<PAGE>   1
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 1998
                                       OR

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

Commission file number  0-24328

                     Richman Gordman 1/2 Price Stores, Inc.
             (Exact name of registrant as specified in its charter)

            Delaware                                      47-0771211
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

12100 West Center Road, Omaha, Nebraska                                68144
     (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code (402) 691-4000 Securities
registered pursuant to Section 12(b) of the Act:

    Title of each class           Name of each exchange on which registered
None.

           Securities registered pursuant to section 12(g) of the Act:

                          Common Stock, Par Value $.01
                                (Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

As of March 30, 1998, an aggregate of 26,715,000 shares of Common Stock, par
value $.01, were outstanding, composed of 16,695,000 shares of Series A Common
Stock and 10,200,000 shares of Series B Option Common Stock. The registrant's
stock is not publicly traded, and therefore there is no ascertainable aggregate
market value of voting stock held by non-affiliates.

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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

Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended January 31, 1998, have been incorporated by reference into Parts I and II
of this Report. Portions of the Registrant's Registration Statement on Form S-1
(Commission File No. 33-79352) and Amendment No. 4 thereto, have been
incorporated by reference in Part IV of this report.


                                  Page 1 of 112
                            Exhibit Index on Page 35
<PAGE>   2
                                     PART 1

ITEM 1. BUSINESS

                                   THE COMPANY

                                 GENERAL HISTORY

      Richman Gordman 1/2 Price Stores, Inc. (the "Company") is the outgrowth of
a retail clothing business in Omaha dating back almost to the turn of the
century. The Company's predecessor was formed in 1915 by Sam Richman. In 1936,
his son-in-law, Dan Gordman, joined him in the business, later becoming his
partner. In 1948, the Gordman family purchased the Richman family's interests,
with Dan Gordman becoming the Chairman and Chief Executive Officer of Richman
Gordman Stores. Until 1993, the Richman Gordman companies remained privately
owned, with all of the stock owned by members of Dan Gordman's family.

RICHMAN GORDMAN STORES, INC.

      Richman Gordman Stores, Inc. was the parent company of 1/2 Price Stores, a
regional retailer in the Midwest that operated the 1/2 Price Stores, a chain of
off-price stores offering first quality merchandise at one-half the traditional
department store full retail prices or one-half of manufacturers' suggested
retail price. Richman Gordman Stores was also the parent company of Richman
Gordman Department Stores which operated a separate chain of moderate-end and
full-price department stores. Richman Gordman Stores was a holding company
owning all of the Common Stock of 1/2 Price Stores and Richman Gordman
Department Stores.

RICHMAN GORDMAN DEPARTMENT STORES, INC.

      Richman Gordman Department Stores, Inc. was a moderately priced department
store chain which at its peak consisted of 15 stores located in five Midwestern
states. Occupying a niche between mass merchants and traditional department
stores, Richman Gordman Department Stores was positioned as a promotional,
popularly priced, branded, family department store. Three major factors led to
Richman Gordman Department Stores' eventual loss in market share and financial
stability: (i) national retailing trends favoring discount shopping; (ii) a
decision to upscale the merchandise offered by Richman Gordman Department
Stores; and (iii) an increasing overhead burden.

      As part of the reorganization discussed below, and based on the above
factors, management decided to convert many of the Richman Gordman Department
Stores chain to the 1/2 Price Stores; those Richman Gordman Department Stores
that were not converted to 1/2 Price Stores were closed.


                                        2
<PAGE>   3
                             1/2 PRICE STORES, INC.

      The first 1/2 Price store opened in 1972 as an outlet for marked-down
Richman Gordman Department Stores merchandise. The concept evolved into an
independent chain with separate buying, operations, advertising and human
resource staffs.

      The 1/2 Price concept is to offer top quality, name brand merchandise at
half of department store and specialty store regular prices. 1/2 Price Stores is
able to execute this concept through opportunistic buying strategies including
the purchase of manufacturers' close-outs and overstocks, in season purchases,
other retailers' canceled orders, merchandise made from excess piece goods and
bulk production overruns. The quality and negotiating strength of the 1/2 Price
Stores' buying staff have enabled the 1/2 Price Stores to acquire merchandise at
substantial discounts from normal wholesale prices, sell at up to half off
department and specialty store regular prices and achieve strong gross margins.
Please see "ITEM 1. BUSINESS -- THE COMPANY -- MERCHANDISING" for a discussion
of the Company's current merchandise strategy.

                                 THE BANKRUPTCY

PLAN OF REORGANIZATION

      On June 17, 1992, Richman Gordman Stores, Richman Gordman Department
Stores and 1/2 Price Stores filed for protection under the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Nebraska. During the bankruptcy proceedings, the Companies operated as
debtors-in-possession.

      On October 5, 1993, the Bankruptcy Court confirmed the Debtors' First
Amended Joint Plan of Reorganization Under Chapter 11, as modified (the "Plan"),
and the Plan became effective on October 20, 1993 (the "Effective Date"). The
Bankruptcy Court approved the Company's application to close the case during
1997. The Bankruptcy Court retains jurisdiction to interpret the terms of and
settle disputes arising from the Plan through the term of the Plan. The Plan
provided for the issuance of Common Stock to former shareholders and management
(the "Series A Common Stock") and to unsecured creditors (the "Series B Option
Common Stock").

      Under the Plan, the Creditors' Committee, as the representative of the
Company's general unsecured creditors (the "Creditors"), will continue in
existence during the term of the Plan for the following primary purposes: (1)
monitoring compliance with the Plan; (2) monitoring defaults and granting
waivers and modifications of the Plan; and (3) exercising rights and duties
expressly granted in the Plan.

      The Company also issued a secured note in the amount of $4 million to
Harris Trust and Savings Bank ("Harris Bank") in partial satisfaction of
pre-bankruptcy obligations. This note was payable in equal installments over
five years, and was paid in full during 1997. Harris Bank was also the largest
unsecured creditor and, at March 30, 1998, held approximately


                                        3
<PAGE>   4
10.4% of the Company's Series B Option Common Stock on a fully diluted basis.
The Company also has an obligation to pay $200,205 to the Dan Gordman Fund, an
obligation which arose out of the personal portion of an insurance policy on the
life of Dan Gordman which was paid to Harris Bank in partial satisfaction of its
claim described above. This remaining obligation is scheduled to be paid in full
in fiscal 1998.

      The Plan provided that Richman Gordman Stores and 1/2 Price Stores merge
into Richman Gordman Department Stores. These mergers took place on the
Effective Date. Additionally, pursuant to the Plan, the Company was formed and
Richman Gordman Department Stores was merged into it.

      As contemplated by the Plan, on the Effective Date, the Company entered
into a Credit Agreement with Congress Financial Corporation. The original
agreement was for a $25 million maximum facility with a four-year term through
October 20, 1997, with provisions for annual renewals unless either party gives
notice of non-renewal within 90 days prior to contract expiration. The Credit
Agreement is the Company's primary credit facility. The amount the Company may
borrow is determined by a formula based on eligible inventory. This line of
credit is secured by substantially all of the current assets of the Company,
including general intangibles.

      The Company subsequently amended and extended the Congress Credit
Agreement. The maximum facility was increased to $27.5 million, the interest
rate was reduced to 1% over the prime rate, the agreement was extended to
October 20, 1999, the definition of eligible inventories was expanded, and the
borrowing advance rate was increased.

PAYMENT OBLIGATIONS TO CREDITORS

      On the Effective Date of the Plan, the Creditors (with claims in the
approximate aggregate amount of $50,156,000) received cash in the total amount
of $10,000,000. In addition, the Creditors received 10,200,000 shares of Series
B Option Common Stock, or 34% of the total authorized Common Stock.

      Under the Plan, the Company remains obligated to the Creditors. The
following is a summary of all of the material provisions of the Company's
obligation to make payments to the Creditors. The summary is qualified with
reference to the complete terms and conditions of the obligation as contained in
the Plan.

