement conferences have been conducted, most recently on December
7, 1998, but have been unsuccessful. Fact discovery was completed by summer
1999. Expert discovery will be completed by early spring of 2000. No trial date
has been scheduled. Management is unable to predict the outcome of this matter
at the present time. Rally's and GIANT deny all wrongdoing and intend to defend
themselves vigorously in this matter.

     Harbor. In February 1996, Harbor Finance Partners ("Harbor") commenced a
     ------
derivative action, purportedly on behalf of Rally's, against Rally's officers
and directors and GIANT, David Gotterer, and Burt Sugarman before the Delaware
Chancery Courts. Harbor named Rally's as a nominal defendant. Harbor claims that
directors and officers of both Rally's and GIANT, along with GIANT breached
their fiduciary duties to the public shareholders of Rally's by causing Rally's
to repurchase certain Rally's Senior Notes at an inflated price. The NASDAQ
closing price of the Senior Notes as of August 5, 1999 was $89, approximately
31% higher than

                                       9
<PAGE>

                              GIANT GROUP, LTD.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)
               (Dollars in thousands, except per share amounts)

the repurchase price of $67 7/8. Harbor seeks "millions of dollars in damages",
along with rescission of the repurchase transaction. In the fall of 1996, all
defendants moved to dismiss this action. On April 3, 1997, the Chancery Court
denied defendants' motion. In the second quarter of 1999, the plaintiffs filed
document requests and interrogatories. Because of the merger of Rally's into
Checkers (see Footnote 6), plaintiffs lost their standing to maintain this
action, and voluntarily dismissed the action on September 10, 1999.

     KCC/Pike Santa Monica Action. In October 1996, KCC filed a complaint, in
     ----------------------------
the Los Angeles County Superior Court, against NeoGen Investors, L.P., N.D.
Management, Inc., NeoGen Holdings, L.P., Danco Laboratories, Inc. and NeoGen
Pharmaceutical, Inc. (collectively the "NeoGen Entities") and Joseph Pike,
stating causes of action for fraud, breach of fiduciary duty, fraudulent
concealment, breach of contract, unfair business practices and permanent and
preliminary injunctive relief and against the licensors of Mifepristone, the
Population Council, Inc. and Advances in Health Technology, Inc., on a
declaratory relief claim. The complaint seeks damages for the breach by Joseph
Pike and the NeoGen Entities of a July 24, 1996 agreement by which KCC agreed to
contribute $6,000, in return for a 26% equity interest in the entity producing
the drug, Mifepristone, in the United States and other parts of the world
("NeoGen Agreement"). The $6,000 contribution was not funded. On February 19,
1997, Joseph Pike and the NeoGen Entities filed an answer to the complaint,
denying its material allegations and raising affirmative defenses. On that date,
the NeoGen Entities also filed a cross-complaint against KCC, the Company, and
certain of the Company's directors, Terry Christensen, David Malcolm and Burt
Sugarman, which alleged causes of action for fraud, breach of contract,
intentional interference with prospective economic advantage, negligent
interference with prospective economic advantage and unfair business practices.
In October 1997, KCC settled their action with the licensors, the Population
Council, Inc. and Advances in Health Technology, Inc., and in November 1997, KCC
settled their action with Joseph Pike. On May 1, 1998, the court granted the
NeoGen Entities summary adjudication on KCC's cause of action for breach of
contract. Discovery in this action is complete. On October 2, 1998, the court
entered an order, which, among other things, effectively eliminates NeoGen
Entities' ability to obtain any money judgement from KCC and the other cross-
defendants. On February 23, 1999, the court entered judgement pursuant to a
Stipulation for Judgement, by which the parties' respective claims are dismissed
with prejudice, save and except for the right to appeal certain issues. On or
about April 22, 1999, NeoGen filed a notice of appeal of that judgement. On or
about June 8, 1999, KCC filed a notice of cross-appeal.

     Neogen/ Danco v. KCC. This complaint for damages for trade libel was filed
     --------------------
on October 30, 1998 in the Superior Court for the State of California for the
County of Los Angeles. The complaint alleged one cause of action for trade libel
against all defendants KCC, GIANT, Terry Christensen and Does 1 through 20,
regarding defendants' alleged statements to the media concerning plaintiffs
Neogen Investors, L.P., and Danco Laboratories, Inc. and Joseph Pike. The
complaint was never served. On August 3, 1999 Neogen filed a request for
dismissal of the entire action without prejudice and the dismissal of this
action was entered on that date by the court.

     Since management does not believe that the previously mentioned lawsuits
and other claims and legal proceedings, in which the Company is a defendant,
contain meritorious claims, management believes that the ultimate resolution of
the lawsuits will not materially and adversely affect the Company's consolidated
financial position or results of operations.

     On July 23, 1999, the Company amended the employment contract with the
President and Chief Executive Officer of Periscope by increasing his annual base
salary to $950 from $500 for the second and third year of his current employment
term, in lieu of the $450 performance based bonus.

     The Company presently fails to meet the recently effective New York Stock
Exchange ("NYSE") continued listing standards requiring total market
capitalization of not less than $50 million and total stockholders' equity of
not less than $50 million. The Company is exploring options to maximize
shareholder value. Such options include, among other things, the sale of
Periscope Sportswear, Inc., a subsidiary of the Company.

                                       10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS. (Dollars in thousands, except per share amounts)

     On December 11, 1998, the Company acquired 100% of the outstanding common
stock of Periscope, a designer and manufacturer of women and children's apparel.
The acquisition has been accounted for by the purchase method of accounting.
Periscope's results of operations for the three and nine-month periods ended
September 30, 1999 are included in the Company's consolidated statement of
operations for the current period. Periscope's unaudited results of operations
for the three and nine-month periods ended September 30, 1998 are not included
in the Company's consolidated statement of operations for the prior period;
however, the prior period's unaudited results of operations for the Company and
Periscope have been combined for proforma comparative purposes in the
discussions that follow.

Results of Operations for the Three Months Ended September 30, 1999 Versus
--------------------------------------------------------------------------
September 30, 1998
------------------

     Net sales for the three-month period ended September 30, 1999 were $21,971.
On a comparable basis, this was a decrease of $5,913 from net sales of $27,884
in the prior period. The net sales decrease, included a decrease of $10,313 in
ladies' knit sportswear and children's apparel, partially offset by an increase
of $4,400 in wovens and imported apparel. The company's sales continued to be
adversely affected by the reduction of Periscope's available credit by the
company's factor which resulted in the company's inability to purchase raw
materials to produce goods and to ship orders. In August 1999, Periscope signed
a factoring agreement with a new major factor to obtain a higher level of
financing and lower interest rate than provided by the previous factor. However,
due to the timing of completing this agreement there was no significant impact
on sales for the third quarter.

    Gross profit for the three-month period ended September 30, 1999 was $4,363
or 19.9% of net sales. On a comparable basis, the prior period was $3,608 or
12.9% of net sales. The decrease in gross profit from the second quarter of 1999
resulted from a year-to-date adjustment, recorded in the third quarter, relating
to higher returns and allowances than projected for the year. In addition, these
results were impacted by the same factors causing the decrease in sales. The
prior year Periscope historical gross profit was also affected by a year-to-date
adjustment, recorded in the quarter relating to higher returns and allowances
than projected for the year and an adjustment related to inventory obsolescence.

     Operating expenses for the three-month period ended September 30, 1999
increased $4,098 to $4,909 from $811 in the prior period. This increase is
primarily due to the inclusion in the current period of the operating expenses
of the apparel operation of $3,784, goodwill amortization of $172 and an overall
increase in corporate expenses of $116. In the prior period, costs of $325
relating to the proposed merger of GIANT, Rally's and Checkers, was offset by
net charter income of $354 related to the yacht that was sold in October of
1998. On a comparable basis, proforma operating expenses decreased $3,467 to
$4,909 from $8,376 in the prior period which reflected expenses of $2,415
related to Periscope's attempted initial public offering, $325 related to the
proposed merger and lower shipping and selling expenses of $985 primarily due to
lower sales and the move of the apparel production and distribution facilities
to Mexico.

     Other income (expense) for the three-month period ended September 30, 1999
decreased $1,523 to an expense of $995 from income of $528 in the prior period.
The decrease is primarily related to the inclusion in the current period of the
factoring and financing costs of the apparel operations of $1,003. In addition,
the Company recorded lower investment income of $498 in the current period
primarily due to lower interest income from the Company's investment in debt
securities and recording of a discount of $139 on a current receivable acquired
in the acquisition of Periscope that was determined will not be collected within
one year. On a comparable basis, proforma other expense decreased $95 to an
expense of $995 from $1,090 in the prior period reflecting the items previously
discussed in this paragraph, offset by the decrease in financing costs of $615
primarily due to the funds that were advanced by the Company in December 1998 to
the apparel operations to reduce certain borrowings.