ANNUAL MINIMUM PAYMENT OBLIGATION

      The Annual Minimum Payment obligation is an unconditional obligation to
make payments in the amounts set forth in the column titled Annual Minimum
Payment, on the schedule which follows. All scheduled payments received on this
obligation will be applied first to accrued stated interest and then payments of
stated principal. Any payments in excess of the cumulative total of stated
principal and interest ($14,865,000) will be considered as payments of
additional interest. To the extent the cash flow contingencies, as detailed
below, allow additional payments in excess of the Annual Minimum Payment column,
such


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<PAGE>   5
payments were to be considered prepayments of the Annual Minimum Payment
obligation to be applied first to accrued stated interest (if any) and then to
stated principal.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
 ANNUAL FISCAL    ANNUAL MINIMUM     CUMULATIVE     ANNUAL PLAN    CUMULATIVE PLAN
          YEAR           PAYMENT        MINIMUM    CASH BALANCE       CASH BALANCE
                                        PAYMENT
----------------------------------------------------------------------------------
<S>               <C>               <C>            <C>             <C>
     1993            $ 2,302,000    $ 2,302,000      $2,708,000         $2,708,000
----------------------------------------------------------------------------------
     1994              3,275,000      5,577,000       3,853,000          6,561,000
----------------------------------------------------------------------------------
     1995              5,521,000     11,098,000       6,495,000         13,056,000
----------------------------------------------------------------------------------
     1996              1,939,000     13,037,000       2,281,000         15,337,000
----------------------------------------------------------------------------------
     1997              1,828,000     14,865,000       2,151,000         17,488,000
----------------------------------------------------------------------------------
                     $14,865,000                    $17,488,000
----------------------------------------------------------------------------------
</TABLE>


The Company operates on a fiscal year basis, and its Fiscal Years through 1998
end on the dates shown below:

<TABLE>
<CAPTION>
            Fiscal Year                                     Ends
          ----------------                                  ----
<S>                                                       <C>
          Fiscal Year 1993                                01/29/94
          Fiscal Year 1994                                01/28/95
          Fiscal Year 1995                                02/03/96
          Fiscal Year 1996                                02/01/97
          Fiscal Year 1997                                01/31/98
          Fiscal Year 1998                                01/30/99
</TABLE>

ACTUAL CASH BALANCE. The Company was obligated to pay, for each of Fiscal Years
1993- 1997: (1) 100% of Actual Cash Balance, as defined in the Plan, to a
maximum of Cumulative Plan Cash Balance shown above, and (2) 50% of Excess Cash
Balance, as defined in the Plan. The fourth column represents the Company's
original estimate of Actual Cash Balance for the Fiscal Years indicated.

OTHER TERMS. In no event will the Company be required to pay with respect to any
Fiscal Year an amount which, when added to prior payments of Actual Cash Balance
and Excess Cash Balance, exceeds the greater of Cumulative Minimum Payments or
Cumulative Actual Cash Balance. In January, 1997, the Creditors' Committee
agreed to defer for up to one year the $1.9 million payment due for Fiscal Year
1996 under the Plan. In January, 1998, the Creditors' Committee agreed to defer
$1.8 million of the remaining obligation. This $1.8 million, which represents
all of the remaining payments required under the Plan, is scheduled to be
escrowed in three installments of $200,000 at the end of April, July and
October, 1998, with the final $1.2 million escrowed on January 31, 1999. The
unpaid obligation will bear interest at 12% until escrowed and is secured by an
interest in the Company's distribution center. Escrowed payments will be
disbursed to the creditor group on or before September 15, 1998 and March 15,
1999. Additionally, the Creditors will receive an additional amount should the
Company execute a sale/leaseback or other disposition of buildings #1 and/or #3
of its distribution center prior to February 1, 2000, as the Company has agreed
to disburse 1.25%


                                        5
<PAGE>   6
of the gross proceeds of any such sale or disposition of buildings #1 and/or #3
of its distribution center to such creditors. However, it is not certain that
such a transaction will occur.

Creditors were also entitled to tax refunds, if any, for the Fiscal Years ended
prior to the bankruptcy filing date in excess of an aggregate of $500,000 for
those years. Also, the Creditors are entitled to payments of amounts equal to
income tax benefits realized solely from the reduction of taxable income which
would otherwise be reported on the Company's federal and state income tax
returns for Fiscal Years 1993 through 1997 resulting from utilization of
pre-bankruptcy tax attributes (i.e., net operating loss carry forwards, capital
loss carry forwards (if any), alternative minimum tax credit carry forwards,
charitable contribution carry forwards and general business credits including
targeted job credits) and payments to Creditors. No such benefits were realized
in fiscal 1997, and the Creditors are not entitled to any such tax benefits in
the future.

On April 29, 1994, the Creditors were sent the annual payment for Fiscal Year
1993 required by the Plan. The payment totaled $4,152,613, composed of the
following:

<TABLE>
<S>                                         <C>
     Annual Minimum Payment                 $2,302,000
     Actual Cash Balance up to
      Plan Cash Balance                        406,000
                                            ----------
        Annual Plan Cash Balance             2,708,000
     50% of Excess Cash Balance              1,444,613
                                            ----------

        Total Payment to Creditors          $4,152,613
                                            ==========
</TABLE>

Payments to creditors required by the Plan for Fiscal Year 1994 in the total
amount of $6,073,260 were paid on April 28, 1995, and consisted of the following
amounts:

<TABLE>
<S>                                         <C>
     Annual Minimum Payment                 $3,275,000
     Actual Cash Balance up to
      Plan Cash Balance                        578,000
                                            ----------
        Annual Plan Cash Balance             3,853,000
     Tax Benefit in Excess
      of $500,000                              387,649
     50% of Excess Cash Balance              1,832,611
                                            ----------

        Total Payment to Creditors          $6,073,260
                                            ==========
</TABLE>

Payments to creditors required by the Plan for Fiscal Year 1995 in the total
amount of $1,480,477 consisted of the following amounts:

<TABLE>
<S>                                         <C>
     Annual Minimum Payment                 $1,259,776
     Tax Benefits                              220,701
                                            ----------

        Total Payment to Creditors          $1,480,477
                                            ==========
</TABLE>


                                        6
<PAGE>   7
For Fiscal Year 1995, no Annual Cash Balance up to Plan Cash Balance or Excess
Cash Balance were available. The Annual Minimum Payment was computed by
crediting the previous two years' payment up to Plan Cash Balance and Excess
Cash Balance Payments to the required Cumulative Minimum Payment.

For Fiscal Year 1996, no Annual Cash Balance up to Plan Cash Balance or Excess
Cash Balance were available. In addition, the Creditors' Committee agreed to
allow the Company to defer the 1996 Minimum Payment of $1,939,000 for up to one
year in exchange for a subordinated security interest in certain real and
personal property associated with the Company's distribution center facility.

In Fiscal Year 1997, a payment to the creditors of $1,967,000 was escrowed on
January 31, 1998 and disbursed to creditors on March 18, 1998. This payment was
made in accordance with the Waiver of Creditors' Committee of Deferred Payment
of 1998 Minimum Payment dated January 24, 1998, which also deferred the payment
of the remaining $1.8 million obligation until fiscal 1998 (the "1998 Creditors'
Committee Waiver").

                           SERIES B REPURCHASE OPTION

The Series B Option Common Stock is subject to an option to purchase exercisable
by the Company or the Trustee of the R.G. Stock Trust in 1998 (the "Option").
Pursuant to the 1998 Creditors' Committee Waiver, the exercise date of the
Option was extended until the Company fulfills its obligations under the Plan.
The Option is noted upon the face of the Series B Option Common Stock
certificates. If the Option is exercised, the holder or holders of shares must
sell them for a price equal to the fair value of the shares, as determined by an
independent appraisal on the day following the escrow of the remaining fixed
obligation of $1.8 million plus accrued interest. Holders of the Series B Option
Stock will not have any rights of appraisal similar to dissenters' rights if
they dispute the market value as determined by the independent appraisal.

Although with respect to the Company's Fiscal Years ended January 29, 1994, and
January 28, 1995, the Company made Excess Cash Balance payments of $1,444,613
and $1,832,611, respectively, to Creditors, the Company's cash position during
Fiscal Year 1995 was such that all of the prior Excess Cash Balance payments
were utilized to make a portion of the $5.5 million minimum payment to creditors
required for Fiscal Year 1995. No Excess Cash Balance payments were generated
for Fiscal Years 1996 or 1997, and no such payments will be required for Fiscal
Year 1998. Therefore the Excess Cash Balance payments will result in no
reduction from fair market value in the Option exercise price.

                      PLAN COVENANTS, DEFAULTS AND WAIVERS

The Plan contains a number of covenants. The covenants include the Company's
agreement to maintain its corporate existence, to maintain its books in
accordance with generally accepted accounting principles and provide reports to
creditors, to pay its taxes, to keep its property free of certain liens, not to
make prohibited investments, not to guarantee debts of third parties, not to
make loans to other parties, not to make distributions on account of its


                                        7
<PAGE>   8
stock, to maintain customary insurance and to comply with environmental and
pension laws. The breach of any of these covenants will result in an event of
default.