Results of Operations for the Nine Months Ended September 30, 1999 Versus
-------------------------------------------------------------------------
September 30, 1998
------------------

     Net sales for the nine-month period ended September 30, 1999 were $58,963.
On a comparable basis this was a decrease of $7,423 from Periscope's net sales
of $66,386 in the prior period. The net sales decrease, included a decrease of
$15,217 in ladies' knit sportswear and children's apparel, partially offset by
an increase of $7,794 in wovens and imported apparel. The company's sales
continued to be adversely affected by the reduction of Periscope's available
credit by the company's factor which resulted in the company's inability to
purchase raw

                                       11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts)

materials to produce goods and to ship orders. In August 1999, Periscope signed
a factoring agreement with a new major factor to obtain a higher level of
financing and lower interest rate than provided by the previous factor. However,
due to the timing of completing the agreement, there was no significant impact
on sales for the third quarter.

    Gross profit for the nine-month period ended September 30, 1999 was $12,797
or 21.7% of net sales. On a comparable basis Periscope's prior period was
$12,348 or 18.6% of net sales. The decrease in gross profit from the second
quarter of 1999 resulted from a year-to-date adjustment, recorded in the third
quarter, relating to higher returns and allowances than projected for the year.
In addition, these results were impacted by the same factors causing the
decrease in sales. The prior year gross profit was also affected by a year-to-
date adjustment, recorded in the quarter relating to higher returns and
allowances than projected for the year and an adjustment related to inventory
obsolescence.

     Operating expenses for the nine-month period ended September 30, 1999
increased $9,513 to $12,815 from $3,302 in the prior period. The increase is
primarily due to the inclusion in the current period of the operating expenses
of the apparel operations of $9,546 and goodwill amortization of $515. This
increase in expenses is reduced by prior period Co-Ownership and charter
expenses of $140, net of $1,308 in charter income earned prior to the sale of
the yachts in April and October of 1998 and $325 related to the proposed merger
involving GIANT, Rally's and Checkers. On a comparable basis, proforma operating
expenses decreased $3,596 to $12,815 from $16,411in the prior period reflecting
the items previously discussed, and prior period expenses of $2,415 related to
Periscope's attempted initial public offering, and lower shipping and selling
expenses of $805 primarily due to lower sales and the move of the apparel
production and distribution facilities to Mexico.

     Other income (expense) for the nine-month period ended September 30, 1999
decreased $5,670 to expense of $960 from income of $4,710 in the prior period.
The decrease is primarily related to the inclusion in the current period of the
factoring and financing costs of the apparel operations of $2,293. In addition,
the Company recorded lower investment income of $769 in the current period
primarily due to lower interest income from the Company's investment in debt
securities of $961 and recording of a discount of $139 on a current receivable
acquired in the acquisition of Periscope that was determined will not be
collected within one year, partially offset by higher gains on the sales of
marketable securities of $291 in the current period. The Company also recognized
a gain of $269 on the sale of land not used in the Company's operations in the
current period compared to a gain of $2,855 on the sale of property and
equipment recorded in the prior period. On a comparable basis, proforma other
income (expense) decreased $1,567 to an expense of $960 from income of $607 in
the prior period reflecting the items previously discussed in this paragraph,
partially offset by a decrease in financing costs of $1,810 primarily due to the
funds advanced by the Company in December 1998 to the apparel operations to
reduce certain borrowings.

Liquidity and Capital Resources
-------------------------------

     Cash and cash equivalents and marketable securities at September 30, 1999
totaled $10,676 compared with $12,023 at December 31, 1998. At September 30,
1999 and December 31, 1998, the Company had working capital of $17,218 and
$19,544 with current ratios of 2.5 and 2.5 to 1, respectively.

     On August 10, 1999, Periscope signed an agreement ("Factoring Agreement")
with a major factor to obtain a new factoring line which permits, as defined in
the Factoring Agreement, daily working capital borrowing of 90.0% of eligible
accounts receivable (non-recourse), 50.0% of letters of credit outstanding
issued by Periscope and 50% of eligible inventory. The maximum borrowings under
the Factoring Agreement are $36 million. The outstanding debt is collateralized
by Periscope's receivables, inventory and other assets as defined in the
Factoring Agreement. In addition, $4 million is guaranteed by the Company and
$1million is personally guaranteed by Glenn Sands, Periscope's President and
Chief Executive Officer. Borrowings are subject to a processing charge equal to
0.45% on factor credit approved accounts receivable and .30% on non-factor
credit approved accounts receivable. In addition, an interest charge is applied
to the total outstanding debt equal to the greater of 6% or the prime rate plus
one-quarter of one percent. On October 1, 1999 this interest rate is subject to
a 3% increase on certain borrowings as defined in the Factoring Agreement.
Periscope is required under the Factoring Agreement to maintain certain
financial ratios and places certain limitations on capital expenditures,
indebtedness and dividend payments. The