The Plan also describes certain occurrences that are defined as events of
default. These events include the failure to make payments pursuant to the
annual Minimum Payment Obligation, the failure to perform or observe any of the
terms or provisions of the Plan, the entering of an order of relief under the
Bankruptcy Code is granted to or against the Company, the Company voluntarily or
involuntarily makes an assignment for the benefit of creditors, applies for or
consents to the appointment of a receiver, trustee, custodian or similar officer
for all or for any substantial part of its assets, voluntarily or involuntarily
institutes any bankruptcy, insolvency, liquidation, reorganization,
readjustment, dissolution, or similar proceeding, the entry of a judgment
against the Company in an amount exceeding the Company's insurance coverage by
more than $200,000.

Following an event of default, a majority of the Creditors' Committee may
accelerate the Cumulative Minimum Payments due under the Plan. The Creditor's
Committee, by a two-thirds vote of its members, may waive for up to six months
any payment required under the Plan and defer the due date of some payments. The
Creditors' Committee will, if requested in writing by a majority in number or
dollar amount of the Creditors, declare an acceleration of any remaining unpaid
annual payments, described above.

Additional information in response to this Item 1 is incorporated by reference
to the "Products and Services" section of the Company's Annual Report to
Shareholders for the fiscal year ended January 31, 1998 (the "1997 Annual
Report").

ITEM 2. PROPERTIES.

Information in response to this Item 2 is incorporated by reference to the
"Products and Services" Section of the 1997 Annual Report.

ITEM 3. LEGAL PROCEEDINGS

As noted above, the Company's predecessor entities filed for bankruptcy
protection in 1992, and in 1993 the United States Bankruptcy Court for the
District of Nebraska approved the Plan under which the Company continues to
operate. For a detailed discussion of the Plan, please see "ITEM 1. BUSINESS --
THE COMPANY -- THE BANKRUPTCY -- PLAN OF REORGANIZATION." Additionally, the
Bankruptcy Court has retained jurisdiction to insure that the purpose and intent
of the Plan are carried out as well as to consider any modifications of the Plan
and to hear any claims, controversies, suits and disputes against the Company
that may arise during the five-year term of the Plan.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There are no items to report.


                                        8
<PAGE>   9
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Information in response to this Item 5 is incorporated by reference to the
"Shareholder Information" section of the 1997 Annual Report.

ITEM 6. SELECTED FINANCIAL DATA.

Information in response to this Item 6 is incorporated by reference to the
"Selected Financial Data" section of the 1997 Annual Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
        OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

Information in response to this Item 7 is incorporated by reference to the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of the 1997 Annual Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      Information in response to this Item 8 is incorporated by reference to the
Consolidated Financial Statements, notes thereto and report thereon contained in
the 1997 Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        ON ACCOUNTING AND FINANCIAL DISCLOSURE.

There are no items to report.


                                        9
<PAGE>   10
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
         OF THE REGISTRANT

                                   MANAGEMENT

                                    DIRECTORS

Three members of the Gordman family are Directors of the Company: Jerome P.
Gordman, Nelson T. Gordman, and Jeffrey J. Gordman. Nelson and Jerome Gordman
are brothers; Jerome Gordman is the father of Jeffrey J. Gordman. Jeffrey J.
Gordman is also President and Chief Executive Officer. The table below sets
forth the name, age and position of the Company's Directors as well as the means
of designation pursuant to the Plan:

<TABLE>
<CAPTION>
NAME                               AGE       POSITION
----                               ---       --------

<S>                                <C>       <C>
Paul M. Bass, Jr. (1)(2)(5)         62       Chairman of the Board of Directors


Jeffrey J. Gordman (2)(4)           34       Director, President, and Chief
                                             Executive Officer

Paul M. Buxbaum(1)(5)               43       Director

Jerome P. Gordman(4)                59       Director

Nelson T. Gordman(3)(4)             58       Director

Thomas J. Noonan, Jr.               58       Director
(2)(3)(5)

Philip Scheipe(1)(3)(5)             60       Director

Seth J. Lehr (1)                    41       Director
</TABLE>


(1)   Member of the Compensation Committee.
(2)   Member of the Executive Committee.
(3)   Member of the Audit Committee.
(4)   Designated as a member of the Board by the Gordman Trustee.
(5)   Designated as a member of the Board by the Creditors' Committee.

All Directors, other than Seth Lehr, were appointed on the Effective Date. On
October 1, 1996, Mr. Lehr was nominated by Jeffrey Gordman, as President and
Chief Executive Officer, to fill


                                       10
<PAGE>   11
the vacancy created by the resignation of Dennis Reaves, in accordance with the
terms of the Plan. Mr. Lehr was elected on October 29, 1996, by the Board of
Directors to serve the remaining term of Mr. Reaves' directorship.

The Directors will serve during the term of the Plan which commenced on the
Effective Date of the Plan and will end on the later of September 15, 1998, or
payment in full to Creditors of amounts due under the Plan. If the Company makes
the final payment to Creditors under the plan when due pursuant to the
Creditors' Committee Waiver dated January 31, 1999, the plan would end on or
before March 15, 1999. Accordingly, shareholders will not be able to vote on the
election of Directors until expiration of the term of the Plan.

In the event of the death, resignation, or incapacity of any of the initial
Directors, a successor Director will be chosen as follows:

      -  Successor Directors to Directors selected by the Creditors' Committee
         will be chosen by the remaining Directors selected by the Creditors'
         Committee and any successor Directors to Directors selected by the
         Creditors' Committee.

      -  Successor Directors to the Directors selected by the Chief Executive
         Officer will be chosen by the Chief Executive Officer or any successor
         thereto.

      -  Successor Directors to the Directors chosen by Dan Gordman will be
         selected by the Gordman Trustee. Mr. Jeffrey J. Gordman currently
         serves as both Chief Executive Officer of the Company and the Gordman
         Trustee.

Within forty-five days after the expiration of the term of the Plan, the
then-Chairman of the Board of Directors shall call a special meeting to provide
for the election of new members of the Board of Directors. Shareholders will not
have cumulative voting rights with respect to the election of Directors.

                                    OFFICERS

The table below sets forth the name, age and position of the Company's executive
officers:

<TABLE>
<CAPTION>
NAME                             AGE      POSITION
----                             ---      --------

<S>                              <C>      <C>
Paul M. Bass, Jr.                 62      Chairman of the Board of Directors

Jeffrey J. Gordman                34      Vice-Chairman of the Board of
                                          Directors, President and
                                          Chief Executive Officer
</TABLE>



                                       11
<PAGE>   12
<TABLE>
<CAPTION>
Name                              Age     Position
<S>                               <C>     <C>
Lance Graves                      49      Executive Vice President of
                                          Merchandising and Marketing

James H. Cooke                    49      Vice President, Stores

Michael A. Mallaro                35      Vice President of Finance and Chief
                                          Financial Officer

Martin Kresge                     46      Vice President, Marketing

Norman J. Farrington              50      Vice President, Chief Information
                                          Officer

Edward D. Williamson              42      Vice President, Human Resources

Ronald K. Hall                    54      Vice President, Operations
</TABLE>


                      BIOGRAPHIES OF DIRECTORS AND OFFICERS

DIRECTORS

Mr. Paul M. Bass, Jr. is the Chairman of the Board of Directors. From 1988 to
the present, he has been Vice Chairman of First Southwest Company, a
Dallas-based regional investment banking firm. Mr. Bass specializes in corporate
finance, investment management and public finance. Mr. Bass is also presently a
Director and Chairman of the Audit Committee and a member of the Executive
Committee of California Federal Savings F.S.B., a Director of Keystone
Consolidated Industries (also Chairman of Audit Committee), a Director of Source
Services, Inc. (also a member of Executive Committee), a Director and Chairman
of the Board of MACC Private Equities Inc., a Director of Jayhawk Acceptance
Corporation, and a Director of Compx International. Mr. Bass holds a B.B.A. in
Finance from Southern Methodist University.

Mr. Paul M. Buxbaum is a Director of the Company. From 1973 to 1978, Mr. Buxbaum
was a field representative for liquidators of retail discount specialty and
department stores. In 1978 he opened a chain of mass merchandising off-price
retail men's clothing stores in greater Los Angeles and in 1982 he sold the
eight stores which were doing in excess of $8 million dollars in annual sales.
Mr. Buxbaum is the President and Secretary Treasurer of Buxbaum, Ginsberg &
Associates, a national merchandising firm organized in 1983 as a consulting firm
which emphasizes restructuring needs and recovery services to companies on a
nationwide basis. Mr. Buxbaum is also President of BGA Consulting which provides
loan evaluations for major banks, financial institutions and insurance
companies. He is also a Director and Chairman of the Board of Ames Department
Stores, Inc. of Rockyhill, Connecticut and serves on the Compensation and
Finance/Audit committees. Mr. Buxbaum attended California State University in
Northridge where he studied business and finance.


                                       12
<PAGE>   13
Mr. Jeffrey J. Gordman is Vice-Chairman of the Board of Directors, President and
Chief Executive Officer for the Company. At the Company, Mr. Gordman previously
held positions in merchandising, store operations and information technology. In
addition, Mr. Gordman designed the Planning and Allocation function for 1/2
Price Stores, including the organization structure and business processes, and
oversaw its implementation in 1994. Prior to joining the Company in 1990, Mr.
Gordman was a mergers and acquisitions analyst for Shearson Lehman Brothers, a
New York-based investment banking firm now known as Lehman Brothers. Mr. Gordman
graduated cum laude from the Wharton School at the University of Pennsylvania in
1986 with a B.S. in Economics. Mr. Gordman also earned a Masters of Management
at the Sloan School, Massachusetts Institute of Technology in 1990.

Mr. Jerome P. Gordman, Director, has 32 years of department store and specialty
store experience. He joined Richman Gordman in 1962 after active duty with the
Army as a lieutenant. He helped develop the Company into a five-state retailer
during his 23 years with Richman Gordman. He rose to Chief Operating Officer of
Richman Gordman Department Stores and Executive Vice President of Richman
Gordman Stores. In 1984, Mr. Gordman joined Kalico's, Inc., a specialty store,
as its President. After the closing of Kalico's, Inc. in 1997, Mr. Gordman
became the Managing Partner of Gordman Properties Company, a company with
diversified real estate holdings in Nebraska and Iowa. Mr. Gordman graduated
from the Wharton School at the University of Pennsylvania with a B.S. in
Economics.

Mr. Nelson T. Gordman, a Director of the Company, is currently involved in real
estate development and management. He was previously President and COO of
Richman Gordman Department Stores and of Richman Gordman Stores, the parent
company of both Richman Gordman Department Stores and 1/2 Price Stores. Mr.
Gordman joined the Company in 1962 after completing studies at the University of
Pennsylvania's Wharton School and, in various capacities, participated in and
directed Richman Gordman's growth to 30 stores, five states and $250 million in
annual sales volume.

Mr. Seth J. Lehr is a Director of the Company. Mr. Lehr is a Managing Director,
Corporate Finance with Legg Mason, Inc., a New York Stock Exchange-listed
regional investment banking firm. Mr. Lehr specializes in general corporate
finance with an emphasis on the retail, apparel, merchandising and consumer
products industries. Mr. Lehr began his investment banking career with The First
Boston Corporation and Goldman, Sachs & Co. Mr. Lehr then became a vice
president of Shearson Lehman Brothers. Mr. Lehr graduated with honors from the
University of Pennsylvania and received an MBA from The Wharton School of the
University of Pennsylvania.

Mr. Thomas J. Noonan, Jr. is a Director of the Company. Mr. Noonan's principal
business experience over the past approximately ten years has been managing and
advising troubled and underperforming businesses. In this regard he is presently
an Executive Vice-President and Chief Financial Officer of Herman's Sporting
Goods, Inc., a specialty sporting goods retailer in the process of liquidation.
Previously, he had served as a Managing Director of Taggart/Fasola Group, a
manager of troubled and underperforming businesses, and as a Director and
Executive Vice President of Intrenet, Inc. Previously, Mr. Noonan served as Vice
President-Finance for Pilot Freight Carriers, Inc., Senior Vice
President-Finance for Purolator Courier Corporation, and


                                       13
<PAGE>   14
a number of line and financial positions with Airco, Inc. Mr. Noonan holds a
B.S. degree from Fordham University and an M.B.A. from St. John's University.

Mr. Philip Scheipe is a Director of the Company. Mr. Scheipe has over 30 years
experience in the apparel and retail fields. Prior to retiring in 1994, for the
last fifteen years he was employed by Levi Strauss & Co. in the positions of
General Manager of DAE Financial Services and Vice President of the Elesco
Factors Division. Mr. Scheipe has broad experience in financial disciplines and
business reorganizations. He graduated from Pennsylvania State University and is
presently active as a consultant.

OFFICERS

Mr. Lance Graves is the Executive Vice President of Merchandising and Marketing.
He joined the Company in January, 1998 after 22 years in the retail business. He
previously held senior merchandising positions with QVC, Ames Department Stores
and Mervyns Department Stores. Mr. Graves holds a bachelors degree from the
University of Nebraska and an M.B.A. from the University of Michigan.

Mr. James H. Cooke is the Vice President, Stores. He joined the Company in 1987
after a sixteen year career with an Ohio-based discount chain. While with that
company, he served in a variety of operational positions. Prior to that time,
Mr. Cooke served in the United States Air Force. He is a graduate of Ohio
University.

Mr. Michael A. Mallaro is the Vice President of Finance and Chief Financial
Officer. He joined the Company in June, 1997. Prior to joining the Company, he
spent 12 years with the accounting firm Deloitte & Touche. He was selected for
admission to that firm's ownership as an audit partner in 1997, but declined the
invitation prior to joining Richman Gordman. He holds the C.P.A. and C.M.A.
designations and has a bachelors degree from the University of Iowa.

Mr. Martin Kresge joined the 1/2 Price Stores in August, 1997 as Vice President
of Marketing. He has over 20 years of retail marketing experience, 16 as the top
marketing executive. Most recently, he was the Vice President of Marketing for
Lil' Things, a start-up superstore concept specializing in baby and juvenile
products which filed bankruptcy reorganization proceedings in June 1997. Prior
to that he was director of advertising and sales promotion for Leewards Creative
Crafts. He earned his undergraduate degree from the University of Colorado and
an M.B.A. from the University of Michigan.

Ronald K. Hall is the Vice President of Operations for the Company. Prior to
joining the Company in May 1994, he completed a 29-year career as a Colonel in
the United States Air Force. His last assignment was as Deputy Director,
Command, Control, Communications, Computers and Intelligence for the United
States Strategic Command at Offutt Air Force Base, Nebraska. In that position,
he had responsibility for an annual budget of over $150 million while providing
computer and communications support to the nation's nuclear war planners. From
May 1994 until February 1997, he was Director of Systems Planning and
Development in the Information Technology Department of the Company. Mr. Hall
holds a BS in Industrial


                                       14
<PAGE>   15
Engineering from North Dakota State University and an MS degree in Systems
Analysis from the Air Force Institute of Technology.

Mr. Norman J. Farrington is the Vice President, Chief Information Officer for
the Company. He received a B.S. and a M.S. in Computer Science from Iowa State
University. For a period of nine years, he owned and operated a successful
computer consulting business. Prior to joining the Company in 1984, Mr.
Farrington was on the faculty at Iowa State University teaching computer
science. He has earned the professional designations of Certified Data Processor
and Certified Systems Professional. Mr. Farrington is responsible for the
development and information strategy and support systems.

Mr. Edward D. Williamson is the Vice President of Human Resources for the
Company and is responsible for the human resources policy, training, benefits
and compensation. Prior to joining the Company in October of 1989, he originated
and directed the human resources department of Grisanti's, a restaurant chain,
during the company's national expansion phase. Mr. Williamson received a B.G.S.
degree in general administration from the University of Nebraska at Omaha, and
currently holds the certification of Senior Professional in Human Resources
(SPHR).

                                   COMMITTEES

The Board of Directors has three standing committees: the Executive Committee,
the Compensation Committee and the Audit Committee.

THE EXECUTIVE COMMITTEE

Mr. Bass, Mr. Noonan and Mr. Jeffrey Gordman are members of the Executive
Committee. The Executive Committee is intended generally to function on behalf
of the Board of Directors when the Board cannot be convened. The Executive
Committee will not act independently of the Board on significant matters
impacting the Company.

THE COMPENSATION COMMITTEE

Mr. Buxbaum, Mr. Scheipe, Mr. Bass and Mr. Lehr are members of the Compensation
Committee. The primary functions of the Compensation Committee have been
negotiating the employment agreement with the Company's President and Chief
Executive Officer, Mr. Jeffrey J. Gordman, monitoring employment agreements with
vice presidents, including considering changes to base salary and contract
extensions, monitoring the bonus program for vice presidents, monitoring and
granting awards pursuant to the 1997 Stock Option Plan and establishing
compensation for additional officers that may be hired in the future.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Of the three current members of the Compensation Committee, none are executive
officers of the Company, and no reportable interlocks exist with respect to any
such current members. However, during fiscal 1996, Mr. Jeffrey Gordman and Mr.
Jerome Gordman were members of


                                       15
<PAGE>   16
the Company's Compensation Committee. Mr. Jeffrey Gordman and Mr. Jerome Gordman
are a present and former employee of the Company, respectively, and are each
beneficial owners of more than 5% of the Common Stock. Mr. Jeffrey Gordman is
the Company's President and Chief Executive Officer. Mr. Jerome Gordman was an
employee of the Company for 23 years, ending in 1984.