                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts)

factoring line shall continue until the last day of the 24/th/ month from the
date the Factoring Agreement was signed and thereafter automatically renews from
year to year unless terminated at the option of Periscope with 60 days of
acceptable written notice given to the factor or terminated by the factor by
giving 5 days written notice to Periscope. The uncollected balance of
receivables held by the factor was approximately $29 million and $12 million for
the periods ended September 30, 1999 and December 31, 1998, respectively. The
net outstanding balance under this factoring line was $5.3 million at September
30, 1999 and $3.9 million under the previous factoring line at December 31,
1998. Interest on the total outstanding debt was 8.50% and 8.25%, respectively,
at September 30, 1999 and December 31, 1998. Periscope had approximately $6.8
million of open letters of credit at September 30, 1999.

     At September 30, 1999, Periscope was in technical default of certain
covenants under the Factoring Agreement. In addition, the factor has provided an
overadvance in excess of the amount provided for in the Factoring Agreement and
the total outstanding, including letters of credit of $6.8 million, exceeds the
maximum line of $36 million by approximately $2.2 million. As of November 1,
1999, the factor has restricted the borrowing by Periscope, availability being
based only on new shipments of goods, and is not issuing additional letters of
credit. It is expected that these restrictions will continue until the default
conditions have been resolved and the overadvance and excess above the maximum
line have been reduced to amounts acceptable to the factor. To date, no formal
demand to Periscope has been made by the factor. Periscope is having on-going
discussions with the factor to resolve these issues. If Periscope is successful
in resolving the issues, Periscope will again have credit available under the
Factoring Agreement. The Company is also exploring alternatives, should the
factor stop all borrowing, and believes that other sources of financing will be
available. However, no assurance can be given that the issues will be resolved
or that additional sources of financing will be identified.

     This Factoring Agreement arranged by Periscope replaced the Company's May
1999 new letter of credit agreement. Both agreements were with the same factor.
The new letter of credit agreement had provided for an additional letter of
credit accommodation to collateralize the Company's obligations to third parties
for Periscope's purchase of goods and inventory. The Company was subject to an
interest rate equal to the greater of 6% or prime plus one-quarter of one
percent on any money paid in connection with the New LC and other fees stated in
the agreement. Upon the termination of the new letter of credit agreement, the
Company received back from the factor its collateral security deposit of $2,000,
plus interest.

     Net cash used by operating activities for the nine months ended September
30, 1999 was $2,322 compared to cash provided by operating activities of $280
for the prior period. This increase in cash used for operations resulted from a
net loss of $875 compared to a net income of $1,758 in the prior period and by
higher liquidity requirements in the current period.

     Net cash used by investing activities for the nine months ended September
30, 1999 was $643 compared to cash provided by investing activities of $272 for
the prior period. In the current period, purchases, net of sales of marketable
securities was $666 compared to $19,575 in the prior period. This higher use of
cash of $ 18,909 was off set by proceeds of $ 19,843 primarily from the sale of
its remaining luxury yacht and corporate plane in the prior period.

     Net cash used by financing activities for the nine months ended September
30, 1999 was $187 compared with no financing activities for the prior period.
During the current period, the Company had a short-tem loan of $1,662 that was
taken out in May 1999 and repaid in August of 1999. In addition $143 was
advanced to Periscope's President and Chief Executive Officer and Periscope made
$44 of principal payments on capital lease obligations.

     The Company's current liquidity is provided by cash and cash equivalents,
marketable securities, investment income, and borrowings under the Company's
factoring line. As discussed above, the Company has on-going discussions with
its factor to increase its available credit. In addition, the Company is
exploring other options. Such options include, among other things, the sale of
Periscope.

                                       13
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts)

Year 2000
---------

     The Company has completed its evaluation of its information technology for
Year 2000 compliance. The cost incurred to modify its information technology
infrastructure to be Year 2000 compliant is not material to its consolidated
financial condition or results of operations. In addition, the remediation of
Year 2000 issues involving the Company's information systems has also been
completed. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be in compliance. The
Company has purchased new information technology platforms, which, among other
things, are Year 2000 compliant. Hardware and software costs are capitalized by
the Company and all other costs associated with Year 2000 compliance are
expensed as incurred. The Company has had discussions with its customers and
vendors and although the Company believes that the information systems of its
major customers and vendors (insofar as they relate to the Company's business)
comply with Year 2000 requirements, there can be no assurance that the Year 2000
issue will not affect the information systems of such customers and vendors as
they relate to the Company's business, or that any such impact on such customers
and vendors' information systems would not have a material adverse effect on the
Company's business, consolidated financial condition or results of operations.