THE AUDIT COMMITTEE

Mr. Noonan, Mr. Scheipe and Mr. Nelson Gordman are members of the Audit
Committee. The Audit Committee is responsible for recommending selection of the
independent auditors of the Company and reviewing audit results. The Committee
has the authority to engage and retain its own professionals.

                      SECTION 16(a) REPORTING DELINQUENCIES

Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's officers and directors and holders of 10% or more
of the outstanding shares of the Company's Common Stock (together, the
"Reporting Persons") to file reports on Forms 3, 4 and 5 regarding their
transactions in the Company's Common Stock. Based solely upon its review of the
Company's records, copies of such Forms sent to the Company and/or written
statements from Reporting Persons that no Form 5 was required, the Company
believes that all Reporting Persons have appropriately filed all forms required
to be filed during Fiscal Year 1997 pursuant to Section 16(a) of the Exchange
Act, except that Mr. Lance Graves, Mr. Ronald Hall, Mr. Martin Kresge, and Mr.
Michael Mallaro each filed late his respective Form 3; and Mr. James Cooke, Mr.
Edward Williamson, Mr. Ronald Hall, Mr. Martin Kresge, Mr. Michael Mallaro, and
Mr. Norman Farrington each filed late his respective Form 5 following the
completion of the Company's fiscal year 1997.

ITEM 11. EXECUTIVE COMPENSATION.

                  EMPLOYMENT AGREEMENT WITH MR. JEFFREY GORDMAN

On February 1, 1997, the Company entered into an employment agreement with
Jeffrey J. Gordman, the Company's President and Chief Executive Officer. The
following describes the terms and conditions of Mr. Gordman's employment
agreement:

    BASE SALARY. Mr. Gordman's employment agreement provides for an annual base
    salary of $225,000, subject to such increases and bonuses as the
    Compensation Committee of the Company's Board of Directors may from time to
    time determine.

    TERMINATION OF AGREEMENT AND SEVERANCE. Mr. Gordman's employment agreement
    provides for an initial term of three years, with annual extensions upon
    each anniversary of the date thereof if neither the Company nor Mr. Gordman
    gives notice of nonextension. The employment agreement with Mr. Gordman
    provides for termination for cause upon 15 days' written notice and
    opportunity to be heard at a Board of Directors meeting. The employment
    agreement further provides that Mr. Gordman or the Company may terminate the
    agreement


                                       16
<PAGE>   17
    with or without cause upon 30 days' written notice. If Mr. Gordman's
    employment is terminated by the Company without cause, the employment
    agreement provides for severance payments equal to the then-present value of
    his then-current base salary and benefits for the remainder of the term of
    the employment agreement. If Mr. Gordman's employment is terminated by the
    Company for nonperformance, Mr. Gordman shall receive severance payments
    equal to his then-current base salary and benefits for the lesser of 12
    months or the remaining term of the Agreement. If Mr. Gordman's employment
    is terminated by the Company for dishonesty or if Mr. Gordman resigns, Mr.
    Gordman shall receive base salary and benefits only through the termination
    date.

    EXECUTIVE BENEFITS. Mr. Gordman's employment agreement also provides that he
    is entitled to the following executive benefits: (i) contribution by the
    Company to 401(k) plans on terms applicable to other senior management; and
    (ii) all other then current executive benefits offered by the Company. Mr.
    Gordman is also entitled to at least four weeks of paid vacation per year.

    NONCOMPETITION: TRADE SECRETS. The employment agreement contains a covenant
    against competition with the Company for a period of one year within 50
    miles of the Company's corporate offices and its stores if Mr. Gordman's
    employment is terminated for cause. The employment agreement also prohibits
    Mr. Gordman from disclosing or benefiting from the Company's trade secrets
    during the term of the agreement and at all times thereafter. Mr. Gordman is
    also prohibited by the employment agreement from hiring any employees of the
    Company within one year after the termination of his employment with the
    Company.

           BONUS PROGRAM AND EMPLOYMENT AGREEMENTS FOR VICE PRESIDENTS

All of the Company's Vice Presidents (except Dean Williamson) are parties to
employment agreements. These employment agreements provide for one to three-year
terms, with a minimum base salary level for each of the three years. The
employment agreements provide for severance payments in an amount equal to the
greater of then-current salary for six months or for the remainder of the fiscal
year during which notice is given in the event of termination for any reason
other than expiration of the term of the employment agreement or the Vice
President's misconduct or breach of the employment agreement. The employment
agreements also provide for a review and possible extension not less than one
year prior to expiration.

The Company adopted an Officer Incentive Program in March, 1997. In accordance
with their employment agreements, all of the Vice Presidents participate in this
bonus program, although no bonuses were earned or paid for Fiscal Year 1997. The
Company anticipates that it will have a bonus plan for its Vice Presidents for
1998 as well. Bonuses are expected to be earned if the Company realizes net
income in excess of $1 million for the year.

The Vice Presidents also participate in certain employee benefits, including
health insurance and a 401(k) plan. In Fiscal Year 1997, the Company made
matching contributions equal to 25% of each employee's contribution, but not in
excess of 4% of the employee's compensation, and expects to do the same in
fiscal 1998.


                                       17
<PAGE>   18
                             COVENANT NOT TO COMPETE

Pursuant to the Plan, Mr. Nelson Gordman, a Director, has executed a covenant
not to compete anywhere in the United States with the Company in exchange for
payments of $125,000 per annum through October 1998.

                                    DIRECTORS

The Chairman of the Company's Board of Directors receives an annual fee of
$25,000, and all other Directors receive an annual fee of $20,000. Each Director
also receives $1,500 per board meeting attended. Directors attending board
meetings by telephone receive $750 per meeting. Members of committees receive
$1,000 per committee meeting attended. Committee members attending committee
meetings by telephone receive $500 per meeting. Directors who are also officers
or employees of the Company do not receive Directors fees. Such Directors,
however, are reimbursed for expenses related to meeting attendance. The Board of
Directors has adopted a policy requiring members to attend at least 75% of all
meetings each year in order to receive compensation as a Director.

OFFICERS COMPENSATION

The following table summarizes the compensation of the Chief Executive Officer
and the four additional most highly compensated officers during the Fiscal Years
1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                         ANNUAL COMPENSATION                             LONG-TERM COMPENSATION
                                         -------------------                             ----------------------
      NAME                                                           OTHER ANNUAL         SECURITIES UNDERLYING       ALL OTHER
  AND POSITION                   YEAR(1)     SALARY        BONUS    COMPENSATION(2)      PAYOUT     OPTIONS (#)    COMPENSATION(3)
  ------------                   -------     ------        -----    ---------------      ------     -----------    ---------------

<S>                              <C>       <C>           <C>        <C>                  <C>        <C>            <C>
Jeffrey J. Gordman                1995     $  93,644     $ 15,000       $    49            -0-           -0-             -0-
Director, President, and          1996     $ 145,222     $    -0-       $   150            -0-           -0-         $ 1,336
Chief Executive Officer           1997     $ 225,071     $ 50,000       $ 1,044            -0-           -0-         $ 2,251

James Cooke                       1995     $ 160,000     $ 29,000       $ 4,641            -0-           -0-             -0-
V.P. Stores                       1996     $ 180,718     $    -0-       $ 1,635            -0-           -0-         $ 1,335
                                  1997     $ 181,620     $  5,000       $ 3,957            -0-        25,000         $ 1,814

Don DeGraeve                      1995     $  60,061     $ 10,000       $   123            -0-           -0-             -0-
Former V.P. of                    1996     $ 171,697     $ 10,000       $ 1,772            -0-           -0-             -0-
Merchandising                     1997     $ 182,738     $ 34,000       $ 2,390            -0-        25,000             -0-

Norm Farrington                   1995     $  95,659     $ 17,000       $ 3,238            -0-           -0-             -0-
V.P. Information                  1996     $ 111,928     $    -0-       $ 3,263            -0-           -0-             -0-
Technology                        1997     $ 121,648     $  5,000       $ 3,179            -0-        25,000         $ 1,213

Dean Williamson                   1995     $ 112,717     $ 21,000       $ 3,238            -0-           -0-         $   860
V.P. Human Resources              1996     $ 117,642     $    -0-       $ 3,264            -0-           -0-         $   949
                                  1997     $ 116,370     $  5,000       $ 3,179            -0-        25,000         $ 1,164

John Simkins                      1995     $ 114,803     $ 10,000       $ 3,238            -0-           -0-             -0-
Former V.P. of Distribution       1996     $ 118,073     $    -0-       $ 3,212            -0-           -0-             -0-
                                  1997     $ 121,576     $    -0-       $ 3,024            -0-        25,000             -0-
</TABLE>


(1)   Represents Fiscal Years commencing in January or February of the stated
      year.

(2)   "Other Annual Compensation" is primarily in the form of, life insurance,
      reimbursement of health and dental insurance, health club memberships,
      value of company-paid automobiles, etc.

(3)   "All Other Compensation" represents 401(k) matching contributions made by
      the Company.


                                       18
<PAGE>   19
OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                            Potential realizable value at assumed annual    Alternative to (f),
               Individual Grants                             rates of stock appreciation for option term     (g) and (h) value
               -----------------                            ----------------------------------------------  -------------------
(a)                    (b)                (c)            (d)             (e)       (f)    (g)     (h)               (I)
                                     % of  total
                                   options granted
                     Number of      during year to     Exercise      Expiration     0%     5%      10%            Grant date
Name                Options (#)      all employees    Price/share       Date       ($)    ($)      ($)          present value(1)
----                -----------      -------------    -----------       ----       ---    ---      ---          ----------------
<S>                 <C>            <C>                <C>            <C>           <C>   <C>     <C>            <C>
Jim Cooke             25,000               2.9%        $ 0.051        Sept 2007     $0   $801    $2,032              -0-
Don DeGraeve          25,000               2.9%        $ 0.051          NA(2)       $0   $801    $2,032              -0-
Norm Farrington       25,000               2.9%        $ 0.051        Sept 2007     $0   $801    $2,032              -0-
Dean Williamson       25,000               2.9%        $ 0.051        Sept 2007     $0   $801    $2,032              -0-
John Simkins          25,000               2.9%        $ 0.051          NA(2)       $0   $801    $2,032              -0-
</TABLE>

(1) The Company's stock is not traded on any exchange and there is no active
trading of the stock. The Company had a independent appraiser value to stock on
September 12, 1997, upon granting of these options. The valuation at that time
was estimated at $0.51 per share for these shares. No subsequent valuations have
been performed and thus no incremental value is disclosed in this table.

(2) These options were forfeited by the recipient upon termination of employment
in fiscal 1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.

The table below represents shares of Common Stock held by management.
Additionally, the table includes those Creditors who, as of April 8, 1998, had
been issued and hold shares of Common Stock in an amount that is equal to or
greater than 5% of the Common Stock on a fully diluted basis.

<TABLE>
<CAPTION>
NAME,                                                        PERCENTAGE
TITLE,                                                       OF TOTAL
ADDRESS                                  NUMBER              AUTHORIZED(1)
-------                                  ------              -------------

<S>                                   <C>                    <C>
R.G. Stock Trust                      16,200,000(2)               54.0%
Jeffrey J. Gordman,
  Trustee
Richman Gordman 1/2
  Price Stores, Inc.
12100 West Center Road
Omaha, NE  68144

Jeffrey J. Gordman                    16,200,000(3)               54.0%
Richman Gordman 1/2
  Price Stores, Inc.
12100 West Center Road
Omaha, NE  68144

Nelson T. Gordman                      6,302,939(4)               21.0%
10777 North 60th Street
Omaha, Nebraska 68152
</TABLE>

                                       19
<PAGE>   20
<TABLE>
<CAPTION>
NAME,                                                        PERCENTAGE
TITLE,                                                       OF TOTAL
ADDRESS                                  NUMBER              AUTHORIZED(1)
-------                                  ------              -------------

<S>                                   <C>                    <C>
Jerome P. Gordman                      4,916,326(5)             16.4%
9925 Essex Drive
Omaha, Nebraska 68114
Harris Trust and                       3,123,459                10.4%
  Savings Bank
200 West Monroe Street
P.O. Box 755
Chicago, Illinois  60603

Norm Farrington                          495,000                1.7%
Richman Gordman 1/2
 Price Stores, Inc.
12100 West Center Road
Omaha, Nebraska 68144

Lance Graves                             250,000(6)             0.8%
Richman Gordman 1/2
 Price Stores, Inc.
12100 West Center Road
Omaha, Nebraska 68144
</TABLE>

(1) Presented on a fully-diluted basis assuming issuance of all 30,000,000
authorized shares; 29,280,000 presently issued and 26,715,000 outstanding.

(2) These 16,200,000 shares of Series A Common Stock are the property of the
R.G. Stock Trust created by Dan Gordman. Mr. Jeffrey J. Gordman, the Gordman
Trustee, is sole trustee of the trust and is Dan Gordman's designee for purposes
of the Plan. The Gordman Trustee has exclusive voting and investment power with
respect to the 16,200,000 shares of Series A Common Stock. There are three
beneficiaries of the trust, Mr. Jeff Gordman, Mr. Nelson T. Gordman and Mr.
Jerome P. Gordman, all members of the Board of Directors of the Company.

(3) See Note 2 above. As sole trustee of the R.G. Stock Trust, Jeff Gordman has
exclusive voting and investment power with respect to 16,200,000 shares of
Series A Common Stock. As a beneficiary of the trust with a 35% interest, Jeff
Gordman in his individual capacity is the beneficial owner of 5,670,000 shares,
plus an additional 4,860,000 shares representing the 30% beneficial interest in
the trust of his father, Jerome Gordman.

(4) Nelson Gordman is the beneficial owner of 5,670,000 shares of Series A
Common Stock as a beneficiary of the R.G. Stock Trust with a 35% interest.
Through his interest in Gordman family entities which are registered owners of
shares of Series B Option Common Stock, Nelson Gordman is the owner of an
additional 632,939 shares of Series B Option Common Stock.

(5) Jerome Gordman is the beneficial owner of 4,860,000 shares of Series A
Common Stock as a beneficiary of the R.G. Stock Trust with a 30% interest.
Through his interest in Gordman family


                                       20
<PAGE>   21
entities which are registered owners of shares of Series B Option Common Stock,
Jerome Gordman is the owner of an additional 56,326 shares of Series B Option
Common Stock.

(6) Represents shares presently exercisable under stock option grants.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The following table describes facilities that the Company leases from entities
owned or controlled by Mr. Nelson Gordman and Mr. Jerome Gordman (both Directors
of the Company).

<TABLE>
<CAPTION>
                         APPROXIMATE
                          FLOOR AREA     ANNUAL
LOCATION                (SQUARE FEET)      RENT      DESCRIPTION
--------                -------------      ----      -----------

<S>                     <C>              <C>         <C>
Omaha, NE                     98,700     $450,288    Corporate Headquarters(1)
Omaha, NE                    163,300      676,710    Distribution Center(2)
Bellevue, NE                 100,000      701,060    Store Location(3)
Grand Island, NE              91,400      215,023    Store Location(4)
LaVista, NE                   81,200      269,540    Store Location(5)
Omaha, NE                    103,200      628,161    Store Location(6)
Lincoln, NE                  101,400      175,226    Store Location(7)
</TABLE>


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

(1)  Lease expires July 31, 2009 with a single option to renew for twenty years.

(2)  The Distribution Center is composed of a total of 267,000 square feet
     (excluding internal mezzanine space of 111,400 square feet). The Company
     owns 103,700 square feet of the Distribution Center and the land beneath
     this portion ("Building 1"). Two portions totaling 163,300 square feet are
     leased from Gordman entities. One lease for approximately 82,000 square
     feet ("Building 2") expires April 30, 2003; the Gordman entity which leases
     Building 2 to the Company also owns the underlying land. The Company has
     four five-year options to extend the term of the Building 2 lease. The
     second lease for approximately 81,000 square feet ("Building 3") expires
     July 31, 1999. The land under Building 3 is owned by the Company and is
     leased to the Gordman entity lessor for a term also expiring July 31, 1999.
     Upon expiration of the Building 3 leases, the Company will own both the
     building and land for Building 3. Building 3 is being subleased to a third
     party effective in fiscal 1998. The Company and the Gordman entity are also
     parties to an Option Agreement giving the Company the option to purchase
     Building 2 and its underlying real estate at the end of the term or any
     option term at fair market value. If the Company does not exercise its
     purchase option on Building 2, the Gordman entity has the option to
     purchase Building 1 and/or Building 3 from the Company at fair market
     value. The Company and the Gordman entity are also parties to a
     Distribution Center Option Agreement which allows the Company to purchase
     Building 2 for $2,850,000 should it choose to do so in connection with a
     financing transaction, such as a sale-leaseback; the option expires on June
     30, 1998.