Personal Holding Company
------------------------

     Under the Internal Revenue Code, in addition to the regular corporate
income tax, an additional tax may be levied upon an entity that is classified as
a Personal holding company. In general, this tax is imposed on corporations
which are more than 50% owned, directly or indirectly, by 5 or fewer individuals
(the Ownership Test) and which derive 60% or more of their income from Personal
holding company sources, generally defined to be passive income (the Income
Test). If a corporation falls within the Ownership Test and the Income Test, it
is classified as a personal holding company, and will be taxed on its
undistributed personal holding company income at a rate of 39.6%. The Company
currently meets the stock ownership test. The Company has not met the income
requirement in recent years and therefore has not been subject to this
additional tax; however, no assurance can be given that the Income Test will not
be satisfied in the future.

Recent Accounting Pronouncements
--------------------------------

     In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". The statement is intended to eliminate the diversity in practice
in accounting for internal-use software costs and improve financial reporting.
The statement is effective for fiscal years beginning after December 15, 1998.
The Company has adopted this statement in the first quarter of 1999 and has
determined that the effect of this statement on the Company's consolidated
financial position and consolidated results of operations is not material.

      In June 1998, the Financial Accounting Standards Board issued FASB 133
"Accounting for Derivative Instruments and Hedging Activities" ("FASB 133").
This statement increases the visibility, comparability, and understanding of the
risks associated with holding derivatives by requiring all entities to report
all derivatives at fair value as assets or liabilities. It also provides
guidance and practice by providing companies with comprehensive rules for all
derivatives and hedging activities. FASB 133 is effective for fiscal quarters of
fiscal years that begin after June 15, 2000. The Company will follow the
disclosure requirements set forth in this statement; however, the Company does
not currently hold or issue derivative instruments or nonderivative instruments
that are designated and qualify as hedging instruments.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT  MARKET  RISK
------------------------------------------------------------

     The Company's primary financial instruments consist of money market funds
paying interest at varying interest rates and equity securities and bond
investments with fixed interest rates. The Company's market risk is the
potential decrease in the value of the Company's financial instruments resulting
from lower interest rates and lower market prices. The Company does not enter
into derivatives for trading or interest rate exposure. Rather, the Company
actively manages its investment portfolio to increase the returns on investment
and to ensure liquidity and

                                       14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts)

invests in instruments with high credit quality provided through major financial
institutions. In addition, the Company attempts to make prudent and informed
business decisions before investing in equity securities.

    For the nine-month period ended September 30, 1999, the Company believes
there was no material change in the Company's primary financial instruments and
related market risk as disclosed in the Company's 1998 Annual Report on Form
10-K.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
--------------------------------------------------------------------------------

     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
document (as well as information included in oral statements or other written
statements made or to be made by the Company) contains statements that are
forward-looking, such as statements relating to plans for future activities.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company. These risks and uncertainties include those
previously mentioned under Periscope, as well as those relating to the
development and implementation of the Company's business plan, domestic and
global economic conditions, manufacturing in Mexico and other foreign countries,
changes in consumer trends for apparel, acquisition strategy, activities of
competitors, changes in federal or state tax laws and of the administration of
such laws.

                                       15
<PAGE>

                          PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------

         For information regarding legal matters, see Note 9 of the Notes to
         Consolidated Financial Statements on page 9 of this Form 10-Q and Item
         3 "Legal Proceedings" as reported in the Company's Annual Report on
         Form 10-K for the fiscal year ended December 31, 1998.

Items 2,3,4 and 5 are not applicable.

Items 6. Exhibits and Reports on Form 8-K
         --------------------------------

         (a)  Exhibits

              9.1  Voting Trust Agreement, by and among the Company, Burt
                   Sugarman, acting in his capacity as Chairman of the Board of
                   the Company as Trustee, and Glenn Sands

              10.1 Amended and Restated Employment Agreement dated July 23,
                   1999, between Glenn Sands and Periscope

              27   Financial Data Schedule

         (b)  During the quarter ended September 30, 1999, no reports on Form
              8-K were filed.

                                       16
<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.


                                GIANT GROUP, LTD. - Registrant

                                    By: /s/ William H. Pennington
                                       --------------------------
                                       William H. Pennington
                                       Vice President, Chief Financial Officer,
                                       Secretary and Treasurer

Date: November 12, 1999

                                       17