                                       21
<PAGE>   22
(3)  Lease expires October 31, 2000, with three renewal options of five years
     each.

(4)  Lease expires February 28, 2001, with no renewal options.

(5)  Lease expires July 31, 2005, with ten renewal options of five years each.

(6)  Lease expires July 31, 2003, with one renewal options of five years.

(7)  Lease expires October 31, 2010, with a first privilege to negotiate a
     second twenty year term.

     During the bankruptcy proceedings, the Company conducted an extensive
review of all locations. As a result, many locations owned by Gordman family
members and other lessors were closed and the leases rejected as being
unsuitable. Also during the bankruptcy proceedings, an independent third party
analyzed the terms of remaining leases with Gordman family enterprises. While
some leases were found to be above market and others below, the portfolio as a
whole was found to be comparable to those from unaffiliated parties in
comparable real estate markets.

While the Company is not materially dependent on one or several store locations,
the Company is materially dependent on its Distribution Center located in Omaha,
Nebraska. The Distribution Center is comprised of three buildings, one of which
is owned by the Company. The remaining two buildings are owned by entities
controlled by members of the Gordman family. Please see footnote 2 to the chart
above. As part of extension of the Building 2 lease, in February, 1996, the
Company granted the Gordman entity which is the lessor of Building 2 an easement
over a portion of the Company's property. This easement provides for access to
Building 2, including truck docking and parking.

As a result of the bankruptcy proceedings, four Gordman family partnerships
("Gordman Partnerships") received unsecured claims of $3,697,749, relating to
the rejection of three store leases. Pursuant to these allowed unsecured claims,
the Gordman Partnerships received the same treatment accorded other Class 3
Unsecured Claims under the Plan, namely Series B Option Common Stock, cash
payments and the right to future cash payments to Creditors.

Three additional issues involving members of the Gordman family and the Company
were resolved during fiscal 1996. First, the Company's claim against the Dan
Gordman estate (the "Estate") approximating $77,000 and arising from a loan from
the Company to Mr. Dan Gordman was settled pursuant to an Estate Claim
Settlement Agreement (the "Estate Claim Agreement") between the Company and the
Estate dated December 13, 1996. In accordance with the Estate Claim Agreement,
the Estate paid the Company approximately $43,000 and agreed to pay up to an
additional $34,000 from any dividends paid before April 15, 1999, on shares of
the Company's Common Stock owned by the Estate. Second, pursuant to an Agreement
Regarding Dan Gordman Fund between the Estate of Esther Gordman, the Dan Gordman
Fund and the Company, dated December 13, 1996, the Company agreed to pay to the
Esther Gordman Estate approximately $347,000, arising out of the personal
portion of an insurance policy on the life of Dan Gordman, which was paid to one
of the Company's Creditors, Harris Bank, pursuant to a collateral assignment of
the policy. The Company is currently making


                                       22
<PAGE>   23
monthly payments of $50,000 following payment in full of Harris Bank, and the
remaining balance due is $200,205, at January 31, 1998. Third, the Company
released to Mr. Nelson Gordman its rights with regard to one or more insurance
policies on the life of Mr. Nelson Gordman in exchange for approximately
$13,500.


                                       23
<PAGE>   24
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.

(a)  Financial Statements.

     (1)   A.  The following financial statements are incorporated by reference
               to the 1997 Annual Report.

           -   Consolidated Balance Sheets as of January 31, 1998, and February
               1, 1997
           -   Consolidated Statements of Operations for the fiscal years ended
               January 31, 1998, February 1, 1997 and February 3, 1996
           -   Consolidated Statements of Stockholders' Equity for the fiscal
               years ended January 31, 1998, February 1, 1997 and February 3,
               1996
           -   Consolidated Statements of Cash Flows for the fiscal years ended
               January 31, 1998, February 1, 1997 and February 3, 1996
           -   Notes to Consolidated Financial Statements for fiscal years ended
               January 31, 1998, February 1, 1997 and February 3, 1996.

           B.  The Report of Independent Auditors with respect to the financial
               statements listed in A. above is also incorporated by reference
               to the 1997 Annual Report.

     (2)   The following financial statement schedule is filed with this Annual
           Report on Form 10-K:

           -   Schedule II -- Valuation and Qualifying Accounts.



     (3)   The following exhibits are filed herewith or incorporated by
           reference as set forth below:

       (2)     Plan of acquisition, reorganization, arrangement, liquidation or
               succession (incorporated by reference to the Company's
               Registration Statement on Form S-1 (Commission File No.
               33-79382), filed with the Commission on May 26, 1994).

       (3)(i)  Amended and Restated Certificate of Incorporation of Richman
               Gordman 1/2 Price Stores, Inc. (incorporated by reference to the
               Company's Registration Statement on Form S-1 (Commission File No.
               33-79382), filed with the Commission on May 26, 1994).


                                       24
<PAGE>   25
       (3)(ii)  Bylaws of Richman Gordman 1/2 Price Stores, Inc. (incorporated
                by reference to the Company's Registration Statement on Form S-1
                (Commission File No. 33-79382), filed with the Commission on May
                26, 1994).

       (4)(i)   Instruments defining the rights of security holders, including
                indentures -- Section 6.03(a), 7.09, and 10.03 of First Amended
                Joint Plan of Reorganization under Chapter 11 of the Bankruptcy
                Code for Richman Gordman Stores, Inc., Richman Gordman
                Department Stores, Inc., and 1/2 Price Stores, Inc. -- Please
                see Exhibit (99)(i).

       (4)(ii)  Instruments defining the rights of security holders, including
                indentures -- Please see Exhibit (3)(i).

       (4)(iii) Instruments defining the rights of security holders, including
                indentures -- Specimen Stock Certificate (incorporated by
                reference to the Company's Registration Statement on Form S-1
                (Commission File No. 33-79382) filed with the Commission on May
                26, 1994).

       (9)      Voting trust agreement -- not applicable.

     (10)(i)(a) Material Contracts -- Credit Agreement between Richman Gordman
                1/2 Price Stores, Inc. and Congress Financial Corporation dated
                October 20, 1993 (incorporated by reference to the Company's
                Registration Statement on Form S-1 (Commission File No. 33-
                79382) filed with the Commission on May 26, 1994).

     (10)(i)(b) Material Contracts -- Amendment No. 1 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated January 28, 1994 (incorporated by
                reference to Amendment No. 4 to the Company's Registration
                Statement on Form S-1 (Commission File No. 33-79382) filed with
                the Commission on March 6, 1995).

     (10)(i)(c) Material Contracts -- Amendment No. 2 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated February 24, 1994 (incorporated by
                reference to Amendment No. 4 to the Company's Registration
                Statement on Form S-1 (Commission File No. 33-79382) filed with
                the Commission on March 6, 1995).

     (10)(i)(d) Material Contracts -- Amendment No. 3 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated September 11, 1995 (incorporated by
                reference to the Company's Annual Report on Form 10-K for the
                fiscal year ended February 3, 1996).


                                       25
<PAGE>   26
     (10)(i)(e) Material Contracts -- Amendment No. 4 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated May 6, 1996 (incorporated by
                reference to the Company's Quarterly Report on Form 10-Q for the
                quarterly period ended August 3, 1996).

     (10)(i)(f) Material Contracts -- Amendment No. 5 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated September 12, 1996 (incorporated by
                reference to the Company's Quarterly Report on Form 10-Q for the
                quarterly period ended August 3, 1996).

     (10)(i)(g) Material Contracts -- Amendment No. 6 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated January 31, 1997 (incorporated by
                reference to the Company's Annual Report on Form 10-K for the
                fiscal year ended February 1, 1997).

     (10)(i)(h) Material Contracts -- Amendment No. 7 to Credit Agreement
                between Richman Gordman 1/2 Price Stores, Inc. and Congress
                Financial Corporation, dated April 7, 1997 (incorporated by
                reference to the Company's Annual Report on Form 10-K for the
                fiscal year ended February 1, 1997).

     (10)(iv)   Material Contracts -- Covenant Not To Compete between Richman
                Gordman 1/2 Price Stores, Inc. and Mr. Nelson Gordman
                (incorporated by reference to the Company's Registration
                Statement on Form S-1 (Commission File No. 33-79382) filed with
                the Commission on May 26, 1994).

     (10)(v)(a) Material Contracts -- Vice President Incentive Program
                (incorporated by reference to the Company's Registration
                Statement on Form S-1 (Commission File No. 33-79382) filed with
                the Commission on May 26, 1994).

     (10)(v)(b) Material Contracts -- Richman Gordman 1/2 Price Stores, Inc.
                1997 Officer Incentive Program (incorporated by reference to the
                Company's Annual Report on Form 10-K for the fiscal year ended
                February 1, 1997).

     (10)(v)(c) Material Contracts -- Richman Gordman 1/2 Price Stores, Inc.
                1997 Stock Option Plan (incorporated by reference to the
                Company's Quarterly Report on Form 10-Q for the quarterly period
                ended August 2, 1997).


                                       26
<PAGE>   27
     (10)(vi)   Material Contracts -- Employment Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and Jeffrey J. Gordman, dated
                February 1, 1997 (incorporated by reference to the Company's
                Annual Report on Form 10-K for the fiscal year ended February 1,
                1997).

     (10)(vii)  Material Contracts -- Employment Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and James Cooke dated February 1,
                1997 (incorporated by reference to the Company's Annual Report
                on Form 10-K for the fiscal year ended February 1, 1997).

     (10)(viii) Material Contracts -- Employment Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and Don DeGraeve dated February
                1, 1997.

     (10)(ix)   Material Contracts -- Employment Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and Norman Farrington, dated
                February 1, 1997.

     (10)(x)    Material Contracts -- Reduced Hour Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and Dean Williamson dated
                February 1, 1997.

     (10)(xi)   Material Contracts -- Employment Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and John W. Simkins dated
                February 1, 1997.

     (10)(xii)  Material Contracts -- Executive Benefit Amendment Agreement
                Between Richman Gordman 1/2 Price Stores, Inc. and Certain
                Executive Officers dated August 27, 1997.

     (10)(xiii) Material Contracts -- Junior Indenture of Mortgage, Deed of
                Trust and Security Agreement from Richman Gordman 1/2 Price
                Stores, Inc. to Chicago Title Insurance Company, in trust for
                the benefit of Cathy Hershcopf, as agent for the Class 3
                Creditors dated January 31, 1997 (incorporated by reference to
                the Company's Annual Report on Form 10-K for the fiscal year
                ended February 1, 1997).

     (10)(xiv)  Material Contracts -- Junior Security Agreement between Richman
                Gordman 1/2 Price Stores, Inc. and Cathy Hershcopf, as agent for
                the Class 3 Creditors, dated as of January 31, 1997
                (incorporated by reference to the Company's Annual Report on
                Form 10-K for the fiscal year ended February 1, 1997).


                                       27
<PAGE>   28
     (10)(xv)   Material Contracts -- Agreement Regarding Dan Gordman Fund,
                between the Estate of Esther Gordman, the Dan Gordman Fund and
                Richman Gordman 1/2 Price Stores, Inc., dated as of December 13,
                1996 (incorporated by reference to the Company's Annual Report
                on Form 10-K for the fiscal year ended February 1, 1997).

     (11)       Statement re computation of share earnings -- not applicable.

     (12)       Statements re computations of ratios -- not applicable.

     (13)       1997 Annual Report.

     (16)       Letter re change in certifying accountant -- not applicable.

     (18)       Letter re change in accounting principles -- not applicable.

     (21)       Subsidiaries of the Registrant -- not applicable.

     (22)       Published report regarding matters submitted to vote of security
                holders -- not applicable.

     (23)       Consents of Deloitte & Touche L.L.P.

     (24)       Power of attorney -- not applicable.

     (27)       Financial data schedule.

     (28)       Information from reports furnished to state regulatory
                authorities -- not applicable.

     (99)(i)    Additional Exhibit -- First Amended Joint Plan of Reorganization
                under Chapter 11 of the Bankruptcy Code for Richman Gordman
                Stores, Inc., Richman Gordman Department Stores, Inc., and 1/2
                Price Stores, Inc. (incorporated by reference to the Company's
                Registration Statement on Form S-1 (Commission File No. 33-
                79382) filed with the Commission on May 26, 1994).

     (99)(ii)   Additional Exhibit -- First Amended Disclosure Statement
                Pursuant to Section 1125 of the Bankruptcy Code with Respect to
                the First Amended Joint Plan of Reorganization Under Chapter 11
                of the Bankruptcy Code for Richman Gordman Stores, Inc., Richman
                Gordman Department Stores, Inc., and 1/2 Price Stores, Inc.
                (incorporated by reference to the Company's Registration
                Statement on Form S-1 (Commission File No. 33-79382) filed with
                the Commission on May 26, 1994).


                                       28
<PAGE>   29
     (b) Reports on Form 8-K. - The Company filed no Reports on Form 8-K during
the fourth quarter of fiscal year 1997.


             [The remainder of this page intentionally left blank.]


                                       29
<PAGE>   30
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                            Richman Gordman 1/2
                                            Price Stores, Inc.

     Date: April 16, 1998                   By: /s/ Jeffrey J. Gordman
          ---------------                      ---------------------------------
                                               Jeffrey J. Gordman
                                               President and Chief Executive
                                               Officer



     Date: April 16, 1998                   By: /s/ Michael A. Mallaro
           --------------                      ---------------------------------
                                               Michael A. Mallaro
                                               Vice President Finance and
                                               Chief Financial Officer


                                       30
<PAGE>   31
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


      /s/Jeffery J. Gordman                                April 16, 1998
     ----------------------
     Jeffery J. Gordman
     President and Chief Executive
     Officer, Director

     /s/ Paul M. Bass, Jr.                                 April 16, 1998
     ---------------------
     Paul M. Bass, Jr.
     Chairman, Board of Directors


                                                           April   , 1998
     -------------------
     Paul M. Buxbaum
     Director

     /s/ Jerome P. Gordman                                 April 16, 1998
     ---------------------
     Jerome P. Gordman
     Director

     /s/ Nelson T. Gordman                                 April 16, 1998
     ---------------------
     Nelson T. Gordman
     Director

     /s/ Thomas J. Noonan, Jr.                             April 16, 1998
     -------------------------
     Thomas J. Noonan, Jr.
     Director


     /s/ Philip Scheipe                                    April 16, 1998
     ------------------
     Philip Scheipe
     Director

     /s/ Seth J. Lehr                                      April 16, 1998
     ----------------
     Seth J. Lehr
     Director


                                       31
<PAGE>   32
                       FINANCIAL STATEMENT SCHEDULE INDEX

     Item                                                          Page
     ----                                                          ----

     Schedule II -- Valuation and Qualifying Accounts               33





                                       32
<PAGE>   33
                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS






                                       33
<PAGE>   34
                                                                     SCHEDULE II

RICHMAN GORDMAN 1/2 PRICE STORES, INC.

VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            ADDITIONS
                                             BALANCE        CHARGED TO                       BALANCE
                                           AT BEGINNING     COSTS AND                        AT END
              DESCRIPTION                   OF PERIOD      EXPENSES (1)    DEDUCTIONS (2)    OF PERIOD
<S>                                        <C>             <C>             <C>               <C>

Allowance deducted from asset to which
 it applies:
     Allowance for doubtful accounts:
    Year ended January 31, 1998              $587,150        $840,012       $(718,253)       $708,909
    Year ended February 1, 1997              $392,948        $926,713       $(732,511)       $587,150
    Year ended February 3, 1996              $370,463        $688,530       $(666,045)       $392,948
</TABLE>

(1)  Additions charged to expense is net of recoveries of amounts previously
     written off.

(2)  The deduction in this column are amounts written off against the respective
     reserve.



                                       34
<PAGE>   35
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                 DESCRIPTION                                                PAGE
-------                 -----------                                                ----

<S>                     <C>                                                        <C>
(10)(viii)              Material Contracts -- Employment                            36
                               Agreement between Richman Gordman
                               1/2 Price Stores, Inc. and Don
                               DeGraeve dated February 1, 1997

(10)(ix)                Material Contracts -- Employment                            43
                               Agreement between Richman Gordman
                               1/2 Price Stores, Inc. and Norman
                               Farrington dated February 1, 1997

(10)(x)                 Material Contracts -- Reduced Hour                          50
                               Agreement between Richman Gordman
                               1/2 Price Stores, Inc. and Edward Dean
                               Williamson dated February 1, 1997

(10)(xi)                Material Contracts -- Employment                            59
                               Agreement between Richman Gordman
                               1/2 Price Stores, Inc. and John Simkins
                               dated February 1, 1997

(10)(xii)               Material Contracts -- Executive Benefit                     66
                               Amendment Agreement between
                               Richman Gordman 1/2 Price Stores,
                               Inc. and Certain Executive Officers
                               dated August 27, 1997.

(13)                    Reports to securityholders --                               69
                               1997 Annual Report

(23)                    Consents of Experts -- Consent of Deloitte                 109
                               & Touche L.L.P.

(27)                    Financial Data Schedule                                    110
</TABLE>



                                       35